Metro Performance Glass Limited (MPG.NZ) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I think it's just passed 10 o'clock. My name is name is Peter Griffiths. I am the Chair of Metro Performance Glass Limited. And I will be chairing today's meeting. Thank you for joining us today, and we're very pleased to welcome you online. My apologies for not being able to hold this meeting in the face-to-face manner we had originally planned, but I'm sure you know Auckland has moved to Alert Level 3, and this led to us changing our plans and holding a virtual shareholder meeting this year. Now just in any physical shareholders' meeting, you can vote and ask questions, but in the online format, I will be providing you with further instructions as we progress through the meeting, but if you do encounter any issues, please refer to the virtual meeting online portal guide or alternatively, you can phone the helpline, 0800 220 200. That's 0800 220 200. If you have questions, I'd encourage you to send these through as soon as you can. This will allow us time to collate them and answer as many as possible. However, if there are any that we're unable to get through during the meeting, or that require a more detailed response, our Investor Relations team will come back to you directly via your registered e-mail address, and we'll also post the responses on our website. Now to the agenda for today. I will shortly introduce my fellow Board members to you. I'll then follow with a few remarks on the current uncertainties around COVID-19 and what this means for the Metro Glass group will reflect on the 2020 financial year, and I will make some remarks about the Board's activities and immediate priorities. I'll then hand over to Simon Mander, and after his address, we'll come to your questions. We'll spend some time on those, and then we'll move to the 3 resolutions that are in the notice of meeting. And again, there will be an opportunity for questions as we go through each resolution. I'd now like to introduce the Board to you. We currently have 6 directors, 2 of whom, Graham Stuart and Mark Eglinton are seeking election today and we'll have, of course, address you during that part of the meeting. However, it's important that people have a sense of those who make up the board and because of our virtual setting, I'll ask each of the directors just to say a few words as I introduce them. Firstly, Angela Bull.

Thank you, Peter, and good morning, everyone. My name is Angela Bull, and I was appointed as a Director of Metro Performance Group in May 2017, and I was reelected at the last Annual Shareholders' Meeting in August of last year. My background is in commercial property, and I am currently also the Chief Executive of Tramco Group based in Auckland. And in terms of Metro Performance Glass, I Chair the People and Culture Committee. Thank you, Peter.

Thanks, Angela. Russell Chenu.

Good morning, ladies and gentlemen, and hello, shareholders. I'm finance individual by background, qualified accountant. I've been involved in the building materials industry for most of my executive career as well as my Board career. I've worked in different countries around the world. And given my experience, I think the best I can offer to Metro is my involvement with Australia where we have AGG as one of our businesses. And I live in Australia, and I think that's the -- as the only Australian Resident Director, I think I can offer some insight into what's going on in this marketplace, not just in glass, but in other building materials. Thank you, Peter.

Thanks, Russell. Rhys Jones.

Good morning, everybody. My name is Rhys Jones. I joined the Metro Board several years ago. My principal background is within building products with an emphasis on manufacturing and distribution. I'm currently the CEO of Vulcan, which is a Trans-Tasman steel and stainless steel business, and it operates across Australasia. Worked across the Australasian industry for over 25 years, spending roughly half my time in Australia and have a particular interest in business improvement and best practice programs to build sustainable customer service and improved financial results.

