Each generation is defined by one great technological leap forward, a leap that rewrites the rules and changes the world forever. The internet, virtualization, cloud, these innovations have significantly reshaped our daily lives and professional landscapes. We're no longer waiting for the next generational change. AI is already here. To harness it effectively, companies must simplify, streamline, and innovate their technology landscape, all without compromising security. This requires a clear strategy with execution, built upon secure and reliable information systems. When an overwhelming 73% of organizations recognize data and AI as a top corporate priority, the direction is clear: technology-driven modernization is everything. What was once considered the future is now our reality. In collaboration with our world-leading technology partners, Data#3 is here to help you navigate today's technological terrain and uncover real opportunities for digital innovation.
Data#3's vision is to harness the power of people and technology for a better future. Let us show you how to elevate your technology journey and take it to the next level. Next is now. Are you ready?
Good morning, ladies and gentlemen. My name is Mark Gray. As the Chair of your board, I would like to extend a warm welcome to all shareholders and guests joining us today at the 2024 Annual General Meeting of Data#3 Limited. This is a hybrid meeting with in-person attendance and live streaming from the Data#3 head office here in Brisbane. I would like to start by introducing your board of directors who are with me today: Leanne Muller, Non-Executive Director, who joined the board in 2016. Mark Esler, Non-Executive Director, who joined the board in 2019. Susan Forrester, Non-Executive Director, who joined the board in 2022. And finally, our Managing Director and CEO, Brad Colledge, who joined the board in March this year.
Also in attendance are members of our executive management team: Cherie O'Riordan, Chief Financial Officer; Terence Bonner, Company Secretary and General Counsel; Mike Bowser, Executive General Manager; and Tash Macknish, Chief People Officer. We also have in attendance Hayley Harpham, Chief Counsel and Moderator for the online questions today. I would like to welcome Jason Evans, representative from our current independent auditors, Pitcher Partners. Also in attendance are representatives from PwC, our proposed incoming independent auditors. Now for the formalities of the meeting. I note that there is a quorum present, and I declare the meeting open. The notice of the meeting was dated 23 September 2024, and the meeting has been properly convened. In the notice of meeting, we set out five resolutions to consider.
The board recommends resolutions two and three for your approval, and the board supports but abstains from voting on resolutions one, four, and five in the interests of good corporate governance. Please note that only shareholders, proxy holders, or shareholder company representatives may vote on the resolutions. I'll start today's proceedings with a summary address and then invite Brad to address the meeting before we move on to the formal business of the day. I'd like to start my chairman's address with an overview of the leadership and board changes completed during FY 2024. These changes have all been part of a comprehensive succession plan developed and implemented over the last few years. I've just completed my first year as chair of the Data#3 board following the retirement of Richard Anderson at last year's AGM.
I note that Richard is here in attendance today, just sitting behind the pillar there, and I'd like to acknowledge his sterling service to the company over a long period of time. Thank you very much, Richard. I joined the board in 2017, and I'm privileged to have been invited to take over the role of chair. I'd personally like to thank my board colleagues for their support during the year. As announced on 10th September, Leanne Muller has chosen not to stand for re-election at today's AGM and will retire following its conclusion. Leanne has served as a Non-Executive Director since February 2016 and was appointed Chair of the Audit and Risk Committee in August of that year. Leanne has made an enormous contribution to the board, and we wish her well and all the best in her future endeavors.
We are well advanced in recruiting for Leanne's replacement, assisted by an external board recruitment consultant, and we hope to be in a position to make an announcement on this in the near future. This year also saw Laurence Baynham step down from his role as Chief Executive Officer and Managing Director effective March 1st, 2024, after almost 30 years with Data#3. I'd like to thank Laurence once again for the significant contribution he made to the ongoing success of the company. Brad Colledge took over the reins from Laurence in accordance with our succession plan and a handover transition period. Brad joined the company in 1995, initially to start the software solutions business, before expanding his remit to encompass the entire business in his role as Executive General Manager in recent years.
Having worked in most parts of the business, Brad is well known, highly regarded, and widely supported across the company and the broader industry. Brad has made a great start to his role, and the board is delighted with the smooth and seamless transition which has occurred. Brad has brought his own style and perspective to the role, but the fundamental underlying strategic direction remains stable, consistent, and enduring. Both Brad and I have participated actively in the development and implementation of the company's strategic plan in recent years, so we both have a strong ownership of and an ongoing commitment to delivering on this plan. We continue to be focused on the sustainable growth of the business through quiet evolution as we respond to the rapidly changing challenges across the world.
In accordance with good governance practice, the board decided that it was an appropriate time to put our external audit engagement out to competitive tender, and following a rigorous selection process overseen by the chair of our Audit and Risk Committee, the board is recommending to this AGM that PricewaterhouseCoopers be appointed as the company's auditors today. I'd like to acknowledge the high standard of service provided by Pitcher Partners, who have acted as our external auditors since we listed in 1997. They have completed our external audits with great professionalism over many years, developing an in-depth understanding of our operations and seeing us through periods of substantial growth and change. In short, they have been part of our journey in growing the business to what it is today.
