OFX Group Limited (OFX) Earnings Call Transcript & Summary

Well, good afternoon, and welcome to the 2023 Annual General Meeting of OFX Group Limited. This meeting is being recorded so that it can be uploaded to our website. My name is Patricia Cross. I'm the Board Chair of OFX Group Limited. And I will chair today's Annual General Meeting, which is being held as a hybrid meeting with some investors present at our offices in person [indiscernible] and some of investors present at our -- attending online. I'd like to start with an acknowledgment of country. We acknowledge the original custodians of the land upon which we work and live and held this meeting and we'd like to pay our respects to their elders past, present and emerging. The company's Secretary has advised me that we have a quorum of at least 2 shareholders present, so I declare the meeting open. I'd like to introduce the OFX directors, on my right, I have Skander Malcolm, the CEO and Managing Director. On my far right, our nonexecutive directors begin with Connie Carnabuci; Grant Murdoch, who is the Chair of the Audit Risk and Compliance Committee; Doug Snedden, who's the Chair of the Remuneration and Nomination Committee; and Cathy Kovacs. Adrian Wong, our Chief Legal Officer and Company Secretary, is attending. And the company's auditor, Sean Kendrigan, in the front row for KPMG, is here in person also. Members of the global executive team who are also attending either in person with me or via Zoom are Selena Verth, our Chief Financial Officer; Mark Shaw, our Chief Operating Officer, back in middle. Axel Freytag, our Chief Strategy and Corporate Development Officer; Gavin Groll, at his first AGM for OFX, the Chief Strategy -- sorry, the Chief Risk Officer. Elaine Herlihy, the Chief Marketing Officer; and Yung Ngo, President of Asia Pacific; Kate Svoboda, the Chief People and Culture Officer; and Adam Thomas, our Chief Technology Officer. Due to time zones, our offshore regional presidents will not be on the call. For those attending via Zoom, if you have any technical issues at all, please call the OFX team on +612-8667-9160 for support. Now on to the agenda for today. I will make a brief introductory address, and then I will introduce the CEO and Managing Director, Skander Malcolm, who will provide his address. We will then move to the formal part of the meeting and the resolution set out in the notice of the meeting that has been sent to shareholders. There will also be an opportunity to ask questions on each resolution and also during the general discussion session following the formal business. I'll now deliver my address. Thank you for joining us either virtually or for those who are lucky enough in our refurbished facility here in Sydney. It's terrific to be able to freshen up our physical space, and the new office is proving very popular with our employees. This is my first AGM as Chair, and I'm delighted to share with you how pleased I am and the Board are with the results in fiscal year 2023 and the progress we're making in building a more valuable company. Skander will share a summary of the results, but we are particularly pleased with the combination of strong growth in NOI at healthy EBITDA margins, strong risk outcomes while we continue to grow our investment in the capabilities we need. It's also terrific to see employee engagement on the rise. As we all know, exogenous factors continue to create both risk and opportunity for OFX. Rising interest rates, inflation, technological disruption create considerable uncertainty for our clients, prospects and employees. Thankfully, at OFX, we have a very strong risk culture and good governance, so we can carefully assess our risks and look for ways to mitigate them but also find opportunities to leverage our strengths. The acquisitions of both Firma and Paytron are good examples of this. In the case of Firma, the combination of technological disruption and regulatory scrutiny created a reason for the vendor to consider an exit while our global platform, balance sheet and operational excellence [ met ] as a natural acquirer. And in the case of Paytron, our clear customer and product roadmap, along with our technological ambition, suited both the vendors as well as us. It's also helped that, as I've said before, we are ambitious. And we took these opportunities because we want to grow a more valuable company, and we continue to have ambitions and capability. As we consider the risks and opportunities offered by the current environment. We continue to evolve strategy in order to best explore and optimize our investments for growth and risk. Skander will speak to the buyback in his address, but I want to confirm to you that the Board will continue to run our disciplined buyback program within the parameters we laid out while we continue to assess the buyback as being on balance in shareholders' best interests, and we will keep investors abreast of outcomes. I am clear on behalf of the Board and the 700-plus OFXers that we are in healthy shape, and we will continue to support Skander in the team build a more valuable OFX in the next year and beyond. Now I'd like to hand over to Skander Malcolm, our CEO and Managing Director.