Thanks, Rhys. Of course, I make up the fourth Director. My background, CV is in the annual report, and I've spoken to you a number of times at these meetings. It's clearly a privilege to be on any Board of any company and particularly a privilege to be the Chair. The reason I am keen to be involved with Metro is I see the opportunities for the company. I'm very keen to see New Zealand manufacturing succeed at home and across the Tasman in Australia. I see Metro is having a range of challenges, both external ones, such as the market, competitive environment, it has a beachhead in Australia. I see it also has internal challenges around marketing excellence, customer relationships, developing its people's leadership capability and capacity. I find those challenges stimulating, and I believe that I can contribute to them. We also have -- I'll just move on now. We also have our Chief Executive, Simon Mander, with us today. You met him for the first time at our last annual meeting, and he's also joined by our new Chief Financial Officer, Brent Mealings, and we have our company Secretary, Andrew Paterson with us. In addition, I'd like to welcome online Troy Florence, our auditor from PwC; and Toby Sharpe, who represents our legal counsel, Bell Gully. Now I can confirm that the notice of meeting has been sent to shareholders that we have a quorum present, and I therefore, declare the Metro Performance Glass 2020 Annual Shareholders' Meeting open. I'd now like to move to the slides and just start by commenting on some of the impacts and uncertainties caused by COVID, both in New Zealand and Australia and the influences it's had on our operations. Now the emergence of the virus clearly presents a global health and economic challenge to everyone, everywhere. It's uncertain how long this is going to be with us or just what particular events and impacts will occur in our markets. But as we have seen in Australia and now more recently in New Zealand, the situation can change very quickly. If I think back to our February Board meeting in Australia, the virus was already on our radar at that time. If you recall, it was making itself felt in China then. And our principal concern was initially around ensuring security of our international supply chain. Our glass is provided by a range of suppliers across a range of companies. And we were able at that time to ensure we continue to receive an unload product in New Zealand throughout the period. The virus, of course, moved very quickly. And by late March, just before the end of the financial year, New Zealand went into Level 4 lockdown. And stage 3 restrictions were instituted in various Australian states. The Metro Glass team in both countries responded promptly and well to the evolving situation. During the Level 4 shutdown, manufacturing was closed down quickly and safely in New Zealand. While in Australia, our operations continued largely unaffected. Though there was a set of COVID safety protocols in place. Those who could work from home did so, and our remote IT system performed very well. During this period, we applied for and received the first round of the New Zealand government wage subsidy. We significantly wound back all our capital and discretionary expenditure. We talked with our landlords, and we engaged with our bankers to confirm that the availability of funding under our existing facilities, and we also agreed some temporary covenant testing relief, should that be required in the future. In line with our company values, we supported our people through the lockdown. This included assuring them very early on, the wages and salaries would continue to be paid during the initial period of Level 4. We also maintained frequent conversations with our customers. And when we were able to return to manufacturing, we were able to do so quickly and efficiently and safely. Now as with every other enterprise, our view of the future has become much more uncertain. So we have spent some of the time during lockdown, developing a range of different scenarios that now provide us with a useful frame of reference when making decisions or assessing information from inside and outside the business. Recent events in Auckland and earlier in Melbourne, have reinforced to us that the threat from the pandemic is very real and shows just how quickly circumstances can change. Today, we're at Alert Level 3 in Auckland, we're at Alert Level 2 in the rest of New Zealand. We're facing stage 4 restrictions in Metropolitan Melbourne. We have stage 3 restrictions in regional Victoria, and we also have a range of ongoing restrictions in New South Wales and Tasmania. However, despite all these challenges, all 7 of our plants are open and operating. We have strong forward orders across the group in our residential, commercial and retrofit segments, and Simon will speak further on this. The Board would like to record its thanks to our teams in New Zealand and Australia who've continued to work hard to ensure the ongoing stability, safety and success of the business during this challenging time. I'd now like to just make a few comments about the Board's activities and its priorities. One of the duties of Chair is to consider the composition of the Board, the mix of skills, capabilities, diversity and the tenure of directors. Over the past 2 years, we've refreshed the Board with 4 new directors. So as at today, only 2 of us being Russell and myself, have more than 4 years' service with Metro Glass. During this time, we've also brought on several new senior leaders, most notably, Simon Mander, our CEO; and Brent Mealings as CFO, who's with us for the first annual meeting today. Since our last meeting, I would like to acknowledge the retirement of 2 directors: Gordon Buswell in December '19 and Bill Roest in June this year. I'd like to thank them both for their service, and in particular, note Bill's willingness to stay on as the COVID crisis developed. And he was able to assist us with the challenges preparing a set of annual accounts during a Level 4 shutdown. Now these retirements have been followed by the appointment of 2 highly capable new directors, Graham Stuart and Mark Eglinton, who are both seeking election at this meeting today. I now consider that the Board has an excellent mix of skill and experience. It is highly engaged and committed to Metro Glass' success. And as an aside, since January, we've held something like 25 Board and committee meetings and at the height of the lockdown, we're meeting on a weekly basis. In my view, we've built a very qualified and committed team at the Board and management level and all are determined to move the company ahead. Now despite the immediate challenges posed by COVID, the Board's longer-term focus is, of course, ensuring that the company is successful at processing glass and delivers value to its shareholders. In service of this, our key near-term goals are: firstly, to maintain our leadership position in the New Zealand market; to defend -- sorry, to grow our Australian business and return it to profitability; and to ensure our balance sheet is strong and sufficient to cope with future uncertainties. And we're making progress on all of these goals. And with those in mind, I'd like to reflect briefly on our financial performance in 2020, which now does seem such a long time ago. In New Zealand, sales in our residential and retrofit segments were in line with our expectations and close to prior years, though the revenue in our commercial glazing activities did decline as we intentionally reduced our involvement in large vertical construction projects. Now while this did result in lower revenue, it allowed us to control our risk exposure to these challenging projects and also enabled us to focus on our core customers and play to our strengths. Now as it has been expected, competition has increased. However, we are successfully and aggressively operating in this environment every day. We're focused on maintaining strong relationships across our broad customer base and ensuring that we consistently provide a wide range of high-quality products delivered and installed to specification across the country. And we achieved -- we went some way to achieving that during FY 2020. In Australia, the Australian Glass Group has continued to grow and improve. We can now clearly see the long anticipated market response to the new commercial building regulations. And these have encouraged and increased specifying of and demand for double-glazing products. AGG is now achieving strong and consistent operational performance. This is being recognized in the market and is now flowing through to improved financial results. The business delivered revenue growth in FY '20 despite the downturn in the Australian new housing construction sector. AGG produced a positive EBIT to date in FY '21, and we believe the business is on a strong footing with a positive outlook for the long term. Our strong operating cash flow, our focused capital expenditure, some prudent cost management have allowed us to further strengthen our balance sheet during the year with net debt reducing by $16.5 million, down to $66.9 million at the close of March. Over the last 24 months, we've now reduced by -- debt by some 29%. Our ongoing focus on the balance sheet has stood us in good stead for weathering the initial impacts of the COVID-19 pandemic. And during the year in review, we saw improvements in debtor management, lower inventory levels and operating cost reductions. These have flowed through into the current period. During the shutdown, we were able to operate on our own cash balances. We did not need to increase our debt levels, and we've actually been able to continue to pay down debt post the year-end and post the shutdown. We've had a long-standing goal of reducing our leverage ratio of net debt to EBITDA to 1.5x before considering the resumption of dividends. On a pre-COVID basis, we were well on the way to achieving that during this year. And if we actually look through the COVID impact, which was principally felt in the month of April, we are at our 1.5x target at the end of July. However, given the ongoing uncertainty and our anticipation of a softening market either later this financial year or sometime in the next, the Board believes that the prudent approach is to continue our focus on debt reduction for the balance of the FY '21 year. Now I will hand over to Simon shortly, but I would like to close by making a few points about our share price. While there are many things that influence the price of any stock, I believe at a basic level, it's investors' view of our future cash flow that should set the price, and I believe there are 4 key -- or 4 major elements that have contributed to the current experience of Metro. Firstly, there's been a long and ongoing speculation for some time about approaching cyclical downturn in our industry, and this has been exacerbated by the pandemic. I think we have to recognize that cycles are a reality of our industry and our scenario planning takes account of these possibilities, and we are confident that we will be able to operate successfully during any downturn. Our focus on customer service and being able to manage our costs in relation to our demand, will stand us in good stead. We aim to survive during a downturn, and we aim to thrive as well. Related to the cyclical nature of our industry, the sustained period of strong housing consents that we've had has resulted in increased demand for construction materials, and it's attracted investment to glass processing capacity in New Zealand. This has come from existing suppliers, including Metro, where we were an early mover and has also attracted newer participants. This additional capacity has now been built and it's commissioned. And in aggregate, for some time, processing capacity has exceeded market demand, but we've been able to vigorously compete and retain our position as New Zealand's largest and most efficient producer. We have the advantages of scale, including an extensive supply network. We have diversified manufacturing locations, and this has clearly been an advantage to us during the recent experiences of COVID. We have a range of supply alternatives, and we have cost efficiency opportunities. We've developed the deep relationships needed with our customers, and we're pleased with the resilience our business is showing in the recent COVID experience and our revenue performance last year and this year demonstrates that. Thirdly, the performance of our Australian business has had a negative impact on group earnings. The key rationale for investing in that market in the first place was the ability to leverage Metro New Zealand's capabilities in double glazing. And as and when, the penetration of those products increased in the Southeastern Australian markets. We're now seeing these changes show through. And we've also invested in our people and equipment to ensure that we have the ability to make larger quantities of these high-quality products. We have to recognize these changes were harder to put in place and took longer than we expected, and we incurred losses. And while we did report a loss for the -- for AGG in the FY '20 year, it was at a much reduced level and the turnaround and positive trajectory is now evident. We actually achieved revenue growth in a challenging market and have delivered a positive EBITDA result for the second half of the year. We're confident the foundational changes are now in place and starting to pay off, and we continue to be optimistic about the growth potential of the business in the coming years. Finally, the fourth factor that's affected our share price has been the suspension of dividends. For some time, the Board has elected to focus on debt reduction to ensure Metro Glass maintains a strong financial position and has the capability and capacity to respond to surprises, like the one we're experiencing right now. We consider to consider -- we continue to consider this a prudent measure and we will reduce debt further during the current year. That said, we also appreciate the value that shareholders, particularly retail holders, placed on these distributions, and we will continue to assess the appropriate timing for resuming these payments. Speaking to you today, I believe the understanding around each of these 4 factors has changed for the positive. We will continue to communicate with our existing shareholders and with prospective investors on these points, and we believe they will ultimately reflect positively in the share price. Now thank you for your attention this morning. I'll now ask Simon to follow with his presentation. And after that, we will go to questions. Simon?

