Healius Limited (HLS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the 2020 Annual General Meeting of Healius Limited. My name is Rob Hubbard, and I am your company's Chairman. I'm speaking to you today from the QML Pathology head office in Brisbane. Thank you for joining our first completely virtual AGM. We have chosen to do this to ensure the safety of all our stakeholders. I trust you'll allow us some latitude today if things don't go as smoothly as possible. It's the first time for all of us. We are attending from many different locations today and from many ancestral lands. I would like to begin by acknowledging the traditional owners on the lands on which we meet today and pay my respects to elders past, present, future and emerging. Let me briefly cover some procedural matters. Shareholders can either participate and vote through the Lumi AGM platform or participate and ask questions over the phone. A guide on what to do is on the Healius website. Should you require assistance during the meeting, the phone number is in that guide and on the side of the screen now as well. A recording of the meeting will be available on the Healius website afterwards. I will ask Charles Tilley, our Company Secretary, to say more about how to ask questions and vote when we move to the formal part of the meeting. It is past 11 a.m. Sydney time, and as a quorum is present, I declare the meeting open. For those of you who feel comfortable with the technology, the polls in relation to all items of business are now open. This means you can vote now if you wish, but please feel free to wait until you've heard the debate and the discussion and questions and vote later in the meeting. Online with me today, we have in Sydney my colleagues on the Board, Arlene Tansey, Sally Evans and Dr. Malcolm Parmenter, our Managing Director and CEO. They're accompanied by Charles Tilley, our Company Secretary. Port Macquarie, we have Paul Jones, a Nonexecutive Director; and in Glenburn, Victoria, Gordon Davis. Those of you who are regular AGM attendees, the agenda today is relatively routine. However, we encourage questions on any items of business. Also, we will speak for some time today as we go through the process and before questions can be asked. I ask you to bear with us because we're keen to explain where your company has been, where it is now and more importantly where we are going into the future. In terms of remuneration, after approving a new long-term incentive framework for our KMP last year, today, we seek only to renew the approval granted in 2017, the securities issued under the short-term incentive plan and the issue of shares to Malcolm Parmenter. We're also seeking amendments to the constitution to enable us to hold virtual or hybrid meetings in the future. The other item for business is my reelection, and that will come up later in the agenda. Let me cover off the last financial year FY 2020 while leaving Malcolm to update you on current trading and our future strategy. Your company has undergone quite a year, as I'm sure we all have due to the impacts of COVID-19. The pandemic has exemplified what Healius really is: a purpose-led organization caring for the health and well-being of Australians at every stage of life. We made the decision early on that maintaining our health care capacity, providing a safe environment for our people and patients should be our overriding aim and in the best interests of all our stakeholders. We responded quickly, setting up pathology drive-through testing centers, reworking our laboratories to expand testing capabilities and creating GP isolation rooms and telehealth services. Our people have been on the front line day in, day out. They have kept the health of their patients their priority and shown immeasurable empathy and care. These things aren't reported in our financial results but are the foundations upon which Healius is based. As well as making a huge effort to service the community, our people and their trade unions also actively participated in various labor management initiatives to keep our costs contained when revenue fell rapidly in the early months of the pandemic. For this, I thank them all. With a company of our size, I'm unable to recognize every individual, but I do want to share you with some examples of the amazing work our people have done. We're extremely fortunate to have leading specialists in Healius. Within our diagnostic imaging national quality team is Lori McLeod-Mills, an infection control specialist. She has played a key role in making sure our business adapted to the new COVID-19 guidelines, protocols and procedures. Lori's expertise has been recognized by the World Health organization who invited her to become a member of the Infection Control Network, providing support to countries in the Western Pacific region to manage COVID-19. Our frontline heroes, including our nurses, health care professionals and our support staff, have also risen to the challenges of combating COVID-19 in our imaging facilities, medical centers, day hospitals and IVF clinics. I also want to call out our pathology collectors and couriers who have been at the vanguard of the crisis, working long days, especially at our drive-through COVID-19 collection sites. Our pathology labs, too, and with them all our laboratory staff, have been opening up to 24 hours a day to ensure a quick and accurate turnaround of people's all-important results. We are extremely grateful for their tireless efforts and dedication. I would also like to make special mention of the people in Victoria. I want to thank everyone for their professionalism and good grace they've exhibited during the second wave, especially with all the challenges associated with such a prolonged shutdown. Our Pathology CEO in Victoria, Ian McPhan, exemplified this spirit, leading his team from Melbourne while separated from his own family in Western Australia for 6 months. We're also grateful for the support of our landlords and the federal and state governments. Federal government provided financial support to our pathology operations when our revenue was at its lowest ebb. This enabled us to keep our remote and rural services open and maintain our permanent staffing levels. The government also provided testing equipment and reagents, imaginably sourced by Andrew and Nicola Forrest's Minderoo Foundation, increasing our testing capacity from April onwards. It's equipment we have put to great use over the last few months. I'd now like to turn to what we've been doing at Healius over the 2020 financial year in addition to navigating the COVID pandemic. In February, we assessed and rejected a highly conditional acquisition proposal by respected private equity firm Partners Group. In the Board's view, this proposal at $3.40 a share did not adequately value our businesses. And where our share price today is trading today is encouraging support for that decision. In June, we announced the sale of Healius Primary Care, our medical center and dental business. It was both a seminal and a sentimental moment in our history. Dr. Edmund Bateman, the Founder of Healius, started out with one medical center in Brookvale, New South Wales some 35 years ago. However, it was done for good reasons. And