Healius Limited (HLS) Earnings Call Transcript & Summary

Good morning, everyone. My name is Jenny Macdonald, and I'm Chair of the meeting. Welcome to the 2023 Annual General Meeting of Healius Limited, and thank you for joining us. I'd like to begin by acknowledging the traditional owners of the land on which we meet today, in particular, aboriginal owners of the Eora Nation and pay my respects to elders past, present and emerging. It is past 11 a.m. Sydney time, and as the company secretary has informed me that a quorum is present, I declare the meeting open. This is a hybrid meeting. Shareholders have the option to participate and vote either in person here in the room or online through the Computershare AGM platform. Here in person with me today in Sydney, we have the following members of the Board of Healius: Maxine Jaquet, our Managing Director and CEO; Gordon Davis, Sally Evans, Kate, Professor John Mattick, Dr. Michael Stanford and Charlie Taylor. Also with us today is Ravi Jeyaraj, a nominee put forward by Tanarra Capital for election as a Non-Executive Director. The agenda includes the following items of business. Mr. Charlie Taylor and Dr. Michael Stanford are standing for election today as Nonexecutive Directors. Mr. Ravi Jeyaraj, a candidate proposed by Tanarra Capital, is also standing for election today as a Nonexecutive Director. In terms of remuneration, we are seeking the approval of the remuneration report and your approval for the issue of securities to Maxine Jaquet under the long-term incentive plan. We seek your approval for the issue of share rights and restricted shares to Nonexecutive Directors under the Nonexecutive Director Share Plan and also an increase in the Nonexecutive Director remuneration pool. A few brief housekeeping points. If you need assistance in the room, please raise your hand, and one of the Computershare team will assist you. For those online, a guide on how to participate was made available with the Notice of Meeting and also how to access assistance if required. I declare the polls in relation to all items of business are now open, and we will confirm when voting is about to close. Votes in the room will be collected at the end of the meeting. Questions will be addressed through the course of the meeting. Having covered the procedural matters, I would now like to take a moment to say a few words about the past year and some recent developments. Unquestionably, 2023 has been a challenging year for Healius. I want to start by acknowledging the disappointment held by shareholders with both the financial position and the share price performance of your company. I can assure shareholders that the Board shares this frustration, along with the management team, is absolutely focused on taking action to strip the company, improve performance and maximize value for shareholders. Nevertheless, in recognition of feedback from investors in the lead up to this meeting, shareholders would have been aware, I recently informed the Board that I would be stepping down as Chair at the conclusion of this meeting. Leadership stability will be crucial for Healius as it further progresses the work required to ensure that it's positioned to take advantage of the strong long-term fundamentals for the Australian health care sector. While we have made some important progress in the past 12 months, our plan requires stability to ensure management is able to further progress our work and allow time for the benefits to emerge. In stepping down as Chair, my objective is to provide stability for the business. At the conclusion of this meeting, Nonexecutive Director, Kate McKenzie, will assume the role of Chair on an interim basis. Kate is one of Australia's most experienced corporate leaders, holding Board and executive roles with both public and private organizations. I pointed to the Healius Board in February '21, Kate is the Chair of the NBN and a Nonexecutive Director of Stockland and AMP. Under Kate's stewardship, the Board will commence a formal process to identify and appoint a suitable candidate for the role of Chair. An executive search firm will be engaged to support the process. It's crucial that we get this appointment right to build on the important work undertaken by the team over the past year. Since our full year '23 financial results announced in August, the Board has had to make a number of difficult decisions in recent weeks to reset our balance sheet with appropriate gearing. Our debt providers agreed to waiver our net covenants for the first half '24 and temporarily increase covenant headroom for full year '24 on the proviso we reduced net debt by at least $150 million. To achieve this, the Board undertook a pro rata fully underwritten accelerated nonrenounceable entitlement offer to raise $187 million. Following the completion of the offer, Healius expects to have sufficient financial flexibility and liquidity to navigate near-term cost pressures in a post-COVID recovery market as well as undertake disciplined investment in its core businesses as industry volumes recover over time. We understand and acknowledge that many shareholders were disappointed at our decision to launch a capital raising at this time. Raising equity in the current market was not our first choice. The Board and management considered alternative options, including asset sales that could satisfy our lenders' requirements to reduce the net debt by at least $150 million prior to 30 June '24. However, the timing and outcome of these processes was considered too uncertain. The Board judged that a pro rata equity raising was the preferred option to provide Healius with more appropriate gearing with which -- to manage challenging market conditions. Shareholders will also be aware that in March '23, Australian Clinical Labs made an unsolicited or script reverse takeover for the company. In May '23, the Board unanimously recommended that Healius shareholders reject the offer. The recent ACCC's preliminary hearings were strong concerns about the potential merger, and the Board confirms that the offer remains highly conditional and uncertain to proceed. The ACCC's final decision is not expected until later this year. Let me now take you through the significant changes in the management and at Board level. In March '23, our previous CEO, Malcolm Parmenter, stepped down from his role and Maxine Jaquet was appointed as the new Healius CEO and Managing Director. Maxine made an immediate impact in her new role with several key appointments to the Healius executive leadership team, including Paul Anderson as our Group CFO, Dr. Jan Van Rooyen as the group executive to lead the pathology operations; and Dr. Phil Lucas as Group Executive of Lumus Imaging. That means that in the past 9 months, the foremost senior roles in the company have been filled by new executives who have made considerable change throughout the business. The Board has great confidence in the newly-formed executive leadership team led by Maxine. The Board is determined to give them the support and stability they need to complete the transformation underway across the business. We've also been pleased to welcome 2 new directors to the Board in 2023. Firstly, Charlie Taylor, appointed March '23; and in September of this year, Dr. Michael Stanford was appointed. You may be aware of media reports where the Chairman of ACL raised questions by e-mail around Dr. Stanford's independence. Boards are required to opine on whether a Nonexecutive Director is considered independent. On receiving the e-mail, the Board made inquiries of Dr. Stanford and remain satisfied of his independence. Also standing today for election is Ravi Jeyaraj, who was nominated by Tanarra Capital. This will mean 3 new directors on the Board in the space of a year. As Chair, it's been my intention to continue that Board renewal process in an orderly way to provide stability and a strong focus on schools needed for the benefits of the business. The Board renewal process will now continue under a new chair. All nominations are unanimously supported by your Board, and you will have the opportunity to hear from each of the nominated directors during the formal business of the meeting. I'd like to acknowledge the dedication of the entire Healius team that has faced several challenging years. Their unwavering effort and dedication to the business, especially through this recent period of significant transformation, is an inspiration. I'd also like to thank my fellow Board members and management team and wish them well. And finally, I'd like to thank you, our shareholders, for the patience during these challenging times and your continued support for the business. I will now hand over to our CEO, Maxine Jaquet, to take you through her presentation.