Thank you, Tricia, and welcome, everyone. And as highlighted on Slide 6, our fiscal year '23 was another record year with turnover of $39.1 billion, driving net operating income of $214.1 million and underlying EBITDA of $62.4 million. These metrics represent the biggest NOI we've ever produced, up 45.6% on prior corresponding period and the biggest underlying EBITDA we've ever produced, up 40.3% versus the prior corresponding period whilst generating the strongest net available cash of $67.4 million we ever had. This financial performance was the result of very strong execution. Clearly, the external markets were as unusual as we've ever seen, with rapidly rising interest rates, inflation and considerable political and geopolitical conflict causing uncertainty for our clients and for our team. Nonetheless, we were very disciplined in driving an exceptional integration of Firma in continuing to invest and deploy new features and services in our global platform in leading our team and engaging our employees and managing the considerable risks we faced. Beyond the financial and operating metrics, I was especially encouraged by the engagement and the productivity of our team. Engagement scores are up. We continue to drive client engagement through our team, and we're seeing excellent mobility. In other words, increased level of promotions amongst our people. Moving to Slide 7. As I just covered, our overall performance in the fiscal year '23 was strong in the first half and flat in the second half, driven by our softening in consumer confidence globally for high value use cases. The chart on the left shows group revenues split by segment by half since first half fiscal year '21. We share this to illustrate a few important points for investors. Firstly, the total portfolio is affected by swings in the consumer portfolio, but that effect will be more limited going forward as the pivot to B2B has well and truly taken hold. We do occasionally see some softness in corporate, such as the first half of fiscal year '22, but largely, we see steady growth at a long-term CAGR of between 10% and 15%. Secondly, whilst we can have unusual half-on-half performance as we did in fiscal year '23 driven by consumer, it is rare that this persists over a multiple periods. And finally, as we start to build synergies from Firma and as we start to build stronger growth from our online sellers and enterprise segments, we expect to see the effects of consumer fluctuations lessen on the overall result. So it still will remain valuable. And all of this revenue growth can be supported by good execution across margin, operating expense and risk management levers also. Moving to Slide 8. Many of our investors will be familiar with our strategy on a page, describing our goal to build the world's leading cross-border payment specialists. Good strategy has never been more important. The external landscape is changing rapidly. Higher interest rates, high and stubborn inflation, systemic banking risk, all of which weren't present 12 months ago. So continuing to question our fundamental beliefs, continuing to test our strength and continuing to take heed of what we see in the market is critical to build the sustainable growth company shareholders expect of us, and I'll just highlight a few of our key strategic points. Firstly, we're playing in a huge market that grows every year and is largely dominated by major banks who are more expensive and less well liked by their clients than the new entrants. More and more, customers are taking up the specialist service in every region, as evidenced by the growth rate of all new entrants, whether they're public or private. And secondly, we choose to target 4 segments. We chose those because we felt we have the right combination of skills, knowledge, global presence platform, risk management and service delivery for those clients and prospects. And our competitive position is strong, driven by years of investment, learning and progress, and we know that we are differentiated through feedback from clients, competitors, banks and regulators. Finally, we have a valuable business that we can make it more valuable through good execution, better capital management, a strong team and by leveraging our credibility as an industry specialist to grow wallet share of our clients by generating revenue beyond the core spot transaction. And our acquisition of Paytron is a great example of this. Turning to Slide 9. Today, we generate broadly 90% of our revenue from spot transactions and the remainder from transactions that are related to forward contracts. This mix reflects our history of starting with consumer clients who largely used us to move funds at a lower price more quickly than banks, as well as corporate clients who found our combination of price, service and speed compelling. Corporate clients increasingly see the value in laying off risk, especially as they navigate turbulent supply chain, payroll and other risks in their businesses. However, we also know that the same corporate clients have needs that are associated with their cross-border payments and have accounts receivables that we don't serve. Firstly, they'll have generally smaller value transactions that they use corporate cards to pay with. For example, software costs that are billed in U.S. dollars, all vendors for services offshore. They can use OFX for many of these, but they don't because it may seem easier to use a [ card ] and they're very widely accepted. The reporting is excellent and they can be controlled well. Secondly, as invoicing has become increasingly digitized and accounting packages increasingly integrated with invoice management, corporate clients have turned to firms specializing and integrating their invoice management with their payable solutions, both domestically and globally. Those firms generally charge a subscription for that service, Paytron provides digital solutions across cards and invoicing. And by OFX acquiring them, we get immediate access to the software, we were in the process of building to access revenues from these clients. The software we were building, as Selena has described many times before in our intangible investments, creates a competitive advantage by making life simpler, safer, more reliable and more visible for corporate clients. The acquisition of Paytron fits into our platform journey by giving us a card and invoice management solution. And over the next 3 years, we will continue to operate the 2 platforms until we're ready to merge the 2 which we expect to start within 1 year of closing. In addition to the software, we're delighted to welcome Paytron's team to become part of OFX, led by co-founders, Jaco Veldsman and Francois Henrion and our Paytron team are here today. Jaco and Francois have over 30 years of experience across multiple geographies in major banks and entrepreneurial organizations in the payments and trading space. They have assembled a very strong and experienced team to build this platform and take it to market. We've structured this investment to align the interests of shareholders, the vendors and the clients. And in summary, we'll acquire Paytron -- we have acquired Paytron in exchange for a consideration of $11.25 million OFX performance securities which vest when certain targets are met by Paytron over the next 3 years. OFX will fund the operating budget with OFX retaining discretion in line with our revenue performance. This structure will encourage revenue to be generated a strong integration and better client experience, all underpinned by our usual disciplined risk and compliance foundations. And we think this is a great way to add valuable features and services for our corporate clients and create the most compelling proposition for corporates globally while enhancing our revenues in time. In addition to generating revenue from loyal clients, OFX has always been a strong generator and converter of cash, and this gives us options with respect to the best way to generate value for shareholders. Moving to Slide 10 at the fiscal year '23 results. In May, we announced that we would buy back up to 10% of our shares via a share buyback program. In simple terms, the program is up and running for up to 12 months, and it will be periodically reviewed during that time. Its purpose is to return value to shareholders through reducing the total number of shares on issue, and whilst we believe it is to the shareholders' advantage to do that. Importantly, it will not be done at the expense of investing for sustainable growth or in repaying debt or at the expense of investing in M&A or other strategic investments as Paytron has highlighted. As our last buyback demonstrated, we will run a disciplined program, and we will keep investors abreast of outcomes. Through the first quarter, I can confirm that we have acquired 2,268,631 shares on the market and continue to run our program actively in line with our guidance. Moving to our trading update for Q1 on Slide 12. I'm happy to confirm that we are on track to deliver the outlook we provided in May. Our NOI was $60.1 million, slightly higher than we anticipated, but it includes an unusual item of $3.7 million in other income that I'll explain later. In terms of our performance, we did see a more subdued period in North America in line with our expectations, driven by the uncertain economic climate and the unusual item in Firma, EMEA and APAC performed well. In terms of our segments, our B2B portfolio was good, in line with fourth quarter, and up just under 17% on prior corresponding period. Performance in corporate was in line with expectations, whilst online sellers were slightly lower than anticipated and in enterprise was slightly better than anticipated. B2C was ahead of expectations and slightly down on prior corresponding period by growing [indiscernible] growing by 10.8% in the fourth quarter of fiscal year '23. Average transaction values and transactions were in line with expectations as was our margin. The unusual item in our net operating income is that in the first quarter '24, we unexpectedly had a handful of traders lead the Firma business. We continue to provide excellent service to their clients and to mitigate the risk of clients leaving have taken defensive actions in the shorter-term. The clients have been allocated to Firma's most experienced traders, and we expect revenue to return to historic levels throughout the balance of the year while client and employee retention overall post the acquisition has been excellent. When we negotiated the Firma sale, we did anticipate this risk, which is why we included an appropriate amount in an escrow arrangement and following the departures of AUD 3.7 million of funds in escrow have been returned to OFX. The net-net operating income impact from the temporary reduction in fiscal year '24 is expected to be AUD 0.3 million. There will be a reduction of approximately $4 million in revenue, which is offset by the $3.7 million of the escrow release. The escrow releases will be accounted for in the first quarter '24 and the revenue reduction throughout fiscal year '24 as it occurs, and we don't expect there to be any material impact to fiscal year '25. Moving to Slide 13. We have positive momentum into the second quarter across turnover, fee and trading income and transactions. Across each metric, we saw growth versus fourth quarter and combined with margin improvements and expense control give us further confidence in our fiscal year '24 outlook. To further illustrate the momentum, we've split performance between B2B and B2C on Slide 14. In B2B, we saw slightly lower average transaction values, offset by a higher number of transactions. Generally, more transactions is a good lead indicator of engagement, and so this augurs well, particularly against the backdrop of sound margin management and a relatively soft North American environment, which we expect to persist through the first half. In B2C, as I mentioned previously, we've seen activity pick up from the fourth quarter lows through the quarter. And while our consumer business consistently delivers good growth and healthy returns, the nature of the high-value use cases we support does mean the transactions and average transaction values can fluctuate quarter-on-quarter. The growth in average transaction values in the first quarter is due to some activity in these higher-value use cases returning, such as for property transactions and salary transfers. And this is slightly above our base case overall, reflecting the value of the segment within the overall portfolio. In closing, on Slide 15, we're therefore happy to confirm guidance previously provided for fiscal year '24. Our performance in Q1 reflects the expectations and assumptions we previously provided and the tailwinds and headwinds remain as we stated previously. Our performance, the acquisition of Paytron and the continuing competitive environment all contribute to us feeling confident in our vision to build the world's leading cross-border payment specialist, and I look forward to updating you on our further progress at the half year. And with that, I'm delighted to hand back to Tricia to conduct the formal business. Thank you, Tricia.

