McMillan Shakespeare Limited (MMS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Tim Poole, Chairman of McMillan Shakespeare Limited. I'm delighted to be able to extend a warm welcome to our shareholders and guests to our 2020 Annual General Meeting. I would like to begin by acknowledging the traditional custodians of the lands on which we meet today, which for me is the Wurundjeri people of the Kulin Nation, and pay my respects to their elders past and present. I'm advised that in accordance with Clause 16.4 of the company's constitution, a quorum of members is present and accordingly, I declare the Annual General Meeting open. The notice of meeting was mailed to all shareholders on the 17th of September 2020, and I'll take the notice of meeting as read. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch and listen to a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Questions can be submitted at any time. [Operator Instructions] Voting today will be conducted by a way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new poling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded, and you can also change your vote up until the time I declare voting closed. I'll now declare voting open on all items of business. The polling icon will soon appear, please submit your votes at any time, and I'll give you a warning before I move to close voting. The proxies received in advance of the meeting are held by the company's share registry and are only available for inspection upon receipt of a written request. The company's previous Annual General Meeting was held on the 22nd of October 2019. I signed the minutes of that meeting on the 26th of November 2019 as a true and correct record of the proceedings. The minutes are available to shareholders for the duration of this meeting in the Notices section of the company's website. Now I'd like to introduce to you the directors of the company who are attending this meeting today and are on our live webcast. So we have non-executive directors, John Bennetts, Ross Chessari, Ian Elliot, Helen Kurincic, Kathy Parsons. And we also have our Managing Director and CEO, Mike Salisbury; and our company Secretary, Mark Blackburn. I also note the presence of Darren Scammell, representing the audit firm of Grant Thornton, and thank Darren for attending. I'd now like to move on to my Chairman's address for the meeting today. And in doing so and starting, I would like to pay tribute to each and every employee of the McMillan Shakespeare Group in Australia, New Zealand and the U.K. for their effort and commitment during the 2020 financial year. With deteriorating economic conditions, a changing and uncertain regulatory environment and a global pandemic, 2020 was a deeply challenging year. The response from our team to these and other challenges were superb, led by Mike Salisbury and his executive leadership team, the commitment displayed by our team to provide high-quality, seamless service to our clients throughout such a disruptive year was a great achievement. Disappointingly, the 2020 financial year results for MMS are not a true reflection of the hard work from our team or the progress we have made on many important initiatives. For the record, in 2020, we delivered revenue of $494 million, which was down 10% on the prior year. And our measure of underlying net profit after tax or UNPATA was $69 million, which was down 22%. Although we did not pay a final dividend, a $0.34 interim dividend was paid in March, and we returned a further $80 million to shareholders through an off-market share buyback. Despite the challenging market conditions, parts of our business performed well. Our GRS business delivered a 5.2% increase in salary packages and a 5.6% increase in novated leases. Whilst plan partners achieved client funds under administration of $669 million by the end of the financial year, growth of well over 100%. The performance of our U.K. and aggregation businesses was well below expectations, which necessitated a material adjustment to the carrying value of the intangible assets of these businesses. Mike, and some of our senior team, will make some further comments on the company's performance in the 2020 financial year shortly. Whilst the 2020 financial year was challenging and our financial results were disappointing, we are very optimistic about the future for MMS. COVID-19 related restrictions are continuing to impact our operations, business and consumer activity and the broader economy. However, absent a further deterioration in the economic environment, we currently expect that MMS will return to growth in underlying net profit after tax in the 2021 financial year. And resume paying dividends with an interim dividend in respect of the first half of this financial year. MMS has some highly attractive and valuable businesses with strong market positions that generate returns well in excess of our cost of capital. The Board and leadership team are committed to focusing on maximizing the value of these businesses, whilst continuing to examine adjacent sectors for opportunities to develop new businesses. In May this year, we welcomed Kathy Parsons to our Board as an Independent Non-Executive Director. Kathy had a long and distinguished career as an assurance partner at Ernst & Young in the firm's U.S., U.K. and Australian practices. Since joining our Board, Kathy has made an immediate and positive impact. And she has recently taken over the chair of our Audit, Risk and Compliance Committee. I was also delighted to announce recently that Helen Kurincic will be the next chair of our company. Helen is a highly skilled and experienced Nonexecutive Director, and she will be an outstanding chair of MMS. Congratulations, Helen, and I'm looking forward very much to working with you in your new role. And you'll hear more from Helen and Kathy shortly when we get to the election and reelection of directors. As we've previously announced, our Chief Financial Officer and Company Secretary, Mark Blackburn, will be leaving MMS in December and embarking on the next stage of his career. Mark has been a critical member of the MMS Board and senior leadership team for the past 9 years. I know Mike will say more about Mark's time with the company shortly. But given his outstanding contribution and close working relationship with the Board, I did want to acknowledge and thank Mark on behalf of the Board. Mark's skill, experience, integrity, transparency and good humor are all qualities we have greatly appreciated. He has done a tremendous job for the company, and we wish Mark and his family all the very best for the future. I'd also like to welcome our new Chief Financial Officer and Company Secretary, Ashley Conn. Ashley is an experienced senior executive with a strong background in financial services and public markets. We are delighted Ashley has joined MMS, and we are looking forward very much to working with him. In closing, I'd like to once again thank Mike Salisbury, his executive leadership team; and all our employees for their hard work and dedication during the 2020 financial year. I would also like to thank my Board colleagues for the guidance and support they provide the company. We have had 62 board meetings during the past-2 financial years as we have dealt with the many challenges and opportunities, which demonstrates the Board's commitment to MMS. Finally, I would like to thank all our shareholders for your continued support and interest in our company. With that, it gives me great pleasure to hand over to Mike Salisbury, our CEO, to provide his address. Over to you, Mike.

