Downer AGM 2021

[Music] good morning ladies and gentlemen my name is mark chalu and i'm the chairman of downer edi limited i would like to begin by acknowledging the traditional owners of the land on which we meet today which in sydney is the radical people of the euro nation and i pay my respects to the elders past and present i would like now to officially open our annual general meeting for 2021. as you are aware this year's meeting is being conducted virtually by the lumi platform and therefore there are some housekeeping matters i would like to mention as usual voting on all resolutions will be by poll once i declare the polls open a voting icon it looks like a bar graph will appear on your screen or navigation bar when you click this icon your resolutions will appear you can select the voting option you can vote at any time during the meeting until i declare the polls are closed i will make it clear later in the meeting when the polls are about to close only verified shareholders or their proxies or attorneys or representatives are permitted to ask questions we have received some questions in advance the meeting which i will answer at the appropriate time during the meeting you can submit a question at any time during the meeting using the lumi platform to to do this click on the messaging tab at the top of the screen this will open a new screen and you can type your question in the box marked ask a question when you are finished typing please hit the arrow symbol to send the question to ask an audio question you will need to pause the broadcast and then click the link under asking audio questions a new page will open where you will be prompted to enter your name and the topic of your question you will listen to the meeting on this page while waiting to ask your question questions should relate to the items of business under consideration at today's meeting and we may moderate questions for example to avoid repetition based on the number of verified voting members who have joined the meeting i declare a quorum for this meeting i would like now to introduce my fellow directors joining us from brisbane are theresa handicott and nicole hollows peter watson is joining us from melbourne here with me in sydney are phil garling as well as our ceo grant then and company secretary robert reagan our chief financial officer michael ferguson is also in attendance and so is nigel virgo representing our orders kpmg before beginning the formal business for the meeting i would like to outline today's procedures and protocols all resolutions will be decided by a poll the meeting will consider the items of business outlined in the notice of meeting sent to all shareholders on the 30th of september 2021. as i have already mentioned shareholders commits can submit questions online only those persons who have been verified as shareholders or their proxies or representatives are eligible to ask questions and questions will be confined to the formal business of the meeting any undirected proxies in my favor as chairman will be voted in favour of the relevant resolution prior to the formal business of the meeting i will present a beef brief report on behalf of the board and then our chief executive officer grant fan will give an update on the business we'll now proceed with today's formal business giving that the notice of meeting has been sent to all registered members i move that the nose of meeting be taken as read the minutes of the previous annual general meeting have been approved and signed in accordance with the corporations act we will now move to the business of the meeting which includes the resolutions to be put to the meeting prior to each resolution being discussed the proxies that have been received on that item will be displayed as part of his representation as i mentioned earlier all resolutions will be signed by a poll which will which will open after the ceo's report item number one is consider and receive the financial report the director's report and the independent orders report for the year ending 30 for june 2021 the annual report has been made available to shareholders and with it there knows a meeting which has been made which has been held by members in excess of the minimum period the annual report is available on downer's website before opening item number one i will present the chairman's address and following that i'll invite your chief executive officer grant then to provide an update of the group's operations ladies and gentlemen i joined the down aboard just two months ago and became chairman last month i believe down has an excellent portfolio of businesses and i'm excited about his future prospects if elected later in this meeting i believe my four decades of experience in senior leadership and governance roles will be valuable to the board as and to you as shareholders unfortunately since i joined the board covet 19 restrictions have significantly limited my ability to visit down the work sites or meet senior management face to face although i have been able to have some virtual and actual meetings with some uh members of the executive team it will therefore be premature for me to make too many judgments about your company however i can say that i believe downa has an industry-leading zero-harm culture with my background in industrial businesses this is of particular paramount importance to me as i am sure it is to you as shareholders i'm very pleased that down the continues to improve his sustainability performance and reporting i believe as with zero harm downer is an industry leader in this area if you haven't already done so i strongly encourage you to read our sustainability report which is available on our website it includes many case studies as well as full details of our performance across the group ladies and gentlemen one of my first priorities will be to continue the process of board renewal at downer this is the first down annual general meeting since 2017 2007 that hasn't featured mike harding mike joined the board in 2008 and became chairman in 2010. he retired from the down aboard at the end of september this year having given over 13 years service to your company mike made an enormous contribution to downer during a period in