our portfolio, with 3 main businesses and 3 growing ones, was becoming too complex and too demanding of both capital and management resources. We also believe the value of the medical center business was not truly reflected in our share price. In terms of the results, these are set out in the annual report. In summary, we saw good trading above our prior period up to February 2020. But all divisions suffered dramatic declines in revenues from mid-March through to April with the national lockdown. We made extensive efforts to reduce our cost base while keeping all permanent staff employed and the majority of our services operational. In May, we started to open up again, and our revenues improved. Specifically, in Pathology, COVID testing accelerated and continues to underpin our strong trading in the first quarter of the 2020 financial year. Indeed, testing and contract tracing remains the key elements of the public health response to this virus. Overall, in FY '20, revenue was up 2% to $1.6 billion, and underlying net profit after tax was down 21% to $55 million. Our reported result was a loss of $70.5 million due to $142.5 million write-down on the sale of the Healius Primary Care business mainly caused by the impairment of goodwill. We will receive in the order of $470 million in proceeds from the sale likely before Christmas, and this will deliver significant balance sheet flexibility to us in the future. There will be plenty of opportunity to ask questions on the financial report. Turning to the matter of dividends and capital. As you are no doubt aware, we delayed payment of the interim dividend in March 2020 by 6 months, and it was eventually paid last week. In addition, we did not declare a final dividend in FY '20 in recognition of the benefit of assistance and, in some cases, personal sacrifices made during the worst of the COVID-related lockdown by various stakeholders, including our people, the government and our landlords. However, we have traded strongly in the first quarter of 2021. In addition, when the proceeds are received from the medical center sale, we will be in a stronger financial position with much lower leverage. As a result and with the tough year endured by shareholders weighing on the Board's collective mind, we will firstly look to resume regular dividends in the first half of 2021 financial year; and secondly, consider what can be done in terms of capital management and returns to shareholders with the proceeds of the medical center sale. Whilst we would have hoped to provide an update at the AGM on these matters, it would not be expedient to do so until the sales proceeds are actually received. Once done, we will make an announcement to the market on this matter. As some of you may be aware from our announcement to the exchange, Arlene Tansey, who is retiring by rotation, is not standing for reelection today. We're all very grateful for Arlene for her time at Healius. She served 8 years as a nonexecutive director of your company, including as Chair of the People and Governance Committee, Chair of the Audit Committee and a member of the Risk Management Committee. Arlene has brought a depth and breadth of knowledge to the Board in capital management, finance and technology. Her insight and advice has been invaluable to me and the Board since I became Chairman. And I will miss her contribution deeply. We have been undertaking a search for 2 new nonexecutive directors. And today, we announced that Jenny Macdonald has accepted our offer to serve as a nonexecutive director commencing in November. I'm very pleased to have Jenny join the Board. I think she will be a great fit. In particular, her experience in customer-centric businesses and her financial and M&A capabilities will be invaluable in helping to deliver on the current growth strategies and to steer the company's future direction. We continue to search for a further Board member, but we will always take our time to identify the right candidates as we go through this process of Board renewal. One of the many factors being taken into consideration is the gender diversity target for the Healius Board, which is now set as a minimum of 40% female and 40% male and then 20% of any gender. We will achieve that by December 2021. I should also note that our nonexecutive director share plan has seen good takeup with over $100,000 worth of fees to be sacrificed into shares in FY '21. The purchase of shares in the company by participating directors will further align our interests with yours, our shareholders. Before wrapping up, I would like to mention a matter which came up in 2018 around the unintended underpayment of medical centers staff under the modern awards. You may recall, we announced a self-identified error, set aside the appropriate amounts and committed to contracting (sic) [ contacting ] everyone impacted to remediate the issue as transparently as quickly as possible. I said at the time, we will not profit out of the pockets of our people. Having contacted all those former employees we could, we have now come to an agreement with the Fair Work Ombudsman, which in essence means we will pay -- pass onto the Commonwealth Consolidated Revenue all remaining monies for employees that cannot be located and pay a contrition payment of $400,000 in respect of this matter. I mention this as the agreement will be public, and I wanted to reassure you it is a legacy matter, which we have resolved to the satisfaction of our people and the Ombudsman. I would also like to make reference to an announcement we made a couple of weeks ago in regard to a taxation case, which has been on foot for some years now. This relates to the tax treatment of lump sum payments to health care professionals. If you recall, we were told in the financial year 2015 that payments made for 2012 to 2014 financial years were tax deductible for the company. We subsequently lodged similar claims for financial years 2003 to 2007. This culminated in what appeared as a very strong decision in favor of Healius in November 2019 in the Federal Court. The commissioner appealed that decision to the Full Court, which, surprisingly to us, upheld the commissioner's appeal. We are currently reviewing the Full Court's judgment and considering our options for further appeal to the High Court. So far, in relation to this case, we have recognized in our accounts $46 million in tax receivables and $26 million in interest receivables. These were put through as non-underlying items last year and will be reviewed after we progress our thinking further on this matter. Well, FY '20 was certainly the most challenging year on record and in my professional experience but one where our team rose to the challenges most wonderfully. I would like to record my thanks specifically to the 12,500-member team who make up the entire Healius Group, to the executive team who have done such a fantastic job of leading our people during the COVID-19 pandemic, our customers and health care practitioners who use our services each and every day. Of course, my final thank you is always to you, our shareholders, for your ongoing commitment and encouragement. I'd now like to hand over to Malcolm Parmenter who will take us through his presentation. Thank you.

