Assetora Limited (AOH) Earnings Call Transcript & Summary

Ross Laidlaw, on the screen.

Yes. Welcome, everyone.

George Paxton, [indiscernible] and Steven James. Apologies Grahame Evans is running a little late. He's having [ the joys of ] some medical treatment as he couldn't move. As the notice of the meeting has been circulated to all shareholders, I propose that this be taken as read. The next item on the agenda is for me to give the Chairman's address. And then John for you to give CEO's comments. On behalf of the Board of DomaCom Limited, it is my pleasure to outline the company's achievements over the course of the financial year ended 30 June 2023. Much has been accomplished over this 12-month period. DomaCom successfully relisted on the ASX [indiscernible] through its 2023 financial year. The outcome flowed from the sustained efforts of the entire DomaCom team. Their work ensured your company met all the preconditions set down by the ASX before shares could recommence trading. These preconditions included a $5 million private placement that strengthened the company's balance sheet and provided additional funding to bankroll the growth initiatives. And a successful renegotiation of the extension of the $2.95 million Thundering Herd convertible notes until February 2024. Subsequent to year-end, we announced plans to undertake another capital raise up to $6 million through the issuance of convertible notes and issuance is fully underwritten, raising [ $2 million ] has already been completed. While these funding-related initiatives were progressed, your company simultaneously delivered on some of the important initiatives that both generated growth across the key financial metrics over the past year and laid the groundwork for DomaCom's longer-term expansion. I'd now like to touch on some of these initiatives. Our 2023 financial year accounts included an early payoff from a recovery strategy we set in motion in mid-calendar 2022. As part of this strategy, DomaCom implemented a number of brand rejuvenation objectives, including an updated brand identity and online platform plus the launch of the new website. All this [indiscernible], an increased number of investors saw the inherent value proposition presented by DomaCom's fractional investment model. This opened the way for the company to leverage its reputation for innovative structures over the course of fiscal year 2023. In the process, your company has made portfolio diversification a reality for a growing list of investors. Funds under management showed -- experienced strong growth, as too did our customer accounts and sub-fund metrics. As John -- [ showing ] by these financial metrics will be examined more fully and addressed by John, which is coming next. While your Board is pleased by the recovery reported by DomaCom's business and operations over the past year, we fully appreciate that this rebuilding process is still very much a work in progress. Looking ahead, we anticipate a further acceleration of the upscaling of the DomaCom business over -- now well underway 2024 financial year. This ongoing process is a necessary prerequisite for your company to deliver on its targeted transition towards earnings positive status. It will continue to be driven by strict adherence to key business objectives, central to our recovery strategy. This will see DomaCom continue to utilize its capital resources to take advantage of identified revenue opportunities. We include sustained efforts to leverage connectivity and collaboration with new and existing distribution and commercial partners, indicative of this attempt -- intent, DomaCom has just signed an MOU with Super Fierce. It will be covered in more detail by the CEO's address. This would also -- we will also strive to create new innovative and differential digital value propositions in niche market segments that further diversify our revenue base. This has many investors see the potential advantages derived from placing some of their funds into asset classes outside the [ plain vanilla sectors ] of the money market fixed interest in physical equities. DomaCom is also cognizant of the importance to investors place on liquidity. With this in mind, the company is highlighting the attractiveness of its secondary market facility, which brings liquidity to assets within the DomaCom platform. Thanks to this facility, investors will not only benefit from being able to invest in fractions of the larger assets but will also have access to mechanisms that provide potential liquidity in those assets. Before finishing, I along with the rest of the DomaCom Board of Directors want to thank our shareholders for their ongoing support while the company executes its growth strategy. I also want to thank our staff for their hard work over the last 12 months. What DomaCom has achieved over financial year 2023 would not have been possible without their diligence. Looking to the outlook for the coming 12 months, we remain confident that DomaCom will continue to build scale. Success will be here -- will help confirm the inherent value of our fractional investing model and see us realize our goal of creating a sustainable business to sound, long-term growth prospects.

Thank you, John. Any questions there?

So I think what we do for questions is after the presentation we will have a pause to talk about any questions you have. And then we'll have the resolutions -- we can have resolution-specific questions.

I have a couple of questions that have come in already. We'll go to those. Okay, John? It's your address.

