Good morning, everyone, and a warm welcome to you all. My name is Susan Paterson, and I'm the Chair of your Board of Directors. Thank you for taking the time to attend today and for your support of Steel & Tube. I declare that a quorum is present, and as such, I'm pleased to declare the 2025 annual general meeting open. The notice of meeting, which includes explanatory notes, has been circulated to all shareholders, and I intend to take it as read. The audited financial statements for the year ended June 2025 were released on the 25th of August and included in the annual report. You can always find documents about the company, financial accounts, news announcements, and so on on our website in the Investor section. Shareholders and proxies may ask questions and vote at today's meeting.
Our online participants, you can do this through the meeting portal in the tabs on your screen. The Q&A is always open, so please feel free to submit questions throughout the meeting, and these will be addressed at the relevant time after the presentations. Voting today will be conducted by poll. If you are eligible, you will be able to cast your vote under the voting tab. You have the ability to vote at any time up until I declare the voting closed. I now declare the voting open for all resolutions. We start today's meeting with presentations from myself and Mark Malpass, the CEO of Steel & Tube. There will be an opportunity for Shareholder questions. We will then move to the resolutions. There will be an opportunity for you to ask questions about each resolution before it is put to the vote.
Following the resolutions, we will open the meeting for any other general discussion, and following the close of the meeting, shareholders are invited to join us and the management team for refreshments. I'm pleased to introduce your directors: Steve Reindler, Karen Jordan, Chris Ellis, and Andrew Flavell. Andrew is standing for re-election today, and you will have the opportunity to hear from Andrew later. John Beveridge is on the screen there. Unfortunately, due to a prior commitment, he's not currently in New Zealand, but we welcome John to the meeting. As previously advised, John will be stepping down at the end of today's meeting. He joined the board in 2019, and his experience across the building and manufacturing sectors, as well as distribution, has provided invaluable insights. John has been a capable and diligent director, and we thank him for his contributions over the last six years.
Also at the front of the room, we have Mark Malpass, our CEO, and Richard Smyth, our Chief Financial Officer. A number of our leaders are here today. Could you please stand so everybody knows who our leaders are? Please feel free to go up and have a chat with any of them after the meeting. Our leadership team brings deep expertise and experience across key areas, and their passion and dedication is evident. For the past eight years, our purpose, making life easier for our customers, has been the foundation of our strategy, and it continues to guide every decision that we make.
Our long-term goals remain clear and unchanged: to position Steel & Tube as the preferred supplier for steel solutions and products, to increase our company's value through investment in high-value products and services, to deliver increasing returns and value for our shareholders, and to create positive outcomes for our business, our people, our communities, and our planet. We are firmly committed to these goals, not just for today, but for the years ahead as we continue to play our part in transforming and modernizing the steel industry for the future. Our dual pathway strategy underpins our actions, being a diversified and resilient business while capitalizing on new avenues for growth. The strategic decisions we have made over the past few years are positioning the company for success.
This year, not only have we continued to strengthen our core, but we have invested in both organic and acquisition growth, further expanding our leading range of steel solutions and businesses. The acquisition of Perry Metal Protection, a market leader in galvanizing services, was a highlight for the year and reinforces our position as a leader in that sector. Here's the previous owner, Simon Perry, and our CEO, Mark Malpass, talking about the acquisition and what this means for our teams and the future across both businesses. At all? Okay, I'll put that clip on a little later when we get the tech going. Apologies for that. For FY 2025, we were disappointed to announce a soft performance for FY 2025 with the challenging economic headwinds affecting volumes, revenues, and margins.
We are a pure New Zealand play, and as such, our performance is heavily linked to the ebbs and flows of the New Zealand economy. Normalized EBITDA remained positive at the bottom of the cycle, as did operating cash flows. Capital allocation discipline has been an important focus and meant that we could buy quality businesses at the bottom of the cycle. As a result, net debt increased to $36 million, which included $30 million for the Perry's acquisition. In the face of ongoing economic pressure, we had to make difficult choices to ensure the long-term health of the business, including a reduction in roles. These decisions were made with the future in mind, but not without recognizing the real impact they have on people today. Our Board acknowledges and thanks those team members who have left us for their dedication and hard work.
As governors of the company, we are committed to modeling the values that matter. The Board, therefore, took a temporary 20% reduction in our fees and salaries, and the CEO. The leadership team has also agreed to a temporary pay freeze. If we are asking our people to cut back, it's only right that we do so too. As a Board, we had two clear priorities over the last year: to navigate Steel & Tube through the current challenging cycle, one of the most difficult we have seen since the pandemic and the early 1990s, and to prepare the company to capitalize on the economic upswing when it returns. We remained focused on our strategy, strengthening our core, delivering for our customers, organic growth, and fast-tracking scale through mergers and acquisitions. Financial performance, risk, and resilience are important topics of discussion, particularly in the current economic climate.