Finally, there have been some questions raised about my other board appointments and the impact on my workload as chair of Data#3. As I foreshadowed at last year's AGM, I am in the process of stepping down from some of my other roles. I resigned from the board of Queensland Cricket with effect from the 30th of September this year, and I've tendered my resignation from the board of the Northern Australia Infrastructure Facility with effect from the 30th of November this year. Over the next two years, I will be resigning from two other boards when my current terms of appointment expire. All this means that I am freeing up additional time to ensure that I continue to devote sufficient priority to my role as your chair. Moving on now to some financial highlights.
2024 was another successful year of growth, delivered in a challenging economic environment of persistent inflation, higher interest rates, and geopolitical instability, which was also combined with changes in market buying behavior in some areas post-pandemic. Overall, the business performed well in this environment, growing in revenue and profitability while maintaining our skilled workforce, delivering strategic growth in our services business, and onboarding new customers. Our FY 2024 gross sales grew to a record AUD 2.8 billion, up 7.6% on FY 2023, despite isolated areas of uncertainty in our operating environment, which caused some customers to deliberate longer on large IT spending decisions. Net profit before tax of AUD 62.1 million was up 16.6% in FY 2024. Earnings per share of AUD 0.28 was up 16.9%, and the board declared a fully franked total dividend for the year of AUD 0.255 per share, an increase of 16.4% on FY 2023.
This represents a payout ratio of 91.1%. Financial results were mixed across our diversified portfolio of business units this financial year, with the strongest growth achieved by our software solutions, maintenance, and managed services businesses. Some key infrastructure projects completed this financial year included the Sydney Football Stadium, Stadium Australia, Queen's Wharf, and Griffith University. Our expertise in the design and implementation of both wired and wireless networking equipment at large sites such as hospitals, stadiums, and universities means we are well placed to capitalize on upcoming opportunities such as infrastructure projects for the 2032 Brisbane Olympics. We continue to build our large project pipeline. Our success in FY 2024 was supported by the dedication and hard work of our people, and we thank them for their continuing commitment to our company. We have an enviable culture at Data#3, which continues to underpin our success.
Likewise, we acknowledge and greatly appreciate the support of you, our shareholders. Before moving to the formal resolutions, I'd like to hand over to Brad to address in more detail the operational aspects of the company's FY 2024 performance and the outlook for the current financial period. Thanks, Brad.
Good morning, ladies and gentlemen, and thank you, Mark. I'd like to add my welcome to you to Data#3's head office and today's AGM, and thank everyone for making the time for joining us here today for my first AGM on this side of the podium. Despite the challenging economic conditions experienced in FY 2024, I'm pleased to report that your company delivered record gross sales of AUD 2.8 billion for FY 2024 and growth in line with IT market forecasts. This was comprised of 7.2% growth in product sales and 9.6% growth in services sales. In addition, we maintained average gross margin earned on these sales to deliver gross profit growth of 7.8%, which was a considerable achievement. We achieved growth across most customer sectors this financial year, including government, defense, education, and mining.
Geographically, we continued to expand in the ACT, Victoria, Western Australia, and Fiji, and while sales in Queensland and New South Wales were relatively flat year on year, given the particularly competitive local markets. I'll now touch on some of the financial and operational highlights from FY 2024. The breadth of our offerings, our track record for delivering for our large private sector and government customers, and the strength of our supplier relationships are all factors contributing to our continued growth in gross sales. We're also pleased to report that our recurring business in FY 2024 has grown to 67%, boosted by growth in managed services and software solutions of 12% and 11%, respectively, in line with our strategy.
Down slightly on the prior year, our infrastructure solutions business was impacted by customers ordering in advance of requirements in prior periods, in turn slowing down growth in new orders and delaying decision-making. The company's balance sheet remains strong and debt-free, with inventory and trade receivables returning to their pre-pandemic normal. We're also seeing the benefit of efficient working capital and a growing average CAS position in our record interest income. Our people numbers increased slightly in FY 2024 as we strengthened our capabilities in managed services and technical product sales roles. Our employee value proposition continues to be enhanced so that we can attract, develop, and retain the best talent. We were proud to have been named as winner of the Five Star Employer of Choice Award for 2024 by Human Resources Director Magazine for the ninth year in a row.
This award is not limited to the IT sector. It covers all industries and includes many multinational entries. We're also recognized as one of Australia's best places to work in technology by Great Place to Work for the first time, and our annual voluntary turnover rate remains below industry average. This financial year, we again strengthened our partnerships with key global vendors such as Microsoft, Cisco, HP, Adobe, and Dell, in addition to many others. By aligning with these partners, we are capturing a significant proportion of the addressable market in medium to large corporate and public sector organizations. Once again, we achieved huge success with national and international vendors and industry awards, notably Global Software Partner of the Year with Cisco and Microsoft Surface Global Awards, and pleasingly, awards focused on our people and sustainability. We continually enhance our solutions to adapt to the changing market demands.
