Welcome and good afternoon, ladies and gentlemen and fellow shareholders. I am Elizabeth Coutts, Chair of Skellerup Holdings Limited, and thank you for joining us today. We are delighted that we can meet both in person with those of you able to be present and by video with shareholders joining online. This is the 21st annual meeting of Skellerup Holdings Limited. I recall the first annual meeting following Skellerup listing under the Skellmax name. It has been a sheer pleasure to serve as a director and more recently as chair over the past 21 years. The notice of meeting and the 2022 annual report has been circulated and made available to all shareholders. You can also access these at any time via our website.
As noted, today's meeting is being held as a hybrid meeting here at Eden Park and online via the Computershare online meeting platform. If you are online, congratulations, you have successfully navigated entry. Before we commence the formal business, I should advise that those present, in the event of an emergency, please remain calm and follow the clearly marked signs to exit the building safely. I am pleased to advise that there being a quorum of shareholders present, I declare the annual meeting open. To begin, I would like to take this opportunity to introduce to you those people alongside me today. On my immediate right is David Mair, our Chief Executive and a Director of the company. Alongside David is Graham Leaming, our Chief Financial Officer. Alongside Graham is Alan Isaac, an Independent Director. Alongside Alan is Paul Shearer, an Independent Director.
On my left is John Strowger, an Independent Director. John will succeed me as Chair of Skellerup at the conclusion of today's meeting. Alongside John is David Cushing, an Independent Director. Alongside David is Rachel Farrant, an Independent Director appointed by the board in May this year. Also, in attendance with us today are representatives from our auditors, Ernst & Young and our legal advisors, Chapman Tripp. A number of our leaders across the Skellerup Group are also here today, and David will introduce those to you shortly. The order of events for today will be as follows. First, I will take you through Skellerup's highlights for the past year and the Chair's Address. I will then hand over to David Mair to give a presentation as Skellerup's Chief Executive.
I will provide an opportunity for questions at this point in my address and David's presentation. I will then put the resolutions outlined in the notice of meeting. We will cover each resolution in turn and invite questions specific to those resolutions. There will be an opportunity for any discussion by shareholders on Skellerup's business and performance. For online attendees, you may submit questions at any time. To do so, select the Q&A tab on the right hand of your screen. Type your question into the field and press Send. Your question will immediately be submitted. Should you require assistance, you can type your query and one of the Computershare will assist and reply via the chat function. Alternatively, you can call Computershare on 0800 650 034. That's 0800 650 034.
Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please note that your questions may be moderated or if we receive multiple questions on the topic amalgamated together. Finally, due to time constraints, we may run out of time to answer all questions. If this happens, we will answer them in due course by email. Voting. Voting today will be conducted by way of poll on all items of business. For those in attendance, you should all have a voting paper which was given to you when you registered. If you do not, can you please indicate that now by raising your hand and a member of Computershare team will assist you. No, we seem fine there. For those online, I now declare voting open on all items of business.
If you are eligible to vote at this meeting, you'll be able to cast your vote on the Vote tab on your screen. To vote, simply select your voting direction from the options shown on screen. You can vote for all resolutions at once or by each resolution in turn. Your vote has been cast when a tick appears. To change your vote, simply select Change your vote. You have the option to change your vote up until the time I declare voting closed. I will give you a warning before I move to close voting. I'll now move to my Chair's Address. Good afternoon again and welcome to Skellerup's 2022 annual meeting. As last year's annual meeting was conducted virtually, it is a real pleasure to be standing back before you, our loyal shareholders.
It is a huge privilege and honor to chair Skellerup, a true New Zealand iconic company. It is with pride tinged with sadness that I make my last address to you as Skellerup chair. I retire from my role with Skellerup in great heart and with another record result to sign off on. I feel a real sense of satisfaction with Skellerup's performance during my time as chair. I've been involved with Skellerup for 25 years, having been on the board of Skellerup's predecessor, Viking Pacific, and a founding director of Skellmax when Skellerup listed on the NZX. Skellerup has transformed over that time, starting as a New Zealand-based manufacturing and exporting company, primarily supporting the agricultural industry.
Today, an international company with manufacturing base, not only in New Zealand, but now the UK, Italy, China, and Vietnam, plus conversion and distribution operations in Australia, the US, and Europe, supporting a diverse range of industries. It has been an incredible journey to be involved in the rebuild of the Agri manufacturing facility, relocated to Wigram following the Christchurch earthquakes, and to successfully grow the business by investing in acquisitions, product development, and new technologies to support our people. Now, after chairing the board since 2017, I consider it healthy for new leadership to take Skellerup forward. Much has changed since even a year ago, when our businesses were still heavily affected by COVID-19 and its globally disruptive effects.
The resilience of our business model and strategy have been thoroughly tested, particularly over these past two years, and its success has seen us continue to deliver substantial growth and earnings and returns to our shareholders. Over the past seven years, Skellerup's revenue has increased by 50% and net profit after tax by 133%. These are excellent outcomes, but there's no resting on our laurels. It's important we continue to invest in our new products, technology, and our people to provide the platform to keep delivering growing and sustainable shareholder returns in the years ahead. It is therefore with pleasure that Skellerup reported another record year. Net profit after tax was NZD 47.8 million, a 19% improvement on the prior year, which was also a record result. Growth was robust across both Agri and Industrial divisions.
