Okay, good morning everyone. I'll read off a script, which for those of you who have been. But I was told that, this time that I do need to stick to the script, so I appreciate your, forbearance. So good morning ladies and gentlemen, my name's Gabriel Radzyminski. It's my pleasure to welcome you to the 2025 Annual General. The time appointed for the meeting to commence, and as we have a quorum, I declare the meeting of Peter Velez. Jackie Sullivan is joining us remotely today. We'll, provide a, a Climb Australia. We've also got attendees, in the past as being Link Market Services. Nicholas. Richard King is in attendance, and Richard can ask any questions about the 2025. Now, the. And I propose that the notice of meeting be taken as read. I'd also request. Hands in pockets. Good.
I turn to the meeting. They're set out in the notice of meeting. Three of those items will need to be voted by A.M. Sandon Capital Investments is pleased to facilitate a hybrid meeting. Participate in the meeting irrespective of where they are in the world, and I warmly. Voting. Now, if you're attending the meeting in person, you will have been given an. Questions related to the cards, please see an MUFG. Have a yellow voting card, you are a voting shareholder, proxy holder, or corporate. You will also be entitled to speak or ask questions at the meeting. If you're entitled to ask questions and make comments, you're not entitled to vote at the meeting. And not entitled to speak or vote at today's meeting.
For those u sing the electronic voting card that you received when you validated online, please refer to the online platform guide or call us on the number set out. Readily available. If we experience any technical issues today, affected. If this occurs, I will advise you accordingly. Hand, state your name or the organization you represent when invited to speak at the meeting. For those participating via our online platform, you will. And selecting the Ask a Question tab. You will have the opportunity to. Option. Please follow the prompts and refer to the online guide on your web phone after I have taken questions from the floor. Out of. And also restrict your questions and comments to the resolution being considered. An investor presentation will be given, after. Performance of the company. I will take questions at that time. Now, proxies.
Proxy voting received prior to the meeting will be shown. Meeting, I will vote where authorized, all undirected proxies in favor of each resolution will be decided by way of a poll, and the poll results will be announced to the ASX. One is subject to voting exclusions as outlined in the notice of meeting. Now, moving to ordinary business, the financial report. Reports for the period ended 30 June. Are there any questions or comments? Note that we have Richard King present to answer any questions pertaining to the audit.
Simon Sondel, proxy for Delta Asset Management.
Thank you.
You pay monthly dividends.
Yep.
Services is the registrar whose offices we are in. Dividend and other documents by email, but by post. As soon as they're here.
Put the registrar on the line. Can I suggest that of the move to monthly dividends, we've had some requests for shareholders about dividends. We're working through those, so if I could perhaps just take your question. I accept the, or I understand and I share the frustration.
I mean, it's not just your company, it's everybody. Everybody will happily take their documents. Report in hard copy.
Yep.
There's not a box on there.
Look, as I said, we'll take it on notice. I think the one good thing is at least a highly produced report, printing it off your computer makes little.
12, at least 12 dividend statements.
On notice, if that's all right, please. Thank you. No. Okay. Look, what I'll do is, as I mentioned previously in the resolutions, I declare the poll open. All members, corporate reps, and holders who are entitled to vote at this meeting may cast a vote by placing an X in the appropriate box, either for. Officer Nicholas O'Hagan from MUFG. Details of the proxy voting. Resolution One relates to the adoption of the 2025. Sorry, that's Resolution One. This is the, are there any questions either from the room or online for Resolution One? Okay. As there are no questions, I'll move on to the next resolution. Item of business.
Thanks, Gary. This is the, a resolution relating to the re-election. Notes, for Resolution Two are on the screen. Questions or comments from either people at the floor? On the floor? No? All right. We'll put that to a meeting. We will move on to Resolution Three, and I'll hand back to you, Gabriel.
Okay. Resolution Three relates to the approval of an additional 10%. Almost every meeting since we became listed, we've never actually used it. Bit of latitude, should circumstances arise where we can raise capital, but we members over the years have been very prudent in circumstances. Details for the proxy vote of Resolution.
This would be best. This would be drop off next year because the sense of mess.
