Peoplein Limited (PPE) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the People Infrastructure Limited 2021 Annual General Meeting. I would now like to hand the conference over to Mr. Glen Richards, Chairman. Please go ahead.

Thank you. Good morning. I'm Glen Richards, Chairman of the Board of Directors at People Infrastructure. Ladies and gentlemen, it is now 11:00, a quorum is present, and I therefore have the pleasure in declaring the Annual General Meeting open. On behalf of the Board, I'd like to welcome those of you participating online through our first virtual meeting platform provided by our share register, Link Market Services Limited. Due to the ongoing COVID-19 pandemic, we thought it prudent to take steps to discourage a physical public gathering, and we encourage people to attend online. If we experience any technical issues today, a short recess or an adjournment may be required depending on the number of shareholders. If this occurs, I shall abide you accordingly. Before I proceed with the business of the meeting, I'd like to introduce my fellow directors. We have Elizabeth Savage, non-Executive Director; Declan Sherman, Executive Director; Thomas Reardon, Executive Director. Also present today is Ross Thompson, our new Chief Executive Officer; Megan just, our Chief Financial Officer; as well as Jane Prior, our company Secretary. We also have in attendance Louisa Di Bella of Talbot Sayer, our legal advisers; and Tim Kendall from the company's auditor, BDO. We also have representatives of Link, our share register online. Shareholders will be given the opportunity to comment on and ask questions. I'd like you all to hold your comments and questions until the item of business has been introduced, and shareholders have been invited to then do so. This year, shareholders will be able to submit questions online during the meeting, and we've introduced a new functionality to allow shareholders to dial in and ask questions verbally via teleconference facility. To utilize the teleconference facility, shareholders must use their unique PIN provided to them by Link Market Services. If you don't have a phone PIN and would like to ask a question via the phone, please contact Link on 1-800-990-363. Find and navigate your PIN. I'll repeat that. If you haven't got a PIN and you need a PIN, dial Link Market Services on 1-800-990-363 to get your PIN. When you dial in, you'll be asked to mute your sound and listen to the meeting by phone. If you wish to ask a question, you need to dial *1 on your keypad that will indicate to the moderator you wish to ask a question. The teleconference moderator requires your name and will introduce you prompting you to ask your question by unmuting your line at the relevant time. In order to ensure that all shareholders have a reasonable opportunity to comment and ask questions I request that shareholders do not ask more than 2 questions at a time. Before Declan provides an update on the company's activities, I'd like to make a few comments. Thank you for your attendance. The 2021 financial year continued to deliver a range of challenges to People Infrastructure, specifically related to the onset of the COVID-19 virus. But we are pleased to report that we're able to successfully weather these challenges through 2021, and our business continues to prosper in the 2022 financial year. For the fourth year in a row as a public company, we continue to deliver on the expectations of our stakeholders be they employees, clients or shareholders. In particular, People Infrastructure continue to generate positive returns for our shareholders with the business growing considerably during FY '21. Declan will confirm the numbers specifically in his address. During the year, every business in our group continued to be impacted in some way by the COVID-19 virus. As we saw in the financial year 2020, this has been the biggest disruption of workforces that we have seen in this century. The ramification was felt across all industries that we service, including 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 are 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 financial year '21, we completed the acquisitions of Techforce and Vision Surveys Queensland, providing a larger footprint and new offering to service national clients. Both of these businesses have performed in line with expectations. Our operations generated substantial free cash flow in financial year '21, and our balance sheet is conservatively geared. Therefore, we are well positioned to invest in further opportunities should they arise. We are actively working on a number of potential acquisitions that will be highly complementary to our existing business. As we look ahead into 2022 and beyond, especially with the backdrop of an especially turbulent past 12 months, I think it is worthwhile reiterating our long-term vision to be one of Australia's leading workforce management companies delivering innovative solutions and services for our clients across a number of industries. The current tightness in the labor market in Australia, which is expected to continue to proceed in the future, provides a fantastic opportunity to take advantage of our strong position in the Australian staffing industry. We maintain a strong and sustained focus on protecting shareholder interest, improving intrinsic shareholder value and always maintaining effort behavior. I'd like to thank our shareholders for your ongoing support. It is very much appreciated that you have been supportive of the direction of the company, and we never lose sight that you are the owners of People Infrastructure. The Board, although small, has had a good balance of experience and the skills required for strong governance and to execute on People Infrastructure's long-term strategy. The company has had serious growth since our listing in 2017, and we plan for this serious growth to continue into the foreseeable future. We have seen a corresponding increase in the Board and committee workload, and we believe it is now time in 2022 to expand the board to assist with the strategic direction of the company and to maintain good governance oversight. I'd like to make a special mention of and thank the executive team during a year that provided significant macroeconomic and business challenges continue 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. I would like now to introduce our outgoing CEO, Declan Sherman; and our current CEO, Ross Thompson, who will provide an update on the business. Ross has joined us -- has joined People Infrastructure from RPS, where as CEO of Australia Asia Pacific. He worked with the leaders of the operational teams to drive business efficiency, growth and success. Ross has successfully acquired and integrated over 20 businesses over his career, as well as creating multiple new service lines for the business at mice has worked. The Board has full confidence that Ross' strategic and operational management capabilities are the right fit to continue to deliver on People Infrastructure's long-term strategy of being a leading provider of workplace solutions. Before I hand over to Declan, I wish to commend him for his successful period of strong leadership in aligning our organization. Not only had the financial results during his tenure been exceptional, but he's leaving the role having delivered multiple acquisition integrations and ongoing positive financial and culture performance across our company. Congratulations, Declan, and on behalf of the shareholders, I thank you for your service as the founding Managing Director of PeopleIN. We look forward to your ongoing participation as an executive director. I now welcome Declan to the microphone to address our shareholders.