Thank you, Jenny, and thank you, everyone, for joining us today in person and remotely. I also want to thank you, shareholders, for your continued investment in Healius, in the health care sector and in better health outcomes for all Australians. I would also like to introduce our team who are leading the change agenda. Dr. Jan Van Rooyen, our new Head of Pathology; Dr. Phil Lucas, Head of Imaging; and Paul Anderson, our group CFO. All 3 of these senior leaders are new to Healius in the past 9 months. They hit the ground running and immediately started making significant changes to improve the business. It's good to remind ourselves that diagnostics is a critical part of the nation's health infrastructure. The pathology sector sees a million Australians each week and imaging season, another 0.5 million. As the leading Australia-focused diagnostics operator, Healius is fundamental to this. Our people are proud of that, and we hope that you are too. In pathology, the sector will continue to have a critical role in the diagnosis and management of most diseases. Furthermore, early screening and diagnosis is fundamental to reducing downstream health care costs. The clinical reality is that 100% of cancer diagnoses rely on pathology and 70% of all treatment decisions rely on pathology. At Healius, our diagnostic technologies are constantly evolving to meet more complex health demand. Some recent examples include improved access to cervical cancer screening using self-collected samples. Medicare funding is also recognizing a broader scope for pathology and genomics. Starting this month, reproductive genetic carrier screening for cystic fibrosis, spinal muscular atrophy and Fragile X syndrome will be 100% bulk-billed subject to Medicare eligibility criteria. The combined power of pathology and imaging will continue to solve some of medicine's most difficult diagnostic questions, such as around Alzheimer's disease, where today, we use PET imaging, but in the future, we will also use pathology such as Healius' [ C2N ] test. We have recently launched bundled services for ultrasound and noninvasive prenatal pathology to offer more comprehensive prenatal testing to mothers with more efficiency and value. Beyond these new items, the industry is working with the Department of Health and Aged Care to reintroduce indexation to pathology, which has been frozen since the 1990s. We believe there is a compelling case for government to respond to this, a critical component of the nation's public health infrastructure. Healius is integral to national screening programs, and is in over 2,000 locations, including low socioeconomic areas and remote indigenous communities. The scale and significance of our services require the security of sustainable funding arrangements. This has already been done in primary care and medical imaging, and we hope to see such an approach replicated for pathology. Over the coming months, we will be more proactively engaging on these matters. There are a number of underlying drivers in pathology that we believe will enable the pathology market to recover and grow again at the long-term average. Jan was appointed a few months ago to lead the Healius Pathology business out of the COVID transition and into future growth opportunities. He is especially qualified to this, being a pathologist by training and leading South Africa's fastest-growing pathology business Ampath over 2 decades. I would also like to announce that Agilex is entering into a commercial agreement with SGS. One of the world's largest laboratory companies headquartered in Geneva, Switzerland. The agreement allows both Agilex and SGS to offer the biotech industry a global solution for bioanalytical analysis from research and development and preclinical work to all 3 phases of clinical trials. The network will include laboratories in Australia, China, U.S.A., France, Switzerland and Belgium. Agilex is focused on preclinical and Phase I trial work, offering the Australian advantages of shorter time to trial and the R&D tax rebate incentive, will be an excellent fit with SGS' predominantly Phase II and III existing network. A focus of the network will be the alignment of equipment and processes to provide a low risk transfer of work. Turning now to the diagnostic imaging market. This market looks to be reverting to the long-term trend of 6% to 7% growth, and pleasingly, Lumus Imaging outperformed the market over the financial year 2023. As mentioned earlier, recent trading in financial year 2024 showed Lumus growing in line with the market. The medical imaging market is driven by the modality mix. By that, I mean the mix of technologies and equipment we use in our Medical Imaging business. Higher growth correlates to higher complexity, being MRI, nuclear medicine, which includes PET and CT. Our strategy is to grow these high-end modalities via an existing community site footprint. This aligns to the clinical need across the major disease burden in the community, such as cancer, cardiovascular disease, neurological disease and metabolic conditions. Dr. Phil Lucas was appointed in January to lead Healius' Medical Imaging business, Lumus Imaging, to execute our growth strategy. A leading musculoskeletal radiologist, Phil, also combines commercial experience in rapidly scaling high-quality radiology business. He was a Director and a founding partner of PRP Imaging for 15 years. Turning now to sustainability. There are 4 key priorities, which we think are plainly good business. We are ensuring our support cost base is appropriate for our size, complexity and risk. We are protecting our patient and clinician data. We're engaging with our customers and our employees and responding to their feedback. And we are doing what we can to reduce global emissions despite our small footprint. Specifically, on cybersecurity, we have upgraded an aging fleet of firewalls, established a 24/7 Security Operations Centre with continuous threat monitoring across the Healius networks. We've also implemented user access control mechanisms, implemented backup and disaster recovery solutions for critical business systems and enhanced our staff training and awareness around phishing risks. In terms of the current trading for the first quarter of FY '24, core pathology volumes grew 6% compared to the prior period. Our share of total MBS benefits remained stable at around 24% despite the ongoing weaker recovery in GP consultations compared with specialists. For Lumus Imaging, gross revenue was up 9% on the prior period, which was in line with the market. As we announced, we expect FY '24 underlying EBITDA to be between $383 million and $393 million, with an EBIT of $95 million to $105 million. We are confident that the diagnostics markets will grow steadily in Australia in line with demographic-based clinical need, with the dislocation caused by COVID being a temporary period. The underlying demand drivers remain strong, including a growing and aging population with greater longevity and more complex health issues. Moreover, early diagnosis, detection and prevention are the best ways to reduce downstream health care issues and costs for Australia. With the need for Medicare funding and future indexation to recognize this. These are market conditions where we have strong expectation but where we don't control the outcomes. What we do control is our strategy and how we operate the business day to day with patients and referrers. You will shortly hear more on this from Jan and Phil. We will also be focused on discipline, capital, dividend and balance sheet management. And I look forward to updating you on our progress in coming months. Thank you for listening. We will now hear from Dr. Jan Van Rooyen and Dr. Phil Lucas. Thanks, Jan.

Good morning. Thank you. Thank you, Max. As mentioned, I've had the privilege to serve in a similar position for nearly 20 years in South Africa, and during my tenure, we merged 6 different businesses into 1 brand and standardized operations with 1 laboratory IT system. This enabled us to build a fully automated mega laboratory that become our reference lab supporting the regional labs. Using that platform and our pathologists, we developed a competitive offering and grew the group into a market leader and high concentration of specialist referrals. The same set of circumstances is present here. I'm very happy to share with you that over the last 5 months, I have gained confidence that it can be replicated in Australia. In terms of revenue growth, we have been working on transitioning Healius Pathology's front end into a desired service from a patient care perspective. We are improving our call centers nationally with new software. We are enhancing our collection center staffing and open times, and we act on thousands of bits of feedback provided each month by our patients. We are helping our referrers with a new portal that is modern and simple to use, where they can easily access the patient's results. We are busy with growth initiatives into segments where we are underpenetrated, leveraging the value we have with our excellent pathologists and assisting referrers with patient outcomes. New areas of growth, especially in screening, as Max mentioned, enable earlier intervention, and this helps, obviously, patients. A good example would be the recent carrier screening done by Genetics division, which is now fully reimbursable with Medicare, as you've heard. In terms of restructuring our costs, of course, a more consolidated, automated, digitized lab network is the way to drive a real step change in cost base beyond the rightsizing that we've recently done. We are working on a plan to do this. Our digital initiatives support and enable all these strategies, including one laboratory, IT system and standardized operations. So in summary, looking forward, I believe we can unlock value with these initiatives. And this will gain, of course, significant momentum if we succeed in getting indexation for our services, which, as you may know, mentioned by Max, that we've not had since the 1990s. All these initiatives are being pursued at Healius Pathology. And I'm happy to be here, and it really excites me to be part of a strong and capable team. So Diagnostics for Life on the journey to make Healius one group, one culture and one easy way of helping our patients with better health outcomes. We will now hand over to Dr. Phil Lucas on prerecorded video. Thank you.

Hi. I've been at Lumus Imaging now for 11 months, and it's a great place to work. I've been all around the country and seen our 150 clinics in operation, our staff, approximately 2,000 of them and seen how they're all working together in a very collegiate way. We are strategically well positioned for growth, with a large footprint of community and hospital clinics across the eastern states and an engaged leadership with extensive industry experience. We also have strong industry tailwinds, including indexation of 3.6% and 0.5% in the MBS that occurred this year as well as a continued expansion of ability to charge out of pockets, currently at 15% of our services, up from 10% from when I started. We've also seen a significant shift of the mix of the modalities to the higher end, with strong growth in PET and CT. We have a clear strategic focus and vision built on 3 core pillars: our people, our quality and our customer experience. It's not rocket science, but if we deliver on these strategies, we'll have sustainable growth and improved shareholder returns. We're investing in our clerical staff to elevate their status in our business and make sure that they feel listened to and able to achieve what they need to, to make our customers' experience and our patients' experience a lot better. We're looking at ways we can improve the training of our technical staff and support their career and growth. We're actively recruiting technical staff to fill the gaps in our roster so that we can support the service demand that's out there. We're also recruiting the best young and senior radiologists that are in the marketplace to come and join Lumus, and this has been successfully occurring due to our new contracting models, with 21 new radiologist last year, 6 new radiologists signed since July, with a double-digit pipeline going forward this year. The cultural change we are driving will bring these people to our business. From a customer experience perspective, we are focused on improving every patient and referral interaction. We are rapidly catching up and targeting to overtake our competitors with the solutions being developed by Healius digital team. We've rolled out our digital phone system over last year and are launching our online booking platform in the third quarter. We're expanding our e-referral platform as well. We are currently piloting a number of AI solutions across the business, with a focus on lung cancer screening in preparation for the lung cancer screening program in July 2025 as well as AI for brain demyelination detection and coronary artery CT angiogram analysis. AI will play a critical role in our business going forward and help our clinicians deliver better diagnosis and clinical outcomes as well as improving their overall efficiency. From a growth perspective, we are focused on the execution of our community site strategy to grow average revenue per site to over $5 million per site over the whole network. Nundah in Brisbane relocation is completed, with the MRI being installed as we speak, and further MRI expansion at Keperra now completed and MRI in North Lakes to start in December and January in Queensland. We have a clear pipeline plan to execute on this strategy over the next couple of years. We also continue to expand our network with strategic greenfield sites, including [ Narangba ] in Brisbane launching in the second half. Jimboomba in Queensland with a rebatable MRI and Gregory Hills Western Sydney, both launching in the first quarter of year '25. We are developing strategic partnerships with key specialist groups, including oncologists with PET scanning and a large cardiology group with CT angiography services. We also continue to focus on expanding our hospital footprint across both the public and private sector. We've successfully won the North Sydney LHD contract, which will commence on the 4th of December with a radiology reporting contract-only as well as further tenders at foot with the public sector. We've also successfully secured long-term leases at the Northern Private Hospital, Ramsay Hospital as well as La Trobe private Hospital, a Healthscope hospital in Victoria, both departments opening in February 2024. These key strategic initiatives, supported by strong focus on clinic -- profitability, will position the business for growth and margin expansion over the next 3 years. Thank you very much.