Look, it's a fair criticism, here to see whether it's appropriate. Each time the directors. What we're conscious of is that while placements are. The board wants to retain the flexibility, to be able to consider raise capital. Just to be clear, for us, when we're trading, you know, either at, above, or close to NTA. Shareholders just to gauge, support, from the shareholder base. Holders to support our ambitions to try and grow when we can. Make that comment, on board for next year's, discussion. The board has felt it prudent to have that flexibility. A while back, last time we raised capital, was that they said, "Look, build their pro-rata obligation," but then they said that they had basically.
Not because of any, you know, lack of interest or support in what we do, but simply their own appreciation in having that flexibility is that we can't assume that all our pre-entitlement offer that we would ever do. That's why we've. There aren't any other questions. We'll put that Resolution Three to the poll as being considered at today's meeting. Please complete your voting cards and wait for a countdown banner on the virtual meeting platform, which will indicate when voting will begin. Our investor presentation, after the presentation of holders attending in person, followed by online attendees. I won't read the last part, which says that only shareholders can ask questions.
Can you give us, um, 30% tax rather than 25%? What's the—
Yep.
Numbers?
Yep. So.
How far are we?
Everyone has is about whether how far away we are from. That is a turnover-based question to our auditors. Is it 100 million or? Sorry?
I'd say it's more than 50.
Yeah, I think one of my colleagues can quickly Google it, but we're a low turnover fund and sell each year in terms of the, the revenue calculation. Been close to paying 30% for quite some time.
It is 50 million. Yeah, it's 50. Six months later you sell $20 million. Is that $40 million of turnover?
Higher tax.
No, no.
From some shareholders' perspective, they prefer a higher Frank being 25%, which is what we pay versus 30%, which is the standard corporate rate. Being equal is better than paying a higher tax rate. Perspective, I can see why some shareholders would prefer us to pay a higher better, all things being equal, than paying a higher tax rate. Investment update or the formal business of the meeting. Meeting, do the polling. If I could ask everyone who's in the room to fill. And for people online, if you could just follow the online. My desk. Yeah. You're at my table. Okay. We.
14 minutes. That is the price for the record.
I'll go for the first closing so I did it in under 50.
I might just get out of the way so everything's in the screen.
The irony is that we've had less people turn up in person. People turn up face to face, so hopefully they've joined us online. Number of people. We'll try and keep it reasonably flexible. As usual, we've got a disclaimer, the substance of which everything I say with a grain of salt. We have reason the portfolio that we're managing doesn't mean it makes sense to you too. Okay. So here's just. From our perspective, we would describe SNC as offering, frankly, today our dividend yield is around 6%, which grosses 6.4% discount to pre-tax NTA. Serves which allow us to pay the current rate of dividends. A number. Consider to be undervalued securities. And therefore, if you are discount. I don't know about you, but that to me makes quite an attractive.
Separately, for those of you in the meeting, you may not have seen it, but we announced for January, February, and March, and we decided to show you what that looks like in the next slide. The portfolio, what we consider to be the more resilient and performing sectors of the economy. A little bit crazy walking here today, we Martin Place. And for the first time in weeks, and I do not go past every day, so I cannot give you a today, when we walked past, there were only two people queued up outside, so certainly a bit out of steam. Again, I just, about this, in the U.S., for example, where markets, people are simply hoping that they get a big payoff value, which is what we focus on, but rather just hoping. More of a strategy than hope when it comes to our investments.
What's a few stocks that we'll talk about today. What's nice to see with the company's after management and board changes has taken us sort of 12 months, we've really seen some of those companies, notably Coglins, that we've thought they've been capable of. So we're quite. Now, unlike the government, your future, your super policy, which is completely predicated on returns do not indicate what future returns will be. Here's just a snapshot that we've delivered. We've trailed in October. We tend to do our own thing, which is not necessarily reflected by dividend chart. This year, I've stopped providing the. What we're doing over the next six months with monthly dividends. As you our first monthly dividend at the end of last month, we're now.
