Peoplein Limited (PPE) Earnings Call Transcript & Summary

All right. Good morning, ladies and gentlemen. I'm Glen Richards, Chairman of People Infrastructure. Now I've been informed that we do have a quorum present. I therefore have the pleasure of declaring the Annual General Meeting of shareholders of People Infrastructure Ltd open. I welcome shareholders here today via our webcast as well as physically in the room. Before I proceed with the business of the meeting, I would like to introduce my fellow directors. We have Declan Sherman, executive director; Elizabeth Savage, nonexecutive director; Thomas Reardon, executive director. And also present today is David Cuda, our Chief Executive Officer; Megan Just, our Chief Financial Officer; as well as Kim Bradley via webcast as company Secretary; and also welcome Tim Kendall from the company's auditors, BDO. Hi, Tim. Tim will be available to answer questions that you may have about the conduct of the audit. And shareholders will be given the opportunity to ask questions in relation to the company's business and the management at the appropriate time. And we will be allowing questions via our Zoom link as well as face to face. So if you are on Zoom, make sure you let us know you have a question coming in, and we'll relay that in the room. Before I [ invite ] Declan and David to provide an update on the company's activities, I'd just like to make a few comments. Certainly, 2020 financial year was an interesting one in terms of challenges, specifically related to COVID-19. But we are pleased to report that we had successively -- successfully weathered some pretty hard challenges in 2020, and our business continues to grow strongly in the 2021 financial year. For the third year in a row as a public company, we continue to deliver, but I think even better than that, out deliver on expectations of our stakeholders, be they employees, clients or shareholders. In particular, People Infrastructure continues to generate positive returns to shareholders with the business growing considerably during FY '20. Our result in financial year '20 was well above FY '19, and the business continues to track ahead of our expectations year-to-date in FY '21. You'll hear more from Declan and Dave on that matter. During the year, every business in our group was impacted in some way by the COVID-19 virus. This was the biggest disruption of workforces that we've seen in the sector. The ramifications are felt across all industries that we service, which includes nursing, community services, child care, information technology, professional services, transport, logistics, food processing, mining, hospitality and the list goes on. That being said, as a company, we're able to manage these challenges and adapt our business practices to still meet the needs of our clients and candidates during this time. Alongside pursuing organic growth in existing and new markets, in FY '20, we completed the acquisition of First Choice Care, which is the leading nursing agency in Queensland, cementing our position as one of the largest employees of agency nurses in Australia. With nearly half our earnings now being generated by clients in the health care and community services sector, we continue to be excited by the future prospects of this part of our business. Our operations generated substantial free cash flow in FY '20, and our balance sheet is conservatively geared. Therefore, we are well positioned to invest in further opportunities should they arise. But remember, we raised capital during the year to both maintain a conservative balance sheet during a period of heightened economic volatility as well as, importantly, to pursue further acquisition opportunities as they come through. This was extremely well supported, and our shareholding register includes some of Australia's leading small-cap investors. The Board, although small, continues to have, in my view, a good balance of experience and skills required for strong governance and to execute on People Infrastructure's long-term strategy. I'd like to make special mention and thank our executive team who, in a year that provided significant macroeconomic and business challenges, continued to patiently focus on providing best practice services to our clients. The Board remains confident in their ability to continue to substantially grow the business long into the future. Finally, I'd like to thank our shareholders for your ongoing support. It is very much appreciated. You have been supportive of the direction of the company, and we never lose sight that you, our shareholders, are the owners of People Infrastructure. As we look ahead in 2021 and beyond, especially with the backdrop of an especially turbulent year, I think it is worthwhile reiterating, our long-term vision is to be one of Australia's leading workforce management companies, delivering innovative solutions and services for our clients across a number of industries. We maintain a strong and sustained focus on protecting shareholders' interest, improving intrinsic shareholder value and always maintaining ethical behavior. I'd like to now introduce our outgoing Managing Director, Declan Sherman; and our CEO, David Cuda, who will provide an update on the business. Before Declan commences his address, on behalf of the Board and my fellow shareholders, I'd like to thank Declan for his dedication and entrepreneurial tenacity as the founding Managing Director of People Infrastructure and congratulate him and thank him on leading a team that has delivered above and beyond expectations for our stakeholders during some tough foundation years. Declan will continue as a director, and I look forward to his continued involvement in the company. Welcome, Declan.