Thank you, Glen, I'd like to go over the economic highlights for FY '21 before making some general observations about our business performance during the year. As Glen foreshadowed, People Infrastructure confronted a number of challenges in FY '21 due to the impact of COVID-19. While the business was immediately impacted at the outset of the first wave of COVID-19, it showed tremendous resilience to bounce back strongly over the second half of the financial year. As a result, we were able to generate a significant increase in revenue from starting in the second half of the year. Financial highlights for the year included normalized EBITDA of $38 million being 33% higher than normalized FY '20 EBITDA. Normalized NPATA of $25 million, being 37% higher than normalized FY '20 NPATA. Normalized NPATA per share of $0.27 per share being 33% higher than normalized FY '20 NPATA per share. And finally, normalized operating cash flow of $18.7 million and a positive cash balance net of debt of $25.2 million. It has now been 6 continuous years in which we have delivered compound growth of over 20% across revenue, EBITDA, NPATA and earnings per share. This is a great achievement and testament to our strategy and execution to be able to achieve such a strong result for investors. Perhaps what is just as exciting is the growth ahead of us, but I will leave that to Ross to speak to. For all our success in 2021, for me, once again, I remember the year not for the year-end results but for our significant operational achievements during the year. For me, the most noteworthy aspects are as follows: our employees, not only did we maintain our workforce during a difficult first half, but we grew it in a highly prosperous second half, in particular, in our IT staffing business and our industrial and special services business as they experienced a significant rebound in demand. Outstanding results in workplace health and safety. Once again, our systems, processes, culture and policies were once again, the pillars underlying our industry leading results in our H&S. And finally, corporate services. We enhanced our corporate services offering to provide improved services to all of our divisions, which enabled them to scale their businesses. The challenging year required leadership at 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, Glen, and Liz and our CFO, Megan; and our divisional leaders, Juliet and Nathan in Nursing; in Community, Marcus and Lincoln in IT; and Tom once again in [ OSS ]. We have such a strong leadership team and the transition to Ross as CEO has been incredibly positive for the business and sets the foundations for growth for the business over the next decade. On that note, I would like to hand over to Ross to talk further about operations in the year ahead.

Thank you for the introduction, Declan, and thank you to you and the team for the warm welcome and support I received in my first 6 weeks at People Infrastructure. It's already apparent that PeopleIN's leadership team is strong and entrepreneurial. In fact, amongst all staff I've met with, there has been a keen appetite to further grow the business and a high level of buy-in to the PI brands and our purpose to harness the talent and people to be extraordinary. The word extraordinary is referred to regularly by staff, and it's clearly something that resonates across the business. In my previous work, developing teams' focus on client relationships and meeting client needs has been key to success. This mindset already firmly exists at people infrastructure. In 2021, continued COVID restrictions and extensive lockdowns in New South Wales and Victoria had impacts across the business. Restrictions on elective surgeries as an example, significantly limited our health workforce as ours. The technology sector on the flip side has seen consistent growth year-to-date. The net result is we are comfortable with analyst expectations for the 2022 financial year based on there being no change to market conditions. We are currently operating in a strong market for staffing companies. The low unemployment rate and closed borders has resulted in a number of our clients facing difficulties in recruiting staff and therefore, more actively seeking our services. This demand for staff is evident in all the sectors we focus on, information technology, nursing, community services, hospitality, child care, logistics, transport, mining, civil construction, surveying, and the list goes on. Our focus going forward is continuing to find sufficient talent to fill both internal and contracted vacancies to meet this demand. We're looking to launch a number of recruitment initiatives when borders reopen to international workers. We'll leverage our prior international recruitment experience, particularly in the health and agricultural spaces to support the securing of talent across all our industries. We believe that this experience, combined with our ability to rapidly execute and scale up, is a major advantage for our clients. In terms of general operations, we'll continue to drive efficiencies across the business by automating low-value processes with best-of-breed systems to maximize staff time spent on high-value activity. This initiative has really kicked off in the past few months at an extensive planning period given the important and complexities associated with systems implementation programs. What bodes well for growth beyond this financial year is the strength of PeopleIN's investment in growth sectors, including health, community, information technology, agriculture and transport that all have long-term demand for resources. There exists at PeopleIN a sound strategic core from which to build. The leadership team and I plan to review the strategy together early in the new year, not with a view to make any fundamental change as the plan is solid, but to ensure that it's evolving to meet any changes in market demand. We will continue to focus on growing our existing verticals of helping community, technology and industrial and specialist services. In addition to organic growth measures across these verticals that include growing our work for the federal government, we'll look to increase our IT staffing capability by acquiring a significant contracted business that will provide a more balanced permanent best contractor portfolio. We'll seek to further diversify our talent solutions offering by building our labor hire and recruitment capability in accounting and education disciplines, both organically and through acquisition. Both these disciplines have long-term demand from private and government clients. We're also looking to expand our own training capability likely via the acquisition of a vocational training business. This represents a unique shared advantage for our staff and clients. For our clients, this would offer a complete talent solution for their internal teams but also ensure their outsourced staff are highly skilled. For our own staff, both permanent and contractor, this would provide further upscaling opportunities so they can continue to realize their own career aspirations within the PeopleIN family. As you can see, it's a busy 12 months ahead. We look forward to updating you on our performance and operations in February upon the release of our H1 results. Cheers.