The directors were delighted to recognize this with a final dividend imputed to 50% of NZD 0.13 per share, which took the full-year dividend to NZD 0.205 per share, a 21% increase on the prior year. The final dividend was paid on the 14th of October 2022. At Skellerup, our leadership has been strong, evidenced by Chief Executive David Mair being awarded the Deloitte Top 200 CEO of the year for 2021. Our Chief Financial Officer, Graham Leaming, was acknowledged as a finalist for CFO of the year, and Skellerup was also a finalist for Company of the year. David was also awarded the 2022 Overall Leadership Award by the Institute of Finance Professionals New Zealand in May of this year. These acknowledgments are really a tribute to the entire Skellerup team.
We thank all our people for their performance this past year. We are grateful for their dedication and contributions. They have all been through a tough time, and we are very proud of their resilience and commitment. I would also like to acknowledge the service of Simon O'Connor of Ernst & Young, who has been the audit engagement partner for the past five years. As required, Simon has now stepped down, and I welcome Susan Jones as the audit engagement partner for FY 2023. Today, Simon is with us, the second row here, and Susan is in Christchurch, visiting our Wigram facility. As David said in the annual report, Skellerup has, over its 110-year history, built a reputation as a good employer.
That reputational capital is an important ingredient to our success, and we reciprocate by investing in our staff's development to grow future leaders, remunerating them fairly, and by keeping them safe. I'm proud that every Skellerup site has an active health and safety committee, reporting monthly to the CEO, with the board having oversight of the committees, with their activities also reported to the board. Your board is focused on enduring long-term success, as befits Skellerup's history. We have been part of New Zealand's story for a long time. Naturally, challenges over such a long period change. However, building and leading a sustainable business that can adapt to changing circumstances is a constant. One of those changes we're now facing is climate change. Skellerup recognizes the impact climate change is having on the world.
In June 2022, we formed a sustainability committee to oversee and measure Skellerup's sustainability initiatives. This adds impetus to our existing sustainability lens, evidenced by investments we have made over the last six years to reduce our emissions and water usage at key sites across our geographies. Recently, we consolidated three Auckland facilities onto a single site at Ōtāhuhu, which will enable us to realize improved commercial, employee, and environmental benefits now and in the years ahead. We have also implemented the ESG World platform to provide shareholders and stakeholders the opportunity to review Skellerup's environmental, social, and governance performance against the range of frameworks in place throughout the world. Skellerup is a global business, and our board has a diverse range of skills, knowledge, and governance experience to deal with the complexities that accompany our international business.
In May 2022, Rachel Farrant, a partner at BDO Wellington, joined as an Independent Director. Rachel brings a strong financial focus to the board and experience across a range of sectors, including construction, technology, finance, and property. While COVID-19 has until recently hampered the board's ability to get across our network of businesses, we have nevertheless been active in visiting our domestic operations to learn from the coal face the issues facing our businesses and workforce. We are pleased to reward shareholders after another record result in FY 2022. Skellerup, as befits its history, is in it for the long haul as a future-oriented and solution-focused business. In line with our well-tested strategy, we'll continue to focus on working closely with key customers to provide engineered products using a range of critical applications and to look for investment opportunities that create synergies to fuel our ongoing growth.
We are very optimistic about Skellerup's future growth prospects and look forward to bolstering capacity to meet the opportunities. Thank you for your ongoing support and trust in the board, executives, and employees of Skellerup. Looking to the future, I believe you'll be in good hands with experienced board members and led by John Strowger. Thank you all for your loyalty, and I'd like to close by wishing Skellerup and its shareholders continued success well into the future. Thank you. I'll now hand over to David.
Thanks, Liz. I'd like to start by introducing the team, I'll ask each person to stand up and I encourage you all at the end of the meeting to go and have a chat with the team, because as Liz said, the results are really a result of a lot of hard work by all our team members. We only have a few here today, but I'd like to start by introducing some of the Agri people. We have the Agri Divisional Manager, Hayley Gourley. Hayley's been here just over three years and seen a huge change in the Agri division in that time. We have Dino Kudrass. He's the new. His title is the Head of Product and Process Development. He's a very smart engineer. I did engineering. He's a very, very clever engineer.
I'm critical of engineers, but he's very, very good. Delighted to have him on board in the team. Mark Inkster's been around for a while. He's the National Sales Manager, so some of you may recognize him. We have Kentillah du Bouchet Ryan . Sorry, right at the back. Sorry about that. She does a lot of digital marketing. Her title is marketing manager Agri, but she has a particular passion about digitization, digital marketing, and things like that. Last but not least, here today, we have Mike Mastrovich. Mike is the R&D Manager. Now, Mike, he will leave on the 10th of November, so he's decided to retire. Retire means, he's going to go and do other things that he wants to do. He's a very clever guy.
Mike has been heavily involved in the development of the Red Band gumboot, and he's been a big part of the development of China. I have a lot of respect for his technical ability. He also runs Flexiflow. He's recently handed that over to a young person who most likely will be at the shareholders' meeting next time. Mike has served, in two instances, more than 32 years. We were trying to work it out together, but I think 32 years. Well done, Mike. I'm looking forward to a beer or two with him in Christchurch early in November. We have Pat O'Loughlin here. Pat is the business unit manager for Gulf Rubber Australia. Pat's come in as a relatively new leader, very structured and having fantastic results.
We have Mark Houlahan, who's been running SRS. Mark Houlahan has led through difficult times a lot of the site health and safety. You know, I would say that Mark Houlahan has been one of the best. We've used some of the techniques there in other parts of the business, and I think the SRS site has benefited a lot from Mark Houlahan's time. Mark Houlahan will be leaving soon to pursue a new opportunity, and we wish him well. We have Don McKenzie. Logon has been around even longer than Michael Mastrovich. I won't go into how long, but he is the international market support for vacuum systems, and so he's seen the transition from pumps to thinking about systems, and that's a big part of the growth program we have in the U.S. through Masport. We have Shaun Spacey.