Thanks, Glen. I'd like to go over the economic highlights for the FY '20 financial year before making some more general observations about our business performance during the year. As Glen alluded to, People Infrastructure confronted a number of challenges in FY '20 due to the impact of COVID-19. Whilst the business was immediately impacted at the outset of the first wave of COVID-19, it has shown tremendous resilience to bounce back strongly over the last 6 months. As a result, we were able to generate both an increase in earnings and significant increase in cash flow throughout the financial year. Prior to COVID-19, and as demonstrated in the first half results, People Infrastructure was on track for a strong FY '20 as a result of the organic growth in the business and the benefit -- the benefits of acquisitions completed during the past 18 months. The first wave of COVID-19 created immediate challenges; in particular, the cancellation of elective surgeries and government/private hospital partnerships, emptying hospitals as well as other workforce dislocations due to virus-containment measures. The impact of these measures on the business is relatively short lived, and the business was still able to generate a strong result for FY '20. The financial highlights for the year included normalized EBITDA of $26.4 million, being 49% higher than normalized FY '19 EBITDA and 8% NPATA guidance; normalized NPATA of $18.4 million, being $0.53 higher than normalized FY '19 NPATA; normalized NPATA per share of $0.205, being 23% higher than FY '19; strong operating cash flow of $27 million and a positive cash balance at the end of year of $9.9 million. Finally, our normalized EBITDA margin of 7.1% was higher than FY '19, where it was 6.4%. So over the last 5 years, we've delivered compound growth of over 20% across revenue, EBITDA, NPATA and earnings per share. This is somewhat of an achievement and something we're immensely proud of. That's what is just as exciting, is the grow ahead of this, but I'll leave that to Dave to speak to. Other highlights throughout the year included the successful integration of our most recent acquisitions into the broader PPE business, these being First Choice Care and Carestaff in the health sector and Halcyon Knights in the IT sector. Also, the successful launch of the homecare business was another highlight, and it continues to perform well. For all our success in 2020, for me, I will remember the -- not for the year-end results, so the operational impact that COVID-19 had on our business, but more by the way we're able to respond to such an unprecedented set of circumstances. For me, the most noteworthy aspects are as follows: first, our employees. They made significant sacrifices during this period, and I thank them for their fortitude and commitment during a difficult time. Second, the focus on workplace health and safety for both our corporate and field employees. This was paramount, especially where a number of our employees were in situations with high risk of direct contact with COVID-19. Third, serving our customers, in particular, to manage their own workforce dislocation issues. This was a major priority to ensure business continuity and employee safety in their businesses. And then finally, to manage the health of our own business in unprecedented economic uncertainty, where we're still able to grow the business during this time. The challenging year required leadership on a number of levels across our business, and one thing our business demonstrated was significant leadership across all levels. Special thanks go out to our Board, Tom, Liz, Glen, for all your support; our CEO, Dave; and our CFO, Megan; and our divisional leaders, Juliet and Nathan in Nursing; Frank in Community Services; Marcus and Lincoln in IT; and Tom once again in [ OSS ]. We have such a strong leadership team, and the transition today of the CEO has been incredibly positive for the business and sets the foundation for growth for the business over the next decade. On that note, I'd like to hand over to Dave to talk further about the operations in the year ahead.

Thanks, Declan. To make an extraordinary impact while harnessing the talented people, one of the inspiring [ principles ] we have evolved to kind of pull us forward to create an impactful business, which is [ due ] to prosper and succeed. We are excited about the journey ahead as we seek to make an extraordinary impact to all our stakeholders, firstly, being our team, our customers, our shareholders and our broader communities. Combined with our 4 core values of be human, be memorable, be bold and be extraordinary, we have a strong culture and a defined DNA that [ underlines ] everything we do. We already have strong foundations to grow our business, underpinned by our talented team, our passion and desire to make extraordinary impact and our core competency to improve. This is also supported by our strong balance sheet and a disciplined capital investment approach. We have set ourselves an aspirational vision: to be the most successful Australian-founded workforce solutions growing [ better ]. Our focus is on building an enduring company, a company which is able to scale through implemented strategies, which generate meaningful medium to long-term growth and value for all our stakeholders. Our strategic plan is underpinned by 3 pillars: together, perform, transform. Together is about growing together as one business, where we can leverage the combined synergies and capabilities across our entire business to maximize opportunities for our firm and our people. Perform is about our relentless focus to cultivate our brands to be the undisputed leaders in the [ emerging ] markets. Transform is about laying down the tracks for our future prosperity through developing high-performing people and teams, internally generating new business units and undertaking complementary acquisitions that we can buy to build. We are currently implementing numerous initiatives to evolve new internally generated business units, plus we're assessing and targeting a range of complementary acquisition opportunities. As we move forward, we will simultaneously exploit the growth opportunities in our current core starting business whilst exploring and creating new solutions and services. Within our staffing operations, we are focused on growth within current and new markets through a combination of sales and business development activities, internally generating new business units and undertaking complementary inflatable revenues. Furthermore, we are very excited about our strategic road map to leverage our core competencies and infrastructure we have evolved over 20 years in the sourcing, scaling, deployment and management of workforces across Australia and utilize these competencies to move into adjacent upstream new solutions and service lines, which we term operation services and business services. As an example, we have recently moved into the human services homecare market, and we are also evolving a business in the facilities maintenance market. Both of these service lines are built on the back of our workforce management competencies and create new markets to penetrate, where we can add enduring value and make an extraordinary impact. Lastly, our success and exciting journey ahead will be powered by our people. And we have an unrelenting focus on retaining and hiring the very best talent whilst cultivating a wonderful culture where our people can flourish and prosper. We thank our team, partners and shareholders for all their support to date, and we are driven to ensure we make a lasting extraordinary impact to you all as we move forward. We look forward to updating you on our performance and operations in February upon the release of our H1 results.