In December, we're not ex-dividend yet, but we've announced today as best we can to give our investors visibility on what the dividend in around March, early March, we will announce the next three months. Comfort as to what the income stream they'll receive from Sandon Capital Investments' side. Now, when we made the move to quarterly dividends first, regular frequent income, one of the benefits we were hoping, aside from discount to NTA, might narrow, and that has definitely happened. I would definitively say that it was the move to monthly dividends that had bridged that gap. Certainly been an improvement. What I find quite, a narrower discount to NTA than the likes of Argo and AFIC. Standard, they were trading at a premium. We're now sort of.
What you can see here is we again, we used to put, to show where we were, and we were always sort of middle of the pack, in terms of discount. What we decided to do now is to show. And other monthly paying equity, criticism or anything, but rather to show that we are trading today and at a larger discount than all of the other, three. I think that for existing shareholders could be an opportunity and interesting, proposition rather than paying a well-regarded manager, but still trading at a 22% premium, I would. The next slide. Here's a chart that we've highlighting both our gains and losses over the last 12 months in rising and falling markets. We're trying to again give investors an appreciation. Mean anything in terms of what it will do in the future. Where we're in between the market and ourselves.
Our win-loss risk. As you can see, well, you cannot, that is the point. Marked-to-market losses. Those are a couple of our worst performers. On the positive side, we have had some strong, positive returns. Is giving us enormous cause for concern. Obviously, we cannot control what people are prepared to overreact both ways. They will tensure. Similarly, the moment there is a bit of a bump in the road, everyone panicked thing because gold was going up, and then gold started going down, so suddenly it was opinion on the gold price. It is not our thing. We had a couple of, call our market, opportunity bucket, which did very good out of that, what, about two months ago?
Yeah, about a month ago.
That is one that we just constantly update since inception. SNC's past performance is such that we tend, but perhaps more importantly, for long-term compounding, we do not tend to fall by as much. Old hands pulled me aside and said, he goes, "Well, Gabriel, rule number one is do not lose money, and rule number two is do not forget rule number one." Hot stuff. I thought that was one of the most inane, 30 years later, I have been through enough that I know that if you can when you lose money, you have got to make it back before you can even get back into positive. What this chart does. Now, again, historic performance does not mean it is going to be, and that has been our experience in the fund. Now. A couple of our specific investments.
I was going to say. In the room, but also online. We comprise a decent chunk of the portfolio. Rather than waiting to, to the end. First one, Carbon Conscious-owned subsidiary of Sandon Capital Investments. We first invested in that. That was an active and somewhat hostile engagement. Them. The company actually spun out Carbon Conscious itself. So that I think provided a got our hands on it. And between Sandon Capital Investments and the rest of the business we did not own last year. So by way of background, 2023s in, in WA, generates a significant. In long form. The company has two BP and Origin. Those contracts expire, but both counterparties have options to extend those contracts for renewal this year. We will provide an update on that one in due course. Are finished. All of those ACCUs that are generated will accrue in Sandon Capital Activist Fund.
We'll, at a minimum, in several years' time. We didn't fully appreciate when we actually did our due diligence on and our numbers for it. We just assumed out into perpetuity the AUD 37 an ACCU. We were told, get us to raise our price, our acquisition price for the business that over time, and obviously we were looking to buy the asset as well, so we weren't prepared to of those ACCUs. June, July this year, we sold close to 10 units. At the time, I think the generic ACCU price was about AUD 30. Hold, and also provides, isn't surprised that the business is probably worth more than what we thought it was when we bought it.
You understand very much why that's a private.
It's a pure stream of cash flows. Discounted out.
Sorry, in terms of valuation, we.
Oh, sorry, in the accounts.
Expert's valuation. What we've adopted for, an expert to, opine on the value. It's an arm's length.
We reduce the valuation by a commensurate amount in the accounts. So we're not. I think the independent expert values it on a DCS. The business is highly cash generative. All of the earnings standard for each year. And since we've taken out, it was formerly an unlisted public company with a separate tax accountant, and had a registry. New owners. Just as an example, I guess, of a couple of months ago, we put up a slide that showed, Carbon AUD 4 million of dividends. And in the update today, we're showing it has, I had to double-check the cash numbers this morning. Now, you shouldn't, come in the last two months than, than a pro rata of AUD 1 million a year that it generates. It's a, it's a great business. Next come, addition.