Thank you. While there's undoubtedly still more work to do, DomaCom achieved much more from both financial and an operational perspective over the course of 2023 financial year. Just to recap on what our mission is, firstly, to connect clients to liquid, wide-ranging and differentiated value propositions, create and maintain strong institutional and corporate relationships, commit to sound environmental, social and corporate governance principles and also build global links. Also in relation to our values, in relation to accountability, trust, collaboration and innovation, these are embedded in all of our staff, and this is what we look for in our partners that we are joined together in regards to promoting the DomaCom platform. Just to recap on our 4 strategic objectives and what DomaCom is looking to achieve: to ensure capital sustainability and deployment to meet corporate objectives and shareholder return and liquidity expectations; drive connectivity and collaboration with distribution and commercial partners; deliver broader, innovative and differentiated digital value propositions to diversify our revenue base, increase market share and improve the client experience; and lastly, to be the employer of choice, attract, develop and retain top talent who are innovative and collaborative. The key financial metrics of funds under management, sub-funds and investor accounts recorded strong year-on-year growth on the DomaCom's 2023 financial year. This was a significant achievement in the face of a host of domestic and global macroeconomic uncertainties which, as a group, had the mindset of many investors much more focused on wealth preservation rather than capital appreciation. Our company's recent upscaling was partly attributable to delivery of strategic initiatives outlined in the Chairman's address which helped our product offering that gained further traction in key addressable markets. It was also attributable to a committed DomaCom team focused on both business growth and getting your company relisted on the Australian Stock Exchange in December last year. DomaCom's growth over its 2023 financial year was headlined by an uplift in funds under management and fee income. This growth came as the company enhanced in-house risk and compliance standards, expanded market capabilities and distribution channels and cultivated strategic partnerships with new commercial entities. There is now a wider range of customer solutions so your company reinforced its position as a leading provider of innovative and comprehensive business solutions that meet the evolving needs of its growing client list. We also introduced monthly communications to our clients, and we also enhanced our website and rejuvenated the brand and boosted our IT infrastructure in relation to our new customer relationship management tool. The DomaCom funds under management was $216 million at year-end, up 61% on the level reported at the end of our full year '22. And further growth was recorded in the first quarter over our 2024 financial year. This uplift was attributable to increased penetration of multiple property segments and varied asset classes. It came as DomaCom gave investors exposure to numerous niche property segments that effectively diversified their asset portfolios. The increasing funds under management over our full year '23 was powered by an accompanying rise in sub-funds and client accounts. The number of sub-funds on the DomaCom platform rose 100 to 133 by the end of full year '23, up 25% on a year earlier. DomaCom's customer accounts numbered 2,330 at the close of full year '23, up 29% on the level reported at the end of full year '22. As DomaCom's funds grew, so did the revenues generated from it. Annual fee revenue totaled $2.4 million in our full year '23, up 134% on that recorded in the preceding year. This strong uplift came despite some delays, which occurred while incorporating improvements to our compliance regime. Once these new processes were put in place, we again ramped up the conversion of revenue opportunities within the pipeline. DomaCom continues to reengage with dealer groups over the course of its 2023 financial year. This ensured that our FUM uplift over this period was spread across multiple advisory groups. This achievement underscores the broad-based appeal and recognition of the company's investment solutions by various investment professionals. It would not have occurred without investment professionals and adviser groups and their clients seeing the value in investing in the assets packaged in the sub-funds on our platform. DomaCom remains committed to a further deepening and broadening of the investor base, underpinning our innovative fractional investment model over time. And I'm proud to say that a significant positive development has more recently materialized in this front. In November 2023, DomaCom announced a strategic partnership with Super Fierce, Australia's premier superannuation advice technology. Assuming the memorandum of understanding we signed with Super Fierce progresses to a final agreement, you will see our platform introduce new innovative solutions using Super Fierce's technology and DomaCom's platform capabilities. The partnership will potentially unlock new avenues to market for DomaCom. Looking to our 2024 financial year outlook, we are confident that the coming 12 months sees further growth in revenues and continued cost discipline. This will in turn lead to material improvement in cash flows and earnings over the periods. We will continue to offer clients of DomaCom Fund value propositions in niche markets, strengthen institutional relationships with the advisory groups and corporate partners, build up global links, evolve its secondary market facility, and still remain committed to sound ESG principles and also develop a new digital strategy. In closing, I want to echo the words of our Chairman to give a big thanks to our staff over the past 12 months. Their tireless efforts have been critical to DomaCom's continued move towards a more sustainable footing over this period. I also want to acknowledge our loyal shareholders who have remained on board as DomaCom's recovery strategy was executed and its suite of investment solutions grew. We now look forward to further improvement in DomaCom's operational performance over the coming 12 months. Success here will demonstrate the long-term sustainability of the DomaCom's fractional investment model. Thank you.