Thanks, Dave. Thanks, Declan. So we now come to the more formal consideration of the matters before the meeting today. So the Notice of Meeting dated 27th of October 2020 was circulated to members. I will take the Notice of Meeting as read. Before moving on to the various resolutions to be considered today, I will now briefly outline the meeting and voting procedures for today's meeting. When you registered your attendance this morning, you would have been issued with an attendance card. Only those with a blue card can speak and vote at the meeting, and those with a green card can speak at the meeting. I'll put each resolution to the meeting for questions or comments and then put the resolution to a poll. And I appoint BeeYen Nah from our registry, Link Market Services, as returning officer. So please complete your voting card when I ask you. Please note, you will have the opportunity to ask questions or make comments in regard to resolutions as we address each one. As Chairman of the meeting, I intend to vote all available proxies in favor of all resolutions at the meeting. I now declare the poll open. The poll cards will be collected at the conclusion of all the resolutions. So now moving to business of the meeting. So the 2020 Annual Financial Report containing the financial report the Directors' Report and the Independent Auditor's report, so a copy of the Annual Financial Report was made available on the company's website, the ASX platform and was sent to those shareholders who requested it. The financial statements have been approved by the directors and audited by BDO. This item is the receipt and consideration of the reports of People Infrastructure. This is not a resolution, so I'll take the report as read. And at this time, I'll ask, is there any general questions or comments about the reports or any questions or comments for the auditor? Any questions? No. Note the auditor did not receive any written questions prior at the meeting. None via Zoom. So we'll move on to -- the first resolution of the meeting is the reelection of Declan Sherman as a director of the company. All director's details are set out in the Notice of Meeting and in the annual financial report. I will not repeat those take-outs, but Declan is present to answer any questions. I am required by law to disclose the proxies, and here they are on the screen. So basically, for, Declan being reelected, is 30 -- just under 37 million in favor, against was 5.5 million, abstain was 700,000 and the proxy's discretion was 174,000. Are there any questions? If there's no further discussion, I now put to the meeting resolution 1. [Operator Instructions] [Voting]

I'll now move on to the next item of business, move to the resolution regarding the People Infrastructure Remuneration Report. The Remuneration Report was contained within the 2020 Directors' Report and is available on the People Infrastructure website. Further details about the resolution are also contained in the Explanatory Memorandum that accompanied the Notice of Meeting. This vote is advisory only and is not binding on the company. Proxy votes are set out on the screen in front of us. So just to really confirm, in favor, for, is 30 million votes against the 760,000; abstained with 700,000; and proxy's discretion, 174,000. So I'll now move to the next item of business. Are there any questions before I do? I'll now put to the meeting resolution 2. [Operator Instructions] [Voting]

So the next item of business. Resolution 3 at the meeting is the renewal of proportional takeover provisions in the company's constitution. Further details about the resolution are contained in the Explanatory Memorandum that accompanied the Notice of Meeting. Quite a detailed discussion there for those who have read it. I'm required by law to disclose the proxies, and here they are. So we have approximately 42 million in favor, 21,000 against, 707,000 abstaining and 198,000 proxy's discretion. Are there any questions? No. No questions. I'll now put to the meeting resolution 3. [Operator Instructions] [Voting]

And the next item of business, so pursuant to the People Infrastructure Notice of Annual General Meeting dated 27th of October 2020, the company advised that the closing share price on the 27th of November 2020 was $3.62. [ SFAS ] for company's market cap today is over $300 million, and the company no longer meets the eligibility criteria to seek shareholder approval for an additional placement capacity under ASX listing Rule 7.1A. Accordingly, PPE announced this morning that resolution 4, approval to additional share issue capacity under ASX listing Rule 7.1A, has been withdrawn and will not be put to our shareholders. The withdrawal of this item of business does not affect the validity of the proxy form attached to the NOM or any other proxy votes already made. Are there any questions? Thank you. So I'll ask you then not to mark the last item and to please hand your blue voting cards to the Link representatives. [indiscernible] Thank you. You now have a chance to submit it -- okay. Good to go. So I'll now declare the poll closed. After the polls have been counted, the results of the meeting will be released on the ASX. Thank you, ladies and gentlemen. Before I conclude the AGM, I just want to -- is there any general questions for the company or any other company representatives? So that concludes the business set out in the Notice of Meeting. So may I take this opportunity to thank you all. Be it physical or online, thank you for attending and participating, and please join me and my fellow directors for light refreshment outside the room. I now declare the meeting closed. Thank you.