Thanks, Peter. Good morning, everyone, and thank you for all joining us today. For those on the call this morning who I haven't met, I'm Simon Mander, and I'm the CEO of Metro Performance Glass. Firstly, I'd like to take -- like to provide some further detail on the COVID-19 related issues we have faced over the past 6 months and are continuing to adapt to. The operational restrictions Metro Glass has faced in New Zealand have been significantly more onerous than those AGG has faced in Australia. We have been able to operate relatively normally throughout this calendar year. As Peter noted, we essentially fully closed our New Zealand based operations from late March to the end of April. It can be very difficult to scale down production quickly, and our staff worked hard to ensure it was conducted safely and smoothly. Alternative working arrangements were put in place where possible. However, this was not possible for most of our glass processing and glazing staff. We committed early on to paying 100% of our staff contracted wages and salaries for the 5-week period of Alert Level 4 as we attempted to alleviate stress and anxiety for them at that time. We believe this was the right move. We continue to receive positive feedback from our people on our communication and general handling of this difficult period. We were very focused during the April Alert Level 4 period on supporting our customers as much as possible. This included emergency glazing work for essential service-related projects, supporting customers to develop their own COVID-19 safety protocols and in ensuring they are aware of all the relevant support packages available to them from the government agencies and the bank sector. We've controlled our costs across the group very closely this year with discretionary costs and capital expenditure down materially. The company received $6.5 million from the first round of the New Zealand government's wage subsidies. And we also agreed short-term rent relief with all our New Zealand landlords. During a highly uncertain period and for the sake of prudence, we sought relief on financial covenants with our banks and drew down additional cash balances at year-end. As part of this conversation on covenant relief, we shared our latest plans with the banks, which included a reduced CapEx profile and no dividend payments in the current financial year. These restrictions were determined by us and were not imposed by the banks. We restarted immediately at Alert Level 3 and ramp back up to normal operating levels quickly, but the wider industry did face some restart and productivity issues as it sought to manage demand expectations and COVID-19 safety-related restrictions. I'll talk more on our year-to-date trading results shortly. All 7 of our glass processing plants are currently open and operational, including those in Auckland and Melbourne, which are operating under a stricter set of safety protocols, including physical distancing, wearing of masks and increased hygiene requirements. Metro Glass and AGG each have geographically distributed processing facilities with the ability to shift volume between them. This provides us with advantages and the ability to mitigate some level of risk. I'd like to offer my gratitude and admiration to all our staff in coming together to support one another and our customers throughout this challenging time. I'll now provide you with a summary of the group's financial performance for the 2020 financial year. Group revenue in FY '20 was $255 million, down 5% versus last year and with earnings before interest tax and significant items of $23.2 million, down 8%. EBIT pre-IFRS 16 was $21.2 million, which was inside the guidance range we provided in November of $21 million to $24 million, despite the impact of COVID-19 late in the financial year. We strengthened the balance sheet and achieved our net debt reduction guidance, reducing net debt by $16.5 million to $66.9 million at year-end. In New Zealand, we delivered a revenue of $203 million, down 7% and an EBIT of $28.2 million, down 9%. The decline is predominantly related to the 24% decline in commercial glazing revenue, which resulted from our decision to reduce our exposure to large-scale commercial projects and focus on small to medium projects. Pleasingly, AGG achieved revenue growth of 3% in New Zealand dollar terms or 5% in Australian and reduced its EBIT loss by $1.2 million to a loss of $3.6 million. While still not at an acceptable level, we were encouraged by the significant changes made during the year and the delivery of an EBITDA positive result for the second half. In line with our strategy to develop our people capabilities we had outlined an aspiration in March 2019 to double our apprentice intake. I'm pleased to say that we achieved that goal and have grown our apprentice pool from 30 in March 2019 to more than 80 today. In 2020, we also introduced a multiyear safety and well-being strategy designed to ensure that we are continuing to drive a heightened focus on safety and well-being within the company. My final point on the FY '20 results is that at the time we were finalizing our accounts, it was clear that COVID-19 would have a significant impact on the potential outlook for future construction activity and therefore, on group performance. In our annual report, we provided shareholders with a significant level of detail on our expectations for the future and the assumptions and methodology we used to determine our range of potential scenarios. In this context, we recognized an $86.5 million impairment to New Zealand goodwill this year. This was a noncash charge and had no impact on the company's banking covenants. In June this year, we conducted 1/3 of our 6 monthly customer surveys. This had been planned for April, but was postponed given Alert Level 4 in New Zealand. The results of the survey are unique as they reflect the views of our customers during the post shutdown ramp-up period under the first set of formal feedback that we have received post the emergence of COVID-19. These surveys with our customers provide us with vital feedback on our offering and our relationship and importantly, on how we can improve. In absolute terms, our ratings in New Zealand and Australia were largely consistent with our November 2019 survey. So the real value comes through in the written feedback that comes along with a rating. Our customers were very complementary of our people, pleased with the improvements made in our communications and our ability to be responsive to their needs. However, inconsistencies in service performance, predominantly with lead times during the post shutdown ramp-up period that create some challenges, which was driven by several factors across the wider domestic supply chain. We continue to work with our customers to address specific issues in general service levels and to develop ways of minimizing the productivity impacts resulting from COVID-19 restrictions across the wider sector. I'd now like to update you on the first 4 months of trading in the 2021 financial year being April, May, June and July. All the numbers we are presenting are on an unaudited basis and starting with an update on revenue. Revenue in New Zealand in April declined 95% from the same period last year due to the Alert Level 4 period. However, the industry quickly returned to work in May and our sales ramp back up to more normal levels from mid-May onwards. Given the circumstances, we have been pleased to see June and July revenue results in line with the same months last year. Australian Glass Group has continued to build on the positive trajectory the business achieved through FY '20. Despite the restrictions caused by the pandemic and the geno deterioration in the housing market over the last year. AGG's revenue year-to-date is running in line with last year with sales growth offsetting the impacts of the rationalization and refocus of our New South Wales business in December 2019. Regarding the New South Wales changes, I'd like to acknowledge the Australian management team for a well planned and executed reorganization process. New South Wales operations currently only represent about 15% of AGG's revenue, but are well positioned and fully equipped to grow alongside the increasing penetration of double glazing in the state. On a year-to-date basis, group profitability has been supported by improved Australian results, with AGG delivering a positive EBIT result year-to-date. This is a strong turnaround from the loss incurred in the same 4-month period last year. In New Zealand for the month of May, June and July, Metro Glass has achieved a similar gross profit margin percentage versus the same 3-month period last year, which demonstrates continued resilience in the competitive market. Given the current climate, we are continuing to closely manage our cost base with discretionary costs and capital expenditure down materially versus the same period last year. We also received $6.5 million as part of the first round New Zealand government wage subsidy, of which $6.1 million relates to the current 2021 financial year. The wage subsidy partially offset the impact of the Alert Level 4 closure in New Zealand during April. We're also very pleased to have been able to continue our progress in reducing net debt. As at the 31st of July 2020, group net debt was $54.7 million, $12.2 million lower than the 31st of March 2020 and $24.1 million lower than the 31st of July 2019. This has been achieved through strong operating cash flows, focused capital expenditure and prudent cost management. As the recent move to Alert Level 3 in Auckland and the stage 4 restrictions in Melbourne have demonstrated, we are operating in a highly uncertain environment, and the outlook for building activity is very difficult to predict. COVID-19 related impacts will continue to affect the group for at least the remainder of the '21 financial year. In the short term, building activity in New Zealand is supported by the ability to execute on a healthy pipeline of existing orders and projects. That said, we remain cautious of how quickly this could change. Trading results in June and July were pleasing and key economic data has been stronger-than-anticipated in recent months. We continue to expect building activity to soften in the second half of the financial year. In Australia, we are confident that the improvements achieved in AGG's EBIT year-to-date will be sustained through FY '21. However, we remain cognizant of the threat COVID-19 represents across the group and the potential for increased restrictions or shutdowns that would adversely impact the short- and medium-term outlook. We will continue to monitor the situation across the group closely and refine our plans accordingly. We are not providing formal guidance today that we'll update shareholders alongside our interim results announcement in November. Finally, I'd like to reiterate our goals, key goals, which remain unchanged. We will defend our strong position in the competitive New Zealand market, grow our Australian business and continue to improve its profitability and reduce debt to provide us with increased optionality for the future. Our focus must be on building a resilient organization that provides excellent operational performance, maintain strong customer connections and invests and supports its people. Before I hand back to Peter, I would just like to take the opportunity to thank all our shareholders, customers, suppliers, staff and the Board for their support over the past 18 months, and in particular, over the last 6 months. Thank you.