Capital management continues to be a key area of focus, allowing for strategic investment while maintaining our flexibility to pursue growth. Our recent investments are delivering value with positive revenue, margin, and earnings growth in the face of a cyclical downturn. In the past year alone, we have expanded our range of aluminum products in response to customer demand. We've extended the reach Kiwi Pipe & Fittings into the South Island and launched QBT540, the first new roofing profile in the market in many years. Our investment to palletize warehousing for our fastness business has been completed, and delivery metrics are now 99%. We also invested in new roll-forming machinery in Auckland and Christchurch and added 13 trucks to our in-house fleet, providing more control over last-mile service, delivery, and efficiency.
We are managing our cash flow carefully with good collections in a soft operating environment, and inventory continues to be managed prudently to ensure best use of working capital. The absolute priority for your Board is to deliver a return to profit. Across the building community, there is a strong consensus on what is required from government to support sustained economic progress, a long-term vision that provides certainty for infrastructure, energy, housing, and transport. We need shovel-ready projects and a credible pipeline that allows business to plan, invest, and deliver with confidence. Business also, though, has a role to play. We cannot rely solely on government action. Companies like ours must continue to invest, innovate, and drive productivity. We're committed to building a strong, sustainable future for Steel & Tube. This runs deeper than just the business.
It's about building something lasting, resilient, and sustainable that creates value not just for our shareholders, but for all our stakeholders. Our people are at the heart of our success, from our exceptional leaders to the wider Steel & Tube team. Every day, they work together to deliver for our customers and our business. On behalf of the Board, I want to thank them for their commitment, adaptability, and professionalism in what has been a really difficult environment. I'd now like to hand over to Mark Malpass, our CEO, to give you more insights into our performance and our targets.
Great, thank you, Susan. [Tina Coto] and thank you for everybody that's attending today. I thought what I'd like to do to start off is just give a reminder about the scale and strength of our business. We've been established for over 70 years. Our stable, best-in-class businesses offer some of the most comprehensive range of steel and metal products, services, and solutions. This year, we added galvanizing services as part of that mix of businesses. Our ability to cross-sell our wide range of products across 13,500 active customers is a significant competitive advantage. We serve customers through our nationwide network of 35 sites. We have an online platform with support from our account managers and our customer service centers and our inside sales teams.
We segment our customers into tiers based on their size and revenue and value, and we're very careful to balance our cost to serve with the customer's potential. Our core competitive advantage is anchored on that national footprint and also our product range, and it only comes together through the quality of our people. We spend a lot of time on product knowledge for our people to be able to leverage that broad range of products. Customer satisfaction remains a core measure for us. Despite the tough economic conditions over the last 12 months, we've been able to keep our Net Promoter Score, or NPS, score relatively high. For the three months to rolling, three months to September, that score is now 50. I visit a selection of our customers every week.
It helps provide insights and feedback from them in terms of informing our value proposition and how we're delivering. Our board meets with many of our customers at least a couple of times a year as we have functions, which enables the board to directly understand how our value proposition is landing for our customers. We also have a very sort of strong customer relationship base, which means that as the economy improves, the market starts to recover, we will be advantaged. Our team remains engaged and committed, with an employee satisfaction score of 33 that's just been completed in September, which is actually industry-leading. It's in the top quintile of our peers.
We're very conscious of the cost of living pressures that are on our people, and we have initiatives in place to support them that range from things like including financial planning and budgeting workshops, back-to-school financial assistance program. We have a Healthnow Programme which assists families with basic health costs, dentists, pharmacy bills, things like that. We also continue to invest in training and development opportunities to support our team members, both with their own personal ambitions to grow their careers, but also to upskill in training. A particular focus has been on training our account managers with product knowledge to enable more cross-selling. Our community support programs are anchored on helping young people to realize their potential. Our health and safety program is very well embedded inside our culture, with a steadfast commitment to ensuring every team member goes home safely every day.
Our people are engaged in our safety program and are important contributors to making sure that the whole team is kept safe. Our 2025 financial year safety metric increased a little bit, and that's mostly due to the acquisition of Perry's and bringing their numbers into our business. It is important to note that we haven't had any serious incidents throughout the year, and Perry's have a very robust safety framework in place. We're very supportive of the New Zealand government's net zero ambitions for 2050, and we're focused on the things that we can control, things like transport emissions from our fleet in terms of energy use, also reduction in waste from our manufacturing plants. It's obviously a journey that we're continuing to make improvements on.