Thanks very much, Tim, and good morning, everyone. Today, I'll be providing you with a brief overview of our performance in 2020 and take you through the key financial and operational highlights for the McMillan Shakespeare Group as well as provide you with an update on current trading for the first quarter. Before I do that, I would like to take a moment to recognize the significant contribution of Mark Blackburn, our Chief Financial Officer and Company's Secretary, who after 9 years with the group is moving on to the next chapter of his career. As the new CEO in 2014, Mark's support and guidance was invaluable to me, providing me his counsel based on his vast knowledge of the intricacies of life in a listed company and his many years of experience. As any good CFO should, Mark has always shared his opinions freely with unwavering honesty and has been a key contributor to the senior leadership group. He has conducted himself with utmost integrity and professionalism throughout his time with McMillan Shakespeare. And I would like to thank him, not just for his contribution to the group. But also for his support over the last 6 years, it has always given me great confidence to work side-by-side with Mark. But importantly, we've also been able to have a laugh along the way. And of course, these roles can't be done without the support of those close to you. So I'd also like to recognize the significance of family in Mark's life, and in particular, thank Liz and the kids for their support and encouragement of Mark over many years. On behalf of the Board, your colleagues on the executive team and the wider organization, our thanks to you Mark for making a difference over the last 9 years. And we wish you, Liz and the family all the very best for the future. Big shoes to fill, but fill them we have. So I'd also like to take the opportunity to introduce Ashley Conn as our new CFO and Company Secretary. Ash joined MMS on October 5, with a strong background in investment banking, having worked in several global investment banking groups as well as ASX CFO experience, most recently at CSG, now part of the Fuji Xerox company. Welcome Ash. I'll now turn to the presentation, and I'm on Slide 5. As the Chairman mentioned in his address, whilst the underlying profitability was below what the group achieved in FY '19, the period's performance reflected a highly challenging operating environment, including the continued decline in the Australian car market, a changing and uncertain regulatory environment and the economic impacts from both the summers catastrophic bushfires and the COVID-19 pandemic. Group revenue for FY '20 of $494 million was down compared with $549 million in FY '19, whilst UNPATA declined by 22% to $69 million. Given the uncertainty of COVID-19, the company determined that no final dividend would be paid with an expectation to resume dividends at the half year in February '21. Group cash flow was very strong with free cash flow before fleet increase of $103.3 million, and group cash at the end of the year of $91.4 million and excluding fleet funded debt, our net cash position was $66.7 million. We also extended our revolving fleet financing facilities in the second half of the year. For various periods from October '21 through March 2024. In all, I believe we managed the period extremely well. Our performance in Q4 showed a lot of resilience and despite the challenges of COVID-19, we have prioritized the safety and welfare of our employees. Importantly, we continue to progress our strategic initiatives. We accelerated our investment in digital technologies. We continued work on establishing a revolving warehouse facility for novated leasing. We commenced the restructuring of our U.K. operations and off the back of another strong performance, we acquired the minority interest in Plan Partners. Given the challenges of FY '20, you could expect to see this level of change negatively impact on our people. I'm very proud of the fact that this has not been the case for our organization. In fact, our people have told us that they are even more engaged and more aligned to our purpose. And through their efforts, we continue to set the benchmark for the industry. On behalf of all, I thank them for their significant efforts and ongoing contribution to MMS. Moving to the key operational dashboard. You can see that despite the highly challenging operating environment, the business has performed well with continued growth in customers across salary packaging, novated leasing and plan management. In a highly competitive environment, our GRS business has performed well. Our continued focus on improving our service offering through digital enhancements and targeted customer engagement led to a 5.2% increase in salary packages and a 5.6% increase in novated leasing. Plan Partners continued its strong performance and strong growth with funds under administration increasing by more than 100% on the previous year. Our asset management segment has operated in a competitive and challenging environment, while new asset financing remains subdued, we have continued our transition to a more capital-light business model, achieving our capital-light funding target with over $100 million now off balance sheet. I mentioned at the full year that we are committed to taking the learnings from the COVID experience and to leverage them to create an even better business. To speak to those opportunities today, I'd like to introduce 3 of our senior leaders, Julia Edwards-Smith, our Chief Customer Officer, will present on our significant data and digital transformation journey. Plan Partners, Chief Executive, Sean Dempsey, will provide some insights into the opportunities that exist within the National Disability Insurance Scheme. And to speak to the opportunities available through the redesigning of our future ways of working, I'd like to first introduce you to our Chief Human Resources Officer, Suzanne Shepherd.