Thanks, Simon. Ladies and gentlemen, we now have some time to answer questions, whether they be related to the presentations, the financial statements or generally the management of the company. You can continue to provide questions online, and we'll also address those that we've already had submitted. We allow some time for this because I think the process is going to be a little disjointed. If -- as I said before, if we're unable to provide an answer for your question online today, we will get a response to you after the meeting. Now I have 4 questions that we received in advance. And I will put these and then we'll provide the response. And either I will provide the answer or Simon will provide the answer depending on how the question sits. So the first question reads, "what actions have the directors put in place to address Metro's share price, noting that the decline has been a tough blow for shareholders?" Now we agree it has been a blow for shareholders, and this is a critical question for directors. And one of the reasons I spoke at some length during my comments was to highlight the 4 principal factors that we see are influencing the Metro share price, particularly. The concern about a downturn, the increased competitive intensity of the market, the performance of our Australian subsidiary and the suspension of dividends. Now hopefully, my comments around each of those will go some way to answering just what we are doing to address that. Our 3 key goals of defending and maintaining our New Zealand position, turning around our Australian unit and holding our balance sheet and improving our balance sheet strength, I think all will go to creating a positive environment and perception around the Metro Glass share price. And hopefully, people will recognize that and understand the value opportunity that Metro provides. The second question reads, "what steps have been taken to increase market share in the face of competition? And how will MPG avoid a price war?" Simon, I think I'll ask you to respond to this one, but I think we'll assume that the question relates largely to New Zealand. So over to you, Simon.

Yes. Sure. Thanks, Peter. Yes, just on the basis that we're talking about in New Zealand, I think within New Zealand and the industry, including Metro Glass, there's been a significant capacity added into the industry over the last 5 to 7 years in order to satisfy the increase and construction activity levels. As a result of this, there has been, for some years, more glass processing equipment and theoretical capacity than is actually required to satisfy market demands. That said, it's very clear in our industry that's simply having the gear does not guarantee you success. Metro Glass has built a leadership position over more than 30 years, and our strong market share is supported by our differentiated customer value proposition. These differentiators include having the best people and relationships, technical support, glazing services, installation, hardware services, our national manufacturing and distribution and a broad product range using quality materials and very strong after sales service. The company has developed deep relationships with its customer base and market pricing or the winning or losing of a customer's business takes each of these diverse factors into account. Initiatives such as our customer surveys and resulting engagement have also contributed to ensuring we stay close and respond very quickly to anything we need to improve. We're continuing to vigorously compete every day as we aim to remain New Zealand's largest and most efficient provider. And we're pleased with the resilience our business is showing, and recent revenue performance is pleasingly demonstrating this. Thanks, Peter.