We'll now move to the formal part of the meeting. The Notice of Meeting was provided to all shareholders. In accordance with the usual practice at our AGMs, I will take the Notice of Meeting as read. The minutes of the previous meeting of members of Healius Limited, which was the Annual General Meeting held on the 20th of October 2022 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 a copy of these minutes will be made available for inspection at the registration table and to those shareholders who request a copy. The meeting will consider each item of business in turn. The proxy position will be reported, and there will be an opportunity for shareholders' questions before the item is formally put to the meeting and voted on. In the interest of any efficient -- of an efficient meeting, shareholders will be limited to asking one question at a time. This year, we will be taking shareholder questions on each item of business in the following order. First, questions by shareholders attending in person, here today. Second, written questions asked online. And finally, spoken questions asked via the phone line. When we invite questions from the room, please raise your hand to make yourself known and wait until a microphone is brought to you. Please confirm you are a shareholder by showing your blue or yellow attendance card. Before asking your question, please give your name, and if you represent an organization, the name of that organization. Mary Weaver, our Group Company Secretary, will then ask questions that have been submitted via the online platform. Finally, our conference moderator will then proceed to ask callers in turn to ask any questions over the phone. For shareholders who are in the room who have not voted, you will need to complete the back of the blue card, which will be collected at the close of the meeting. For shareholders online, the voting icon is on your screen. When you press this icon, the voting screen will appear and you will see votes available from items 2 through 9. Please note that as Item 3 has been withdrawn, there will be no voting recorded on that item online or in the room. To cast your vote, press the button of your choice, and to change your vote, simply press your new selection. Whichever option you have highlighted at the time the polls close will be recorded as your vote. Following the close of voting at the end of the meeting, the results of each item of business will be determined and posted on the ASX and the company's website. The number of proxy forms received by computer -- by the company's registry, Computershare, by 9:00 a.m. on Sunday, the 26th of November was 513. All proxy appointments have been ruled as valid. In accordance with the Corporations Act, the minutes of this meeting will be recorded in respect of each resolution in the Notice of Meeting. The total number of proxy votes exercisable by all proxies are validly appointed. The directions in the proxy forms and the total votes in favor, total votes against and total votes of absensure. To ensure a full representation of our shareholders in the hybrid meeting environment, I have determined that each item of business will be decided on a poll. Maria Dzopalic of Computershare will act as Returning Officer of the poll. Subject to any required voting exclusions, I will be voting all proxies available to me as the Chair of this meeting in favor of each item of business. Likewise, subject to any required voting exclusions, any open proxies received by the directors or any other key management personnel will be voted in favor of each item. Moving to Item 1 in the Notice of Meeting. The company's financial statements and the reports of the directors and auditors for the financial year ended 30 June 2023 are before the meeting. Item 1 in the Notice of Meeting concerns receipt of the company's annual financial report. Turning to the 2023 annual financial report of your company, I note that shareholders may ask questions on the report or the management of our company. Our auditor, Ms. Katrina Zdrilic, from EY is in attendance today, should there be any questions in relation to the preparation or conduct of the audit.

We will now take questions. To ask your question, please raise your hand and a microphone will be brought to you. As there were questions submitted in advance of the meeting, we will start with a question from [ Natasha Lee ]. Natasha, there you are. Could someone please get Natasha a microphone?

Thank you, Madam Chair, and thank you, Board. You said one question. Do you want one question at time?

Yes, we'll go one question and then we'll go to other shareholders.

I just wanted to check on protocol. The first question, I know that the company has progressed to build a doctors portal and patient portal. You may recall that I did raise the issue of moving towards electronic means to communicate results last year. I'm pleased to hear about this development, but could you elaborate on the time frame to finish these portals and the estimates and the savings these will generate?

Yes. Thanks, Natasha. Thanks for the question, and you did raise it last year, which was good.

Taking credit for it, but...

No. So we're about 50% of the way through the digital transformation. The envelope for spend for the transformation was $90 million. In 2023, we recorded $22 million in the P&L as a nonunderlying item. In this year's budget, we've got $20 million for it as well. This has been a wonderful thing for us because it's going to help our revenue initiatives, a specialist -- especially with our specialist strategy. The e-referral platform is very important to our clinicians, and they, of course, will help us in terms of referral. In terms of the benefits that we're going to get from it, it really will be of revenue initiatives. It will be making sure our legacy systems are not there anymore, and we've got up-to-date systems. There will be -- in terms of our people, they will be working on more nonmanual labor type of work. And we'll also, of course, save on paper, et cetera. So we're really very excited about this digital transformation, and we do have one of our executives in here, who actually is Prasad, who is the Group Executive of the Technology and Digital. So he's the man leading that program.

I'm excited about the development as well.

Yes, there's another question over there.

Thank you. I've got a few comments to make, Chair, as per the Corporations Act, and also one question. Good morning, everyone. It's sure been a massive pile-on of heavy criticism since you announced the emergency rights issue. It's been a real bloodbath, maybe even a circus. A few years ago, Board seats were a cozy sinecure. Not anymore. Each director is now accountable for bad results. Maxine and I had a Zoom call with you 8 months ago when the stock was $2.75. I raised major concerns with you. Thankfully, I was underwhelmed, so I didn't buy any shares at that time. You concluded our Zoom call that you hope the next time we spoke, I would not slam HLS again. Sadly, Healius has gone from bad to worse. Stock is down from a peak 2 years ago of $5 to the current $1.30, $1.40. That's a reduction in market capitalization of $2 billion. This is a great Australian health care company, huge market shares in fundamental business, Pathology and Radiology. We all use them. It's an iconic company. Given that, it really is totally unacceptable for the Board to have presided over such a destruction of shareholder value. And in that, I include Board members who have resigned in the last year. Shareholders have entrusted the Board with their investments to achieve a strong total shareholder return. That's what it's all about, a combination of dividend and capital growth. Shareholders want to see 3 deliverables from the Board. Number one, earnings and cash flow. Now that's a miserable fail. Since the COVID spike, Healius has delivered poor earnings and poor cash flow, another major earnings downgrade recently, feeble underlying EBIT of $14 million to $17 million for the first half 2024. That's the forecast. For a company of this size, $14 million to $17 million in a half year is unacceptable. The second deliverable shareholders want from the directors is strategic management. Now that's another woeful fail by Healius. Terrible purchase of Agilex. The adviser involved also should be reviewed. You mentioned your Day Hospital Business was meant to be a key growth pillar. Wow, shortly thereafter, that business had failed, and so it was sold at a weak price, another failure. It's also worth noting that the Board -- not the current Board, the previous Board in 2020 rejected a $3.40 takeover bid. Looks pretty good now. The third deliverable that shareholders want from the Board, each and every one of your directors, is capital management. Now sadly, that is another terrible fail by the directors, including the previous ones. You got an injection of nearly $500 million from the sale of the GP business. Wow, have you wasted that? $300 million waste on Agilex, way overpriced. Crazy buybacks in the high 2s up to the $4 range, buying -- spending all that money on buybacks that are priced massively over the current level. Halleluia. You then bridged your banking covenants because you've mismanaged your capital terribly, and therefore, forced into a destructive rights issue at a massive 30% discount to TERP. Again, I think Barrenjoey had been pretty generous with that price. It seems like too big a discount to me. As in baseball, 3 strikes and you're out. So what's happened here? The Healius C-suite has been a revolving door. In September 2022, the Chairman, Robert Hubbard, stepped down. That's great. He didn't do a good job in my opinion. December 2022, CEO, Malcolm Parmenter, stepped down in favor of Maxine. Again, that's great. I think he did a bad job, notwithstanding the motherhood waffle when he resigned. And yesterday, Chair Jenny Macdonald stepped down. I've got to wonder who's next. Anyway, let's move on. Another perspective of reinforcing how poorly the prior Board, including current Board members has performed, is that the current market cap of Healius is around $750 million before the rights issue. In direct contrast, in 2008, the major part of the current businesses, Radiology and Pathology, were bought by a takeover for Symbion at a price of $2.65 billion. Wow. If we put $2.65 billion into Sydney real estate, it will be worth $10 billion plus today, not $750 million. So let me postulate what's wrong with Healius. It seems the culture has been too soft. It almost seems like a plaything at times given the capital management or mismanagement. Directors have little skin in the game. Maybe you've been too reliant upon your advisers. And as Wylie pointed out in the Fin Review this morning, maybe you should change your advisers, because they haven't done a good job. A graders in business creates solutions. They're accountable and they take ownership to deliver proper outcomes. B graders make excuses. There have been plenty of excuses from Healius. In my opinion, Healius needs an urgent blood transfusion to become a performance-oriented organization. You are a shareholder-owned business, not a charity. In my opinion, you need to become more mercantile, maybe like private equity. You need to actually create value for shareholders. Healius has far better assets than ACL that's bidding for you, but to be honest, in my opinion, ACL has better management, better culture and better shareholder value enhancement. On a lighter note, and I will then come to my one question. On a lighter note, my personal thanks to the Board for the debacle, as I was able to buy plenty of very cheap shares last week on market at $1.20. I'm probably the only shareholder in the room who's actually made money out of Healius. Come to my question. Maxine, we all make mistakes, but smart people learn from them and don't repeat them. With the benefit of hindsight, over the 4 years you've had as CFO and now MD, and you had another few years before that in different roles, could you please elaborate on the significant mistakes that Healius has made and what you as Managing Director will do differently to finally deliver proper shareholder value? Thank you.

