Bapcor Limited (BAP) Earnings Call Transcript & Summary

Good afternoon to everyone. My name is Margie Haseltine, and I'm the Chair of the Board of Bapcor Limited. And on behalf of the Board, it is my pleasure to welcome you to the Bapcor Limited 2021 Annual General Meeting. I hope you and your family and friends are keeping safe and well in these challenging times, indeed unprecedented times. While this online format may be familiar to some shareholders, I acknowledge it may be less so for others. However, I assure you that you will have the same opportunity to participate today as you would at a physical meeting. This includes being able to ask questions and vote electronically. Allow me to begin by introducing my fellow Directors and the management team. On the line, we have Darryl Abotomey, Chief Executive Officer and Managing Director; our Independent Non-Executive Directors, Jennifer Macdonald, Therese Ryan, James Todd and Mark Powell; and also Noel Meehan, the -- our CFO; and George Sakoufakis, the Company Secretary. And for the sake of completeness, I should also note that I am also a Non-Executive Director. Also online today are the company auditors, PwC, represented by Jason Perry, and I also welcome Faith Sullivan, representative of the company's share registry, Computer (sic) [ Computershare ] Investor Services. It is past 1:30, and the company's secretary advises me that a quorum is present. So I now declare the meeting open. The Notice for this Annual General Meeting was circulated to shareholders within the required period. If there are no objections, I would like to move that the notice be taken as read. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxyholders and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. And in addition, shareholders and proxyholders have the ability to ask questions and submit votes on the Lumi platform. Before we move to the formal business of the meeting, I'd like to run you through a few process and housekeeping matters so that we can assure that this virtual meeting proceeds smoothly and a conducive manner for everyone's benefit. Today's webcast may be subject to a transition delay of 15 to 30 seconds, and we will ensure that we leave sufficient amount of time in between each resolution to give shareholders a reasonable opportunity to submit their questions. At this meeting, there will be 7 items for business, including 5 shareholder resolutions and 1 conditional shareholder resolution. Each resolution will be proposed and voted on as a simple majority, except for resolution 5, which is a special resolution, which to be passed, requires 75% of the votes cast to be in favor of the resolution. Before I put each resolution to shareholders, I'll give shareholders the chance to ask questions on the resolution. And again, to ensure for an orderly meeting, I will only be taking questions that directly relate to the resolution at hand. I will seek to address any other general questions at the end of the meeting. [Operator Instructions] Please note that while you can submit questions from now on, they will not be addressed until the relevant time during the meeting. And I will read out the questions before answering them. We encourage you to start sending written questions, and I see we've got some already today, so that's fabulous, now so that they are received by us before the resolutions are put to all shareholders. For those shareholders who wish to ask a verbal question, an audio questions facility is available during this meeting. [Operator Instructions] I've seen that some people have already done that. So well done -- before being connected. You will listen to the meeting, you'll listen to the meeting on this page while waiting to ask your question. If you have any issues using the system, please return to the Lumi platform. Finally, please note that although we will endeavor to address as many questions as possible, there will not be sufficient -- there may not be sufficient time available to address all of the questions and comments raised. If your question does not get answered, please submit your question via the e-mail to the company secretary following the meeting, and we will endeavor to provide a response in due course. Voting today will be conducted by a poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for all resolutions. At that time, if you're eligible to vote at this meeting, a voting icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to press a submit or an enter button as the vote is automatically recorded. You do, however, have the ability to change your vote at any point during the meeting until I declare the meeting is closed. So I now declare the voting open on all items of business. The voting icon will soon appear. Please submit your votes at any time, and I will give you a warning before I close voting. As well as those shareholders online today, the holders of approximately 239 million ordinary shares or 70% of the company's total issued share capital has already been sent in -- I'm sorry, have sent in valid proxies. As I read out each item of business today at today's meeting, I'll announce the total number of valid proxies received for that item and the manner in which those proxies have been directed. These figures will be, at the closing time, receipt of proxies, which is at -- sorry, these figures will be at the closing time receipt of proxies, which was at 1:30 p.m. on Sunday, 17th of October. And in my capacity as Chair, I will be voting all available undirected proxies in favor of each of the business, except for resolution 2 and resolution 6, if that resolution is put to the meeting. Before we move on to the formal business today, I would like to address shareholders in relation to the company's progress in 2021 and our objectives going forward. A copy of my address to shareholders and as is our CEO and Managing Director's presentation, which will be delivered today, has been lodged with the ASX this morning and will be published on the Bapcor website. Also, the video we will show today will be available on the Bapcor website. So now I would be -- I'm about to go on to the Chair's address. And I have to say, I'm absolutely delighted to present my first Chair's report to this Annual General Meeting of Shareholders, which is for the year ended 30th of June 2021, and that seems like a very long time ago. The 2021 financial year delivered record results across Bapcor despite ongoing challenges and uncertainty in a COVID-19 environment. The Bapcor team once again delivered record annual revenue and earnings, proving their dedication and adaptability with a strong response to the unprecedented circumstances. The result highlighted the resilience of the Bapcor business in difficult economic conditions. It is also worth reiterating that Bapcor is predominantly a nondiscretionary business, supplying essential parts and supplies to keep vehicles operating safely. A final fully franked dividend of $0.11 per share was declared and paid in September '21. This brought the full year fully franked dividend to $0.20 per share, representing a 14.3% increase on the prior year. The safety and well-being of our team members remains always at the forefront of Bapcor's priorities. We reviewed our workplace COVID-safe plans, rollout wellness programs focused on mental health, introduced paid pandemic leave and encouraged from working from home where possible. Succession planning and development plans were also completed across the business over the course of the year. At the 2020 Annual General Meeting, shareholders delivered a first strike on Bapcor's remuneration report. The Board acknowledged the sentiments of the shareholders, and in response, Bapcor has amended many parts of its remuneration practices, which are outlined in detail in the 2021 remuneration report, and indeed, we've probably spoken to many of you about that. Bapcor is committed to accelerating our work to deliver on our ESG, our environmental, social and governance strategy. And to emphasize the importance of this area, the scope of the Nomination and Remuneration Committee has been expanded to include ESG. The group's initiatives and targets are outlined in the annual report, including the vision that Bapcor aspires to be net carbon neutral. In line with the annual review of Bapcor's strategy and reflecting the exceptional progress made in 2021, the 5-year strategic targets for Bapcor have been updated with physical store and own brand targets revised upwards. And the revised 5-year strategic targets will ensure that Bapcor maintains its very strong and positive growth trajectory. It would also be remiss of me if I did not acknowledge Andrew Harrison's outstanding contribution in shaping Bapcor to be the business that it is today. Andrew retired from his position as Chairman after 7 years with the company, including 4 as an Independent Non-Executive in February, and we extend to Andrew and his family our very best wishes for his retirement. In September 2020, Bapcor welcomed 2 new Independent Directors to the Board, Mark Powell and James Todd. And as part of the Board and renewal succession planning, we continuously review the needs of Bapcor and will appoint additional Directors as appropriate. I'd like to just add that Mark Powell has also took over as Chair of the Nominations, Remuneration and ESG Committee. The success of Bapcor is in our people. On behalf of the Board, I wish to express my gratitude to our leadership team, and within that, our CEO and Managing Director, Darryl Abotomey, and to all the Bapcor team members for an exceptional year in such difficult circumstances. We also thank our shareholders, our franchisees, customers and suppliers and all, for everyone that contributes ongoing support and contribution for the continued success of Bapcor. So now we're going to go to a video that has been pulled together, which -- in normal circumstances, we would have investor days, we would have all kinds of opportunities to share some of the exciting news. So I will now be quiet while we play a 10-minute video on Bapcor. And after which Darryl will do the CEO's presentation. So over to Lumi, I think, to... [Presentation]

