Good afternoon. My name is Michael Sammells, and as Chairman of the Board of Sigma Healthcare Ltd, I would like to welcome you to today's AGM, including those joining us online in this hybrid meeting. This is our first AGM since the merger between Sigma and Chemist Warehouse Group was completed in February this year. Through the merger, we have created a stronger, more integrated healthcare business with an exciting future. More on this shortly. I wish to begin by acknowledging the Wurundjeri people of the Kulin Nation, the traditional custodians of the land where we are gathered today. We pay our respects to their elders, past and present. I formally declare the 2025 Annual General Meeting of Sigma Healthcare open. All presentations and a recording of today's meeting will be available on our website for later viewing. Voting in today's meeting will be conducted by a poll.
All polls will remain open until the conclusion of today's meeting. As we move through the items of business, I will respond to questions from shareholders and proxies. As this is a hybrid meeting, we will provide opportunities for questions from those in the room and online. For those participating online, the instructions on how to ask a question are in the details provided in the online guide, which was provided to shareholders and is on our website.
In terms of the agenda today, we have items of business covering 14 resolutions as outlined in our notice of meeting, being the Chairman and CEO addresses, the financial statements and reports, two remuneration reports, the reelection of directors, and several resolutions covering remuneration arrangements for certain key executives, the ratification of the appointment of our auditor, and finally, we have two conditional spill resolutions relating to the outcome of the remuneration reports. Before we proceed, I would like to introduce the members of the Sigma Board and management who are present today. Starting from your left, Dr. Chris Roberts, who joined the Board in October 2023 and is Chair of the Risk Compliance and Sustainability Committee and a member of the Audit Committee. Damien Gantz, who is a member of the Risk Compliance and Sustainability Committee.
Damien is a qualified pharmacist and until recently was Chief Strategy and Business Development Officer. Jack Gantz, who is a member of the Nomination and Remuneration Committee, Audit Committee, and the Risk Compliance and Sustainability Committee. Jack is a qualified pharmacist and a co-founder of the Chemist Warehouse Group. Danielle De Piller, who is a qualified pharmacist and an executive director in the role as Chief People Officer. Danny is a member of the Risk Compliance and Sustainability Committee. Mario Verrocchi, who is an executive director in the critical role of CEO Retail, as well as a member of the Risk Compliance and Sustainability Committee. Mario is a qualified pharmacist and a co-founder of Chemist Warehouse Group.
Annette Carey, who joined the board in April 2023 and is Chair of the Nomination and Remuneration Committee and a member of the Risk Compliance and Sustainability Committee and a member of the Related Party Independent Board Committee. Neville Mitchell, who joined the board in February 2023 and is Chair of the Audit Committee and a member of both the Nomination and Remuneration Committee and the Related Party Independent Board Committee. Vikesh Ramsunder, our Managing Director and Chief Executive Officer, who you will hear from shortly, and Cara McGowan, who is our Chief Legal Officer and Company Secretary. We are also joined by our senior executives who will be available to chat with shareholders at the conclusion of the meeting, as well as Alison Milner from the company's new auditors, PricewaterhouseCoopers, Zenya Delaney from our former auditors, Deloitte, and our share registrars, MUFG.
While PwC are the new auditors, they were previously the auditors of Chemist Warehouse prior to the merger. The first item of business is effectively an overview of the past 12 months and a general business update, which I will cover now before introducing Vikesh. The first thing I wish to acknowledge is the board that I have here before you today. At the AGM in January this year, where shareholders approved the merger with Chemist Warehouse, shareholders also endorsed the appointments of Jack, Mario, Damien, and Danny to the Sigma board, subject to the merger completing. They are before you here today as officers of the company. I do need to acknowledge that the current board composition does not fit the target objectives of many shareholders in terms of independence and diversity.
To understand this, I also need to confirm that this is the right board to lead your company, given the uniqueness of the merger transaction and the skills and experience required to deliver on the next steps of integration and continued growth. Since this board first convened in February this year, it has been very committed to ensuring good governance is in place at all times. This is while recognizing many of these governance practices as an ASX listed entity are new to the way Chemist Warehouse Group historically operated its business as a private company, and I thank them for the way they have openly embraced and adopted these changes. 2025 marked a pivotal moment in Sigma and Chemist Warehouse Group's long and proud history, defined by the transformative merger we completed in February.
As I said at the outset, this is our first AGM as a merged business, so I think it's important to quickly remind everyone of the merits of the merger going into the transaction. The strategic intent in combining the logistics and warehousing expertise of Sigma and the retail marketing expertise of Chemist Warehouse was clear. The merger was designed to create a leading Australian retail pharmacy franchisor and full-line pharmaceutical wholesaler. It also presented Chemist Warehouse to the ASX, enabling institution and retail shareholders the opportunity to invest in this outstanding business that has been built by its founders over the past decades. The modeling ahead of the merger pointed to the opportunity to make Sigma a stronger and more sustainable business, to bring greater retail expertise and value to franchisees, better product choice and pricing to the end consumer, and create value for all shareholders.
It also provides Chemist Warehouse a better and more efficient access to capital markets to enhance its growth prospects over the course of time. It has only been 252 days since our merger was completed, and the reality since merger is that it has so far delivered everything we anticipated and more. The first thing I would say about the transformation is that it will take time. Sigma and Chemist Warehouse are very different businesses, different origins, culture, different ways of working. Our challenge is to understand and protect what has made each company successful while merging the two into one. This has been done in a very measured way in order to maximize the value of the merged Sigma entity. The pre-merger documentation pointed to a combined market capitalization of the merged group of around $8.8 billion.
This week, with Sigma's share price up over 400% over the last two years, our market value is around $35 billion, placing Sigma in the top 20 companies on the ASX. This is an outcome of strong global investor interest in the merged group, which is off the back of the strategic execution and strong financial and operational performance of the business, which Vikesh will talk to shortly. The merger prospectus pointed to our ability to extract synergies of around $60 million per annum. With the benefit of being able to share information and conduct more detailed analysis, we have upgraded that synergy target to $100 million per annum. In the merger prospectus, we also forecast net debt of around $1 billion- $1.3 billion. With strong operational performance and cash flow generation, net debt was $752 million at year end.
