Getlink SE (GET) Earnings Call Transcript & Summary

Good morning. My name is Sharon Flood. I am 54, married with a 19-year-old son and a 16-year-old daughter. I am a dual British-Irish citizen and currently live and work primarily in the U.K. I'm delighted to be proposed by the Getlink Board for election to their Board at the next AGM. I have a deep interest in the infrastructure sector and have lived, studied and worked in France at various points in my career. So I'm pleased to be able to use these experiences for the benefit of Getlink. I'm a graduate in Mathematics from the University of Bath, a Fellow of the Chartered Institute of Management Accountants and was lucky enough to study for a year at INSEAD in Fontainebleau where I gained an MBA with distinction. My career has covered a number of finance and strategy roles, starting with Unilever in the U.K. where I held finance and operational roles. I then joined OC&C Strategy Consultants working on a number of consumer-oriented projects before joining Kingfisher as Head of Strategy for B&Q, their DIY business. I was fortunate to work there during the merger with Castorama, helping the leading European business in the sector, which built my understanding of working across European borders. During this time, I was also responsible for the highly successful acquisition of Screwfix. In 2005, I was appointed Finance Director for John Lewis Department Stores, the U.K.'s leading department store group which has a unique employee ownership structure. I had the privilege of being part of the team building one of the most successful multichannel retail businesses in the U.K. Since leaving John Lewis, I spent 2 years as an operating partner at Sun European Partners, leading private equity turnarounds in businesses across Europe. I then moved into a plural career as a Board director with 2 initial roles, spending 4 years as president du conseil de surveillance for ST Dupont, a much loved French luxury goods business, and director of Network Rail, the owner of the U.K.'s rail infrastructure. These 2 roles bring great experience for the appointment at Getlink. At Network Rail, I've chaired both their Audit and Treasury Committees. More recently, I've also established and chaired a board committee focused on environmental sustainability and I'm working with the team to establish a clear strategy on climate change and other environmental issues before I stand down after my second term in August 2020. I also have the pleasure of serving on 2 other FTSE 250 boards: Chris Nicholson, a leading housebuilder; and Pets At Home, a pet care business, covering both retail and veterinary services. In addition, I have a long history of not-for-profit work. Having lived in India, I helped establish and run an educational charity supporting projects on the Indian subcontinent. I then spent 6 years on the Board of Shelter, the U.K.'s leading charity tackling homelessness. I'm currently a charity of the Science Museum Group and a Trustee of Cambridge University. I'm particularly excited to be considered for the Getlink Board as it allows me to combine so many of my experiences and passions. Working between the U.K. and France allows me to reinforce my knowledge of the special bond between our countries. I am pleased about the role that Eurotunnel can play in addressing climate change by providing the most sustainable way of transport between the U.K. and Mainland Europe, combined with ElecLink's potential to optimize energy supplies and the opportunity to manage freight in a sustainable way. I feel sure that serving on the Getlink Board will be a stimulating experience to which I hope to bring relevant insight. I look forward to having the opportunity to meet Getlink's employees, shareholders and stakeholders in the near future. Thank you for your time.

Page 25. I now raise the issue of the remuneration of corporate officers. As you know, there are the ex-post and ex-ante voting mechanisms, which are in line with the best recommendations of the AFEP-MEDEF code and the Sapin II law. It is based on simplicity, transparency and stability. There's nothing new in this. And so you will allow me to talk quite briefly about this since this is all well known, made public as well and I'm sure you have plenty of time to read it. On Page 26, you have the details of my own remuneration for the 2019 financial year. On the left-hand side of the slide, you have the list of everything that I don't have. In the middle of the page, you have the breakdown of the objectives, which are set for me in terms of performance. And on the right-hand side, you have the result of these performances. Same thing for the Deputy Chief Executive Officer, Page 7 (sic) [ Page 27 ]. You know that Mr. François Gauthey left his mandate as Deputy Chief Executive on the 15th of March 2020. Resolution #16, which is explained on Page 28, gives my remuneration as Chairman and Chief Executive Officer for the first half of 2020 with here, again, the breakdown of the variable remuneration, and of course, the fact that I have no longer any long-term remuneration in 2020 since I will be leaving my executive function in -- on the 30th of June 2020. As Chairman of the Board of Directors for the second half of the year or 2020, Page 29, with the objective of ensuring the best liaison or link with the new Chief Executive Officer, you have in resolution 17 the elements of the ex-ante vote for the second half of the year 2020. Page 30. You have the details of the remuneration of the Chief Executive Officer for the second half of the year 2020. On the right-hand side, you have everything he doesn't have in accordance with a very strict and rigorous policy of the company. Then on the rest of this page, you have the breakdown between the fixed remuneration, the salary part, the variable remuneration component and the long-term incentive part of remuneration, which I will comment in greater detail on Page 41. It will be resolution #18. Mr. Yann Leriche will receive a fixed annual remuneration of EUR 400,000 with a variable remuneration of up to 100% of the fixed salary with some EBITDA criteria, net results, ElecLink, its integration into the company, and of course, the CSR index, which is very important to continue to ensure continuity in these subjects, on which I will come back later on. Page 32. You have in resolutions 20 and 21 the reminder of a long-term incentive plan set up in the company, LTI. Firstly, with a collective and equal egalitarian plan for the allocation of free shares to group employees up to a maximum of 462,500 shares. Then the incentive program for the main leaders of the group, which only amounts to 265,000 ordinary shares, that is