So, I'm sorry, I did miss your name. I'm sorry about that.

David Houston from K Capital.

Thank you, David. And thank you for your comments, and I do note your comments. Before I ask Maxine to speak, look, I do want to acknowledge, and I do understand shareholders' frustrations with both the financial performance and the share price. You've heard from our new executive team, certainly Jan and Phil, who are going to run -- who are running our Imaging and Pathology business. Our Imaging business, of course, is going very well. It's been helped, of course, with indexation of which Pathology also in its indexation. 25 years of not having any indexation means that we have to solve the price issue of Pathology. It's not just the volumes that surprised this year. In terms of Agilex, the investment thesis of Agilex is still there. Australia is a great place to do Phase I clinical trials. Agilex has 20 years of experience in that and has a very good reputation, and it is not dependent on government funding. Where I think is this a fair criticism is that we did have leadership issues, and we didn't get onto them quick enough. So that is absolutely a fair criticism. We have now got onto them, and Agilex is showing significantly improved financial performance. We expect Agilex to meet its investment base case, although we will do that 2 to 3 years later than what we initially expected. Maxine, do you want to make some comments?

Thanks, Jenny. I'll add to that. So look, let me talk about what we've done in 7 months and what we're going to do going forward. In 7 months, we have put in place a leadership team, particularly with Jan and Phil, who are highly experienced, who have clinical backgrounds and proven track records. And I think that is a big -- significant change that this business needs not only from an experience base but also from a culture. They are focused. Phil has got a very clear strategy around how to deliver growth in the existing network. It will require some capital, but it will be self-funding. And Jan has a similar plan around pathology, which is going to be a fairly radical rethink of the Pathology business. So they are the 2 key parts of our business. Agilex with its SGS partnership, will be a much higher performing asset in the group than what it has been. Your questions on what would we have done differently? Should we have not sold medical centers? No. I think that was the right thing for the business to do. And it did allow us to reduce our debt at the time. I think the question around buybacks, given where trading has got and coming out of COVID, yes, I agree with that. In -- on reflection, the buyback was definitely too high given where we are now in terms of balance sheet.

Thank you. Is there any other questions in the room? Thank you.

Charlie Kingston, K Capital. Just a follow-up on some of those questions, which I think the response was a bit underwhelming about looking forward given how many consistent mistakes have been made I think that were sort of overlooked. But Chair, you said the thesis is still intact for Agilex, but can we just flesh that out a bit? I mean, in terms of the GP sale, well done, I think that was good, a good price, $500 million.

The price of what sale?

Sorry, the GP sale, right. You said Agilex's the thesis is still intact. I believe is your comment. But for context, yes, you sold the GP business well, $500 million, I believe, that was sold on 10x earnings. That's real cash flow coming to shareholders of which we can use to repay debt, pay dividends, et cetera, none of which Healius is doing today. But of those proceeds from the sale of the GP business on 10x earnings, you bought a business that was loss-making at the time and was delivering, I believe, about $30 million of revenue. So that's 10x revenue the price to which you paid. So I would just like to hear more on the logic, the thesis in terms of selling a business that was delivering real cash flow, free cash flow to the company, and then funding the acquisition of a business which was essentially loss-making on the bottom line to which you paid 10x revenue. I do still scratch my head. And clearly, you've already impaired circa half of the acquisition price, so I'm not sure that it's fair to say the thesis is still intact.

So in terms of the medical centers, yes, I think we -- I think -- it was before my time, but it certainly was appropriate to sell that. It was very capital intensive. In terms of Agilex, I think, I've answered the investment thesis. It is actually improving. We have made some mistakes, which we have addressed, and we are expecting to improve financial performance significantly over the next 2 to 3 years. It is behind our base case -- and we -- but we do expect it to come back in the next 2 to 3 years and hit our base case. Natasha?

Thank you, Chair. Whilst every company is getting into AI and you stated that data driven AI is to be used in diagnostics, are you using machine learning algorithms? And what safeguards have been built in to prevent various forms of bias and hence, incorrect results occurring?

Thanks, Natasha. I'm going to hand -- but before I do, I'm going to hand over to Prasad, our Group Executive of Technology and Digital, but before I do, I'll just say we are using AI, machine learning within mainly our Imaging business. We have our clinical oversight of it. But maybe Prasad, if you could just give us a little bit more probably nuanced around AI and what we're learning.

Thank you, Jenny, and thank you, Natasha, for the question. Yes, AI is a very important part of our service model now and into the future. I think there's perhaps 2 parts to your question, how are we approaching some of the clinical safety aspects as well as protecting the data side. We've got protections across both. Our current applications for using AI in diagnostics is largely focused on radiology, and they're all based on proven worldwide solutions that have the right approvals from relevant clinical bodies in order for them to be used in diagnostics. Looking ahead, we will be investing in the use of text-based AI from all of the data that we've currently hold from Healius over the last 13 years. For that, it is entirely clinical driven in terms of what use cases do we want to prioritize. Hardest is achieve either a very specific outcome for improving the clinical insight that is required for clinicians to make decisions or it is to help drive operational efficiencies around the speed of reporting. They are the 2 primary objectives we have. For all of them, we take data security very seriously. We use the data only within the context of what it was obtained for and we intend to continue that in terms of how we want to use data.

[indiscernible]

I think it comes down to very specific use case, clinical use cases, on how the AI is used. At this stage, we do not see any reasons for -- by unconscious biases or hallucinations in the way in which we use our data for making clinical decisions. They're only used in image-based machine learning at the moment. In terms of text based, it will be very specific clinical applications where we will look at. We don't see any reasons for that, either demographics [ or race ] being issues in terms of our diagnostics. We actually provide that insight to doctors even today in our reports, and we don't intend to automate that. There will always be a clinician in the loop -- there will always be a pathologist in the loop, whether that is to decide the rules with which we use AI or actual sign off of the final report itself.

Thanks Prasad. Any other questions in the room? Yes -- sorry, we'll just go back.

Just a second question, please. And it's just around the company's use of the term growth regarding CapEx. Now for context, since 2019, every year, the company reports it spends roughly $30 million to $60 million a year on growth CapEx. Now the logic there being that CapEx spend will actually lead to increased earnings, increased margins, increased -- better returns for shareholders. But clearly, it has delivered anything but growth on all those key metrics. So I'd just like to ask the question, and maybe I can direct it at Gordon Davis, given you are the longest standing Director on this Board. You've been here since 2015. So you have accepted -- or allowed the company to continue to suggest that, that $30 million to $60 million of spend would deliver growth for shareholders. So I'd just like to understand your thoughts on that. Do you think that's been miscategorized? And then going forward, if the company could please report in a more transparent manner in that you report your free cash flow in the annual report, which is before growth CapEx, which clearly has not been growth. You reported before lease payments, rent, interest, which are obviously real expenses. So to ask the question, if Gordon could respond, given his long-standing tenure on the Board, why you've accepted or allowed the company to continue to suggest that it is growth spending when it has not been. And, two, just going forward, if we can actually be a bit more transparent on what sort of the true earnings of the company is, what the free cash flow of the company is, given that if you include all those other costs, we are not making money. And clearly, we can't pay debt from the free cash flow that you put forward. We can't pay dividends, which we have not been. So I just appreciate your thoughts on that.