Thanks, Simon. Our third question reads, "Is MPG expecting consolidation in the ANZ glazing industry, and if so, what consolidation?" That's an interesting question. And in our view, if residential construction activities decline in the coming years as is generally expected, then yes, we would expect it likely that some capacity will either be restructured or exit the market. We won't speculate who or when this could happen. However, the flow-on impacts from COVID-19 are already putting a number of companies under some financial strain, and that's even before the underlying market activity softens. So essentially, yes, we do expect something. We're not sure when, but we do feel -- we do wish to remain available and open to taking advantage of that, if we can. The fourth question reads, "There has been some reduction of debt in this very difficult time, but we wondered if it is appropriate to have a call on shares to further reduce debt and build equity in the company. There were a number of matters I was impressed with by the company, which is still there, and I would -- but I would like to see improvement in the equity situation and reduction in debt funding." Now thanks for that question. Clearly, the Board's had a long focus on strengthening the balance sheet for more than 2 years now. And as noted, we've made some significant progress in reducing debt, and we're now down to perhaps close to half what we had at the peak. Reducing that debt is important to us and ensuring the company can withstand surprises and shocks is the key need for that. We want to be able to resume dividends to shareholders, but we also want to be financially responsible for further shocks and also to take advantage of any opportunities if they arise. So we regularly consider the merits of taking an equity raise in order to strengthen the balance sheet, but this option has many pros and cons with it. And to date, the Board has been comfortable in reducing debt using the company's operating cash flows and not taking an equity raise at this time, but that is always an opportunity for us. As I discussed earlier, I think there are many factors which would support an improved share price for the company and the Board needs to balance what it considers to be the best interest of its existing shareholders. And so we are maintaining our focus on debt reduction using our cash flow and have not sought to raise capital at this time. So thanks to those shareholders who sent those through. I'll now turn to Andrew. Are there any other questions that have come through online?

Yes, yes, Peter. So we've got 8 -- sorry, 9 questions on general business for now. So the first question reads from Shane, "Since the dividend was stopped by your Board and small shareholders are financially affected. How is the Board helping shareholders during the economic downturn?"

Right. I feel I've spoken a little bit to this during my remarks and also answering one of the earlier questions. The Board and management are focused on the sustained success and performance of Metro Glass and I guess the way we are seeking to help small shareholders is by the market perceiving an improved view of that operation and thereby reflecting that in the price. We don't think it's wise to resume distribution to shareholders at this time and that -- what cash flows we do have are better placed, reducing debt for the immediate term. But we will review that and change that orientation when the Board thinks circumstances will allow. Thanks, Andrew.

Thanks, Peter. So the second question comes from Shane as well, asking, "It would be advantageous to hold AG meetings in other regions" -- or sorry, "Would it be advantageous to hold AG meetings in other regions such as Wellington?"

Yes, Shane. We do consider where we hold meetings. Though I think our shareholder base is largely weighted to the North of New Zealand. And this Board meeting would have -- sorry, this ASM would have been held in Auckland. We will give consideration to that over time. Of course, virtual meetings becoming more and more common and give the opportunity for shareholders, not resident in the particular term, by holding the meeting to join in, but we will consider that every year.

Thanks, Peter. The third question from Bruce Parks reads, "Many companies in response to the COVID-19 downturn have reduced the remuneration of directors and senior management. Does MPG intend to do so? And if not, why not?"

Okay. Thanks, Bruce. We have considered that. And at this point, have chosen not to do that. We've had a company-wide view that we will continue to maintain the wages and salaries and board remuneration of the people involved and committed to Metro. We see that, and why not? I think we see that, I guess, symbolically as a way of showing our commitment to those folks who are having to work harder and longer during the shutdowns and perhaps they would in the normal course of business.

Thank you. Next question is around the use of the auditors and perhaps Brent Mealings, CFO, might have some thoughts. So the question reads from Jennie Miller. "Why is there a tendency to use PwC for other services in a particular -- in FY '20, $20,000 was spent on real estate advisory, was no one else available that had more experience, e.g. real estates valuers versus accountants? Or were PwC merely the intermediaries and arranged for this service to be done?"

Brent, are you able to comment on that?

Yes. Can you hear me okay? Just wanted to test my line. First time I've had the chance to talk.

Yes. We can hear you.

Thanks for the question. Great. Thanks for the question. We are certainly always very careful and conscious around nonaudit work use of PwC to ensure their ongoing independence. However, in this case, the real estate assistance was relatively minor, from which we saw for a qualified person that we had an individual recommendation.

Thanks, Brent. Okay. So the next question comes from Bruce Parks. "So there has been a near doubling of the lost time injury frequency rate. Have you identified the cause for this? And what steps have you taken to address it?"

Simon, can you answer that?

Yes, sure. Thanks. Bruce, for that question. It's something that I'm particularly passionate about. And I think I'll straight up open with our accident frequency rate is not acceptable. And there's a tremendous focus from the management group and everybody within Metro to improve that. What I would say is just since we published the annual reports that lost time injury frequency rate over a 12-year period is trending down, which is good. But more importantly, what have we done to address root causes. In 2019, we launched a multiyear safety and well-being strategy, which addresses the many facets about creating a safe culture and a business. And that's been running nearly a year now, and I'm pleased to say that we're seeing behaviors change to address sort of really long-established behaviors in the industry. A lot of the injuries we're seeing about people lifting things that are heavier than they should be lifting. And then also through cuts from glass breakages. And so those are sort of the main injuries that we're occurring, but frankly, a lot of the root causes around about changing behaviors of people to understand that injuries, it's not just part of your job that you end up getting hurt. It's about making it very clear that it's not acceptable that people are injuring themselves. And so we're addressing things like the leadership. We call it safety leadership with a lot of training of people and also empowering people to make good decisions right where these injuries have been happening. Very, very happy to sort of take you through the strategy that we have and sort of expand on that if you're interested. Hope that answers your question.