Thank you, Rob. Good morning, everybody. Let me add my welcome to the Chairman's to all of you on the airwaves. Before I go any further, I wish to acknowledge the custodians of this land, the Cammeraygal people of the Eora Nation and their elders past, present and future. It's an honor to be talking to you today at my fourth AGM as CEO of this great company. And I do echo Rob's sentiments about how wonderfully our people have responded to the COVID pandemic this calendar year. Many of our people are on the front line of care every day, and they never really know whether the next patient they see will have COVID or not. And for our staff and doctors, this pandemic is the medical equivalent of a battle with all the risks that this entails. I, and I know my executive team as well, are honored and humbled to lead a group of people who have so selflessly put themselves in harm's way for the good of all Australians. As Rob has mentioned, we responded to the battle cry by setting up drive-through pathology testing centers, reworking our laboratories to expand our COVID-19 testing capabilities, running COVID-19 testing 24/7 at times to ensure short turnaround times of results and also creating GP isolation rooms and telehealth services. As an executive team and as a company, we've worked hard to ensure our people are as safe as humanly possible. And this has resulted in a very low infection rate of just over 1 for every 1,000 of our staff and doctor group, which is quite similar to the broader population. All of those people have now recovered except for one GP who unfortunately remains quite unwell several weeks after the onset of infection. And our thoughts are with him and his family, and we wish him a full and speedy recovery. Now turning to the executive team. I must say it is great to introduce the same team as last year. And this team has done an extraordinary job in the face of huge challenges this year. I'd like to thank them all for the wonderful way they've pulled together and led the response to COVID-19. They're all online today and more than happy to answer questions when we get to that part of the meeting. Firstly, in Queensland, we have John McKechnie, who is CEO of the Pathology division; and Ben Korst, who is CEO of our Day Hospitals division. In New South Wales, we have Dean Lewsam, CEO of Imaging; Scott Beattie, the CEO of Medical Centers; and Maxine Jacquet, our CFO; Peter Wilson, our Group Executive, People and Shared Services; Janet Payne, our Group Executive, Corporate Affairs. We also have Mark Neeham, our Group Executive for Government Affairs. Mark has done a fantastic job liaising with government on our behalf during COVID-19 and has rejoined the executive team this year. So let's now turn to how we have been trading in the first quarter. In summary, it's been a very good start to FY '21. Looking at our continuing operations after the impact of AASB 16, unaudited group revenue was $493 million compared to $419 million in the prior comparable period, and unaudited group EBIT was $81 million compared to $32 million in the prior comparable period. Every business has contributed while the learnings from the March-April national lockdown and the cost savings from the Sustainable Improvement Program have underpinned what is a very strong result. In terms of our trading trends, Pathology revenues have been strong in the first quarter of the year and continue so into October. Non-COVID revenues are now ahead of the prior comparable period. Community COVID testing is currently plateauing, it seems, around 7,000 to 10,000 per working day, but these numbers can ramp up quickly again with local outbreaks. And commercial COVID testing is growing quite rapidly. Imaging revenues have fluctuated due to the Victoria lockdown and the outbreak clusters in other states. However, revenues are currently up in all states other than Victoria. And in Victoria, activity is starting to grow in line with the easing of restrictions. Our day hospitals division performed very strongly in the first quarter with revenue up 34%, and it made a positive contribution to the group's results. This also is continuing in October. There is a backlog of essential services coming through in all the divisions at present. We also believe COVID testing is likely to continue until such time as a vaccine is widely in use. However, the impact of the COVID-19 pandemic remains dynamic. Both our business-as-usual revenues and COVID revenues may be affected positively or negatively by any further outbreaks of COVID; federal and state government responses to these outbreaks, including further lockdowns, restrictions on clinical activity and increases or decreases in the community COVID testing regimes. They may also be affected by clinical advances in other testing capabilities and ultimately in the production of a vaccine. With this high level of uncertainty, we will continue to undertake periodic trading updates rather than providing guidance for FY '21. And as a caveat, we'd caution against extrapolating from 1 quarter's trading to the remainder of the financial year as we do not expect this level of performance to continue. Turning to our strategic initiatives. With the sale of medical centers, we will become a simpler and a more streamlined business with a stronger balance sheet and greater cash flow generation. Our near-term focus is on delivering growth to our shareholders by driving better margins and top line growth. Firstly, our Sustainable Improvement Program, or SIP, continues apace in FY '21. We addressed the low-hanging fruit in FY '20, and we're now looking at more complex but highly value -- but higher-value structural improvements as we aim to deliver margin growth and bring our businesses up to the best levels -- up to the levels of the best of our peers. Our focus for the next 3 years is as follows. The first major area is around digitization and automation. And this aims to do 2 distinct things: one, to improve the front-end experience for our patients, for example, with online bookings, referrals and results; and the other is automate the back-end processes. As an example of that, about 80% of receptionist time at our imaging sites is currently spent on making bookings, and we can free them up with automation. Another area is network optimization in our physical footprint of pathology collection centers and imaging community facilities and in our courier route network. And we've already reduced our collection center footprint by a net number of over 70 sites. And then there's workforce management. And this is also about 2 things: workload balance as we seek to improve efficiency; and improvements in our rostering tools to match supply and demand. We're currently looking at a range of useful applications which can roster staff dynamically. Reduction in our external spend, sitting at $750 million, as we instigate more direct sourcing and re-tendering of contracts. In order to lower our support costs as we complete the sale of the medical centers, we've already reduced our finance support head count from 192 to 60 and with an annual benefit of $7.2 million. The SIP program will include all capital investment, including our Laboratory Information System. And here, we continue to assess the right pathway for investing in a modern IT system, which mitigates risks, reduces technical debt, enables a single Pathology business, extends our customer-facing capability and extends our capacity to capture back-end efficiencies. Specifically, we are looking to make targeted modular investments that address each of these business objectives. Overall, our goal remains to have a better spread of benefits and costs over the next 3 to 5 years. We'll provide a more fulsome update on our solution set and the execution time line and the associated financial profile at the capital management update, which will be undertaken after the medical center sale is completed. In addition to growing our margins, our goal is to drive top line growth. And we aim to build a substantial third business in our day, or more correctly, short-stay hospitals. This sector has strong economic, technological and regulatory tailwinds as a lower-cost and clinically equivalent alternative to traditional overnight hospital care. The market is starting to appreciate the growth potential here. Apart from the continuing ramp-up of Montserrat's 4 newest facilities, which we expect to deliver strong growth, we will look to selective greenfield and brownfield sites and also M&A as we develop a diversified platform for the future. As the second and third largest players, respectively, in Pathology and Imaging, we will look to use our balance sheet on selective opportunities to grow. And we aim to become a great customer care organization in health in Australia, where the consumer is at the center of everything we do. I believe that in the future, it will become a matter of, "The patient will see you now." And consumers will expect their health care providers to enable them to transact online from booking appointments to telehealth consultations to receiving e-results and to respond to their feedback. I believe that those providers which can provide health care services combining consumer-friendly delivery with clinical excellence and cost efficiency will be sustainable into the future. To deliver this, we're currently moving to embed a range of customer experience tools, including the use of AI to establish data collection at every consumer touch point with the aim of driving a best-in-class customer experience across all our health care services. On the sustainability front, we remain committed to delivering the majority of our health care services as bulk-billed services, thereby enabling all Australians to access the care they need irrespective of the circumstances. We recognize that our people are at the core of our strategy and that only by having the best people and the best health care professionals are we able to deliver the best health care. To underwrite this, we continue to strive to be a workplace of choice for all health care professionals. We live our WE CARE values and to deliver on diversity, inclusion and equality. We also recognize that climate change is a global issue and that despite not being a major emitter, we have an opportunity to play our part in developing a pathway to a carbon-neutral future through initiatives such as solar panels, LED lighting, electric vehicles, recyclable materials where possible, waste reduction and ensuring ethical supply chains. And finally, while we already play a key role in society through the delivery of accessible care, we aim to develop a charitable foundation specifically to support health care in disadvantaged sectors in Australia both through financial contributions and through enabling our people and clinical experts to give of their time and expertise. I encourage you to read our second sustainability report, which will be issued soon. I'll now return you to your Chairman, Rob Hubbard, and thank you for listening.