Looking back at the 2025 financial year results, Steel & Tube has broad sector diversity and exposure across the manufacturing, construction, and infrastructure sectors. Manufacturing is accounting for just over one-third of our overall revenues in the last 12 months, and it started to show some signs of positive momentum in the second half of the financial year. Commercial construction makes up about a third of our revenues, just a little under a third, and when you add resellers and residential, it actually comes up to about 50% of our business's construction exposed. That has been impacted by the high interest rate environment. We've also seen a lot of international uncertainty. We've seen very limited government spending on infrastructure and social housing that have really affected that confidence, business confidence in the commercial construction markets in general.
Investment into infrastructure projects has been very limited, although we've seen a lot of projects either paused or put on hold that have been led by the government. Conversely, the rural sector has been a real standout, with the rural economy driving rural incomes and, of course, job creation and sector-related manufacturing that's come with that. Despite the tough environment, we continue to execute on our strategy, strengthening the core, delivering for our customers, and growing higher value products, either organically or through mergers and acquisitions. As Susan said, it's been a very challenging economic backdrop. We've seen that impact our demand for steel. We've seen that affect volumes, revenue, and average sale prices have all been impacted in the financial year 2025. Low demand and volumes increase competition, putting pressure on margins.
However, we have seen our strong operating leverage starting to come through, and margins are showing some early signs of improvement as volumes improve and capacity is better utilized. A focus on cost and efficiency has improved our operating leverage, with an additional $7 million of costs taken out in the 2025 year. That's on top of the $5 million reduction that we did in 2024. Regardless, our normalized EBIT was a loss of $21.4 million, and our normalized EBITDA was a profit of $2.1 million. We have had a disciplined approach to use of shareholder funds, and particularly in the current economic environment. Inventory has been very carefully managed to ensure that customer availability is high while shifting the product mix towards higher value products and services, and our operating cash flows have remained positive throughout the period.
However, in this environment, it has opened up opportunities for us to utilize our balance sheet strength to grow through acquisitions, and we've also been able to acquire Perry's Metal Protection, as Susan mentioned earlier. Acquisitions enable us to grow into adjacent sectors that trying to grow organically would not be as attractive. We started out with smaller acquisitions, so Fasteners NZ in 2021, Kiwi Pipe & Fittings in 2022, and Roadex last year. They all proved our ability to acquire businesses and products and integrate them well into our group. In the past financial year, we acquired Perry's , which expanded our range into the galvanizing area. We also expanded into aluminum products in response to customer demand. We extended our reach Kiwi Pipe & Fittings into the South Island, and we launched QBT450 as a first roofing profile into the market in many years.
We also added 13 trucks to our in-house fleet, so we now have 33 trucks, providing more control over the last mile, service, and delivery efficiency. Our recent investments are delivering value with positive revenue, margin, and earnings growth in the face of a cyclical downturn. The Perry Metal acquisition has been a good demonstration of our strategy in action and was a highlight over the past year. It further extends our offer to our existing customers and new customers, and we're seeing a range of benefits from cross-selling to actual operational synergies and benefits coming through there as well. It has gone well for us, that integration, and we're now mostly complete. We had a good cultural and values fit between the Perry's teams and the Steel & Tube teams and strong alignment with our customer groups.
While it's early days, the results have exceeded our business case expectations. In fact, for the first five months, we're up about 45% on what we assumed the economics would look like. The steel and metals sector in New Zealand is fairly busy and fragmented, and you can see there's a wide range of potential consolidation opportunities on this chart. Steel & Tube is a natural acquirer. We're very well positioned to integrate and continue to grow. The Perry's acquisition is the largest we've done so far, and it demonstrates our capability in terms of being able to identify strategic opportunities, execute them, execute fairly complex transactions, and realize the synergies and strengths in our group's market position. Looking forward, the market conditions remain fairly challenging.
We've got slower infrastructure growth, high cost of capital, and complex regulations have made planning and investment harder than what they should be. Many businesses are having to put projects on hold or stop spending, and the government has canceled or paused many large infrastructure projects. While the fast-track bill and the current growth narrative from Wellington is a positive step, approvals and funding will take time. There are some positive themes that should lead to activity over the next 12 to 18 months. Manufacturing is poised to grow. It's been supported by a recovery of export, rural, and construction markets, and also domestic demand. We're seeing further interest rates reductions, fingers crossed for another 25 basis points in November that will help stimulate commercial and construction sectors.
