ASX Limited (ASX) Earnings Call Transcript & Summary

Good morning, everyone. I'm Damian Roche, Chair of ASX. I welcome you to the 2023 Annual Meeting of ASX Limited. I begin today by acknowledging the Gadigal people of the Eora Nation, traditional custodians of the land on which we meet today and pay my respects to their elders past and present. As we have many people joining us remotely, I'd like to extend my acknowledgment to the traditional custodians of all the lands from which you join us. We're delighted to offer our shareholders and proxy holders the choice of participating in today's meeting in person or via our online platform. The AGM is an opportunity for shareholders to hear from and put questions to the Board, the Managing Director and CEO, and the external auditor. I encourage shareholders to use the various platforms available to participate in this meeting. If you experience any technical difficulties while attending the meeting using the online platform, please contact the help line number on the screen behind me. If I'm advised of any significant technical issues during the meeting, I may declare a short recess to allow us to resolve the issue. I will provide some instructions a little later on, on how to use the different platforms available today. There is a quorum present, and I now open the meeting. Let me commence our business with some introductions. Next to me is our Managing Director and CEO, Helen Lofthouse. All of your Nonexecutive Directors are present today. Yasmin Allen, Vicki Carter, Melinda Conrad, David Curran, Peter Nash, Luke Randell and Dr. Heather Smith. Also attending today's meeting is Group General Counsel and Company Secretary, Johanna O'Rourke; and Voula Papageorgiou from PricewaterhouseCoopers, our external auditor. Voula is available to answer any questions you have about the conduct of the audit of ASX' financial statements, the preparation of the content of the auditor's report, the accounting policies adopted by ASX in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct to the audit. Before moving to the addresses, I will outline the agenda for the meeting and how to ask questions and vote during the meeting. The details of formal business as set out in the Notice of Meeting, which was released to the market on the 15 September 2023. I note that we have one contingent item of business on the agenda for this meeting. This is a spill resolution, which is Item 7 in the Notice of Meeting. The spill resolution is only required to be put to the meeting if at least 25% of the votes are cast against the adoption of the remuneration report, which is Item 3 in the Notice of Meeting. This would constitute a second strike. However, as Item 3 regarding adoption of the remuneration report is being considered on a poll and the results will not be known until the end of the meeting, the spill resolution will be put to the meeting as a contingent poll. In the event the remuneration report receives more than 75% support, the spill resolution will have no force or effect. Votes cast on the spill resolution are cast on this understanding. In relation to the Chair and CEO speeches we will be delivering shortly, they were released to the market prior to the start of the meeting and have been published on the ASX website. Following the completion of the meeting, those here in person are invited to join the Board and management team upstairs for refreshments. I will now explain the question and voting procedures for today's AGM. Shareholders and proxy holders will have an opportunity to ask questions on each item of formal business. There will be an opportunity for shareholders and proxy holders to ask general questions relating to the management of ASX when we consider ASX' financial report for the 2023 financial year. I ask that questions be directed to me in the first instance. There are 3 ways to ask a question today. Those in the auditorium can use a microphone. Those attending using the online platform can submit a question either in writing or by asking the question using the web phone functionality. I will outline each of these options in a little more detail. Shareholders and proxy holders present in the auditorium will be holding a yellow or blue card. If you need assistance, please ask one of the registry staff in the auditorium or the foyer. We have 4 microphones in the auditorium. We have 2 fixed microphones with reserved seating in the middle of the stairs on each aisle. To ask a question, please make your way to the reserved seats, there are also 2 members of staff standing at the back of [ the chair ] holding roaming microphones. If you cannot move to a fixed microphone, please raise your hand and an attendant will bring 1 to you. For those using the online platform, the information I'm about to provide is contained in the virtual meeting online guide available in the Download section on your screen. You will see at the top of your screen 3 boxes: ask a question, get a voting card, and exit meeting. To ask a question -- to ask a written question, click Ask a Question button, a box will appear with 2 sections as shown on the screen. Select from the drop-down menu, the item to which your business question relates, then type your question in the space provided. Please note that an online question must be more than 24 characters and less than 513 characters. Online questions will be read aloud by an ASX staff member during the relevant item of business. To ensure you have enough time to type and submit your questions, I encourage you to start typing now instead of waiting until later in the meeting. To ask an oral question, click the Ask a Question button, select the second button, go to web phone under audio question as shown on the screen. [Operator Instructions] When it is time to ask a question or make a comment, the moderator will introduce you to the meeting. In addition to being able to ask questions during today's meeting, shareholders were able to submit questions in advance. Thank you to those shareholders who took time to do so. Where the matters raised in those questions have not been covered in the Chair or CEO speech that will be covered at the relevant item of business today. We will endeavor to get as many questions as we can during the course of the meeting. However, where we receive multiple questions on the same topic, we will amalgamate questions in the interest of time and clarity. We will address questions for each item of business by first taking questions from shareholders present in the auditorium. We will then address the written questions we have received in advance of the meeting and through the online platform. Finally, we will take any questions from those using online web phone feature. Turning now to the voting procedures. All items of business requiring the vote will be conducted by poll. Our representative ASX' share registry, Link Market Services, is returning officer for this meeting. I now declare the polls open. Please note that the polls will close 5 minutes after the conclusion of the meeting. If you are eligible to vote, there are 2 ways you can cast your vote, in person or via the online platform. If you are present in the auditorium, you will have a yellow voting card, which you will be asked to complete and hand to the registry staff at the appropriate time. I will advise you when it is time to complete your voting card. If you need assistance, please ask one of the registry staff in the auditorium or the foyer. If you have a yellow voting card and need to leave early, you may, if you wish, hand your completed voting card to the staff at the registration desk as you leave. To cast your vote using the online platform, please click, Get a Voting Card button and follow the prompt. You may cast your live vote at any time during the meeting. Where undirected proxies have been given to me as Chair of the meeting, I confirm that as set out in the Notice of Meeting, I will vote the undirected proxies in favor of all resolutions as part of Items 3, 4 and 5, and against all resolutions as part of Items 6 and 7. In accordance with the voting exclusion set out in the Notice of Meeting, other directors and executives identified as key management personnel will not vote undirected proxy votes given to them in respect of the spill resolution. I confirm that I will vote all directed proxies given to me as Chair of the meeting in accordance with the directions provided. We will display on the screen the number of direct and proxy votes received prior to the meeting on each resolution. The final results of voting will be released to the market as soon as they are available. Now to the Chair and CEO addresses. Fellow shareholders, thank you for joining me today and what will be my third AGM address as your Chair. The 2023 financial year has been a pivotal year for ASX. When I addressed you last September, ASX was yet to determine that it would pause and reassess the CHESS replacement project. As you know, since that time, confidence in ASX has been tested, and we acknowledge that we must demonstrate that the changes we are undertaking will help restore that confidence. The decision to pause and reassess the CHESS replacement project was difficult but necessary. It was ASX' decision to commence a review into the escalating delays for the project, and that act itself should serve as a reminder, that your Board and management team are willing to address difficult situations. Since then, the Board's focus has been on taking meaningful action and urgent action. Accountability