Thanks, John. I ask the company Secretary to address and then we'll do the questions.

Yes, that sounds good. So a lot of this -- the slides are bringing -- sort of putting into graphics what the CEO and Chairman have just said. So this first slide is the FUM. It shows the growth in FUM over the -- particularly over the last 12 months, which is at 61% increase in FUM. You can see it's across a number of different asset categories. And it's driven by a number of different factors, but one of them is an interest that there were some specialty markets that we've managed to tap into. And the other is some of the attractive returns we're able to play out that through the sub-funds. So that was $134 million to $216 million [ in financial year ] 2023. It's the key message there. And that's driven by an increase -- that's not just the same investors, there's new investors coming in. Obviously, you've seen an increase in the number of investors there, but also the number of sub funds. So generally, sub-fund is a new development or campaign showing this -- it's not growth for existing properties, but it's new properties coming in so new sub-funds coming in. So increasing customers, increasing number of sub-funds. That FUM obviously drives revenue. So revenue comes through 2 different routes. So one is the -- what we call a Campaign Management Fee, which is an upfront type of revenue, which represents the -- all we do to actually put -- to run a campaign, to create a campaign, to put the properties on the platform. So the fees for that, we call it the Campaign Management Fees. Then the ongoing management fees, every year or every month for managing the funds, we [indiscernible] as well. So as the FUM goes up, [ they can ] go up. As the FUM goes up, [indiscernible] we get those campaign management fees as well. So both of those have gone up significantly over the last financial year. Operating costs, so that's the other side of the equation. Given we've grown so significantly, we've kept these operating costs very much under control. You can see sort of year-on-year for the last 4 years, it's remained fairly steady. The operating costs are stripping out your financial costs, stripping out your [ amortization ]. So that's actually underlying cost for running your business. The final slide for me is the -- this is just Q1 FY 2024. So the last quarter, that's just [indiscernible]. So the message here is fee-driven revenues continue to come through for this quarter. Our costs continue to be under control are in fact coming down. You'll see the last quarter have come down just across a number of areas. I probably just wanted to highlight, it's just the rental positions. We've had a much more cost-effective rental opportunity in Melbourne. So that's little bit of money in the Melbourne office rental area. So that was all from me.

Okay, we move to questions.

So I think we can have question -- general questions now. Or we can obviously, afterwards, we can have individual one or more questions, if required. But sort of we can do general questions now.

I've received 2 questions in advance. First question is, why are there more board members than staff? And the second question is why does the sales organization has so few resources invested in sales and marketing. I don't think it's true that we have more directors than staff...

[indiscernible]. So our staff figure is between 10 and 15 people, depending on company [indiscernible]. So we've currently got 7 directors. So there is -- that balance between the 2 is fairly high.

What's the minimum number of directors required [indiscernible].

I [indiscernible] but less than 7.

Question is why we have 7 directors. Have they -- have the directors brought business -- new business in the company? For example, [indiscernible] since you became CEO, what's the percentage of the increase in fund that is coming from new business?

All deals that we do are new business.

[indiscernible] they come from the same source. So [indiscernible] new business is pulling in new group of investors from a totally different source, not just balancing off the existing clients that you've got [indiscernible].

So over the last 12 months, we would say approximately 20% to 30% was from new business.

So what we're talking about here is the distribution partners. This is a significant [indiscernible]. So new distribution partners.

And is DomaCom a sales and marketing organization?

It's part of our business. We are -- part of the business. Correct, and we -- all staff, and that's where I talk about values in regards to collaboration, we all work together. We all wear different hats and we also pull the organization in different areas.

How many sales people?