Every customer has a business strategy that includes digital technologies, and all digital technologies require a foundation of multi-cloud networks, end-user computing, and security. Customers continue to look at ways of optimizing their IT environments, and we are seeing a shift by customers from purely on-premise or public cloud to a hybrid or multi-cloud environment in preparation for their adoption of artificial intelligence, AI, and to reduce the significant cost of public cloud computing. This evolution provides further opportunities for us to design, procure, and implement hardware, software, and services to enable our customer success. Demand for our security solutions remains strong as security was yet again our customer's top priority in FY 2024.
In response to increasing demand, we opened our own Security Operations Centre, or SOC, here in Brisbane in July 2024 to meet the highest standards of data protection and sovereignty in delivering threat monitoring, detection, and response. We expect this to present further opportunities in FY 2025 as protection against the threat of cyber attacks continues to be one of our customers' number one priority. Having a local SOC provides comfort to customers who prefer their operations to be supported locally by an Australian company. The launch of ChatGPT during FY 2023, followed by Copilot for Microsoft 365 in FY 2024, has sparked widespread interest in the future of generative AI. We are leading the Australian market for Copilot services and licenses, and we're one of only 600 organizations globally to have taken part in the Copilot Early Adopters Program in FY 2024.
We're helping our customers understand how they can use and apply AI with our Copilot readiness assessments while also helping them minimize any potential risks surrounding data governance and security through our specialized consulting services. Our strategy is to enable our customers' digital transformation by continually evolving our solutions capability. Our strategic priorities remain the same, with our focus on innovative solutions, people and community, customer experience, and operational excellence. Despite challenging economic conditions, the market opportunity remains strong. Gartner is forecasting overall IT spend growth in Australia to be 8.7% in calendar year 2025 and to exceed AUD 147 billion. Data#3 solutions are well aligned to the growth sectors, including multi-cloud, security, devices, data center, networking, and of course, AI. Let's now move to the outlook for FY 2025. Our sales pipeline in FY 2025 remains strong.
Sales activity is high, and we are well placed to capitalize on the market growth opportunities. Investments in the public sector, in new infrastructure projects, investment in public and private education and health, plus the wave of advancements in AI should all help our growth in our pipeline across all our lines of business. We expect to provide earnings growth on last year's first half pre-tax profit of AUD 30.8 million. There are, however, many variables that can impact growth, including the timing of customer decision-making, government elections, product shipments, and services project milestones. Our current first half projection is to deliver pre-tax profit in the range of AUD 31 million-AUD 33 million. This is in line with our full year objective of delivering sustainable earnings growth.
As in the past, we expect earnings to skew to the second half, and our fourth quarter is again expected to contribute significantly in our annual profit. The first half projection is inclusive of AUD 6.2 million in forecast interest income compared to AUD 6.5 million in the prior comparative period. The first half results and the interim dividend will be announced on February 19, 2025. It is our intention to maintain our usual dividend practice. Our performance continues to be underpinned by our leading market position, unrivaled vendor relationships, large and long-term customer base serviced by a highly experienced and skilled Data#3 team. I would like to thank all of our people for their incredible commitment and support during the last year, and I look forward to reporting on our progress in the months ahead.
Finally, I'd like to thank all our shareholders and the board for their support during the last year and my first reporting season as CEO. Thank you, and back to you, Mark.
Thanks, Brad. Before we consider each item of business, I'd like to outline the procedure and matters for the meeting. For those participating virtually, at the bottom of the webpage, under the webcast and presentation, there are three boxes which allow you to get a voting card, ask a question, and download the AGM documents being the notice of meeting, the annual report, and the virtual meeting online guide. Shareholders will have the opportunity to comment on and ask questions in relation to the resolutions. I will hold comments and questions until the item of business has been introduced. Questions from those in person here in the meeting in this room will be addressed first. For those shareholders using the online platform, you can ask your question during the meeting by clicking the Ask a Question button and follow the prompts.
For each item of business, we will address questions received from shareholders attending in person first, then from those shareholders participating virtually. I'd now like to summarize briefly the voting procedures which will apply to this meeting. Voting on each resolution will be conducted by a poll. Shareholders who are attending the meeting in person will have been given a voting card on registration, and the completed voting cards will be collected at the end of the meeting. Shareholders who are participating virtually in this meeting can register to vote by clicking on the Get a Voting Card box at the top of the webpage or below the presentation slides and follow the instructions. Following discussion of all items, shareholders will be given a further five minutes after the meeting has closed to submit their votes via the online portal.
After this time, the polls for each relevant item of business will close. Your board supports all resolutions put to the meeting for your consideration today. However, as set out in the AGM notice, it abstains from voting on the final two resolutions. Where undirected proxies have been given in favour of the chairman, the chairman will vote in favour of the resolution to the extent permitted. The number of proxy votes received on each resolution will be displayed on our slides as we move through the resolutions. The results of each poll will be announced via the ASX as soon as possible after this meeting and will also be displayed on our website. If you experience any difficulties using the online platform, the helpline number is displayed at the top of the page.
