Good morning, ladies and gentlemen. For those of you who don't know me, my name is Trent Peterson, and I am Chair of the Board of Adairs Limited. On behalf of the Board, I extend a warm welcome to everyone in attendance, particularly our s hareholders, including those watching online. It is now 11:15 A.M., the appointed time for commencing our 2025 AGM. I'm advised that a quorum is present, and I declare our meeting open. Details about how our shareholders can participate are set out in the notice of meeting, which was sent to shareholders on the 22nd of September 2025. The notice is also published on our Investor website. I'm joined today by my fellow directors and also key members of our leadership team, including Ashley Gardner, our Group CFO, and Jamie Adamson, our Company Secretary. Where is Jamie? Jamie. From the Board, we have in attendance Keira Grant.
Keira, if you could speak for yourself. Rachel Kelly, new to the Board, Non-Executive Director and Chair of our PRC . Sorry, and for clarity, Keira chairs the Audit and Risk Committee. David MacLean, many of you know David, Non-Executive Director, and Elle Roseby, our Managing Director and CEO. Elle and Rachel both joined the Board in 2025, and we are looking to appoint one further independent director in the next 12 months. Elle and Rachel are each highly experienced retailers, and we are fortunate to have secured their services. As I was chatting to one of the shareholders earlier, I have a very firm view that retailers run retailers. As we think about how our Board should be mixed, we think very heavily about people with deep retail experience. That's very forefront of our mind when we're looking at the further appointment.
Tony Morse from Ernst & Young is also in attendance. Tony's down the front, and Tony will be available to answer questions at the appropriate time. We also welcome the team from the company share registry, and MUFG Corporate Markets. The agenda for today's meeting is that, following my introductory remarks, Elle, our Managing Director and CEO, will present her report and will also comment on current trading. We will then proceed with the formal business of the meeting to receive and consider the company's financial report and vote on the resolutions. I will now explain the procedural matters for the meeting. In relation to questions, we are only taking questions from shareholders in attendance or their appointed representatives, as well as shareholders who have pre-lodged their questions in accordance with the procedures set out in the notice of meeting.
We will endeavor to answer as many questions from shareholders as we can, and I ask that all questions are directed to me in first instance, and then I'll direct them as appropriate. Voting today will be conducted by way of a poll on all items of business. Voting for all resolutions will remain open until five minutes after the meeting is closed to provide eligible attending shareholders or their proxies with sufficient time to cast their vote. With each resolution, we will show the tally of votes which have been lodged prior to the meeting on a screen. The final outcome of each resolution, including the votes cast at the meeting, will be released to the ASX and posted on our investor relations website later today once voting has closed and the numbers have been tallied.
Moving to my report, the first thing to note is that the last two years have seen significant changes in the composition of both our Board and our leadership team. These changes have been part of a deliberate and forward-looking renewal program. The addition of fresh perspectives and more retail expertise drives us to reassess our strategy, sharpen our focus, and better position the group for long-term growth. The first phase of these changes began prior to Elle's appointment in January this year. However, her arrival has undoubtedly materially accelerated the pace and depth of change across the group. We are increasingly clear on where we are headed strategically on a business-by-business basis. We remain culturally curious, humble, deeply focused on listening to our customers, and we are focused on studying the data. As a Board, we are pleased with how our leadership teams across our group are taking shape.
We run three distinct businesses with unique market positions and customer value propositions. Our operating model lets each business focus on the matters that matter most to their customers, supported by centralized group functions in select areas. The operations of our business remain substantially independent from each other, and we remain committed to this approach. Fundamentally, our ownership model for our business priorities is what I call coordinated cooperation rather than operational integration. This takes, to some extent, inspiration from big retail groups globally like LVMH and how they organize themselves. We encourage the collaboration between our businesses and their leaders through shared processes and leadership forums, rather than driving physical integrations of operations between the businesses or sharing resources in substantive ways. This is true in most instances, but not all. The scope and depth of our shared services is narrow and expected to stay that way.
Benefits of common ownership can arise through our group executives' involvement in governance, strategy development, sustainability and compliance, property and leasing, people development, and risk management. On the topic of governance, both Mocka and Focus now have a Non-Executive Director and have a Non-Executive Director from our main board on their advisory committees, promoting more effective and transparent governance and faster operational decision-making. At Adairs, we've commenced a program of technology investment, including a multi-year systems replacement project, principally around a new ERP system. This important project is progressing, and we're working closely with the management team and expert advisors to monitor the associated risks and mitigate those. While FY 2025 delivered solid top-line growth, we know that none of our businesses are operating to their full potential. Elle will speak to the results and strategies in her report shortly.
Across all our businesses, there is much work to do, but there is also increased clarity and confidence that the actions already underway will be effective. Elle and her team are now firmly focused on the next few years with the formulation of what we call Vision 2030 for each business. Elle will also speak to this in her update shortly. The Board's renewal has also progressed well, both in terms of who we are and how we operate. We are a highly engaged, collaborative, and I believe hard-working board. In addition to Elle, we have been joined by Rachel Kelly, who has quickly made a significant contribution, reflecting her strong retail experience and straightforward communication style. You'll hear shortly also from Rachel. Rachel has joined the Mocka Advisory Committee and has also taken on recently the role of the Chair of the People and Remuneration Committee.