Recent addition to the portfolio. Company that a couple of years ago was focused on developing processing nickel, which would be imported from New Caledonia. They bought the Murrin Murrin Gas Project, close to 12 months ago now. And when I say bought it, they were actually paid 35. The CEO today of QPM Energy is a guy by the name of Jack, 20 plus years ago when he worked at Macquarie. In terms of the business lines that QPM has, it is obvious, petajoules of gas reserves, which is a growth project they are looking at developing. No, sorry. They sell part of the gas to Dyno Nobel. Amount of gas goes to a smelter in Townsville, and the rest of it goes 24/7. It is a peaking plant which looks to take advantage of early evenings and in the mornings as well.
They've got operating a much smaller one at Murrin Murrin. The growth project I alluded, the first part of that will be the Isaac Plains Power Station, which will be hopefully commissioned within two years. The sound commercial undertakings that they've combined. I'm not sure if many of you follow the gas fund. There's three major producers, one of them being GE Venice. QPM have actually managed to get their hands on some effectively of next year, and that power station will be built in earnest. The capital cost is around AUD 215 million, which means about AUD 70 million a year. An EBITDA of about, once that's built, they'll have close to 300 megawatts of generating around 500 megawatts. That'll be more gas turbines. Recently they announced fund, but the turbines themselves.
That obviously, we expect they'll require more capital to fund forms of potential capital to fund that. We'd expect three to six months before you stack QPM up against any gas producer. It looks that they can produce it at, if you stack it up against any utility, getting fully funded and having the market value.
I will just add to what Campbell was saying. What is, the company looks cheap in our opinion, but what is even perhaps debated at the moment is that we have a gas shortage, that there is not enough gas to go around. Gas, 400 petajoules, 30 years of supply of the two together, that is a force multiplier in terms of this investment.
We are, again, it's a more recent investment for the fund, close to 12 months. For those who are not familiar, Triple M and Hit FM are the two best developed internally. The only radio to iHeartRadio or others. That's, I've got to stick to the script on this one, so I do not go too far outside that. As I said, we bought stock 12 months ago, it's trading around AUD 0.83. We commenced with the board and management team behind closed doors, bore the fruit that we expected, hence the resolutions at the AGM next week. I think it's next Monday, but also an amendment to the constitution, to protect a merger agreement with Seven West Media merger, but unfortunately, Southern Cross shareholders do not get to vote on it. Situation as well with the AGM coming up next week.
No, look, we've been very public. We're critical of the deal now with that term, but really it's coming down to, yeah, that's why we're just being a bit circumspect. Obviously, our desire to go last phases of this game.
Next, the investment now, since we first made an investment in Fleetwood, it's got, it's Australia's largest modular builder. The two, they're looking to sell more into the defense industry as, as, potential housing industry as well, where they've recently won a, the second division they've got is they, they call, units one at Karratha, Osprey, which is near Port Hedland. A phenomenal asset for the company for a number of years. It was originally in the late 1980s, when it was acquired, converted to, several years later and has continued. The utilization does tend to wax and wane, much better at the moment. I think last year the occupation showed a lot of earnings and cash flow for Fleetwood. Part of the company today, even more so since they've recently shut down, simply import parts and accessories from market.
Can I just ask you a question?
Sure.
Look, it used to be a darling of the 13. Now, you've made money on it because you bought below the patient. I held it for a while and sold it after a couple of years at a between value traps and also things that you can turn. Sharpening up management. I think that's a great attribute. For example, that has been really tough. There are some smart people. Fine line between something that can be turned around with better role. Well done. How do you differentiate between value traps and things that can?
For every value manager's existence, I guess, the value trap. We all, with, with I'll talk about Fleetwood specifically, Gabriel, to come good. It took probably management. In the meantime, the underlying business is looking along okay, and the longer-term economics of the business. Certainly with Sea Ripple, it is cyclical as well.
We did a lot of work, like in Karratha, over the next decade. That was at the start of this for Rio Tinto in particular. A lot of their assets in that part out, they've announced, I think, AUD 1 billion for a new stack and reclaimer. We were pretty confident Fleetwood had always had a relationship with contractors and their own employees up in that part of the world. That gave us comfort in the solutions business that the value of that wasn't impaired long term. We'd seen that they were performing significantly better than Fleetwood. Previously the company had chased revenue and annual report that looks nice in a glossy annual report, but doesn't actually, could earn good economics longer term as well. With band manufacturing business.
