AGM 2021

Oct 21, 2021

Slides

Okay. It's just gone 10 o'clock, so we'll make a start. Good morning, ladies and gentlemen, and welcome to the 85th Annual General Meeting of Coventry Group Limited. My name is Neil Cappy, and I'm the Chairman of your Board and this meeting. Due to the COVID-nineteen pandemic and resulting public health concerns, this meeting is being held virtually via live Zoom webcast. For those participants at today's meeting unfamiliar with some of the functions of the Zoom technology platform, we will try our best to assist you during the meeting in order to make your experience at this meeting a good one. I would now like to introduce the members of the board, Andrew Nisbett, James Todd, Tony Howarth and Robert Hors, our CEO and Managing Director. Online, we have Richard Baker from Mertens Corporate Services and our CFO, Rob Jackson. Our external auditor, KPMG, is represented today by partner, Julie Carey, who will be able to respond to any questions relating to the FY 2021 audit. Also in attendance is our share registry, Computershare represented by Peter Rinder, who will act as Returning Officer and his colleague, Jody Lester. My Chairman's report is contained in the 2021 annual report, and I do not intend to repeat that content here. It is much more important that you all hear from rollercoast who will provide an overview of the current state of the business and in particular how we are managing the Coventry business during these unprecedented times. I would remind everyone in attendance that this is a formal meeting of shareholders. While visitors are welcome, only members of the company, proxy holders or appointed representatives are permitted to submit questions online. Questions can be submitted online at any time. Please see the steps outlined on your screen. Type your question in the chat window stating your name or the organization you represent and send it to the meeting moderator titled 2021 AGM Questions. The meeting moderator will forward your questions to me. I will address questions as I move through the respective items of business. And at the end of the meeting, there will be an opportunity for general questions. Due to the virtual nature of the event, Computershare will be facilitating voting on the formal part of this meeting using an application called Loomin accessible on your desktop or Internet enabled device as detailed in the shareholder letter sent to you on the 21st September and posted on the ASX market announcements page and Coventry website. Eligible shareholders who have not already voted by proxy and wishing to cast a vote, please follow the steps as outlined on this training and submit your vote at any time during the meeting. Voting is now open. Right. As the meeting has been properly constituted and the company secretary has advised the quorum is present, I declare the meeting open. The notice convening the meeting having been provided to shareholders will be taken as read. All resolutions except Resolution 1 are subject to voting exclusions as outlined in the notice of Annual General Meeting. As Chairman of the meeting, I intend to vote in favor on all open proxies on all resolutions to be put to the meeting. The minutes of the 84th Annual General Meeting held on the 29th October 2020 have been signed as a true and correct record by the Chairman. Ladies and gentlemen, the first item of ordinary business is the consideration of the financial report, directors' report and auditors' report for the year ended 30th June 2021. These were circulated as part of the annual report, which members received in hard copy if they so elected or were able to access on our website. To provide some additional narrative around these reports and an update on current initiatives, trading and outlook, I will now hand over to our Managing Director and CEO, Robert Force. Thanks very much, Neil. Welcome, everybody. Very pleased to be here today to present again on the business. And we're also very pleased with the progress we've made and the results from last year as well. And we can also confirm that we've had a solid start to FY 'twenty two as well, which is encouraging in the current environment. So just starting with health and safety. We had 7 lost time injuries last year, which was an improvement over the previous year on a larger organization. Previous year was 13 LTIs. We had a total of 56 days loss. So we still have quite a lot of work to do. Our aim is for 0 incidents in the business and 0 harm to our people. We continue to invest in this area. We've appointed a group safety health and safety manager at the start of this year. We've more recently appointed a Chief People Officer who will also take responsibility for the health and safety and well-being side of the business. That person starts early in December. We've got a much larger team, so each business unit now has a dedicated safety manager in place. We're moving towards implementing a new safety app that will be available to all people to report incidents and note safety issues in the business. So a lot of work going on in this space, a lot of distraction in this area from COVID-nineteen, of course, trying to make sure our people are safe, our customers are safe. We've got in and out of lockdowns, in and out of having click and collect in some of our operations. So quite a big distraction, but to date, we've done a good job of keeping our people safe and have had, I think, only 2 COVID cases since the start of the pandemic. Next slide. Thanks, Rebecca. So one of the things that we're most pleased about with the business that's happened over the last 4 years is the change in culture. The culture that we had at the start was very poor. We had extremely high turnover, very, very low engagement from our people. We've spent a lot of time and effort developing the values that I've spoken about many times before and really embedding them into the culture of the business and making sure the leadership of the business and the managers are living by those values. I think we're most proud probably of the last engagement survey that we did where we had the 84% engagement, 16% ambivalent, but only 1% of our people disengaged. And