Good morning, everyone, and thank you, Mike. At MMS, our focus is on creating an engaged and connected workplace that enables our people to thrive personally and professionally whilst delivering high-value business outcomes. We have a strong and engaged culture focused around the notion of better together. This means we place emphasis on cross-functional collaboration in a way that supports and challenges our people to grow and develop their capabilities. Our people strategy and practices, both short and long term, continue to be shaped by our learnings and successes, and in particular, those relating to our COVID-19 response and recovery. In the initial stages of COVID-19, we moved quickly to manage the impact on our business with the health and safety of our people and continuity of service delivery to our customers, our highest priorities. Our culture positioned us well for the transition to remote work, and we are very proud of the resilience and adaptability of our people as they continue to demonstrate our collective ability to pull together to protect and grow our business through the toughest of times. These qualities are pivotal in our attraction, on-boarding and retention of talent. And the ability to pivot quickly and with confidence during this time was paramount. We invested in the technology required to transition our entire workforce to work remotely by giving our people the necessary tools, support and empowerment to continue their work. And by way of an example, within a matter of weeks, we implemented a new telephony platform for our GRS business, enabling us to maintain service delivery to customers, whilst enabling all of our client services and operations teams to work from the safety of their homes with high levels of productivity. Virtual learning and development solutions have been implemented to support the capability and careers of our people no matter where the learning is done. And in order to protect our financial health for the longer term, we partially or fully stood down parts of our workforce where there was a material in workload. A COVID-19 online hub was established, and we leveraged this to stay intimately connected with our people whilst providing an array of well-being strategies and resources focused on mental and physical state. And also injecting a sense of humor and fun. This was complemented by a newly implemented parent portal to provide additional support for our working families. And we also recognize that for some of our people there may be more formalized support that was required and ensured strong awareness of our employee assistance program in all communications. Importantly, during this period, we also initiated an executive-led future ways of working team to examine and guide how and where we work in the future. And to help inform the work of this team in May this year, we conducted a pulse survey to gauge the sentiment of our people concerning COVID and working from home. Pleasingly, we achieved a score of 87% on the sustainable engagement elements of this survey with our people telling us that they felt well connected, informed, supported and enabled to effectively work remotely. This was a powerful reflection on the commitment of our leaders, and our results in this regard placed us above the Australian and high-performing organization's norms at this time. Looking forward in FY '21, our future ways of working team is focused on executing on our multi discipline integrated road map, giving consideration to critical business perspectives. These include our people, our properties, our technology and systems, and importantly, our customer and employee experience, particularly from a digital service capability and productivity aspect. The health and welfare of our people is imperative to their capacity to achieve their best in both their professional and personal lives. This along with preserving our strong culture, whilst enabling greater flexibility to where work is done into the future remains our highest priority. Time does not allow me to go into many other initiatives that we have in play. However, I can say that we remain highly focused on enabling the organization to pivot in an agile and confident way in order to drive long-term success, confidence, trust and loyalty for our customers, people and you, our shareholders. I mentioned that one of the critical focus areas about future ways of working team centered on our digital service capability. And to provide further insight into this and our digital transformation journey, I would now like to introduce you to Julia Edwards-Smith, our Chief Customer Officer. Thank you.

Thank you for that introduction, Suzanne, and good morning, everyone. Leveraging our Beyond 2020 program that kicks off in 2018, we have now embarked on a significant data and digital transformation journey. Which has culminated in a significant pivot within the group's marketing, CX and digital focus and capability over the last year. In particular, we have moved to focus on our data science capabilities, customer engagement and continuing on our digital transformation journey. A key driver of these initiatives has been our ongoing commitment to further enhance the customer experience and enable our customers to make confident choices. Accordingly, our digital vision is to create the ultimate connected customer and employee experiences, how? By embracing the future to improve core performance, exploring new products and services and experiences and also how we go about delivering them. Furthermore, over recent years, our customers' expectations and behaviors have changed in terms of how they go about their buying journeys for products and services. They want brands to make it easier for them to provide them with greater flexibility and even more control so they can interact with us in a time and place that suits them. In FY '20, in order to meet these changing customer needs and to respond to COVID-19, we have needed to accelerate our digital transformation. So we introduced digitally led education and customer enablement tools that not only allowed us to be able to continue to connect with Maxxia and RemServ clients when we were no longer able to visit science. But will also allow us to differentiate and increase our operational efficiency. In addition, we consolidated our live chat platforms, which involves the expansion of our real time live chat tool across our websites and our AI chatbot, resulting in live chat being our highest growth channel. We also enhanced Maxxia online, resulting in a material increase in platform engagement and utilization. And we launched our first salary packaging online setup solution, which enables customers to set up their salary packaging remotely. Importantly, we also increased our customer service offering through the development and investment in the following capabilities: in-house data science; customer experience; marketing automation technology; and continuous digital delivery teams. All of which helped to support the development of personalized customer communications, digital estimates, self-service app enhancements, products and more. We also transitioned our contact center platform to support a fully work from home workforce designed to continue its services to customers. Since its implementation in March 2020, the new platform has received more than 260,000 calls from customers. So our focus for FY '20 -- '21 is to continue to improve the customer experience through further digital enhancements in the GRS segment through seamless interactions with the intent of increasing opportunities for digital engagement and self service, whilst reducing operating costs. Our pursuit of a digital-first approach will include adopting advanced automation technologies and agile delivery practices in order to improve productivity and increased utilization of robotics and the digital distribution of customer engagement initiatives, creating a digitally enabled employee experience. Enhancement of our self-service capabilities will include further online customer sign-ups, increased utilization of chat bots, and the ongoing development of a digital lease sales estimate experience. During FY '20, we are continuing to invest in further customer research at both the corporate and consumer levels. With a view to trialing new products and services. We are, therefore, strengthening our internal capabilities and platforms to ensure that we have the right agile and innovation processes and investments in place to enable us to bring new concepts and ideas to market rapidly in a post-COVID world and will apply the following 4 lenses: customer desirability; viability; feasibility; and sustainability. We're really excited by FY '21, and we're looking forward to the continued evolution of our data and digital transformation journey. And such investment in digital self-service tools and other digital enablers forms the common focus across our respective business units, and not least, Plan Partners. So on that note, I'd like to introduce Sean Dempsey, our CEO of Plan Partners to talk about the business and its performance and its future focus. Thank you.