Where's Shaun? Down the end. Shaun leads product development and a very key team for what we do, particularly for the Gulf group. We see a lot of opportunities for future growth, particularly in the U.S. through that process. And Shaun and his team have been working very, very hard. Recently, we were in Vietnam for a week, or he was there for a week. I was there for a couple of days. Just to see the transformation of some of the products we make there is just fantastic. Richard Cosman. Here we go. Richard's down here. Richard is also helping me. He collates all the information on health and safety.
He makes sure we rigorously go through the explanations if they're a bit weak, and makes sure we're right on top of the management process for health and safety. He was also a big part of bringing the sites together in Auckland. Elizabeth referred to the three sites coming together at Ōtāhuhu, and that's not easy, and there's a lot of logistics and things like that. Richard Cosman's done a great job. We have Marie Baxter. Where's Marie? Oh, down the end. Marie is the sales manager for this new combined group, Ultralon Nexus. How long have you been here, Marie? Sorry.
6 or 7 years.
Six years. She's a very good salesperson. It's quite technical, some of the things she does. She's doing a very good job. We have a newbie. Where is he? There he is. Mervyn, over the back. He's the national sales manager for construction. He also works at Ōtāhuhu. Overall, the New Zealand businesses are benefiting from that consolidation. We have a special guest today, of course. We have Kate. Kate is here. Kate Walsh. She's the Digital Marketing and Brand Manager for DEKS. Christian Spears, the Business Unit Manager, would normally be here, but DEKS actually moved locations in Melbourne this weekend, or this last weekend. Christian couldn't come. Kate's come over, and Kate is also leading the charge on digital marketing.
She's very, very clever in this area, which to be honest, as an oldie, I don't fully understand how we can use that to our best advantage. If you want to learn more, you can have a chat to her, or you can have a chat to Kent illah, who is also very strong in this area. It is a big part of the future of the business. We acquired Talbot, as you may know. We have Mike Draper, so he's the Business Unit Manager of Talbot and doing a very good job there. Of course, we are supported by the head office team. We have Tim Runnalls at the back, who will collate and check the questions that come in, and of course, our EA, Danielle Burke. Thanks, everyone. You make our job easy.
Right. On to the actual CEO Address. It's great that Skellerup's had another record year, the latest in an unbroken chain of performance excellence by our people across all parts of Skellerup's global businesses. I've been reflecting on our sustained success. I'd like to begin by talking about trust. The essence of building trust is in valuing long-term relationships. It's about being consistent. It takes a lot of effort and can be easily destroyed by one slip. Over time, a reciprocal trusting relationship that brings benefits to both parties is built. That's how you build loyalty. I've talked about purpose in previous annual reports. Our purpose consists of five groups of people, five long-term relationships. Our customers, our suppliers, our people, of course our shareholders, and the wider community that they influence.
Working closely with customers to define and solve their problems has been an unwavering focus of Skellerup's, our chief purpose. Without customers, of course, there's no business. It's a dynamic interaction that takes place between our deep material expertise, strong product and tool design capability, and remember, that's hard to reverse engineer, so it's hard for competitors to take advantage of that, and proven manufacturing process knowledge. It is that dynamic interaction that has been the enduring key to building trust and loyalty with our customers, as has our ability to solve difficult supply problems for them, accentuated during the disruptions of the past two years. Excuse me a moment. Sorry. Got a runny nose. Sorry about that. Sorry. In the same way we strive to be the best supplier to our customers, we also seek to be the best customer to our suppliers.
We are dismantling that fear, and over time, we have established high-performing networks with those suppliers. Trust also underpins the relationships we have with our people. Skellerup has always treated its workforce as an extension of family. Over time, this has built a reservoir of trust or reputational capital. I see loyalty as a reciprocal process. We work hard to develop our people, broaden their skills, and provide opportunities for their career development. Allied to developing our people and their sharing in our successes, Skellerup is deeply committed to keeping them safe. The protection and safety of our people and others from accidental harm in our workplaces is our highest priority. We are proud that once again, this year, there have been no serious harm injuries. Safety is also reinforced through our commitment to maintaining a high standard of ethics in how we operate and do business.
We ensure Skellerup's leaders work closely with their teams to review and discuss the behaviors outlined in our code of ethics, including ensuring our suppliers and partners operate in accordance with our standards. Taken together, being a good employer engenders reciprocal trust and loyalty, and helps to create the stable workforce necessary to ensure consistency of performance. A final word on trust. I believe building reputational capital with our customers, suppliers, workforce, and out in the community underpins our value proposition to shareholders. We have an effective board that gets to the essence of business decisions quickly. This is key to improving our performance and enables shareholders to have confidence in us. I see a lot of loyal shareholders here today. Thank you. Moving on to the Industrial Division, just going back through some of the numbers and things like that.
Skellerup's Industrial Division designs and manufactures products that often combine multiple materials such as rubber, plastic, and metals to perform in a wide range of applications. Our Industrial Division develops products predominantly for original equipment manufacturing customers, with 85% of its revenue generated from international markets. From our technical salespeople to our engineers and chemists, we work closely with our customers and their customers to develop and deliver reliable products that meet their needs. Interacting dynamically in collaboration with our customers to help define and solve their problems, and designing products that perform, is a consistent thread across the division's businesses. Results from our Industrial Division reached another record with sales of NZD 206.4 million, up 16% from 2021, and earnings before interest and tax, EBIT, of NZD 39.1 million. Also a record and up 20% on FY 2021.
