Monadelphous Group Limited (8MP.F) Earnings Call Transcript & Summary

And as it's now at 10:00 here in Perth, and we have a quorum, I declare this meeting open. My name is Phil Trueman, and I'm the CFO and Company Secretary here at Monadelphous. And I'd like to commence today's proceedings by introducing Matt Macfarlane, our local content coordinator for an acknowledgment of country. So Matt's been with Monadelphous for about 15 years now and is responsible for developing and maintaining relationships with aboriginal and Torres Strait Islander peoples' organizations and businesses. And he also plays a key part in retaining and attracting indigenous employees at Monadelphous. So welcome, Matt.

[Foreign Language] Hello and welcome. I'm proud to be invited to present this acknowledgment of country today. I would like to acknowledge where we hold this meeting today is on the lands of the Whadjuk people, the traditional owners of Perth and surrounds members of the Noongar nation. I would like to welcome the Monadelphous Board, executive and shareholders to this place where my ancestors gathered to meet, embrace family and hold great ceremonies. 2020 has been a very different year to what we are used to. And my best wishes go out to you all to keep you safe and well. I would like to bring your attention to this magnificent painting by Clifton Bieundurry along with [ Jerry ] of Kimberley region in the north of Western Australia. As you can see, Monodelphous' values are depicted in this painting, including safety and well-being, integrity, achievement, teamwork and loyalty. These values have helped shape Monodelphous into what it is today, central to this are our people as well as our shareholders. People are the engine room of monodelphous and by living our values, they have helped Monadelphous be the company it has grown into today. Finally, I'd like to pay my respects to elders past and present. While in this place, [indiscernible] protect and guide us and keep us all and our families safe. [Foreign Language] Hello and welcome to you and all at Monadelphous family. Thank you.

So thanks, Matt, for that wonderful introduction. So today's meeting is being held at the University of Western Australia in Perth as well as online. And for our online shareholders, we probably have about 50 people in the room with us today. And we've done this to ensure our shareholders, proxies and guests can attend either in person or virtually. Now this is our first attempt at running a hybrid meeting so that we can include as many of our shareholders as possible, so just bear with us if things don't go absolutely according to plan here. And for those of you in the room today, I'll quickly go through some important safety information. In the event of an emergency, a high pitch tone will sound over the PA system, in which case you must evacuate the building immediately following the green fire exit signs at the front of the auditorium. And the club's fire wardens will be on hand to assist. And once outside, you'll be directed to assemble at the far corner of Riley Oval near the Dolphin Theater. And in addition, in light of COVID-19, please continue to ensure good hygiene and physical distancing at today's meeting. So as we are also running the meeting virtually today, there is a small chance that despite all of our preparation and backup plans, technical difficulties may arise during the course of the meeting. And in the unlikely event that these do, our Chairman has the discretion as to whether and how the meeting should proceed, having regard to the number of shareholders impacted and the extent to which participation in the business of the meeting is affected. And should there be any technical difficulties, we will immediately publish a notification on our website. So for our shareholders and guests attending virtually, questions can be submitted via the online website at any time. And if you'd like to ask a question, just press the speech bubble icon, and this will open a new screen. And at the bottom of that screen, there is a section for you to type your question. And once you finish typing, press the arrow symbol to submit it. And you'll be able to submit questions on the platform throughout the meeting up until we commence question times -- question time rather. And any questions which have not been addressed in the presentation or have not been answered previously will be put to the Board at the end of the meeting. And if we receive a number of questions on the same topic, we may amalgamate multiple questions. Now as usual, voting will be conducted by way of a poll on all items of business, and there will be a time later in the meeting for voting here in the room. However, in order to provide our online participants with enough time to vote, we will shortly open the online voting for all resolutions. So for our online attendees, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options and to cast your vote, simply select one of the options. There is no need to hit a submit or enter button as your vote will automatically be recorded. Now you can change your vote up until the time we declare voting closed. I now declare the online voting open on all items of business. The polling icon will soon appear. So please cast your votes at any time, and we'll give you a warning before we move to close voting. So now that we're finished with the housekeeping, I'd like to take this opportunity to introduce you to our Board of Directors. So with us here in the room this morning from your left to right are our Chairman John Rubino; our Managing Director Rob Velletri; our non-executive directors, Sue Murphy and Dietmar Voss. And attending online are our lead independent non-executive director, Peter Dempsey; and nonexecutive directors, Helen Gillies and Chris Michelmore. And in addition, representing our auditors, Ernst & Young, we are joined in the room this morning by Darren Lewsen. Welcome, Darren. So our Chairman, John Rubino, will commence today's AGM with a brief overview of the company's strategic progress and market conditions. And John will then hand over to Rob, who will speak in more detail about the company's highlights and performance for the 2020 financial year as well as the outlook for the foreseeable future. And then Kristy Glasgow, my fellow company secretary, will then take care of the formal business of the day before opening to shareholders for questions and conducting the poll. So with that, I'll now hand over to our first speaker of the morning, John Rubino.