Good afternoon, everyone, and thank you for joining us. The video you have just seen provides some highlights of Bapcor. Also, as my slides are published on the ASX this morning, I will work through them rather quickly. In this year's annual report, we asked, "What's at the heart of Bapcor?" And I'll cover this in my presentation. Next slide. As you may have seen in our promotion during the Olympics, we are the unseen parts of every journey, as Asia Pacific's leading provider of vehicle parts, accessories, equipment, service and solutions with over 1,100 locations, employing approximately 5,000 team members across 8 countries in Australia, New Zealand and Asia. Next slide. We supply 750,000 parts for cars and 400,000 parts for trucks, trailers and buses. No one carries more parts than Bapcor. And we do those through the next slide which shows we are growing our footprint, and we continue to grow through the Asia Pacific region. Next slide. Bapcor is predominantly a distributor and wholesaler of nondiscretionary vehicle parts, with 90% of our revenue from parts and accessories coming from vehicle servicing to keep cars and trucks safely operating. Next slide, Bapcor is also comprised of specialist businesses, be they trade, retail, truck, or wholesale, and we supply workshops, distributors, resellers and end consumers. The chart on Page 6 here shows our businesses and the customer groups they supply to. So you can clearly see the different businesses that we operate and the end customer group that we target on those -- each of those businesses. Then turning to Page 7. We deliver results. Since listing in 2014, Bapcor has one of the most impressive track records year-after-year delivering outstanding results, including in the last financial year 2021 an all-time record. These results don't just happen. It is due to our talented and dedicated team members. But it doesn't stop and -- next slide, we have a plan and are well positioned to continue to grow through expansion of our network footprint, both physical and online; through growing our own brand products, so continuing to grow our own-brand products; investing in realizing efficiencies; and investing in and developing our team members. On Slide 9, we have strategic priorities and targets, with the major targets being clear and public. We update these each year, and they are very specific. So we go through the 4 key areas are to grow our network, to grow our own brand programs, to deliver supply chain initiatives and investing in technology and to invest in store refurbishments and relocations. Bapcor investing for the future, next slide. With on-road vehicles increasing in Australia and New Zealand by 350,000 per year. This isn't a once up. This has been what occurs and has happened over the years. Between Australia and New Zealand, there are over 25 million vehicles on the road. The average age of those vehicles is getting older. The number of parts required continue to increase, which is normal as a vehicle gets older. We're the only aftermarket business to supply parts for all on-road vehicles. We continue to expand our store footprint, and we continue to develop state-of-the-art technology. And we have a digital transformation program that supports bricks and mortar as well as making it easier for our customers to do business. And we continue to expand into new markets with significant growth potential, and you saw us invest in Tye Soon based in Singapore in April this year. So we've got plenty of opportunities to continue to grow. On the next slide, we talk about being responsible and committed. We have programs and targets that positively impact our community in environmental sustainability, in ethical supply chain and procurement and in good governance, supporting and developing our people. And we aspire to be net carbon neutral, with a substantial reduction in our footprint and emissions coming from our DC consolidation program as you saw in the video. Now to the all-informed trading update on the next page. Sometimes, I think this is the only section that people have a real interest in at times, but it's -- we actually believe we've got a very good update and outlook. So we've had a solid start to the 2022 financial year, with overall group revenue flat compared -- quarter-over-quarter. So the first quarter of this year, group revenue was flat compared to the same quarter last year, which is quite astounding when you consider the impact of prolonged lockdowns. So -- and what it does do is demonstrate the resilience and nondiscretionary nature of Bapcor's businesses. So what we're showing on this chart is that we've shown that a number of days impacted in each quarter by government-imposed lockdowns. Now depending on where the lockdown is, which state it is, how -- what level it's at, they have different impacts. But this is showing the macro level to show you the sort of impact. So if you look at the first quarter in last year, the impacts were around that 145 days. It over doubles in the first quarter this year, and in particular areas like New Zealand where when they do a lockdown, it's a lockdown. There's no business whatsoever whereas other states, it's slightly different. So what you can see is that there was a substantial increase in the first quarter this year compared to last year, and our revenue was flat. So that's an amazing position to be. And what you'll also see is that in the second quarter of last year, the third quarter and the fourth quarter, there were lockdowns in every quarter. So as we go forward, we hopefully, we'll see less lockdowns in the quarter we're now in. We'll see New South Wales come out of lockdowns. We expect to see Victoria come out of lockdowns. So that in the second half of the year, we're assuming and we're predicting that we won't have any lockdowns. So that is an upside for our business compared to prior year. So you can see the result is multiplied for us. And then looking at the next slide, it actually shows by business how our results have looked. So you've got Burson with 70% of their stores impacted by lockdown still having their total revenue up by 2% in the -- quarter-over-quarter. In New Zealand where, as I said, lockdowns mean no business as a general rule, we had 100% of our businesses -- our stores impacted it in some way or another, and they are down 10%. In retail, in Autobarn, so particularly for Victoria and New South Wales, 50% of our stores have been impacted by lockdowns, yet revenue is down 12%. And