they have very, very high rates. If we go back 4.5 years ago, disengaged number was around 50%. So it's a big turnaround. What that does is it enables us to attract much, much better people into the organization. It helps with retention and it ensures that we've got a workforce that really is working with us and doing a great job executing on the strategy that we've got in place. So very, very important and something that we're particularly proud of that we've achieved in the organization. Thanks, Rebecca. So the business as it sits today, not a lot of real change. We still got the 2 channels to market. The first is our trade distribution business, which is made up of Connect and RT Australia, Connect and RT New Zealand and our Nubco business. And then on the other side, we have our fluid systems business, which has grown again through acquisition during the year. So we added in the HLS Hose business into it, fluids and also fluid power services business down in Tasmania. And so both quite distinct businesses, very strong in their own right. We have both of them in a profitable state. And fortunately, now all of the business units in the trade distribution business are generating a positive contribution for the group. Definitely fair to say that it took longer than we'd hoped to get Connect and Altria Australia to that position. But I guess that only reemphasizes to us the importance with our acquisition strategy to only buy good profitable businesses and not try and think we can grab something and fix it up. Thanks, Rebecca. So just the latest statistics, obviously, we're very pleased to see share price pushing up again, particularly pleased to have got a dividend back in place for shareholders. Definitely like to thank the long term shareholders that we've had that have stayed with us for the whole journey, in particular, Viburnum and Richmond Hills, Sand and Castle Point who have been very loyal to us the whole way through the journey today. Thanks, Rebecca. So FY 'twenty one, another very interesting year. So we operated with the backdrop of COVID the whole way through. We, I guess, learned how to set the business up for success in the end of the preceding year at the start of COVID. The reality is we've probably been or have been a slight beneficiary of what's happened from the COVID-nineteen pandemic from the perspective that our markets have continued to perform well and in some cases have benefited from government stimulus. That being said, it's a huge distraction just going from the changing of settings that the various state governments and New Zealand government make on an ongoing basis, having borders closed and having stores going in and out of having customers in to click and collect or shut altogether. So a strong in the 4th consecutive year of sales and EBITDA growth, very strong sales growth of 16.5%. Business at the end of the year generated $248,000,000 of sales that was up from $151,000,000 4 years ago. Underlying EBITDA at $13,400,000 was a $6,800,000 improvement and a solid statutory net profit as well at 7.2 percent. As I said earlier, we completed the 2 acquisitions. Very importantly, we got the NAB borrowing facility in place. And overall, we've done what we think is a pretty good job managing the COVID situation the whole way through making sure we keep our people communicated to and engaged and working through that through the pandemic. But look, overall, a pretty good year and certainly one that we are pleased with. Just the highlights, I've touched on most of them already. But look, when we look at the people side, our key measures are those LTIs, our safety results and the engagement results. We're very pleased with those. Notable events for us during the year was the way we managed COVID, getting KAA back to that small profit, getting the debt facility in place, which enables us to go to the next piece of our growth story. The Redcliffe property, which has been a huge thorn in our side for 13, 14 years for the group, but definitely for the last 4 applied for us is now pretty much close to fully tenanted and is no longer a cash burn on the business, which is very helpful. Only I think 6.5 years to go to the end of that lease. E commerce wise, the reality is we are a bit behind where we should have been. It would have been great to have had all of our online ordering sites up and running at the start of COVID when people on mass move to that sort of sales channel. But we are at the stage now where we're starting to go live with these sites and we see them as generating additional sales force as we move forward into the future. The acquisitions that we've done so far, Nubco and Talk both had very good years in FY 'twenty one. We're very pleased with the progress and the performance so far of the 2 acquisitions from FY 'twenty one. So again, that policy we've got a strategy we've got of only buying profitable well run businesses, I think is definitely the right way to go for us and so far has proved to be very successful and minimize the obvious risks that acquisitions bring with them. Thanks, Rebecca. So this is just a bit of a historical highlight of where we've come from. Obviously, we inherited a business that was losing a lot of money, had a very poor culture, was not competing very well at all in the markets. What we've really done is focused on getting the right people in place, building our value proposition so that the customers come to us rather than to our competitors, if you like, and then add the acquisition strategy on the side of that. So really, I think that strategy has been indicated today. It survived COVID. We've come close to doubling the sales over that period and we've had a turnaround in EBITDA of close to $23,000,000 So, so far so good and we hope to continue the trends that are shown in those graphs on the screen at the moment. Thanks, Rebecca. FY 'twenty two, really we've continued on in the same vein as we were in FY 'twenty one. So very positive sales growth number at 14.3% on the prior year, both fluid systems and also trade distribution up. Those numbers were impacted negatively by the fact that we lost the New Zealand business entirely for about 3 weeks and