less than for the collective one in view of its concentrations on the key stakeholders in the company with the same levers as in previous years. That is to say, in particular, the stock market performance of the share, the performance in terms of EBITDA and the CSR performance. Page 33. A reminder on the dividend policy with a decision which was very difficult to take and which is very, very painful, the fact that the Board of Directors decided to exceptionally cancel the payment of a dividend for 2019 not because we didn't have the financial means to do so, but because in the current context of uncertainty, it seemed wise to do so, having, of course, the possibility to keep the capacity to distribute an interim dividend at the end of this year depending on the lifting of lockdown procedures in the countries, which are particularly interested for us. And I can confirm that the group's intention is to resume as soon as possible a dividend distribution policy that continues to grow, reminding you that since the first dividend in 2008, we have distributed in total EUR 1.2 billion to you, shareholders. I now turn, and this is on Page 34, as it is announced, I give the floor to our statutory auditors who are going to give us their usual opinion on the various elements I have presented to you. Gentlemen, you have the floor.

Thank you, Chairman. Ladies and gentlemen, dear shareholders, on behalf of the College of Statutory Auditors, I present to you the reports we have drawn up for you for the financial year ended December 31, 2019. These reports are as follows: I will report on the annual financial statements. I will report on the consolidated financial statements, our special report on regulated agreements. I will report on the share capital operations provided for resolutions 20 to 23, on which you are invited to vote. In addition, the KPMG cabinet, as an independent third party, has issued a report on the extra financial performance statement included in the group's management report. These reports are detailed in the documents that have been made available to you. I will now summarize the contents of these reports. In our report dated 26th of February 2020 on the annual financial statements for the financial year ended December 31, 2019, presented in accordance with the French standards and set out on Pages 96 to 98 of 2019 universal registration document and in our report dated 26th of February 2020, on the consolidated financial statements for the year ended December 31, 2019, presented in accordance with the IFRS standards as adopted in the European Union and set out on Pages 41 to 44 on the 2019 Universal Registration Document. We present the characteristics of our missions. We confirm that they have been carried out in compliance with independence rules applicable to us. We'll recall the respective responsibilities of the company's management and governance and all the statutory auditors with respect to a consolidated and annual financial statements, respectively. We issue an opinion without reservation on the annual and consolidated financial statements. In these 2 reports, we have justified our assessments by bringing to your attention the key points of the audit relating to the risk of material misstatement, which in our professional judgment, were the most important for the 2019 audit as well as the responses we made to these risks. With regard to the consolidated financial statements, the key points of the audit concerned the recoverable value of the ElecLink fixed assets, the recoverable value of the concession fixed assets, the accounting treatment of financial debt. With regard to the annual financial statements. The key point of the audit was the valuation of equity investments and intra-group receivables. Our work consisted in particular, for these key points of the audit, in assessing the approach adopted by the company and in ensuring the reasonableness of the significant estimates made and the appropriateness of related information in the note or annex to the financial statements. Finally, in these 2 reports, we confirm that we've made the specific verifications required by law and we have no observations to make. In our report on the consolidated financial statements, we have certified that the consolidated statement of extra financial performance required by the French Commercial Code is included in the group's management report and that we have also certified the information relating to remuneration, benefits and commitments in favor of executive officers. In our special report on regulated agreements dated 26th of February 2020, appearing on Pages 195 and 196 of 2019 Universal Registration Document, we indicate in the first part, with respect of agreements submitted to the approval of a general meeting, that we have not been advised of any new agreements. In the second part, with respect to the agreements that have already been submitted for the approval of your shareholders' meeting and which remained enforced during the financial year 2019, we have not been advised of any agreement that have already been approved and which remained enforced during the financial year 2019. With regard to the extra financial performance statements. In the report of the independent third-party organization appearing on Pages 258 to 268 of 2019 Universal Registration Document, the latter confirms that it has not identified any significant anomaly regarding the compliance of a consolidated extra financial performance statement with the regulatory provisions enforced. Finally, with regard to capital transactions. We issued reports on the 23rd of April 2020 on the delegations and authorizations to be given to the Board of Directors to carry out the following transactions: authorizations to make a free allotment of shares to all employees of the company except to members of the management, resolution 20; authorization to grant existing or future ordinary shares to employees and/or executive officers of the group, resolution 21; reduction of the share capital of the company by canceling treasury shares, resolution 22; capital increases with all of the shareholders' preferential right of subscription by the issue of ordinary shares or transferable securities reserved to the employees who signed up to a company's savings plan, that is resolution 23. As the final terms and conditions of this capital increase have not been set, we do not express any opinion on this capital increase, and consequently, on the proposed cancellation of a preference execution right made to you under this resolution, we'll prepare an additional report if necessary when the Board of Directors makes use of this delegation. We thank you for your attention.