With a three-year $1.5 billion debt facility in place, we have significant headroom to pursue growth ambitions should the right opportunity emerge. The reduction in debt has been aided by the strong cash generation capability of the merged group and relatively low capital investment requirements. As we progress through our integration, particularly the integration of distribution centers and inventory, we will bring more rigor to improving working capital management. The board will, in due course, consider the appropriate level of debt and use of capital to continuously optimize shareholder returns. We rewarded shareholders with a $0.013 per share dividend, fully franked, consistent with our stated dividend payout ratio of 50%- 70% of net profit after tax.
Going into the merger, we were very cognizant of the need to introduce first-class governance policies, processes, and practice to provide the necessary assurance to shareholders around ongoing related party transactions and overall fairness. This has been functioning as intended. As we outlined at our merger AGM, we implemented a strong related party governance framework that is designed to overlay all related party transactions. This has been in place since day one of the merger. We established the Related Party Independent Board Committee, which I personally chair with Neville and Annette as other independent members. The committee provides the governance overlay and direction and is supported by the Related Party Working Group, which manages the everyday arrangements at the direction of the Independent Board Committee. Since its establishment, we have had four IBC meetings and five Related Party Working Group meetings, as well as ad hoc catch-ups.
Provided related party transactions fall into the category of certain pre-approved agreements, the working group has a delegation to approve and report these to the board committee for formal ratification so we don't slow down progress. Any proposed related party transaction that is not within the standard pre-approved agreement terms must come to the board committee for review and approval. Reassuringly, the process has been operating in line with expectations. Lastly, on ESG. In the year just completed, we had a major focus on the cultural integration that comes with bringing together the two businesses. It was important to not only bring together the best expertise and experience, but to embrace the entrepreneurial can-do spirit of the Chemist Warehouse team with the governance overlay from the Sigma team.
Whilst merging our two support centers into the Preston office has resulted in some departures from the business, being together is an important step in our integration. For those team members who have left the business, we thank them for their service. As a result of our change of year end and Sigma releasing a sustainability report in May this year, we did not release a new sustainability report with our first merged annual report. We have, however, made strong progress in advancing our sustainability efforts. The new Risk Compliance and Sustainability Committee has been formed, chaired by Chris Roberts. Importantly, we've made inroads in preparing our merged entity for the upcoming changes with the introduction of mandatory climate reporting that will take effect in 2026.
This includes having the appropriate governance structures in place and better understanding and being audit ready with the calculation of our baseline Scope 1 and Scope 2 emissions and preparing for the introduction of Scope 3 emissions reporting. As reported in our annual report, our community engagement is strong. As a CSO wholesaler, serving the community is at the heart of what we do every day. Further, we've also supported the community through our giving programs with over $8 million in support provided during the year to organizations such as Lead Timber, Save Our Sons, Gotcha For Life, Fight MND, and Food Bank, to name a few. Before I hand over to Vikesh, I'd just like to thank my fellow board members for their hard work, diligence, and support as we navigated a transformational year.
As a newly constructed board, we have the spread of skills and experience to provide the oversight as we seek to execute our strategic objectives. I also wish to thank Vikesh for his exceptional leadership, the executive team for the outstanding progress and achievements, and all Sigma and Chemist Warehouse team members for their resilience through what is a challenging period of change. With those comments, I thank our shareholders for your support of Sigma and will now hand over to Vikesh.
Thank you, Michael. I also extend my welcome to everyone in the room and those joining online. FY 2025 marks the first set of results for Sigma as a combined business. These results demonstrate the strength of the merger and the growth opportunities that it brings. Our company is now a stronger, more integrated healthcare business with enhanced scale, capabilities, and long-term growth pathways.
Sigma and Chemist Warehouse have united as Australia's leading retail pharmacy franchisor and full-line pharmaceutical wholesaler, recognized by the inclusion in the leading financial market indices. For the 2025 year, research and data company Fonterre recognized Chemist Warehouse in the top 10 fastest growing consumer brands in Australia. We have world-class distribution infrastructure, coupled with unparalleled franchise and marketing expertise. Today, Sigma supports almost 900 Australian franchise network stores across three brands: Chemist Warehouse, Amcal, and Discount Drug Stores. We have around 3,000 wholesale pharmacy customers serviced by 14 distribution centers across Australia, distributing over 530 million units last financial year. We cover the entire country with over 99% of orders delivered in full. Our domestic strength and ongoing growth runway provide the opportunity to carefully expand our international footprint with 77 stores at year end in four countries.
Whilst we remain a house of brands, we have also grown our own and exclusive label products to expand ranges, provide customer choice, and enhance margin. Most importantly, we have the infrastructure, expertise, capabilities, and capital to drive long-term growth across all our major markets. It's clearly an exciting time to be at Sigma. In FY 2025, we delivered promising results with strong growth. Revenue for the year was up 82% to $6 billion, reflecting a combination of market share growth as well as the inclusion of the Sigma wholesale business from February 2025. Normalized EBIT was $835 million, up 41%, and normalized net profit after tax increased by 40% to $579 million. We also reported pro forma results for the year. Pro forma assumes the merger took place for the full period commencing from 1 July 2024, with the same normalization adjustments.
Pro forma EBIT for FY 2025 was $903 million, which is the base from which we expect to grow in FY 2026. In terms of some key highlights, the Chemist Warehouse network achieved over 11% like-for-like sales growth. We opened 35 new Chemist Warehouse stores, we launched the Wagner Genetics Medicines range, and our distribution centers delivered 29% more product while cost per unit reduced by 11%. The achievements from this year provide some insight into what is possible. Most pleasingly for me is that we have a highly scalable, capital-light business model and the balance sheet strength to deliver enduring long-term growth. 2025 was a busy and productive year for the team. We delivered these results while making good progress bringing together two complementary businesses. We have unified our leadership structure and took some key decisions to strengthen the business.
We established a dedicated integration management office to plan and coordinate the activities. We combined our support centers in Preston, and we converted most of the My Chemist stores to Amcal and DDS . Recently, we announced the closure of our e-pharmacy DC in Victoria and CWDCs in Port Adelaide in South Australia and South Guildford in Western Australia. The volumes in SA and WA will be absorbed into the Sigma DCs in Pooraka and Canning Vale. These changes are expected to be fully implemented by the end of the calendar year 2026. We have also completed a deep dive to validate our integration opportunities. This resulted in us upgrading the expected synergy benefits of the merger from $60 million- $100 million by year four.