Thank you. Okay. So the next question comes from Ching Wing. The question is, "If prefabrication becomes a major trend in New Zealand housing, what is the impact on MPG's business? And is that impact, positive or negative?"

I'll take that the question. Yes, look, prefabrication of housing is -- we're already involved in that. So at the end of the day, it's a house, and it will have glass products in it be their windows, balustrading internal partitions, showers and kitchen splashbacks and the like. So it's still an opportunity for us. We're very well placed to service that market, given the breadth of our product offering and capability. So we're quite comfortable with that prefabrication of housing, and we're already participating in that. Obviously, things that are imported. We like to be a local supplier. So we are working there to make sure that we compete and people see that there's the good option of using local supply for those sort of secondary structural elements or tertiary that are being used in housing. So I sort of see it as an opportunity as -- while others might see it as a threat. And as I say, we're already participating in it.

Thanks, Simon.

Okay. So the next question is for Peter, I guess, we've touched on a couple of these bits. But -- so a question from Jenny. "How many additional meetings did the Board hold during the lockdown? And did they reduce the directors' fees given MPG received the wage subsidies?" I'm not sure if you've got any additional comments on that, Peter?

I think I mentioned the number, Jenny, from sort of late January through till, I think, it was July, we had something like 25 meetings. We were meeting weekly during the initial period of the shutdown when that was very uncertain. And we continue to meet on an as needs basis on top of our regular meeting schedule. And as I commented earlier, we have not reduced directors' remuneration during this period.

Thanks, Peter. So next question from Grant Hausman. "Can you add some color to the marketing excellence strategy and key focus areas? Have you fully rationalized your product such market mix regarding commercial work? And are there any low-margin areas that you're considering to change in the mix?" So just to repeat, there's a few questions in there. So just answer some color on the marketing excellence strategy and focus question. Have we fully rationalized our commercial glazing changes? And are there any lower margin areas we're considering changing?

Simon, will you speak to that?

Yes, sure. Thanks, Grant. Yes, look, there's a number of questions in there, so I'll try to make sure I cover all of those off. I think in our marketing excellence, we've been putting a lot of work into our Retrofit business, which you may have seen publicly, but -- on television, but also in how we're doing that online, and I believe that's showing good dividends to us and how our Retrofit business is performing year-to-date. In addition, we're doing a lot of work in the marketing area around our -- what we call our monolithic or single-glaze products. So there's things like balustrading and showers and that type of work as opposed to the double glazing. So I think we're seeing benefits there. We have in that with how we're positioning our balustrading offer as you now can go online to Metro and get your PS1 as you fill in all the questionnaire, you will receive your PS1 at the end of filling in the form. That process used to take weeks. So that's a real benefit. And you end up at the end of that with a complete product offering from us. So that's a good example. On our product mix, that's something that we're always adjusting. On the commercial side, we -- last year, we did reduce our exposure in the large commercial projects. So that -- there was a mix of reasons for that, but there's certainly the risk aspect and also our confidence in being able to execute those bigger projects. We've been, since in the last 12 months, we've restructured internally glazing, commercial glazing operation, and it's performing really well now, and we're actually entering back into that market, but we're being extremely selective of how we do that. So while our mix of commercial projects are sort of in that $100,000 up to even $300,000 is a really nice area for us. We do have the $1 million projects. So we're certainly okay with doing those, but we're very selective about the types of those projects that we do. I hope that answers your questions, Grant.

Thanks, Simon. So the next question from James Noble. "Having moved out of the large commercial projects, is there a pathway and skills retention process that will allow MPG to move back into the sector in the future? Or is this a permanent and irreversible decision?" So a bit of a follow-on.

Yes, sure. So like, I think I'd just answer that as, look, we are quite happy to get back into those larger projects as far as the things around pathways and skills is a really great tangible example of that is the number of apprentices that we have got. So a year ago, we had just over 30, we've now got over 80. Those are not all new hires. A large number of those people are people who are already in the business and have elected to do an apprenticeship program. So I think we do have a good skills retention process. We do have really good internal training and learning programs to make sure that we hone our skills there.

Okay. Next question is from Richard Flower. The question reads, "Last year, there were 20 more employees on over $100,000 remuneration per year. Expenses were the same when turnover was down. I have heard nothing on how expense will actually be reduced in the future. I would have thought that you would be able to quote us a potential figure for this financial year."

Simon, do you want to speak to that?

Yes. Sure. Look, I think this is a challenging one when you have an organization like Metro. We've got 900 -- less than 950 in New Zealand and couple of hundred in Australia. And I think we're in the situation where we pay market rates for a role. And so I don't believe that we're overpaying people. I think there'll be plenty of people who would say the counter to that. We're very mindful and conscious of the productivity and the value that people and senior roles add to the business. So I think it's just the nature of -- we have people who are on wages earning in that level. So yes, I'm not quite sure how we can address that question there other than just give assurances that we're very mindful of our cost base. And we're very mindful of the value-add and the productivity that we get from everybody in Metro.

Simon, do you want to add a couple of extra comments about overhead cost reductions that you've got it [indiscernible]?

Yes, sure. We have -- yes, sure, Peter. We've got a lot of programs in place that to reduce and address our overhead. Some of it -- we're quite pleased with how those numbers are playing out year-to-date. We'll be able to update you, I think they'll become a bit more transparent at the half year, but as far as employee expenses go, there's been a wage and salary freeze for this financial year and the business. And so I think we're keeping a very good handle on those costs.

Thanks, Simon. Back to you, Andrew.

Thanks, Peter. Okay. So the next question from Grant Hausman. "Given the recent significantly lower interest rates, have you reduced your interest rate payments or interest payments, given the debt level ratio has improved to close to 1.5x EBITDA?"

Simon or Brent, do you -- can you answer that?

Yes, I can provide a very quick answer to that, and that is, yes. I mean our average level of debt is reducing. So therefore, our interest also is reducing.

Okay. That's right.

Next question from [ Sam Ogurve ]. There's 2 parts to this question. The first one is around initiatives in place to -- for increasing market share, which I think we addressed in the second question we provided before the meeting. The second part says, "You've spoken at length around reducing debt given the forecast environment, are you willing to hold this program and/or take on debt to be more aggressive?"