You can also refer to the virtual meeting online guide, which is accessible via the online platform. We'll now move to the formal items of business for the meeting. The first item of business for discussion today is to receive and consider the financial report, the director's report, and the independent auditor's report for Data#3 and its controlled entities for the year ended June 30, 2024. Jason Evans, the audit partner with Pitcher Partners, please stand. Jason's available to answer questions relevant to the conduct of the external audit and the preparation and content of the independent auditor's report. I'd now like to invite questions for this item of business. Are there any comments or questions from shareholders attending in person in this room?
Yep.
Peter Richardson, shareholder.
Yep.
Just a question on the net operating cash flow being negative for this year. Quite a change from the previous year. Is there any particular drivers of that? Would you like to answer that one, Brad, or we get Cherie?
We can ask to Cherie. She's got a microphone right.
Cherie, would you like to comment on that?
Yeah, thank you. It really just relates to the build-up of cash from the previous financial year, which related to the carried forward working capital following the pandemic. So we had a build-up in inventory and debtors, which were realized in the first half of last year and then flushed through in FY 2024. So really just timing, nothing to be concerned about.
Follow-up question?
Yeah, I guess from there, we do see that interest was a large portion or increased quite a lot.
Yep.
You do have cash. If you're expecting cash flows to be normalized, are you considering the uses of that money, or do you still intend to just keep it and get interest on it?
At this stage, I mean, the board will always give consideration each month to the cash position and what we should do with it and overall cash and capital management. At this stage, we have no intention to change our current policy settings, but it's something we continue to look at on a regular basis. Good morning. Steve Mabb representing the ASA today and also a member of Team Invest and a shareholder. Give a bit of feedback here. Just a couple of quick comments. I just wanted to commend the board for your engagement prior to the meeting. Really constructive, so thank you for that. And also thank you for outlining the changes to your workload, Mark. I think most shareholders are looking forward to having more of your time, hopefully, dedicated to the company. So really appreciate you covering that.
Lastly, also really want to compliment you on the board skills matrix that you produced this year. Interested shareholders, I think, can now really get a good sense of what the skills are that you're looking for on the board and how each of our directors has them. As one of the few things that shareholders get to vote on, we really appreciate it and want to commend you on the transparency there. Thank you. Thanks, Steve, and thanks for your support in your various roles. We certainly enjoyed engaging with you in the lead-up to this AGM and always keen to engage with you on a regular basis. Thank you. Are there no further questions in the room? Hayley, are there any questions online? Thank you. This item of business does not require a vote by shareholders. We'll now move to the next item of business.
Second item of business is to adopt the remuneration report for the financial year ended June 30, 2024. Please note that the vote on this resolution is advisory only and does not bind the directors or the company. However, when reviewing the company's remuneration policies each year, the board considers the level of shareholder support received and the matters raised by shareholders. Voting exclusions apply to this resolution as set out in the notice of meeting. As in previous years, targets have been established to produce earnings growth, and the management team's remuneration is structured in line with these targets, with a significant proportion comprised of short-term and long-term incentives. These are awarded based on the achievement of appropriate financial and operational targets. We measure remuneration against industry benchmarks on a regular basis to ensure it is set competitively.
During FY 2024, we engage with an external remuneration consultant to review the remuneration of both the directors and senior executives to ensure that the structure and levels of remuneration are in line with the market. I would now like to invite questions for this item of business. Are there any comments or questions from shareholders attending in person? Ray, I think, is it? Ray? Yep.
Yes. Ray Tolleson from Team Invest, but I'm not speaking on behalf of Team Invest just as a retail shareholder. The STI requires employees to meet budgeted impact criteria. Fair enough. I might have misinterpreted the hurdle, but from the annual report description on page 44, it looks as if it's possible to receive 10% of the LTI if they only achieve 10% of the budgeted amount. Is that correct?
I think you mean STI, not LTI?
Oh, sorry. Yes.
STI?
Is that correct? And if it is, will the REM committee revise the conditions so there is no reward unless the employee achieves at least 90% of the target, with the full reward being 150% stated on page 44?
The structure of it is on a sliding scale.
Yes.
So it works that way. I might get Brad to comment in more detail on how that works as applied to the executives.
The way the example says you get 90% if you achieve 90%, but it doesn't say that's the cutoff. So in theory, 10%, you get 10%. That's not much of an achievement.
Okay. Thank you. So first off, the STI also has non-financial KPIs in it as well. So the financial KPIs are just one part of the STI. And secondly, the way that the compensation is devised is based on target earnings. So it's deliberately simple. It's deliberately there so people can follow their progress towards their targets. And it's also set up so overachievement is rewarded as well. And our experience has been that we've found that that simple approach to the STIs gets the best performance. We've seen that other people that have joined us from other organisations, the reason they've left those other organisations is because of the complexity of the gates that they have to achieve, and they never know what they're going to get paid and what it's going to be if they overachieve.
So I guess in summary, ours is deliberately simple so people can follow it, and that motivates them to achieve.
Just as I read it, as I said, you could get 10% of that and still get an incentive.
Correct, but you wouldn't be achieving your on-target earnings.
Okay.
Yeah, so you wouldn't be, yeah, I'll just leave it at that. You wouldn't be achieving your on-target earnings that you've been employed to achieve, if that makes sense.
Righty-o. Thanks.
Are there any other questions in the room?