Whilst realization of the synergies will be weighted towards the back end of the four-year target period, savings will be incrementally delivered to further support EBIT margins. Looking ahead, we have a positive long-term outlook and our execution priorities are clear. We will continue to roll out new stores domestically and internationally with an objective to achieve network growth in line with historical patterns. We are opening new network stores in underpenetrated local and offshore markets while revitalizing Amcal and DDS . Own and exclusive products will continue to be rolled out to support margin and differentiation, but we will always remain a house of brands. Meanwhile, ensuring a seamless integration of the business will remain a top priority for the years ahead. Pleasingly, the strong momentum the business delivered in the fourth quarter of FY 2025 continued into FY 2026.
For the first quarter of FY 2026, total Chemist Warehouse network sales was up 17.9% and like-for-like sales was up 14.7%. First quarter FY 2026 sales reflect a strong performance across key product categories and a stronger contribution from GLP-1 sales. I do call out, though, that in FY 2025, GLP-1 sales did not start to gather meaningful momentum until the second quarter. This has led to the elevated sales growth in the first quarter of FY 2026. As we enter the important Christmas trading period, our retail network is well prepared to execute with excellence. Finally, I would like to personally thank the board for their support and guidance, the management team and all team members for their valued contributions throughout the year, and of course, our franchisees, supply partners, and customers for their trust and collaboration. Thank you. I will now hand back to Michael.
Thank you, Vikesh. Before we move on to the remaining items of business, we did receive one question from a shareholder in advance of today's meeting. The question was, with all the different brands owned by this company, would you consider linking all loyalty programs to have one cover all the brands owned by Sigma Healthcare? We thank you for the time you've taken to ask your question. A broad loyalty program across all brands is not a current priority. Our priorities for now are focused on driving the integration, extracting the synergies, and growing our business. A loyalty program may be considered down the track. We will now move on to the next four items of business, which are the financial statements and reports, the remuneration reports, the reelection of directors, remuneration arrangements for certain key executives, ratification of appointment of our auditor, and two conditional spill resolutions.
All eligible proxy votes were required to have been received by 2:00 P.M. on Monday, October 20. All voting will be conducted by way of a poll. I'll be voting any undirected proxies appointing the chairman as a proxy in favor of all resolutions. We have numerous resolutions to work through today, so we will provide an opportunity for questions at various intervals along the way rather than after each resolution. We will show the votes for the resolutions, then go to questions from the floor first, then online, then from the phone. Item two on the notice of meeting is consideration of Sigma's financial report, director's report, and auditor's report for the financial years ended 31 January 2025, and 30 June 2025, which I will take in as received and read.
Given Sigma would historically hold its AGM in around May of each year, we have two sets of financial statements and reports to consider at this meeting. As part of the merger, ASIC provided relief to Sigma to align the financial year-end reporting to Chemist Warehouse June 30 year-end and provide an extension period to hold our 2025 AGM. The financial report for the financial year ended 31st January 2025, was Sigma on a standalone basis. This matter does not require a resolution. The company's audit partner, Ms. Zenya Delaney from Deloitte, who was the auditor for the relevant period, is available to take any questions on the auditor's report and the conduct of the audit. Similarly, Sigma has prepared a financial report together with the director's report and the auditor's report for the financial year ending 30 June 2025.
The company's audit partner, Ms. Alison Milner from PWC, who was the auditor for the relevant period, is available to take any questions on the auditor's report and on the conduct of the audit. Are there any questions from the room with respect to the company's financial report and director's and auditor's report for either of these financial reports?
Chairman, we've got a question from Mike Robey.
Good afternoon, Mr. Chairman. My name is Mike Robey and I represent the Australian Shareholders Association, which represents the mom and dad retail shareholders in this country. Today I hold about 1.5 million proxies, worth a modest $4.5 million on behalf of these shareholders. My first question concerns the transition of what was a very private founder-led company into a very public ASX listed one of a size and clout similar to our beloved Coles and Woolies. Look at the markup of them. You have been part of that change as Chairman. I'd be interested in how the process of merging these two quite different cultures is going so far. If you could give us some color behind that, that'd be great.
Okay. Thank you. I think, as I said in my speech, Mr. Robey, and thank you for your question, Sigma and Chemist Warehouse are quite different companies, different histories, different ways of running. We've taken the business of integration in a very measured way so far. I think our job is to maximize the value on behalf of shareholders of the organization. That involves harnessing everything that's made Chemist Warehouse successful and protecting it. Similarly, with Sigma, on the way through recognizing that Chemist Warehouse is now part of the listed entity of Sigma Healthcare and with that has a whole bunch of new governance processes. I think, as I said in my speech, I take my hat off to the Chemist Warehouse folk about the way they have harnessed those changes.
I think they had done a lot of homework for many years over the prospect of coming to market in one way, shape, or form. They were ready to do so. They've been enormously respectful about all the governance processes that at one level we're imposing on them, quite different to the way they would have run their business. Integration will take time. We're being cautious about it because we're not going to spoil what works properly. I think Vikesh and his team are doing a great job of that so far. I think our results on the way through speak for themselves.
Chairman, Stephen Mayne has a question for you.
Thanks, Chair. Running a great meeting so far. Hybrid best practice. Worried you might do the one job lot of questions, but you've promised the intervals, which is a good compromise between going through 14 laboriously and just doing it all as one job lot. Just a couple of questions on general business. The annual reports do note the escrow arrangements with the founders of Chemist Warehouse. What would it take either legally or contractually to vary those agreements? Is it just people sitting down and a handshake, or is it sort of a legal because it was in the prospectus? Is it sort of like a legal, can never be changed, irrevocable arrangement?
Okay. Thank you, Mr. Mayne. First, I appreciate your compliments of the way we've grouped this meeting. That is appreciated. The escrow arrangements are clear, and they've been publicized through our prospectus and documentation. There's no prospect or discussion about changing those escrow arrangements.
All right. Okay. In terms of the process around the notification, we saw the maximum sell down from the three founders when the first 10% came out of escrow in August. Circa 4% or 5% of the company was sold for a few billion in fairly quick fashion. What's the notification process around that within the board for both directors and non-director founders such as Sam?