which the company successfully navigated many challenges and achieved significant growth on behalf of the board i thank mike for his leadership and positioning downer for success in the future phil garling has been on your board for 10 years and while he is standing for re-election as a non-exec director today we have stayed in the notice of meeting that if re-elected he intends to retire during his next term as part of the process of board renewal at downer the board has appointed a recruitment firm to assist in this renewal process and the firm will closely work with the board to identify the skills that new directors should bring to downer and then identify a list of candidates to be interviewed i expect the next annual general meeting there will be at least two non-exec directors on your board and hopefully about to see them in person not just on a screen when a company appoints a new chairman he or she is usually asked if they support the current corporate strategy i confirm my support for dalvin down as urban services strategy and congratulate the team for successfully reshaping the group into a focused urban services business with a strong platform for long-term sustainable growth a lot has been achieved in relation to this strategy since last year's annual general meeting including divestment of non-core mining and laundry's business and grant will have more to say about that in his report importantly down the service services focus enabled the group to deliver a resilient performance despite this year's covert restrictions and lockdowns in both australia new zealand again grant will provide you with more details i'd like to thank grant his executive team and our people for their efforts during what has been a very challenging 12 months i would also like to thank our shareholders for your support for downer during this year i will now hand over the grant before i return to run through the resolutions they'll be put through to the meeting thank you well thank you very much chairman ladies and gentlemen the 2021 financial year really tested the resilience of our business and in doing so it brought out the best in our people i'm very proud of the way we continued to adapt and respond to the many challenges that confronted us particularly the myriad of ever-changing covert 19 restrictions now it has been a handful that we continue to deliver for our customers in such a positive way is a testament to this great company and i'd like to take this opportunity to thank our people and our customers for their amazing efforts during the year i would also like to take this opportunity to thank our previous chairman mike harding who stepped down from the board in october mike was the chairman for 11 years and was instrumental in building downer into the company it is today financial year 2021 was an important year for downer 12 months ago we laid out a number of priorities we said we needed to deliver strong earnings and cash in the 2021 financial year and earnings were up 21 percent cash conversion was 101 percent of ebitda and margins increased by 0.7 percentage points overall it was a very solid financial performance particularly in light of covert 19 operating restrictions the board declared a final dividend of 12 cents per share that's a 60 payout ratio for the second half of the year and full year dividends total 21 cents per share and we intend to build the dividend per share over time we said we needed to complete the sale of our non-core assets and during the year we made very good progress and have since announced the sale of our last mining business open cut east the divestment of our mining laundries and a large chunk of hospitality contracts has realized 778 million in total proceeds a very good outcome for shareholders we've received 537 million of that to date with the remainder expected to be received in the next number of months we've taken action to change our corporate structure to improve market focus and reduce costs the spotless operations are now fully integrated into downer and we've reduced management layers and consolidated functions for better performance we've recapitalised the business reset our target capital structure and commenced a 400 million dollar on market share buyback we've so far bought back 90 million dollars worth of shares under this program and will continue buying back shares into the 2022 financial year ladies and gentlemen our urban services strategy focusing on transport utilities and facilities is the right one we leveraged on the long-term trends of expanding population urbanization government outsourcing and now with the federal government's commitment for net zero carbon emissions by 2050 decarbonisation of the economy government is getting bigger every day and 90 of our work in hand which totals more than 35 billion now comes from contracts with governments and owners of critical national infrastructure in australia and new zealand this compares with 56 percent five years ago so that's a huge change the downer portfolio is now less cyclical with lower capital requirements and stronger cash conversion and importantly we have scale diversity and financial strength the chairman mentioned earlier that our sustainability reporting and performance has continued to improve as have our external ratings in this really important area at downer we believe the increasing focus on sustainability by our customers and capital providers is a real opportunity to differentiate ourselves the divestment of our mining and laundry's assets will reduce our scope one and two emissions by 35 percent or 206 000 tonnes of carbon dioxide equivalent diana's technical capabilities and investment in new technologies will not only lower capital intensity for our own business but increasingly we are helping our customers reduce their carbon emissions our road services business has been very successful in developing new green products that use a high level of recycled or repurposed material from roads road sweepings glass and other waste that otherwise would go straight to landfill these products are very popular with customers particularly local governments we're investing in state-of-the-art manufacturing and recycling plants that are energy efficient