Gordon, just before -- just in terms of CapEx. CapEx, just to give you some context on what we spend the CapEx on, accredited collection centers, of course, part of our pathology footprint, our imaging sites, of course, as well and our digital program. So that really does make up the vast majority of our CapEx. Gordon, would you like to...

Thanks, Charlie, for giving me a speaking part, I thought I was going to avoid the whole meeting. Look, I think the makeup of the numbers roughly of that $60 million is about $30 million is maintenance and $30 million is what we typify as growth. There's a -- and most of it is going on kit and hardware and premises and so on. There is a strong correlation between the attractiveness of our facilities and the utilization by the public in both the businesses. And so we see in the growth piece that, that is a logic to be made, spending that money to improve either collection centers or imaging facilities leads to high levels of activity. I can certainly ask, Maxine if you'd like to comment more on that.

Yes. Look, I'm happy to add to that. In terms of growth CapEx going forward, the main part of growth CapEx is going into Imaging. So you will have heard from Phil at the full year results, the community strategy, which is very practically taking our existing footprint and adding modalities to that existing footprint. That is where the capital is going, and that's going to take each of those sites from about $3.1 million revenue per site to $5 million revenue per site. That makes a fundamental difference to the EBIT margins of that business, and that's where the lion's share of that growth CapEx is going. It is -- there is some growth CapEx, which is going to digital, but we are looking for a fairly fast payback on that because we are very well aware that there has been a tech debt in this company, which we have met the market on now, we think. And so taking a pretty judicious approach around where we're adding to that digital spend. But they're the 2 main areas at this point in time. A small amount has been put into ACC growth into independents, but that has been largely completed in the last financial year.

Yes, but just as a comment. I mean from my perspective, not going forward, but historically, none of that growth CapEx has resulted in growth in terms of the key metrics, margins, et cetera. So I think it would be more fair to say that, that is staying business, what has been spent to date, given it clearly hasn't delivered growth, but I'll leave that as a comment. Thank you.

Natasha?

I think you touched a little bit on this in your presentation anyway, but I know that Healius is committed to affordable health care and it's very closely dependent on the bulk billing system. There seems to be a slight move away from this, which is understandable given the Medicare rebates have not kept up with inflation. Whilst your -- the majority of your service will continue to be bulk billed, what is the strategy going forward to address a shortfall?

Natasha, you're right, a significant amount of our services are bulk-billed, which we're very proud of, because that does give equitable and accessible health care to Australians. In terms of Pathology, you're right again. It's difficult when your indexation and your reliant on government funding has an increase for about 25 years. So that pricing problem will need to be solved. And we can solve it in a number of ways. I won't go through them all today, but one of them could be out-of-pocket expenses, which we would hate to do. We are engaging with the government on that pricing solution, and we'll continue to do so. In terms of Imaging, Imaging, of course, did have indexation and it has benefited from that. In terms of our other areas that we aren't reliant on government funding, some of our commercial contracts, and we've got revenue initiatives around that, and of course, our clinical trial businesses.

Okay. Yes, I think that -- I suppose one of my observations overall is that we as a country not that good at sort of prevention, not only in health care but in other social areas. We're more reactive. And as I saw from your presentation, the prevention and early detection is critical to save money for -- not only for the individual but for the country in the longer term.

That's correct. Yes. Any other questions? I think, if there's no other questions -- Natasha does have...

Yes. Just the final question here is in Pathology, there's mentioned of developments of genetic -- genomic diagnostics. Last year, Healius talked about partnerships with universities and research institutions and genetic analysis in line with individualized health care, particularly in cancer treatment. Could you elaborate on who you have partnerships with and the types of commercial arrangements arising from these partnerships?

Look, I will talk about a few, but not all of them because they're commercial and confidence. But we have a partnership with C2N Diagnostics, and that's to bring some of their testing to Australia, certainly around Alzheimer's. And also, we have a partnership with Sydney University to evaluate the impact of AI on TB. So we are entering in partnerships and whatever we can bring to Australia that will make a bit of a difference for Australians' health. That's what we will be doing. They're the 2 partnerships we are currently in.

Just a short one. Bearing in mind, you're stepping down, Chair, and I appreciate the destruction of shareholder value is certainly not singularly attributable to you. I think Hubbard and Parmenter got off very lightly when they resigned or were squeezed out. But just on a formal basis, so just wondering whether you -- at a formal level, would you say you are embarrassed by the shareholder value destruction that has caused a lot of loss of dollars for a lot of people? And would you like to take this opportunity to formally apologize to the shareholders for the massive destruction of value? Thank you.

Look, thank you for that question. We understand the frustration of shareholders, and we certainly don't want to see shareholder destruction. The Board and management are working very hard and have actions to improve the financial performance of the company. I think you've met the executives who are in charge of Pathology and Imaging, and you certainly know Maxine. They are working tirelessly to improve the financial performance of this company.

They are very simple questions. Your last AGM as Chair, would you like to acknowledge that with the huge destruction of shareholder value. Are you prepared to say you are embarrassed by it and would you like to take this opportunity to formally apologize for it.

So look, I think I've answered that question, so I'll move on. Thank you. Is there any more questions in the room? So now I think we've gone online. I might just sit down so I can read some of the questions.

Yes. The first question from the Computershare virtual platform comes from Michael Coburn. We are long-term shareholders in this company, and we are astounded as to what has happened in recent years. From a company reaping the benefit of exceptional COVID testing revenue flowing through its veins and with record profits to one that has paid its executives, given the company's size, very, very large remuneration. Seen most of the same executives replaced. Spent over $300 million or so on an acquisition that now looks to have been written off, and having to raise discounted new equity to meet banking commitments and stopped paying dividends. I mean what has really happened here? Are more directors and executives to take responsibility? And what is the future?

Thank you, Mike. -- everyone hear me. Thank you, Michael. Thank you for the question. I think that question has been asked, or the theme of that question has been asked in a number of questions that came through the floor. So we'll leave it at that, if we could.

The second question that I have on the platform comes from Mr. Stephen Mayne. Why did you limit retail shareholders to overs of just 25% of their entitlement when this will almost certainly guarantee a shortfall diluting retail shareholders as a class. Was this the recommendation from Barrenjoey? Is the Chair aware that dozens of major companies such as Wesfarmers, BlueScope, Stockland, Mirvac, Suncorp and Fairfax have offered unlimited overs when doing a nonrenounceable offer over the years?

Look, that was the structure that we entered into with -- all shareholders can take up the all -- retail shareholders can take up their entitlement plus 25% over their entitlement. The retail offer went out today. So I think that's the answer to the question.

There are 2 further general questions. The first general question is from Mr. Stephen Mayne. On November 21, the AFR's Rear Window published a critical article about our company, including claim that the CEO recently attended Wimbledon as a guest of Barclays, one of the major shareholders in Barrenjoey, which was paid $4.7 million to underwrite our recent $187 million capital raising. Could the Chair and CEO, please provide a response to the article? Was it fair or unfair? And have we made any changes as a result of it, such as different protocols on accepting corporate entertainment by service providers?

Thank you, Stephen. And because it was in the paper, I guess, it's on people's minds. That was a legitimate work conference. It was approved by the Board. I don't -- I won't probably answer anything more, because I believe Rear Window is really a gossip in your window, so I'll leave it at that. In terms of Barrenjoey though, and in terms of any adviser, the Board makes the selection of the adviser.

The remaining question comes from Mr. Stephen Mayne. Thank you for offering shareholders at a hybrid AGM this year, and will you commit to keep doing this in the future to maximize shareholder participation? Also will a full copy of the AGM. webcast be made available on the company's website?

So that -- the decision of a hybrid AGM will be for the Board going forward, and Mary, you'll have to answer the full copy of the AGM.

It will be. Yes.

It will be. Thank you. Thanks very much for that. Is there any more questions?

Not on this item on the platform. We might just see if there are any questions over the phone.

There are no phone questions at this time.

Thank you.

Thank you. As there are no further questions, I'll close this question session. As Item 1 is a nonvoting item, we will now move to Item 2. Item 2 in the Notice of Meeting concerns the adoption of the 2023 remuneration report. The position as to proxies and direct votes is shown on the screen. The vote on the resolution would be advisory only and nonbinding. However, the Board will take the outcome of the vote when reviewing the remuneration policy for directors and senior executives in the future.

We'll now move to the questions on this resolution. Is there any questions in the room on this resolution? I don't believe so. Any online questions?