The first thing I have to say is the decision to sell or not sell shares is exclusively the sole property decision of the owner of the shares. It's not a board matter. At no time has the board discussed with the owners of those shares who may or may not sell what, and we have no intentions of doing so in the future. That's the first point. The second point is that we do have a governing policy about particularly board members' KMP selling shares. Effectively, that would be a notification seeking approval from ourselves for those relevant people. That's the process.
All right. Now, the one small deviation from best practice you've done so far is you didn't include the proxy votes in the formal addresses that you lodged with the ASX before the meeting commenced. A lot of companies are doing that now because the AGM really essentially is an election outcome announcement event. If you don't tell the people here today what the proxy position is when 99% of people have already voted and you already know what the votes are, we finish up sort of debating in the dark if there have been any issues. I just want to ask one broad sort of umbrella question. Did any of the main proxy advisors recommend against any of the 14 resolutions today? Have there been any material against votes or protest votes which would be worthy of discussion or explanation during the course of the meeting?
Okay. The first answer to your question is the way we've grouped and dealing with proxy votes through the 14 resolutions that we have today is that prior to opening the discussion on each of the items, we will show the votes first, then invite questions and answers. At least people at that point have the benefit of understanding voting that has taken place before we open the forum for questions. I've lost track of the second part of your question, Mr. Mayne.
Any proxy advisor against recommendations or material protest votes?
Typically, proxy advisor reports on public information. I am aware of one who has recommended a no vote on one particular item, not being the remuneration report, another item. Those reports aren't public, but yes, one proxy only.
All right. Okay. Just a final question on general business. Have we got any enterprise agreements coming up in the next 12 months? Just broadly, a question about the union coverage across the two companies. I know warehouses traditionally are quite heavily unionized. Which unions are we primarily dealing with? Do we have any material agreements which are expiring in the coming 12 months? Thank you.
I can't say specifically, Mr. Mayne. What I can say is that enterprise agreements expiring are routine business practice. Negotiation renewal is also routine. From our point of view, there's nothing in any of that that should worry shareholders in any way, shape, or form. It's a routine business practice we're well versed in. Are there any further questions from the floor?
We fully understand the need for major shareholders to actually have people on the board and therefore perfectly happy with the structure of the board at the moment. The one question I have really is about what's called a board skills matrix. Best practice here is to list skills required to run a particular business down one axis, the names of the directors across the other axis, and then fill in each square with what level of skill from elementary to expert. The reason is that shareholders have very few rights in most companies, but one they do have is the ability to elect directors. It's quite useful for them to get quite good granular detail on directors. This is becoming more and more prominent amongst larger Australian listed companies, and in particular in the finance industry, where I believe APRA is going to make it mandatory.
My question really is, will you look to actually expand what your current skills table is into a proper matrix with preferably audited skills so that it's not self-assessed? I have one other question, but I'll wait.
Okay. Thank you for your question, Mr. Robey. I think we'll take that on board. I think as time goes on, we'll perpetually review the governance practices and our disclosures to the market, along with the skills matrix. I make no promises other than to say that we perpetually review what we do.
My last question on general business is about capital raising. You had a big capital raise about 15 months ago or thereabouts, which didn't actually comply with what we considered to be the best practice for retail shareholders in that if you didn't have the $30,000 to buy the shares, you got diluted when the extra shares came to market. There is a process, which is no real skin off Sigma's back, where you can actually make it much fairer for retail shareholders. Effectively, it's called Patrio. What you do is you issue rights to the shares that you choose not to buy. All I guess we're asking here is, should you go to market again to raise capital for the issue of more shares, would you consider using what's called this Patrio process, which effectively leaves retail shareholders who don't participate completely, completely fairly undiluted?
No. As I think we've briefly discussed before, Mr. Robey, we'll take that on board. We don't have any plans for capital raising at the moment. Another day, another time, if we do, we can take that feedback on board.
Chairman, Leonard Levy has a question for you.
Chairman, first of all, may I say congratulations? It's good to see how much better the performance is this year than it was 12 months ago.
Thank you .
Some people in the room may know I've been a member of this entity in one form or another for over 65 years. In those good old days, the shares were only $1 each, but we did get $0.28 dividend. Now, looking at just general adjustments for inflation, you'd expect those dollar shares to be $64 today, but they're only about $3. Instead of getting $0.28 a share now, we have just had a huge increase to get $1.3. Seriously, over the years, we've had a huge growth in business. I come to each of these meetings if I physically can, and I hear the same story every year. We're going to invest more money. We're going to grow the business. It's going to be better. It is better. It is bigger. It's wonderful. The return to investors, I find not satisfactory.
A point's been raised a moment ago about the composition of the board and the future formation and composition of the board, which you might like to address in just a little bit more detail. What really, seriously, what are we going to do about a business like this, which returns such a poor result as a dividend on investment?
Mr. Levy, thank you for your question and your loyalty to Sigma over that period of time. On the return to shareholder question, I have to say this, that the dividend you recently received, $0.013 per share, represents a payout ratio between 50%- 70% of our net profit after tax. I think as a dividend yield stock, that's a strong cash payout to shareholders from profits earned by the company. As you would appreciate, we did issue 9.9 billion shares to Chemist Warehouse as part of the transaction to merge Sigma and Chemist Warehouse. If I looked at today's share price measured against the share price of Sigma as it was, as disappointing as it might have been back then, I think when I joined the board, the share price was $0.45, $0.50 odd. Today, I think this afternoon it's $3 something.
I can't speak for 60 years of history or the last 30 years, but I can say for the past three years, you've experienced a very material share price growth, which I think we're really proud of. Prior to that, I honestly can't reassemble history for you.
I appreciate your comments, and they're perfectly correct, of course. It still doesn't alter the fact that when it comes back to cash in the pocket, there's very little.
Yes, no, I hear you. Are there any other questions from the floor at all before I... Gary, is there anything online?
No questions online.
there anything on the phone, Gary?
There are no phone questions.