We have 2 designated to sales. Sorry -- Ross Laidlaw and [ Nat Wise].

[indiscernible] are certainly not met. But that's [indiscernible] have any marketing bids here.

We did have one, which was just recently -- not at the moment.

[indiscernible] sales and marketing organization. Sorry for being [ caustic ]. You are a sales and marketing organization and directors haven't brought in any new business, where is the business going to come from in the future?

So that's -- it's what the company is still working on it. It's a work in progress. It doesn't just happen overnight. So we are working...

[ And how many months ] that you have been in the chair?

16 months.

[indiscernible] in the chair for 16 months?

So there's numerous parts of our business, which have changed, especially in relation to just from a governance perspective and a risk component. So there's all different areas that we need to look at that we improved over the last 12 months. From a sales perspective, getting new distribution partners in has been achieved, not probably to the level that we expected. But we look at the current financial markets, and it has been very difficult with the economic conditions. But from a marketing perspective, it is one of our key objectives. We didn't have a person until recently, and we are looking at improving and setting up a digital marketing strategy, and we will be bringing a new person on board.

[indiscernible] directors running the business. So again, I ask the question, how much business have the directors brought in? With 8 directors sitting there and [ taking about ] 50% plus of the staff of the company, how much business have you guys brought in?

To provide you, it's not just one. Believe me that we have numerous people that do work in this area, including myself, going out and talking with distribution partners, going out and talking with institutional partners as well and bringing in more...

[indiscernible] institutional partners, if you say that.

Sorry? I'm more than happy to take this offline and be able to respond to you directly.

Okay. Other questions?

If your funds under management now are around [ $213-odd million ], when do you think and at what level do you think that you'll be breakeven?

Yes, I think, directed at me. So probably the best way to look at this is, if you look at -- for the operating cost is -- let's say, $4 million is the operating cost for capital. You've got [ finance ] cost on top of that. But so what fund do you need to come out $4 million is the way looking at it. So it depends on the 2 factors. So what is your ongoing management fees and you've got your campaign management fee. So balancing those 2, how much you need to grow. So broadly, if we -- for where we are at, we grew funds under management by [ $150 million ] in the next year, 1.5 years. The combination of the campaign management fees and the increase of ongoing fees that come from that over the next year, 1.5 years will get us towards the -- that $4 million mark. So that's taking us basically, so from -- roughly $400 million is what I'm saying is what we need to get to -- $400 million at a minimum to breakeven. If we start adding in interest costs as well, then it's maybe more than $400 million. It might be $450 million will be at that breakeven point. So that's targeted to happen over the next year, 1.5 years.

The number of shareholders and the top 20%, what is the percentage of that now? The top 20% of your funds or sorry, of your shares. How many -- what is the concentration? And how many -- given that there's only 5, I don't know how many are on line, but obviously, a reflection of how the share has gone, if there's not a very good market because there's not too many people [ that have got shares ], then it's -- that the shares can go up and down, yes, a lot without having any intrinsic reason for doing so.

Yes, just in terms of concentration, so on the -- back again, [indiscernible] has got the exact numbers, but approximately, it's 1,000 shareholders and probably half of that is owned by the top 20% just roughly. So that's our [indiscernible]. But in terms of -- so there is -- so of those 1,000 shareholders. So there is some liquidity, you would hope from 1,000 shareholders.

Yes, I didn't realize that there were as many as that from [indiscernible].

There's no more questions come on the screen here. So any hands raised through Zoom, [ Tony ] ? So there's no more questions at this stage, we can move on to the next [ article ].

Corporations Act requires that the financial report, which includes the financial statements, directors' declaration and directors' report and the auditor's report to lay before the Annual General Meetings and the record is required to be audited and lodged prior to the Annual General Meeting, and therefore, there is no formal resolution required being put to the meeting. The auditors, Grant Thornton are represented today by [ Mr. Derek Boone ]. Are there any questions on the financial reports?

So I've had no questions at advance on the financial report. So no questions came through. Any hands raised, [ Tony ] on Zoom? So there's no questions on the financial.