measures were taken, governance strengthened, delivery capability reviewed, and we have significantly raised the level of industry engagement while reorientating our approach to transparency. There is more to do, but we are clear about the path ahead and what it will take to ensure we build on the foundations of what is an enduring and attractive business. This year's remuneration report reflects the collective and individual accountability endorsed by the Board following the decision to reassess CHESS replacement. You can see the detail in our annual report, but broadly speaking, these measures included halving the reward pool available to the whole executive team and further reductions for executives directly involved with CHESS replacement. Deferred rewards from FY '22 and prior for executives and leaders responsible to the project were reduced or canceled, as were outstanding equity for the former CEO and former Deputy CEO. We have also rebalanced our remuneration framework to further focus executives on generating long-term sustainable value by delivering our 5-year strategy. We introduced the long-term variable reward to the whole executive team and replaced earnings per share with underlying return on equity as a key metric for performance. These developments will better align with the executive team's remuneration with the value created for our shareholders. While we've taken specific accountability actions during the year, there have also been more wide-ranging changes overseen by the Board over the past 18 months to help drive transformational change at ASX. Chief amongst this was the appointment of our Managing Director and CEO, Helen Lofthouse. When I spoke at the last year's AGM, Helen had only been in the role for over a month. Yet it was clear she was prepared to apply new rigor to existing challenges, and we've started to see the impact of her commitment to customer-driven growth, technology renewal, stakeholder engagement and cultural uplift. Helen has appointed a number of very capable executive team members with the experience and leadership skills to deliver our new 5-year strategy. Turning now to key regulatory developments during the year. As an operator of critical market infrastructure, ASX is subject to a high level of scrutiny, and this is as it should be given our special position in the nation's economy. It has therefore been unsurprising that our regulatory agencies, the Reserve Bank of Australia, and the Australian Securities and Investment Commission have sought assurances from ASX that we have the appropriate governance arrangements, capability and stakeholder engagements -- stakeholder engagement forums in place to successfully progress the CHESS replacement project. By the end of the year, ASX will have delivered 3 special reports to ASIC, demonstrating how we will maintain CHESS, implement the CHESS replacement, external review recommendations and enhance our broader portfolio, program and project management frameworks. Each report is being independently audited by EY. During the year, ASX also provided a report to the RBA on intragroup conflict management. The report was prepared by an expert law firm and concluded that ASX' intragroup conflict management arrangements are sophisticated and consistent with what would be expected of a listed group with the complexity and scope of ASX. Taken together, these reports provide our regulatory agencies with a deeper view of our governance and other arrangements for CHESS and CHESS replacement. The RBA's recent annual financial stability standards assessment also required ASX to replace the high priority on recommendations related to Board process, internal audit, stakeholder management and the management of aging technology assets, including CHESS. These areas of concern have already been in focus for ASX, and we've previously stated, we know we're not where we want to be, and we're doing the work to make improvements. ASX will implement all of the recommendations from the FY '23 assessment, and this work should further strengthen ASX' ability to meet the high standards expected of us. In March, ASX announced that ASIC was conducting an investigation into suspected contraventions of the ASIC Act and the Corporations Act in relation to the CHESS replacement project. This investigation is ongoing. I'm unable to comment further other than to say ASX is cooperating fully with the ASIC investigation. Turning now to the financial performance of the group. For the second year in a row, ASX delivered operating revenue of more than $1 billion, notwithstanding the challenging operating environment and the significant additional focus required to meet our regulatory commitments. This achievement is a testament to the strength of our diversified business model and the dedicated efforts of everyone at ASX. You will have seen from our annual accounts that total expenses during the year following increased investment in risk management and technology, including insurance and solution design activities related to CHESS. We expect this heightened expense growth rate to persist in the short term as we allocate appropriate resources to support our strategy reset. Our statutory net profit of $317.3 million was down by 37.6%, and this was impacted by several one-off items during the year. Underlying net profit after tax was $491.1 million and was just 3.4% lower. This resilient performance allowed ASX to declare total dividends for the year of $2.283, which was a slight decrease of $0.081 in line with the 3.4% fall in underlying net profit after tax. While this year's dividend reflects a payout ratio of 90% of underlying net profit after tax, the Board has approved a modification to the payout policy going forward of between 80% and 90%. These are not decisions we take lightly. With the new 5-year strategy announced in June, we have sought to address some key areas that require business investment, which we expect will grow the long-term value of your shareholding in ASX. During the year, ASX implemented several initiatives to increase stakeholder engagement, particularly in relation to the CHESS replacement project. This is one of the key differences in approach taken on the project and has helped us inform our decisions on the new solution design. The initiatives included the creation of 2 new stakeholder forums and the establishment of CHESS replacement partnership program which aims to encourage stakeholder participation in the next phase of the project through rebates and a series of development incentive payments totaling up to $70 million. One of the forums established in February was the CHESS replacement technical committee, which has wide industry membership that can provide input on key items such as scope and implementation. ASX also recently established the Cash Equities Clearing and Settlement Advisory Group, and this smaller group of highly experienced industry representatives is designed to provide input on key strategic issues for cash equity and clearing and settlement, including strategic aspects of CHESS replacement. We are well progressed in our analysis to determine the solution design and Helen will speak on this in more detail shortly. What I can tell you is that this process has been very focused on the project's objectives, and our top priority is ensuring that our new system will meet our high standards, consider the needs of the whole market and provide for future innovation. Since taking up the role of Chair in April 2021, my fellow directors and I have been focused on the process of board renewal. Since March 2022, 4 of 8 Nonexecutive Directors have retired and 4 have been appointed. The new directors, all of whom are sitting before you today are Dave Curran, Dr. Heather Smith, Vicki Carter and Luke Randell. Later in the meeting, you'll hear from Vicki and Luke. Their appointments align with our commitment to strengthen the technology, project management and financial market expertise around the Board table and on subsidiary Boards. I hope shareholders will join the Board today in supporting the election of Vicki and Luke. I would also like to recognize the contributions of 3 former directors who we farewelled during this year: Heather Ridout, who joined the Board in 2012 and retired in February; Rob Woods, who joined the Clearing and Settlement Boards in 2015 and the ASX Board in 2020 and retired in March; and Peter Marriott, who joined in 2009 and retired in August. I personally valued their insight and advice and the depth of experience they have brought to the Board. In the Notice of Meeting sent to all shareholders, I explained that should I be reelected today, it would be my last term in accordance with the ASX tenure guidelines. I have served on the ASX Board since August 2014, and today's Annual Meeting is my tenth as an ASX Director and will be the fourth time I've stood before you to seek your support for my continued service. As always, I'm deeply indebted to my fellow directors for their support, encouragement, care and dedication during this past year. To everyone at ASX, a heartfelt thanks from me and the Board for your energy, expertise and commitment during a year of change and challenge. What we do matters, and I am proud of what we are building. I would also like to thank you, our shareholders, for your loyalty and support. My commitment, alongside that of your whole Board and management is to embed the changes we are making to restore confidence and secure the long-term success of ASX. I now invite Helen Lofthouse to address the AGM.