We have an online question from the platform from Mr. Stephen Mayne. Do any of the 5 main proxy advisers, ACSI, Ownership Matters, Glass Lewis, ISS, NASA follow Healius? If so, did any of them recommend a vote against any of today's resolutions, including this remuneration report and what reasons did they give? Please comment on any material protest votes lodged today. Best practices now to disclose the proxy position to the ASX along with the formal addresses to offer more timely disclosure to the market. The likes of Origin Energy, NAB, Carsales, Viva Energy, Webjet, Zero Eight, Myer, Brambles and JB Hi-Fi all do this. Will you adopt this practice at next year's AGM?

Well, again, the adoption of any practice for the next AGM will be for the ongoing Board. In terms of the voting, we have put up the voting, which shows the proxy advisers. Is there any further questions? Mary?

Not from the platform. Are there any from the phone?

Is there anything from the phone?

There are no phone questions at this time.

As there are no further questions, I will close this question session. We'll now move to the vote on Item 2. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that the remuneration report for the year ended 30 June 2023 be adopted. As previously directed, we will proceed directly to a poll. [Voting]

We will now move to the next item of business, which will be Item 4 as Item 3 has been removed from the formal business of the meeting. Item 4 in the Notice of Meeting concerns the election of Charlie Taylor. Before I invite Charlie to speak, I will report the positions as to the valid proxies and direct votes in relation to Charlie's election. The position as to proxy and direct vote is shown on the screen. Well, it will be very quickly. I'll hear it is. I would like to invite Charlie to say a few words.

Thank you, Jenny, and thank you for the opportunity to speak to you today and put myself forward for election as a Non-Executive Director of Healius. I believe I'm well suited to join the Healius Board at this challenging time. I have 3 decades working at McKinsey and helping companies on both strategy and improving performance. This includes 12 years living and working in the U.S. and Asia and 12 years leading McKinsey's Health & Public sector practice in Australia. I have extensive experience in helping health companies address challenging industry dynamics and turning around their performance through improving operations or, in some cases, selling a business. Healius' Pathology business is currently experiencing challenging conditions. Historically, it has been able to navigate an absence of indexation through a combination of fast-growing volumes, enabling improved efficiency and automation in a low inflation environment. However, reset in volumes post COVID and high inflation environment have led to a significant reduction in margins and the banks requiring partial repayment of our debt. Healius' Pathology business needs a more radical restructuring involving consolidation and streamlining operations and head office, combined with more automation to achieve satisfactory margins and generate the funds required for investment and growth of the business. It also needs indexation to sustain some low margin and negative margin services in a higher inflation environment. I believe that I have the skills and experience to support management in driving a fast restructuring as well as building a compelling case for indexation. I also have extensive experience and skills in supporting health companies grow businesses with attractive margins. Our Imaging business is developing increasingly attractive margins and returns and has exciting growth opportunities in many of its products and services. I look forward to supporting that growth. It would be an honor to be elected to the Board of Healius and to be able to continue to work with my fellow directors, Max, and the executive team to ensure the turn and future growth of Healius I hope that my -- that you support my election, and I'll hand back to you, Jenny.

Item 4 is now open for questions. Yes. Okay. We've got a question to be asked. Thank you. Sorry, is there a microphone?

Charlie, you've got an excellent CV, health SKU of McKinsey's. Some people love McKinsey, some people don't, but let's give McKinsey's the benefit of the doubt, a good organization. In my opinion, there's something fundamentally wrong with the culture at Healius. I've briefly, in my opening remarks, went back through the previous Chairman, the previous Managing Director, both of whom who left in 2022. In my opinion, I think [ ACL ] has a better culture, more performance-oriented more mercantile, more focused on shareholder value. But just could you give us your initial thoughts? You've been on the Board for 7 or 8 months. Your initial thoughts, and try to be candid and transparent. Don't just fob the question off with nothing answer. Is there anything wrong with the culture? You've got anew Managing Director now, you're going to have a new Chairman soon. Do you think that a poor culture and lack of respect for shareholder value is part of the reason for the monstrous shareholder value destruction? Thank you.

Thank you for the question. Clearly, when you've got issues with performance, you have to go to the question of culture and what underlies that. And I think there needs -- certainly one of the things I've observed is in looking at the times that the company has been through, particularly just focusing on the Pathology business because that's where I think the biggest issues we're struggling with right now, it was in a fairly relatively comfortable environment with the -- with low inflation and being able to get rapid growth. Then COVID came through and created lots of opportunities, which the company did respond to. But it has -- in terms of resetting into this environment, I don't think we were fast enough at understanding what will be required in restructuring the business to ensure that we could survive and generate adequate margins in this context. And that's the challenge we face now. I think bringing new management was part of the challenge to actually address that cultural challenge. And that probably wasn't the best time to bring -- to be making changes in that, in the context of those changes going on in the environment, but we've now made our bets in terms of driving this turnaround, and I feel that there's a recognition of the situation and a commitment to addressing that.

And just a brief response to that. John Wiley is not always right. Clearly, he's been wrong on his investment in this company, but he did publicly say the other day that this is a very poorly run company. Do you agree with John, or do you disagree with him?

So I agree that there's been some decisions that can obviously be challenged in the past in terms of what's happened, but I think we've got a new management team in here now. I don't think he's given them sufficient time to demonstrate what they can deliver in terms of a good performance. So I think he's wrong.

Any further questions for Charlie? Yes. Thank you. At the back.

Charlie Kingston again. A question for Charlie. Just in terms of similar type of question, but relative to the peers, again, I'm certainly no expert. But clearly, you are given your experience with health care, et cetera. But I mean my understanding is pathology is very much a scale game to which Healius is the second biggest player and has been for quite some time, Sonic is the biggest, ACL is the third biggest. But just if we compare margins, EBIT margins from Healius to your direct peers, Sonic is a bit hard to assess, very global company. But when you look at their stock, they've clearly performed exceptionally well. The Australian division performs very well. ACL claim to have EBIT margins of circa 10%. Then the bigger player who has more scale benefits has been around for a lot longer than Healius, we're sitting at about 5%. And that's, of course, we accept growth CapEx, if you adjust for that and a few other capitalized one-offs, et cetera, we're losing money. So I just appreciate your thoughts on if there are any structural issues with Healius -- or why do we -- there's been a lot of talk today about indexing issues and industry-wide issues. But clearly, the other large industry players are performing very well. Healius is not performing well. I don't think that the industry-wide issues are acceptable given our peers are making money and we're not. So I just appreciate your thoughts on. Are there are any structural issues for Healius, why we cannot earn similar margins. So just any thoughts on that would be great.

Sure. So I think there's some debates around the sort of exact margins on a comparable basis, but I think we can take that offline and debate that. But there is a difference. And one of the -- and I would still say that ACL's margins are not adequate, and we're going to see significant pressure on them in this current financial year as well. Sonic, I think, as we know, has a benefit of the higher margins they're generating in the specialist business and it's harder to compare. What I would say is we are not realizing the full benefits of scale because we've got separate state businesses right now. So in a sense we're a sort of an amalgam of, what we would say, subscale businesses right now, and that's one of the opportunities for us is to realize more of the scale benefit, recognizing that if you have a high inflation environment, that scale, it's not going to solve all things, because we've got some very low margin and negative services in there that need to be addressed.

Thank you. Is there any more questions in the room for Charlie? Is there any questions online?

Yes, I have a question from the online platform. The question is from Mr. Stephen Mayne. Could the 3 new directors facing election for the first time today in the Chair comment on the recruitment process that led to their appointment to the Board? Was a headhunter involved? Did the [ fore board ] interview any other candidates? Did any of the new directors know of the existing directors before engaging with the recruitment process?

I'll answer that. So we -- so I'm going to talk about the 2 directors that were elected or came on board in March and September, being Charlie and Dr. Stanford. That was done through recruitment process, which there was a headhunter involved and all board members met with the candidates, and they were, by far, the best candidates. In terms of Ravi's appointment, as you know, it's a nomination by Tanarra Capital. Thank you. Anything else? Is there any questions from phone line?

There are no phone questions at this time.

Great. Thank you. As there are no further questions, I'll close this question session. We'll now move to the vote on Item 4. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that Charlie Taylor, being a Director appointed by the Board as a casual appointee since the last Annual General Meeting, who retires in accordance with the constitution of the company, and being eligible, offers himself for election, is elected as a Non-Executive Director of the company. As previously directed, we will proceed directly to poll. [Voting]

We will now move to the next item of business. Item 5 in the Notice of Meeting concerns the election of Dr. Michael Stanford. Before I invite Michael to speak, I'll report the position as to valid proxies and direct votes in relation to Michael's election. The position as to proxies and direct votes is shown on screen. I would now like to invite Michael to say a few words.