We were, the board and management at the time thought otherwise, and they affect capital, which was effectively written off a couple of years later. We lost AUD 20-30 million of capital. Focus on the fundamentals. We'll do work looking out or will be impaired as a result of a change in the structure. You need to push for change at board and management level. Once we've got the right, they'll put the right people in the right seats at the management level.
For the simple reason, Bruce Nicholson, who was appointed in 2020, well, certainly 12 months, where he could not even go to the West to visit the operations because of the lockdown and travel restrictions. If it were not, but what we started to see from 2021 onwards was that they wanted to manage the business compared to the previous. We do, we say that our investment of 15% per annum compound, at a gross level, Fleetwood is actually now well on track to achieving that objective. Value traps and opportunity costs, when you get it right, no one questions it. Coventry, I do not put that in the same bucket.
Thank you. I also think Skelton was running it. It was going sideways. I think he was looking in. He did an outstanding job and probably doubled the investment from being a debacle with what's happening with taxis. I think it was drifting sideways, down too many businesses. Ending job, cleans it up, sells a couple of smaller businesses. The stock.
I think, I appreciate your observations. The only way we can get the right management in place is if we have the right boards in place.
So people in this crappy caravan business, how are they gonna lose them? You know, riding up, just get rid of it.
We have AUD 15-20 million of working capital. There's no point giving it away. We'll be break even to slightly profitable this year. A lot of that was actually the AUD 4-5 million you talk about. That's as a result of shutting. They are actually shutting down the non-profitable part of it. It's just they don't split it between manufacturing and distribution. Like Sea Ripple, much like the queues for old just down there, there won't be occupancy like there is at those, like a good time to be, not today, but there's a prevailing view, I think, in the market that when the, the off a cliff. We think otherwise. There's a Dampier Peninsula in the Karratha region, but there's a lot more now talking about backward integrating into hydrogen.
Originally he was about building a, I think it's a AUD 3 billion, massive solar farm, to generate electricity to run, has a lot more work it needs to do and contract Rio have time. It doesn't come up for another 18 months. Next year, Woodside are obviously developing Browse, which is a gas project off the coast of Western Australia. I don't understand the chemistry exactly, but to turn the Browse gas into LNG. Over 24 months, Karratha's going to be strong or the Karratha accommodation.
Particularly with them. What we are now, we have been trying to find where everything is for sale at the right price. Something. The response is, why would we do that? I think ultimately, we're not pressing them at the moment for any of these things, but it is a board with a mindset that everything is for sale at the right price.
100% payout ratio. Every single dollar of free cash that comes out of is probably not going to pay more than four to five times. We're going to get that back in the form of fully franked dividend. We project both the dividend itself, but also the frank is now profitable. It's earning its 15% return on capital. It should actually do. Similarly with the RV solutions business, we'll continue to receive those cash flows as well. A distribution down at some point is going to be a lot easier to do than a manufacturing business. Simply operation leases at their sites. They've shut a couple of sites. Last company, and it's a long-held investment for Sandon, listed on the London AIM. Sorry, Derek. Indication and cleaning of bank notes, bank note polymer.
Central banks, they do not disclose who the world, so I'll let your imaginations run wild and guess who that may be. They have been a long-term customer of Spectra as well. Vacation products are used in things like coffee pods, cigarette packs for lotteries, and that is in North America. Half of 2025, that should be not 2026. Outstanding. The underlying business performed very well, but they have got to provide sensors to the said central bank. The underlying business, the continued the past seven or eight years, it has grown from effectively a standing to generating very strong profits today. Windfall in 2025. We have a significant amount of cash that I think I have disclosed there that we expend of 2026.
That's well over a third of the board and management team that has a very, very good small acquisitions over the years. They've paid dividends. They've bought back stock. We have a high degree of confidence that that orders. The shares have sold off recently. Longer-term issues. There's two contracts that they have talked about previously. Bank customer, but another central bank, for bank note polymer deferred into 2026. I think some of the shorter-term shareholders' results. We obviously got the update, but not the update they were expecting us, on the back of that. Last couple of years, a dividend of AUD 0.115. We'd expect that to be at least maintained. Obviously unfranked because it's a US business in the US. Yep. Part of that's part of that. There's not just, you know, the latest disappointment with 200p before the result.