[Audio Gap] processes used in our past AGMs may be changed. Before we move to the items of business, I want to make sure that everyone attending either online or via phone understands the procedures for asking questions and for those online, voting, so that everyone has full opportunity to participate. I will now hand over to our Company Secretary, Charles Tilley, who will explain the procedures.

Thank you, Rob, and good morning, everyone. First, I'd like to explain the procedures for questions. We are grateful to everyone for taking the time to attend today, and we want to ensure that shareholders have adequate opportunity to ask questions. Today, we will be dealing with all questions in relation to all voting items as well as any general questions in one single question-and-answer session. First, let me confirm that the right to ask questions is limited to shareholders, as has been the case in all our past AGMs. If you are not a shareholder, you will have been registered as a guest when joining this AGM online. This means that the buttons for asking questions and voting will not be activated in your case and you're in attendance as an observer. Similarly, for people joining by phone, only those registered as shareholders will be able to ask questions today. This year, we'll be taking shareholders' questions from 3 sources: first, questions that have been asked by shareholders in advance of the meeting using the instructions that were set out in the Notice of Meeting; second, questions asked by shareholders who have joined the meeting online today using the question utility within the Lumi website or app; and third, questions asked by shareholders who have joined the meeting by phone. [Operator Instructions] If you wish to make a comment rather than ask a question, please follow the same instructions as for questions. And if, for any reason, you wish to raise a formal or procedural point, please also follow the same instructions as for questions. [Operator Instructions] Please note that your questions may be moderated and summarized, if necessary, to avoid repetition and to ensure as many shareholders as possible can ask questions. Next, I'd like to explain the procedures for voting. Remember that only those shareholders or proxyholders who have joined online are able to vote at the meeting today. If you've joined by phone, you are not able to vote. As the polls have been open since the meeting commenced, you should be able to see the voting icon on your device's screen. It looks like a small column graph. When you press this icon, the voting screen will appear, and you will see votes available for business items 2 through 6. Remember, item 1 is not a voting item, so you won't see a selection for item 1. To cast your vote, simply press the button for your choice: for, against or abstain, which will then be highlighted onscreen. There's no need to do anything further, and to change your vote, simply press your new selection. Whichever option you have highlighted at the time the polls close or if you log out before the polls close when you log out will be recorded as your vote. There is no send icon or button needed for voting. Again, if you have not yet voted, I encourage you to lodge your vote now to ensure your vote is recorded. You can change your vote on any item right up to the closure of the polls. And Rob will provide a warning that the voting will shortly be closed for all items of business, and this should enable you to finalize and submit your votes if you've not already done so. Following the closure of the meeting, the results of the poll on each item of business will be released to the ASX and on the company's website. I'll now hand back to Rob to continue the formal part of the meeting.