Thank you, Skander. I will now turn to the formal business of the meeting, taking each resolution in the order set out in the notice of the meeting. There will be an opportunity to ask questions on each resolution. Questions not related to the resolution should be held until the end of the formal business when I will open the floor for general questions and discussion. A poll will be conducted on all resolutions. Votes will be excluded in accordance with the Corporations Act and the ASX Listing Rules. The combined proxy votes and direct votes will be shown after discussion on each individual resolution. I advise the meeting that I will be voting all undirected proxies in favor of the resolutions as indicated in the notice of meeting. To ensure that all shareholders and proxies have an opportunity to vote, I now formally open the polls. Shareholders and proxy holders who have registered with their shareholder number or their proxy code can now vote in person or online. If you are a shareholder or a proxy holder here in person, you were given a voting card at registration this afternoon. Please complete the voting card by ticking the for, against or abstain box in respect of each resolution and hand it to the Link Market Services staff sitting at the entrance table. If you have to leave prior to the completion of the meeting, no problems, please complete your voting card and place it in one of the ballot boxes held by Link Market Services staff on your way out. If you've joined online, we have now opened the electronic voting card for the poll. And it should have popped up on your screen. Please vote by selecting the for, against or abstain box in respect of each resolution on the electronic voting card. After completing all items in the vote, you will need to click the submit button at the bottom of the voting card. If you want to vote later, then you can move the electronic voting card on your screen or you can close the electronic voting card by clicking the X at the top right-hand corner. You will be able to vote at any time until the close of the meeting when I declare the voting closed. You just click on the poll button on the banner to reveal the electronic voting card again. If you are not a shareholder or proxy voter -- proxy holder or if you have already voted, please close the electronic voting card by clicking the X at the top right-hand corner of the electronic voting card. If you have already voted and you vote again during the meeting, your previous vote will be invalid. The votes will be counted by our share registrar Link Market Services, who will also act as a scrutineer. We'll announce the results of the poll and advise the ASX as soon as the results are determined, which is expected to be before the market opens tomorrow. If you have any issues voting during the meeting, please look at the detailed instructions in the OFX online AGM guide or call +612-8667-9160. So the first formal item is the financial statements. There is no vote on this item. So please check acknowledge if you have joined online. And then for items 2 to 6, please lodge your vote. For those attending here in person, could you please address all your questions to me as Chair. And if you wish to speak, raise your hand and a microphone will be brought to you so that all shareholders in the room and online can hear your comment or question. And please then state your name. Shareholders or proxy holders who are attending online and have provided their shareholder number or proxy code when registering can ask questions by typing it into the Q&A box at any time or by indicating that you would like to ask the question verbally. [Operator Instructions] If you would like to ask a question verbally, at the appropriate time, the moderator will indicate directly to you verbally that you can ask your question, and then your microphone will be unmuted so you can ask it. Please then state your name. So turning now to item #1 on the notice of meeting, the financial statements and report of the directors and auditors. The first side on the formal business is the tabling of the financial statements and reports of the directors and auditors for the year ending 31 March 2023. The company is required to lay before the meeting the last audited financial statements and reports, which were released to the ASX on 23 May 2023 as part of the company's annual report. No resolution on this particular matter is required, but I now invite shareholders and their proxies to comment or ask questions on the reports. Questions may also be asked directly of the auditors in relation to the conduct of the audit, the content of the audit report, accounting policies adopted by the company and the independence of the auditor in carrying out the audit. Our auditor, Sean Kendrigan, partner with KPMG, is present as part of our panel for that purpose. So are there any questions or comments on the financial statements and reports of the directors and auditors for the year ended 31 March 2023? Remember, you ask your questions by for those here in the room, raising your hand and for those attending online, navigating to the Q&A button at the bottom of the screen. Bear with us, as we'll need some time to confirm that those who are asking questions are shareholders or proxy holders. So Skander, I'm going to hand over to you and to Maddie. Thank you, Maddie.