then the rest of Auckland for another 2 or 3 weeks. So all combined with construction shutdowns in Australia, we estimate we lost between $2,500,000 to $3,500,000 worth of sales. So that result could have been quite a bit better if all the sales had aligned for us and we had the entire business open for the whole time. One LTI year to date that continues through October as well. So again, looks like we're heading towards an improvement with the additional investment we've made into safety to get a lower LTI rate than what we did last year and the year before that. Balance sheet is still in a solid position and we just continue to modify our COVID safe plans to the various changes in settings that we're seeing around both Australia and New Zealand. So challenging, we've got many of our stores still at click and click state at the moment. But as we sit here today, at least we have all of our branches operational and all of New Zealand operational. But look, good start to the year. We've continued to see Connect growing in Australia, which is a positive for us. And just what do we see on a day to day basis at the moment? The current challenges are always there and we have to manage and mitigate those. That's what we're trying to do the whole time. So COVID is constantly there. The latest thing that we're that when we as all organizations are is the vaccinations, trying to get all of our people to that vaccinated state. We get forced in some cases by governments to do that in Victoria. All the people are authorized workers, so we're working through or have worked through making sure that everybody is vaccinated here. Again, it's a big distraction, particularly for our HR teams and safety teams in the business. We've constantly seen lockdowns, different shutdowns. Again, we managed through those supply chain issues also impacting on the business, particularly in the Nabco business from the steel products, but also roofing screws over in New Zealand. Again, overall, what we're trying to do is mitigate that by where we can increase in stock holdings and making sure that we've got more stock than our competitors. All businesses, not just ours, are under pressure from labor shortages, wage pressures and then we have the normal things that we have to manage around currency fluctuations and also costs and price inflation that's coming at us from suppliers. Most of these things we see continuing into the medium, potentially even the longer term. We can manage them and mitigate them. The good news is from our perspective that all of our markets are still performing. Commercial construction has taken some little hits along the way with lockdowns, but when it's open, continues to perform very, very well. Mining and resources has continued to perform, and we're seeing more and more of the government stimulus spend into the infrastructure markets coming as well. The other thing that's happening and I think we're seeing a lot of press about at the moment is the merger and acquisition market is also accelerating at the moment. We're seeing more activity out there and having more discussions with potential targets every day as well. So in all, our market is in good shape. The acquisition opportunities are still there. We sort of know how to manage and mitigate all the other things that are coming at us. And so as we've said before, we're cautiously optimistic about the future for the group. Thank you, Megan. I'm not going to touch too much on this slide. It's pretty much nearly the same as what we had in the year end presentation. For fluids, again, the markets are performing. There's lots of opportunities out there for us. Our biggest challenge remains getting the labor we need to do the work. There's a real shortage in the business owners and other trades people, engineers that we need to run that business. Look, overall, again, performing well, and we expect to continue to grow. Thanks, Rebecca. Trade distribution, very similar story. Market's performing very well for us. We don't see any change to that in the near term. We have had some disruption some more disruption in that business, particularly in New Zealand, obviously, from COVID, but all the business is back up and running at the moment, which is great. All of the same opportunities that we've had in the past are still there for more store expansion, more makeovers, the infrastructure market, digital customer engagement, lots and lots we can still continue to do there. Thanks, Rebecca. So I guess in conclusion, we're very pleased with last year. We're very pleased with the overall 4 year performance of the business from where we came from. We've got the COVID thing as a constant. We don't see that going away anytime soon. We think we can mitigate and manage that fine. Our markets are performing well. So really, we do see the business continuing to grow. We'll continue to look for acquisition opportunities. And as we've said, we're cautiously optimistic about the future. So thanks for your support, and I'll hand back over to Neil. Thanks, Robert. Ladies and gentlemen, we will now deal with any questions in relation to the financial statements and reports for the year ended 30th June 2021 and the management of the company. Richard, do we have any questions? Yes, we have one question, Mr. Chairman, from Paul Turnbull. The question is, what is an off coil vendor? Mr. CEO, would you like to address that? I'll do the best I can. So this is a piece of equipment that we have in Nubco. It basically bends coil reinforcing coil into particular shapes that the builders want when they're constructing something with concrete. So we've got the only one of these down in Tasmania. So if a customer wants something custom bent, we can do it. Otherwise, they have to get it shipped across from Bentham, shipped across from Melbourne. So it gives us quite a nice little competitive advantage. Okay. Thanks, Robert. Hopefully, that answered that question for that shareholder. If there are no further questions or comments on the financial statements reports, I'll declare them as considered and received. So, we'll now move to the resolutions on which shareholders, representatives and attorneys of