Thank you Damian, and good morning everyone. It is a pleasure to be here with you today. I've been in the CEO role for just over a year now. And despite the challenging period that we've had, it's clear to me that ASX has a high-quality portfolio of core businesses with privileged positions and strong long-term tailwinds for future growth. We have had some near-term challenges, which have been a major focus for me during the year, but we're making good progress, which will place us in a strong position to serve our customers well and capture future growth opportunities. FY '23 has been a year of reset for ASX. We have launched our purpose, defined our new vision, developed our 5-year strategy and refreshed our values. We've introduced capital management settings to support our strategy, including our 2 near-term focus areas of regulatory commitments and technology modernization. And we've introduced underlying return on equity as a key performance metric for the organization. As Damian said, there's been significant renewal at the Board and executive level over the course of the year to help drive our new strategy. There have been a significant number of new appointments in my executive team, reflecting a valuable balance of experience from within ASX moving to new roles and leaders from outside the organization. We're also pleased with our progress against our sustainability goals, achieving a 99% reduction in Scope 1 and Scope 2 emissions as we progress towards our target of net zero in FY '25. The market as a whole is our primary customer, and we're focused on working effectively with our diverse range of customers to understand their challenges and deliver solutions. And I'm a believer in customer-driven growth, and it's vital that we continue to increase and deepen our customer engagement. Horizon 1 of our strategy is prioritizing our near-term focus areas of regulatory commitments and technology modernization. We've made good progress against these focus areas so far in 2023, but we still have work to do. Beginning with our regulatory commitments, our licenses are some of our most important assets. The role of market infrastructure has become ever more important in supporting a fair, efficient and stable financial system and regulatory standards have changed accordingly. We must ensure that we continue to meet our regulators' expectations. The decision to pause CHESS replacement was difficult, but necessary, and we're working to rebuild the confidence of our shareholders, our customers and our regulators. And to that end, this year, we've published 2 special reports, one on the support and maintenance of the current CHESS platform and the other on our response to the CHESS replacement external review recommendations. And by the end of the year, we'll have published a third special report on portfolio program and project management frameworks, and our CHESS governance statement. Last week the RBA released its annual Financial Stability Standards report on ASX which covers a review period of significant change and reset. At our FY '23 results, I said that we are exposed to a heightened level of risk, particularly regulatory and operational risk relating to our near-term focus areas. And this report confirms our view that we're not where we want to be in some areas. And we have work underway that will give the focus and investment required to uplift where we need to. And finally, we continue to cooperate fully with the ongoing ASIC investigation. We're making good progress working through our regulatory activities, and we will maintain focus in this area. Now moving on to technology modernization. ASX operates critical market infrastructure, which is, of course, underpinned by technology. Our technology modernization approach continues to have a strong focus on addressing risks associated with legacy technology assets as well as adding value for our customers. And while we're undertaking remediation activity in some areas, we're still performing strongly in terms of system resilience with a pattern of decreasing material technology incidents. We remain committed to continuing to deliver resilient, secure and operationally reliable services that meet market and regulator expectations. For CHESS replacement, we continue to work towards announcing the solution design by the end of this calendar year. And it's important to have clear objectives of what we're trying to achieve with these projects, which I'll recap now. First, our licenses. Our top priority is to implement a CHESS replacement platform that meets our license obligations and the current needs of the market. A supportable solution. We operate critical market infrastructure and the solution must be reliable, supportable and operate at the high standards needed to underpin the Australian financial market. A robust implementation plan. We must have a robust and achievable implementation plan that gives stakeholders confidence in a safe and reliable industry transition to the new platform. And industry impact. We need to consider the impact to industry stakeholders by continuing to engage with them and to leverage their previous investments where that's possible. And finally, innovation. We want to create opportunities for industry efficiencies and growth, including support for new asset classes and capabilities such as tokenization. ASX is considering solution options, which would take a more modular approach with separate components for clearing, settlement and subregister services to support flexibility and interoperability. And this would allow for the provisioning of services by ASX or other providers as driven by market demand. So these objectives have underpinned the robust solution decision framework, which is being applied to the options considered within the 4 solution design archetypes, which are under consideration. And while we're well progressed with our analysis, stakeholder engagement is key, and the timing of our announcement is subject to our regulators' expectations on consultation with the industry advisory group. And whilst the solution design has been announced, further stakeholder engagement will be required in 2024 as we map out the implementation plan and the industry time lines for the project. Addressing these near-term focus areas has required a significant increase