on Autobarn same-store sales, down 16%. But they are up 36% prior year. So net if you're looking over a 2-year period, we are up substantially. And our online and retail sales were up 80% in the first quarter. So you would sort of expect that simply because people are buying more online. But our click and collect has been working extremely well as well. The thing with retail and with the online purchases and click and collect, that does impact our margin because most of the products people are buying are the ones that are advertised or in catalog and I'll cover that. Our Specialist Wholesale business is up strongly. So you're seeing our auto electrical business is performing strong. Our truckline, heavy commercial vehicle group is performing strongly. And our WANO, which is our light commercial vehicle business is underperforming. But that is as expected due to most of those vehicles are used in the hospitality industry to deliver product and into the cities. So overall Specialist Wholesale business is up 7% despite the lockdowns. So overall group revenue being in line with the past year, the summary of it is in non-lockdown areas we're overperforming to expectation. In the lockdown areas, as you would expect, we're negatively being impacted, particularly in New Zealand. Next page, a few of the other things to point out for our first quarter and what we would expect to see in our first half of this year. We have got a higher cost base, and that's because of what we're doing in the Victorian distribution center. We still have the old warehouses still online. So they've got a duplication of cost. Now we've got a new group office at Mount Waverley and Melbourne. Unfortunately, we haven't been able to move everybody into it because of lockdowns. So once -- and we're still carrying out all the existing businesses. So once we're properly -- we expect to properly transition that once we get through lockdowns. And we have also significantly supported our team members during lockdowns through pandemic leave and retaining team members despite the lower revenue. Our gross margins have been stable in wholesale and in New Zealand. However, in trade and retail, as I mentioned before, the average margin is down about 0.5%, and that's simply due to the people buying promotional items and online pricing. And again, we expect margins to be good when the lockdowns cease. That's a thing that we expect to happen. And we -- so we're seeing that already when New South Wales came out of lockdown, we see a surge back. Even when parts of New Zealand came out of lockdown, we see the surge come back. So we're quite comfortable with that. But we have continued our initiatives. So our store rollouts and refurbishments continue. They're largely on track, but a little bit delayed because of the restrictions we've been under. But for the full year, we're comfortable we will achieve our targets. We have consolidated our biggest 3 DCs into the distribution center at Tullamarine. Not without challenges. And we would be remiss not to point out that we have had challenges in the teaming side of converting across to the DC. When you're taking -- you're putting in a completely new system, a semi-automated picking system at Goods to Person, a 50,000 square meter facility and you're moving all big businesses into it, you expect to have some challenges. However, we have dispatched every single day, even though at times, we've got 20% of our people off due to pandemic requirements because of the restrictions with being Tier 1 and Tier 2 people, and that has had an impact on what we're doing as well. But that's starting to -- we're getting on top of it, and it will continue to improve. Our Brisbane DC project that we announced when we announced our full year results is underway. Our digital transformation is continuing, and our own brand products are continuing to grow. So on the next page. So what do we expect the result for the full financial year to be? Well, the fundamentals of our vehicle aftermarket continued to remain strong, notably the fact there are 350,000 additional vehicles are added to the Australian and New Zealand roads every year. The average age of vehicles continue to increase, and consequently, more maintenance required. The trends during cohort are likely to continue. And that's where we're seeing an increase in secondhand vehicle sales, and that leads to more cars on the road. People have moved away from public transport due to social distancing. And more people are spending their holidays domestically utilizing their vehicles. In that recent time, they haven't had a lot of choice. But we expect to see that continue for some time. So in this current financial year, Bapcor continues to aim to deliver pro forma earnings at least at the level of previous year in 2021. This remains our objective, particularly on the basis that we do not expect to see any further significant lockdowns in the second half. What we do expect, though, is the first half of FY '22 in a profit sense will be softer than for the first half of FY '21 would be expected, especially when you look at that graph that I showed, that showed the relative number of days that are in lockdown. And we expect the second half of the year as we get out of lockdown to be stronger than the first. And we expect to see that because profit will be supported by strong rebounds, which we have seen as each area comes out of lockdown. So in summary, if I go to Page 16, which is the final page, which is -- well, again, what is at the heart of Bapcor? We are a group of specialist businesses. We focus on the distribution and wholesale of nondiscretionary vehicle parts required for repairs, maintenance and servicing in the automotive aftermarket, where our team members are the heart and soul of our business. We're a business that continuously delivers results and will continue to do so. A business that has a well thought out and proven plan for growth. We've got plenty of identified growth opportunities. We operate in a resilient market. The business is responsible and committed and proud of our history and excited by our future. It's genuine, down to earth practical values. We have specific clear strategy and growth targets, and we have a track record of delivering increasing shareholder value. So just in closing, I'd like to thank all our team members and franchisees who are at Bapcor and make it the outstanding company than it is today. So thank you for listening, and I'll pass back to Margie.