Thank you, Julia, and good morning. Each one of us holds goals and dreams for our future, a vision of how we want to live our lives and who we want to be. For people with a disability too often, those goals and dreams can be what most Australians take for granted. The introduction of the National Disability Insurance Scheme has been a tremendous development for many hundreds of thousands of Australians and their families, giving them greater choice, more control over the direction of their support and bringing them a step closer to living the life that they want to live. The potential of the scheme is extraordinary. However, as the scheme is designed to meet so many diverse needs, it's complicated. And some may say unnecessarily so. Many people find it challenging to navigate, particularly when it comes to managing their own NDIS funds and handling the administration of their budgets, and organizing their own support. In response, in 2016, we brought together the expertise within MMS GRS business in managing and disbursing funds together with expertise in the disability sector through Disability Services Australia to form our business, Plan Partners. Our core business is the provision of plan management and support coordination services to participants of the NDIS. Plan management supports participants in managing their NDIS funds and taking care of the many related administrative tasks of budgeting and funds oversight. Support coordination, on the other hand, helps participants find and connect with service providers who are the right fit for their needs. Our aim is to make a positive difference in the lives of people living with disability, enabling them to live the life that they want to live. We continue to be focused on building a scalable business and to grow our earnings through enhancements to our person-to-person and digital offerings for both customers and service providers. Pleasingly, over the course of financial year '20, the number of NDIS participants receiving funding for plan management increased by 8% to 38% of all plans. This creates further opportunity to capitalize on the scale that we have built. During financial year '20, the business delivered a strong performance, growing funds under administration by more than 100% to $669 million. And delivering MMS share of UNPATA of $2.7 million. Also, during financial year '20, our continued investment in technology including offering next day reimbursements through our online dashboards and improving our digital self-service tools, enhance our customer experience and created a more attractive offering for service providers. Our customer feedback has been extraordinary. This reinforcement of our value proposition led to our decision during the year to acquire Disability Services Australia's minority 25% shareholding for $8 million effective June 30, 2020. With the continuing rollout of the NDIS, which at full rollout will see around 500,000 participants in the scheme, we are well positioned to continue to grow and to further invest in technology and business performance to scale the business in financial year '21. Together with a focus on improved customer retention, further investment in digital self-service tools will be key to our ongoing growth and productivity. The plan management sector within the NDIS remains greatly disaggregated with a small number of providers holding market share of any notable size. As a result, we will continue to actively explore consolidation through acquisition. Our current systems have been built to be transferable and our capacity to manage a high-volume of transactions can be scaled. In addition, we are cognizant that the management of funds and the large volume of transactions that occur between providers, participants, workers and others in the human services sector provides an opportunity for Plan Partners. Thank you for your time, and I'll now hand back to Mike.

Thanks very much, Sean. I'll now take a few moments to provide a brief update on our start to the current financial year, our priorities and our progress to date on some of our key initiatives and programs. I would like to emphasize how resilient our business is. We have strengthened MMS. We have achieved our capital-light funding target. Our debt facilities have been extended, and we have a solid net cash position. Notwithstanding the COVID restrictions in Victoria we have had a good start to the new financial year with positive performances across all segments. The core business continues to perform through the defensive nature of the salary packaging business, a faster than anticipated recovery in novated lease sales and strong growth in Plan Partners. Pleasingly, whilst not yet returning to pre-COVID levels, the improvement experienced through May and June in RFS and asset management has continued through the first quarter of FY '21. And subject to the Federal Court approval, we're pleased to say that the class action has been settled. Good progress has been made on the restructure of the U.K. operations. We have seen a much stronger activity system across our broker businesses in the first 3 months of the financial year as restrictions have been relaxed. Clearly, the increasing case numbers currently being experienced in the U.K. are a concern, and we continue to monitor this situation closely. In respect to the regulatory environment in Australia, there has been no update on the review of deferred sales of add-on insurances. And the recent announcement by the Federal Treasurer in respect to the availability of credit may be a positive for our business. However, this has some time to run before an outcome is known and whether it generates any positive changes to credit availability. In closing, I've included a number of the positive attributes of our organization that has served us well during COVID, and will continue to do so moving forward. We remain committed to leveraging scale, introducing new technology and pursuing strategic growth opportunities that consolidate and enhance our position in a changing, competitive and complex marketplace. This includes continuing our program of digital innovations and long-term investment in technology across core sales and operating platforms, driving growth from new and existing clients. In the face of the ongoing market challenges, we are committed to ensuring our value proposition remains compelling. To achieve what we have in the last 12 months is a credit to the team, and I would like to acknowledge the support of the Board and thank our leadership team and all our employees for their dedication and commitment throughout the financial year. Thank you very much.