in our total expenses, but this investment is key to delivering long-term sustainable shareholder value. We understand that this level of expense growth isn't sustainable, and we are committed to reducing the total expense growth rate in FY '25 through a series of measures, including workforce optimization, process simplification and automation and strategic procurement. We'll provide a further update at our first half '24 results, and we'll continue to provide transparency around the expense growth drivers. Despite our near-term challenges, it's important to remember that ASX has a portfolio of high-quality businesses able to perform strongly through market cycles. We're privileged to have leading positions in a number of markets and structural tailwinds to support our businesses going forward. We have strengths which differentiate us and underpin long-term value in our businesses, which are not easy to replicate. Over our 150-year history, we've created unmatched connectivity across multiple markets, bringing global customers together in fair, transparent markets which provide deep liquidity and access to a range of data, products and services. I've talked before about the importance of our licenses and our deep experience in operating in regulated environments. And we have 2 market licenses and 4 clearing and settlement licenses, and we also hold a benchmark administrator license, which allows us to administer the bank bill swap rate. And these licenses set us apart and are crucial to the value of ASX. And from this privileged position, ASX is well positioned to benefit from long-term structural tailwinds. Australia's superannuation system is the fifth largest and fastest growing in the world. This supports long-term growth in capital markets and is part of what makes ASX an attractive global listing venue. As the leading domestic capital market with 89% on market share of the cash equities market, ASX is well positioned to capitalize on this trend. There's also a growing pool of retail investors who are keen to educate themselves and invest in the future. In fact, there's never been a time when more Australians have been invested in the share market, and we know this from our Australian investor study, a significant ASX commission survey that we conduct every 2 years and most recently published in June this year. We saw an increase in the number of investors who hold on exchange products from 6.6 million to 7.7 million people, which is the highest number in over a decade, with ETFs making up a significant portion of this growth. ASX is also a data-rich environment, and there's further value to be unlocked from this. We're exploring this thoughtfully and looking at new capabilities and products that can leverage this appropriately for our customers and the market as the demand for data continues to grow. And decarbonization presents many opportunities and challenges for the Australian economy, and ASX has an important role to play in enabling markets to support this transition. We're already doing this through our electricity futures, which have seen significant growth over the past 5 years. And there's an opportunity to play a key role in Australia's carbon market through the launch of futures products and as the potential operator of the Australian Carbon Exchange pending the decision from the Clean Energy Regulator. The first quarter of FY '24 has seen the continuation of the trends we saw in late FY '23, primarily driven by cyclical factors. Secondary capital raise is down 46% although the prior comparative period includes very strong activity in July and August 2022. Despite being slightly below pre-pandemic levels, September 2023 saw an increase compared to last year. And although it's still early days, it's pleasing to see an increase in new listing activity with companies such as Redox and Freightways listing in a few months. And the pipeline of corporates looking to list on ASX remains solid. Cash market trading volume is down 15% compared to the same period last year, similar to what we're seeing in exchanges in a number of other parts of the world. And although significantly down since the record levels seen during the COVID pandemic, current cash market volumes are slightly ahead of pre-pandemic levels. We should expect to see a recovery in volumes as inflation eases and the market gains confidence about where interest rates will peak, although further geopolitical tensions could impact this. Our futures business has been a beneficiary of the rising interest rate environment with solid volume growth of 9% compared to the prior corresponding period, driven by short-end rate products in particular. We're seeing early signs of growth in some of our longer-dated rates products, particularly the 3-year bond as activity moves along the curve with the market's expectations that interest rates may soon reach their peak. The global market theme of interest rates being higher for longer is also expected to support this longer-dated activity. We reiterate the guidance that we provided at our FY '23 results in August. So FY '24 total expense growth is expected to be between 12% and 15%. We have an operating expense review underway, which is aiming to bring this growth figure down in FY '25. Capital expenditure for FY '24 will be between $110 million and $140 million, which we expect to remain at these levels for the medium term to support our regulatory commitments and technology modernization programs. We have the capital management flexibility in place to support this investment. We've moved to a dividend payout ratio range of between 80% and 90% of underlying NPAT. And we expect to be issuing a corporate bond of between $200 million and $300 million depending on market conditions. We have a diversified portfolio of core businesses and interesting opportunities ahead. We have some near-term challenges, which we're working through, but our high-quality businesses are well positioned to benefit from our structural tailwinds and deliver long-term sustainable value for our shareholders. So I'd like to conclude by thanking our people for their hard work during a challenging year for ASX. What we do matters, and it's our team of highly dedicated people who deliver for the Australian market every day. Thank you. And I'll now hand back to Damian.