Thanks, Darryl. Okay. And now to the formal business of the meeting. And the first item of business is the consideration of the company's audited financial statements and related reports for the year ended 30th of June 2021. The Corporations Act requires that audited financial statements and related reports for the 2021 financial year be laid before the meeting. I now declare that these reports, which were made available to shareholders on the 18th of August 2021 via the ASX and Bapcor's website, have been laid before the meeting. Although shareholders are not formally -- sorry, are not required to formally vote on the company's financial and related reports, I would welcome any discussion or questions on the reports. And as I mentioned previously, the company auditors, PwC, Jason Perry, the partner responsible for the company's 2021 audit, is online today and is willing and able to answer any questions on the conduct of the audit or the intent of the auditor's report. Jason, I think this is still the case. I'm advised by the auditors that no relevant questions for your attention were received prior to the meeting.

That's right, Margie.

I just want to question, though, because there is a comment, I think, from Mr. [ Stephen Mayne ] on Resolution 1, which I think [ Stephen ] was probably redirect resolution 1 as my reelection. So I'll take that comment. And Scott, look, I -- do you want to read that comment -- the resolution talking about JobKeeper. I'm very happy to answer that question. So Scott, did you want to read that out. I think it is...

[indiscernible]

Sorry.

How much JobKeeper did Bapcor claim? How much was paid back? And why don't we pay back more, given that Bapcor is going so well with the shares now trading at $7.76 at a market capitalization of over $2.5 billion.

Yes. So I'm very happy to answer that. And it's -- part of it is a dusty memory, but Australia did not claim JobKeeper. The Bapcor business absolutely claimed not $0.01 of JobKeeper and nor have we. The only business that claimed JobKeeper money was in the 2020 year was New Zealand. And that money got -- it was I think circa, [ Stephen ], around $2 million, and it was paid directly to all the New Zealand employees. And additional to that, we, the Board and the company, topped up that payment so that no employee in New Zealand was -- we made them whole basically. So there has been no JobKeeper. And I'm assuming, and it's an assumption, the New Zealand employees still will be obtaining JobKeeper currently as they are in lockdown, and we will have the same approach. So no, I'd just reiterate, we claimed no JobKeeper in Australia and Bapcor. Okay. So I'm assuming now that I think I don't see any other -- Scott, correct me if I'm wrong, there were some other questions around electric EV and stuff, but I think they're related to general questions. We've got the next questions around the resolution is #3. So at this point, because -- this next, resolution 1, is with regards to my reappointment. I'm going to hand over to Mark Powell, who will take you through this resolution. So over to you, Mark.

Okay. Thank you, Margie, and good afternoon, everyone. So this next item of business, resolution 1, relates to the reelection of Margie Haseltine as Director. Margie was appointed to the Board on the 30th of May 2016 as an Independent Non-Executive Director. And her qualifications, and background and experience are summarized in the Notice of Meeting. I'll now read out Margie's biography as set out in the Notice of Meeting. During her career, Margie gained extensive leadership in human capital management skills, which she brings to her role as Chair of the Board. Margie has spent more than 30 years in various senior executive roles in FMCG, including senior roles at Mars Food Australia, subsidiary of Mars Inc., where she was responsible for strategy, risk management, product innovation and brand launching and the implementation of new systems. From 2002 to 2007, Margie served as CEO of Mars Food Australia with responsibility for the APAC market, and was also responsible for ensuring sustainability of the business and its supply chain. Margie currently serves as a Non-Executive Director of ASX listed Metcash Limited and was a Director of various government and not-for-profit Boards, including National Food Precinct, Central Coast Grammar School and Agrifood Skills. And I'll also add on a personal note that Margie has done an outstanding job since taking over as Chair. The resolution now appears on the screen, and I will take it as being read. Also appearing on the screen are details of the valid proxy votes on this resolution. I don't think there's any questions on this, Scott. Can you confirm whether any questions have been received?