Thank you very much. That concludes our consideration of the financial statements and reports. We now come to item three on the notice of meeting to adopt the company's first remuneration report for the year ended 31st January 2024. The Corporations Act requires an advisory non-binding resolution to be put to shareholders for the adoption of the remuneration report. Before I open this item, let me make a few introductory comments that pertain to both the first and second remuneration reports that are being tabled today. Sigma received the first strike against our 2024 remuneration report, which was prior to the completion of the merger. Whilst that vote was prior to the merger completing, this strike carries forward into the merged group's 2025 year.
As I reflect now with the benefit of hindsight, I remain comfortable with the arrangements we put in place and the reasons we put them in place. The board at the time had a natural reluctance to use retention payments for the CEO and CFO, but in the context of the unique merger proposal, felt it was the right thing to do for the business as a purely one-off measure. Through retaining our people, we've executed an incredibly complex and transformational transaction that has ultimately delivered significant value creation for all shareholders, as I outlined in my earlier address. While we stand behind the reasons, the board did take on board the feedback and concerns raised from stakeholders through the process, with changes made in reporting and structures for our subsequent remuneration reports.
We assessed structures and hurdles in place and took external expert advice to benchmark Sigma against other top ASX listed high-growth companies. I think it's important to point out that through this transaction and the share price re-rating that has followed it, Sigma has very quickly been elevated from an ASX 200 company to inside the top 20 companies on the ASX. Our remuneration structures and parameters need to reflect this status. For some final context, as Sigma and Chemist Warehouse were competitors up until the merger was completed, this new board was not formed until February this year and therefore was not able to formally consider the future operating parameters, including remuneration structures other than what was outlined in the merger prospectus. I also acknowledge the feedback from the market requiring further clarity on our FY 2025 NPAT number.
That is the starting base to which EPS targets will be measured against. With further work now complete and certain assumptions adopted around debt, interest, and tax in the pre-merger period, the FY 2025 normalized pro forma NPAT being used for this assessment is $598.8 million. As we further mature as a merged entity and have the benefit of time together to better understand our future growth profile, we will review and assess the design and performance metrics that are in place to ensure they are appropriate at the time. I will now put on the screen the valid available votes received from shareholders for this resolution. We now come to item three, resolution two, being to consider, and if thought fit, to pass a resolution for the second remuneration report.
That the remuneration report for the year ended 30th of June 2025 contained in the company's annual report for the year ended 30th of June 2025 be adopted. I will now put on the screen the valid available votes received from shareholders for this resolution. I will now open up to any questions with respect to the adoption of the first or second remuneration report for the year ended 31st of January 2025. Firstly, are there any questions from the floor?
Chairman, Mike Robey has a question for you.
This is a small matter, and it actually refers to the existing year's remuneration framework. You've got total shareholder return, but you've got an absolute total shareholder return as one of the measures against the LTI hurdles. I guess if you looked at your peer group companies, you'd find they use relative total shareholder return. You're looking at how your other companies are going in that cohort, and you effectively set the benchmarks around doing better than the median and whatever in that. All I'd suggest is if when the time comes and you review your current remuneration structure, that you change the absolute to a relative TSR, as it's called. Look, my sympathies to the Sub-Chair who looks after remuneration. This must be a nightmare to have to do all these reports. Thank you.
Thank you, Mr. Robey. Comment noted.
Chairman, Stephen Mayne has a question for you.
Thanks, Chair. Just firstly, you had a strike, Sigma, the old Sigma shares at $0.80, had a strike, and then you've managed to go 18 months before you've come to the shareholders again, effectively. Could you just take us through the legal situation as to the law obviously says you've got to do a second strike vote within 12 months. What was the law in terms of, and was that actually a bit of a key point of discussion with ASIC saying whether you could have the six-month extension or not? This meeting in January, you said you weren't sure when the meeting was going to be, and you have gone 18 months since that strike.
I think it'd be fair to say that we've had lots of discussions with regulators over the journey, and the word unique and unprecedented has been used a lot. Just beyond the merger, the aligning of balance dates, Sigma was a January 31 balance date. Sigma Chemist Warehouse is a June 30 balance date. Effectively, through discussions with the regulators, they came to the view with us that the most appropriate and efficient thing to do was exactly what we've done. Rather than potentially have put shareholders to the cost of running an AGM in May based on a January 31 balance date set of considerations for a business that doesn't exist in that form anymore, this is a much more efficient use of everyone's time. Effectively, that's the circumstances.
This is a truly unique set of circumstances coming to an AGM with two remuneration reports with different KMPs in both. The first strike carries through. I'm delighted to see the votes here that I have overwhelming support for the last two remuneration reports.
With this one here, you've got the 98.5%. Is it possible just to pop up the proxy from the first one? There was just a bit of an anomaly with a very large open vote of what's happening there. I would have thought the founders, someone's got 1.34 billion sitting in the room. I would have thought all the Chemist Warehouse founders couldn't vote on REN. That shouldn't be sitting as an open proxy. It should have been excluded. What is the situation with that $5 billion worth of open votes that are here today ready to be voted?
I can't say specifically who it might be other than to say that open votes will be carried forward, and I take a very strong support for that remuneration report.
They're not open with you. They're not open votes that you hold as Chair. That's normally the most open votes at a meeting are held by the Chair where people haven't ticked all the boxes and it defaults to the Chair. That very large chunk is not held by you today?
It is held by me, I think. It is held by me. I can assure you that for all of the voting, we've worked through very closely about who can and can't vote for which resolution based on the fact that they may or may not be conflicted.
All right.
Now, as I mentioned, the stock's gone from $0.80- $3.08. It's all irrelevancy, frankly, the salaries on the overall performance. I'm pleased to see that the box tickers haven't got caught up in structures and TSRs and hurdles and details. Performance has been great. My only request is that when you disclose the poll outcome, could you also include the headcount data like with a poll? It's always interesting to see how many of the, in your case, 35,385 shareholders have voted. I'd like to vote today, but obviously the founders have got 40% and my $500 worth of shares will be irrelevant. I may as well not bother to vote. If you disclose the headcount data, then all shareholders can see the sentiment of retail shareholders, and it will also stimulate more participation by retail shareholders because they'll see that their vote is actually being reported.
TABCO did this last week, and it was 97% for Gillan McLaughlin's LTI based on shares, but 58% of retail voted against. We saw that because they voluntarily disclosed that. Computer Share does it, Qantas, TABCO, SunCore, the whole range of them doing it. It'd be great if you could join that disclosure train today and just hopefully encourage and stimulate more retail voting at future AGMs.