Thank you, Helen. We will now move to the items of business. The first item of business is to receive the ASX financial report for the 2023 financial year. Helen and I have already discussed ASX' financial performance, and comprehensive material was released on the 17th of August as part of our full year results. Voula Papageorgiou, our external auditor from PwC, is available to take questions about the conduct of the audit, the preparation of the content of the auditor's report, the accounting policies adopted by ASX in relation to the preparation of financial statements and the independence of the auditor in relation to the conduct of the audit. There is a separate agenda item dealing with the remuneration report. I will address questions about remuneration matters when we consider that item of business. I ask that you save any questions about remuneration matters to them. There will be no vote on this first agenda item. It is a discussion item only. I now invite general questions and any questions about the financial statements from shareholders present in the room. I ask that you please state your name and then ask a question.

Good morning. Peter Gregory is my name from the Australian Shareholders' Association. We're an organization that represents retail and individual shareholders. And today I'm holding proxies from 220 shareholders with total votes of over 275,000. So that represents, I think, about 17th largest shareholder on the ASX -- top 20 shareholder listing. Thank you for your presentations, Damian and Helen. I'd like to, if I could, to make 3 observations about competition that can potentially impact on ASX business in the near term. Firstly, 2 weeks ago, the government announced new legislation to support competition in clearing and settlement services. This was the -- up until then was the exclusive territory for ASX. Secondly, CBOE, the global exchange operator that acquired Chi-X in 2021 recently stated, and I quote, "it now has the performance and capacity to better meet both the current and projected future capital market trading volumes for the entire Australian equities marketplace." And thirdly, the observation in the annual report in Helen's presentation about the size of the pension pool $3.5 trillion, as the fifth largest and fastest growing in the world, is likely to attract significant interest from other global players who may be able to enter the market. It's likely that the future competitive landscape that ASX operate in will be quite different to today. And through you, Damian, I'd like to ask Helen, if she could share with us how the ASX is now working to competitively grow its revenue and protect its margins so that shareholders will continue to receive the dividends they depend on in the near term.

Thank you, Peter. And we appreciate our engagement with both you and Sue throughout the year, and we thank you for that interaction. Helen, I'll pass Peter's question to you.

Happy to. Yes. I guess the first thing I'd say, Peter, is that I think we do embrace competition. And we actually already compete actively both domestically and internationally in the majority of our businesses. So competition is certainly not a new feature for us. And of course, it brings challenges, but I think it also can drive innovation and a really sharp focus on making sure that we're delivering value for our customers. And at the end of the day, that's really what we need to do, right, is focus on our customers and ensure that they want to do business with us and that we're genuinely adding value of them. So the significant part of what we're doing really exactly that, making sure that we have a really strong communication with our customers, and we understand them very well and that we're working with them to ensure that we're adding value and that they actively want to do business with us. I think do certainly recognize the competitive landscape that you're describing. In respect of the CICS Legislation, the Competition In Clearing and Settlement Legislation, we support that legislation. It's worth noting that we already upgrade within a set of regulatory expectations. So this is in relation to cash equities clearing and settlement, and those expectations are that we deliver our services and operate in a fashion as if we were in a competitive environment already. And the legislation is really providing the legislative backing for those existing regulatory expectations. So we'll continue to stay very focused on our customers and really focus on continuing to drive that customer strategy to make sure that we're adding customer value.

There's been a lot of discussion about CHESS. It's been referred to in both of your presentations. I'd like to refer to the update letters to ASIC on the 29th of June, where you gave a fuller explanation of the progress of the CHESS replacement project. That was a couple of months ago now. Are you able to give us some more specific information and particularly as to where you're at leading up to the expected full release at the end of the year?