Well, let's first take any questions from the floor. Tara on the phone questions from the floor.

Question from the floor.

My name is Kevin Daly. I just have a quibble to raise about your FY '23 result. And I noticed that you expanded both organically and inorganically. But the end result of that was that your EBIT margin declined from about 30% to 29%, which in turn, that's your expenses increased faster than your revenue. So I'm just wondering if you could give some explanation as to why this diminution in margin occurred?

Skander.

So the business that we have acquired actually had a slightly lower EBITDA margin than OFX. And the reason for that was that they hadn't invested as much in their technology. So they had people doing a lot of tasks, which created a higher cost than technology doing tasks from much lower cost.

So what happens to your organic expansion [indiscernible].

More or less, yes, there was the margin on the organic business, we typically target positive operating leverage, and that's pretty much what we delivered.

My name is Wayne Harter. I'd like to ask a question of the auditor. In the audit report, you've referred to a number of key audit matters. Now I noticed when I go through the profit and loss statement, one of the items in there is bad and doubtful debts, which appeared to have increased twentyfold on last year. As part of carrying out your audit to do examine the bad and doubtful debts, and did you find out the reason for all that?

I think Sean will call you up to the microphone. And Grant, you might want to just follow on, Sean, with that. Thank you.

Yes. So firstly, thank you very much for the question. So first, just commenting on key audit matters. So those matters we specifically call out in the audit report that are those areas of largest audit focus and/or largest judgment, they're not the only things we look at. So that's just to help you understand the context of that. Absolutely, we did look at the bad and doubtful debts expense. In fact, we look at all balances in the accounts to varying degrees. And so the procedures that we did on bad and doubtful debts included understanding the provisions, both general and specific that were taken and the losses that were incurred by the business. Most of the losses that drove bad and doubtful debts related to unrecovered costs on transactions that have failed and so we work with finance to understand the reason for that and the provisions that are carried. So I mean in terms of the actual specific reason behind why the number is higher, that's not something that, I guess, I would go into. I guess management can give you more information on that, if you want. But I confirm we did specific procedures over the level of bad and doubtful debts and the disclosure of those in the accounts. Yes. And we are comfortable with the number as it was presented.

Could I now ask a question of the Board about the bad and doubtful debts. I raised this at an AGM about 3 or 4 years ago. And the explanation that I got was that in the U.S. people were impersonating customers and say you were paying the money out to them and then paying out to the real customers. I have to say I didn't find that explanation terribly convincing. And until this day, I can't understand why a company in this line of business has significant bad and doubtful debts. It's not like buying where you're selling stuff to builders on credit and then they go [ broke ]. My understanding of the business is that you're collecting money from one party and then paying it into the bank of another party. So if proper processes are followed, to my way of thinking, there should be absolutely minimal bad and doubtful debts. And I see that in this financial year, the bad and doubtful debts were about $2.5 million. And if they didn't exist, the profit would be 8% higher. So can you please elaborate on why there's such a significant level of bad and doubtful debts and more what you're doing about it?

Thank you. Thanks for your question. So I'm going to hand it over to Selena. My practice would be we would always expect to have a small amount of provision for bad and doubtful debts and in fact, probably some bad and doubtful debts due to the nature of the Ford business. But Selena, I'll let you talk about our controls.