and can blend high levels of recycled material into our product mix not only is this more sustainable environmentally but it's cost effective when compared with virgin materials dug out of the ground we expect more investment in recovery and repurposing of materials for road building and maintenance and our economy repurpose it and reconnect felt service offerings puts us in a very strong position more broadly in the transport sector we will continue to develop smart road and rail solutions and we're already building the new infrastructure required to support alternate fuel vehicles all governments and fleet owners will look to reduce energy use and we're working on the production and trial of lower emissions trains and locomotives as well as zero emission buses our utilities business will continue to play a role in renewable electricity generation and benefit from the network upgrades required to support higher renewable capacity including transmission lines substations and associated connections there are also opportunities in energy storage systems energy efficient waste water treatment facilities and smart motor technology we will continue to maintain and upgrade existing power generation assets and we're well placed to play a role in delivering hydrogen associated infrastructure as well as carbon capture and underground storage across the group you can see the downers extensive capabilities are well placed for this potentially massive decarbonisation effort that will be required to meet our net zero target we anticipate that state and local governments and major corporates will accelerate their efforts and dana will be there with solutions more broadly on the esg front we're a good corporate citizen and our corporate culture is strong our workforce is diverse and we support and empower indigenous business culture and education we work very hard to look after our people including their mental health we've implemented a range of initiatives in recent years to change the conversation around mental health reduce the stigma associated with it and empower our people with strategies and activities to support their wellbeing in may this year we became a major partner of beyondblue a leading australian mental health organization this partnership deepens our support for our people and also the broader community which has reached out to beyond blue in record numbers during the covered pandemic ladies and gentlemen now let's turn to financial year 2022. when we reported our full year results in august we stated that while we were not immune from the impact of cover 19 restrictions the impact on downer was relatively limited we said that we expected our core urban services to continue to grow in the 2022 financial year both in revenue and earnings we also noted that we were cautious of the changing nature of the covert pandemic and the ongoing restrictions and so we did not provide specific earnings guidance for financial year 22. soon after we reported of course as you would all unfortunately understand the delta strain was upon us and there was a significant increase in the severity of restrictions across australia and new zealand and this has impacted all of our businesses to varying levels in the core business the most heavily impacted have been our new zealand operations with a level 4 shutdown and our facilities and asset services with the shutdown of small-scale construction and state border closures of our remaining non-core businesses hospitality has been most heavily affected as events have been cancelled at our major venue the mcg despite the negative impact of covert 19 restrictions the first three months of trading for financial year 2022 that's july through to september have again shown the resilience of the core down in business transport utilities and facilities with core ebitda in line with the prior year we're hopeful that the worst is over with restrictions on work and mobility starting to lift demand for our services remains strong for the remainder of financial year 2022 in conclusion i would like again to thank our people right across the group for their massive contribution in financial year 2021 and also thank you our shareholders for your continued support i'll now hand the meeting back to our champion thank you grant we will now open the polls i will invite the company secretary robert reagan to advise the poll procedure thank you chairman richard powell computer share investor services has been appointed returning officer for this meeting and i'm satisfied as to computer shares independence if there is any person who believes they're entitled to vote but have not yet registered please send a message via the meeting platform every member attending in person or by representative attorney or proxy is entitled to one vote for each year held the resolutions on which you are required to vote by poll are items 2a 2b 2c 3 and 4 as set out in the notice of meeting thank you chairman thank you robert the financial report director's report an independent orders report are now open for discussion there is no requirement for shareholders to approve these reports accordingly item number one is for discussion only and there will not be a vote on this item i remind you that only shareholders of the company or the duly appointed representatives or proxies are permitted to ask questions i'll now address questions from shareholders michael sharp down the head of corporate affairs in investor relations will read the questions to me and i'll decide whether to respond myself or refer to one of my colleagues thank you chairman first question from the australian shareholders association is this year you have highlighted your green products and the fact that i move to a more sustainable future is a big win for you can you give some examples and put dollars into your answer this question was submitted before today's meeting and garage covered this in some detail in his report we haven't put a specific dollar value on our sustainability opportunities but it is clear that there are substantial opportunities across the whole group thank you chairman a second question from the australian shareholders association is has the ongoing covert 19 issue across australia since 1 