shareholders and proxy holders are being asked to vote. Voting today will be conducted by way of a poll on all items of business. The poll results will be announced to the ASX as soon as practically. Excuse me, Mr. Chairman, another question has just come through. Right. Okay. From Campbell, the net asset has increased by $1,200,000 in September quarter, implying the same amount of profit growth. Is this correct? Robert or Rod to assist? Rob, did you want to take that one? Correct. We have had profit growth. Right. Okay. No other questions, Richard? Just a request for more detail, please. We have consistently we've matched budget profit for the Q1, which is pleasing. And that's based on sales, not quite where we wanted them. As Robert explained earlier, that we've been able to improve our margin and we continue to do that and make there's a lot of price movement going through. We push that through the market, and we'll maintain that position. Right. Okay. Thanks for that, Rod. So as I was saying, we're now moving to the resolutions. And I got to the point of just saying that discussion of each resolution will be dealt with individually. As the next item of business concerns me, I will temporarily hand over to Mr. James Todd for this resolution. Over to you, James. Thanks, Neil. The next item of business is the reelection of a Director, Mr. Neil Kathy. The explanatory notes in the notice of meeting contain particulars of Mr. Kathy's skills, qualifications and experience, which I will not repeat here. The Board, with Mr. Kathy abstaining, unanimously recommends that shareholders vote in favor of his reelection. The ordinary resolution before the meeting is that Mr. Neil Kathy, having retired by rotation in accordance with clause 8.1(2) of the constitution, being eligible and offering himself for reelection, be reelected as the Director of the company. I will now respond to any questions received online. Richard, are there any questions? There are no questions. Thanks, Richard. I'll direct you to the slide now shown on the screen, which outlines the proxies received in respect of this resolution. I now hand it back to the chair to Neil Caffey. Thank you, James, and thank you for all the shareholders have voted for. Thank you. The next item of ordinary business is to seek shareholder approval to adopt the remuneration report for the year ended 30th June 2021. The Corporations Act requires listed companies to make expanded disclosure relating to directors executive remuneration information. As a result, the directors' report must now include a section called the remuneration report. This report is set out in the annual report. Additionally, the act requires listed companies put the remuneration report for each financial year to a vote of members at the company's Annual General Meeting. Under Section 250(three) of the Corporations Act, the vote is advisory only and does not bind the directors of all the company. Having said that, the Board has and will continue to take the outcome of the vote into consideration when reviewing remuneration practices and policies. The Board unanimously recommend that shareholders vote in favor of the adoption of the remuneration report. I refer you all to the explanatory notes of the notice of meeting in which the 2 strikes rule in the Corporations Act is outlined. If at least 25% of the votes cast on the adoption of the remuneration report at this meeting are against it, it will constitute a 1st strike as laid out in Section 250(new) of the act. The ordinary resolution before the meeting is that the remuneration report of the company for the financial year ended 30th June 2021 be adopted. I will now respond to any questions received online. Richard, do you have any questions? You're on mute, Richard. Apologies. There are no questions, Mr. Chen. Thanks very much. So I direct you to the slide shown on your screen, which outlines the proxies received in respect of this resolution. I also draw your attention to the voting exclusion statement for this resolution detailed in the notice of meeting. Very good. Moving to the next resolution. The Board is seeking shareholder approval for the issue of performance rights to Mr. Robert Porus, the company's CEO and Managing Director, in relation to FY 'twenty two. The ordinary resolution before the meeting is that for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes, the directors are authorized to issue up to a maximum of 163,617 performance rights to Mr. Robert Bullis, a Director of the company or his nominee as soon as practical following the conclusion of the company's 2021 Annual General Meeting and in any case by no later than 12 months after the conclusion of the company's 2021 Annual General Meeting on the terms and conditions set out pursuant to the company's executive and director incentive plan and the terms and conditions set out in the explanatory statement accompanying the notice of meeting. I will now respond to any questions received online. Richard, do we have any questions? There are no questions, Mr. Chairman. So again, I direct you to the slide now shown on your screen, which outlines the proxies received in respect of this resolution. I also draw your attention again to the voting exclusion statement for this resolution detailed in the notice of the meeting. Thank you. We've had no questions shareholder questions registered prior to the meeting. No other items of general business, which notice has been received. Richard, do we have any other questions? There are no more questions. Mr. Chen? Okay. Thanks, Richard. Those shareholders who have not already voted are encouraged to do so now. In accordance with the instructions provided at the beginning of the meeting and as detailed in the shareholder letter sent to you on the 21st September also displayed again on the screen. Please note the voting closes at the conclusion of the meeting. With the results of the poll not available immediately, shareholders are advised the results will be announced to the ASX and displayed on the company's website as soon as they become available. With there being no other business, I declare the meeting closed. Thank you all for your attendance today.