Okay. Could you just repeat the first piece again? I just -- that was.

Sure. So the question is, you've spoken at length around reducing debt. Given the forecast environment, are you willing to be more aggressive?

Okay. I thought there was something about market share in there.

I think we've addressed that one.

All right. Okay. Right now, our forward view is that the most prudent thing to do is to reduce debt, but to hold in the balance sheet some capability to draw down those funds if we saw opportunities that warranted sort of further investment. But at this point, we are basically building capability or capacity rather than entering into any aggressive activity. I think people would agree that we're only some 90 to 100 days out of our first experience of COVID. Forecasts are still quite uncertain in the medium term. And being conservative during that period is probably -- is the right stance for us at this time.

Thanks, Peter. So this is the final question we have received so far under the General Business section. So the question from Martin Spires reads, "Have you considered [ South ] Australia to pay down your debt?

Sorry you broke up just during the sentence there.

Sorry. So have you considered selling the Australian business in order to pay down your debt further?

Peter, I'm here. I can answer that one. And I'll say, yes, I have considered that. I look at what's the value of our business constantly and think who's the right owner? What's the value here? And I see AGG, given the trajectory it's on and the performance of it, and how it's on the trajectory it's on is that I think, at the moment, that we see a lot of value in AGG. And if we were to sell AGG, I don't see that right at now that you'd recognize -- you'd get recognized for the value that's there. So yes, we -- I have considered it, but I consider that it's worth quite a bit more to us at the moment.

Thanks, Simon.

Sorry, Peter, we just had one further question before we move on.

Sure. Sure.

A question from Grant Hausman. "Can you provide an update on the modernization of your digital experience across the business and the potential margin impact of this and timing?"

Simon, that's another one for you, I think. You want to add anything?

Yes, sure. I guess there's a -- that's a pretty broad question. So internally, we're going through a process at the moment of upgrading our ERP system in the financial aspect. So that's one thing. That's going to be seen externally. I think there will be some benefits there that people -- our customers will see in things like invoicing and that type of stuff. Our EDI program, where we have that is well embedded in New Zealand with our metric, correct, that's rolling out through Australia is called surprisingly, AGG Connect. That's being received extremely well by customers who have installed that system, and we're definitely seeing that's contributing directly to the growth in our customer base and end market share and share of wallet in the Australian DGU market because of that EDI program. And in New Zealand, we've got -- I spoke a bit earlier about what we're doing with balustrading with the online PS1. That has been running for this calendar year now and working very well. So we've been progressively expanding the product suite that you can do that for. So -- and then on top of that, there's other initiatives that we're doing with individual customers to improve the supply chain through there that is work in progress. How to put exact numbers on that's a bit difficult. In Australia, though, we have seen specific growth in shares of wallet from going from 20% to 100% share of wallet of some customers because of our EDI program. Yes.

Thanks, Simon.

Sorry, one further question, Peter.

Yes.

So a question from Thomas Wilson around net debt cash and cash balances. So the question reads, "Why has the Board mislead shareholders on debt reduction when only $7 million was paid off the debt, and an extra $10 million was left to wash in the bank account. Cash floating around in the bank account is $14 million. So why hasn't the debt been paid off like we have just been misrepresented that it was?"

Okay. I mean, I think he's referring to the accounts as at the end of March?

Yes.

So Brent, I was just about to say, Brent, can you spend...

Yes. No problem. I can just talk about that a little bit. So if you're just -- I mean, if you go back to -- I assume we were referring to the 31st of March accounts. And at the time, we took a view, a very conservative view, if you'll recall situation, I suppose, a lot of uncertainty about what was going on as we entered into lockdown in the last week of March, we took a prudent view, I think, to draw down $10 million of our debt facility just for the basis of having that in the bank account with a lot of uncertainty faced. So we've subsequently in the new financial year, put that back into -- against the debt. And so when we talk about net debt, we always talk about our primary debt left, what's in the bank or what's in cash.

Yes. So there's no intent to mislead. We are talking about the underlying base numbers when we refer to the debt exposure. Thanks, Andrew. Is -- do you have another one? You look like there's another one coming?

Sorry, one more has just come through okay. So a question from Thomas Wilson. "So given the company has lost 93% of its value over the last 4 years or $361 million, why would the market have any confidence in the directors? Also the nonpayment of dividends for the last 2 years treats our capital as free. This is a discretion commercially disrespectful. That is why the market do not rate the Board." I think that reads.

Okay. Well, thanks for those comments. I think a large number of the statements we've made or the things we discussed today have been, I guess, in response to that very point. The Board is committed to delivering a sustainable and large glass processor and to generate value for shareholders. We acknowledge the track or the trajectory of the price over the preceding years, but I think in my discussion around the various points that I think are affecting that price. I think I mentioned the 4 key ones that I think are critical. The long-term view of the market, i.e., the cyclical nature of it, the intent -- the increasing intensity of competitive participation, the underperformance of Australia and we've done things on all 3 of those things. So we do believe that we're on the right track, and I don't accept that we take shareholders' capital as a free good. We recognize people investing in the company are taking on faith, some of the statements we're making and the direction we're trying to move things. And that's not always easy, but we think we are doing absolutely the right things for Metro at the moment. And we appreciate the tolerance, forbearance and continued support of our shareholder base, and we hope and intend that they get -- their investment gets recognized over time as Metro Glass continues to exist and succeed. Thanks, Andrew.

Thanks Peter, there's no more questions under general business.