Yes. So bad and doubtful debts in our business, there's 2 ways that can occur. One way is on our forward book which is kind of you are giving a little bit of credit to corporates generally. So if you -- if the forward goes out of the money, you need to do a margin call. If the margin call can't be completed, you can create a bad and doubtful debt. In the $2.5 million for fiscal year '23, there was only about $200,000 to $300,000 that related to forward credit. And that's what I've seen in the past. We manage our credit exceptionally well. We underwrite the deals as they come through. The remainder of that bad and doubtful debt number, which comes up to the $2.5 million is actually fraud. And it's fraud exactly from the AGM a few years ago as we explained. It's from predominantly North America. And in North America, the banking system is very different to Australia or the U.K. or New Zealand. And here in Australia, we're very lucky. We work from most of our clients here. They book a transaction with us. They send us the money. We know it's here then we send it on. What happens in North America is actually to send money into us is very difficult because of the banking system, so you're actually doing a direct debit pool. Once you've done the direct debit pool from their bank account, you send it on. But if someone has intercepted that original bank account, they say, "No, that's not authorized, and it's a fraud," we have to send it back. Now we've invested a lot in technology to combat that. And we do prevent a lot of frauds every now and then they do come through. You may remember a couple of years ago, that number was more like [ $3.3 million ]. So we're always being vigilant, but it can happen. And predominantly, where we see it happen is in North America.

Perhaps if I could just add a little, what happens that we have to pull the money out of the client's account. They then have a certain period of time to which they can say, no, I didn't mean to do that, and you have to refund it. The identity theft that's taking place which is getting more and more sophisticated. So if you think about it in terms of how cyber has gotten much more sophisticated over the years, we're continually working on the identity of the person who takes the transaction with us. We can take you through how initially, it was through voice recognition, we were trying to do it. Now it's through visual recognition. But that's what causes the problem. If the U.S. bank account system work the same as here, where you transfer -- you're correct in saying people transfer their money into our bank account and then we transfer it out. Unfortunately, in the U.S., we have to pull it on what we think is a legitimate transaction out of someone's account, but somebody has just impersonated the account holder, then the account holder finds out that you might think that they would find it out very quickly, but a number of them don't unfortunately. And then we have to refund the money. That's why so high. Sorry. And then progressively, as like cyber, every time they find a way of doing it, we have to find another way of authenticating a person, which is difficult and expensive.

Can I ask some more questions to the auditor, please? Am I correct in thinking that the tax rate, the company tax rate that applies to this company because of its size is 30%.

So there are a number of issues that impact the effective tax rate of OFX, one of which is the offshore banking unit, which has a concessional tax rate. Another thing is the eligibility for research and development credits, which has a concessional tax rate. And the other thing is it offshore income, which has different tax rates to Australia. So actually, no, there's not 1 blanket 30% tax rate applied to all the income of OFX. There's a number of things that could change what that is. And depending on where income is and how it's recognized depends on what that looks like in any given year.

Okay. Thanks. Now the company, according to the accounts had a tax liability in this last financial year of just over $6 million. Presumably, if the company pays company tax that generates franking credits, doesn't it?

So that technically, that's definitely a question for management, not for me, but the answer is yes. And we do look at the franking account credit transaction, our balance and the roll-forward of that balance, the disclosure of that balance in the accounts as part of our audit.

And can you hazard a guess as to how much the franking credits would be on a tax bill of $6 million?

That's not really a question for me because it doesn't relate to the conduct of the audit. I imagine that management would be happy to take you through that off-line or even as part of this discussion. Yes, sorry.

So, but it would be more than 0, presumably the franking credits generated.

Yes.

And would it be about $2 million or...

Honestly, it's not actually really a question that I called to ask in terms of the conduct of the audit. But I mean if you would like to, yes. I'm not trying to avoid it if I could give you a theoretical answer, but, there's certain things that I'm allowed to talk about and other things that are actually the provision of management.

Selena. Yes, please.

So franking credits are only generated when you are paying tax in Australia, which is great, and we have a very good corporate tax citizen. But the other thing that we're going at the moment right now is also investing in R&D, okay? So our R&D investment creates some R&D tax offsets. You will see in the franking balance, it's minimal movement. So we are paying tax, but now we're getting these R&D offsets, which means they are franking credits are not growing at this point because of we do all that tech work in Australia.

Right. So what I have trouble getting my head around is why the franking credit balance is so low? I mean 2 years ago, it was about $2.7 million or $2.9 million. In 2022, it was $1.26 million. And this year, it's $1.29 million. It's almost as though the company hasn't been getting any franking credits. So I would have thought that you'd only -- the franking credit balance would only decline if the company is paying out dividends, and it hasn't paid our dividends since 2020.

No. The reason is we're not generating many franking credits right now because of those R&D tax benefits that we're receiving.

Okay. The annual report said the franking credit balance as at 30 March. Is it any higher now?

It would be around the same number. It will be a little bit higher, but not a lot because, again, we are continuing to invest in our technology, which is creating the R&D tax benefits, which offset those franking credits.

Thanks, Selena. And feel free to have a chat with Selena after the meeting if you'd like to continue the discussion. Thank you.