Yeah, we just had a question around the STI as well.
Can you stand up against it?
Yeah, sorry.
People can hear you.
So, given you don't disclose the actual targets, which we understand the company considers confidential and doesn't want to engage in formal guidance, kind of understand the motivation, how should shareholders think about it? How should we have a sense of confidence around what targets are being set and that we're getting good value for money with our STI?
I suppose the simple answer to that, [Steve], is that those targets are set very much in line with the strategic direction of the company to achieve sustainable earnings growth over time. In retrospect, you can see obviously the growth performance of the company for the year, and it's a reasonable assumption that the STI and LTI targets have been geared to the achievement of those targets. Any other questions in the room? Hayley, do we have any questions online?
No, Chairman. No questions.
Thank you. The proxy votes received in relation to this resolution and now shown on the presentation slide. Shareholders may wish to cast their votes for Resolution 1 now. The third item of today's business is to approve by ordinary resolution that Mr. Mark Esler, who retires by rotation in accordance with Rule 18.4B of the company's constitution, and ASX Listing Rule 14.4, and being eligible, be re-elected as a director of the company. Mark brings valuable experience and insight to the board, and his qualifications, experience, and responsibilities are summarised in the explanatory statement, which forms part of the notice of meeting. Mark is a member of both the remuneration and nominations committee and also the audit and risk committee. The directors, with Mark abstaining, recommend that shareholders vote in favor of the resolution. I'd now like to invite Mark to the podium to address the meeting.
Thank you, Mark. I'm very pleased to nominate for my third term at Data#3 as a non-executive director. For those of you that don't know me, I commenced my career in IT in 1976 at IBM here in Brisbane, and I spent eight years there, and I then joined Data#3 Proprietary Limited as a co-founder and director in 1984. I retired from the Data#3 Limited board in 2002, some 22 years ago, to pursue my various executive roles within the business, and during that time, I built considerable knowledge about the company and the IT market. I have maintained that passion about technology and its role in solving business problems and improving productivity. I retired as Queensland manager 10 years ago in 2014, and I rejoined the board in August 2019. I'm also a member of both the audit and risk and the remuneration and nomination committees.
I've been a fellow of the Australian Institute of Company Directors for 31 years now, and I believe I can add value with my knowledge of the company and the IT industry and contribute meaningfully to our strategic direction in the interest of all the shareholders. I'll now hand back to Mark. Thank you.
Thanks, Mark. There's too many Marks in the room. I'd now like to invite questions for this item of business. Are there any questions from the floor? Steve?
Yeah. Just a couple of quick questions for you, Mark. You had five or six years away from the business. What, if anything, do you think has changed significantly during that period away, if anything? And then secondly, what do you think the one or two things are that you're really bringing to the board now beyond your bio? Obviously, we can all read your bio, but what are you really helping us with day in, day out on the board these days? Mark, would you like to come back up here?
Gee, in terms of the five years away, I guess the business has progressed and gotten better at many of the things that it does. I think the IT industry opportunity is notably greater. There's a lot of interest in technology around the world because people know that it's a good way of achieving their business goals. So I think I noticed a healthy growth in the industry, projected at 8% coming up. So I think that opportunity is terrific. I do notice that in that five years, there's been a very strong investment within the company on systems, and systems that I believe we're starting to see the fruits of now that will make things more productive for people. And not only in things like our payroll systems and our learning and development systems, but training of people to do better at the job.
So I think we're going to see some improvement there. Notwithstanding the sort of risks that are out there, you've got the, well, the geopolitical scenario, you've got elections, not just here in Australia. Hopefully, we'll see some of that sort of settle down, and the general economic conditions hopefully get better. But it's the drive coming from interest in IT, particularly AI, and we're at the forefront of getting in there early. We've got a lot of engagements, hundreds of engagements across Australia and government, and we're really helping people get the most out of that. And that brings all of our other offerings to bear. In terms of additional to what I said before with the bio, I think that background allows me to interpret things that come forward and put my input into the board from a technological point of view, is something really an opportunity.
What are the other considerations, etc.? And I think that only comes with 50 years of being in the IT market.
Thank you. Thanks, Mark. If I can just add to that briefly from my position as chair, Mark certainly contributes valuably to debate and questioning around the table. And I think it's fair to say he puts the executives under a fair bit of scrutiny from time to time. Isn't that right, Brad? Which is exactly the role that we want him to play. And obviously, his knowledge of the IT sector, plus his knowledge of the inner workings of the company, I think make his contribution invaluable. Any other questions from the room? Hayley, any questions online?
There was a question online, but Mr. Esler has efficiently answered the question that we've received.
Okay. Thank you. So the proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for Resolution 2. Item 4 of today's business is to approve by ordinary resolution the appointment of PwC as auditor of the company and its controlled entities in accordance with Section 327(b)(1)(b) of the Corporations Act. Pitcher Partners is currently the company's auditor, following a competitive tender process, the board, on the recommendation of the audit and risk committee, has selected PwC to be appointed as the company's new auditor, and PwC has consented to the appointment. As a consequence, Pitcher Partners applied under Section 329(5) of the Corporations Act for the consent of ASIC to resign as the company's auditor. ASIC's consent to Pitcher Partners' resignation is required under Section 329(5)(b) of the Corporations Act.