july impacted income and profit in any specific areas of the business and are there any concerns about overall performance in the remaining eight months of 2122 thank you michael grant clearly has already covered this question in his report earlier thank you chairman and the third question from the aca on item one is has the board decided if directors are going to be required to have a meaningful shareholding i know the asa believes directors should hold shares equivalent to their remuneration and that they should have three years to achieve that shareholding i'll be having a conversation with the board about this issue including the time frame for example three years may be too short a time frame for younger directors thank you chairman that is all the questions received in relation to item number one thank you michael we'll now move to item number two this item involves my election so i'll hand it over the meeting to teresa handicock thank you teresa thank you mark and good morning everyone mark chalu was appointed as an independent non-executive director of the company effective one september 2021 and in accordance with rule 3.3 of the company's constitution and being eligible mr chalu offers himself for election as a non-executive director of downer proxies received in relation to this motion are displayed on the screen the other directors including me unanimously recommend that shareholders vote in favor of this resolution there is now an opportunity for discussion of this resolution michael do we have any questions no there have been no questions submitted in relation to item 2a thank you very much ladies and gentlemen i will now hand the meeting back to mark as we move to item 2b thank you teresa and thank you for thank you shareholders for your support the meeting now considers item 2b the re-election of philip garling mr garling was appointed independent non-executive director of downer on the 24th november 2011 in accordance with the rule 3.6 of the company's constitution and being eligible offers himself for reelection mr garling is currently a member of the zero harm and remuneration committees as mentioned earlier in my address the aboard renewal process is underway means that mr garling if re-elected intends to rejoice retire during his term proxies received in relation to this motion are displayed on the screen there is now an opportunity for discussion of this resolution michael are there any questions uh yes chairman the australian shareholders association asked mr garling to tell us why he should be re-elected as usually a director with his longevity would be stepping down at this stage as i mentioned in my address earlier one of my first priorities as chairman will be to continue the process of board renewal at downer we appointed a recruitment firm and i believe we'll appoint two new directors by this time next year it will be valuable for phil garland to remain on the board while we go through this process is phil intentions to retire when we have a new director's in place phil would you like to add anything thanks mark um i guess just to point out that uh if mike harding and myself retired at the same time it would reduce the average tenure on the board from over six years to around two which i think the rest of board perceived or was of the view was not necessarily in the company's interest and i guess to give you some comfort i'll go quietly when the time comes i'm actually not standing for a re-election at charter hall for annual general meeting next week as a result of having served a similar term on that board so i do support the process of of renewal thank you thank you there are no more questions on item 2b thank you michael the meeting now considered as item 2c the re-election of the coal hollows mrs holland miss hollows was appointed an independent non-exec director of of downer on 19th june 2018 in accordance with rule 3.6 of the company's constitution and being eligible offers to sell for re-election nicole is currently chairman of the audit and risk committee and a member of the remuneration tender risk evaluation and nominations and corporate governance committees proxies received in relation to this motion displayed on the screen there is now an opportunity discussion of this resolution michael are there any questions uh no chairman there'd be no questions submitted in relation to item 2c thank you the meeting now needs to consider item three adoption of the remuneration report for the year ending 30th june 2021 proxies received in relation to this item are displayed on the screen the remuneration report is now open for discussion are there any questions michael yes chairman the australian shareholders association asks now that you're a new look business will you move to the realization that for it to be a long-term award it has to be mentioned measured over more than three years downer undertook a comprehensive review of all aspects of remuneration only two years ago with the assistance of an industry expert and the review concluded that the time frame for the lti was appropriate we'll now we will continue to review our remuneration policies to make sure they are appropriate for downer there are no more questions on item three we'll now move to item 4 the approval of managing directors lti the details of a long-term incentive are set out in detail in the notice of meeting proxies received in relation to this motion are displayed on a screen there is now opportunity for discussion of this resolution are there any questions michael no there have been no questions submitted in relation to item four okay the polls now that all items have been discussed we'll allow a short time to lodge your votes before closing the poll is there any person who if there is any person who believes are entitled to vote but isn't able to do so please send a message by the meeting platform now this takes about a minute so uh just hang on guys we're nearly there okay nice i now declare the poll closed the county results will take a little while so i propose to close the meeting and announce the results of the poll to the asx this afternoon thank you very much for joining us and thank you very much for your attendance the meeting is now closed [Music] you