We do remain optimistic about our future as a group. We are confident in the strength of our portfolio and the capability of our leadership teams. That concludes my report, and we will have time for questions shortly. I will now pass to Elle, which I'm sure you will all enjoy, to present her Group CEO report. Thank you, Elle.
Okay. Thank you. Good morning. Thank you very much, Trent. It's an absolute pleasure to be here today. This is my first AGM as Group CEO and Managing Director of Adairs. I'm going to start with a quick update of FY 2025 performance. At a group level, we delivered total sales of AUD 618.1 million, and that was up 6.5% on the prior year when adjusted for a comparable 52-week period. Underlying EBIT came in at AUD 55.2 million, a modest increase of 1.4%. Performance across our business units was mixed. Adairs, our largest brand, had a stronger year and saw sales growth of 9.5% to a record AUD 442.2 million. While gross margin softened slightly due to the extent of clearance activity and also a weaker Australian dollar, EBIT rose 21.2% to AUD 35.8 million.
That was driven by a strong store performance, productivity gains at our national distribution center, and tighter cost control, with cost of doing business as a percentage of sales improving by 130 basis points. Focus on Furniture had a second successive difficult year. Sales declined 6.5% to AUD 117.9 million, and despite active cost management, EBIT fell 36.6% to AUD 11.8 million. The business was impacted by gaps in our range, its appeal, and promotional activity that didn't deliver the customer response we'd like. Mocka, on the other hand, delivered strong sales growth. Sales rose 14.7% to AUD 57.9 million, with Australia up 31%, a record result, offsetting a 3% decline in New Zealand. Pleasingly, we also saw growth reemerge in Mocka's New Zealand business in the second half. EBIT increased 21.1% to AUD 7.6 million, supported by improvement of margins and a refreshed product range.
Statutory EPS was AUD 0.146, and we paid dividends of AUD 0.105 per share, representing a payout of 72%, which is in line with our policy range of 65% - 80%. Beyond financial results, we also continued to make good progress on our FY 2025 sustainability agenda. Our Scope 1 and 2 emissions rose 1.8%, and that was primarily due to the expansion of our store network. We've taken proactive steps to reduce emissions by installing solar panels in a couple of our stores, with more sites planned for FY 2026. In terms of packaging initiatives, we've replaced polystyrene and soft plastics with recyclable or reusable packaging across all categories. Social impact remains core to our values, and we contributed over AUD 135,000 to Orange Sky this year, bringing a total support of AUD 1.1 million since 2019.
Through our Red Cross partnerships, we've also donated 5,500 kilos of product to support humanitarian efforts and reducing landfill. We've also strengthened our ethical sourcing efforts, enhanced our safety reporting, and proudly, we've achieved our gender diversity targets at a board level and also at an executive level. Before I take you through our planned FY 2026 initiatives by business unit, I want to take a moment to just talk about how we're approaching the development of our five-year strategy for each of our business units. This is known as Vision 2030. For each of our businesses, Vision 2030 is a strategic blueprint for sustainable growth built around a clear ambition to inspire customers through thoughtfully, really beautifully curated collections that reflect different lifestyles and life stages, delivered seamlessly across both physical and digital channels.
It's our end vision for what we want the group and each business unit to become: more customer-led, more digitally enabled, and more operationally efficient and resilient. In his speech, Trent spoke about our decentralized model for our three businesses and the rationale for this. This also applies to Vision 2030. Each of our businesses will take a different path to get there based on their maturity, their market position, and also the specific risks and opportunities they face and market dynamics. Each has its own customer value proposition, culture, and strategic priorities. We actively acknowledge, support, and protect differentiation in these areas. However, we do have a common strategic planning cycle, governance standards, and business ethics. We're also working more proactively in areas where the businesses can cooperate and collaborate for mutual and collective benefit. To be clear, this is about cohesion. It's not about integration.
The initiatives we're rolling out are phased and they're pragmatic. Transformation doesn't happen overnight, but we're building the capabilities, the systems, and the cultures within each business that will really allow us to evolve more dynamically, be innovative, and be differentiated in ways that matter most to our customers. We also operate across the group with a common approach to how we make our decisions and guiding strategic principles. The most important of these principles are a focus on understanding our customers and meeting their needs every day, a test-and-learn approach to new initiatives and risk management, a commitment to constantly driving business simplification and raising productivity, a focus on attracting and retaining outstanding talent, and a commitment to performance, transparency, and accountability. FY 2026 marks a strategic reset, a pivotal year of transformation, investment, and capability building.