Thanks, Mike, for your presentation. And can I also say a particular thanks to Suzanne, Julia and Sean, I think it's a real positive development in our AGMs to have some of our senior leaders in the business play a role in this meeting, and your contribution has been terrific. So thanks, Mike, but also particular thanks to Suzanne, Julia and Sean for being with us this morning. We now come to the formal business of the meeting. Each item of business will be discussed in turn, and members will have the opportunity to ask questions on that item of business. [Operator Instructions] So let's start with Item 1, which is in relation to the financial reports. So the first item of business listed in our notice of meeting is to receive and consider the financial report, Directors' report and independent audit report of the company and its controlled entities for the financial year ended 30th of June 2020. In accordance with the Corporations Act, there is no vote on this item. This item of business provides shareholders with the opportunity to ask questions about the reports and management of the company generally. So can I ask whether there are any questions, and Mark Blackburn is moderating this morning of the questions. So Mark, can I see whether there are any questions, please?

Yes, Mr. Chairman. The first question comes from the Australian Shareholders' Association. Their question is as follows: the Plan Partners business has grown strongly since inception. The company has leveraged McMillan Shakespeare's core skill sets in this different market. What other markets has the company assessed may present similar diversification opportunities?

Thanks, Mark. And yes, we have been particularly pleased with the growth in our Plan Partners business and also the performance. It has been an area where we have felt we've been able to transfer our core skills and experience, as Sean said earlier, from our GRS business into this business. And so I think the skills, experience and the team from the broader McMillan Shakespeare Group has been important in helping to build the Plan Partners business. It's one of the reasons why we had Sean come and present to the AGM today. He and his team have done a fantastic job, and we see this as a very important growth avenue for our business going forward. It's also, as Sean highlighted in his presentation, while we were particularly pleased to buy the additional 25% of the business, and we now own 100% of the Plan Partners business. In relation to other markets, for obvious commercial reasons, I'm not particularly keen to call out particular markets. But I just would like to reconfirm, as I said, as part of my presentation, the Board spends an awful lot of time examining adjacent markets. We're going through another process at the moment where we are quite carefully looking at a range of adjacent markets where we think our skills and experience, again, can be brought to bear. So we hope to say some more about that in the future. And we hope to be able to generate more opportunities like the very successful Plan Partners opportunity in the future. Thanks, Mark. Back to you.

Mr. Chairman, another question's coming from shareholders in this instance. And that question asks, will we provide guidance for the FY 2021 year? And the second part of that question was, what are the prospects for our U.K. business?

So in relation to formal guidance. Look, from time to time, when there's been a particular need to provide guidance because of certain developments in the market, we have provided guidance. But typically, we don't provide guidance. We're very mindful of the broker reports and the analyst reports and where consensus sits. And so we obviously have the requirements to talk to the market about our prospects if we believe both positively or negatively we're materially away from consensus. But at this stage, we don't believe we need to say anything to correct that consensus. And we also don't believe we need to or see the need to be providing any particular guidance around FY '21 other than to say or reconfirm what I said in my presentation, which is, we do see the business returning to growth in underlying net profit after tax in FY '21 compared to FY '20. In relation to the U.K., we have been going through quite a process over the last 12 months or so in terms of assessing the U.K. There's been a number of developments in those markets. Some of those has been macro-driven in terms of Brexit in terms of the economic conditions, which have all been very tough for businesses over there. We've also been examining the sectors that we've been operating in, where returns on capital are very low and have been for some time. So we have made the decision to restructure that business. We've made the decision to stop lending on our own balance sheet, and we are looking to wind down our lending activities on our own balance sheet. And once we achieve that, repatriate any excess capital back to Australia. But we will have several quite attractive broking businesses remaining in that part of the market. So it will be a much more capital-light business for us going forward. And the businesses that we'll be retaining will be businesses that we think can generate attractive returns on capital and provide some growth prospects in that market. So it will be a smaller part of our business, but it will be a more profitable part of our business and a better return on the capital we've got invested in that part of the world. Back to you, Mark.

Mr. Chairman, there's just one final question at this stage. And I know you dealt with this in your opening remarks, but the question pertains to when we'll be returning to paying dividends again?

Yes. So just to reconfirm, our expectation is that, absent any demonstrable change in the economic environment and as we've all talked about this morning, the COVID world continues to surprise us, but we are coping well with where we are at the moment, and we're quite positive about the 2021 financial year, if the current conditions remain. And if the current conditions do remain, we expect to be resuming paying dividends in the 2021 financial year and starting with an interim dividend as part of our half year results. Which we'll talk to the market about in February. Back to you, Mark.

Mr. Chairman, at this stage, there are no further questions for Item 1 of business.