Thank you, Phil. Good morning, everyone. I'm pleased that you could join us today, either in person or online. I'm sure you will agree, 2020 has been a unique year due to COVID-19. Even though it has been challenging, we continued to grow in our core markets, diversification in our business, ensuring a sustainable business for the long term. We experienced strong demand for our maintenance, shutdowns, and sustainable capital service during the year, which contributed to Monadelphous' Maintenance and Industrial Service division, achieving a record revenue for the third year in a row. The division continued to broaden its service offering and expand its geographical footprint within Australia and overseas. This included strengthening its marine, civil, fabrication and corrosion management service, as well strategic acquisitions in the coal seam gas and rail sectors, and more importantly, the acquisition in Chile. On the back of renewed confidence in the resources sector, our Engineering Construction division commenced working on numbers of large resource construction projects, many of which were in the iron ore construction sector in the Pilbara. The division expanded its engineering, procurement and construction delivery through Mondium, our joint venture with Lycopodium. It also continued to cement its position as a leader in the renewable energy sector via Zenviron, again our joint venture with ZEM Energy. While COVID-19 continues to create uncertainty, the resources sector is expanding to provide a steady flow of opportunities for our business. In the medium to long terms, the outlook for both the oil and gas and the renewable energy sectors remain positive. However, this sector are facing some challenges in the short term. We entered the new financial year with a solid pipeline of work and an exceptionally strong balance sheet, meaning we can invest in suitable opportunity as they arise. Our people are what makes us successful. We want to ensure that the retention, attraction and development of the right people, supported by initiatives, including remuneration practices, which foster an owner's mindset. To ensure we have critical skill and capabilities requirement to achieve our strategy, we will continue to review our talent management and succession planning, including at Board level. Safety and innovation remains more important than ever and are a key part of our culture. They will ensure we remain competitive into the future. Rob -- and before I hand over to Rob, on behalf of the Board, I would like to thank our shareholders and customers for their ongoing support. And I also like to commend our team for their effort and resilience this financial year, particularly through the COVID-19 pandemic. Rob will provide you with more detailed insight into 2020 financial year. Thank you very much. Over to you, Rob.