Across the group, we've taken deliberate steps to strengthen our capability and build a team that reflects the next chapter of our business, one that is more connected to our customers than ever before. Many of our team are here today, and in the break at the end, please make sure that you do introduce yourself to the team. I know that they'd certainly love to talk to you about the vision and how they bring that to life every day. This team is certainly going to be bringing clarity, energy, and expertise to take us from good to great. Across the group, we're also piloting new initiatives in customer experience, product development, and operational efficiency, with a clear focus on learning fast and scaling what works. Of course, not everything is going to go to plan, but that's part of meaningful change.
What matters is our ability to test, measure, and adapt. We're embracing that mindset across our group's businesses. We're going to share more on Vision 2030, and we're going to have a proposed investor day in the second half of FY 2025. During that day, that's also going to be a great opportunity to introduce our team and give them the stage for them to speak directly about their roles in delivering to that vision. For now, let me bring the strategy to life by showing you what it means in practice, starting with the FY 2026 initiatives of each of our three business units. Do I just have to pause here? Adairs is our largest business. Our ambition is to make it Australia's ultimate home styling destination.
To get there, we're refreshing the brand, deepening our customer understanding, elevating our product, and you can see that there with the little stand that we've created, and in-store experience, and we're investing in omnichannel excellence. Over the next year, customers will see a refreshed brand identity that tells a more aspirational story of design, quality, and value. We're also cautiously testing a gradual shift away from the extensive, always-on, very deep discounting model, which is so prevalent in our category, while protecting the value of our Linen Lovers program. Early trials of alternative promotions like Spend & Save, Multi-Buy, and also product bundles have delivered us really valuable insights. We're also seeing the continued importance of a deal for many of our customers, particularly in certain product categories and not in others.
The power and effectiveness of our Linen Lovers loyalty program is to activate and inspire our customers, which continues to be an important lever. The evolution of our go-to-market offering at Adairs is an important long-term strategy to drive both sales and margin growth. We have seen the need to be gradual and measured in our approach. Over the first half for FY 2026, we have seen instances where we've moved too fast in the evolution of our go-to-market offering, and those insights have been really valuable for us to move forward. The discipline we need to maintain is about staying data-centric, curious, and really focused on the long-term vision. We're also focusing on big retail moments like Easter, Mother's Day, Black Friday, and seasonal changes from summer to winter, and of course, Christmas.
If you've been into store lately, you'll certainly see an expanded Christmas offering in our stores and online because Christmas is retail's, you know, it's the biggest time in retail for us. It's the biggest event of the year, and we are determined to win more share. We've also aligned our product development to core style profiles, which will help us stay really focused on our core customer types and really identify gaps in our range and offering. We're also using mosaic segmentation, and we're using that and also our Linen Lover data for when we're thinking about opening new stores, expanding our stores, and also store closures. The in-store experience, as you know, is so important for our customers, and we're enhancing visual merchandising and emphasizing our team's styling expertise to create more rooms that our customers love.
Our Linen Lover program remains a cornerstone of our operations and strategy, with over a million paying members and more than 80% of our sales coming from members of the program. We are now looking to deepen that engagement with new benefits like the Qantas Frequent Flyer program and a more personalized experience powered by data and segmentation, personalization of offers, and engagement tactics like that AI allows us to implement really cost-effectively. Operationally, we are investing in our store network and technology. We will launch our next generation of our Store of the Future in the second half of FY 2026, and that is going to be in a homemaker store and also a large format store.
We plan to open six new stores, upsize four, and close two smaller stores, ensuring that we have the right footprint to showcase more of our ranges in locations where customer demand is underserved. We have also commenced a AUD 25 million- AUD 30 million technology transformation centered on replacing a legacy ERP with Microsoft Dynamics 365, and this will enable smarter decision-making, better fulfillment, and integration with emerging technologies. While the technology is powerful, it only matters if it helps our teams work more effectively and productively and our customers enjoy a better experience. It is impossible to talk about technology today without recognizing the transformative potential of AI. Across our group, AI is already streamlining a wide range of previously really manual tasks, from enabling our customer service team to respond faster and more consistently to editing digital assets and generating content for internal and also for external purposes.
As AI-enabled tools continue to evolve, so too do the opportunities to embed them more deeply into our business. Turning now to Focus on Furniture, where our vision is to make Australia's favorite destination for well-designed, quality furniture representing exceptional value. Focus on Furniture is working through a strategic reset. Following a period of underperformance and inadequate customer response to our promotions, we undertook extensive customer research. The insights from that are shaping a new direction for the business, which has confirmed that the value proposition of the business is sound, but it does need a refresh in certain areas. It is not a dramatic repositioning. We have also strengthened the leadership team with two really key appointments, both bringing deep furniture expertise. Our new Head of Retail will focus on consistent execution, store performance, and customer experience.
Our new Head of Marketing and Digital will lead brand strategy, campaign delivery, and importantly, e-commerce growth. Both hires commence with us in the next few months. We're also rolling out several key initiatives this year. We're expanding product choice with major order options, with broader fabric and color options and ranges. We've introduced Latitude Finance to offer more flexible payment options, and we're accelerating speed to market with more trend-led collections and options and continuing to focus on our quality, availability, and our relative value for money. We're accelerating store upgrades with three to five refurbishments planned over the next 18 months, and recent refurbishments in South Australia have delivered a 15% - 20% sales uplift and a payback period of under two years, highlighting strong return potential.