Okay. I note the financial report as duly received and considered by the meeting. We have 15 resolutions to deal with today. Voting on the resolutions as set out in the notice of meeting will be through a poll. Shareholders are encouraged to submit their votes prior to the meeting and also voting is now through the Lumi software for shareholders attending online that have not already been -- that have not already voted by proxy. In addition, for shareholders attending in person that have not already voted by proxy, voting will be made by using the voting cards provided to registration. As the voting is by poll, each vote will be allocated in accordance with the number of shares held. The votes will be combined with the votes received in advance to the meeting to determine the results of the poll will be released in the ASX subsequent to the meeting.

Yes. So [indiscernible] read out every single number we put them up on screen. So we -- so the resolution -- going through the 15 resolutions. So resolution 1, the proxy numbers are up on the screen.

Before the resolutions are formally put, there'll be an opportunity for shareholders to ask questions. Kindly ensure that only questions related to the relevant item of business are asked. A question can only be taken by persons who are entitled to vote at this meeting. As Chairman, where I have appointed -- been appointed by a proxy, I tend to vote in favor of all resolutions. Now we go through each resolution. Resolution 1, adopting the remuneration report under Section 250R(2) of the Corporations Act, listed companies are required to put a resolution to their shareholders that the remuneration report be adopted. Vote on this resolution is advisory only and will not bind the company or the directors. However, the Board will take the outcome of the vote into consideration when reviewing the company's remuneration practices and policies. The remuneration report forms part of the director's report and is included in the annual report for the financial year ended the 30th of June 2023 that was distributed to shareholders prior to this meeting and is also available through the company's public website. Given the interest in this resolution, the Board makes no recommendation on this resolution. I move the following advisory resolution that the remuneration report for the financial year 30 June 2023 be adopted. Are there any questions on the resolution?

No. No questions have come through.

I now put the matter to a vote through a poll. If you've not already voted in accordance with the meeting, please vote using Lumi software and/or please complete the voting card if you're attending in person. Any additional votes to these?

No. [Voting]

So the actual process, yes. So these proxy votes are added to any votes which come through -- during this meeting but also through the Lumi software, and then there will be released to the ASX after the meeting.

The second resolution relates to the reelection of Grahame Evans as Director. So I move that Grahame Evans who retires by rotation in accordance with the company's constitution and is eligible for election, be reelected as Director of the company. Voting exclusions for Resolution 2 are set out in the Notice of Meeting. I advise that the company is in receipt of proxy votes shown on the slide. Are there any questions in relation to the resolution?

No.

Okay, I now put the matter to a vote through a poll. [Voting]

Resolution 3 is the reelection of Mr. Hilal Yassine as a director. I move the following ordinary resolution that Mr. Hilal Yassine, who retires by rotation in accordance with the company's constitution and is eligible for election, be reelected as a director of the company. Voting exclusions for Resolution 3 set out in the Notice of Meeting. And I advise that we've received the proxy votes that are shown on the slide. Are there any questions in relation to the resolution? Okay. I'll now put the matter for votes through the poll. [Voting]

Resolution 4 is the election of Mr. Steven James as a director. Summary of his background is set out in the explanatory statement. We look forward to Steven being able to apply his knowledge and expertise to assist in driving the DomaCom forward. I move the following ordinary resolution that Steven James who is appointed to the Board by the directors on 12th of April 2023 in accordance with the company's constitution is eligible for election, be elected as a director of the company. The voting exclusion for Resolution 4 is set out in the Notice of Meeting. I advise that the company received proxy votes as shown on the slide. Are there any questions in relation to this resolution? Okay. I now put the matter to vote through a poll. [Voting]

Resolution 5, subsequent approval for the issue of up to 27,500,000 ordinary shares. I move the following ordinary resolution, that the issue of up to 27,500,000 ordinary shares on terms and conditions set out in the explanatory statement is approved under and for the purposes of listing rule 7.4. The voting exclusions for Resolution 5 are set out in the Notice of Meeting and I advise that the company has received proxy votes on the slide. Are there any questions on this resolution? I put the matter to vote through a poll. [Voting]

Resolution 6. There's a resolution of the issue of up to 2,926,021 convertible notes on terms and conditions set out in the explanatory statement is approved under and for the purposes of listing rule 7.4. Voting exclusions for this resolution are set out in the notice of meeting. I advise that the company has received proxy votes as shown in the table -- shown on the slide. Are there any questions in relation to this resolution? Okay. I now put the matter to a vote through a poll. [Voting]