Sure. Thanks, Peter. I think Helen has covered that reasonably extensively in her speech, where we in a position to provide more details, and we're still maintaining to do that before the end of the year on the solution design. And that's certainly where we're progressing to. We're well progressed with solution design, but a really important takeaway as part of the solution was designed was to make sure we have broad-ranging industry consultation. And we're working with the advisory group, and that's also part of our regulatory expectations. So we want to ensure that we have all the input from the advisory group before we move forward with solution design. And we are still anticipating before the end of the year.

Good morning, and thank you for your time this year and for your time today. Wayne Parry is my name. I'm a shareholder through SMSF and through our joint holdings. Just further on the CHESS replacement, I guess, to try and get down to a little bit more detail in terms of where we are. Clearly, the failure of the replacement to date means we're back at some point previously to where we'd like to be. So I guess I could ask a lot of questions, but a simpler and broader one is what are the lessons that are being learned from the work to date? What can be taken forward with that work or is it all completely lost? And what is the time frame now that you're thinking about for the new replacement?

I'll take that to start with, and then I might ask Helen. I think the -- you raise an important point, and thanks for your question, Wayne. Lesson learned is something we're very focused on. We are -- we conducted a review of the program from Accenture. We are focused on implementing all of those findings of the review. We've talked about capability uplift to ensure that we have the right people driving the program forward, greater stakeholder engagement and making sure that we're listening to the industry, and we're receiving input. I think I'll let Helen talk -- where there's been a significant uplift through the Technical Committee, the Business Committee and obviously, the Advisory Group. We recently made some changes to the Business Committee and appointment of an Independent Chair, and I wish we have an Independent Chair of the Advisory Group. We've talked about our commitment subject to approval of the Advisory Group to announce solution design by the end of the year. But then we will further progress consultation with our stakeholders to make sure together we are moving on the journey, and it will be a consultative process. I think that consultative progress is a key takeaway that we're really focused on. And I think we've talked in previous meetings, capability and also on the Board, lifting our capability with regard to technology both with Vicki and Dave. And you'll hear from Vicki later and governance and oversight from the Tech Committee. Helen, I'm not sure if there's anything else you'd like to add there?

Sure. And maybe just picking up on a couple of the other points you raised there, Wayne. So firstly, I would say, I agree that lessons learned from the process is really important. We've taken that very seriously. We've obviously published quite a lot of information in relation to that. But as I just want to assure you that it's been a significant focus for me, making sure that we really understand how to do this more successfully going forward. I think you asked about reuse of the previous solution design. So just to touch on that. The brief to the team was to be really wide ranging and thoughtful. As we -- having made such a consequential decision to pause the project back in November, we really wanted to make sure that we were looking very broadly at the possible options for the CHESS replacement solution and that we really were very broad ranging and trying to identify the best outcome for the market. We've mentioned 4 different solution archetypes, as we call them. One of those is evaluating the build that we've already done and considering if there are ways to address the issues that we'd identified and to take that solution forward. So that's one of the 4 archetypes that we've been evaluating in that broad ranging process. We've already talked about the next milestone coming up, which is really announcing that technical solution design. So -- and as I said, we're working towards announcing that this year. So hopefully not too long to wait on that. Really, figuring out the overall project time line is then a matter that we'll need a great deal of industry input. I expect that when we announced the solution design, we will do so with an indicative time line for consultation, but that will, at that stage, only be indicative because what we actually need to do is consult with all of our stakeholders because this isn't an ASX project, and ASX going live on its own. It's the entire industry going live together. So actually what we need to do is go through that consultation process, which I expect to start early in 2024, and we'll go through that process together as we work out how -- what the time line is for the entire industry. So a lot more to come on that and more detail will emerge.

Can I invite any more questions from the floor? If there are no more questions on the floor, we'll move to questions online.

Thank you, Chair. I will note that some of the questions online have been addressed, either questions answered on the floor. We have had some pre-submitted questions on the topic of ASX' share price. It can be summarized as such. Why has the share price fallen so sharply? And what is ASX doing to lift it?

Thank you. Look, we understand your disappointment and we share your disappointment in our share price. In June, we outlined a new 5-year strategy, and that 5-year strategy is a real reset of the organization. The 5-year strategy has short-term priorities around technology modernization and meeting our regulatory commitments. Our focus is ensuring that we are protecting the wonderful franchise and business that you are shareholders of. I would note that for the second year in a row, we produced $1 billion of revenue, and we have a strong position and a really strong business. But there are issues that we need to address. We are being very transparent about those issues, making the necessary decisions and making those investments, and focused on building long-term sustainable value for shareholders.

Thank you, Chair. The next topic area from pre-submitted questions relates to the dividend. The question is, why have you cut the dividend? And when will it rise again?

Thank you. We're pleased with the dividend that we paid this year. But in our Strategy Day, we did announced that we were looking at a range of between 80% and 90% for the dividend. And that is part of ensuring that we have the right capital management strategy to support our 5-year plan. And I think as I've just talked about, that plan is really focused on ensuring that we're building the exchange for the future, and we have the right framework in place to execute that strategy. And while I understand that some of you may be disappointed about that, it's not a decision the Board takes lightly, but we're really focused on ensuring that we've got the right settings to drive that long-term performance.