Revenue growth was driven by strong demand for gaskets, seals, and vacuum systems into potable water and wastewater applications, most particularly in the US market. Our acquisition of Talbot Technologies at the end of August 2021 is bearing fruit, with expanded technical and production capability enabling future revenue growth. We also saw strong sales of high-performance foam products across most of our market geographies. While sales growth has driven strong performance, we have also made efficiency gains, such as the consolidation of the three businesses I mentioned earlier onto one site at Savill Link in Auckland. Operational efficiencies have been gained and will continue to be gained, won't they, Richard? With improved storage and distribution from a single site.
Additionally, the consolidation also saw a reduction of intercompany freight costs and time, and an improvement in health and safety, and sustainability gains through better social distancing space, LED lights, and solar paneling on the roof of this facility. On to the Agri Division. Skellerup's Agri Division is focused on, and a global leader in dairy rubberware design and manufacture. We also design and manufacture rubber footwear for farming and specialty applications, including fire, forestry, and electricity sectors. Agri Division sales were a record NZD 110.5 million, up 8% on FY 2021. EBIT was NZD 33.6 million, also a record, and up 10% on the prior year. 58% of Agri Division's revenue was generated from international markets.
Sales revenue was fueled by increased sales of food-grade dairy rubberware in the US and New Zealand markets, and increased sales of rubber footwear, most notably in New Zealand. Skellerup is the second-largest manufacturer of food-grade dairy rubberware in the world. Our products are critical to the supply of fresh milk and milk products. While dairy faced a challenging period in getting products to international markets, our adaptive capability in sourcing different materials and finding ways to get products to customers underscores the skill and diligence of our people. FY 2022 reinforced the value of our customer focus, as in challenging conditions, we've continued to innovate new products and embed strong relationships that will help fuel future growth. Agri Division continued to see improved operating performance with greater process standardization to meet increased demands in revenue from the same capability.
Productivity gains at our large New Zealand and China manufacturing facilities helped to offset some of the significant impact of raw material prices and freight costs. Skellerup is committed to continuous process improvement, which improves processes and offers training to selected employees. While we are proud of Skellerup's performance this year, we are always focused on the future. We learn from our successes, but are continually seeking the next improvement, the next quality acquisition, and looking to develop new products and expand markets. The business environment will remain challenging in the short to medium term, so we're also turning our minds to pricing strategy and structures to ensure we have a good understanding of costs and that products are priced fairly for market conditions, so as to continue to provide value for our customers.
Staying close to our customers and providing them with solutions remains the main driver of our performance going forward. Under current economic conditions, helping them navigate a high inflationary environment will also be a particular focus. We will strive to ensure Skellerup's consistency of performance and continually seek to standardize processes to deliver on our promise of continuous improvement and building resilience across our businesses. We also continue to build trust capital with our people and support them, focusing on retaining, developing, and attracting quality staff that Skellerup needs as labor markets stay competitive. Building an adaptable, highly skilled, and resilient workforce is central to our future growth ambitions. I'd like to end this part by thanking you, our shareholders, for your loyalty. It fuels our drive to keep Skellerup performing to reward your trust in us.
To close, I noted that earlier today we provided guidance on our expected result for FY 2023. Our Q1 results are in line with a very strong comparative period. Markets are uncertain, but we expect to report another record year with FY 2023 net profit after tax in the range of NZD 48 million-NZD 52 million. Thank you.
Thank you, David. Now, before we move to consider the resolutions before the meeting, we will open the floor and to online participants for any questions on the presentations provided by David and myself. A reminder to please state your name and whether you are a shareholder or a proxy holder. I will take questions from the floor first. Now, we do have Danielle with a roving microphone. If any of you would like to-
Camilla.
Thank you. We've got two roving microphones. Yes, question over here. I feel like I'm trying to swap someone.
Hello, David. My name's David Lee, shareholder. In the financial highlights, the net profit after tax was NZD 47.8 million, which is wonderful. Do you have a feeling for what that figure would have been if the New Zealand dollar exchange rate had stayed as it was at the start of the financial year? In other words, how much of that is affected by exchange rate movements?
I think, Graham. We'll pass it over to our CFO, Graham, who's an expert in this.
In terms of the comparative against the prior year, the exchange rate had very little impact. The average exchange rate over the last financial year, FY 2022, was actually quite similar to FY 2021. It had a very modest impact on our FY 2022 result.
Thank you, Graham.
Close to currency. Thanks, Graham.
Any further questions from the floor? Yes, we have a question from this gentleman. Just wait for the microphone to come to you.
Thanks very much. McLeod, shareholder. My question is directed to David Mair. Some time ago, there was a rumor that Skellerup may be entering into a business with the nuclear energy area plants and supplying boots for personnel there. Has anything ever come of that?
First of all, I don't think we supply boots into the nuclear industry, but we do make a special boot that protects against electric shock, which is quite a different thing. That may actually involve nuclear power stations, I'm not sure. Most of those are sold into the U.S. The dielectric boot, we do have sales of dielectric boots. That is a protection like a lot of Skellerup's product. It's a protection of the individual, if that makes sense. It's really around making sure that people can't be injured through electric shocks.
Okay, thank you.
Thank you, David, and thank you for that question. Oh, Bruce.
Thanks. I'm Bruce Parkes, a shareholder and proxy holder for the Shareholder Association. Can you give us an update, please, on the Stevens milk filter plant relocation?
David, if some-
Sure. It's been very successfully relocated to Christchurch, and I think it's been difficult. You know, obviously, logistically, it's been difficult to get containers in and out of Wellington, and it's much closer. It's not on exactly the same site as Wigram, but it's very, very near. I have to say again, we've done a lot of relocation recently, as you've heard. It's a wonderful new site. Mike Dennis, the leader, has been working hard on the transition. From my point of view, it's gone extremely well. To be fair, I had very little to do with this other than approving it. If you want more details, please ask Hayley, the Agri Divisional Manager, later. It has been very successful and actually necessary for us.