We're also planning three to five new store openings over the next 18 months, with a focus on New South Wales, Queensland, and entry into Western Australia in late 2026, 2027. We continue to see a compelling case for a national store footprint of around 50 to 55 stores. Finally, to Mocka, our smallest business by sales and EBIT, but an exciting opportunity for growth. Our vision is to make Mocka the most loved furniture brand for young families and young adults in Australia and New Zealand. These customers' needs are typically triggered by changes in life stages, such as the arrival of children, moving out of home into an apartment, or decorating a new home or a new space. Mocka wants to be there at all of these firsts, and times have changed for our customers as an important entry point for the Mocka brand.
We've consistently seen customers respond really well to the ranges developed for these purposes in mind, when coupled with beautiful, unique Mocka design and value for money. Our offering is currently online-led. However, our customer research is clear that our customer wants to be able to shop Mocka in a physical retail environment. The co-located store offering that we've trialed in Tower Junction in New Zealand provides us valuable lessons and a clear sign of what our customer wants from Mocka in a physical store. Expansion into the physical retail for Mocka is the opportunity that excites us most with long-term value creation in mind. We plan to open our very first standalone Mocka store in Australia in the second half of FY 2026. It's going to be about 300 sq m- 500 sq m with a sales target of about AUD 2 million.
If successful, we're going to expand this trial further with a view to scaling it to 20 to 30 stores nationally. First, we must establish and refine our retail model for Mocka. This year, for Mocka, we're also expanding our range in categories like youth and lighting, outdoors, and also sofas. We're really pleased with the progress being made at Mocka and excited about the future at Mocka as we commence the expansion to standalone physical retail stores. For the trading update and outlook, we have released a trading update this morning, which builds on the update that we released for our FY 2025 results in late August. Year-to-date trading across the first half of FY 2026 has been largely in line with what we foreshadowed in the commentary provided with the FY 2025 results in August 2025.
Adairs sales growth has moderated as the company has pulled back on the frequency and intensity of the promotional activity. After an encouraging start, sales at Focus on Furniture have slowed despite ongoing promotional activity, leading to lower than planned gross profit margin, and Mocka's strong sales momentum has maintained with customers continuing to respond well to new product. Looking ahead, the next 10 weeks will list the most important trading period of the half, delivering about 55% of our sales in the next 10 weeks, with key events like our Linen Lover for Adairs, and our Linen Lover event starts tonight for all of our Linen Lovers out there. Of course, we've got Black Friday, we've got Christmas, we've got Boxing Day sales, all to come. The half-one result is very heavily dependent on performance during these peak periods.
The group and individual business unit guidance for the first half can be seen in the table we have provided. In summary, we expect the group to deliver sales of AUD 319.5 million -AUD 331.5 million, approximately AUD 10 million - AUD 20 million above the first half of FY 2025, with a gross margin that is approximately 40 to 90 basis points lower. We remain cautiously optimistic about the trading outlook for the rest of the half. All three businesses are ready. The teams are ready. We're well stocked. As of tonight, we're pushing the button and off we go. We're very much ready for the peak trading ahead. In closing, I want to reaffirm our confidence in the path that we've set. We're building a business. We're building a business that is resilient, that's customer-led, and future-ready. To our shareholders, I want to thank you.
I want to really thank you for your ongoing partnership and your support. The journey ahead is full of promise, and we're incredibly excited by what's to come. To our customers out there, your custom is our privilege, and we do not take that lightly. We remain absolutely committed to delighting our customers every single day. To our suppliers and to our partners, thank you. Thank you for your collaboration and always for your support. Finally, and very importantly, to our team, thank you for your passion, your creativity, your commitment. We are so fortunate across all three businesses to have such a talented and such a dedicated team of people. You are, without doubt, our greatest asset. Thank you. That concludes my report. If you have any questions, please hold on to them for now, as there will certainly be an opportunity to ask questions in a moment.
I'm now going to hand back to Trent for the formal part of the meeting. Thank you.
Thanks, Elle. I have a saying in life that is, "Never follow Don Bradman into bat," and I think I've let myself down. Thank you, Elle. Now to the exciting part of the meeting. The notice of meeting was made available to all shareholders in accordance with the company's constitution, and I will take that notice as read. The register of relevant shareholders is available for inspection. Shareholders are asked to contact our share registry following the meeting if they wish to make an appointment to inspect the share register. Julie Stokes, I believe, is here from MUFG Corporate Markets, our share registrar, and she will act as returning officer. If there are any aspects regarding voting that you are uncertain about, please speak with Julie or a member of her team who are down in the back corner. We will now move to the first item of business.
The financial statements and reports for the year ended 29 June 2025 have been circulated to shareholders as a part of the annual report, and are tabled here today for discussion. I now open the meeting for any discussion or questions on matters of particular relevance to the FY 2025 annual financial report, questions of the company auditor, or any other matter that someone would like to ask in relation to Elle's presentation as an example. Please note that we'll be specifically focusing on the remuneration report later in the meeting, and we will first address the written questions submitted prior to the meeting in relation to item one. I ask Jamie, if you don't mind, to please read out those questions.