The residential sector is slowly recovering, and low interest rates, a large proportion of the mortgages are fixed and are coming up for renewal over the next 12 months. That should increase demand over time. In the short term, elevated supply relative to demand, as well as sluggish wage growth, high unemployment, and affordability constraints continue to dampen demand for residential. In terms of infrastructure, there are some shorter-term government projects that are coming online, such as Dunedin Hospital, which has been helpful, and we're already participating in that project. The government has also advised that there are billions of dollars of government-backed construction projects that are set to get underway across New Zealand before the end of the calendar year, and we're actively working to secure some of those contracts.
However, we are cautious that by the time we actually see shovels hit the ground, it can take some time. We're also well positioned to deliver for climate-resilient projects such as port rebuilds, wind and solar energy developments, coastal protection, and resilient buildings, areas we've got proven expertise in. We're committed to investing and innovating and executing, but the progress will be faster if the government provides greater clarity around long-term infrastructure pipeline. That's energy, transport, and also housing, so businesses can plan, can invest, and can deliver. Clear planning, decisive government actions, and business execution working together to unlock those growth opportunities for our company and also for the wider economy. We're well positioned with the strong operating leverage.
We have streamlined our fixed cost base over the last few years to make far more efficient and tighter control over our variable costs, which enabled substantial profit expansion as volume returns. This chart is fairly conceptual, but what you can see there on the graphic on the right-hand side is really our operating leverage, and we've used the 2023 financial year as a sort of midpoint proxy for the cycle. Looking at the shaded bar on the right-hand side of the graph, you can see if we took the 2023 financial year and assume we got back there at mid-cycle, our volumes modeled our current operating leverage, our earnings are that red dot, and you can see they would have been significantly higher than they were back in 2023. That also excludes the Perry's impact.
You would call Perry's as a sort of $8 million- $9 million EBITDA business. There is significant operating leverage that you can see as volume increases that will mean our margins and our earnings leverage is clearly there. While there's some uplift emerging, we expect the headwinds will actually start to unlock further as we get through the 2026 financial year or into the calendar year 2026, by which time we should be seeing some easing as the benefits of lower interest rates take effect and can stimulate confidence in spending and investment. We've started to see some uplift in key customer segments there, with more projects moving to the planning stage and an increase in tender requests, and actually, importantly, an increase in tonnage per tender. Large infrastructure projects are coming online with more definitive timelines around them, so they're not just circulating for cost proposals.
They're actual real projects, and they're moving to that execution phase, which is great. In the short term, while there are signs of improvement, margins remain under pressure as the market competes for lower demand. We are maintaining a balanced approach to jobs, ensuring that we're competitive while retaining appropriate margins. Our focus is on maintaining our market share position, supporting margins, and continuing our disciplined management of costs and inventory. Our strong market position, loyal customer relationships, and customer-first mindset across the business will support revenue. We will continue to tightly manage our cash and our costs and support margins through higher value products and services and cross-selling opportunities. The current environment offers opportunities to continue to grow organically and also through acquisitions, and we remain attuned to those opportunities.
Our 2026 financial year results will benefit from both the full year of Perry's plus group-wide cost out and efficiencies that we delivered last financial year. Our strategy is delivering value and growth, and we continue to identify and assess opportunities at the bottom of the cycle. Thank you, and I'll now hand back to Susan.
As Mark said, we're well positioned for the economic upswing with product diversity and broad sector exposures that differ from listed peers. We do have a cost-efficient and streamlined business, strong operating leverage, broad sector diversity, and a solid market position as a trusted supplier with competitive scale and long-standing customer relationships. We are well positioned for the cyclical upswing and to drive margin expansion and profit when growth demand returns. Market fundamentals remain strong, and long-term drivers provide a multi-year growth strategy. Steel is actually everywhere in our lives, where we play, live, work, in our transportation networks, our buildings, and our infrastructure. Steel is one of the most essential and sustainable building products. It's permanent, forever reusable, and the most recycled substance on the planet. There are many projects where steel is the best and sometimes the only suitable product.
Over the past 70 years, we have proven our ability to successfully manage through down cycles, and we are very confident Steel & Tube will be able to capitalize on increasing demand as the economy improves. On behalf of the board, I'd like to thank all our shareholders for your committed support. I'd now like to invite questions in relation to the annual report or today's presentations. There will be an opportunity to ask questions about the resolutions once they have been put to shareholders. Questions may be moderated if we receive multiple questions on the one topic or amalgamated together. Any questions not answered in the time available will receive an email response after the meeting. When asking a question in the room, please wait for the microphone and introduce yourself by name. I'll start with questions in the room. Do we have any questions?