All right. Well, if there aren't any more questions, we might proceed to the formal resolutions. And in doing so, I'd like to appoint David Squires of Computershare Investor Services as the returning officer for the purpose of conducting the poll on each resolution. As I mentioned at the start of the meeting, voting on the resolution is currently open, and you can vote at any time until I declare the voting closed. Results, as is our normal practice, will be released to the ASX after the conclusion of the meeting. Please note that only shareholders, proxy holders or authorized representatives may vote. Any directed proxies given to you by a shareholder will automatically be cast as directed when the poll is closed. The voting icon is available within the navigation bar. Once you click on this, the resolutions will appear on the screen along with the for, against and abstain voting options. Simply select one of the options -- one of these options to cast your vote. When voting is closed, your final voting selection will be recorded. And once again, if you have any difficulties, please refer to the user guide, which can be accessed through the platform. Okay. So let's move into Item 2, which is -- which relates to the adoption of the remuneration report of the company for the financial year ended 30th of June 2020, and is set out on Pages 20 to 41 of our 2020 annual report. The remuneration report sets out the company's remuneration policy for its executives, employees and directors. The company strives to ensure that its remuneration report is clear, transparent and demonstrates your Board's objective of ensuring the alignment of executive reward with the creation of shareholder value and that current market practices have been duly considered in terms of both quantum and structure of the company's remuneration framework. The resolution before the meeting is that for the purposes of section 250R(2) of the Corporations Act and for all other purposes, the remuneration report for the financial year ended 30th of June 2020, as contained in the Director's report be adopted. The Board unanimously recommends that shareholders vote in favor of adopting the remuneration report. I'll now put the resolution to the meeting. And as you can see on the screen, the summary of the votes received before the meeting now appears. So Mark can ask whether there are any questions in relation to the remuneration report, please?

Certainly, Mr. Chairman. The Australian Shareholders' Association has a question. And in the first instance, they'd like to make the point that they welcome the adoption of face value rather than fair value in the valuing of performance rights granted to the CEO. However, they do not support the use of underlying profit as defined by the company, as a measure for management performance. The company's calculation explicitly excludes impairments, which are usually one-off. And MMS has now written off goodwill in each of its last 4 years with an aggregate loss exceeding $80 million. This implies either overpaying for acquisitions or failing to make them successfully. If management is not held accountable for such failures, who within McMillan Shakespeare is?

Thanks, Mark. I think it's important to be very clear on this, so for market reporting purposes, so when we talk to the market in our investor communication, our annual report, our investor presentations, and so on, we do exclude impairments of goodwill and a range of other things as we try and get to a definition of underlying profit, which is as close as possible to a proxy for the sustainable operating profit of the business on a run rate basis. So yes, for the purposes of market reporting and communication to the market we certainly do exclude goodwill impairments, amongst other things. However, just to be absolutely crystal clear, for remuneration purposes, we do include and take into account write-offs of goodwill in calculating both for the purposes of our EPS tests and also for our return on capital employed tests, we absolutely do take into account write-offs of goodwill. So management through the LTI mechanism is held to account for those write-offs. And indeed, it's why in the 2018 grant, there was a nil vesting, and that's why in our remuneration report for both FY '19 grants and FY '20 grants, we disclosed that it's highly unlikely that the EPS and ROCE targets will be met in either of those grants because of the impact of the impairments. And just to cover off, I think it is -- I know remuneration reports can get quite complicated and quite lengthy. And for those market participants that need to wait through a number of these, it can get quite cumbersome. But on Page 30 of our annual report, as part of our remuneration report, we do quite clearly show that and quite clearly disclosed that goodwill impairment write-offs are taken into account in both the EPS and ROCE calculations. Back to you, Mark.

Thank you, Mr. Chairman. We have another question from a shareholder that asked the question in relation to the timing of allocation of rights, and in particular, the rights this year, where the share price is 40% reduced at the time of the striking of the opportunity.

Sure. Thanks, Mark. So this is actually a question that we've dealt with in previous calls. That's obviously something of interest to shareholders. Look, I think the key point to note here is that our practice is consistent each year. And again, as we have forwarded in our notice of the meeting, we do use 1 day VWAP or a 5-day volume weighted average price leading up to June 30 in terms of calculating the share price that we use. And this year, it was $8.90. Now some years, it's going to be low, like it is this year because of a whole range of effect, including a lot of market disruption, including the pandemic, including a challenging year for us. And in other years, it's going to be high. I think the key issue that shareholders should note and reflect on is that and hold us to account on is to make sure our practice is consistent from year-to-year. So our methodology is consistent. Just to reiterate, it's a 5-day VWAP leading up to 30 June. It's something we've been doing for several years now, and it's something we should -- we will continue to do. And provided we are consistent, I think the volatility from one year to another will even out over time. Mark, back to you.

Mr. Chairman, I don't have any other questions on the remuneration report at this time.

Okay. Thank you. I think it is just before we move off from this item. It is important to note that the company will disregard any votes cast on item 2 by all key management personnel and their closely related parties, except where that vote is cast by them as a proxy for a person who is entitled to vote. Okay. So that deals with item 2. Let's move on to item 3, which is the reelection of John Bennetts as a Director of the company. Details of John's background, qualifications and experience is set out in the notice of meeting. And I would now like to invite John to the meeting to say a few words.