Thanks, John, and good morning, everyone. In what was a very different and challenging year for Monadelphous, we did record a 2.6% increase -- year-on-year increase in sales revenue for the year to $1.65 billion. As John mentioned, the Maintenance Division achieved record revenue performance for the third consecutive year, exceeding $1 billion for the first time in the company's history. This milestone reflected strong demand for shutdown and maintenance services across the resources sector, particularly in the first half of the financial year. The Engineering Construction division reported revenue of $616 million, with a number of large resource construction projects kicking off during the year. Net profit after tax was $36.5 million, with earnings per share at $0.387. Earnings in the second half were significantly impacted by the disruption caused by COVID-19 as well as disappointing levels of profitability experienced in the company's Water Infrastructure business and the costs associated with restructuring this business. Monadelphous continued to be recognized as a leader in its markets. We continue to win work, securing around $1.34 billion in new contracts and contract extensions since the beginning of the financial year, including over $300 million since June 30. A strong cash flow from operations in the second half of the year strengthened our balance sheet, something I'll touch on again a little later. And subsequent to the year, as we announced on August 3, Monadelphous was notified that Rio Tinto had filed a writ of summons in the Supreme Court of WA against one of Monadelphous' wholly owned subsidiary, in respect of a fire at Rio Tinto's iron ore processing facility at Cape Lambert in January 2019. The company denies Rio Tinto's allegations and claimed losses, and along with its insurers, Monodelphous continues to work with Rio Tinto to seek a satisfactory outcome in this matter. Now despite this, I'm pleased to say that Monadelphous continues to have a strong and positive working relationship with Rio Tinto. In fact, we've recently secured a number of new contracts with Rio, including a 3-year contract to provide maintenance services for fixed plant shutdowns at Rio Tinto's Gove operations in the northern territory and also 3 master services contracts for the delivery of sustaining capital projects over 3 years across various Rio Tinto iron ore mine sites and port operations throughout the Pilbara. Now as I previously highlighted and well aware -- I'm sure you're well aware, our operations and performance was significantly affected by COVID-19 in the second half of the financial year. A broad range of the company's projects and service contracts were delayed, suspended or reduced, and potential new contract awards were deferred. Company's workforce declined around 20% between February and June. And we estimate approximately 10% of Monadelphous' annual revenue for the 2020 financial year was deferred into subsequent financial periods. We implemented a significant number of proactive measures to protect the safety and well-being of our people and the communities in which we operate and to ensure Monodelphous' long-term sustainability. This included the development of detailed COVID-19 health risk management protocols as well as a targeted cost reduction and cash protection plan, which was supported by our Board and executive team agreeing to salary reductions of up to 30% for a 6-month period. With precautionary measures being lifted by governments in most parts of Australia where we operate and demand from our customers improving, the business has experienced a recovery over recent months. And pleasingly, as you can see on the graph, our employee numbers, workforce numbers have recovered over the last 4 months of this financial year. COVID-19 impacts, of course, remain unpredictable, and we'll continue to monitor the situation and adapt our response accordingly. Moving now to safety performance. On the 7th of March, we announced with great sadness that our teammate Haydyn Grubb had been fatally injured following a serious incident at our Kalgoorlie services facility. Since that tragic incident, we've taken a range of measures to understand what happened, and we've implemented a number of actions to prevent a similar incident in future. Monadelphous continues to provide support to Haydyn's family, friends and colleagues, and Haydyn will live long in our memory. Overall, our 12-month total recordable injury frequency rate improved by 7.5% to 3.72 incidents per million man-hours worked. Pleasingly, the Engineering Construction division recorded its strongest safety performance in history, achieving 0 recordable injuries in its resources business for 12 consecutive months, extending over more than 3 million hours worked. Monadelphous remains committed to 0 harm. And to support this, we undertook detailed assessment of our safety governance practices, including reviewing our minimum standard for the control of fatal risks and further enhancing our health and safety management standards. Now to support our safety culture, I launched an Annual Safety Innovation Award back in 2017. The award recognizes outstanding safety innovations which eliminate and control hazards and reduce risk for our people. Pictured in this slide is the winner of the 2020 award for a smart conveyor module assembly system at South Flank's Inflow Project used to assist our team to install 22 kilometers of overland conveyor. Conveyor module assembly normally requires our people to perform repetitive movements, lifting heavy loads in often very awkward positions and in hot conditions. So to reduce these manual lifting, handling and health risk, the team modified the assembly methodology to incorporate a production line approach with rail-mounted mobile assembly frames, specially designed module assembly jigs with lifting aids and shaded workspaces. The innovation enables the on-site preassembly of over 3,500 conveyor modules and is highly effective in reducing the associated -- the risk associated with multiple hazards as well as improving quality and productivity. Importantly, the concept is transferable to other projects that we have in the business. Our value is -- the way we frame our values is safety and well-being. Safety and well-being clearly includes the mental health of our people as well as their physical health. And 2020 has thrown us challenges we could have never anticipated or been prepared for. As a result, we've seen a particular focus on developing mental health awareness programs to support our people in a meaningful way. This included our people participating in Mental Health First Aid courses through Lifeline WA as well as rolling out our R U OK? Day and COVID-19 awareness campaigns and supporting our people in participating in Movember. Now moving to our operational highlights. If you look at the Engineering Construction division, as I mentioned earlier, reported $616 million, which was pretty well in line with the previous period, with a number of projects experiencing delays in the second half due to COVID 19. The division has secured over $700 million in new contracts and extensions, including around $155 million subsequent to year-end. Now in a moment, I'll provide you with an update on some of our key projects, including our work at BHP South Flank, Albermale's Kemerton plant. I'll also touch on work being undertaken by our joint ventures, Mondium and Zenviron. But