Thank you, Mr. Cherqui. Thank you very much for this proposal on behalf of the College of Statutory Auditors. And thank you for the high quality of your work, the work that you do for us and which is absolutely indispensable to us. Now ladies and gentlemen, I now would like to mention the perspectives of the group because we have, and we're quite certain, we have capacities to achieve even more great things, thanks to the fundamentals of the group. On Page 42, I would like to come back on the development of rail traffic. Two aspects are particularly important. You may recall that back in 2019, there was a protest movement coming from Sweden against short distance flight connections in the European environment. And today, unfortunately, in view of the coronavirus crisis that I cannot say I'm happy with, we see that air transport is deeply affected and that it will need quite a long time to recover. There is, therefore, for us at the level of the European railway high-speed network a possibility, which is extremely interesting, possibly a development and we are working on it. And in particular, this is the second point, thanks to our capacity to get infrastructure managers to work together because the real issue in relation to a railway service or link is to find in the different networks used by the operator some time slots, which are compatible and relevant. We started this work. It is the one which has allowed us to open the service line in Amsterdam, and we continue with other perspectives. And we hope that in the context of European Green Deal, there will be a massive support to the development in the countries, which are particularly relevant to us of the new European signaling system called ERTMS, which allows to increase in a considerable way the capacity and safety of railway flows. We are in contact, as I have already mentioned and I do confirm, with a large number of operators. We're ready to derive profit from this renewed interest for the railway compared to the air transport. And in this context, as I recalled the incredible situation of Deutsche Bahn, which 10 years ago took 3 years to obtain a railway safety certificate, which in view of the hassles they had to face as we also faced today with the situation of ElecLink, I'd finally reannounced to do it. We are working on the implementation of new authorization rules for passenger equipment in the Channel Tunnel which corresponds to new services in line with the European prescriptions called TSIs, which take into account our competence and capacity acquired over 26 years of operations in the Channel Tunnel. It's a very time-consuming work, but we're determined to achieve it. We don't forget railway freight, which also represents interesting capacities in terms of development. And in this context, we are currently finalizing a negotiation with the British government to take over the exit of the tunnel located at Dollands Moor so that we could have an entrance at Fréthun and an exit at Dollands Moor and vice versa, which can be managed in smart, and of course, performing way in view of the use of the tunnel and this, why not, in the perspective of the rail motorway. It is something that the British government supports in an extremely relevant way. Slide 43 recalls the commitments, which are ours in terms of CSR performance. Of course, and I've already mentioned, there is customer service, with level of satisfaction, which is extremely high and for which we want to keep on improving. We have, and I will come back to this, some extremely remarkable results in terms of environment protection. We are not outside the real world, and we work intensely to help partnerships around our installations for the benefit of all. We, of course, are particularly careful about social aspects. We have signed recently a group gender equality charter unanimously approved by, of course, trade union organizations. And we wish to continue to decrease work-related accidents, which have a frequency rate today which has significantly improved itself. And I've also mentioned the separation of functions, which is an issue, which is particularly appreciated by Anglo-Saxon investors. The environmental performance of the group, I would like, if you do allow me, to summarize it through the following video. [Presentation]

Page 44. Let me come back on the reduction of CO2 emissions, carbon-based gases, greenhouse effect gases. Of course, in order to assess our results, which is a reduction by 33% of our emissions, you need to bear in mind that at the same time, the revenue of the group, that is to say, traffic, increased by 28%. And therefore, if you combine the 2 figures, you end up with an absolutely remarkable result. You have in the right-hand side section of the slide the details of all the actions that we implement. Of course, far from lyrical musings, you know that we are absolutely concrete. We work small dossier per small dossier step-by-step and this allows us to end up with remarkable results and which have been certified for a long time. And we are the only ones on the cross-channel segment, which have their results certified by the best international organizations. On Page 45, we've also worked on the basis of the risk of climate change on a low-carbon economy concept as this is the dedicated terminology to be used. I think we're well prepared to follow recommendations in these fields. I'd like to remind you that we were the first on the market to implement charging points for electric vehicles at both extremities of a tunnel. This resulted in 12,000 