One minor advantage, we ship containers to the US often, probably fortnightly, if not more frequently. Because of the weight, there's often space in the top. Now we can do things like consolidate filters where we ship to the US or things like that. It's always easier to have your sites closer together. You know, it's been a big effort in Auckland with Ōtāhuhu. It's been a relatively minor effort to bring Stevens to Christchurch, but it's been great. Thank you.
Just one second question. How is the energy crisis in Europe affecting your costs and your Scope 1 and 2 carbon emissions?
The second part's easy, I think. Look, the reality is it's an uncertain climate. My take on what's happening in Europe is it's gonna be more interesting in a year's time for the following winter. Directly in our businesses, we have several businesses in the UK. We've hedged the electricity there. That doesn't mean you won't get cut off, but we've hedged. It hasn't affected our customers. More importantly, we think it's negatively affecting our competitors. Some of our larger competitors are based in Europe. They compete with us internationally, and we see that in some ways as an opportunity. We often talk about the tyranny of distance, being a little island nation far away from our markets. In actual fact, this is quite a good thing for us.
In terms of Scope emissions, Scope 3 is the big issue for us. That's the shipping, bunker fuel mainly. Of course, next year we'll be reporting on that. A good question. Like a lot of things, I see that as an opportunity for us, not as a threat. Directly in our raw materials, we don't see a lot of increase in our raw material costs at this time. We do in general, but not from Europe and the energy crisis. Thank you.
Thank you. Oh.
Shareholder, thank you for your guidance today, NZD 48 million-NZD 52 million. How much of that can be attributed to price rises as in inflation, growth or currency shifts, please?
Sorry, Liz. Look, more than two years ago, I think I'm right in saying I sent a note to all of the leaders warning them that we were likely to be in an inflationary period and that our costs would go up, and they needed to be reviewing pricing. A number of our businesses, not all, but a number of businesses started then to move on pricing ahead of time in that sense, and we are continuing to review pricing. I don't necessarily wanna get into the divisional thing for obvious reasons, because we do have customers that listen carefully and review what we say. We believe we're realizing the true value of what we do. We have price increases that will impact on this financial year, and many of those have already been agreed.
Of course, no customer wants to accept a price increase. The really interesting thing is. What are they doing? What we're starting to see with some customers is they are putting prices up in the market. That also gives us an opportunity. One thing I can say is, in general, we are managing two things really well. One is our pricing strategy, and I mentioned that briefly in the CEO report, but also collections. We have a number of customers who, you know, without giving names necessarily, but, you know, in the U.S., they pay on time. It's in their interest to pay on time. As much as I think about price increases and profit, I think about getting paid, 'cause at the end of the cash flow cycle, you have to get the cash. I
Honestly, I think the team have done a great. It's not easy. Ask Hayley after the meeting. Not easy. Thank you, Peter.
Thank you, David. Any further questions from the floor? Oh, yes. One more. Yeah. Thank you.
My name's John Griffin. I'm a shareholder. I think this is really a question for Liz. Skellerup's quite a cash positive company. In fact, its earnings in a year really cover its debt load. Could you outline the strategies that are mentioned in one of your reports about your defense to a takeover?
I'm not sure with you, but I've been asked that question over the years, and our approach has been that we promote our company and we perform well, and that gets the share price up, and that is the best form of defense that we can have. The higher our share price, the better the defense it is. Good performance provides us with defense. Are there any other questions from the floor? Tim is our Group Financial Controller, and he's our moderator. Are there any questions online, Tim?
Yes, Liz. We've got two questions that have come through. I'll just put those to you, and then you can direct them to the board. The first question is from Justine Margaret Baker. She's asked if the board could provide some information around the working conditions in Skellerup factories and workplaces here in New Zealand and overseas. There's a number of other questions in there, but I guess as the board, just a general feeling of the working conditions and the way Skellerup's employees are treated both in New Zealand and offshore.
Happy to. I will answer it. I have personally been to not quite all of the sites because of the COVID the last two years, and where we've made acquisitions overseas, I haven't been able to visit them because of closed borders. Being with the business a long time, I've visited every site. I can say I am very impressed with our premises, the way our people are treated, and the general working environment. That includes China. I've been there several times. To Vietnam, I've been several times, as well as U.K., Italy. When we set up in overseas jurisdictions, we set up with the basis that it has to comply or be to a New Zealand standard. We do not have or want different standards around the world.
I'm, as I say, been impressed with how we do look after our people and the environment that they work in. You know, I for one, and as other board members have also visited some of the sites, will certainly let management know if we saw any issues.
Can I add something else?
Yes.
Sorry, if I may, I'll just add a couple of things. The first is that the structure of China is a WFOE, wholly foreign-owned enterprise. In general, we fit in with the minimum wage or the requirements of the country. I'm very proud of the fact that actually we pay people better than that. Whether it's New Zealand, whether it's in Christchurch and, you know, a relatively new company, Talbot, has joined in, and they've seen some of the changes there. We don't wanna be talking about the minimum wage. We don't wanna be talking about the so-called living wage. That goes back to the trade-off between productivity gains and sharing that with our employees. That's very important to us.
Specifically, though, we do not own a factory in Vietnam, but I was there recently. They comply with the ILO, the International Labor Organization rules, and actually it's the Vietnamese government that owns that business. So in other words, everything complies with both the local law and ILO conventions, and we have certification for that. Which we will put on the website.