Resolution 7, Concerning the issue of 1,250,000 options. I move that the issue of up to 1,250,000 options on terms and conditions set out in the explanatory statement is approved under and for the purposes of listing rule 7.4. Voting exclusions for Resolution 7 as set out in the notice of meeting. I advise that the company has received proxy votes as shown on the slide. Are there any questions about this resolution? I can now put the matter to vote through a poll. [Voting]

Resolution 8 relates to the approval to issue up to 4 million convertible notes. The purpose of Listing Rule 7.1 and for all other purposes, shareholders approve the issue of up to 4 million convertible notes on terms and conditions set out in the explanatory statement. The voting exclusions for resolution 8 is set out in the notice of meeting. I advise that the company has received the proxy votes on this slide. Are there any questions in relation to the resolution? Okay. I now put the matter to a vote through a poll. [Voting]

Resolution 9. Approval to issue of up to 2,500,000 options. For the purpose of Listing Rule 7.1 and for all other purposes, shareholders. The motion is that they -- shareholders approve the issue of up to 2,500,000 options on terms and conditions set out in the explanatory statement. The voting exclusions for Resolution 9 is set out in the notice of meeting. I advise that the company has received the proxy votes that are shown on the slide. Are there any questions about this resolution? Okay. I now put the matter to a vote through a poll. [Voting]

Resolution 10. Approval to issue up to 650,000 convertible notes. The purposes of Listing Rule 7.1 and for all other purposes, shareholders approve the issue of up to 650,000 convertible notes on terms and conditions set out in the explanatory statement. The voting exclusions for resolution 10 are set out in the notice of meeting and I advise the company's received proxy votes that are on the slide. Are there any questions on Resolution 10? Okay. I now put the matter to a vote through a poll. [Voting]

Resolution 11 and for the purpose of Listing Rule 7.1 and for all other purposes, shareholders approved the issue of up to 609,375 options on the terms and conditions set out in the explanatory statement. Voting exclusions for Resolution 11 are set out in the notice of meeting. I advise that the company has received proxy votes that are on the slide. So are there any questions about resolution 11? I now put the matter to a vote through a poll. [Voting]

Resolution 12. I move the following ordinary resolution and for the purpose of Listing Rule 7.1 for all other purposes, shareholders approve the issue of up to 56,820,158 ordinary shares on the terms and conditions set out in the explanatory statement. Voting exclusions for Resolution 12 are set out in the notice of meeting. I advise that the company's received proxy votes as on the slide. Are there any questions in relation to this resolution? I'll now put the matter to a vote through a poll. [Voting]

Resolution 13. Approval to issue of 70,000 convertible notes to Mr. Grahame Evans or his nominee. I note for the purpose of the following ordinary resolution that for the purposes of Listing Rule 10.11 and for all other purposes, shareholders approve the issue of 70,000 convertible notes to Mr. Grahame Evans as a Director of the company, on the terms and conditions set out in the explanatory statement. Voting exclusions for Resolution 13 are set out in the Notice of Meeting. I advise that the company has received a proxy votes as shown on the slide. Are there any questions about resolution 13? Okay. I'll now put the matter to the vote through a poll. [Voting]

Resolution 14. Approval of 10% placement capacity. That is a special resolution the company had the additional capacity to issue equity securities provided for listing rule 7.1A. There is no voting exclusion as at the time of dispatch of notice of meeting, the entity is not proposing to make an issue of equity securities under the mandatory guidance through Resolution 14. I advise that we've received the proxy votes as shown on the slide. Are there any questions? I now put the matter to a vote through a poll. [Voting]

And Resolution 15 is an amendment of the constitution. Special resolution. I move that pursuant to and in accordance with section 136(2) of the Corporations Act, and for all other purposes, approval is given for the company to amend the constitution of the company in the manner set out in the explanatory statement with effect from the close of the meeting. Voting exclusions for Resolution 15 are set out in the notice of meeting. I advise that the company has received the proxy votes shown on the slide. Are there any questions in relation to this resolution? And I now put the matter to vote through a poll. [Voting]

Thank you, everyone. I declare the voting is now closed. The results of the poll will be released to the ASX after the meeting.