Thanks, Trent. We've got about four questions just relating to resolution number one. The first question is, with Christmas approaching, what is the strategy to take the share price north of AUD 4? Also, what are the headwinds expected from online retailers?
I think, first of all, it's a good question, and I'm not sure who that one's from, Jamie, but I thank them all the same. Firstly, the thing that I'd note is myself and my fellow directors are shareholders in a meaningful way. So why do I say that? Do we care about the share price? You bet. We think about it all the time. We don't have a strategy for the share price. We have a strategy for the company, and our belief is that we execute that strategy that will translate to share price. We can't control the equity market, but we can control the business that Elle and her team lead, and that's what our focus is on.
I do also note that in relation to that strategy, we have advised that it is our intention to hold an investor day in the second half of FY 2026, and strategy will be front and center on that day. That'll be webcast, and there'll be an opportunity for all shareholders to not only hear more about strategy, but I think importantly, as Elle alluded to, see a broader cross-section of the team and the people who are really bringing it to life. I think that'll be a great opportunity for shareholders to understand how we're going about improving the business. We will continue to be clear on our strategy and executing it to the best of our ability. Our belief is that if we can successfully do that, that will translate to share price appreciation and continued strong dividend flow to shareholders.
In relation to the component of the question on the threat of online retailers, I think it is worth noting that, first of all, we do monitor competitor behavior closely. We are not an internally focused only organization, and we operate in a competitive and dynamic market that is changing. We do have a very strong online channel ourselves. Whilst we are perhaps best known for our stores, our online channel is very significant. Without any element of hubris, I would say that our online channel across the group is substantially larger than most of the emerging online retailers. I think critically, though, our online channel is integrated with our stores. The very clear insight that we see globally is that that is a superior customer proposition because it's an integrated proposition. That enables customers to shop online and return to store.
It enables customers to browse in-store and shop online, as just examples. You're seeing globally pure-play online retailers starting to lean toward opening stores because it is recognized the broader opportunity that that mixed experience provides shareholders. That's the game book that we're playing through, to make sure that we can defend against new and emerging players who we have the utmost respect for.
Okay. We've got a second question from Natasha Lee, who asks, "While there's a good level of female representation on the board, overall, the board seems to lack other forms of diversity and generally, boards that are better reflective of the wider community perform better. What efforts are being taken to improve the overall diversity of the board?
Yeah. First of all, thanks for the question again. It's a good question. It is one we think about. I can only infer the question by its inferences about skin color, because our gender is obvious, and I don't know, religious connotations or sexual preferences, etc., aren't clear. We are a small board, and the thing that we have to prioritize above everything else is skills, fit, motivation, and capability. Whilst I absolutely acknowledge the important role of diversity in businesses, I think it has to belong in the right place in the priority stack. When we are considering board renewal, and we are, is diversity a consideration? Absolutely, it is. I unashamedly say it is secondary to the skills that we look for in relation to industry knowledge, domain expertise, cultural fit, and drive to contribute.
Thank you. The third question is, "Trade receivables have increased significantly from AUD 3.6 million- AUD 8.9 million. Can you please explain what caused this and what efforts are underway to bring this amount down?
My mere encyclopedic knowledge of the financial accounts of the business come in handy at this moment, Jamie. The year-end receivables balance included landlord incentives in relation to the new Adairs support office in Chadstone, for those who haven't been there, and also for the new Focus on Furniture Distribution Centre and Support Office. That is when the landlord commits to a financial contribution to the new fit-out of a facility, and they typically wait for that facility to be completed before they make that contribution. At the end of the year, that amount was receivable. Since the end of the financial year, that amount has been received, so that amount has unwound. It has proven to be a non-trading increase in that amount. Hopefully, that helps that shareholder understand that dynamic, Jamie.
Thank you. The final question is, "The auditor remuneration has increased 15.5% since last year. This seems excessive given the complexity of the business has not changed significantly since last year. Can you please explain?
First of all, I love all questions that put downward pressure on audit fees. In this instance, there is, to an extent, a misunderstanding that needs to be clarified. Our FY 2025 audit fee was, in fact, 8% lower than FY 2024. I think where the confusion arises, that we set out on page 127 of the annual report, is that the total fees paid to Ernst & Young in the current year, or in the FY 2025 year, were increased by a one-off non-audit services fee of AUD 144,000, which related to advisory work that we engaged Ernst & Young to perform in connection with the mandatory climate reporting, which I'm sure everyone is aware is upcoming and is a significant body of work, and a certain technology advice, principally related to the ERP project that we're moving down. The underlying audit fee actually came down in the year.
Thank you. There are no more questions with notice.
Great. Thank you. Perhaps opening then to the floor, are there any questions from the floor in relation to item one? Great to see you, Mike.
First of all, congratulations to you and Elle for your new positions.
Thank you.