before I do, I wanted to just mention a few other high level highlights for the division in 2020. Firstly, we were awarded a major construction contract around -- over $100 million with Rio Tinto associated with West Angelas deposit C and D project. We started work during the period, and we're expecting that project to finish up in 2021. Under the division's BHP iron ore panel agreement, 3 projects were completed during the financial year with a further 4 projects started. In addition, subsequent to year-end, the division secured a number of new contracts under this agreement, including a contract for the port availability improvement project, which provides brownfield modification works across BHP's Nelson Point and Finucane Island facilities and a dewatering project at Jimblebar mine site. After 2 years onsite, our work at Rio Tinto's Oyu Tolgoi project in Mongolia was completed early in 2020. The project continues to be strategically important for Monadelphous, with further opportunities expected to come to market over the next year or 2. And finally, our China fabrication business, SinoStruct delivered several fabrication packages for repeat customers as well as for Monodelphous and Mondium construction projects. And last month, SinoStruct opened a facility in Tianjin, offering its customers improved fabrication and modularization services. Post year-end, the division was also awarded a contract to provide multidisciplinary construction services at BHP's Olympic Dam copper mine in South Australia. Now -- moving now to the projects I mentioned earlier. This one is a picture of some work at South Flank. We continue to deliver on 3 major construction contracts at South Flank, which is a $3.6 billion investment by BHP iron ore. And we made good progress on our structural, mechanical, piping and instrumentation work associated with the project's inflow and outflow infrastructure as well as construction of the world's largest rail-mounted stockyard machines through a contract with thyssenkrupp. Work also commenced on a major construction contract for MARBL, which is a joint venture between Albemarle and Mineral Resources at their Kemerton lithium hydroxide plant in Western Australia south west. Significant progress has been made on our scope of work, with the team recently recognized for their strong safety performance. Our EPC joint venture, Mondium, secured a strategically important $400 million contract with Rio Tinto for the Western Turner Syncline Phase II project, which is Mondium's largest contract to date. The Mondium EPC delivery model encompasses full project development and direct execution, significantly reducing interface risk between engineering, procurement and construction disciplines and providing a one-stop, cost-effective solution to customers. Finally, our renewable energy business, Zenviron, continues to go from strength to strength. The business completed 4 wind farms during the period, significantly progressed an additional 2 and subsequent to year-end, secured a new contract for the Murra Warra Stage 2 wind farm in regional Victoria. Now pictured here is the 228-megawatt Lal Lal wind farm in Victoria, one of 4 wind farms delivered during the year. Since establishment, Zenviron has been involved in the construction of 9 wind farm projects with a total generation capacity of 1,600 megawatts, which represents power for around 1 million households and a displacement of around 5 million tonnes of carbon dioxide each year. So we are helping to do our bit there. Looking -- moving on to Maintenance Industrial Services. As I said, strong demand for maintenance, shutdown and sustaining capital services within the resources sector, particularly in the first half of the financial year, contributed to the Maintenance division achieving record revenue performance, which was up 5% on the previous year to $1.05 billion. Division continued to win work with approximately $625 million of new contracts and contract extensions since year-end. During the year, the division was awarded a major 5-year contract at Rio Tinto's coastal iron ore operations as well as a 3-year contract for maintenance services and minor projects on its Pilbara marine infrastructure. This is in addition to various sustaining capital works projects under its panel agreement. Further to this, the division was appointed to BHP's iron ore site engineering panel, providing services at BHP's mine site and port operations throughout the Pilbara for the further 2 years. In recent months, the division has completed 2 major car dumper as rail car dumper refurbishment projects, which there -- which is one of those projects underway there in the right-hand photo. And post year-end, the division secured a further 2 contracts at Jimblebar and at the Newman Hub site. And overall demand for maintenance and minor project works remains strong as our iron ore customers seek to optimize their assets. And we do expect this to continue over the coming years. Now this slide is our entry into Chile. We announced the acquisition of construction and maintenance services contractor, Buildtek late last year. Now Buildtek is an established and well-recognized operator with strong relationships with major mining and energy customers and provides us with a foundation for growth in South America. During the period, Buildtek secured a number of new contracts and the resumption of a number of Chilean copper projects, which were suspended or deferred due to the outbreak of COVID-19 that are expected to provide us with opportunities for us to continue to grow our position in Chile and South America in the long term. Rail. We're building on our existing rail maintenance offering. We expanded to the East Coast through the purchase of Harbinger Infrastructure's business and assets during the year, which included a 5-year contract with ARTC for rail maintenance services on its Hunter Valley rail network in New South Wales. In addition, we were awarded a strategic 3-year contract with Rio Tinto on its rail network in the Pilbara, which is pictured on the slide here. Rail tendering activity remains strong across the Pilbara and in New South Wales, and the division continues to explore its options more broadly to build out our rail maintenance business. Finally, as John mentioned earlier, the division continued to expand its services offering both organically and via a number of strategic acquisitions. This included strengthening of marine, civil and corrosion management services as well as establishing a stand-alone oil and gas industrial services team. It also acquired iPipe Services, a specialist provider of coal seam gas, pipeline maintenance and construction solutions. Pictured on the left here is our team at BHP's Nelson Point operations, who are blasting and painting fender piles as part of a wharf remediation project. And on the right is our civil team working at BHP's Jimblebar mine site. Moving quickly to financial performance. Earnings before interest, tax, depreciation and amortization,was $92 million, with earnings in the second half significantly impacted by both the disruption caused by COVID-19 as well as disappointing levels of profitability within the Water Infrastructure business that I mentioned earlier. Net profit after tax, as I said, was $36.5 million, earnings per share at $0.387. The Board declared a final dividend of $0.13 per share fully franked, which took the full year dividend to $0.35 per share, which