Thank you, Charles. I now move on to the Notice of Meeting. The Notice of Meeting was sent to all members in the mail or electronically for those who have opted to receive it that way. In accordance with our usual practice, I will take the Notice of Meeting as read. Minutes of the previous meeting of Healius Limited, which was the Annual General Meeting held on Monday, the 25th of November 2019, were approved by the Board and signed by me as Chair of that meeting in accordance with Section 251A of the Corporations Act. The original minutes are tabled, and there is a copy of these minutes will be made available for inspection should any shareholder wish to see them. To do so, [ you may ] contact with the Company Secretary on [email protected]. I've also made rulings on the appointment of proxies. And I'm going to ask the Company Secretary to report to you on the matters of the proxies.

The number of proxy forms received by the company's registry, Computershare, by 11 a.m. on Tuesday, 20th of October 2020 was 627. And Rob as Chair of the meeting has ruled all of those proxy appointments as valid. In accordance with Section 251AA of the Corporations Act, the minutes of this meeting will record in respect of each resolution in the notice of this meeting the total number of proxy votes exercisable by all proxies validly appointed, the directions in the proxy forms and, where decided on a poll, the total votes in favor, total votes against and total of abstentions. I now hand back to you, Rob.

Thank you, Charles. There are a few other procedural matters which I need to deal with before we move to the question session. After the question session, each of the agenda items will then be voted on in turn. To ensure a full representation of our shareholders in this virtual meeting environment, I will determine that all items of business will be decided by a poll. Maria Dzopalic of Computershare will act as returning officer for the poll. Subject to any required voting exclusion, I will be voting all proxies available to me as the Chair of the meeting in favor of each item of business. Likewise, subject to any required voting exclusion, any open proxies received by the directors or other key management personnel will be voted in favor of each item. Before we move to the question session, I would like to ensure that all shareholders have an opportunity to hear from my fellow directors on the relevant voting items. Item 1 of the agenda concerns the receipt of the company's annual financial report. I would therefore like to invite Arlene Tansey, in her capacity as Chair of the Audit Committee, to speak on this item. Thank you, Arlene.

Thank you, Rob, and good morning, everyone. I also wish to acknowledge the custodians of this land, the Cammeraygal people of the Eora Nation and their elders past, present and future. I would like to express my thanks to Rob for his kind words and leadership and add my heartfelt thanks to the wonderful people at Healius, who have gone above and beyond during the COVID-19 pandemic. I would also like to thank my fellow directors and you, our shareholders, for your support during my time as a nonexecutive director. It has been an extremely fulfilling role to serve a company like Healius that plays such a key part in the health care of so many Australians. Turning to the 2020 annual financial report of your company. I note that our auditors, Ernst & Young, are online today should there be any questions for them. I will briefly explain some of the items that have made Healius' reported results a little more complicated this year. Firstly, there is the sale of our medical centers business, Healius Primary Care, which we announced in June. This business is accounted for as discontinued operations, and an explanation of the result is in note E3 to the accounts. In FY '20, there is a loss of $142 million from discontinued operations. This is predominantly made up of the noncash impairment of goodwill we were holding on the balance sheet for the medical centers. This year, there is also the impact of new accounting standard AASB 16 that has removed the distinction between operating and finance leases, resulting in almost all leases being recognized as an asset and a lease liability. A detailed explanation of the treatment is set out on Pages 80 and 81 of the annual report. The adoption of AASB 16 has reduced our reported net profit after tax by $9 million in this financial year. The impact of AASB 16 will vary year-to-year based on the number, length and age of our leases. Thank you for your attention. I'll now hand back to Rob.

Thank you, Arlene, and thank you once again for your contribution to Healius over the past 9 years. Item 2 of the agenda concerns the adoption of the 2020 remuneration report, set out on Pages 43 to 64 of the company's annual report. Explanatory statement, which accompanied the Notice of Meeting, describes the Board's policy on remuneration of directors and senior managers of the company. We'd like to ask Sally Evans in her capacity of Chair of the People and Governance Committee to speak to this item. Sally?

Thanks, Rob. Good morning, everyone, and thank you for attending our AGM today. I wish to acknowledge the custodians of this land, the Cammeraygal people of the Eora Nation and their elders past, present and future. I would also like to add my sincere thanks to all the amazing people who are part of the Healius family for their commitment during the COVID-19 pandemic. Turning to the 2020 remuneration report of your company, I would like to say a few words by way of background before we ask shareholders to vote on the report. Firstly, I am pleased to say that in a tough year for everyone impacted by COVID as we all were, both the Board and the senior team voluntarily took pay cuts to base fees for the Board and to base pay and annual leave allowances for the senior team. We also decided that no STIs should be paid in view of the company's performance and the sacrifices made by various stakeholders during the worst of the COVID national lockdown. These decisions are made in full agreement between Board and senior team. On the LTI front, no LTI was given in the year as the targets were not met for the FY '18 plan. We did, however, make the one-off grant of options to KMP under the 3-year transformation long-term incentive plan, which was approved at last year's AGM. While the number may look large, there is a long way to go before any options vest, if at all. The company will need to meet both TSR and EPS hurdles over a 3- to 5-year time frame. And if these hurdles are met, it should see all shareholders in a very good place. Finally, I hope you've found the remuneration report readable this year. We have continued the simplified format from FY '19, including a key outcome section upfront and a nonstatutory table showing the KMP's actual take-home pay at Section 4.2. Thank you. I will now hand back to Rob.