I'll take that request on board for further ones. We won't be changing what we do today, but we will take it on board as an ingredient to our next meeting. Are there any further questions from the floor? Any questions online?
No questions online.
Any questions from the phone?
Yeah, there are no phone questions.
Thank you. That now concludes resolution one and two, and we thank you for your support. We now come to item number four on the notice of meeting, the reelection of two directors. In accordance with Rule 3.6B of the company's constitution and Listing Rule 14.5 and being eligible, Mr. Neville Mitchell and Ms. Annette Carey both offer themselves for reelection as a director. No other nominations have been received in accordance with Rule 3.5C of the company's constitution. First up is item 4.1 relating to the reelection of Mr. Neville Mitchell. Neville was appointed to the board in February 2023 and is currently the Chair of the Audit Committee and a member of the Nomination and Remuneration Committee and of the Related Party Independent Board Committee. Neville's experience is set out in the notice of meeting.
From the board's perspective, Neville brings a wealth of industry experience and extensive financial expertise, has been a valuable contributor to the board and a leader of the Audit Committee since joining. I now hand over to Neville to address shareholders. Thank you, Neville.
Good afternoon. I'm standing for election as an independent non-executive director at this AGM. I'm currently the Chair of the Audit Committee. By way of background, I'm a chartered accountant and my executive experience was largely as Chief Financial Officer with Cochlear Limited for over 25 years. This provided me with not only a sound financial background, but also practical hands-on experience in the global healthcare sector. Since leaving Cochlear in 2017, I've served on a number of boards in industry, government, and advisory. Currently, I am the independent non-executive Chairman of Fisher & Paykel Healthcare. I'm also an independent non-executive director of Sonic Healthcare and the Audit Committee Chair there. This has provided me with extensive governance experience both here and in New Zealand, where Chemist Warehouse is well represented.
Sigma plays a unique and essential role in supporting the overall health of Australia, a role that I think is often unrecognized. I'm very proud to be part of the Sigma team. I believe I have the depth of relevant experience to add value to Sigma, and I look forward to working alongside my colleagues on the board and the wider team to deliver shareholder value. I seek your support for my election.
Thank you, Neville. All directors have voted in favor of the resolution, and I now move that Neville Mitchell be reelected as a Director of the company. I will now put on the screen details of the valid available votes received. Are there any questions with respect to this item? Firstly, from the floor.
Neville, I was a bit disappointed the other week when I asked you at the Fisher and Paykel AGM to voluntarily put up a remuneration report, which is not required in New Zealand. Fletcher Building, Xero, and a few others do it. You said no. As you've seen today, it's nice to get 98% in favor of the remuneration report, and I hope you can spread the love and support remuneration report voting elsewhere at major public companies in Australasia. Just because it's not in the law in New Zealand doesn't mean it's not good practice that shouldn't be embraced. I'm delighted that Neville's on this committee, serious heavy hitter, a lot of experience. I've just got a couple of specific questions on the related party transactions committee, and I'd like to hear from Neville on that. Are we settling into a routine of sort of every second month meeting?
Is that because you've said we've had four so far? Who are the lead executives? Within the company, who are the staff or the executives who are actioning and reporting back to the three non-executive directors on the committee? It's a very sensitive area. There's a whole lot of complexity. We haven't seen anything like this before in the public markets. Quite hard for Neville in Sydney, part-time non-executive director. Who are the people in Preston, elsewhere, actually executives running the management and the reporting of the whole related party transactions management process?
Mr. Mayne is Chair of the committee. I'll take that question. I won't be naming the individuals who are on the working group, but we have three very experienced people on it who are heavily involved in the financial reporting, the legal work, and the licensing work that goes on. I need to remind ourselves that we did a lot of due diligence on all of these transactions pre the merger to inform the prospectus. There was an independent expert's report that opined on them. Our experience to date has been that there is no discernible difference at all between the arrangements put in place for related parties as it relates to franchisee arrangements as compared to non-related parties. All the property transactions are supported by two independent market valuations. Coming into setting up this committee, we believe that there was no discernible difference.
Our meeting rhythm and detailed work has confirmed that. I think we have disclosed more details on related party arrangements than we are legally obliged to in our reporting, and I'm very comfortable with the objectivity, the experience, and the process.
All right. I know Neville has a microphone in front of him and he's up for election. I'll just throw one last question through you, Chair. I'd be interested to hear Neville's perspective on what have been the trickiest issues from his point of view in managing the management of the related party transactions, and also just get some color and some understanding as to whether the committee's role is really just to manage sort of a business as usual related party transactions process, disclosure, and management, or to encourage managing down the amount of related party transactions. It would be good over time to reduce the number. You know, the lease comes up and just so is there a goal here to actually try and overall reduce it?
Are there any examples that Neville could cite of where there's been good progress in just reducing the complexity and the scale of the related party transaction arrangements?
I'll take that as Chair of that committee, Mr. Mayne. What I would say is related party transactions are complex by volume rather than the agreements themselves. Our approach to this whole matter has been not changing the way that Chemist Warehouse has been operating its business. It is about putting good governance and transparency and reporting next to it. That's been our approach. We haven't walked in together seeking to materially change what works and what exists. The rate of growth of related party transactions will naturally slow because as it relates to franchise agreements, the related parties in many circumstances are almost maxed out over how many they can own under various state-based regulations. I'll continue to say that we're really comfortable that we have a very strong handle over what's going on.
It's well governed, and all the promises we made to shareholders through our AGM material and prospectus are being met. Are there any further questions from the floor in relation to this matter? If not, Gary, do you have anything online?
No questions online.
Do we have any on the phone?
Chair, there are no phone questions.
Okay. I congratulate Neville on his reelection. Thank you, Neville. Next item is item 4.2 relating to the reelection of Ms. Annette Carey. Annette was appointed to the board in April 2023 and is Chair of the Nomination and Remuneration Committee and a member of the Risk Compliance and Sustainability Committee and of the Related Party Independent Board Committee. Annette's background and experience are set out in the notice of meeting. From the board's perspective, Annette brings extensive legal, commercial, and logistics experience. She has been a valued contributor since joining in April 2023. I'll now hand over to Annette to address shareholders. Annette.