Thanks, Tim. I'm John Bennetts. I've been a Director of the company since before it listed on the ASX in 2004. I have commercial experience as a founder, investor, executive in a range of businesses in the financial services, technology, biosciences areas. Early in my career, I practiced as a commercial lawyer. Since listing on the ASX, McMillan has raised approximately $30 million from investors, and I'm proud to say, has returned almost $600 million in dividends and capital. On top of that, the company has now increased its market capitalization from $35 million on listing to around $700 million now. Most importantly, in the history of the company, McMillan has delivered a very high standard of service and value to an ever-expanding and increasing customer base, and has generated around 1,000 new and rewarding opportunities and employment roles for our staff. I'm extremely excited by the opportunities ahead of the group. I think there is a lot of opportunity, and I'm very keen to contribute to the execution of that opportunity. I'd like to thank my board and management colleagues for supporting my reelection. Thank you.

Thanks, John. Excellent. Can I ask Mark whether there are any questions in relation to this resolution?

Mr. Chairman, there are no questions in relation to this resolution.

Thank you. The Board, excluding John, as this resolution is for his reelection, recommends that shareholders vote in favor of this resolution. The resolution before the meeting is that John Bennetts, a Director retiring from office in accordance with Clause 20.2 of the constitution and being eligible, is reelected as a Director of the company. I'll now put the resolution to the meeting. A summary of the votes received before the meeting is now on the screen. Okay. So let's move on to item 4, which is the reelection of Helen Kurincic as a Director of the company. Once again, details of Helen's background, qualifications and experience are set out in the notice of meeting. I will now invite Helen to say a few words.

Thank you, Tim, and thank you, shareholders, for your consideration. I have a deep, career long understanding of the health, government and not-for-profit sectors, a large proportion of the customer base of your company. I have corporate governance experience on listed entities, and I'm passionate about sustainable strategy setting and leading high-performance cultures demonstrated in my prior executive and current nonexecutive roles. Over the last 2 years, I've served on the company's Audit, Risk and Compliance Committee and Remuneration and Nomination committee. I'm honored to have been asked to succeed Tim to serve as Chair of your company subject to reelection by you, our shareholders. I'm looking forward to working with the Board and management team to achieve growth and improvement in our business for customers and in turn, deliver for our shareholders. May I also take this opportunity at this AGM to thank Tim Poole for his exceptional service as Chair of McMillan Shakespeare over the last 5 years, and we appreciate him continuing on our Board and committees. Thanks, Tim.

Thanks, Helen. Can I ask whether, Mark, there are any questions on this resolution?

Mr. Chairman, the Australian Shareholders' Association don't have a question, but they would like to congratulate Helen on her appointment as Chair of the company.

Terrific. Thanks, Mark, and thank you to the Australian Shareholders' Association for that comment and vote of confidence in Helen. The Board, excluding Helen, as this resolution is for her reelection, recommends that shareholders vote in favor of this resolution. The resolution before the meeting is that Helen Kurincic, a Director retiring for office in accordance with Clause 20.2 of the constitution and being eligible, is reelected as a Director of the company. I will now put the resolution to the meeting. A summary of the votes received before the meeting is once again displayed on the screen for us. Let's move on to Item 5. Item 5 is the election of Kathy Parsons as a Director of the company. Again, direct details of Kathy's background, qualifications and experience are set out in the notice of meeting. I'd now like to invite Kathy to say a few words to us.

Thank you, Tim, for the opportunity to share some of my background. I retired from [indiscernible] at the end of April this year, following a career in assurance. Whilst a Partner at EY, I had both client service and internal leadership roles and most recently, I was the Oceania Audit Quality and Risk Management leader. In addition to time in Australia, I spent time as a Partner in the U.S., where I was responsible for the development and deployment of global tools. And in the U.K., where I led our real estate audit practice. Subject to election, I look forward to continuing as Director and Chair of the Audit, Risk and Compliance Committee, sharing my experience and working with my fellow directors in enabling McMillan Shakespeare to achieve its strategic goals.

Thanks, Kathy. Can I ask Mark whether there are any questions in relation to this resolution?

Yes, Tim, the Australian Shareholders' Association notes that with Kathy Parsons election to the Board, the Board will comprise the majority of independent directors. And it will diversify -- and its diversity will be improved. They also note that Ms. Parsons after 8 months on the Board has already acquired more equity in the company than Director, Mr. Ian Elliot, has after 6 years. Has the Chairman spoken to Mr. Elliot on the desirability of showing good faith to the company and shareholders by progressing his commitment to the company's equity holding policy and to the verbal commitments he made at his reelection at the 2018 AGM?

Thanks, Mark. And can I start by just thanking the Australian Shareholders' Association for noting the improvement in both our diversity and independence. But I think most importantly, in relation to this resolution, in a short space of time, Kathy has proven itself to be a very high-quality director and an excellent addition to our Board. So she is an accomplished director and is going to be a valuable asset for our company. So I think that's of most importance to us. In relation to the second part of that question from the ASA. As the ASA knows, we brought in a policy around minimum share ownership levels back in the 2018 financial year. We didn't have one before that. But the Board felt, notwithstanding we have 2 directors who are very significant shareholders in the company. So we thought -- even notwithstanding that very strong alignment there, we felt it was important that all Board members have a minimum level of ownership in the company to ensure that there is alignment between the Board and the shareholder experience. The policy that we introduced did have a phasing in period. Our policy that we introduced in 2018 said that a director at the time of introducing that policy had until September 2022 to achieve 100% of their 1 year's fixed base fees in terms of minimum share ownership. So Mr. Elliot does currently comply with our policy, and I'm sure he'll continue to comply with our policy into the future. Mark, back to you to see whether there are any further questions?