ASIC has consented to Pitcher Partners' resignation as auditor, and accordingly, in accordance with Section 327(b) of the Corporations Act, the company is proposing to appoint PwC as its auditor, which will, if this resolution is passed, take effect from the date of this AGM. I'd now like to invite questions for this item of business. Are there any questions from the floor? Yeah, Megan's worked hard here, Steve.
Last question, I promise. It's a better meeting when there's some questions. So we're very supportive of the change after 20-odd years. We think that's best practice, so very supportive of the idea. Just wanted to probe into PwC specifically a little bit. So there's been a lot going on there, obviously, with the company over the last couple of years. Why did you yourselves and maybe Leanne as head of audit and risk, why did you choose PwC, and how should we be confident that you think we'll get good value for money there?
Sure. I might make a couple of general comments and then ask Leanne to add to that. I mean, as I've said in my introduction, we went through a competitive tender process. I'd have to say sort of a lot of the noise around the consulting arm of PWC has little, if anything, to do with the audit arm. The audit arm is quite separate and distinct and continues on with its business. Those other things are really off to the side. I mean, it's the quality of their business, the quality of their systems. I had no role in the selection process, but I do have to say that I've worked with the PWC team on other boards that I've been involved with, and I've always been impressed with the quality of their work.
So we had no reservations about that, but I might get Leanne to add to the detail of the process.
So thanks, Mark, and thanks, Steve, for the question. As I think Mark's already said, we went through a detailed evaluation process where we, as you would expect, received proposals and had a small group involved in that evaluation. In fact, a very wide number of people within the Data#3 team were responsible for meeting with representatives from the firms that were under consideration. Then the small team, including myself and Cherie as CFO and Brad as Managing Director, conducted evaluation considering that feedback, and PwC were on the top of the list. As a consequence, we did then have a separate conversation with PwC about the changes that had been made in the firm pertaining to the issues that had been well publicised.
At the end of the day, we were satisfied with the responses that go to the PwC's own transparency on responding to the independent report that was done into what happened in the firm, the governance changes that they themselves have introduced, including bringing independent members onto their governance board, and also the fact that the tax practice that was substantially the reason for those underlying issues is quite separate from the assurance practice, and so we were comfortable that PwC will provide Data#3 with the best value for money and the best quality of input for our future audit activities. Thank you. Thanks.
If I can just also reiterate what I said in my comments before, the reason we decided to look at a change was simply because of good governance practice, and you'll appreciate that good governance practice as much as I do. That was the only reason. There was no dissatisfaction with Pitcher Partners' performance, and again, I'd like to acknowledge the fantastic work that Pitcher Partners have done for the company, supporting the company through its growth process, and we wish them all the best in their future work. Thank you again. The proxy votes received in relation to the resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for Resolution 3. Item 5 of today's business is to approve by ordinary resolution the renewal of the existing Data#3 long-term incentive plan.
The existing LTIP was established in 2018 to replace a previous deferred share and incentive plan that was originally approved in 2007. Shareholders previously approved issues under this LTIP under the previous employee incentive scheme exception under ASX Listing Rule 7.2 at the annual general meeting held on November 14th, 2018 and on October 28th 2021. As it has been three years since the last shareholder approval, the company is now seeking to refresh approval of the LTIP, including the issue of securities under the LTIP for the purpose of ASX Listing Rule 7.2 Exception 13 and for all other purposes for a further three-year period.
The LTIP has been designed to align the interests of eligible employees with the interests of shareholders of the company by enabling directors and employees to have involvement with and share in the future and growth of the company and to assist the company to attract, reward, and retain high-quality staff. Are there any questions from the floor? No questions from the floor. Hayley, are there any questions from shareholders participating online?
Yes, Chairman. There actually is a question for this resolution. It's from Stephen Mayne. Mr. Mayne would like to know if any of the proxy advisors recommended against this resolution, and if so, what concerns did they have?
I think the answer to that question is to ask the proxy advisors themselves. I mean, that's entirely up to them. That's their business and not something we have any influence over apart from obviously talking to them and consulting with them. The figures are up there on the screen. I think that's a matter for Mr. Mayne to pursue with the proxy advisors involved.
There's another question, Chairman, from Mr. Walker. Mr. Walker asks, why does Data#3 consider it appropriate for the. Let me rephrase that question. Sorry. I'd just like to go back actually to the last resolution and just double-check with Mr. Esler if he had anything that he would like to add about the perspectives that he brings to Data#3 and the challenges that it might face into the future, and anything that you might have not had an opportunity to express in the last resolution.
Was that from Mr. Mayne again?
No, sorry. That question was from Mr. Walker. Sorry for the confusion.
I think I forgot to ask if there were any online questions for that one, didn't I?
No, no. That's my interruption there. Sorry. So perhaps let's leave that one aside. We'll come back to that one. Perhaps we just stay with this resolution right now.
Yeah. That might be best. So that's all for this resolution?
Thank you. Yes.