customers, which have used these facilities in 29 (sic) [ 2019 ]. And we have many other projects in progress. A new report for rail freight also has some capacities in the context of the rail freight recovery to move forward in this field. Page 46. We are mentioning the reduction in industrial waste production, whether hazardous or nonhazardous with, of course, a significant reduction, which has to be offset-ted against the increase of the activity. And in terms of waste recycling rate, we come to an absolutely acceptable rate of 94.4%. Once again, it is day-to-day work. It has to do with awareness of staff. It's not visible work, but of course, results are visible. Page 47, we are mentioning our biodiversity dimension. We are reducing the amount of water taken from the public networks and from the natural environment in order to maintain the cooling of the Channel Tunnel. You know that we have a nature reserve of Samphire Hoe, which has just received its 14th Green Flag Award. It shows that it's something huge, very important, which is, by the way, accessible to the general public. And we, in France, work on eco-pasture on plots of lands which are available to us. Therefore, we are improving carefully and we use in a very careful way all our capacities to improve our indicators. Page 48. And to come back on this issue of climate change, we are perfectly aware of this. We want to be part of the national -- or international policies, which were raised via the public authorities. This goes with strong organizations in the CSR and environment department for -- in which we have recruited high-level directors. It has to do with structuring of climate reporting and a set of concrete actions in order to face climate change. And you have in the blue section of Page 48 the motto, I would say, the statement, the commitment of the Board of Directors on this policy in favor of the fight against global warming. Now let me mention, Page 49, an issue which is particularly painful, that we are all experiencing today, which is the COVID-19 pandemic and the way according to which we manage it. First, I would like to recall that our customers being international, we have been aware of the need to take lockdown measures as early as the 9th of March as soon as Italy did so and well before France and well before the United Kingdom. And this has allowed us -- while being fully aware of what this represented, this has allowed us to commit very rapidly, very close collaboration with both the French and British authorities to deliver an adapted service, and above all, to implement both of the protection of our workforce and protection of our customers, everything we could implement with installation of hand sanitizing dispensers in buildings, onboard shuttles, a reminder of a protection protocol and social distancing. We have, of course, strengthened cleaning operation and disinfection. And we have implemented a work organization, which is adapted. And having understood what Italy on the 9th of March and Spain on the 15th of March were deciding before the lockdown measure in France, we have switched as early as this to remote working facilities for support services. In a nutshell, we've been among the first operators to react in a significant manner, an important manner to this situation, which is extremely difficult. Page 50. You have, for example, the quantity of hydroalcoholic gel or sanitizing gels that we have used. So far, the number of masks that we have purchased and that we are currently renewing, thanks to some orders that we have launched in China but not only at the international level, number of gloves distributed. But I think the most simple thing to do is to show you for lorry drivers the measures we have implemented against COVID-19 from a video which follows. [Presentation]

Page 51, I come back on 2 particularly important issues in the context of the management of this COVID-19 crisis. First of all, I think we need to continue to strengthen our commercial activities. We have, obviously, for passenger shuttles when the borders are open, passengers who do remain onboard their vehicles, so it is extremely reassuring for them. I think it will probably be an extremely strong sales argument when borders are reopened to attract maybe new passenger customers. For lorry drivers who, as you may know, had no access to showers and toilet facilities, we have provided free access to showers and toilet facilities to them. We have installed these facilities. We are providing them with a snack pack and give them EUR 8 or GBP 8 voucher to use in France or the U.K. to complement their meals or elements that they need. It goes without saying that this success has allowed us to maintain a very good level of freight traffic and to even witness an increase in figures. We have obviously largely communicated with lorry drivers and haulers. In general, for the whole of services and operations, we have taken -- or we have adapted our services and work processes to take into account COVID, it's very simple. This was carried out through a staggering of working hours and rotation so that people don't meet. We have reduced the number of vehicles and their movements. We have postponed, in the interest of savings, all the investments, which were neither linked to safety nor to urgency. We have taken a very courageous decision to reduce the capacity -- or load factor of our freight shuttles of 32 trucks -- from 32 trucks to 24 trucks so that there is more space between lorry drivers in the club car, which is the rail wagon which is meant