One question has just come through, Mark, from Mr. [ Stephen Mayne ] related to the Chair's reelection. With the benefit of hindsight, does Margie agree the last 2 years' institutional placement was a mistake.

I'm happy to take that, Mark.

Okay. You take it, Margie.

Yes, absolutely. No, I do not think it was a mistake. I think that when most of -- all companies was going into unprecedented times of COVID, none of us knew what was ahead of us, and we needed to prepare. The responsible thing to do for all companies was to make sure we had options and all kinds of options, from financial options through making sure that we had room to breathe. So my answer is absolutely no. There's another question from [ Stephen ], given that Metcash is also in the auto business, is there any conflict of interest and how is that managed? [ Stephen ], that was obviously a very well-asked question and was -- there was a view taken both by chairs and company secretaries at both companies that the level of competition is no more than what you're going to -- a lot of these products you'd find in any company, whether it would actually preclude me from [indiscernible] on any Board because these -- a lot of these tools and items are right across many businesses. So no is the answer to that. I think...

Yes, I'd also add to that question. There might be some confusion that Metcash did have an auto business that we acquired. They now have a business in do-it-yourself and Homeways that sells a few overlapping products, but very little. We discussed that at the time of Margie's appointment, and we all agreed there was no conflict there at all. Okay. I now formally put this resolution to the meeting. And I'll hand back to Margie, who will take you through the remaining resolutions. [Voting]

Thank you, Mark. Resolution 2. Resolution 2 relates to the election of a non-Board-endorsed Director, Mr. Daniel Wallis. Mr. Wallis has nominated himself for election as a Director of the company in accordance with clause 6.1(n) of the Bapcor constitution. A statement provided by Mr. Wallis, setting out his qualifications, background and experience are set out in the Notice of Meeting. I note that the company also provided Mr. Wallis with the opportunity to address the meeting by way of a video recording, which has not been provided. So I decided -- to be consistent, I would now read out Mr. Wallis' statement as set out in the Notice of Meeting. Danny holds a Bachelor of Computing from Monash University, Melbourne. Danny was the founder of DWS Limited, an IT company established in 1991. DWS specializes in providing IT solutions to Australia's largest companies. Danny successfully listed DWS on the ASX in 2006. Under Danny's stewardship, DWS grew in revenue and profits and employed over 800 people when it was successfully sold to Indian company HCL Technologies Limited in 2021. Danny has over 40 years' experience in IT and has considerable knowledge and experience in complex IT systems, having worked on many large installations and transformations. Danny was a 42% shareholder and a Director of Autobarn prior to its sale to Metcash in 2012. He has intimate knowledge of all aspects of auto parts industry. Danny has considered experience as a Director and our Chairman of private and public companies. He's presently a Director of the Philanthropic Trusts. Danny has management and leadership skills at the highest levels. Throughout his career, he has interacted with all levels of management, supplies and customers to achieve optimal outcomes. He has been instrumental in negotiating, securing and delivering on contracts in both the private and public sector across diverse industries. Scott, it's -- the resolution appears on the screen, and I will take it as being read. Also appearing on the screen are the details of the valid proxy votes on the resolution. Are there questions, Scott? I need to scroll or not.

No questions have been received for the Directors to the company on Resolution 2.

Thank you. I will now formally put this resolution to the meeting. I'm giving my allocated time, I think -- if we're voting. [Voting]

Thank you. I will now move to resolution 3. Resolution 3 is a nonbinding resolution to adopt Bapcor's remuneration report, which is set out in the company's 2021 annual report. I note that as I said earlier, at the 2020 AGM, the company received a first strike in relation to its remuneration report. As such, if 25% of the votes validly cast on resolution 3 today are against the resolution, this will constitute a second strike. I have been advised that, that is not the case, and that resolution 6 is no longer valid for this AGM. So what I would like to say though is since the strike against the remuneration report last year, the Board took that strike very, very seriously and also acknowledge that there was much work to do to overhaul the remuneration report. And we listened, we did a listening tour. We've done further tours. And we've taken many steps to address the concerns that were raised. And some of them very rightfully so by the shareholders. And so as outlined in 2021 remuneration report, you'll see a lot of those questions and answers and changes. The resolution also appears on the screen, and I will take it as being read. Also appearing on the screen are the details of the valid proxy votes on the resolution. Now I do know there's questions there, Scott. Can you just perhaps read that out for me. I saw that before.

First question is from the Australian Shareholders' Association. The Australian Shareholders' Association prefers that at least 50% of any short-term incentive be paid in equity within a 12-month holding lock. Will Bapcor's remuneration plan transition to this approach?

Thanks for that question. And we have actually been having a lot of conversation and questions. I'm not giving any guarantee that we're going to transition to that. But we do understand that we are working towards best practice. In the first year, we did as much change as possible to, I guess, direct the concerns of our shareholders without also impacting our senior staff. Given the environment that we live in today, our staff have worked tirelessly, and we also put through a lot of change. So in this first year, went to an equity deferral of 25%, which in the first year, not impact too significantly, it was a choice of cash or equity. We understand that a lot of companies our size migrate to equity as deferral and there are ratios from 25% up to 50%. So we've listened, we've heard and we are currently reviewing. But at this point in time, I'm not going to guarantee, but that is an intention. So unless, Scott, there are other questions...

There's one further question, Chair, it's from Mr. [ Stephen Mayne ]. What caused last year's strike, and what changes have been made. Will you disclose the proxies on the spill vote as well?