is a dividend payout ratio in excess of 90%. The Board declared a final dividend -- sorry, despite the recent challenging economic and operating conditions, the company's balance sheet strengthened. We ended the year with a solid cash balance of $208 million. This just is a snapshot of our contracts secured for the year. You can see the significant amount of work secured in the north west, iron ore's dominating there for us as well as some in the south west and over on the -- in Brisbane. But also a couple of -- you can see there on the slide a couple of contracts secured overseas. You see in Papua New Guinea, we secured a 3-year contract to provide capital project services at Newcrest Mining's gold mining operations on Lihir Island, where we've been operating since 2017. In addition, Buildtek was awarded a number of new contracts in Chile, including 2 contracts with Minera Escondida, BHP as well as a contract at GNL's Quintero's LNG operations. There's more information on our contracts in an appendix to this report. Looking now at our, I guess, our people. You can see during the first half of the year, we did experience strong demand for skilled labor in the resources sector and continued to implement a number of strategic sourcing initiatives. We reviewed succession planning across our business during the year, ensuring we've got the critical skills and capabilities for our ongoing growth and providing valuable development opportunities for our people. As I mentioned earlier, I've said a few times now, the numbers were impacted significantly in the second half. However, pleasingly, we've experienced increased demand for our services. We've seen our employee numbers grow, and we're running around 6,800 as at the end of October, well up on where we finished last year. So look, as part of our sort of initiatives around retaining and attracting the right people, we are investing in a range of new technologies. This includes upgrading, replacing our recruitment and onboarding systems as well as developing and launching a new employee application, MonaWork, which is pictured on this slide. This is an app people use on their mobile phone for our workforce, and it's designed to improve our engagement with our people, give them greater access to job, mobilization information as well as the ability for them to manage their own work schedule. We just move to subject social value. At Monadelphous, we believe it's important to support, have a positive impact on the societies and communities in which we operate. And in that respect, we do -- we focus our efforts on 4 important areas: diversity, community, education and environment. And throughout the year, we've had dedicated engagement plans, developed for strategic regional locations, which has led us to supporting more than 50 community initiatives right around the country. We also focus on diversity, as you'll see in the coming slides. Since launching our Gender Diversity and Inclusion Plan in 2018, we've worked at improving female participation in our business, including identifying job and development opportunities. I'm pleased to report since 2018, we have seen an increase in females across our business, including a 38% increase in number in senior leadership and management roles in our business. In addition, almost 40% of total appointments in our 2020 apprenticeship programs were female as well as almost 25% of our 2020 graduate program intake, which is significantly influenced by engineering graduates. So we're also a major supporter of women in engineering programs aimed at supporting participation in STEM education, so we can improve the availability of women in our industry. We also continue to deliver on our stretch reconciliation action plan, delivering our -- achieving our aboriginal and Torres Strait Islander employment stretch goal of 3% during the year. We employed around 70 indigenous job seekers as part of our participation in the Australian government's employment parity initiative. As you can see in this slide, as well as focusing on our workforce and improving job opportunities for aboriginal and Torres Strait Islander peoples, we've had a strong focus on upskilling young indigenous students from the communities where we operate through programs such as the Graham Polly Farmer Foundation. The picture on the left is from our partnership launched -- partnership launch event earlier in the year in the south west of Western Australia. And on the right, you can see one of our Newman-based employees mentoring Graham Polly Farmer Foundation students as part of our after-school program, where the students have named themselves the Monodelphous Mechanical Mob. Planning is now well underway for our next stretch reconciliation plan -- reconciliation action plan, which will be our fourth plan due to be launched next year, 2021. We'd now start just to have a quick look at the outlook for our markets. This slide shows that in all -- pretty well all the sectors where we're operating in, we are seeing solid, if not continuously improving market conditions for our markets going forward, both in resources, in energy, certainly, maintenance continuing to grow and also in our infrastructure sectors. So just giving you a bit of a view around our outlook. Going forward, as you can -- as we said, the outlook, I guess, in the wake of COVID-19 does remain somewhat uncertain given the havoc it's creating around the world. Nevertheless, the resources sector is expected to provide a steady flow of opportunities for Monadelphous over the coming years. Strong iron ore price, demand from China, which is ramping up, the outlook for Australian iron ore investment remains solid. Ongoing capital and operating expenditure required to sustain high levels of production that will drive strong and steady demand for engineering, construction and maintenance services. Developments in other resource sectors, including lithium, gold, copper, nickel are also expected to provide us ongoing prospects. The effective declining global demand on the oil and gas sector has resulted in some deferment of development of new LNG projects with customers clearly having a focus on reducing operating costs and deferring nonessential work in the short term. The long-term outlook for renewable energy sector is positive with a pipeline of new wind farm projects expected to come to market over the next few years and opportunities from developments in hydrogen technologies are also emerging in this sector. Maintenance activity in the resource and energy sectors has recovered steadily from the effects of COVID-19, with some impacts lingering in the oil and gas sector. But clearly, longer-term demand for maintenance services is expected to grow steadily on the back of aging assets and current customers deferring nonessential work in prior periods. Monadelphous has entered the new financial year with solid forward workload. I guess based on the continued recovery from the impact of COVID-19, we do expect to see first half revenues to be up around 10% on our second half of last year. And our reputation as a leader in our chosen markets, our long-standing commitment to the delivery of safe, reliable, cost competitive solutions, I guess, as well as our swift response to COVID-19 means we're well positioned to capitalize on opportunities and to deal with the challenges ahead of us. That's it from me. I'll hand over to Kristy now, who'll complete the formal proceedings.