Thank you, Chair. There was a follow-up question online. When will ASX reintroduce its dividend reinvestment plan?

Thank you. The Dividend Reinvestment Plan is an option to allow us flexible capital management, and it may be reinstated at some point in the future. I would note that in August, we updated our rules and made a series of enhancements, and they're available online. If there are changes, we will be short to let you know if there are any changes to the implementation of the DRP.

Thank you, Chair. There were also several questions in relation to CHESS statements. The question can be summarized as will ASX stop delivering paper-based CHESS holding statements?

I'm pleased to say that back in 2021, ASX created an electronic CHESS statement option. So if you were to contact your broker, they will be able to assist you with receiving your CHESS statements online, or if you have any more questions, please follow up with afterwards, and we can talk to you more about what you need to do there.

Thank you, Chair. The next online question is why did the date for the AGM move this year?

Thank you. We published our calendar back in January. And on the basis of feedback we've received from shareholders, we wanted to make sure there was adequate time between the release of our annual results and the publication of notice of meeting to ensure that director -- for those people that may wish to consider nominating as directors, they would have that time. So it was really based on feedback from shareholders that we've made those changes, we communicated them back at the beginning of the year.

Thank you, Chair. The next online question relates to climate change. The question is, how is ASX climate change concerns? And what role can it play in supporting decarbonization?

Thank you for the question. Given our role as market operator, we're very aware of the role we should be playing. For ASX, ourselves in FY '23, we saw a 99% reduction in our Scope 1 and Scope 2 emissions, and we are targeting net zero by FY '25. You can read more detail about that in our annual report under the Sustainability section. But I think if we think more broadly of ASX' role as a market operator, we believe there's -- we're working with both government, public policy, the Corporate Governance Council on what we can do around standards of reporting for companies. And we're also looking at what we can do around the development of decarbonization products, carbon futures and the expansion of electricity futures.

Thank you, Chair. The next question states "I know PwC is ASX' auditor, do you have concerns about PwC's audit quality given the tax fraud problems that were discovered at that firm?"

Well, I'd note that this is the AGM of ASX. So we'll keep our comments relating to ASX. But specifically, as regard to PwC as our auditor and the team, we have had conversations with them and sought and received assurances that the people involved in the audit of ASX have nothing to do with the issues of that PwC is currently dealing with. PwC provides high-quality audits. We review our engagement with PwC annually. Are there any more questions on line, Tracy?

No, Chair, there were no more questions online, but I believe there is a question specifically for the auditor. I can read that out now.

Okay.

Is the application of section 311 of the Corporations Act 2001, limited in any way by the scope of the audit or other contractual arrangements between PwC and ASX?

Voula, if you wouldn't mind taking that question.

Thank you, Chair, and thank you for the question. It's a very simple answer to that question. The application of Section 311 is in no way limited by the scope of my audit.

Thank you. If there are no more items of business there, we'll move on. No more questions relating to items of business. We'll move on.

That's correct, Chair. There are no more further written questions. I will ask the online moderator to confirm if there are any participants waiting on the phone to ask a question.

There are no phone questions.

As we have no further questions on this item, we will now receive the financial report and Auditors' Report for the National Guarantee Fund for the 2023 financial year. The Securities Exchanges Guarantee Corporation or SEGC is the body responsible for administering the National Guarantee Fund. The Corporations Act requires the SEGC to have a copy of the audited financial statements of the fund laid before the AGM of each member of the SEGC. ASX is one of the 2 current members of the SEGC. The statements have been published on our website and are also available through the online platform. There is no vote on this matter. I will now take questions on the financial statements and Auditors' Report for the National Guarantee Fund. Are there any questions in the room relating to this matter? Are there any questions online relating to this matter?

Chair, there are no written questions on this matter. Online moderator, are there any questions waiting on the phone?

There are no phone questions.

The next item of business is to consider the remuneration report, which commences on Page 47 of the 2023 annual report. The wording of the proposed resolution, along with the direct and proxy votes for this item submitted prior to the meeting are now shown on the screen. As set out in the notice of meeting, I intend to vote all open proxies in favor of this item. The resolution on this item is advisory. However, we take shareholder feedback into consideration when formulating ASX' future remuneration policies. A voting exclusion applies to this resolution as set out in the notice of meeting. The remuneration report sets out the Board's assessment of management's 2023 performance against the objectives established at the start of the year. As outlined in my address earlier, FY '23 has been a year where we have made significant strides to becoming a new ASX with the launch of a new vision, values and strategy. We've taken hard decisions, including the announced replan of CHESS. We are keenly aware of the impact this decision has had on our stakeholders. You will recall that last year, we received a strike on our remuneration report with around 30% of shareholders voting against its adoption. The Board has been engaging widely this year, and listening to your feedback. In particular, shareholders raised concern that the remuneration outcomes last year were not reflective of the issues with CHESS. These decisions were made in August 2022 prior to the commissioning of the Accenture report and subsequent decision to return to solution design. The FY '23 remuneration outcomes summarized on Page 52 of the remuneration report outlines some of the actions the Board has taken to ensure that the remuneration outcomes are appropriate for those with accountability leading the CHESS replacement project. During the year ended June 30, 2023, the Board also brought in new capabilities at Board level with the appointment of Vicki Carter and Luke Randell to the Board in addition to enhancing ASX' governance processes. We have also focused on renewing our leadership capability with over 80% of the group executive being new or in new roles. We have made changes to rebalance our remuneration framework for this new executive team, which strengthens the focus on long-term sustainable financial performance through the extension of the term variable reward scheme to all group executives. We have also aligned the performance hurdles to the 5-year strategy through the introduction of a return on equity metric. We believe these changes create a more appropriate remuneration framework and will improve the alignment between the value generated for shareholders and the remuneration received by executives. As the votes on the screen show, we have received broad support from proxy holders and direct votes ahead of this meeting. I will now take questions on this item. I invite questions from shareholders present in the room.