Thanks, Bridgepark shareholder. You're mentioning mostly through the bolt-ons. What will that do to the net profile? What's the headroom there for that?
Certainly, having just borrowed for the Perry's acquisition, and you'll notice where we have a resolution to refresh our headroom, we will obviously need to have a look at what is our capital capacity to take on any future acquisitions and exactly how those will be funded. At the moment, without the refresh, we're kind of at our limit with regards to further acquisitions, as we're always trying to optimize our capital management and our balance sheet. If they're small acquisitions, we probably have the headroom to be able to absorb those. If it's anything larger, we'd have to look at how those would be funded.
Thanks. Second question, Mr. Beveridge is retiring. Will he be replaced?
In the meantime, we've actually had a look at the skill set across the board and believe that we're pretty well covered from a skills perspective amongst the five directors that are all here today. We're not planning on replacing John just at the moment, but we will obviously keep looking at the short, medium, and long term and look at what skills that we do need on the board and refresh and take new directors onto the board and put those to the shareholders to vote for as and when we see, you know, a need to add to the skills around the board table. Question over here.
I'm a shareholder. Two things. One is, I think, congratulate the board and the leadership team on the way you've performed during the downturn because it's not been easy, as your slides show. I have personal knowledge of these guys through my son, who speaks very highly of Mark and his team. Going back to the Perry Metal's acquisition, you put in, you borrowed money, $30 million, from the bank of what appears to be a very conservative business case because you're doing six times better than you were. How did you convince the bank to lend you the money?
I'll start off very briefly. We had positioned our balance sheet really well, so you will recall that we actually had no debt, and we had considerable headroom, also naturally being a good business case, we took it to the bank and got their approval for that acquisition. Mark, pass over to you for any other comments, or Richard, our CFO, has been dealing well with the banks.
Yes. We did have to go to the bank and ask permission, as you would expect. They were very supportive of the Perry's acquisition once they'd had a look at the business case. You know, when you go to a bank and say, "Hey, we're losing some money, but we want to borrow some more to buy something else," their first response is, "Okay." They then looked at the business case. They probably agreed with you that the business case was conservative. They went through and did their due diligence, and they very quickly got to a position where they were very comfortable with the Perry's acquisition and could see what we were trying to achieve.
That was a due diligence on Perry Metal s.
We did due diligence on Perry Metals , but the bank did due diligence on the process that we went through to make their own decision as to whether they would support the transaction.
Are there any other questions from the floor?
Madam Chairman. So, that Perry Metal, well, the trucks, 33 trucks now, what's that, $50,000, $60,000 a week just to run them, pay and run them? You know, like I say, all the places over New Zealand, you wouldn't be paying that a week to bring someone in. Instead of having got quite a big trucking output now, and the maintenance, road user charges, and how's edible working out? Perry Metals , I mean, it's all very well to talk about $30 million for an outgalvanizing plant, but what happens if this goes on for another three years? Everybody's painting still. You're not galvanizing. You just got a chance to buy it, so you're rushing and buy it in hard times, whereas you could have knocked them down. Plus, you give them 15.5 million shares. You have issued to that output. At that time, it was 9.2% of the shareholding.
That's nearly 10% taken off each shareholder just sitting here. When it's added on after the other, like all up 27 million shares, all up 20 has been issued. I just got a year coming near that 27. That's how many shares have been issued over the time. Because Perry Metal s is now 8.5%, they pay about $12 million for the shares. They didn't pay them, but they go on the books about $12 million. Like that New Zealand Steel, BlueScope or through New Zealand Steel, they got about 15%. They paid $46 million for their line. You're talking about acquisitions and mergers and all that. I thought, under the half million dollars involved in this output. You just carry on buying stuff. No dividends, no thought of dividends. 6% of people unemployed, 94% people working. Where's the recession? It's all talk of juggling the books.
When you go through and look at the accounts, there's $6 million there that's gone into one of these acquisitions that you're propping up. Also, what's a contingent consideration for Perry Metals ? That's the other $6 million, $46 million all up for that. That's $6 million if they come to a, if the revenue gets up to a certain point. I mean to say, why are you putting it on the books now? $5 million, $4.9 million. Why didn't you pay that out to shareholders? How come you're just giving these people a free ride? You never even went in there and tried to, you just rushed in and bought the place. What are they going to do with galvanizing? You take that emission trading scheme for CO2, and you've got to buy the New Zealand units. How many units do you have to pay? How many tons?