Thanks, Rob. As we still have a quorum, we'll commence the formal business of the day. As mentioned previously, if you are online and have a question, please press on the speech bubble icon and type your question. Once you finish typing, press the arrow symbol to submit it. For those of you in the room, I ask that all questions be held until after the resolutions have been introduced. Today's resolutions will be voted on via a poll, which will be conducted after all of the items of business have been introduced and discussed. I'll provide some guidance to the people in the room after the poll prior to commencing, and there will be assistance available to shareholders who have queries. We will tell you the results of the poll at the end of the meeting and announce on the ASX shortly afterwards. As at the proxy close date, we'd received valid proxies representing around 54.5 million shares or 57.5% of the issued capital of approximately 94.7 million shares. We'll show the manner in which the proxies are to vote on the screen before each resolution is voted on. Where a proxy vote has been directed to the Chairman without a specific voting instruction, the Chairman will vote in favor of each resolution, except where a voting exclusion applies. The minutes of last year's AGM have been signed, and a copy is available for inspection. If you'd like to view the minutes, please speak to Phil Trueman. We have 4 items of business to consider at today's meeting. These are set out in the Notice of AGM and the accompanying explanatory memorandum released to the ASX and available to shareholders on our website. Unless anyone objects, I will take that notice as read. The 2020 annual report contains the financial statements of the company and the reports of the directors and auditor for the financial year ended June 30, 2020. No resolution is required. However, if shareholders would like to raise any questions or comments with either Darren Lewsen from Ernst & Young or with the Board regarding the financial statements and reports, for those online, please type in your questions now. And for those in the room, please hold your questions to the end. The meeting will now consider the formal items of business. The first item of business is resolution 1, to reelect a director, Mr. Peter Dempsey, who retires by rotation in accordance with the company's constitution and being eligible, offers himself for reelection. Peter was appointed to the Board in May 2003 and his background and experience are contained in the Notice of Meeting. The Board, with the exception of Peter Dempsey, who abstained, unanimously recommends that shareholders vote in favor of his reelection. The proxies received in relation to resolution 1 are displayed on the screen. As previously mentioned, we will conduct the poll after all resolutions have been discussed. We will now move on to resolution 2. The second item of business today is resolution 2, to reelect a director, Ms. Helen Gillies, who retires by rotation in accordance with the company's constitution and being eligible, offers herself for reelection. Helen was appointed to the Board in September 2016 and her background and experience are contained in the Notice of Meeting. The Board, with the exception of Ms. Gillies who abstained, unanimously recommends that shareholders vote in favor of her reelection. The proxies received in relation to this resolution are displayed on the screen. We will now move on to the third resolution. The third item of business is resolution 3, granting of options to Managing Director Rob Velletri. It is proposed that Mr. Velletri or his nominee be issued with 300,000 options under the 2019 Monadelphous Group Limited employee option plan. The key terms of the options are contained in the Notice of Meeting. Voting exclusions apply to this resolution and the details thereof are set out in the Notice of Meeting. The Board, with the exception of Mr. Velletri, who abstained, acknowledges the outstanding contribution that Rob has made and will continue to make to the company and therefore, unanimously recommends shareholders vote in favor of resolution 3. The proxies received in relation to this resolution are displayed on the screen. We will now move on to the final resolution. The last item of business for today is resolution 4, adoption of remuneration report, which is contained in the director's report to shareholders. The vote on resolution 4 is advisory only and will not bind the directors or the company. However, the Board will take the outcome of the vote into consideration when reviewing remuneration practices and policies. Voting exclusions apply to this resolution, the details of which are set out in the Notice of Meeting. The Board recommends that shareholders vote in favor of the adoption of the remuneration report. The proxies received in relation to resolution 4 are displayed on the screen. I'll now hand back to Phil for shareholder questions.