Thanks, Jenny. Ladies and gentlemen, it gives me great pleasure to be with you today at the Healius 2023 Annual General Meeting. As you are aware from the Notice of Meeting, I was invited to join the Board several months ago, my commencement date being 1 September 2023, just 12 weeks ago. It has been an interesting 12 weeks. My entire career has been in the health care sector. After initially training and working as a medical doctor, I moved into executive roles, spending most of my working life, 23 years of it, in managing director roles of very large hospital and health care services businesses. These included pathology and imaging services, both of which have had executive operational oversight of decades. Over the last almost 6 years, I have been a Nonexecutive Director on a number of Boards. In the listed company space, these have included Healthscope, Australia's second largest private hospital group; Virtus Health, one of the world's 5 largest IVF businesses; Australian Clinical Laboratories, the third largest pathology provider in Australia; and on the Board of the Manager of the New Zealand Stock Exchange listed Vital Healthcare Property Trust, where I'm the Chair of the Audit Committee. Vital is Australasia's largest health care property trust. In the private equity space for 4 years on the board of Nucleus Networks, which specialized in Phase I clinical trial studies. I've also had the opportunity to serve as Chair of a number of private sector and 4 purpose businesses presently chairing the Queensland Investment Corporation owned Nexus Day Hospitals Group, which operates 28 day hospitals. I bring to the Board of Healius extensive experience as a Registered Medical Practitioner, a Health Care Executive and Nonexecutive Director with specific and extensive experience in each of the 3 main service areas provided by Healius. COVID gave us a very stark reminder of the importance of diagnostic services to health care service provision and to the wellbeing and prosperity of the Australian population. I'm excited by the opportunity to further contribute to the Australian health care sector through membership of the Board of Healius and helping it maintain and enhance its market position as a leading light for the diagnostic services it provides throughout Australia. I'll hand back to Jenny.

Thank you, Michael. Item 5 is now open for questions. To ask a question, please raise your hand and a microphone will be brought to you and -- by one of our attendants.

Thank you, Chair. Michael, you obviously got great experience. Your positive vote is enormous. So Charlie, you missed that, 75-25 but Michael is 96. My question to you, Michael, is you've obviously observed Healius for some time. You've been on the Board of a competitor. You've run many health businesses, including hospitals. What do you think is the root cause of the shareholder value destruction at Healius in the past few years?

Thanks for the question. I don't have experience of being on the board beyond the last 3 months. So I'll -- that is my answer with that. I think businesses in Australia, healthcare business has struggled through COVID. That's an understatement. Everyone tried to work out how the heck do we manage it? At that stage, I was on the Board of a pathology company, and it was all hands to the pump for a period of time trying to work out how to deal with COVID. That was the case in the hospital sector, both private and public. It's been the case in the GP world. I'm on the Board of the College of General Practitioners. I see some of the effects. One of the issues that pathology businesses had during COVID was what would normal look like when COVID eventually started to move away? It was very hard to plan for that. And in some ways, all of the health care sector, in my view, still has a version of long COVID, where a year later, we're involved with cost increases, but volumes have gone away. Less people going to GPs. Why is that? Not as much pathology being ordered, et cetera, et cetera. So it's been a very difficult time. I think my observation, from my experience, is it's hard to be good at everything. And one of the things that makes me very interested and excited about joining Healius is it's ended up with a focus on diagnostic services. As you had pointed out, I think it had sold some of the other businesses. It started as a medical center business back in the day. It sold out of IVF. It sold out of the day hospitals. And now we're very focused on something that we think we are and can be even better at, or good at and can be better at. We've got great leadership through Jan, Phil and Maxine. So having been involved with more focused businesses, for example, ACL is a pure play pathology business. The right strategic decisions have been made by this business to move out of lots of different things and to become very good at 1 or 2 particular things, which, in our case, is Pathology and Imaging. So I think that refocusing is helping, but I wouldn't underestimate the difficulties of COVID and the year after COVID that have had on all health care businesses, including hospitals, including GPs, including diagnostic services.

Thank you, Michael. Is there any other questions in the room?

Thank you. So sounding like a broken record, but again, we're blaming the issues of COVID, but I think Healius made over $700 million of actual free cash flow during COVID. That's just a comment. But Michael, I think you said you work still with Nexus, is that?

I Chair the Board of Nexus.

Right. And I think, correct me if I'm wrong, they bought the day hospitals of Healius, is that right?

In May this year prior to my involvement with that group, yes, QIC bought them, yes. So 11 of the 28 Nexus Day Hospitals were previously Montserrat within Healius. Yes, that's correct.

Are there any learnings that you can discuss, given they obviously think they got a good price buying the day hospitals of Healius. Healius shareholders didn't make any money. So are there any learnings now that you're on the Board of Healius? Also your next experience in terms of they run any differently? What's sort of the crossover of learnings that you can take from both those hats that you wear?

Thanks for the question. Scale matters in a lot of businesses, and Nexus had a view that it needed to increase scale. It has a view it still needs to increase scale. But it also has to do some of what I think Charlie responded to. You have to work out in the business that's distributed, how to maximize the scale benefits without getting scale of these benefits. You need local leadership, but you need a corporate approach. And I think that point that Charlie made with regard to the way we've had state approaches to pathology that we're now working hard to integrate with laboratory information systems, digital systems and the rest. It's the same in the hospital sector. In that case, that organization hasn't done enough of that, has not done enough of that yet and is working on a very similar sort of playbook to what's going on here. There's not enough money in the health care sector, and there's an enormous amount of demand. And sometimes the volumes, which used to be our friend, aren't there. And when they're not there, you've got to focus on cost, which is what Healius is doing.

Is there any more questions in the room? Is there any questions online? Is there any questions from the phone?

There are no phone questions at this time.

As there are no further questions, I will close this question session. We'll now move to the vote on Item 5. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that Dr. Michael Stanford, being a Director appointed by the Board as a casual appointee since the last AGM, retires in accordance with the constitution of the company, and being eligible, offers himself for election, is elected as a Non-Executive Director of the company. As previously directed, we will proceed directly to a poll. [Voting]

We'll now move to the next item of business. Item 6 in the Notice of Meeting concerns the election of Mr. Ravi Jeyaraj. The position as to proxy and direct votes is shown on the screen. I'd now like to invite Ravi to say a few words.

Thank you, Jenny. It's a pleasure to be here. By way of background, I'm the Head of Private Equity for Tanarra Capital. I've 15 years private equity experience. I've got skills in M&A, balance sheet management, operational improvement, and incentive alignment, amongst others, across several sectors during my private equity career. It's clear that Healius needs to improve its credibility with its investors, and if elected, I'll work with my Board colleagues and the management team to try and affect us that.

Is there any questions on the floor?

Look, welcome to the Board. I think you had a 99% approval rate, so everyone likes that. Look, your background, as I understand it, is you participated in the bid that failed at [ $340 million ] for Healius a few years ago?

That's correct.

So clearly, you did a lot of due diligence on Healius at that time with that bid. You're lucky you didn't get it. Or maybe you might have run it better. Anyway, the stock is now $1.30, $1.40. Your boss is hurting and making a lot of statements. He did say publicly that Healius is a very badly run company. I asked Charlie the question. He acknowledged there are a few issues but basically said Wiley was wrong. Is Wiley right or wrong? Is it a badly or well-run company?

Look, I think from my perspective now is to focus on the future really. So that's about getting the information, assessing it with my Board colleagues and then making appropriate decisions. I think shooting for the hip, given where I am today, which is working for all shareholders, wouldn't necessarily be wise. And I hope that's an acceptable answer.

What are your main initiatives though, your main thoughts about going forward? Clearly, you've done a lot of work. You did a huge amount of work a few years ago, and you wouldn't be joining this board without having followed it extremely closely. So I think it's appropriate that you give us a few thoughts on what new initiatives you would like to bring to the company.

Yes. Look, look, I think the observations that I would make is it's quite a privileged asset position and it's got meaningful market shares. And I think that's a fantastic basis on which to execute operating performance. And so the real question is how we, as a team, both Board and management, going to execute on that? And given I'm not Board, I cannot answer that.

Thank you. Any more questions for Ravi?

Thank you. Just a quick question, again similar to the previous question, but I think when you -- in your previous role if the company the equity was worth circa $2 billion or $2.1 billion at the time of the bid. Clearly, there's a few changes, GP business is gone. We've bought Agilex. The balance sheet is a bit different. There's been some dilution.. The $2.1 billion of equity value at the time of the bid compared to today's equity value of circa $1 billion, so over $1 billion of value destruction within that time frame. But I just appreciate your thoughts. Obviously, you're working -- or you're associated with one of the directors -- one of the shareholders, so clearly, you're aligned to deliver a good outcome for shareholder value. But I was just hoping to get your thoughts on given that bid of $2.1 billion, is that a fair sort of target for what you think the Board should be shooting for in terms of delivering value to shareholders? We're sitting at $1, you thought it was worth $2.1 billion back in the day? Is that a fair target?