You know, 50,000 tons, 2,500 CO2 units coming out at the cheapest. At the cheapest, what's the cost of that to the company and to the shareholders? It's all very well to come out here and up there and talk the social talk, and then you end up running a company hard right. Forget about the shareholders, the owners of the company. You're still talking about acquisitions and mergers. I wouldn't mind a merger. In fact, I wouldn't mind if the company went up. When the company was broke, it was worth $1.70. It's $1.75. New Zealand Steel bought it. Now it's down to what? $0.70. Plus, another thing on that Perry deal, the market capitalization when you bought it was more than 25% of the market capitalization. That's not approved in proper business.
We are buying, we are paying something that's going to be more than 25% of the market of the business's capitalization. It all might sound good, but it's not. Plus, you don't seem to come in and say, oh, well, it's 45% up, like on that Perry's. What? There's only $9 million a year. What's $9 million a year? That's, you know what I mean, to have that and that much ownership in the company. It doesn't seem right to me. Anyway, that's it. Thank you.
Thank you for those comments. Obviously, each of the items that you've referred to, we look at on a one-on-one basis and the incremental value that they add to shareholders. Certainly, looking at the Perry's, and I'll let Mark talk in more detail with regards to the cost that we've paid for it. I can assure you that we did negotiate a very good price, and what we believe in so far, the results are showing us we're getting a very good return on that investment. Likewise, for the trucking, that is replacing costs that we were paying externally. Again, we're seeing a really good return on that investment into the roading and trucking. You're absolutely right. We discussed it this morning at an early board meeting that we had today with regards to attracting the right truck drivers effectively.
Certainly, we're seeing a good return on that investment relative to what we were paying third parties to deliver those products for us. The other thing to remember is that our truck drivers dropping off the steel to our customers at the worksite, they are, I guess, the face of Steel & Tube. We're seeing a lot of value in having our truck drivers trained well, looking after our customers at the coalface. Mark, let me pass over to you to elaborate on a few of those points.
Thank you, Susan. Can you hear me? Are you working? Yeah. Look, I think it's probably worth just noting that we are a very cyclical business, and we're very much linked, as Susan said in her prepared remarks, to the New Zealand economy. When you're at the bottom of the cycle, like we are at the moment, we are still generating strong operating cash flows. We are obviously not making any EBIT, but we are gradually getting closer to break even. You have a one-time opportunity to buy business as well at this stage in the cycle. We have been very carefully working through a range of different options that we think are viable. We had had galvanizing in our sights for many years. We've also got a list of other businesses where we've got high margins and low market share that we want to grow into. We're very discerning.
We've got a process set up with the board around a gate process that we work through on every single acquisition. We only ever move on one in ten, if that gives you an idea of the kind of process that we're working through. Even then, we often find through due diligence that they fall over. In the case of Perry's , I can assure you that the value that the business was looking for before we got involved was significantly higher. We worked through a year-long after an exclusivity period and an offer was made. We spent a year in due diligence, so understanding every part of that business before we actually signed a commitment to buy it. We bought very well.
The founder, Simon Perry, has very large land positions in the Waikato, and it's how I came across him, was actually trying to sell him some steel for some land developments that he was doing. The 30% of the transaction value that is in script is Simon has to hold that for three years. We've done that because we really want that reciprocal trade. We've also put an earnout on the back of the deal, are you right? $6 million of forward consideration there that is totally linked to some improved EBITDA numbers coming through the business. Simon and I meet every month, and we talk through the results, how they're tracking towards that earnout.
It is all a credit to shareholders in terms of if those earnouts are met, but it also gives us a wonderful opportunity to have the wisdom and experience of somebody who's run the business for 50 years help us through the first three years of the transition. Perry 's has been a wonderful deal for us. It's well ahead of our expectations, and we continue to look for other good deals. We've always got one or two non-binding indicative offers out there in the market, as we do a couple today. We don't get too attached to any of them. The numbers have got to be proved up. We've got to go through due diligence and prove the case every single time and get it through our board in terms of whether the deal makes sense. We've got a lot of financial criteria to meet.
Your comments on the emission trading scheme aren't quite correct. There is, you know, we've just seen this morning a change there. We will no longer be required to, we're not at $1 billion of revenue, so we will be in a different category going forward in terms of reporting around emissions. That's a change that's just been announced today, I think, to be enacted in another year's time.
The follow-on, thank you.
Yeah, just furthermore, what about the properties that all this galvanizing is on and the leases? I mean, what happens if you have to uplift this whole effort and move it somewhere else because it's no good for the areas? They made sure they're looking after that. What period annually property?