Which is an interesting point to kick off from. We know there's been last year, you'll recall that we actually talked about the fact that there was wholesale change on the board. It seemed to be sort of a moving feast, and that's now settled down, which is good. It's nice to see one of the original people involved as Chair. So congratulations on that. There now seems to be wholesale replacement of staff at the executive level. We've moved down one level in the organization. We've got a new CEO and mention of a significant fraction of people at the executive level being swapped out. They get some color from that from Elle's speech, particularly in Focus on Furniture and Mocka. As a rule, shareholders get quite concerned about sweeping changes in management.
One of the things I guess we would then look for is how the engagement in the staff has actually followed, whether the staff are, in fact, on the same train. My question really is, have you done a before and will you do an after staff engagement survey to make sure that your staff are actually following the same path? That's the first question. I have a couple more. Do you want me to?
What about I answer that one first, if you don't mind, Mike? You know I won't limit you on your number of questions, so you'll get an opportunity. First of all, I love this question, Mike. I love that you've identified the criticality of people. We're not ashamed in saying there's significant people change going on in the organization. We're really happy with the way that's going. You're right. Where does the rubber hit the road on it, and are people on the journey with us? It's a very timely question. We did a team engagement survey two weeks ago. I'll give you some of the headlines of the results. The first thing to note is that we had a record level of response from that. In terms of people actually choosing to participate, it's not a mandatory team engagement survey.
We saw a team response rate of over 73% of employees participated, which is a record. That was great. It's a good indicator when people are willing to participate and engage. There's a lot culturally that people feel like they're operating in an environment where they want to invest their time to provide that participation and feedback. Importantly, it showed an increase in the overall engagement from 68% - 70% year-on-year. That's the year-on-year comparison that you alluded to, Mike. It's essentially approximately at the same time, I think, to my understanding. I think it's a pretty good read. The number that I thought was most interesting within that, and there's a pretty broad set of questions that get asked, was in relation to whether team members said they would recommend Adairs as a great place to work.
It's a kind of a proxy for what management consultants talk about as NPS or ENPS. That number was 81% said that they would recommend Adairs as a place to work, and that's up from 72% a year ago, Mike. We absolutely watch these measures. We're really focused on whether the rate of change is causing, I'll say, a level of unacceptable disturbance within the team. I think that there is an acceptance, though, that to drive change, we need to change. There is always a significant portion of people who have a high level of aversion to change. It's not to be unexpected that as you drive these processes, you won't always have high fives from everyone. I think that is a measure that we're doing it pretty well. I will say that Elle and her team bring consistent focus to this matter.
I think you get a sense from Elle's presentation today as to her passion for her people and her team and her willingness to be engaged with them. I think that and the reflected way that works through the organization is playing a material role in continuing to improve our team engagement. Mike, I hope that helps.
It does. Thank you very much. Good answers. Look, my second question is related, and it's basically now going up one step to the board. Adairs has published a reasonably good skills matrix, I'd have to say, by comparison with many other companies. It's got more granularity than many, because you've identified three different levels of skill from kind of kindergarten to expertise, if I'm not kidding. And the number of directors which possess each. It also seems to be candidly rated. It's not all kind of CV stacking. It seems to be quite good, and we all know what CV stacking looks like. The one thing that doesn't appear there, which is increasingly what some regulators are asking other parts of the industry, in particular, APRA is asking the finance industry to do this, put names against each skill. In other words, it's a true matrix.
You have names on one end, skills on the other, and then in the boxes, you put the three levels. I guess I'm saying it's the kind of thing we're pushing for because shareholders can vote on very few things. One of them is the election of directors. If you've got candid, well-audited, fair skill levels that are basically appraised, it's something that they can then, you know, correctly vote on. Otherwise, you're voting against what somebody has self-assessed as their skill level. We'd appreciate it if you could actually modify the table in the coming year to actually include that level of detail. Thank you.
Mike, thanks for the question, particularly I know you sent that to us in advance. I was able to do a bit of work around it. I think it's a good question. I do understand the sentiment for the avoidance of data on the kindergarten level in your question. There's a self-identification. We will do some work on this. As you noted or as Elle noted in her report, one of the values that as a board we have said we live by is transparency. We will look at it through that lens. I don't think it's certainly not constructed to hide anything. We think we've got an excellent board. Mike, if I could just take that question on notice and give it further consideration as we go into next year's annual report.
Excellent. Thank you. Apologies for taking your time. The third one really is about the IT transformation. I mean, as shareholders, when we hear people doing wholesale ERP swap-outs, we get nervous because when you look at the history of IT projects, particularly in Australia, they always go over budget and over cost and sometimes miss on their requirements. I could give you a litany of companies that have come out with their IT stuff. What we then did, segue back to the last question, which on the board is the person that's basically got the most expertise in IT? When I looked at your, as I said, very candid summary, it was nobody with expertise. Therefore, you must be going to perhaps the person that's doing the IT transformation, and I wouldn't trust them, frankly. I'd get an independent view. What are you doing about board supervision?
