Future Generation Australia Limited (FGX) Earnings Call Transcript & Summary

[ Amy ] or anybody can tell me otherwise. Bear with us, this is a hybrid meeting. The first we've done when we've got you both present and we've got an online presence as well. So [ Kristen ] has closed the door, so we're ready to go. Thank you very much. Good morning, everyone, and a very warm welcome on a cold winter's day to the seventh AGM of Future Generation Investment Company. I'm Jonathan Trollip, Chairman, and I'll be chairing today's meeting. As I just mentioned, on account of COVID, we have a hybrid meeting today with shareholders present, and it's nice to see some familiar faces and also a number of shareholders online. Before we begin [Audio Gap] and the other directors, Geoff Wilson, David Leeton and David Paradice. And we have online Jesse Hamilton who, as I mentioned, is indisposed, but we wish him a speedy recovery. And we have from Mertons, [ James Williams ], who's over there, who will be taking the minutes today. And Sandra McIntosh who will be joining the company soon, I think, as a company secretary. And from the auditors, Pitcher Partners, we've got Sylvia Wallace and some colleagues. And Sylvia will be available to answer any questions you may have. [Audio Gap] [Operator Instructions] And if it does relate to any specific resolution, if you could identify the resolution, that would be helpful. And if we do have a lot of questions, we'll seek to collate them to refer to the same resolution. So into voting, you should have on your screen a voting icon at the top of your screen. Again, just press the option on the way in which you want to vote. So it will be for, against or abstain. And then select that option and then your vote should appear in blue. You will have the chance during the course of the meeting to -- you'll have the opportunity during the course of the meeting to change your vote as you want to, and I will announce when the poll is closing at the end. So you can change your vote any time up until the poll closes. I do declare the poll open so you may start voting now if you so like. If you -- obviously, if you've already submitted a proxy form or voted online, you're not required to vote again. And all the votes online as well as the votes cast today will be combined. And the Boardroom are here as returning officers and will announce the results to the ASX probably later today. Our shareholders who are here, I presume you've got your voting cards. I'll now move to the Chairman's address. If we can move the slide forward. [Audio Gap] year 2020 with COVID. No need to go into all the aspects of that. We've all been impacted by it in different ways. But I think very relevantly for Future Generation Australia, a lot of our charity partners have been very badly affected by it. And they've had to move a lot of their services to online and work out how to provide their services -- and people have been very distressed. There's been a lot of increase in the demand for their services at a time when it's been very difficult for them to provide those services, and often with reduced income. They have been able to hold a fund [Audio Gap] so I'll just deal with a few of the key points. The income -- the profit before tax for the year was $15.3 million; after taxes, $14.4 million, the comprehensive income, and that measures the profit; then adjusted for realized and unrealized gains was $33.5 million. So that was a very solid and commendable performance. The total shareholder return, as shown on the screen, and that's the opening share price at 1 January 2020. Then looking at the difference between net share price and the closing share price on 31 December 2020 and then adjusting for dividends paid during the year was 12.9%. I think it's also worth reflecting on how the company has performed since inception, and that was September [Audio Gap] accumulation index and I think, again, a very commendable performance. More relevantly, in the financial year, also the calendar year, December to -- 31 December 2020, the investment portfolio increased 10%. And that was at a time when the index only increased 3.6%. So the outperformance was 6.4%. [Audio Gap] managers, all of whom provide their services pro bono. They don't take any [Audio Gap] the interim dividend and then a final dividend of [Audio Gap] the previous year's fully franked dividend. But I think it was a very meritorious achievement at a time when a lot of companies cut their dividends or even stopped paying dividends. And that's also one of the benefits of a listed investment company that you can [ smooth ] your dividends out. We do hope, as a Board, to continue to pay a stream of fully franked dividends. Subject to the usual caveats of prudent business practice, franking credits and sufficient profit reserve as at 31 December 2020 was $0.071 per share. If we could just move to the next slide, please. And that shows that the dividends paid since inception, $0.273, and they've all been fully franked. Dealing with the current financial position of the company, the NTA as at 31 May 2021 was $1.43. And the share price is a slight discount to that, it's about 7%. The discount has been a lot larger. We're encouraged that it's narrowed, but we're still making every effort we can to get the discount to the stage where it is extinguished. And Caroline, that will be one of your major tasks when you start. Okay. Just if we can go back to the previous slide, thank you very much. Looking at the overall operation of the company. As you're aware, we have 2 objectives, and that's to provide an attractive investment proposition for shareholders and also a source of funding for Australian charities with a focus on children at risk. And shareholders do have access to leading fund managers. Often, they would not be available to shareholders because they don't take retail money or they are closed. So we're very grateful to our fund managers. They participate pro bono, and that enables 1% of net assets to be allocated each year to our various charity partners. The -- for the financial year to 31 December 2020, the savings on the manager fees was 7.5%, the directors and the Investment Committees and other service providers participate primarily pro bono. We estimate that those savings are $1.1 million. So the total savings on management fees, performance fees and service providers is $8.6 million. What happens to that $8.6 million? The answer is in 2020, looking at the social impact, $4.8 million went to our charities. And the remainder stays in the company, so that does, in a sense, benefit the shareholders as well from all of the pro bono contributions. So in 2020, we invested $4.8 million in the 12 charity partners. We're on track to deliver a further $5.2 million in October this year, and shareholders will get the chance to vote on their pro rata allocation of which charities they wish to support. And that will bring the total amount invested in charities since inception to $26.7 million, which I think is a tremendous achievement. We're very focused on the social impact. I'm delighted that in May of this year, we appointed Emily Fuller in a new role, in both Future Generation Australia and Future Generation Global, of Social Impact Manager [Audio Gap] to ensure that the shareholders' investments in the charities does achieve an impactful social return. We undertook a detailed analysis of the outcomes of the range of work which our partner organizations do. And the outcomes were very broad and, in some cases, very profound. We found that some people have broken the cycle of disadvantage by ending the homelessness or stopping committing criminal activities. Many made social and emotional well-being leaps, and that's improved self-esteem resilience, confidence, [ kinships ]. There have also been numerous educational achievements, improved school attendance, engagement and learning, improvements in numeracy and literacy and indigenous students graduating from school and university, often the first in their families to do so. I would encourage you to look at our website, futuregeninvest.com.au, where you can find lots of relevant information on the charities and on other aspects of the company and join our 20,000 subscribers. And we will continue to keep you updated with weekly newsletters, monthly investment updates and other communications. Now before I conclude, there are a number of people I would like to acknowledge and thanks. In April 2021, Louise Walsh stepped down as CEO after almost 6 years of experience and has made a terrific contribution to the company. And we acknowledge and thank her for that. And thanks to Kate Thorley for so seamlessly taking on the role of interim CEO, which she's done magnificently and also for the very strenuous activities in locating a new CEO. And we very much look forward to Caroline taking on that role. I also thank all my fellow directors and committee members for giving [Audio Gap]