So thank you, Kristy. We will now open question time. We haven't had any questions from any of our online shareholders, so we will open the floor to the room. If you have something you wish to ask, please raise your hand and one of our attendants will bring you a microphone. And especially for the benefit of those listening online, could I please ask that you speak into the microphone so that everybody is able to hear your questions clearly.

Thank you. I have a few questions. The first is in the financial area, the second in the safety area. I noticed that the revenue has maintained a good position this year, which is great to see, as has the cash position. But there's been a significant drop in the dividends per share, the net profits, the earnings -- and the earnings per share, which seems to be a much greater drop and would indicate [Audio Gap] of the business. So understanding that, obviously, COVID has had an effect in the second half of the year, what's actually led to such a significant drop in the net profit after tax? Is it related to the path -- the issues with the water in the eastern states or other factors?

As Rob mentioned in his opening highlights slide, we did announce in May that we had taken a provision of $14 million on some water projects. So that would have been one of the key factors. And the other factor, as you quite rightly say, was the impact of COVID, especially in the last 3 months of the financial year, we saw our activity levels reduced quite significantly, which had an impact on our profitability.

Okay. And the second question in terms of provisions. Are you making any provisions for the issue at Cape Lambert for the fire with Rio Tinto?

The -- as we've said also in our announcements, we have $150 million of public liability insurance in place. And we have no reason to believe that, that insurance policy will not respond in the event that the matter settled -- when the matter is settled.

And if I could ask a couple of questions on the safety. I note that sadly, there was the fatality at Kalgoorlie, but also that the Engineering and Construction division had 0 all injury frequency rate for the -- in the resources sector, which was good to see. But beyond that, there was very little information in the financial report -- annual report. And it was good to see, though, that Rob was able to produce a chart with -- showing what the trend is over the last couple of years. However, the trend indicates that the all-in -- or the reportable injuries is actually fairly steady at 4, 4 per million manhours, I assume it is. And I'm just wondering what you believe are the underlying factors that's holding you to that position? And specifically, what you're going to do differently -- or plan to do differently to address that situation?

Chris will take that.

Thanks for that question. Best way I can -- first of all, let me just say that we agree that we're not -- whilst we did see a small increase -- I guess, in our recordable rate, a small improvement last year, we're not certainly not satisfied with the longer-term trend, which's really plateaued out probably over the last 3 or 4 years. We've got a number of, I guess, programs in place in our business to try and pull that number down. Significantly, it's in the supervisory area in terms of safety leadership programs that we're running right through our supervisory team as well as senior leadership programs, coaching programs throughout the business. We're also rolling out a number of specific blue-collar programs around, call it, delivering the safe way, which is the Monadelphous, I guess, culture, it's a very simple set of messages for our blue-collar workforce in respect of things like life-saving rules, et cetera. We've actually got a significant program underway now, a campaign around working with mobile plant as well as the line of fire injuries, which is a significant risk to our business. But there is -- I guess, the message is significant focus around culture and making sure that our supervisors who really are on the front line of managing safety in the field are trained in our leadership requirements, particularly at a time when we are bringing on -- we have had a rapid increase in the number of people that we bring into the businesses.

Derek Miller representing Australian Shareholders' Association. First, I'd just like to thank Mr. Rubino and Ms. Glasgow for meeting with us. We find those meetings particularly useful. I think ASA is one of the few groups that does, in fact, meet with the company representatives. I've got a question first on total share of margins, the margin is down this year to 5.6%. That's come down every year over the last 5 years from something like 8%. And that seems to me to be a bit of an anomaly in the industry. If you look at the margins of all the people that you work for and I look at particularly the iron ore producers, their margins are 70% or thereabouts. And I just wonder how sustainable they're positioned putting the pressure on people like you to [ screw ] the margins down. As Mr. Rubino said to us, the companies are just interested in price now, they're just not interested in timing as they used to be. So that makes me wonder, is part of the reduction in margins due to the increase in work in the engineering and services section as opposed to the construction section? You can almost see a correlation between as engineering services has gone up, margin has gone down. And I guess the basic question is, is that the case? Or is it the same in all areas? Or same in the 2 areas?

No, I think you have made a good point around the volume of services in our business. Our services business, I guess, is a more sustainable, secure source of revenue for us long term. However, the potential to make margin in that business is somewhat less than it would be in the construction business. So that's clearly impacting the longer-term trend there. Yes, and the other is that it's probably only been 1 or 2 years now since we're starting to see a higher volume of larger construction projects in resources, which are more suited to our business in terms of our sweet spot. Prior to that, there wasn't as much of that work around for a few years after the boom, if you like. But we also have an overlay of competitiveness in the market. Whilst I think we've got a very strong position in the market, clearly, I mean, customers do have a heightened focus on price, which clearly, I guess, makes it more difficult to, I guess, access the potential for improved margins for our business.

But you sort of just got to wonder whether the companies are not forcing you to carry too much risk for too smaller margin in the light of...