to transport them. And we have multiplied collection buses to make sure that there aren't too many people onboard those collection buses. And in view of a virtual disappearance of passenger traffic, we have innovated putting into service as of the 23rd of April only half of one passenger shuttle. You know that shuttle passenger is 800 meters long, but it has 400 meters single deck at a very high height for coaches. And then behind a second half double-deck shuttle where vehicles are parked on 2 floors and 2 decks, we only run the single-deck wagons, which is 400 meters long. It is less costly in terms of operating costs, maintenance and energy costs. And we have worked in a very determined way on the basis of a cost reduction schemes without putting at risk neither quality of service nor safety, which is absolutely fundamental. Slide 52 recalls the traffic figures of the first quarter 2020 with a decrease of both truck and passenger traffic as well as Eurostar and freight trains. I recall, after a first international impact of a lockdown as early as the Italian measure of early March, so therefore, these figures are to be considered with a March impact after months of January and February, which were particularly good. I raise a second essential issue for cost reduction and the adaptation of our organization. It is the impact of the implementation of part-time working for 2,239 employees of the group in France. That is 300 employees on furlough in the U.K. In France, as it's -- as the word indicates, it is partial unemployment. In the U.K., it's the all-or-none principle, either the employee works or he or she stops working completely. This is why -- reason why this figure of 300 can't be compared to 200 -- 2,239. Managers who were not submitted to part-time working voluntarily decreased remuneration by 10% as of the 1st of April. And I think we can praise their decision. I have, myself, announced that I was reducing my remuneration as of the 1st of April by 25%. And I am pleased to say that the Board of Directors expressed its solidarity because directors have decided as of the 1st of April to reduce their monthly attendance fees by 10%. All this to say that the company is fully mobilized to face this particular difficult crisis. You have on the right-hand side the total revenue of the group in the first quarter with the breakdown between Eurotunnel and Europorte. Eurotunnel is not decreasing its performance much because it is an infrastructure, which is particularly useful, and it is, by the way, mentioned. Europorte had been impacted and affected by the strikes for the pension reform of the SNCF from the 1st to 25th of January. This was quite a strong impact. But this is not what I wanted to mention. I wanted to say that Europorte has run specific trains, which were not part of its work program to transport 250,000 tonnes of benzene, which is, as we all know, the fundamental ingredient or product for the making of hydroalcoholic gels. Therefore, this is another interesting aspect of Europorte, these additional trains which run in this context. I would conclude by saying I remind you and confirm that we have no difficulty with our financial situation. We have taken cash flow preservation measures -- or protection measures for our cash flow. And we can -- we have enough -- or a good level of liquidity, which enables us to face with no difficulty the reimbursement of the debt. There's no hesitation on this. The capital reimbursement is of only EUR 53 million this year. We have great teams that I would like to publicly congratulate here today because they have adapted to the crisis with agility, speed and determination. And these teams are fully dedicated to be in a capacity to benefit from a recovery plan should it present itself. And as soon as it should present itself, we have an economic model, which is extremely solid and robust. We are fully in line with the expectations of populations in terms of social and health protections and environment preservation. We obviously ensure a mission of public service between Europe and Great Britain, and this will continue in the future. And we are a benchmark player in the field of eco-responsible transport. From Slide 54 onwards, you will have on the website of the group on the page dedicated to the general meeting, the result of a number of voters and the results of votes per resolution. You shall see that, once again, you have massively supported the company, and I do thank you for this. I hope that this presentation, which was very specific, has met your expectations. I'm sorry for the possible difficulties or errors in diction that I might have made in this presentation because it is through contact with you -- direct contact with you in a room with you shareholders is something that I miss. We work together for the benefit of this company and we've been doing so for many years now. Results are there. And we all face an absolutely exceptional unknown crisis with no reference, and what I can assure you is that we organize ourselves to get through it as best as possible and that we should be there performing efficiently as soon as we recover the path towards activity and shall certainly be among those who shall reap the best benefits of this situation. Ladies and gentlemen, dear shareholders, thank you for accepting this presentation behind closed doors. Thank you for your support, and I hope to see you very, very soon. Thank you very much, and I now officially close this General Meeting 2020. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]