Are you going to look for perhaps the next board member to have some sort of expertise? This is potentially going to derail the business if things go awry.
Yeah. It's a great question, Mike. The litany of issues that you refer to is a topic of consistent conversation, not just that, but also the risks and specific triggers that have led to that. Julian, who was actually leading that project, is in the room. Julian, I personally think you're very trustworthy, but I do take the point of the critical role of expertise in the governance and monitoring of this. We have a steering committee. It does have independence on it. It has got independence not just of people from within the organization, but also external people who all they do for a living is deploy these major projects. These projects are incredibly detailed. We did discuss as a board whether one of our board members should be on that steering committee.
Where we got to was that the level of detail and operational knowledge that's required is not only something that we, as a group, didn't feel that we had as directors, but it is also something that you can get lost in the weeds if you end up in that as a director. What we wanted to do is bring genuine expertise to that room. The other thing that having a director on that board, and I don't think we roll this way as a group, is it can sometimes constrain conversation within that group. We need that group to steer very deeply and openly into problems and risks and issues. We don't want that constrained by the presence of people who are, you know, honestly not experts in this matter, even if honestly one of us was.
We've got external deep capability to support our governance of that project, Mike. I will say that I'm not going to be the chair who says that will never happen to us. It is a high-risk project, and we're working through that very cautiously. We have taken significant steps to design a governance and monitoring framework around that project and have also made sure that we have bolstered the team, internal to the organization, with the expertise that we believe gives us the best opportunity to manage that and also manage expectations that it won't all go to plan. If you talk to people who have been through these projects before, as they flip live, the number of issues that they're dealing with are often measured in the hundreds and thousands in terms of on the hit list. We will go through that.
We need the right people at the coalface that day.
I'm done.
Thank you. Are there any other questions from the floor? Okay, thank you. As there are no further questions, we will now move to the next item of business. As this item is in relation to my own election, I will hand over to Keira Grant to chair the meeting for all matters pertaining to item two. Thank you, Keira.
Hello, everyone. We have now turned to item number two, as you'll see on the screen in front of you. The members are here today to consider, and if thought fit, to pass the following as an ordinary resolution: that Mr. Trent Peterson, being eligible, be re-elected as a director of the company. Before proceeding to the vote, I would actually like to ask Trent to speak to this election.
You didn't escape me for too long, did you? First of all, most people know me. I've been a Director of the company both prior to its listing. I ran the private equity firm that was the majority shareholder in the business. Since its listing, the private equity firm that I ran, called Catalyst, has sold out its position a long time ago. The shareholding that I have in the business is my own. I bought that with my own money. The first thing to note is I am a shareholder. I don't manage other people's money. I manage my own money. I think like a shareholder, and that's principally why I'm here. In the evolution in my career, I've become a retail-focused private equity-oriented executive, and I'm a professional Director. I sit on four public companies. They are all specialty retailers.
For better or worse, specialty retail has become my wheelhouse. My motivation is in working with great leaders, and I am increasingly of the view that that is what this organization has, and that's what brings my joy, enthusiasm, and energy to the organization. I do feel privileged to serve this organization and its shareholders, and I certainly thank our Directors and our shareholders for their continued support.
Thanks, Trent. You'll see on the screen the proxy results are shown. Jamie, turning to you now, are there any questions that have been lodged in relation to item number two?
No.
Okay. Turning to the room, are there any questions in relation to item number two?
If I could ask the obvious question, a significant again. Trent, was that a particular proxy collector, and did they give you a reason?
I don't know. Maybe Jamie can. If I were to have a guess, Mike, and you know I think I'm an eternally reflective person, I would say there's a bit of it that's in longevity. I've been a director for a long period, and there are definitely certain quarters of shareholder bases that think there is an absolute use-by date on directors. I think with some good reason, and I'm cognizant of that. The share price hasn't done what we wanted it to, Mike. I think there's always an element of protest vote. Our shareholders, including me, are not making enough money. I think there's always a reflection back of that, I think, in these sorts of things. If you're going to hold anyone accountable, you know a director who's been around for a bad time or a long time is not an illogical place to direct that perspective.
I'm cognizant of that. I own it, and we wanted it better.
I might just also add, it's Jamie Adamson. I'm Head of Investor Relations. Approximately 15% of the company is owned by passive funds. These are quant funds, index funds. For the vast majority of cases, those people, those are machine-driven decision-making. They don't take meetings with the company. They have very little regard to any direct feedback from the company. What they do though, is they follow the advice of some proxy advisors. Two of the largest global firms, Glass Lewis and ISS, have very firm public policies around director tenure. Once you're over 12 years, which is typically three cycles for a director, they automatically consider you to be non-independent. As I say, they don't really have any interest in engaging in the discussion. That simply is their policy.
I suspect the vast majority of that protest, that against vote, is simply a reflection of the policies of some global advisors, not personal to Trent.
Thank you, Jamie. I'm just going to ask for any other questions from the room. We'll close it out there, and congratulations, Trent. Thank you.