Thank you, Sally. Item 3 of the agenda concerns my reelection as a director. And customary with our local -- our historical practice, I'd like just to say a few words. I joined the Board of Healius almost 6 years ago and last stood for election in 2017. I'd like to give shareholders a short insight into what I believe is the contribution that I have made since my last election, why I believe I should continue to make a valuable contribution in coming years. Healius has a genuine opportunity to make a real difference. Doing well by doing good is a mantra that I adopt for all my corporate involvements. These are characteristics that I find in Healius. In Healius' case, this has never been more apparent than in 2020. Even putting to one side the huge contribution to COVID testing, Healius is a significant collection of businesses, employing many Australians and delivering affordable quality health care, sometimes in areas with limited government support like day hospitals and IVF, by being innovative, efficient and effective. Since my last election, the structure of the business has changed significantly with a growing day hospital business added to the group and the sale of the medical center business. I'm absolutely convinced that these changes to the group's portfolio will drive good shareholder outcomes, and so I remain confident that Healius will grow and prosper. I consider it an absolute privilege to serve on your Board and ask for your support in my election. I'm happy, of course, to take any questions in the up-and-coming Q&A section. Turning to the other items of business. Items 4 and 5 relate to the issue of securities under the short-term incentive plan. Item 4 relates to service rights issued to key management personnel and other direct reports to the CEO as part of any short-term incentive awards that may be made over the next 3 years. The effect of passing item 4 will be that any such securities issued not count against the 15% annual placement capacity of the company to issue new shares should we choose to do so. Item 5 relates to service rights that may be issued to the CEO as part of, and at this stage, it's hypothetical, short-term incentive awards that may be made by the Board to Malcolm in relation to FY '21. As [Audio Gap]

[Audio Gap] that occurs. We'll just adjourn the meeting temporarily for 2 minutes while our technical people attempt to restore the connection to Brisbane. I encourage you to remain online or on the phone, and I apologize to you for these difficulties. [Technical Difficulty]

[Audio Gap] STI awards to be made to senior executives this past year. If STI awards are made in FY '21, the details will be included in next year's remuneration report, which will be voted on by shareholders at next year's AGM. We therefore request your full support on items 4 and 5 to help keep management and shareholder interests aligned. Item 6 concerns amendments to the company's constitution. And as such, item 6 is a special resolution requiring 75% of votes cast to be in favor. These amendments are designed to keep our constitution, as one of the company's principal governing documents, up to date and in a position to afford shareholders maximum flexibility in attending, participating in and voting at general meetings of the company. Today's meeting is being held virtually under temporary COVID-19 relief measures granted by the federal government. These measures are currently scheduled to expire in March '21. Our experience and the experience of many other companies is that virtual meetings allow a greater opportunity for shareholders to participate without the need to travel long distances to the meeting. We want therefore to be in a position to capitalize should the government allow companies to conduct virtual meetings on an ongoing basis. If this occurs, it is highly likely that virtual meetings will still need to be authorized by the company's constitution, something that our constitution does not currently do. The virtual meeting amendments in item 6 will ensure that we are ready. I know that some market participants and, in fact, the Australian Shareholders' Association have expressed concern about fully virtual meetings. And I understand the reasons for this. So I can confirm your Board's intention is to hold hybrid meetings in future. The benefits of a physical meeting can be matched with the democracy of a virtual meeting. Similarly, technological developments mean that online voting is now the norm rather than the exception. Like the virtual meeting, direct online voting is only possible at the meeting through the federal government's COVID-19 special measures. Outside the COVID-19 exemptions, our constitution currently allows only online voting in events of a general meeting and then only through the proxy mechanism. By allowing direct online votes before and at a general meeting, your directors intend to facilitate greater shareholder access and participation of future general meetings. Finally, we propose to remove the requirement for Notice of General Meeting to include a fax number [ arrangement ]. Medical industry is somewhat notorious for still using faxes. And your new Board intends, in its -- in this small way, to provide some leadership from the top in removing this as an essential element for Notices of Meeting. It is 2020, and the time has come to remove the fax machine. For these reasons, your Board therefore requests your support on item 6 to amend the constitution to maximize shareholder access to and involvement in our future general meetings. We will now move to the question session. This is your shareholder -- this is your chance as a shareholder to ask questions about or make comments on the management of the company. These can be general questions, which need not relate to any specific item of business before the meeting. All questions will be directed to me in the first instance. I or someone more appropriate will answer your question. Now is also the time in the meeting where questions for the auditor may be asked. We've received no written questions for the auditor prior to the deadline. But if you have a question, it can be asked now. Again, any questions of the auditor should be directed to me in the first instance. The question session is also your opportunity to ask any questions you may have or make comments on the specific items of business before today's meeting, including questions about the financial statements, the remuneration report, my reelection, the approval of securities under the short-term incentive plan, the approval of securities being issued to Malcolm Parmenter under the short-term incentive plan and the proposed amendments to the company's constitution. After the question session, we will proceed to vote on each of the business items in succession. But it is important to note that there will be no further opportunity to ask questions, make comments or raise points after this discussion. We will start with questions submitted by shareholders in advance of the meeting. I will be assisted in the moderation of questions by Charles Tilley, our Company Secretary. Charles, could you please read the first question?

Thank you, Rob. We just had a small break in the feed from Brisbane. Just to ensure we are still synced, can you hear me speaking now, Rob?

Yes, I can, Charles.

Thanks very much. Firstly, questions that have been asked by shareholders before today's meeting. First of these is from [ Natasha Lee ], shareholder. Mr. Chairman, first, I would like to thank Rob and the Board for the 2020 results. Could you advise the total dollar amounts of government support received in 2020, for example, JobKeeper, et cetera? Over to you, Rob.

Thank you, Charles, and thank you, [ Natasha ], for that question. It's good to see your questions again this year. As I mentioned in my speech, we had support from the government to maintain pathology capacity in the early months of the lockdown. This was an essential element for us to maintain capacity, not just in our main labs but also in our rural and regional areas. I ask all shareholders to cast their mind back to those days, albeit it seems a very long time ago, when uncertainty was certainly the -- ruled the roost in all of our thinking. So it ensured we could meet their -- the government's need to maintain capacity. The level of support we received is disclosed in the annual report in the financial report. I'd like to just ask Maxine Jacquet, our CFO, in St Leonards, just to go more specifically into the items of support that we received. Maxine?