Very good point you had. It's a good point. But we're in a competitive market. But yes, it's valid.

The second question just relates to the rem report. We appreciate you've got a relatively simple rem report. I think it only occupies 13 pages or something, which is still quite a few pages to work through. It's a lot better than many other companies. But the last -- 2 years out of the last 3, you haven't paid any bonus, and you've got to put two and two together with the margins and say it's probably a bit unlikely to do it, to pay bonuses to the executives. I just wonder whether you shouldn't be thinking about just pay executives a decent or top line salary and forget about all these complexities of bonuses and rem reports. I worked for 40 years in the industry. And it was only bonuses in the last 2 years, if I recall, likely, and it didn't make the slightest difference to how you worked. So it's just a thought to pass on. There's a lot of cost in putting together all that rem report and the data that Phil has to keep together to do it. So I'll just leave that as a thought.

Very valid. Thanks. And I agree with you on this one. Personally, I never get a bonus.

[indiscernible]

Okay. Any further questions?

I'm [ Peter Simmons ], a shareholder. Just on that very last point about bonuses, I'm strongly in favor of the bonus culture. I think it adds a lot of value and keeps management and executives on their toes. How it plays out in Monodelphous, I'm not quite sure, but longer it may continue. I think it's -- turning to the Rio issue, I think it's a credit to the company that it was announced just in the last few days that there's been some very healthy contracts from the company, and that's a credit to Monodelphous, well done for that. However, relating to that issue and when it was announced to the market, it went down like a lead balloon. And the point I would make was the market hates shocks. And the communication process needs, perhaps, to be a little bit more visible. And the other question I would have is why the necessity to go to court? This is what really is my question. Clearly, Monadelphous is going through a process now of working with Rio to resolve the situation. And in my view, the court should be the last resort.

We're only going to get violent agreement on that out of court. Yes. Look, I think the reality is that, that issue we've been working through with our insurers for a period of time. And I guess, Rio decided to escalate that through the filing of a writ, which, I guess, at the end of the day, that required it to be announced, and there's not a lot we could do about it, I don't think in that respect. But we haven't been served the writ. And we are in discussions with our insurers and Rio Tinto, and those discussions are continuing. Hopefully, we can keep it away from court, but that really won't be our decision. But the important point -- I mean I want to stress the point around the fact that we -- our working relationship is not impacted. There has been no impact in terms of the awarding of work, the relationship in terms of our working relationship. This is very much a separate matter.

No further questions. We will now conduct the poll. So I'll hand back to Kristy to take you through that.

Thanks, Phil. For those shareholders, representatives of shareholders and proxy holders attending online, please ensure that you have cast your vote on all resolutions using the online voting button. We will now conduct the poll for shareholders in the room. This should only take 3 to 4 minutes, and then we will return to close out the meeting. For those here in the room today, at the time of registration, those entitled to vote being shareholders, representatives of shareholders and proxy holders were given green admission cards. Each shareholder present, either in person or by proxy, has 1 vote per resolution for every share owned. Rod Somes from Computershare has agreed to act as returning officer for the poll. If you have any queries during this process, please raise your hand, and someone will come over to assist you. If there is anyone who believes they are entitled to vote but is not registered to vote, can you please raise your hand? If you are here in more than 1 capacity, for example, on your own behalf and as proxy for another shareholder, you will have been issued with as many green admission cards as you have separate capacities. On the reverse side of your green admission card is your voting paper and instruction. I'll now run through the procedures for filling in the voting papers. Attached to the admission card of proxy holders is a summary of proxy votes, which details the voting instructions where these have been directed by the shareholder. By completing the voting paper, when instructed to vote in a particular manner, you are deemed to have voted in accordance with those instructions. In respect of any open votes a proxy holder may be entitled to cast, you need to mark a box beside the resolution to indicate how you wish to cast your open votes. Shareholders also need to mark a box beside the resolution to indicate how you wish to cast your votes. Please ensure you print your name where indicated and sign the voting paper. When you have finished filling in your voting paper, please lodge it in one of the ballot boxes being circulated to ensure your vote is counted. And if you need any help, please raise your hand. I will close the voting system in a couple of minutes. [Voting]

Does anyone in the room need more time to complete the voting paper? No. Great. Okay. The poll is now closed. The results of the poll will be tallied and published on the ASX shortly after the close of today's meeting. If there are any other business today that can be properly brought to the meeting about the management of the company? If there's no other business, I declare this meeting closed. I would like to take this opportunity on behalf of the Chairman, the Board and everyone at Monadelphous to thank you for your attendance today and for your continued support of our company. That ends today's formalities. For those online, thank you very much for joining us. And for those in the room, please join us for some light refreshments in the foyer. Thank you.