Yes. That's a big question, [ Stephen ]. We could talk for quite some time on that. The -- sorry -- the proxies are all for our remuneration report. Last year, they were all against. And the reasons that we -- the strike occurred -- so we've -- if you look to the rem report, there was a number of reasons and they were all -- there's a Q&A then all being addressed. There was 2 main things, and it was mainly around the threshold of the STI. So because it's all being laid out in the annual general report, and there's a lot of -- I hope that answers the question. But we have certainly addressed all the concerns of proxies and shareholders as laid out in the AGM -- sorry, as the annual report. It's fair to say we -- perhaps, we weren't keeping up with best market practice, but now we believe we absolutely are. Okay. I've got to go back, and we have to -- if that's it, Scott, I will now formally put this resolution to the meeting. [Voting]

Thank you. I will now move on to Resolution 4. Resolution 4 seeks shareholder approval for the issue of performance rights to Mr. Darryl Abotomey, the company's CEO and Managing Director, in relation to FY '22. The resolution appears on the screen, and I will take it as being read. Also appearing on the screen are the details of valid proxy votes on the resolution. Over to my trusted, Scott, are there questions? I don't think so.

No questions for this resolution.

Okay. Fabulous. Thank you. I formally put this resolution to the meeting. [Voting]

Okay. I will now move to Resolution 5. Interesting resolution. We've had a lot of feedback. And I've noted you've got some questions here [ Stephen ], which we will address. Resolution 5 is a special resolution seeking shareholder approval to amend the company's constitution to facilitate the holding of virtual general meetings. For this resolution be passed, it requires 75% of the votes cast to be in favor of the resolution. The resolution appears on the screen, and I will take it as being read. Also appearing on the screen are the details of the valid proxy votes on the resolution. And I know there's questions. So Scott, maybe you can read that out for me, please?

As we start, the first audio question is from [ Stephen Mayne ], for the topic of AGM transparency.

Is that a resolution question for this? Or is that a general one, Scott? Because I thought [ Stephen ] had one around the constitutional amendment.

Yes, there's more than one question.

Sorry. Okay. Go. I'll leave it to you -- where you go. Sorry, go for it.

Margie, can you hear me?

Yes, I can.

-Yes. Great. Okay. Look, most of my questions are written. I just wanted to raise a couple of transparency things on audio because there may be a bit of back and forth. The first one is can you undertake to make sure that a full archive of the webcast is available on your website after the meeting, along with a full transcript.

I'll pass that one straight to maybe -- I -- my assumption is that, that was in place, but I cannot answer that. I -- so can I -- have we got some feedback?

Yes, Margie, the webcast will certainly go up on our website.

Okay. Fabulous. The answer is yes then, [ Stephen ].

Okay. So the likes of ASX, AGL, Woolworths, Crown are also doing transcripts. So that would be great if you could also spend a couple of hundred bucks on a transcript for all shareholders. My second request is to replicate what both Metcash and Southern Cross Media have done as a recent innovation. And that is whilst not doing this in the ASX announcement of the poll results. In terms of what they put on their website the following day, they have included the total number of shareholders voting for and against each resolution in the poll just like would happen at a scheme meeting. So I'm asking if you will also commit to do that so that we don't just get swamped by institutional shareholders, and we can get a sense of retail shareholder sentiment by seeing how many shareholders voted for and against the constitution change, for and against the rem report, et cetera. Because otherwise, as retail, we just feel swamped. We don't bother to vote. And if we can get companies to voluntarily disclose the turnout, including the fors and againsts, it will stimulate more retail participation in corporate democracy in Australia.

Yes, [ Stephen ]. Look, absolutely, I 100% believe in transparency so yes is the answer to that question. Whether we're -- I'm not sure about the mechanics of getting it there tomorrow, but we'll get them there. So yes is the answer.

Okay. Now I have to jump off shortly and go to the Dexus AGM. I'm trying to set a world record today with 6 AGMs in 1 day. So I've got a couple more written ones, which you can work through over time, and I can go back and listen to later. Just on the constitution, I'm a bit surprised you've run the gauntlet here because the likes of Bendigo and Brambles and Dexus have all pulled the plug, when the proxy advisers and the institutions have come out against online-only AGMs. I personally love online AGMs because it saves my travel bill, and I can get to multiple AGMs in the 1 day like this. But the proxy advisers have taken a position. They like to look at the way through the eyes of the Directors, et cetera, et cetera. So why didn't you withdraw this resolution and rather running the gauntlet. And it's very hard to read the proxies on my desktop. Even though it's a big screen, somehow that display not very good. How big is the protest vote against the new constitution? And which of the proxy advisers or how many of them recommended against? And have I summarized the reason correctly that they insist on having a physical AGM when there's no pandemic. Is that the issue?

Yes, it is. And look, all of them voted against. But to their -- to be fair, we had a really good -- a fabulous conversation with them. And most of them actually as a courtesy said to me, look, Margie, we have to -- as a principle, we're voting against. Why did we actually not withdraw it? For the very thing that you've talked about with regard to transparency? Transparency for us is that we put the resolution. We -- I would far rather be, trust me, not seeing in a room by myself, but with my fellow colleagues around -- in talking to people. So we put it there for -- we thought if we actually withdrew it, it was like we had something to hide. We don't -- we put it up. We prefer absolutely to have face-to-face, but we've decided to just let it fall. And it's -- I'm not sure of the exact votes, but it's not got up, and we're fine with that. There's no games here. It's just a matter of full transparency that -- it was the sort of the thing everybody thought we should do to basically give ourselves options because of the environment we live in. But our intention is always to hold face-to-face, whenever possible, AGMs. It's much more beneficial for all of us.