Perry's own four of the five operating leases, and those sites have all been checked for environmental contamination, all that sort of stuff. Building galvanizing plants is quite a process, and to get resource consent for them, there are quite a few barriers to entry with those locations. Galvanizing is a service business. When customers want something galvanized, they really want it turned around in three to five days because that's when they can invoice their end clients. It's a service-oriented business. There are really two large players in New Zealand, so it's a very attractive market. The assets that Perry's have in terms of those land positions are well placed, and we're happy with those.
What are they well placed outside of, because outside of the rural areas where, you know, housing and all that? Patiki Road, Rosebank Road, that's one of their places there, isn't it?
I guess one of the strengths with Steel & Tube's acquisition of Perry's, Perry's customers, 75% of them were already our customers. There's another 25% that weren't. We've been able to grow into that customer base that we didn't have, and we've also been able to get a lot of our customers to buy from Perry's. Massive cross-synergy. One of the other jewels with this acquisition that we haven't really tapped yet is we've got a national network, as I showed you earlier, 35 sites. We can offer a pickup, drop-off service because we're delivering steel to those sites weekly, daily, and we can offer our customers that can't get galvanizing done in those areas a national footprint. It's a great opportunity, but keen to hear from other shareholders if there are other questions.
Yeah, just, what's the guarantee of these properties in this galvanizing in those areas?
Probably getting into a bit too much detail, I think.
Didn't they look into it? I mean, what did you pay?
We're across all the.
$600,000 for just to get hold of this acquisition.
We did a lot of due diligence to make sure we understood the land positions and the.
How long they could stay there, how long the leases last?
Yeah, we have long leases at all of those sites.
What's a long lease?
15 years +.
Okay, yeah, thank you.
Thank you. There's another question over there, and then I'll turn to see if we do have some online questions as well.
Thank you. I'd just like to make a general comment. We're at the bottom of the cycle, as Mark just said. They just bought Perry's at the bottom of the cycle. Right now, this company is a takeover target, trust me, because we're cheap. What I implore every shareholder to do, if you get an offer, refuse it because this company is going up.
Thank you. Jackie, do we have some online questions?
We just have one online question from Paul Grant. Can you talk about market share? Are there any areas where you're losing market share or winning market share back?
Thank you. Our market share has remained pretty stable over time. Obviously, it is a really competitive market out there. As volumes decrease and people end up with excess inventory, etc., they do try and liquidate that and make the market pretty tough. What we have been working very hard on is to try and maintain market share while also maintaining margins and having the right inventory in the right place and competing on service so we can maintain our margins. Mark, if you've got any further detail you want to add, pretty much stable from a market share point of view. What I'd like to do now is move to the resolutions. Thank you very much, everybody, for the questions. These were notified in the notice of meeting, and the explanatory notes have been provided. Voting on each resolution in the notice will be by way of poll.
Only shareholders, proxy holders, or corporate representatives of a shareholder may vote on today's resolutions. For online shareholders, please cast your vote under the vote tab on the meeting platform. For those in the room, please complete your voting forms. The first resolution is to authorize the directors to fix the fees and expenses of KPMG as our company auditors. We have Lara here as a representative, our Managing Partner from KPMG, who is our auditor for the company. KPMG and Lara and her team have done an amazing job and been incredibly diligent as our auditors. Are there any questions or any questions online with regards to this resolution? If there are no further questions on the resolution, I would encourage you to fill in your voting. The next resolution is the re-election of our board in 2021. He's a very experienced Senior Technology Executive.
As you will understand, in all markets, having senior technology people to drive our customer experience, increase digitalization, and enhance efficiencies and productivity across the business is incredibly important. He's helped drive our digital transformation, and this comes off his experience of driving such digital transformations at the likes of Nike and Microsoft. Steel & Tube's digital strategy is an increasingly valuable pathway for us, and Andrew's extensive experience is of real value to the company. I'll now ask Andrew to say a few words.
Kia ora koutou and good morning, shareholders. I'm pleased to offer myself to the shareholders for re-election as an Independent Director of Steel & Tube New Zealand . Since joining the board in 2021, I've actively participated in all board discussions, been an active member of the Audit and Risk Committee, and I've attended and participated in the People & Culture, Quality, Health & Safety, and Environment committees. Recently, I requested to join the Quality, Health & Safety, and Environment Committee, and I'm now a member of that as well. I continue to use the skills developed while at Microsoft and Nike in the U.S.A. as a technology advisor to the board of the ASB Bank and as a Director of the Port of Auckland to guide discussions on the use of technology to lower costs and drive revenue.