Okay. So the proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for Resolution 4. Item 6 of today's business is to approve by ordinary resolution for the purposes of ASX Listing Rule 10.14 and for all other purposes, the grant of a maximum of 43,274 performance rights and any fully paid shares issued on vesting of those rights to Mr. Brad Colledge or his nominee. Mr. Brad Colledge is Managing Director and Chief Executive of the company and a related party of the company by virtue of him being a director, and so is within the category of persons listed in Listing Rule 10.14.1.
Accordingly, the company seeks shareholder approval for the purposes of ASX Listing Rule 10.14 and for all other purposes to grant a maximum of 43,274 performance rights within the terms of the company's long-term incentive plan and any fully paid shares issued on vesting of those rights to Brad Colledge or his nominee. The board has decided to grant these rights as part of Brad Colledge's remuneration package and in recognition of his contribution to the company. Details of the remuneration package are contained in the explanatory statement, which forms part of the notice of meeting. Are there any questions from the floor? Hayley, are there any questions from shareholders participating online?
Yes, Chairman. The first question is from Stephen Mayne. Mr. Mayne says, "Thank you for offering shareholders a hybrid AGM, and will you commit to doing this in the future years to maximize shareholder participation?" There are a few parts to this question, so I'll keep going. Big companies like Bank of Queensland, BHP, Brickworks, Fortescue Metals, Harvey Norman, Origin Energy, Premier Investments, Ramsay Health Care, Rio Tinto, Seven Group, Soul Pattinson, Whitehaven Coal, and Worley all banned online questions and voting in 2024. So well done for showing them up. What was the experience like from your end?
What was the experience like from my end? Well, I mean, all I can say is I think the hybrid meeting and the online questions give an opportunity for shareholders who aren't able to attend the meeting in person. And it's obviously difficult for some shareholders to do that. It may be physically difficult for a variety of reasons, largely because they may reside outside Brisbane. So I think it just gives more shareholders an opportunity to ask questions and is more participative.
Thank you. The next question is also from Mr. Mayne. When disclosing the outcome of voting on all resolutions today, including this rights proposal, could you please advise the ASX how many shareholders voted for and against each item, similar to a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronically low retail shareholder participation rate. Others such as Qantas, ASX, Metcash, Suncorp, Altium, AUI, Dexus, Webjet, Tabcorp, and Myer all do this.
I think I need to take advice from our general counsel on this, but I think we'll be providing the results as we have done previously. Terence, did you want to add anything to that at all?
Yeah. Quite simply, our policy is not to disclose that currently, and we'll keep on considering that moving forward.
Thanks, Brad. Any further questions, Hayley?
One more, Chairman. We'd like to go back to Mr. Esler and just ask, sorry, one moment, please. Sorry. Just asking Mr. Esler what you think the biggest risks facing the company are.
I guess I see less risk than I see opportunity. I think there's the sort of risks I did mention before. There's the geopolitical, there's the election, there's the general economic conditions. But in terms of opportunity, I think perhaps there are some specific opportunity. I mentioned AI. A lot of people might be unaware of some of the detail of our success in big infrastructure projects, particularly stadiums, hospitals, that sort of thing. For example, in Queensland, there's plans for another eight hospitals to be built. And with having a large presence in that space, we would expect to get a share in some of that opportunity. With stadiums, some of our past experiences, we've refurbished Suncorp Stadium, Homebush Stadium. We've just completed the Geelong Stadium, which the board had a tour of.
These are all testimony to the sort of work that we would be able to do should the Olympic Stadium projects start. We do see great opportunity in that particular space. I guess in summary, I'm seeing way more opportunity than risk. Is that right?
Yep. Thanks, Mark. It may also be worth just adding to Mark's comments here. For those who are interested, on page 32 of our annual report, our annual report there, on page 32, we do have a listing of our main risks, our main material business risks, and comments on those. We obviously have a very comprehensive risk management system at a strategic and operational level, and that is summarized on page 32. So I think that provides further insight into some of the points that have been raised by Mark. Any other questions, Hayley? So proxy votes received in relation to this resolution are shown on the presentation slide. Shareholders may now wish to cast their votes for Resolution 5. Before we close the meeting, are there any general questions from the floor that haven't already been asked? Ray?
Excuse me. Thank you. Is the partnership and the recently announced partnership with SecurityHQ expected to contribute meaningfully to profit? Is it an exclusive contractual arrangement? And why didn't SecurityHQ go it alone in Australia?
I'll give Brad to answer that one.
Three bits, three questions. So yeah, let me just talk to the SecurityHQ relationship. So we've had a relationship with SecurityHQ for some years now. So what we announced is the opening of the Security Operations Centre, which is a secure location. And that is new with us with SecurityHQ. What it means is, rather than relying on SecurityHQ to provide some of those services from overseas, that jointly with SecurityHQ, we're able to provide those services in Australia. And that provides that sovereignty that some customers are looking for. And there was a third part of the question.
Oh, why didn't they go it alone?