Thank you, Rob, and [ Natasha ], thank you for your question. So as you will have read in the annual report, our Pathology division did receive an estimated $11 million for the delivery of its services specifically in April. In addition to that, Montserrat and Healius day hospitals also received a combined $1.7 million in both JobKeeper and viability payments. Now since that time, $11 million, which we had booked in the annual report, we are in discussions with the government as this is obviously based on an assumed activity level. And that will be finalized in the coming months. Thank you, Rob.

Thank you, Maxine. Charles, if we could move on to the next question, please.

Thank you, Rob. Our next question, also asked in advance of the meeting, is from [ Natasha Lee ]. One of the risks set out on Page 35 of the 2020 annual report examined by the Board is economic drivers, population growth. Given the impact of COVID, with the expected reduction of international migration as well as the likely decline in birth rates, what population growth rates have been assumed in the modeling feeding into future projections? To you, Rob.

Thank you, Charles, and again, thank you, [ Natasha ]. I think we've all become very familiar with the economic driver that our immigration policy and population growth has been to Australia over the next 20 or 30 years. And I, as I think many people do, remain confident that once COVID is behind us, that strategy of positive immigration will continue. But when that will be is uncertain. In the short term, we will have to adapt and adopt accordingly. It is mitigated by a continuing aging of our population. And as we have spoken before in the past, that aging demographic is a major user of our services. But in that medium term, short to medium term where we have to adapt and change, I'd like Malcolm Parmenter just to go into a bit more detail about the specific approaches and mitigations that we have for this. Over to you, Malcolm.

Thank you, Rob. There are a number of uncertainties about where we are right at this point in time. I think lower population growth is probably one of the more certain parts of where we're headed over the next little while. And we would expect population growth to be flat for the next couple of years, I would have thought over that period of time. As Rob has said, though, there are mitigating factors around this. There are actually positives and negatives to where we see this headed in the next little while. We believe that the other things that could be a drag on performance over time are things that relate to the sort of general economic climate that we expect over the next year or 2 as unemployment rises. And although health care is relatively immune to that, it does have some impact in terms of people's willingness to spend over that period of time. There's also some other things around COVID and self-isolation that you may not think about. But the added hygiene measures that we have in place in most parts of Australia, with masks and self-isolation at times with social distancing 1.5 meters apart, they not only prevent COVID. They also prevent most other viral infections as well. So there are drags in terms of where health care goes. I mean they're positive things from the population's perspective. On the other side of things, as Rob mentioned, we still have an aging population that -- where demand for health care increases over that period of time. But we also expect that COVID testing will continue for some time yet. And certainly, our view is that will continue for the rest of this financial year. And look, it's unlikely that a vaccine will eliminate COVID altogether and that testing will continue to -- for some time into the future after that. So many variables to look at in terms of where forecasts go. It's one of the reasons why we don't have a -- we're not trying to provide guidance for this financial year in that it's very difficult to be able to do that. So hopefully, that gives some color to your question, [ Natasha ].

Thank you, Malcolm. Charles?

Thank you, Rob. Our next question, and this is the final question that was asked in advance of the meeting, is also from [ Natasha Lee ]. Given the resignation of Errol Katz announced at the 2019 AGM, does the Board intend to fill this vacancy? If so, I would encourage that the Board look to improve its level of female participation. What is the Board position on achieving best practice of at least 40% female representation on Boards? Over to you, Rob.

Thank you, Charles. As I referred to in my speech, the Board established a policy of a minimum of 40% female participation in the boardroom. We've set ourselves a target of achieving that by 2021, and I will be very disappointed if we do not achieve that earlier than that. We have made an appointment today effectively as a replacement for Arlene with Arlene stepping down, so not specifically related to Errol resigning last year. And we hope to be making an appointment either this year or in the first half of next calendar year. But that is now our formal policy: 40%, 40%, 20%. Thank you, Charles. Are there any more questions that we received in advance of the meeting?

Thanks, Rob. There are not. And so I will now move on to questions which we have received online during the meeting. The first question is from the Australian Shareholders' Association regarding item 1. Imaging, the second-largest division of Healius, is in perhaps a more awkward position than Pathology being the third-largest group in the country, whereas Pathology, being in second place, has just one main competitor. How likely is Imaging to be able to change its ranking over the next few years through the strategies outlined in the annual report? Over to you, Rob.

Thank you, Charles, and thank you to the ASA for that question. It is clearly one of the strategic questions that the company faces. We have a very, very good Imaging business. It is #3 in the marketplace but not by very much from the second-place provider. There is opportunity to make acquisitions, but we're very disciplined in our approach to acquisitions. Better growth is by winning market share, and we have great capability in our hospital contract business where we support many of the public and private hospitals in the country. We have ambitions to grow the business, but we also have ambitions to improve its performance because the fitter the business, the more attractive growth opportunities are. So as we go through the next year or so, we'll probably be more specific about our ambitions for Imaging, but I hope that answers the question of the ASA. Charles, next question, please.

Thank you, Rob. Our next question comes from Buzz Fund Proprietary Limited. Has FIRB approval been granted for the sale of the medical centers division? And FIRB being a reference to the Foreign Investment Review Board. Over to you, Rob.