As a former expat Kiwi, I am honored to now use my extensive experience with digital technologies here at home and for the impact I can have in shaping the future of Steel & Tube New Zealand . Thank you.
Thank you, Andrew. Before you disappear, are there any other questions? Are there any questions for Andrew before we let him go and sit down? Thank you, Andrew. I now encourage you to fill in your forms with a vote for Andrew as a Director of the company. The third resolution today is to ratify the issue of shares made as part of the Perry's acquisition on the 1st of May 2025. This will replenish the company's replacement capacity and allow the company to issue another 15% of issued capital in the same 12-month period. Having this flexibility is important to delivering on our strategy, strengthening our ability to act with speed and flexibility to secure growth opportunities and position the business for the long term. Further details have been provided in the notice of meeting. Are there any questions from anybody?
Being no questions, I ask you all to vote on the resolution. That concludes the discussion on the resolutions. In a minute, I will close the online voting system. Please ensure that you have cast your vote on all resolutions, and Computershare, would you now like to collect the voting forms from the room?
We're delighted to welcome Perry Metal Protection to the Steel & Tube .
Hi, I'm Simon Perry, Chairman of Perry Group. Our company was founded by my father, Brian, in the mid-1950s, and our galvanizing business was formed in the late 1970s. Our mission statement, Built to Last, is not just about being in business for a long time, it's about building long-term relationships with our staff and win-win business partnerships. Steel & Tube is an obvious fit for Perry Metal Protection. Like Perry's, Steel & Tube is focused on excellence and creating win-win outcomes for our customers, our people, and our communities. The combined business creates a steel solutions offering and secures a strong business for all our stakeholders. It's an exciting time for our business in delivering a wider range of steel services and products.
Steel & Tube's expertise in steel solutions is now enhanced by Perry Metal Protection's industry-leading protective coating services, ensuring stronger, longer-lasting steel products. Perry Metal Protection is at the forefront of galvanizing and protective coatings. Hot-dip galvanizing is the most reliable, durable, and trusted way to protect steel from corrosion. It can help steel last up to seven times longer, making it great for our customers and great for our planet. Proven protection for steel that lasts a lifetime. Also included in the acquisition are Waikato Sandblasting, experts in surface preparation, and Perry Grating, providing strong, reliable steel grating solutions for industrial, commercial, and infrastructure needs.
It's the beginning of a new chapter for both of our businesses. We're bringing together two trusted industry leaders with strong legacies and a shared commitment to our people, excellence, community, and pride. By combining Steel & Tube's national branch and freight network with Perry's expertise, we're able to create an outstanding galvanizing offer across New Zealand.
Together, we're building our customers' expanded service, nationwide reach, and enhanced expertise, ensuring quality galvanizing and steel solutions from start to finish. For more information, visit steelandtube.co.nz.
Thank you. I hope you enjoyed that little video clip. The voting is now closed. I wish to advise that we did receive proxies in advance for 22% of the shares and that the majority of those shareholders voted in favor of the resolutions. The results of the voting will be released to the NZX as soon as practical. Is there any other business that anybody would like to raise? If there's not, I'd like to thank you all very much for your continued support and thank you for those who have joined us online or have joined us in the room. I think we might have one extra online question. Jackie?
We do have one more question from Paul Grant. He says, to the CEO, thank you and the board for your 20% temporary fee reduction. Looking forward, when do you hope to be EBIT positive and net PAT positive?
Thank you, Mark. I'll pass to you. Obviously, it's a question that we keep modeling, and we are certainly looking at and beginning to see some uptick in the market, which should assist us in that.
Yeah, totally. I think, as you said earlier in your remark, Susan, that, you know, it's really, we do see the conditions easing as we get through the 2026 year as interest rate reductions start to stimulate demand. We've also seen a, you know, a plethora of projects being announced by the government over the last few months, and they continue to come in strong. Those projects typically take a little while to get moving, but I think we're starting to see already, you know, Bledisloe Wharf at Ports of Auckland come through, you know, regional funding, and we're seeing Dunedin Hospital, we're on those type of projects. They're all starting to build momentum. I think as we get into the third and fourth quarter of the financial year, we should start seeing a different profile in terms of the earnings for the businesses.
Capacity starts to get utilized more effectively. Margins can come up a bit more across the industry. I wouldn't want to actually give a date. In fact, Susan was pressing us for it earlier today, but, you know, we're certainly on a pathway where we're reducing our monthly losses and getting close to break even, you know, within the next six to nine months.
Thank you, Mark. I'd like to thank everybody for their attendance today, and we welcome those of you who are here in person to join the management team for refreshments. Thank you very much.