Yeah.
Thank you.
Thanks, David.
Thank you. Second question is from Paul Hawken. He asks, "Why are dividends paid to shareholders only 50% imputed rather than with a full imputation credit?
That's one for Graham Leaming. We would like them at a higher imputation level, but we haven't got Graham quite up yet.
I mean, it's an outcome of the fact that more than half of our earnings are earned overseas, in overseas jurisdictions. You'll have seen from the information that's been presented, 75% of our revenue is earned in international markets. 50% of our profits are earned in international markets. We have a healthy share of earnings being captured in New Zealand. Of course, that's tax we pay in New Zealand, which allows us to attach imputation credits to those dividends paid to New Zealanders. As our business continues to grow and we generate more profits in international jurisdictions, it's not possible for us to fully impute dividends unless we were to reduce the level of dividend.
Thank you, Graham . Tim, you've got any further questions online?
No further questions at this time.
Thank you. No further questions from the floor? No, there appear to be no questions remaining. I will now move to the rest of the agenda, turn to the formal business of the meeting. Following that, there will be an opportunity for you to ask questions of me, David, and other directors and executives and teams today about the business and performance of the company. Now, some shareholders over the years have given me feedback to say they want questions after our presentations and before the resolutions to help them with voting and other shareholders say they only want questions at one time.
Because this is my last meeting, I said, "Look, I would make sure I gave you as many opportunities to ask as many questions as you could." Next year, John Strowger gets to decide. Because of that, refreshments may be delayed. We have three resolutions to be voted on today. The first two relating to the re-election of David Mair and the election of Rachel Farrant as directors, and the third resolution being the auditors' fees. I shall give an opportunity for discussion on each resolution, and we will also monitor the online platform for questions. At the appropriate time, should you wish to raise a comment or question, please raise your hand and we will bring the microphone to you as we've just done, or submit your question on the online platform.
By way of introduction, please advise your name, whether you are a shareholder or a proxyholder, the name of the shareholder represented. As noted earlier, in accordance with the NZX listing rules, voting will be by poll. Those here at Eden Park should all have by now a voting paper, which was given to you when you registered. If you do not, can you please indicate that again now? As noted before, only attendees can vote. Online attendees can vote at any time. Jim, were you wanting a?
Yeah.
Computershare. Great. Thank you. A number of shareholders have cast a postal vote or have appointed proxies to cast their votes ahead of today's meeting. I advise that the board is holding discretionary proxies, which will be voted in favor of all resolutions. Resolution one, re-election of David Mair. In accordance with the company's constitution, David Mair retires at this meeting, and being eligible, offers himself re-election. The board recommends David to you as a Director of Skellerup and unanimously supports his election. Before we consider the resolution, I would like to invite David back to the podium to briefly talk in support of his election.
Thanks, Liz. I'm standing for re-election to the Board of Skellerup for many reasons, but here are a few. I think like an investor. I have experience in allocating capital and creating wealth for shareholders. I think capital allocation is an easy thing that Graham and I spend a lot of time focusing on as part of the business, but it's also a critical thing for the board. It's about getting the best people focused on the most important projects, not just how we allocate the dollars. We invest in strategies, not one-off little capital items and things like that. Finally, it fits with our customer strategy. We don't get long-term OEM contracts. We get their money up front for the development.
It's just a really important sort of process and a way to think about that, and I think that's a useful skill that I bring to the board. I believe that I have the skills to win more of that OEM business and to provide sustainable growth into the future. Our future requires more customer-led development, and that requires meeting customers in market. The good news is the world is opening up, as we know. There are a lot more opportunities, and I think I have a good track record of doing that. I have an incentive, just like you, to deliver very good results. I'm absolutely committed to doing that. I'm a shareholder, obviously. Together with the other directors, we've been working very hard to transform this business. It's not finished.
There's a lot of change going on in the business, and it's getting better and better all the time. They're just a few reasons why I'm seeking re-election to the Board of Skellerup Holdings Limited. Thank you.
Thank you, David. I now move as an ordinary resolution that David Mair be re-elected as a director of the company. I'll now pause for any questions on this resolution, and we'll take questions from the floor first. Are there any questions from the floor? There doesn't appear to be so. Tim, are there any questions online?
There are no questions, Liz.
Thank you. I'll now give you a moment to cast your votes. As there appear to be no further questions, I'll now move to resolution two, the election of Rachel Farrant. In accordance with the company's constitution, Rachel Farrant retires at this meeting, and being eligible, offers herself for election. The board recommends Rachel to you as a Director of Skellerup and unanimously supports her election. Before we consider the resolution, I would like to invite Rachel to briefly talk in support of her election. Rachel, would you come up to the podium. Thank you.
Good afternoon. My name is Rachel Farrant. As Liz said earlier, I'm a partner in BDO Wellington. I also have over 12 years governance experience in a variety of roles, including infrastructure businesses, trans-Tasman businesses, property, construction, and personal services. When I was asked to join the Skellerup board, it was a massive privilege. Really, there were several things that attracted me to the role. The first was the diversity of the businesses within Skellerup. This is something I've worked in before, and I enjoy the opportunity to work with a variety of businesses. The second thing was the skills and the strength of the board, including the opportunity to work with Liz. It's been short and sweet, but thank you, Liz, for the opportunity.
The third thing that attracted me to the role was the strength of management. In meeting both the CEO and the CFO, that really gave me a strong feeling of not only the senior management team, but what the organization was like as a whole. The last thing that attracted me to the role is the strength of the balance sheet. This is obviously an area that I am well-versed in, given that I'm an accountant. You know, the strength of the business and the financial management of the business was clearly attractive. I'm really looking forward to the privilege of being a director and looking forward to the exciting future that the organization has.