Thank you, Michael, and good afternoon, everyone. My name's Annette Carey, and it's been a great privilege to have served on the board of Sigma Healthcare since 2023. I'd like particularly to thank and acknowledge our Chairman, Michael Sammells, my fellow board members, the executive management teams, and all team members of Chemist Warehouse and Sigma businesses who are now united under one banner and with one purpose, which is to serve the community for the benefit of all stakeholders. Since February of this year, I've served as Chair of the Remuneration and Nomination Committee, and I've worked closely with our board and external remuneration advisors to align our remuneration framework to the merged business and to set the business up with success going forward to attract, retain, and reward high-performing team members.
In doing so, obviously, I've been conscious of the first strike that Sigma received last year for its remuneration report. Although there's more work to do to refine the framework, I believe we've struck an appropriate balance, noting that we've not yet had a full 12 months together to calibrate some of the performance measures around growth and operational efficiencies. In putting myself forward for reelection today, I've reflected on the skills and experience that I can hopefully continue to bring to the Sigma board. These include experience working in and then leading another of Australia's most successful founder-led businesses, Linfox Australia, and managing the international operations of Australia Post, which has one of the largest franchisee networks in Australia. I bring a mix of strategic, operational, legal, and governance expertise and skills, particularly focused on complex supply chains.
Since 2022, I've been a full-time non-executive director in the listed, unlisted, and government sectors. In closing, I'd just like to reiterate my optimism and excitement about the future of the Sigma Chemist Warehouse business, and I hope that I can make a contribution to that success as a member of the board. Thank you.
Thank you, Annette. All directors have voted in favor of the resolution. I now move that Annette Carey be reelected as a Director of the company. I'll now put up on the screen details of the valid available votes received. Are there any questions in respect to this item?
Chairman, Stephen Mayne has a question.
Just one quick one. I'm strongly supportive and will vote in favor of Annette's reelection. I just want to clarify, under the terms of the merger agreement, are the three Chemist Warehouse founders contractually or legally prevented from voting against an independent director today?
They're members of the board that unanimously voted in favor to reelect. I think there's a natural follow-on from there.
I know that. Is it in the merger agreement that the founders are not allowed to come in and reshape the board in how they would like? Is it contractually locked in, or it's just good faith?
The merger agreement was really clear about what the board would be on the first day, and from that day forward, it's the property of effectively the shareholders and the board as to what happens after that. There are no promises made or other conditions in any agreements.
Right. Okay. All right. From a governance point of view, it would be good to see another one or two independent directors added. We've got four executive directors, although I think Damien's rolling off to NED. It'd be good to see a reduction over time. What happens next August when the three founders can sell their remaining 90% stake? Who knows? Do you think we'll see any changes to board composition, independence versus non-independence before we gather again next year?
I'll say two things, Mr. Mayne. One is this is the right board for this business at this point in time. It's natural that a board considers succession over the course of time, and as the business changes, the needs change, shareholdings may or may not change. That's obviously a discussion that we will have over the course of time. I'm not promising anything because effectively this is a new board and we've just started our work. Board succession and planning is a natural piece of work that we will do.
Just don't add you to your CFO, Richard, here as our fifth Executive Director, if that's all right, for next year.
Thank you. Are there any other questions from the floor? Gary, anything online?
Nothing online.
Are there any questions from the phone?
Chair, there are no phone questions.
Okay. Thank you. I congratulate Annette on her reelection. That now brings us to item five and resolutions five, six, and seven regarding the remuneration arrangements for the Managing Director and Chief Executive Officer. A full explanation of this agenda item and the three supporting resolutions is set out and explained in the notice of meeting. As an overarching comment, as we embark on a complete transformation of the merged Sigma group, the board has reviewed the remuneration framework in place to ensure greater alignment with the breadth and depth of our business, the increased scale and complexity, and our updated strategy and appropriate growth metrics. In relation to the 2025 long-term incentive plan, Sigma has taken external advice in establishing our remuneration structure to align with more market standard structures and in setting performance targets that are appropriate for an ASX top 20 high-growth company.
Under the 2025 LTI plan, the CEO can earn up to 150% of his TEC, total employment cost, in the form of rights if the tiered TSR and EPS hurdles are achieved. With that introduction, I'll now move to each resolution, and we will take questions at the end of these three resolutions. Item 5.1 relates to the grant of 813,449 rights to the Managing Director and Chief Executive Officer under the 2025 Long-Term Incentive Plan. I will now put up on the screen details of the valid available votes. Item 5.2, Resolution 6, relates to the grant of performance shares to the Managing Director and Chief Executive Officer under the company's Short-Term Incentive Right Plan. Participants in Sigma's SEI plan are assessed against predefined financial and non-financial performance measures.
The board retains discretion to amend aspects of the plan as a last resort, such as to reflect achievements beyond the predetermined measures or events beyond executives' control. The board believes it continues to demonstrate its commitment to rigorous performance hurdles evident through increased transparency in our SEI disclosures and remains confident in its ability to strike the right balance in setting achievable but challenging targets to ensure executives continue to deliver improved shareholder returns. I will now put on the screen details of the valid available votes received. Item 5.3, Resolution 7, relates to shareholder approval for the potential retirement benefits to the Managing Director and Chief Executive Officer in accordance with Section 200B and 200E of the Corporations Act.
The board has sought shareholder approval at this time to provide Sigma shareholders and our CEO with certainty regarding the terms that may apply if a relevant accelerated event were to occur and to ensure that such arrangements, which are considered appropriate by the board and in the best interests of shareholders, are able to proceed in a timely manner. I will now put up on the screen details of the valid available votes received. I will now open up for questions in relation to Resolutions 5, 6, or 7. Do I have any questions from the floor on this matter? If there are no questions from the floor, or Gary, anything online?
Nothing online.
Thank you. Would there be any questions from the phone on this item?
Yeah, there are no further questions.
Thank you. That concludes consideration of Resolutions 5, 6, and 7, and again, we thank you for your support. We now move on to Resolutions 8 and 9, and again, I will take any questions at the end of these two resolutions. Item 6.1, Resolution 8, relates to the grant of 314,021 rights to the Chief Executive Officer Retail under the 2025 Long-Term Incentive Plan. I will now put up on the screen details of the valid available votes received. Item 6.2, Resolution 9, relates to shareholder approval for the potential retirement benefits to the Chief Executive Officer Retail in accordance with Section 200B and 200E of the Corporations Act. I'll now put on the screen details of the valid available votes received. Are there any questions with respect to Resolution 8 or 9? Starting with questions from the floor.