Oh, and the reason they didn't go it alone is that we've had a relationship with them for quite some time, and it was for a number of reasons, but basically, by working through Data#3 as a partnership, it provides them an easier path into the market with partnering with us, with our customers. If they were to go it alone, they would have no presence in Australia and it'd be considerably more difficult for them.
You mentioned it, Brad, in your presentation, and also it was mentioned in the results call about competition. Now, competition is a good thing. I mean, it keeps you on your toes, but is this coming from existing players or new entrants, and do you think they're trying to buy market share?
It is both. So what we find, and this isn't anything particularly new, we've seen this over the years, is there's new specialist businesses pop up. So security becomes the customer's number one. So there's a whole bunch of security organizations that pop up. AI becomes number one now. So there's a whole bunch of AI competitors popping up. Our strategy has been to build through our certifications and relationships with the vendors and training of our people to be able to compete and win against the best specialist organizations. And that's what's been effective for us. And my personal experience within Data#3 was that from a software licensing perspective. We grew a software licensing team that was better than any of the other specialist software licensing teams out there and became number one in market.
So we'll continue to apply that strategy to our solution sets and offerings that I mentioned during my address.
Thank you. Are there any other questions in the room? Yep, over at the back.
Nairi Groves, shareholder. Mine's just a general comment, I guess. I'm worried about where we're heading with AI and ChatGPT and all of that. I don't know where it's going to head, but I know we can do a lot better than this as human beings. I've held onto my Data#3 shares, but I just know we can do a lot better as human beings, caring, brave human beings for the future of the world. ChatGPT, I mean, what are we encouraging our university students to cheat? Not use their brains. We need to use our God-given brains more, I think, and IT, my husband's been in IT for years, but I don't think it's the future, but I've held onto my Data#3 shares, so I'm in a bit of a quandary, but all the best to all of us. Human beings rule. Go, human beings. Not AI.
Because what can you do? They can take photos of us. We can have videos of us, and that's not really us, but it looks a lot like us. But I mean, worries the hell out of me, to tell you the truth. But just a comment. Any more you want to say about ChatGPT? I'm interested.
Look, I won't comment any more on particular AI solutions. I note your comments and respect your comments, which go a lot broader than Data#3, obviously. Technology is here to stay. There's nothing much we can do about it. Data#3's role, I think, is to take advantage of and leverage that technology to grow the business and provide support for our customers. I'll leave my comments at that. I don't know whether Brad wants to comment any further about Microsoft Copilot or ChatGPT or AI more generally.
Only that we will and others will continue to publish use cases that show the value of AI. It's like anything. It can be used well and correctly, and it can also be used not well and correctly. One of the areas that we're particularly, I guess, comfortable with is vendors such as Microsoft and Cisco and others are really spending a lot of time on responsible AI, as they call it, and using AI in the right ways. And there's a lot of investment and time and effort going into that. But certainly, in terms of use cases across multiple industries, it certainly has great potential to improve human life.
Thank you. Any other questions in the room? If not, then we have had one come in online from a shareholder as follows. The question is, Queen's Wharf was a major project for Data#3. Has Star Casino's problems impacted the project or payments to Data#3? I'll make a general comment and then ask Brad to add to it. My understanding is that Data#3 was not contracted by Star Casino. We were contracted by the D&C contractor. Milestone payments were scheduled along the way. All those milestone payments have been made, and we don't have any exposure to Star Casino. Did you want to add to that, Brad? No? I think that sort of covers it pretty well. Hayley, anything further?
Yes, there's one further question, Chairman, from Stephen Mayne. There was a 12.3% vote against resolution number six, but we didn't get time to ask questions online about this because the proxies were disclosed relatively late in the piece. Could you please disclose the proxy position to the ASX along with the formal addresses ahead of next year's AGM to shareholders so that they can ask questions about any proxy votes? Also, corporate voting is not a secret ballot. Have you interrogated who voted against the CEO's incentive grant and why? And will you do that?
We'll take those questions on notice and look at them as part of the process for next year. Anything else? Something further?
Yes, we've received another question. It's from Stephen Mayne. Why is the board so small, and will you add at least one new director before next year's AGM?
Thanks for that question. I find a small board is actually very effective and very agile in making decisions. We do have one vacancy on the board currently, and we will be giving consideration to whether we fill that during the course of the next year. Any other questions?
No further questions.
Thank you. With each item of business at this meeting having been dealt with, I now declare that the polls in respect of each resolution will be closed five minutes after this meeting ends and formally ask Link Market Services to count the votes following the expiry of that period. For those that haven't, please finalize your votes for each resolution put to the meeting and click on the Submit Vote button at the bottom of your voting card. For those of you here in person, if you need assistance, a representative from our share registry, Link Market Services, will be on hand to help. They will also collect your voting cards at the end of the meeting. If you require assistance to submit your vote online, please call the helpline number displayed at the top of your screen. I propose now to bring today's proceedings to an end.
The results of this meeting will be released through the ASX as soon as possible and will also be displayed on our website, including the video recording of this AGM. On behalf of the board and management, thank you to everyone for attending Data#3's 2024 AGM. Ladies and gentlemen, I now declare the 2024 AGM closed and invite you to stay on for something to drink and eat and to chat with us. Thank you very much.