Okay. I can assure you [indiscernible]. While I'm on my -- can I just go on to one thing that why I have this abiding interest in franking credits, and that is the issue of buyback versus dividends. Now Australian shareholders love dividends. And the thing about buybacks is no one can really ever say whether it's effective because lots of things influence the share price. It's a daily popularity poll. So today, it went down by 4%. Now did a buyback have anything to do with that? I don't think so. So from a shareholder point of view, dividends would be very good. And you can actually see the effect on share price the day the company goes ex dividend. If the company pays a dividend of $0.05, almost certainly, the share price will go down by $0.05. And that's the onetime you can really see the effect of dividends on shares. The other time is if you watch [ Alan Kohler ] on the 7 p.m. news, because about twice a year, 2 of the banks go dividend, x dividend on the same day, and that knocks the whole share market round. So dividends do have an effect. And there's one now compelling reason why shareholders value dividends. Now some of you guys on the board may not be old enough, but some of us who conduct self-managed super funds know about dividends and franking credits. And for the last 3 years, the amount that people have been required to withdraw as a pension from self-managed super funds has been half what the rate is by law. But suddenly, since the 1st of July, it's no longer halved. So for people operating self-managed super funds taking a pension, there is a real hunt on for dividends. And so from a shareholders' point of view, we'd like to get him. So here's the question. That was a same here question. Come October when you're announcing the annual results, or the half yearly results, will you reinstate dividend payments to take effect from December? That's the question.

Thank you for your question. Everyone loves fully franked dividends. I won't comment on what our specific plans are, but I can assure you that the Board constantly looks at the best use of its funds and its capital. The Board took the decision when it acquired Firma, the best use at that time. was to continue to invest in the business, which we are doing, investing, including in R&D, for example, but also to keep up to a healthy repayment on our debt profile. And as you know, we announced the buyback for the reasons that we explained. But thanks to your question. Are there any more questions from the floor? Thank you.

I'm [indiscernible]. This is a follow-on from that last question. I was going to ask about whether it was a policy not to pay dividends in the future, and I understand it probably may not be. But you said there's been a buyback, and I think you've mentioned a figure something like 2,255,000. Can you tell me what the average price was that you paid for that buy back?

[ 1.9293 ]. If I got that right, [ 1.9293 ]. Questions from the floor. No? Skander.

We've got some questions -- sorry. We've got some questions that have been submitted online. So I'll tackle some of those. The first one comes from Faircase Proprietary Limited. And the question is, why issue so many performance rights, almost the same number as bought back? Just to clarify, we offered performance securities. So they are contingent on the Paytron team actually delivering revenue as well as providing product capability in the future. We look at per that prior conversation best ways to use cash. We think about ways in which we can generate value. And we felt very strongly that issuing performance securities very much aligns shareholder interest with the interest of the Paytron team so that overall, we come up with a reasonable price paid for the business that we're acquiring in OFX stock if indeed the targets permit. The next question, which I'm going to ask Doug to tackle. Do you want to save that to the end? Okay. We'll do the remuneration. The other questions relate to different sections, so we can save them for later.

Thanks, Skander. So we have no other questions online.

There are no investors wishing to ask further questions for this resolution.

Thanks, Maddie. Well, this moves us on to item #2, the reelection of Mr. Grant Murdoch. Grant was elected to the Board of the company on 19 September 2013, and he was last reelected as a director of the company of the company's 2020 Annual General Meeting. He will retire under Article 47A of the company's constitution and being eligible under Article 47C of the company's constitution, he offers himself for reelection as a director of the company. Details of Grant's experience are set out in this meeting, so I won't repeat those details. The Board, with Grant abstaining strongly supports Grant's reelection as a Non-Executive Director. If reelected, Grant has indicated to the Board that he will retire prior to the expiration of his 3-year term as determined by Paragraph 47A of the company's constitution and Listing Rule 14.4. The Board has commenced a process to review the Board composition and believes in ensuring an appropriate and smooth transition. Until such process is concluded, the Board believes that it is in the best interest of the company and shareholders for Grant to be reelected. I'll hand over to Grant now to briefly address you.

Thanks, Tricia. First, could I thank shareholders for their continued support over my tenure as a Non-Executive Director of OFX. I've always considered it a privilege to serve as a director of OFX, and I can assure you that I've never taken either the responsibility lightly or the position for granted. As you might note, with my age, I do understand self-managed super funds and the benefit of franking credits. As Tricia indicated, I'm seeking reelection but not for the full years -- for the full 3 years. This is to ensure an orderly transition of my responsibility as Chair of the Audit, Risk and Compliance Committee. Because OFX operates globally and is regulated in many jurisdictions to different degrees, this is a challenging assignment. However, what I'd like to take the opportunity to do is to command the OFX executive and staff because I can assure you that they take those responsibilities very seriously, both from a compliance point of view and from an ethical point of view. With that, I'd like to thank you again for your support, and I look forward to contributing through the rest of my tenure. Thank you.

Thanks, Grant. So I'd like to ask if there are any questions from the floor, and Skander you and Maddie can coordinate that, please?

Any questions from the floor?

So no questions from the floor that we can see.

There are no investors wishing to ask verbal questions online at this point on this item?

No questions.