Mr. Chairman, there are no further questions.

Okay. Thank you. The Board, excluding Kathy, as this resolution is for her reelection, recommends that shareholders vote in favor of this resolution. The resolution before the meeting is that Kathy Parsons, a Director appointed to fill a casual vacancy and retiring from office in accordance with Clause 19.4 of the constitution and being eligible, is elected as a Director of the company. I will now put the resolution to the meeting. And again, a summary of the votes received before the meeting is now available on the screen for people to see. Let's move on to Item 6. Item 6 relates to the issue of indeterminate rights to the Managing Director. The resolution before the meeting is that for the purposes of ASX listing rule 10.14 and all other purposes, approval be given for the issue to the Managing Director, Mike Salisbury, of 103,763 indeterminate rights under the company's long-term incentive plan and for the issue of shares, subject to vesting on the exercise of those indeterminate rights. I will now put the resolution to the meeting. Once again, we have a summary of the votes received before the meeting on the screen. Can I ask Mark whether there are any questions in relation to this resolution?

Yes, Mr. Chairman. The Australian Shareholders' Association have a question in relation to this matter. In setting the vesting thresholds for compound average growth rates, and for return on capital employed, how did the Remuneration Committee take into account the current depressed starting point of the business for these particular performance measures?

Thanks, Mark. Yes, look, it's a good question. And I have to say, in terms of setting forecast numbers, this has been one of the more challenging periods with the times that we've been living through. And we have had many meetings to discuss the setting of targets. We have looked at a number of forecasts. We've looked at a number of scenarios, but this hasn't been a straightforward exercise. But look, the direct answer to the question is, the proof is really in the numbers. If you look at, for example, our EPS targets from last year's issue of -- the issue of rights under the long-term incentive plan, the 2-year tranche and the 3-year tranche for the EPS targets was 6% at the low end and 10.5% at 100% vesting. And if you compare that to our issue this year, our proposed issue this year in our notice of meeting, the 2 year range is 11.5% to 15.5% and the 3 year range is 9.5% to 13.5%. So you can see quite clearly that there's a demonstrable uplift. And that largely reflects the fact that we -- the 2020 financial year and particularly the last quarter of the 2020 year was quite affected by the COVID period. And equal, if you look at the return on capital numbers, last year, the range was 21.5% to 24% and 21.5% to 23% for the 2-year issue and the 3-year issue. And again, demonstrably higher in relation to this proposed issue, 29.5% to 32.5% and 31.5% to 34.5%. So again, curious that up and again reflects the challenging year that -- well, it's certainly the challenging fourth quarter of 2020. So we do believe, notwithstanding what I said earlier, that it has been a challenging time to be setting 2 and 3-year forecast for the business. We do see that the forecast with all the targets we've set have taken into account that the prior period was affected. Mark, are there any other questions?

No, Mr. Chairman. No other questions for Item 6.

All right, as I said before, I will put the resolution to the meeting. And I think it is also important to note that the company will disregard any votes cast on Item 6 by Mr. Salisbury and his closely related parties, except where that vote is cast by them as a proxy for a person who is entitled to vote. Let's move on to the last item of formal business, which is Item 7, and that relates to the amendment to the company's constitution. This item of business is a special resolution, this means at least 75% of the votes cast by shareholders entitled to vote on the resolution must be in favor of the resolution for it to be passed. The resolution before the meeting is that for the purposes of Section 136 of the Corporations Act, approval be given to amend the company's constitution to: a, facilitate the holding of general meetings virtually; and b, allow for direct voting in the form set out in the section titled proposed changes to the constitution in the notice of meeting. Once again, I'll put this resolution to the meeting and a summary of the votes received before the meeting now appears on the screen. Mark, can I see whether there are any questions in relation to this resolution?

Mr. Chairman, there are no questions at this time.

Okay. If there are no questions. Again, I'll put the resolution to the meeting. We can see the proxy numbers already received on the screen. All right. Well, if there's nothing on Item 7, we'll move on to the conclusion, and that does conclude the formal business of the meeting. I would like to advise that the voting on all resolutions will close shortly. I might just take a few moments to pause to allow those shareholders who haven't already done so, the opportunity to finish voting. So we might just pause for a few seconds. [Voting]

Okay. I think that's probably enough time. So I would like to say that voting has now closed. Please note, as I said earlier in my introduction, the final results of the meeting today will be notified to the ASX as is our practice and in accordance with the Corporations Act and also place those voting results on our website as soon as they become available. Given there's no further business, can I thank all of our shareholders and guests for attending the meeting today. I hope you've enjoyed the slight change in format. I certainly enjoyed having both some of our senior leaders talk and also the directors standing for election and reelection also play a role in the meeting. So hopefully, you found all of that useful and helpful. And with that, I'll declare the meeting closed. And thank you once again for attendance. Thank you, and good morning.