I understand the duties and responsibilities of being a director and look forward to the journey and challenges going forward. Thank you.
Thank you, Rachel. I will now move as an ordinary resolution that Rachel Farrant be elected as a director of the company. I'll now pause for any questions on this resolution. Again, we'll take questions from the floor first. Any questions from the floor? No, there does not appear to be. Tim, are there any questions online?
There are no questions online, Liz.
Well, thank you very much. I'll just pause for you, take some time to do your voting. I'll now move to resolution three, remuneration of the auditor. Ernst & Young are the existing auditors of Skellerup. Pursuant to Section 270 of the Companies Act, Ernst & Young are automatically reappointed as auditors for the ensuing year. The board seeks the approval of shareholders to be authorized to fix the remuneration of Ernst & Young for the 2023 financial year. I now move as an ordinary resolution that the directors be authorized to fix the remuneration of the auditor for the year ended 30th June 2023. Are there any questions on this resolution from the floor? There do not appear to be. Tim, are there any questions online?
There are no questions online, Liz.
Thank you, Tim. Well, ladies and gentlemen, that concludes our discussion on the resolutions. If you wish to vote on the resolutions, whether in person or online, you should do so now, as I will shortly close the voting. For those of you here in the room, after voting, you should place your form in one of the ballot boxes, which will be passed around the room. If anyone is unsure how to complete the voting form or hasn't got a form, please go to the registration desk, where someone will be able to help you. Once all the votes have been cast, they will be counted by the company share registrar, Computershare. The results of today's meeting will be released to the NZX upon completion of verification of voting. I will now pause to allow you time to finalize your vote.
I now declare voting is now closed. I will ask Computershare to continue collecting the voting papers in the room. At this point, we will open the floor to any questions on Skellerup's performance and any other matter shareholders now wish to raise, including questions submitted online during the course of the meeting. A reminder to please state your name and whether you are a shareholder or a proxy holder. I will take questions from the floor first. Any questions or comments from the floor? Yes. Thank you.
The calendar, that's a lovely practical idea.
The calendar. Thank you. Well done, the team.
It wasn't me. Sorry.
Any other comments or questions from the floor? Yes, we have gentleman to my right.
Hello, David Lee, again, shareholder. You've shown in both divisions very impressive growth in both revenue, net profit after tax and EBIT percentage. Is it possible to keep growing the last item, the percentage? Secondary question, I noticed that the EBITDA percentage for the agricultural division is much higher than for the industrial. I'm just interested in your views on why that is and if the success in one area can be translated to another in that regard.
Do you want to take that, David?
Why don't I answer that? I could be flippant and say yes, and yes, but I won't. The short answer is, one of the key measures I use with the business managers, as they'll tell you, is EBIT as a percentage of sales. In reality, that's just one measure. I mean, you should never run the business on just one measure, but it's a very useful measure for business managers to think about the decisions that they make, particularly capital allocation. The reality is we have to be careful about this ratio because of course, customers look at it and they start thinking that you're having too much of the pie in that sense. Yes, I'm used to seeing businesses, really good businesses achieve a much higher percentage than we currently have.
I've been proven wrong for a long period of time on the industrial side, but our initial target was to get to 20% EBIT as a percentage of sales. Round figures, industrial revenue's double the Agri. Part of the reason the Agri number is so good is it's a quality business, and literally a quality business that we make. We're the second-largest manufacturer in Christchurch of dairy rubberware in the world, and we distribute around the world. But it is high quality. It meets high, you know, standards of food safety. You get a premium for that kind of product. We've been working very, very hard on the industrial side, and so we have. I mean, it's a healthy competition. I keep reminding the industrial people that they could do better. Look at the Agri division. The interesting question you asked is, i s there a crossover?
In reality, I'm not convinced there is, but there are some common themes like how do we more efficiently ship things or how do we think about certain processes? A number of the products are really quite different. It's a telling point. I would love that also, by the way. I think I want all three to improve. I want revenue to go up, which drops through. Obviously, a price increase drops through to EBIT straight away. Pricing is very, very important to me and to the team as they know. The potential for this business. Look, it took a lot of time. You know, I'll talk later. This business has been transformed. We went from having an Agri division. I won't go into this now. I'll come back to it.
Look, really, the Agri division, by moving on to the new site, it's not finished. Hayley and her team, she would argue she's only just completing the formation of her team. The future over the next three-five years for the Agri division is very strong, particularly with the disruption in Europe. We have the same opportunities in the industrial division. For whatever reason, the industrial division has struggled a bit more, but that's the value argument in my view. Yes, I expect much higher EBIT as a percentage of sales going forward. That's my expectation. Thank you. Good question.
Thank you, David. Are there any further questions from the floor? Tim, are there any questions online?
There are no further questions online, Liz.
Okay. There appear to be no further questions or matters for discussion. David.
Yes. Thank you, Liz. It's my pleasure to just reflect on a few things. Actually, it's really interesting. Jim Greenwood, Company Secretary, been around a long time. He'll know far more about this than I do. Just by the way, I've got a few thoughts about Liz and her contribution to Skellerup. I'm gonna keep it relatively brief, but I think it's really important because we've done a lot together. You know, there's been a lot of change in this business. I'm sure there are many things that Liz is proud of in the time that she's been involved in Skellerup. Just a few thoughts. Viking Pacific was the promoter and IPO'd Skellmax in 2002, having acquired the viable businesses from Main Investments in 1998.