And no questions online, okay? Before I put the resolution to the meeting, I'll advise you of the proxy votes. The proxy votes received are as follows: for, 97.72%; against, 1.73%; and abstain, 60,416. Open proxies in favor of the chair of the meeting at the time and meeting will be voted in favor of the resolution. Congratulations, Grant. This brings us on to item #3, which is the nonbinding advisory vote on the FY '23 remuneration report. Under the Corporations Act, listed companies are required to include as part of the directors' report a remuneration report. The rem report is included in OFX' annual report. The Corporations Act requires companies to put to shareholders a nonbinding vote to enable shareholders to voice their opinion on matters included in the rem report. Under the Corporations Act, the vote on this resolution is advisory only and does not bind the Board or the company. However, the Board will take the outcome of the vote into account when considering future remuneration policy for directors and key management personnel. Remuneration outcomes for our key management personnel, the CEO, the CFO and the Chief Operating Officer, are set out in the remuneration report and notice of meeting. So I don't propose to repeat those details. The remuneration report for fiscal year '23 reports on incentives for fiscal year '23, including the STI outcomes, that's the short-term incentive and the metrics for fiscal year '23 long-term incentives that were approved by shareholders at the Annual General Meeting last year. Are there any comments or questions concerning the remuneration report? And we'll first take questions from the floor. No, there don't appear to be any questions from the floor. Are there any questions on Zoom, Maddie?

There are no questions at this point.

Okay. And we had a question online, didn't we, Skander? So I'll hand that over to you. You'll read question? Thanks, Doug.

I'm the Chairman of the Remuneration Committee. A question came in online of how do you justify an increase in director remuneration in excess of last year? And the answer to that question is, during the course of last year, you'll recall we had an outgoing Chair, Steve Sargent, and an incoming Director who succeeded Steve, Tricia. During that period, there was a time where we had 1 additional director, so the additional cost that's reported in the annual report and the remuneration report simply reflects that overlapping period. The fees paid to individual directors did not change during the course of the year.

Okay. And do we have any other online question, Skander? No, we don't have anymore. So before I put the resolution to the meeting, I'll advise you of the proxy votes. The proxy votes received are as follows: for, 99.26%; against, 0.49%; and abstain, 2,415. Thank you. Thank you, Doug. Item #4 is the ratification of the granting of performance rights. The company announced the acquisition of Paytron Holdings Pty Limited on 23 May 2023. As part of the consideration that the company paid for its acquisition of Paytron, the company has granted performance rights being the acquisition issuance, which will entitle the recipients being the owners of Paytron to up to 11,250,000 ordinary shares, subject to Paytron meeting relevant performance milestones. Shareholders are being asked to ratify the granting of performance rights so that it falls within exception 13b to ASX Listing Rule 7.2, and the acquisition issuance does not count to the 15% limit in this case, on the issue of securities in a given year. Are there any comments or questions concerning this item? Any questions from the floor? No. And Maddie, do we have any questions on Zoom?

We do not.

And no questions online. Thank you, Skander. Before I put the resolution to the meeting, I'll advise you of the proxy votes. The proxy votes received are as follows: for, 98.2%; against, 1.26%; abstain, 20,415. Open proxies in favor of the chair of the meeting at the time of the meeting will be voted in favor of the resolution. Thank you, and welcome again to Paytron. Item #5 is the issue of performance rights to Mr. John Alexander Skander Malcolm. Under the OFX Group Limited Global Equity Plan in respect to the FY '23 short-term incentives. Item 5 concerns the proposed issue of performance rights to our CEO and Managing Director, Skander Malcolm, to reflect Mr. Malcolm's achievement of STI for fiscal year '23. The issue of securities under OFX' STI plan will be completed in accordance with the company's global equity plan. The 2023 company performance measures were set out in the slide for item 3, and are set out in detail in the remuneration report and the notice of meeting. Skander was also assessed against individual performance measures, the details of which are set out in the remuneration report and the notice of meeting. And Skander's STI payment is settled 50% in cash and the remaining 50% is subject to shareholder approval, deferred equity to be delivered in performance rights, 50% of which vest 1 year after issue and 50% of which vest 2 years after issue. For FY '23, Skander short-term incentive target was AUD 828,990, being 115% of his total fixed remuneration and his STI achievement, as assessed by the Board was 110%. The short-term incentive outcome was calculated based on a 102.7% funding from company performance measures and an individual performance of exceeds expectations, measured against his individual KPIs. Further details regarding the calculation of Skander's performance rights are set out in the current slide and in the notice of meeting, so I will not repeat those details. Are there any comments or questions concerning the issue of these performance rights to Skander in respect to his fiscal year '23 short-term incentive under the global equity plan? No questions from the floor? Are there any questions on Zoom, Maddie?

No questions on Zoom.

There being very quiet on Zoom. Skander, are there any online questions? Okay? All right. Thank you. So before I put the resolution to the meeting, I will advise you of the proxy votes. The proxy votes received are as follows: for, 99.4%; against, 0.35%; and abstain, 2,915. And again, open proxies in favor of the chair of the meeting at the time of the meeting will be voted in favor of the resolution. We now move on to the final item, which is item 6. Issue performance rights to Mr. John Alexander Skander Malcolm, under the OFX Group Ltd Global Equity Plan in respect to fiscal year '24 long-term incentives. Item 6 concerns the proposed long-term incentive grant for fiscal year '24 to the CEO and Managing Director, Skander Malcolm. This fiscal year '23 long-term incentive grant comprises an issue of performance rights to the Skander pursuant to the global equity plan. The long-term incentive opportunity for Skander was increased to 115% of its total fixed remuneration from the fiscal year '23 grant onwards. Details regarding Skander's proposed fiscal year '24 long-term incentive grant are set out in the current slide and in detail in the notice of meeting, so I won't repeat those. There are 2 performance metrics for long-term incentives. The first is the compound annual growth rate of earnings per share and the second is the compound annual growth rate of the absolute total shareholder return. This is set out in the explanatory memorandum. Skander's total remuneration package comprised fixed remuneration, short-term incentives and long-term incentives, as shown in this slide. The details are also set out in the notice of meeting. Are there any comments or questions concerning the issue of these performance rights to Skander under the global equity plan? Questions from the floor? Have no questions from the floor. Questions from Zoom?