Chairman, we have a question from Sabermain.
Okay, so one of those resolutions, there was $1.5 billion worth of votes against. Normally in this situation, there's an information imbalance. You know a lot more than we do. Can you shed any light on what the issue is? Which proxy advisor? Have you said you'll address it? You know, what's going on? Maybe if we put the slide up showing the modest against vote on the other resolution?
The one issue that I've had discussions out there with some shareholders and a proxy advisor, there was some concern about the EPS rates of target growth in the LTI scheme. There was a question around pondering whether a full vesting at 15% compound annual growth was a strong enough target. What I've said transparently to everybody out there who's asked in meetings I've been involved with is that the first occasion on which this board could sit down together to discuss the future of the business was in February this year. As you would appreciate, given the complexity and magnitude of the merger, it takes time to get a really clear view about what the future might look like strategically and financially. As I stand here today, I'm reasonably comfortable that I have a good grasp over forecasting for the next 12 months.
The out years are a much higher level. We haven't had that much time together. In that context, we have our own view about that, and we also took advice from a remuneration expert consultant that has been employed to help us understand what equivalent EPS metrics would look like in an LTI scheme over three years for a large listed ASX high-growth company. We came to the view that vesting would kick in at 7.5% compound growth and full entitlement vest at 15% compound growth. We remain comfortable with those metrics. That's the only issue that sat out there, quite frankly. As I said to people, as we spend more time together and we have greater clarity about the future, we will perpetually look at our RIM frameworks, our LTI schemes, and targets.
When I stand here next year with something, that could be the same, that could be different. That's the issue.
All right, I am going to speak against this resolution just on a materiality point of view and request that Mario doesn't ask for any more votes or grants on LTIs at future AGMs for this reason. If you own $4 billion or $5 billion worth of stock, it's just immaterial. I would just say, you know, when it comes to billionaire pay at public companies, the continuum is the Packers, Kerry and James work for free, and the Murdoch men who've taken $2 billion from public companies in the last 25 years. From gerrymandered stacked public company boards where they can vote on their own rep, it's a disgrace. I think the Packer thing is obviously great, you know, and I'd just ask if the CEO could move in that direction and certainly not give us another two items on an already cluttered agenda.
I'll just chance my arm here as well, because I think this is the most appropriate time to ask this question. We saw the three founders sell the maximum, close to the maximum 10% of their stakes they could when the escrow came up in August. We won't see them again before the full 90% is available to be sold. It's a material thing in the market. Rather than having endless speculative pieces in the street talk column, I'd invite Mario to answer this question, which is, is it his intention, whether we vote for or against this, to sell more than $1 billion worth of shares before we get together next year? It's a material thing he's perfectly entitled to, but it's just a huge amount of shares. We saw the maximum sell down last time.
I know I don't like to comment publicly particularly, but it is a public company. 35,000 shareholders are trying to work what's going on. He's got a microphone in front of him, and I'd just ask if Mario could shed some light, whatever he's comfortable with, on that question of his intentions with his very large shareholding, and also why he feels the need to be in this LTI scheme when it's just immaterial to his overall position.
Mr. Main, I'll take that question. I'll say two things. One is Mario didn't ask for anything. That's the first thing. It was the board felt that this was appropriate. Mario typically hasn't asked for anything at all. That's the first thing. Secondly, I'm not going to ask Mario his intents about what he may or may not sell when escrow expires. It's not a discussion that I have with Mario. It's not a discussion that we have at the board level. It's certainly not a discussion for public today. Mario's decision about what happened, what he does with his shares, likewise with Jack, is solely their own personal decision at that point in time. It's not a board matter. I understand people's interest in it. I understand the market sensitivity of it, but it's just not a board matter, and it's not a matter for today's AGM.
Are there any other further questions from the floor on this item? Gary, anything online?
No questions online.
Are there any questions on the phone?
Yeah, there are no phone questions.
Okay, thank you. That concludes Resolutions 8 and 9, and we thank you for your support. We now move on to Resolutions 10 and 11, and again, I will take questions at the end of these two resolutions. Item 7.1, Resolution 10, relates to the grant of 141,591 rights to the Chief People Officer under the 2025 Long-Term Incentive Plan. I'll now put up on the screen details of the valid available votes received. Item 7.2 relates to shareholder approval for the potential retirement benefits to the Chief People Officer in accordance with Section 200B and 200E of the Corporations Act. I'll now put up on the screen details of available votes received. Are there any questions on items, on Resolutions 10 or 11? Any questions from the floor? If there are no questions from the floor, Gary, any questions from the floor?
No questions online.
Okay. Are there any questions on the phone?
Yeah, there are no phone questions.
Thank you. Item 8, Resolution 12, relates to the ratification of the appointment of PricewaterhouseCoopers as auditors of the company, having consented in writing to act as auditor and having been appointed by the directors to fill a casual vacancy. Before I put this motion, can I first thank Xenia Delaney and the team from Deloitte for their services over a long period of time and through what was an incredibly large and complex transaction. We also thank them for their professionalism through the tender and changeover process. I will now put on the screen details of valid available votes received from shareholders for this resolution. Are there any questions in relation to Resolution 12? If there are no questions from the floor, are there any questions online?
Nothing online.
Nothing online. Any questions from the phone?
There are no phone questions.
Thank you. That now brings us to the last two resolutions in the notice of meeting, being Resolutions 13 and 14. Both these resolutions were conditional spill resolutions pending the outcome of a shareholder vote on our first and second remuneration reports. As shareholders voted in favor of both the first and second remuneration reports at today's meeting, a vote on Resolution 13 and Resolution 14 is no longer required. That now brings us to the end of the items of business, and I may now formally close the meeting. Voting will remain open for a further five minutes to enable shareholders to complete and submit their votes. The results of the voting from today's meeting will be announced via the ASX and placed on the company's website. Finally, I thank you for joining us today, whether in the room or online.
For those in the room, I may now invite you to join us for refreshments in the lobby. Thank you very much.