It's now 140. So there's 30% dividend that's been paid as well a year ago. And it's, yep, apart from a bit of doesn't believe them .
Or our other investments, we are focused far more on the quality of the business. It would have been great if we'd traded out at 270p. We do see Spectra as a long-term proposition for the portfolio. Fleetwood, plenty of times where our shareholders and Campbell's talked about the work that we did at Fleetwood in terms of, we're not speculating. We're not sort of, you know, shooting, looking through the disclosed, common train with Spectra. Yes, in hindsight, sometimes, yeah, wouldn't it be great if we'd traded? Anyway, we continue to have confidence in this as a long-term investment.
For the last eight to nine years, sorry, undershot it when I said you've got an enterprise value of $US of earning six times multiple. At some point in the name to something like the NASDAQ or something in the US, we're really there than the AIM. What's the likelihood of them losing for 10 plus years? They keep winning additional work, not losing any work with that customer. And Bo that they've got, or other arrow in their quiver, I should say. There's only two producers of polymer bank notes at the moment. They're in the middle of getting that product ratified. It's a big market.
The swit, as we understand the authentication system they provide, because they do two things. There's the chemical itself, which is a phosphatagant, which is in, in sub, the switching costs are incredibly high. Once you are in the system, or a competitor dislodge you from that system. What we like to have at least two, sometimes three suppliers bank contracts. You won't have one supplier winning 100% of the work. Two substrate providers who dominate the market today. Polymer desperately looking to inject a third into the market just to the Spectra is well placed both in terms of incumbents, other parties in terms of the polymer substrate.
I talked about that central bank has spent AUD 40 million. I think that's when they've spent a truckload of money, buying sensors. I'll hand back to Gabriel if there's no more questions.
Thanks, Campbell.
Relations. You've got a very good long-term performance record. I've got no high at MFF. He doesn't churn the portfolio at all. Yet his results sort of, you've got on the other end of the spectrum, you've got traders like LSF, Regal obviously do well. I'm not advocating be trading some stocks because the market overreacts. I don't know whether you're ahead or behind, but it goes happy to trade stocks where they're volatile and the market overreacts. If the churn target you would have, I know it varies from year to year, but you're much lower, which is fine. On average over the, thanks.
Thanks for the question, David. Look, there's quite a few, please come back to me. First of all, I think we've stressed is, I think that I was talking with, the other day who's finishing uni, wants to, you know, understand funds management. Good investor, one of the first things you've got to do is understand how you're wired. You know, I know that I'm not particularly well wired to trading and, so we don't have a set portfolio target for, like us. Well, it's not that they don't like us. They don't favor us that much because we don't over each year, which implies a five-year holding period.
That waxes trade out of an entire position like, when we did A2B, that was an entire, again, I can absolutely guarantee that with the benefit of hindsight, hindsight when it's, when we're trying to get foresight, everything out when it was, over AUD 6, we're still well ahead. I've forgotten what our average price is. It's quite low.
We bought in a, we've done very well. There's an, and again, because we don't provide, you know, the likes of a Spectra where it was up at 270 and it's now claiming to be, I think to try and be both a long-term investor, what we do with our trading portfolio is try and take advantage of opportunity, something that is a short-term opportunity, but it's not so much. Thank you. Thanks for the question. Any other questions from anyone? Scared most of you, including myself, walking into such, salubrious, would say that the only funds manager, the only two tomorrow, which is David Di Pilla, solely private, even though funds managers I think go hybrid because I think it's important for you. A couple of days ago last week with Navigator, and, you know, great.
Look, we thank our service providers at MUFG. It did not work. When we tried to do it more professionally, it was going to cost. Up and set up the room at the Automobile Club or at History House that are not as expensive. We have taken the lead. Thank you, Jackie. Campbell, thanks for taking the heat on all the, I am just high level. Thank you to everyone around. I think we will close the meeting. Thank you.