Thank you, Charles. The acquire -- the purchaser of our medical center business is BGH Capital. Because of where they source -- which is an Australian private equity group. But because of where they source capital, they're obliged to obtain approval from the Foreign Investment Review Board. That is primarily their responsibility, of course, and I don't want to speak on behalf of BGH. But as we go through the process for completion of the medical center sale, all indications are that, that approval should be forthcoming, although it has not been formally received by BGH at this stage is my understanding. Charles, next question, please.

Thank you, Rob. We are currently showing no more online questions. I'd just invite anyone else who would like to submit a question online to please do so now. Otherwise, Rob, I think we can move to any questions on the phone. And I'm just being advised that currently, we have no questions on the phone. [Operator Instructions]

Thank you, Charles. Yes, we'll just pause for a moment. If people have questions and the technology is troubling them, I just want to wait a moment so their question does not go unanswered. So it looks like that we have no further questions. I'd like to thank everybody for their contribution and those questions. They were all highly valuable.

I now need to -- for the purposes of the AGM and compliance with the corporations law, to run through each item of business specifically and identify the proxies and give one last opportunity to vote on each resolution before the meeting. Moving to agenda item 1. The company's financial statements and reports of the directors and auditors for the financial year ended 30 June 2020 are before the meeting. I note that we have opened the matter for discussion during the question session and that discussion is now closed. No vote is required in relation to this item, so I will move on to item 2. Item 2 in the Notice of Meeting seeks the adoption of the 2020 remuneration report. And we have opened this matter for discussion earlier, and the question session is now closed. I will now report the position as to valid proxies in relation to the adoption of the remuneration report and say a few words about the proxy position. The proxy position is 98.55% in favor of the report with in excess of 80% of shares being voted. So I thank shareholders for the turnout and the significant support for the remuneration report. I will now formally put to motion that the remuneration report for the year ended 30 June 2020 be adopted. As previously directed by me, we will now proceed directly to the poll. As I've mentioned, the poll for this item is now open and has been since the meeting commenced. To vote for the resolution, against the resolution or to abstain from voting, please press or select the corresponding button on your device's screen. To change your vote, simply press or select your new choice. The poll will remain open for the remainder of the meeting. We will now move to the next item of business. Since the next item of business is my reelection, I will ask Sally Evans to move this item. Thank you, Sally.

Thank you, Rob. I note that we have opened this matter for discussion during the question session and that the discussion is now closed. I will now report the position as to valid proxies in relation to the reelection of Rob and say a few words about the proxy position. As you can see on your screen, it appears from the lodged proxies that there is strong shareholder support for the reelection of Rob as director with the percentage of votes directed in favor of the resolution at just under 98%. I now put to motion that Robert Hubbard, a nonexecutive director, retiring in accordance with the company's constitution and being eligible for reelection, is reelected as a nonexecutive director of the company. As previously directed by the Chair, we will proceed directly to a poll. As the Chair has previously mentioned, the poll for this item is now open and has been open since the commencement of the meeting. To vote for the resolution, against the resolution or to abstain from voting, please press or select the corresponding button on your device's screen. To change your vote, simply press or select your new choice. The poll will remain open for the remainder of the meeting. That concludes item 3. And I pass the Chair of the meeting back to Rob to move to the next item of business.

Thank you very much, Sally. Item 4 of the meeting concerns the approval of issue of securities under the short-term incentive plan. I'll now report the position on valid proxies. This resolution has a percentage of votes in favor of 98.28%, and so there is clearly strong support for this resolution. I will now put to motion that for the purposes of Listing Rule 7.2, exception 13 and for all other purposes, the issue of securities under the short-term incentive plan, the terms of which are described in the explanatory statement to this Notice of Meeting, be approved. Voting will proceed by poll, adopting the instructions we have mentioned in the previous resolutions. However, the poll remains open through the course of the meeting. I will now move to item 5. This resolution concerns the approval of acquisition of securities by the Managing Director and Chief Executive Officer, Malcolm Parmenter, under the short-term incentive plan. Looking at the valid proxies, the percentage in favor is 98.29%. Again, strong support for this resolution. I will now formally put to motion that approval is given for all purposes for the grant or issue of securities under the short-term incentive plan to the Managing Director and Chief Executive Officer, Malcolm Parmenter, in the manner set out in the explanatory statement to the Notice of Meeting. The voting poll remains open and will remain open for the remainder of the meeting. I now move to the last item of business, the amendments to the constitution, and remind shareholders that this requires a special resolution and 75% vote in favor. The valid proxies are -- percentage of votes in favor are 94.48%. And so we have strong support for these changes in the constitution. I will now put the motion as a special resolution that the company's constitution be amended with effect from the close of the meeting in the manner set out in Attachment B to the Notice of the Meeting. Voting is continuing by poll. And since this is the last resolution, I will repeat the instructions for voting. To vote for the resolution, against the resolution or to abstain from voting, please press or select the corresponding button on your device's screen. To change your vote, simply press or select your new choice. Before I close the poll, I'll just give you a few seconds to complete any voting. [Voting]

Thank you. As we have now reached the conclusion of the formal business of the meeting and having paused to allow shareholders to vote and finalize and submit your votes, I will look to close the polls on all items of business. Thank you for all of you who have attended the meeting today. I declare all polls on all items of business closed, and that concludes the business of the meeting. The results of today's polls will be published on the company's website and to the Australian Securities Exchange later today. I declare the meeting closed. And I look forward to seeing shareholders, hopefully as many as possible, physically next year. Whilst this has been a very good way of protecting the safety of our shareholders and stakeholders, it is nothing quite like meeting shareholders directly, and I look forward to that. Thank you very much, and have a good day.