Thank you. Thanks, Keira. We now move to item three on the agenda, and that is that the members are to consider, and if thought fit, pass the following, and that is that Rachel Kelly, being eligible, be elected as a Director of the company. I'd now like to invite Rachel to speak to her election.
Good morning, shareholders. My name is Rachel Kelly, and it is my privilege to stand for election as Non-Executive Director of Adairs Limited. Like Trent was saying earlier about being a retailer, I bring to the board more than two decades of executive and board experience across retail, consumer, and fintech sectors with a strong focus on governance, scale, strategy, and risk oversight in ASX-listed environments. My background includes serving on boards of retail and consumer product companies, navigating transformation, regulatory complexity, and brand growth, with a particular focus and interest in multi-channel transformation, customer experience, cultural change, and most of all, sustainable performance. My approach is grounded in stewardship and long-term value creation, ensuring decisions balance the interests of shareholders, customers, and employees alike. I am passionate about supporting Adairs Group's continued growth through disciplined strategy execution, strong culture, and an unwavering focus on delivering value to the shareholders.
It would be a privilege serving on the Adairs Limited board and contributing to the group's next phase and transformation under the Vision 2030 strategy. Thank you for your consideration and support.
Thanks, Rachel. The results are shown on the screen. Congratulations on your appointment. As I mentioned in my speech, Rachel's already making a wonderful contribution, and she's a great addition to the board. Interesting shoes to follow in Rachel's. We look to add another director to the board over the course of the next 12 months. The proxy results are shown on the screen. Jamie, are there any questions pre-lodged?
No, there are no questions.
Are there any questions from the floor in relation to item three? As there are no further questions, I will now move to the next item of business, which is in relation to the remuneration report. The next resolution is the adoption of the remuneration report. Adairs is required to put to a vote a resolution that its remuneration report for the year ended 29 June 2025 be adopted. The vote on this resolution is advisory only and does not bind the directors or the company. Team management personnel are excluded from voting on this resolution. The proxy results are shown on the screen. Jamie, are there any questions lodged prior to the meeting in relation to item four?
No, there were no questions lodged prior.
Are there any questions from the floor in relation to item four?
I have a very small question, and it certainly doesn't go against in voting, and that's that your LTI framework uses earnings per share as a measure, and it doesn't actually have a total shareholder return score, which typically what shareholders want is if basically the shareholders are going to do well, then, sorry, if the staff are going to do well, and a company's going to do well, then the shareholders should also do well. We tend to ask for what's called a relative total shareholder return score as an addition to a hard financial measure, which you've got there. Would it be something you'd consider in the future? Thank you.
Yeah. Mike, first of all, absolutely, yes, it is something we do consider, have considered. We've analyzed the market on this point. We did it when we first implemented the scheme, and we keep track of what our peers are doing in the market. When we think about our peers, we tend to think about other listed specialty retail organizations in Australia. What we found, somewhat to my surprise, is that TSR is not commonly used among that group. We ask ourselves, why? What's going on? Why are other boards like us reaching that conclusion? I think it's largely because equity markets are inherently volatile. When we're trying to have a scheme that promotes long-term thinking among a management team and leads to fair outcomes, both fair for shareholders and fair for participants, there is merit in removing or trying to dampen, at least, the impact of volatility.
The reason for that is it can lead to outcomes that can either be unfair to the participants or unfair to shareholders, in reasonably often scenarios. When I couple that with the lack of propensity for our peers to use TSR, then we've not done so to date, including that as a measure. I will note the participants in the LTI do have an inherent interest in the performance of the share price because the LTI is worth more to them as the shares appreciate. They absolutely want the shares to be of higher value. They also want EPS to be of higher value, which should, over the long run, translate to share prices. Like as a private equity guy by background, I completely understand the alignment of interests and the interests in when shareholders win, management win, when management wins, shareholders should win as well.
We're acutely aware of the philosophical thinking behind that. I'll say we're trying to achieve the same thing. I hope that helps, Mike.
That's okay.
Are there any other questions from the floor? Okay. As there are no further questions, I'll now move to the next item of business. We now move to item five on the agenda, which relates to the approval of the long-term incentive grant of performance rights to Elle Roseby, who, of course, is a Director. The members are to consider and, if thought fit, pass the following, and that is that approval be given for all purposes, including ASX Listing Rule 10.14, for the grant of performance rights to Elle Roseby as her annual long-term incentive for the year ended 28th June 2026 on the terms described in the explanatory notes accompanying the notice of meeting. Elle Roseby and her associates are excluded from voting on this resolution. The proxy results are shown on the screen. Convincing?
Jamie, are there any questions lodged prior to the meeting in relation to item five?
No, there are no questions.
Are there any questions from the floor in relation to item five? As there are no further questions, I will now move to the close of the meeting. Ladies and gentlemen, that concludes our discussion on the terms on the items of business for today. I declare that the poll will close in five minutes. The results of the poll will be released to the ASX and will be available on our website this afternoon. I thank you all sincerely for your attendance. I encourage you to talk with our fellow shareholders and some of our management teams through the next little while. I declare the meeting closed. Thank you.