Thank you. I'd like, first of all, to acknowledge and thank you for the changes in the long-term incentive program and also for the Chess short-term incentive adjustment. However, our concern with the short-term incentive continues. Many of the STI measures are not based on quantifiable performance metrics, and there is no statement of the weighting applied to each performance measure. It appears to have an overreliance on unexplained director discretion and does not meet the ASA guideline that the remuneration report should be readable, transparent and understandable for investors. In the circumstances of a company embarking on a new direction as ASX is, the STI has a very critical role in aligning with company leadership with that new direction. We are -- just in conclusion, we are voting against the remuneration report today and advise you that we continue to be available to assist you in developing an STI that is in the best interest of individual shareholders.

Thank you, Peter. So I might make a comment on the STI. And once again, both Melinda and I -- Melinda as Chair of the Rem Committee appreciate the engagement we've had with you through this process. We appreciate your comments on the actions we've taken around the accountability measures and also the changes to the LTI scheme. And as we discussed in our meeting, we will be planning on making changes to our STI disclosures and scorecards in FY '24. What we've been focused on is really our 5-year strategy. And now that Helen has announced that strategy in FY '24, we will be aligning that scorecard with the new strategy and the recent accountability statements that executives are in place. So that is something we will be coming back in FY '24 with those changes, as we've discussed with you.

Mr. Chairman, Giles Edwards shareholder. I note pleasantly on Page 67 of the report that the Board fees remained steady from last year to this year, $235,000 for a nonexecutive director, $550,000 for yourself. Given the problems we've had with CHESS and other things, I think that's profit that you should hold it steady. That's where the good news ends because I notice the more shareholder-friendly metrics over the last year, net profit down 37%, NPAT. Earnings per share down from $2.62 to $1.64 per share. That's a significant reduction for 1 year. Share price this time last year was something with an 8 in front of it or a 7. Recently, it's got a 5 in front of it. that's the metric that shareholders really do look at every day. Dividend is down 3.4%. Now you've said that you share our disappointment and yet there seems to be already a 21% vote against some elements of the remuneration report, so there's a bit of a disconnect there. But the disconnect I'm more concerned about is that I see that Ms. Lofthouse, and no disrespect to her personally, her fixed remuneration last year is listed on Page 50 at $825,000. This year, $1.9 million. Total remuneration for Ms. Lofthouse last year, $1.2 million, 2.3 million this year. Surely, that's a disconnect. And you're asking us to vote in favor of the remuneration report, and there have been a number of problems with ASX, which we've fairly threshed out here, I won't go over them again. But if you're willing to share some of the pain, we hear this time and again that you sympathize with shareholders. This is a focus. We share your pain. But Ms. Lofthouse is just as 1 metric. Always a key issue is executive salaries. It has been for years and years and the shareholders' association has been going on about this for many years, 2 decades at least. How can you reconcile what you've said and the difficulties involved and the negative metrics for shareholders with almost a doubling of Ms. Lofthouse remuneration in just 12 months? I don't get it.

Thank you for the question. I think there's an important distinction to make here that in the year previous, Helen was the group executive for markets, and that salary reflects her role as the Head of Markets. But the numbers reported there reflect her stepping up to be the group executive -- to be the Chief Executive Officer. So that is Helen stepping into her new role and a change of basis as Chief Executive, taking on the responsibilities and leading the new strategy of ASX.

Can we expect some restraint both at executive and nonexecutive level because it always seems to be to me that "oh, it's been a tough year, we've got to pay more money to get more performance. Oh, it's been a good year. We've got to pay more money as a reward." There's no downside ever. I challenge you to name 3 right now, where there's been a significant downside measuring relative and relevant to shareholders downside to share our pain. I can't think of one company and I've got a few in my lot portfolio where there's a real measure, a real measure of sharing the shareholders pain on whatever particular metric.

Look, I appreciate the performance of the share price and the disappointment I would point you to our annual report. And on Page 52, where we outline the steps we've taken of executives. So the group executive pool was cut by 50%. We have taken measures to cancel previous awarded short-term incentives, and in some cases, canceled long-term incentives. So I believe we've shown accountability and significant reductions for our executive staff. If there are no more questions in the room, do we have any questions online?

Yes. Thank you, Chair. There were several pre-submitted questions in relation to this resolution. Some of them have been covered by questions and answers in the room. I'll read out the one that hasn't been fully add. The question is, can you explain what remuneration measures were applied to the former CEO and Deputy CEO?

Thank you. We've outlined those in the annual report, but long-term variable rewards were canceled, as were some short-term variable rewards.

Thank you, Chair. The next question on this topic reads as such, "will the Board please introduce a requirement for nonexecutive directors to acquire and maintain shares equal in value to 100% of the Chairman's fees by the end of the director's third year on the Board?"