Okay. Thanks, Margie. I emphasized, I'm sure they've been there, because I thought that Dexus have got a 65% protest vote against their rem report, so they need a little bit of a rhetorical attention. But I sort of sign off by saying that I served 2 years on the Audit Committee at City of Melbourne with Therese Ryan. And she was one of the best Audit Committee members that I've ever served whether and I've served on 3 or 4 of those committees over the years. So I'm very pleased to see you've got Therese on this Board. Therese, she is an excellent Director. And good luck in continuing to be a very successful company. And I'm looking forward to listening back later to your comments about potential merger or takeover activity with the ARB, and the colorful characters at Ultra Tune. Anyway, have a good day.

Thanks. Happy AGM dancing. I will now -- sorry, was there other questions, Scott, that was a distraction for me trying to pay attention. There are other questions? I think I noted that the Australian shareholders supported virtual. But is there any other relevant questions before I formally put the resolution to the meeting?

You've covered off on everything on your last answer, Margie.

Okay. Thank you very much. I now formally put this resolution to the meeting. [Voting]

I'll now move to the next item of business, resolution 6. I do not need to do this one, but I will -- so I'll read this out. The share -- resolution 6, the share registry has now come at all votes for resolution 3 and informs me that over 75% of the votes validly cast on this resolution are in favor of it and there is no second strike. As such, resolution 6, the spill resolution, does not need to be put to shareholders. So -- and that's a fabulous result for a lot of hard work. Anyway, final questions. All resolutions at this meeting have now been put to shareholders. Before I close the polling, I'll now address any questions received in relation to Bapcor's business generally. We have got some questions. And I think what I would choose to do is answer [ Stephen's ] other questions around -- a little bit later, and I open it to others who haven't had the chance. Maybe...

We've got 2 questions from the Australian Shareholders' Association. The first one being, how are the global supply chain issues affecting Bapcor? And the second one, how will the transition to electric vehicles affect Bapcor's business? So supply chain and electric vehicles.

Thank you. I could pass this on, but I don't think there's need to. Unless, Darryl, if you -- you indicate to me if you've got something to add. In terms of global supply chain, I mean, this is a topic that we are always constantly talking around at Bapcor, and we are holding sufficient inventory to cover this. But like any other company, we are all being impacted by an imbalance of containers globally positioned around the world. And secondly, that from a freight and container point of view, what was a $2,000 a box is now $10,000 to move them. So we have taken the situation where we are in a fortunate position to have continued to have significant industry stocking to actually make sure that we have no shortfalls and we are not shorting to the market. This is going to take 18 to 24 months to roll out. And I think Bapcor is in a very good position and situation. And alternatively, if there is sourcing issues, we look for backup sourcing. So I think, Darryl, unless you've got anything to add, I think that covers that one. And the second one was how does the transition to electric vehicles affect Bapcor's business. I think Darryl has covered that off quite significantly in his report. But throughout -- it's high on our strategy. It's high on Board discussion. In the car part, secondary car part is around for a long time and EVs are -- just like the hydrogen, are just another vehicle, and we will have a parts strategy and strategies to meet that need as every change affects every business. But Darryl, do you have something else to add there?

Probably a couple of things, Margie. Number one, just for people to be aware that we have been, as part of our business through our precision equipment business, we've actually been installing the workshops for some of the electric vehicle businesses such as Tesla. So we are their provider. And we will continue to do things like that, which gives us good learnings as to what they're doing and how they're doing it. We also have a program in place where we -- ourselves are acquiring electric vehicles and identifying what parts do wear and what parts don't. We already supply some parts for some electric vehicles, but recognizing that over 40% of the value of our internal combustion engine today is electronics, it is a significant part of our business is the electronics for vehicles. So it doesn't matter whether they're electric or internal combustion. And for us, we'll continue to get parts vehicles for every type of vehicle on the road, whether it's electric or whether it's anything else. And as time goes on, the business has evolved, and the business will continue to evolve, whether it's electric vehicles, hydrogen vehicles or whatever comes next.

Thanks, Darryl. We've got...

Margie, there's been another follow-up question from the Australian Shareholders' Association. This goes back to hybrid meetings to the AGM. I'll just read that out for you. The Australian Shareholders' Association advocates the hybrid meetings, a combination of virtual and physical meetings. We also acknowledge that in the current once-in-a-lifetime circumstance, a pure virtual meeting is necessary. However, despite the assurance of the current Board, the proposed constitutional amendments mean that a future Board may opt for only virtual meetings under normal circumstances. How can you prevent that from happening under these proposed amendments?

Okay. Thank you. Firstly, the amendments have not gone through. So we will be -- with -- we have really bad feedback. We will be compliant with current legislation. And that will be of the day. So I would think that we will -- under that legislation, we will be face to face. And if it's face-to-face and virtual, we will also do that. So we will comply. Does that answer the question? If any other Board member jump in if I'm missing it.

I want to just add, I think you have answered it, Margie. But in some ways, it's a moot point now, in that it's highly unlikely the resolution is passed with what we've seen. And therefore, we just -- we'll take stock on it. We've had the feedback and the Australian Shareholder's Association feedback is clearing in their questions as well. And so it's sort of moot. And where we're at, then we'll take stock on that for the future. As simple as that.