More information. I'm sorry.

I think that's answered. Thank you. Is there any more questions on the floor -- from the floor? Just a second, is there any questions online? Is there any questions on the phone?

There are no phone questions at this time.

Thanks, Ravi. As there are no further questions, I will close this question session. We'll now move to the vote on Item 6. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that Ravi Jeyaraj has been nominated in accordance with the constitution of the company and being eligible, offers himself for election, is elected as a Non-Executive Director of the company. We will proceed directly to a poll. [Voting]

We will now move to the next item of business. Item 7 in the Notice of Meeting concerns the acquisition of securities by the Managing Director and Chief Executive Officer, Maxine Jaquet, under the long-term incentive plan, details of which have been provided in the Notice of Meeting. I will now report the positions as to develop proxies and direct votes. The positions as to the proxies and direct votes is shown on screen. Item 7 is now open for questions. To ask a question, please raise your hand and a microphone will be brought to you by one of our attendees.

We'll now move to questions.

Thank you. Maxine, I think, again, Wiley said that you haven't bought any shares with your own money. Is that correct?

So I'll answer that. So Maxine intends to buy shares in Healius and is part of the entitlement offer of the retail shareholders. So will take up her full entitlement. Do you want to answer that more?

Look, it's actually part of my contract that I buy my full salary's worth over a period of time, and we've had 1 open trading window since I took over as CEO. So I do intend to take up this offer and continue to buy. I agree with you. It's good value at this point.

Incredibly cheap. Ravi would agree with that. Thank you. Just one follow-up though. I think most sensible people really welcome if the CEO and MD gets very rich. It's one of the reasons private equity have generally done well. They remunerate the CEOs very well. So we'd be delighted if you got a huge remuneration, providing you can reverse the massive shareholder value destruction. And again, bearing in mind this one is for you, Maxine, and the Chair has done a great job today, very eloquent. You'd be great in politics, but she did avoid my fairly simple question of whether she was embarrassed and whether she would be prepared to apologize. Would you care to answer those 2 questions?

Maxine, the question has been answered. Thank you.

Chair, it hasn't. That's out of order, Chair.

Sorry, it is not out of order. The question has been answered.

You did not answer those 2 questions, Chair.

Thank you. Thank you. Is there any more questions in the room? Is there any more questions online? Is there any questions on the phone?

There are no phone questions.

Thank you. As there are no further questions, I'll close this question session. We now move to the vote on Item 7. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that approval is given for all purposes for the issue of 512,645 securities under the long-term incentive plan to the Managing Director and Chief Executive Officer, Maxine Jaquet, in the matter set out in the explanatory statement to the Notice of Meeting. As previously directed, we will proceed directly to a poll. [Voting]

We will now move to the next item of business. Item 8 in the Notice of Meeting concerns shareholders' approval for the issue of share rights and restricted shares to nonexecutive directors under the NED Share Plan. This year's approval has been sought so that our new directors can participate. I will now report the position as to valid proxies and direct votes. Item 8 is now open for questions. To ask a question, please raise your hand and a microphone will be brought to you by one of our attendants. I'm looking at you. All right, given that there is no questions in the room, is there any questions online? Is there any questions from the phone?

There are no phone questions.

Thank you. As there are no further questions, I will close this question session. We now move to the vote on Item 8. I note that I have notified the meeting of the proxy and direct voting status of this item. I now put the motion that approval is given for all purposes for the grant or issue of securities under the Nonexecutive Director Share Plan to all Nonexecutive Directors for the next 3 years in the manner set out in the explanatory statement to the Notice of Meeting. As previously directed, we will proceed directly to a poll. [Voting]

Now Item 9, which I believe is the last item of the business today. Item 9, it's the last item of notified business in the Notice of Meeting and concerns approval for the increase in the aggregate amount of remuneration that may be paid in any financial year to the company's Nonexecutive Directors, be increased from $1.4 million to $2 million. I now report the position as to valid proxies and direct votes.

To ask your question, please raise your hand. Is there any questions in the room?

Chair, you look disappointed I didn't have one in the last.

Absolutely. I was hoping.

So I'm sorry if I'm missing out, but I kept one for last. Look, delighted to pay people, and there's some excellent people on the Board, albeit I think the company hasn't performed well. I think different directors need to take some accountability, but when companies have performed poorly, there have been a number of examples, including over COVID, where directors actually took a reduction in remuneration as an example to shareholders that they would share the pain. It's easy to talk the talk, and we've heard a bit of that today. It's a bit harder to walk the walk. But to be honest, I was somewhat shocked this resolution was being put forward, a maximum $2 million in the context of the value destruction of -- to shareholders. I was shocked. So I'd just appreciate some clarification as to whether any of the directors think that they should have a pay reduction rather than the pay increase?

So this remuneration pool is just a pool. This -- in this financial year, '24, the directors have not taken an increase. The increase hasn't been since 2008. It's purely for the future of directors' remuneration. Certainly not. They won't be getting paid all this now. So that's why the resolution was put up, because we're coming closer to the cap. Thank you. Any more questions? Yes.

Bit underwhelmed by that response as well. I mean given that the owners of the business have sustained a monumental loss in the value of their shares, I do think it's a bit mind boggling to ask for an increase. I think you've said a few times that the directors are deeply concerned about the loss of shareholder value, but I think roughly speaking, the Board owns about 300,000 shares, call it, [ sub-$400,000 ] in terms of the actual value, depending on where the share price settles. But to ask for an increase for total pay of $2 million, that does seem very anomalous and heavily misaligned, especially given that some directors are new. So certainly understand that we need new people to correct the wrongs of old, but Gordon, 2015, I think Sally, 2018. So clearly, there is a lot of blood on people's hands unintended given the company we're assessing today, but I do just say this is very anomalous to be asking for an increase in director remuneration, given, to date, it's heavily misaligned in terms of the shares owned relative to remuneration. So I would just appreciate why you think that is justified given the owners of the business have had such a bad outcome in terms of their shareholders' value.

So like most companies, the company has a Board that they have to own approximately -- they have to own 1 year of their base fees in shares over a 3-year period that's our policy in terms of owning shares. That's fairly equivalent to every company under ASX listing. In terms -- as I said, in terms of this cap, it purely is a cap. It doesn't mean that people are going to be taking increases or anything like that. It is just to put as a normal process to increase the cap to take into account future changes to directors' remuneration. Thank you. Is there any more questions in the room? Is there any questions online?

There is a question from the online platform. The question comes from Mr. Stephen Mayne. When disclosing the outcome of voting on all resolutions today, including this net fee cap increase, could you please advise the ASX how many shareholders voted for and against each item similar to what happens with the scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and was a voluntary disclosure initiative adopted by the likes of Metcash, Altium, AUI, Dexus, Webcorp, Webjet, [ Tabcorp ] and Meyer over the past 2 years. The ASX itself and Qantas, both did it for the first time this season. You've got the data, so why not let the sunshine in? Question.

Thank you. Look, we will certainly disclose our regulatory requirements. It's up to the ongoing Board if they would like to do that next year. Is there any further questions? On the phone, is there any questions on the phone?

There are no phone questions.

As there are no further questions, I'll close this question session. we'll now move to the vote on item 9. I know that I have notified the meeting of the proxy and direct voting status of this item. This item has been open for discussion getting questions, and that discussion is now closed. I now put the motion that for the purpose of ASX Listing Rule 10.17 and clause 16 of the company's constitution, the aggregate amount of remuneration that may be paid to any financial year -- in any financial year to the company's nonexecutive directors be increased from $1.4 million to $2 million. As previously directed, we will proceed directly to a poll. [Voting]

As we've now reached the conclusion of the formal business of the meeting, I will now pause for 60 seconds to allow those shareholders yet to vote to finalize and submit your votes, and then I will formally close on all items of business. [Voting]

Just while we are awaiting the 60 seconds for everybody to finish their votes. I just wanted to take the opportunity on behalf of the entire Board to say thank you very much to our fabulous Chair, Jenny. She has achieved a lot over the course of only a year that she's been in the job. She's been a great leader of the Board. She's a woman of great courage and dedication. I think she's stood up so brilliantly today. We all feel very proud of her and very grateful for her contribution, and we wish her all the very best with what she does in the next. That took up most of the 60 seconds.

The ballot box is coming around. Thank you, ladies and gentlemen. I now declare all polls on all items of the 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 ASX. I now declare the meeting closed. Thank you for your attendance.