[Audio Gap] Thanks.

Thank you very much, Kate. It looks like I'm going to squeak in. If anybody knows who voted against me, please let me know. Okay. The next resolution is for the reelection of David Paradice as a Director. David is incredibly well-known in the funds management area. It's great to have him on the Board. It's a great to have him as a fund manager. And his bio is set out in the Notice of Meeting. So I'm not proposing -- anybody have any questions in relation to David's proposed reelection? Okay. Thank you. If we could just have a look at the proxies. And again, David, 100%. So obviously, some people like him more than me, which is very understandable. And so it looks like he's been reelected. Congratulations, David. The third resolution -- the fourth resolution is the reelection of Kate Thorley as a Director. And Kate, would you like to say any words?

I can. I mean I'm sure most of you have probably met me before. But for those of you who are new to the company -- and I was speaking to one of our shareholders earlier. So I've been working with the team at Wilson Asset Management for 16 years now and as CEO for the last 10 years. I helped Geoff with putting together Future Gen when we first launched it. It is definitely one of my career highlights, I must say. It gave me such joy to go around and market FGX and raise that first pool of capital. So -- and it's also been really pleasing to take on the role as acting CEO and to be spending the last few months recruiting for the new CEO and finding that what we're looking for was sitting right here. So I'm really excited about continuing to be a Director of Future Generation and also working closely with Caroline as our new CEO. So thank you.

Thanks very much, Kate. If we could have a look at the proxies. Same as me. A few people voted against her. Okay. So again, it looks like Kate has been reelected. Congratulations, Kate. That concludes the resolutions for the meeting. And as I said, the results will be announced to the ASX later. And I -- if shareholders would like to complete your voting cards. And I might ask Boardroom -- David, in the back there has a box. If you could hand them into him, and they will all be tallied up and announced later today. [Voting]

Not a lot of suspense in the results. Okay. Everybody handed in their -- you want them to -- I had one as well, so...

Go ahead.

Okay. Thank you very much. Before I close the meeting, are there any general questions shareholders would like to ask of any of the directors or myself? Yes, [ Fred ]?

A question regarding share buybacks in which, as far as I know...

Just why don't you just hold the microphone?

Apologies. Sorry. Question regarding the Board's approach to share buybacks when the shares trade at large discounts to NTA. Some people believe that when the discounts get sufficiently wide, companies should buy shares back. I'm interested to hear the Board's view on this matter.

Yes. It is fair to say that it's obviously one of the issues we have considered at the Board level, particularly when the discount was, I think, at the maximum extent, actually about 15%, Kate, is that right? But we formed the view, and it's my own experience, too, in other companies, that buybacks are a short-term sugar hit. They don't really work. It's the fundamentals which will drive the share price as against the NTA. I think nothing is more important than the performance of the company over time and communication with shareholders. So I think it's fair to say -- I'm not going to fetter the discretion of the Board, but we've considered it and buyback is not on the agenda. We're going to use other measures to narrow the discount and hopefully eliminate it. Any other questions? There'll be tea outside, and you can ask any other questions you may have on that basis. So I declare the meeting closed and invite you to join me for a cup of tea. Thanks very much.