Thanks, Mark, for jumping in. We also now have an audio question by Danny. But Scott, before we go to Danny's question, [ Stephen ] did have 2 other questions that he wanted to answered as part of the AGM and then was part of the transcript. So I see you've removed them. I don't know whether we want to do that as just an answer on the transcript. But anyway, I'll just put that there. And maybe can we now please go to Danny's question.

One of those more personal in nature and the other one, we can cover after the meeting I think, Margie. There is an audio question from Mr. Danny Wallis and it relates to governance.

Can you hear me?

Yes, I can, Danny.

Okay. This question is directed to the Chairperson. I actually have 2 questions. The question is directed to Chairperson who can redirect it to the appropriate person to answer. My question is about the Bapcor whistleblower policy instituted by the company in 2018 and authorized by Mr. Abotomey. The policy is designed to encourage reporting the misconduct on unethical behavior to the attention of the company and specifically to Mr. Abotomey. My friend, as franchisee, has reported ongoing bullying conduct in the form of bullying of us and other franchisees to the attention Mr. Abotomey in February. And since then, nothing has been done about it, but we have been blamed for the lack of progress for not further demanding meetings and actions. My question is, is Bapcor serious about upholding its whistleblower policy? And if it is, why has nothing been done about this complaint and the appalling state of affairs causing franchisees distress? That's my first question.

Right. Do you -- can I answer that now, Danny? Or is the second one related.

No, second one's not related, but you can answer that one.

Okay. So the first thing that I would say, Danny, is -- sorry, I'm getting terrible feedback. Darryl, can you maybe -- the Tullamarine go on mute. Thank you. The first question, the way I would answer that, Danny, and I'm going to take that for myself is, firstly, yes, we are -- Bapcor is incredibly serious around all complaints around bullying, harassment and whistleblower events. And if there were any, that they would have gone to the appropriate channels. I am not aware of any. So that was my first thing, which is of governance, we have the best corporate governance. The second part of that question is I would rather on off -- honestly take that off-line because I think that is a -- it's sort of a bit of a personal allegation towards Darryl. And I don't believe this is any forum in any way, shape or form to have this discussion in a public place. So I will take on no, and I will personally respond to you because I think any allegation of bullying, harassment against anyone is a very, very serious matter, and I'm choosing, as right of the Chair, not to take that question any further today. But I will come back to you personally and that can be -- this conversation -- these comments can be transcribed as I've answered that on the web as requested by [ Stephen ]. And your second question, Danny?

My second question, again, I'll direct to yourself. And again, you can pass it on to whoever you think is appropriate. This is a different question. My question concerns the issue of what is now known as wages theft across Australia.

And the question is? What's the question? Okay. Well, for the record, there was no question. And if it was a more generic question, I would hand that automatically to PwC and our auditors because -- and our Audit Chair because this is something that we spend an enormous amount of time. I'm very proud of living by the best standards of governance. So there would absolutely be no room for theft there.

Margie, can I answer that, that we have a whole lot of processes in place, and we have had internal, external reviews of wages. There have been no material, any way, shape or form. And we also have a process in place to go out and audit and verify franchisee payments to their team members. And that's a consulting -- more of a consulting and advisory because it's entirely their role, but we go through that entire process to assist the franchisees as well.

Thanks, Darryl. Absolutely. Okay. Danny, we -- I don't know if you've heard us answering what we thought your question was. So would you like to ask your question?

Can you hear me? Can you hear me?

Now we can. We lost you, we lost you.

Yes, the question got cut off halfway through. Now, look, I think that answered the question. The question went on to say that, what, if anything, have you done to audit, both at the corporate level -- at the corporate store level and at the franchise level to satisfy yourself that there is no wages theft going on because it will be a terrible situation if it was found wages theft have been happening in the past, and we had to pay out money.

Absolutely. No, we go through -- but Jason, sorry to put on the spot, but as an auditor. I mean you've been very close to Bapcor, and it would be great to have an insurance as our company auditor that this is something that is -- that we look at and take very seriously.

Yes, it is. Hi, Margie. And hi, Danny, and thanks for your question and your interest in the audit. Look, the audit is -- and the audit opinions on the account overall are not really designed to give sort of specific opinions on individual elements. But in relation to the question, Danny, on wages, we did perform procedures around that. And we obtained evidence, as we're required to do under the auditing standards and based on the procedures that we perform. And the evidence we obtain around that, we're satisfied that wages were recorded in accordance with the accounting standards. And Darryl -- when you dropped off, Darryl did give a bit of color around the sorts of things that were being done by the company in relation to it.

Thanks, Jason. Thanks, Danny. So unless there are no questions, I have no further questions, that concludes our discussion on the items of business. In a couple of minutes, I will close the voting system. Please ensure that you have cast your vote on all resolutions, and I will now pause to allow you to finalize your votes. [Voting]

Voting is now closed. Rather than keep you waiting for the result, I propose to close the meeting at this point. The results of the poll will be notified in the ASX and published on the Bapcor website following this meeting. And as that concludes the business of the meeting, I firstly want to thank members and everyone who's attended today, including my fellow Directors, the staff, Jason, et cetera. And thank you very much, and I now declare the meeting closed. And thanks to Lumi and to Faith and the Lumi guys as well. You've been of great help. Appreciate it. Thank you. The meeting is now closed.