Okay. Thanks for those questions. Let's move on then to the resolutions, which are outlined in the notice of meetings. You may, of course, ask questions on each of the matters being put to shareholders. Now voting on all the resolutions will be conducted by a poll, and you will be able to cast your votes online using the electronic voting card you received when you registered and were validated. To vote, you'll need to click your get voting card, and we'll ask you to enter your shareholder or proxy number to get that validation. And then you need to mark the card in the way you see fit, voting for, against or abstaining on the card. Once you've made your selections, please remember to click submit vote at the bottom so that your vote is lodged with us. Once again, if you are having trouble, you can refer to the online portal guide or the 0800 number I mentioned earlier if you need support. Now we have 3 resolutions in the notice of meeting. They are considered to be ordinary resolutions. And as such, must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on the resolution. Proxies have been appointed for the purposes of this meeting for approximately 55 million shares, representing approximately 30% of the total share capital. My fellow directors and I hold discretionary proxies and intend to vote in favor of all resolutions set out in the notice of meeting. The outcome of the proxy votes will be displayed after the voting for all to see at this meeting. Now voting will remain open for about 5 minutes after the conclusion of the meeting to give people time to submit their votes, and we will post the answers on the NZX and ASX later today. So let's come to resolution 1. The first motion concerns the fixing of auditor's remuneration and seeks shareholder approval that directors be authorized to fix the auditor's remuneration. PwC have been our auditors for 6 years, in fact, since the listing of the company. And in accordance with the NZX Corporate Governance code, we've had a new lead audit partner from the beginning of the 2020 financial year, that's Troy Florence. I now propose that the Board be authorized to fix the fees and expenses of PwC as auditor for the ensuing year. Andrew, do we have any questions on this motion?

Thanks, Peter. Yes, we've got one question, which brings to, again, might have some thoughts to answer. The question from Jennie reads, "There was a $61,000 increase in the auditor's fees from 2019 to 2020, so what was the reason for this?

Thanks. Happy to answer that question. I guess the reality is that if you think back to at balance date 31st of March, the increase in auditor fee is a reflection of the enormous amount of disruption and uncertainty that we were faced through the period of our annual balance. And the additional fee is a reflection of that time, the auditors required to work through their statutory duties.

Okay. There's no other questions.

Okay. Thank you, Andrew. Right. Ladies and gentlemen, if you haven't done it already, if you could please mark your cards for, against or abstain in the appropriate place on your voting card. [Voting]

The next 2 resolutions cover Director elections. And under the NZX Listing rules, a Director appointed by the Board must not hold office without election at the next ASM. And so the following directors appointed since our last meeting, Graham Stuart and Mark Eglinton, both seek election today. In the Board's opinion, both Graham and Mark are independent directors, as defined in the listing rules, and the Board unanimously supports the election of both of them. So let's come to resolution 2, the election of Graham Stuart. The Board recommends Graham to you, supports his election. His credentials are outlined in the annual report and in the notice of meeting. And I'd now like to ask Graham to briefly speak to you.

Thank you, Peter. [Foreign Language]. Good morning, ladies and gentlemen. Hello, shareholders. Even before COVID-19, these were challenging times for Metro. And as you would expect, before agreeing to join the Metro Board, I undertook my own due diligence. For me it was important to be confident that not only did Metro have a good and winnable game plan, but also that it had the right mix of people on the Board and in management mix [ and that thing ]. I also needed to be confident that I could meaningfully contribute and complement the skills of my fellow board members. I believe that I fulfill these criteria. I have had 30 years in senior executive roles, both in New Zealand and overseas. During that time, I've experienced at least 3 recessions and financial crises, small pandemics, but nothing of the scale we're currently experiencing. I'm a fellow chartered accountant, and I've served on listed company boards over the past 10 years. Genuine, I Chair Audit and Risk committees. I like to work collaboratively with my fellow board members. And as Peter and my fellow directors probably can attest, we'll not have a strong or diverse view. I'm not [indiscernible] on the table. Throughout my executive career, I've been close to manufacturing operations, and I've been closely involved in capital management, M&A activity and restructurings. I have confidence in Metro's future direction, and I'm excited at the prospect of contributing as a board member with your support. Thank you.

Okay. Thank you, Graham. Are there any questions for Graham?

Not at this time online. Thank you.

Okay. Thanks, Andrew. Okay. Ladies and gentlemen, if you could -- I will now put -- I propose that Graham Stuart be elected as a Director of the company. If you could mark your cards for, against or abstain at the appropriate place. [Voting]

That now brings us to our final resolution #3, the election of Mark Eglinton as a director. The Board recommends Mark to you and unanimously supports his election. His credentials are also outlined in the annual report and in the notice of meetings. Mark, could you briefly address the meeting now?

Thanks, Peter, and good morning, everyone. With regard to my election to the Metro Performance Glass Board, I'd like to make 3 points outlining why I think I can contribute to the current Board: Firstly, while new to the Board, I'm not new to the window industry and have run the window and door business unit of Fletcher Building from 1996 to 2001. Beyond that, I have been involved in the building industry in some way or form with -- since joining Fletcher Building 28 years ago as a graduate. Secondly, for the last 11 years, I've been running and continue to run NDA group, one of New Zealand's leading engineering and fabrication businesses. We have 13 fabrication operations globally and so I understand firsthand the challenges facing our window fabrication customers. And thirdly, having spent 11 years in private equity, I have a keen focus on cash generation and the balance sheet efficiency. So I have some skills that I think are relevant to Metro Performance Glass' current needs. I'm enjoying working with my fellow board members and the strong management team, as we weave our way through these uncertain times, but ultimately looking to maximize shareholder value. Thank you, Peter.

Thanks, Mark. Are there any questions for Mark?

No, there's no questions so far online. Thanks.

Thanks, Andrew. Okay. I would now like to propose that Mark Eglinton be elected as a Director of the company. If you could please mark your cards for, against or abstain at the appropriate place. [Voting]

All right. Now that concludes the formal part of the meeting. You should now submit your voting cards, please make sure you do that. The results of the meetings will be released on the NZX and ASX later today. Andrew, do you have a summary of the proxy vote outcomes to display as a slide at this time?

Yes, we do. So we've put that up.

Okay. All right. I will just pause for a little while for people to have a look at that. Okay. Thank you. Andrew, are there any other questions that we should address?

No, we've received no further questions. Thank you.

Okay. All right. Thank you, ladies and gentlemen. I'd like to thank you for your attendance and perseverance during Metro Glass' online Annual Shareholders' Meeting today. We do appreciate you joining us on this platform. We hope your experience has been okay. We'd like to thank all of you who submitted questions. We covered a number of issues there. And hopefully, people felt satisfied with the answers. As I said earlier, the final results of the voting will be posted on the NZX and ASX later today. I now declare the meeting closed. Remember, we're open to receive votes for the next 5 minutes. Thank you very much for your attendance. Enjoy the rest of your day.