There are no questions on the Zoom.

Thank you, Maddie. And is there any questions online?

No.

Thank you. Before I put the resolution to the meeting, I will advise you of the proxy votes. The proxy votes received are as follows: for, 99.35%; against 0.4% and abstain 2,915. Open proxies in favor of the chair of the meeting at the same time of the meeting will be voted in favor of the resolution. Thank you. That concludes the formal business of the meeting. And I now invite shareholders who may have some questions or comments that have not already been addressed. Again, we'll start with questions from the floor, and Skander, I'll hand this over to you and Maddie.

Before the pandemic, I know you recall that you were doing some research as to the effect of volatility in foreign exchange markets on the business. Since the pandemic, the structure of your business has changed quite a bit in that you're now more into the payment system and your clients are more likely to be corporates and small and medium enterprises. And I'm just wondering if this has made any change in the effective foreign exchange market volatility on the business?

Thank you. And yes, it has. So as you highlighted previously, we'd pointed out, particularly in our consumer business because we typically attract clients who are moving money for what we call high-value use cases, so property purchases, share purchases, debt repayments, those types of things. When there was volatility, we tended to see an increase kind of bring forward of transactions. What we saw which was quite unusual was with a prolonged period of high interest rates and high inflation and volatility. We didn't quite see the same level of activity in consumer business through the kind of fourth quarter that we would normally associate with volatility. As we reported in the first quarter, we started to see that come back. More broadly, to your point, because our business is now more skewed towards B2B, those types of clients are less impacted or changed their minds, for want of a better term, because of volatility. What we do start to see though is, they are more impacted by their, if you like, conviction around interest rate rises. So we've started to see that as those types of clients see the rate and pace of interest rate rises slow, they enter into more forward contracts because they feel more confident on economic outlook.

The word takeover is one that I'm hesitant to raise in the walls of this company especially for those directors who have been around for a while. But here's the question. In the last 12 months, have there been any indicative nonbinding conditional blah, blah, blah approaches made to the company about any takeover and what has happened with those approaches?

Thanks for your question. You would expect that all companies have conversations that are not necessarily offers, and I think I would leave it at that. Thank you. Any other questions from the floor? Anything on Zoom.

[Operator Instructions] There's no one at this point, so maybe Skander if we go to any others question?

One more that was submitted online. And the question from Mr. John [ Sedlak ]. At the time of the acquisition of Firma, OFX suspended dividends until the borrowings associated with the Firma acquisition were fully paid off and yet a buyback was initiated of up to 10% of existing shares, which could amount to $38 million of funds going to shareholders, whose preference is to exit their shareholding rather than support the company. There seems to be an inconsistency and approach here. And could you please comment on that? And our answer to that is exactly as Tricia highlighted earlier on, we look at capital management holistically. Our general approach is we generate a lot of cash. We want to grow the company. We want to create a more valuable company, and so we think of things like debt repayment, particularly when it came to the Firma transaction, you'll notice from our results that we have paid down a lot of debt. And we felt at the time that good use of cash would be a share buyback whilst we continue to invest. And in fact, it's important to note in that answer, it's the combination of the 3 happening together to build a more valuable company that really persuaded the Board to use the cash in that manner.

Thank you, Skander. So I believe there are no more questions, so I'm about to close the meeting. Before doing so, I would remind shareholders and proxy holders who are attending online to please complete your voting cards immediately if you haven't done so already. And once completed, press to submit button at the bottom of the screen. There's one more question. Thank you. On Zoom?

Yes. It's just actually been written down. I will read it out. It's from Mr. John [indiscernible]. He said there is a crossover point where the buyback is not value accretive. Has management determined where that crossover point is?

Thanks. Skander.

We meet -- we had a subcommittee that assesses on a regular basis what represents good value. And yes, we have a view on where that is, and that obviously takes into account the conditions at the time.

There's one further question, which has been submitted from Mr. Carlos Gil from Microequities. He asks, are you still actively searching for further acquisitions? And if so, how advanced are you in that activity?

Thank you. Skander.

All right. Thank you, Carlos. And yes, we are active. We've been certainly looking at different opportunities around the world. And no, we're not highly advanced in any particular transaction, but we're certainly active in looking at good opportunities.

There are no further questions.

Thank you, Maddie. As advised earlier, the results of the polls will be released to the ASX as soon as these are available. Is there anyone who has not completed and submitted their voting cards that wishes to do so? So I think we need to submit these cards now or on the way out. [Voting]

Perhaps there's some cards here still, which I think technically have to be submitted before we close the meeting today. [indiscernible] Thanks you so much. Sorry. Always important to vote. All right. I think that we have all of our ballot cast. And so the polls are now closed. Thank you very much. Thank you all for your attendance today and for your support and your merit-based long-term ownership of OFX. We very much appreciate it, and we look forward to your continued involvement with our company in the year ahead. The meeting is now closed.