The emphasis was very much on dairy rubberware and vacuum pumps for liquid waste. Skellmax was formerly called Viking Footwear Limited. Liz was a founding director and chair of the audit committee when Skellerup listed. It listed as Skellmax on the 19th of June 2002. The financial year began FY 2023. The three things I think about that Liz has overseen as part of that role as a director and lately the chair of the company, it's a truly global business. If you go back in 2003, 55% of revenue was generated in New Zealand versus 24% now.
45% of revenue was generated overseas, and you saw earlier in the slides, now there's 76%, 33% in North America, 15% in Australia, 12% in Europe, 9% in Asia, and 7% the others. This is a truly global business. People don't appreciate that. You know, they understand Red Band gumboots and things, but actually sophisticated investors, it's quite interesting how they ask questions about this and not. It's a very exciting business in that sense, being a truly global business. Project Viking, well, you know, boy, that was exciting, I can tell you. We had an Agri division then. Did we have an Agri division? Liz, along with Sir Selwyn Cushing, were the key people on the board that enabled us to effectively do a phoenix, rise from the ashes. It's not that the whole place burnt down.
It wasn't quite like that. We had weeks where we couldn't mix rubber at all. The old site in Woolston would've inhibited us achieving the kind of numbers that we do now. We had more than 20 buildings. We had a fleet of fork trucks going backwards and forwards. We had asbestos in the roofs. It was just a horrible old industrial site, to be honest. Not a great place to have a vibrant team atmosphere. Actually, in difficult times, the construction of the new site at Wigram, which round figures cost us more than NZD 70 million, and that was funded in difficult times because people wanted certainty. Certainly, shareholders are asking us a lot of questions.
I was regularly going to the board through Liz and asking for NZD millions, and then the next board meeting it'd be another couple of NZD million. We had no idea. We were jackhammering out old equipment to see what kind of foundation it had to see if we could move it. People forget that. I mean, we're all over that now. We're worried about Ukraine and Taiwan and those kind of things, but that was very intense. I can't honestly say that's where I got gray hair. I met my wife in Japan, and that's where it started. I can tell you, I had a few frights. Honestly, well, Michael will remember well. When we couldn't mix rubber, I was like, "what are we gonna do?" 'Cause you don't mix rubber.
We had to make liners and supply the local market. Excuse me. I think Liz was very good through that period. She helped me to achieve the funding that enabled Wigram. It just wasn't easy. I have a lot of time and respect for Liz through that period. She was also holding us accountable, like, you know, this is shareholder money. Like, regularly, we had interesting discussions about, "Is there a better way of doing this?" Of course, we were in a real hurry. We had to keep producing. The most important thing I think that Liz will be proud of is the financial performance.
If I go back, Skellerup's closing share price on the 13th of June 2003 was NZD 1.12, with 100.3 million shares on issue and a market cap of NZD 112 million. Skellerup's revenue and NPAT for the year ended thirtieth of June 2003, 'cause the IPO was 2002, was NZD 96.2 million and NZD 12.6 million NPAT. FY22, Skellerup's closing share price on the thirtieth of June 2022 was NZD 5.29, with 195.3 million shares on issue and a market cap of just over NZD 1 billion. Skellerup's revenue and NPAT numbers for FY 2022, which you should know, NZD 316.8 million revenue, NZD 47.8 million NPAT. Roughly 3x revenue, 4x NPAT.
A fantastic dividend story. Skellerup is now seen, we can argue about it, but as a growth stock, but we also pay a very strong dividend. Arguably at 50% imputation, but if we can do more in the New Zealand markets, then we'll be able to do something about that. Anyway, for me, those are the three big things. I mean, as shareholders, and I've been a shareholder for a long time, I just look at the financial performance of this business. We haven't necessarily been well-supported by the share market. We are, through various people, but people often say they don't understand Skellerup. I don't think it's that hard to understand. You know, we... The Agri division is very much on volume of milk. The industrial division splits into two or three areas. It's easy to get some data and sort of see.
The big interesting thing right now is the competitive situation. I think we have a team that can compete better. I love winning. I hate coming second. Why would you come second? Anyway, it's not about me, it's about the delivery of performance from Liz. On behalf of all the Skellerup team, Liz, thank you for your support, and we wish you well in the future. Thank you. We have a little present for you.
Oh. Well, thank you for those kind words, David. As I said, it's been an absolute pleasure to work with Skellerup and the whole team. The board over the years, the executive staff, it's been my pleasure. Oh, thank you. Beautiful.
I'll give those and then take them away, Liz. It's just too hard. Thank you.
Thank you.
I'm sure you'll keep this one.
Yes. To be shared. Thank you very much. Much appreciated.
We'll miss you too, Liz.
Well, I will miss everyone here. As I say, as David said in his presentation, you know, Skellerup is a family and, you know, that's one of the key ingredients of success. I wish you well, and I will be holding the board to account as I remain a shareholder and s ometimes in life, I have to say it was in October 1997, I had left my executive role at Carter Holt Harvey, having run the tissue business and the Carter Holt Harvey building supplies business, and I'd been on holiday. I arrived back, and Sir Selwyn Cushing, David's father, phoned me and said, "I've got a job for you." 25 years later. Sometimes you just think after this long time, it's time to hand over to someone else. It's.
John is retiring from Chapman Tripp next month, so he's going to have plenty of time to support you and support the board and look after everyone. You'll be in good hands, and I'm very confident about that. Again, thank you all very much. You're great shareholders, and I've certainly enjoyed seeing so many familiar faces over the years. In closing, thank you for your attendance. Please enjoy the refreshments. I now declare the meeting closed. Invite you to all join the directors and management for afternoon tea and refreshments. Executive will be here, so feel free to chat with them about products and activities that they do day-to-day. Thank you.