Thank you, Ross. Thank you, Declan. We appreciate you recapping our very positive results, and good to hear where we're heading to the future. A Notice of Meeting dated 29th of October '21 was circulated to shareholders, and I'll take the Notice of Meeting as read. I will briefly outline the meeting and voting procedures for today's meeting. Voting on the resolutions will be conducted by the way of poll. Shareholders attending the meeting online will be able to cast their vote using the electronic voting card received when online registration was validated. If you have any issues proceeding or voting card, please refer to the virtual meeting online guide available on the company's website or use the help line currently on your screen. I note that all directors have lodged their proxies online. I confirm that as described in the Notice of Meeting, I intend to vote all undirected proxies I hold as Chairman in favor of each resolution. Those participating virtually today will be able to submit questions via the online platform or by using the telecom facility during the meeting. I will provide sufficient Notice for Shareholders to ask questions in these formats. I will endeavor to answer all relevant questions from shareholders during today's meeting. However, I reserve the right as Chair to rule questions as not pertaining to the AGM out of order and take questions on notice. I propose that the order of taking questions will be as follows: firstly, for many shareholders using the teleconference facility, and then we'll move secondly to any shareholders who have submitted a question online. Following the close of meeting, the results will be announced on the ASX as soon as possible. I will now move to the business of the meeting. The 2021 annual financial report contains the financial report, the directors' report and the independent auditor's report. A copy of the annual financial report was made available on the company's website, the ASX platform and sent to those shareholders who requested it. This item of business is the receipt and consideration of the reports of People Infrastructure Ltd. There is no voting on this item of business. Please note that Tim Kendall from BDO, who oversaw the conduct of the audit is present. Any shareholder may direct questions, Tim, which are relevant to the conduct of the audit, the preparation and content of the independent auditor report, the accounting policies adopted by the company in relation to the preparation of the financial statements and the independence of the auditors in relation to the conduct of the audit. At this time, I'd like to take any general questions or comments about the reports or for the auditor. I note that the auditor did not receive any written questions prior to the meeting. Are there any questions from telephone participants? Thank you. Are there any questions online? Thank you. With no further questions, we'll move on to resolution 1. Second item of business is the reelection of Elizabeth Savage as a direction for the company. All directors' details are set out in the Notice of Meeting and in the annual report. I'm not going to repeat these details. Elizabeth is present to answer any questions. Are there any questions from telephone participants? Any questions online? Since there are no further questions, I advise that the proxy votes that are eligible to be voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

I'll now move on to the next item of business. The third item of business is a nonbinding resolution to adopt the company's remuneration report. The remuneration report is contained within the 2021 director's report in the annual report which is available on the company's website. Further details about this 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. Do we have any questions on the telephone? Thank you. I'll now take questions from shareholders online. Any questions? No questions. If there are no questions, we'll move forward, I advise that the proxy votes that are eligible to be voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

The fourth item of business is the approval of the company's performance rights plan pursuant to ASX Listing Rule 7.2 Exception 13B. The Board considers the PRP to be a key part of the company's remuneration strategy going forward and to assist in the motivation, retention and reward of eligible participants and to align the interest of employees and shareholders. Further details about this resolution are contained in the explanatory memorandum that accompany the Notice of Meeting. And a summary of the key terms of the performance right plan is set out in next to the expansion of a random. Are there any questions from telephone participants? Thank you. Are there any questions online? Okay. We move forward. I advise that the proxy votes that are eligible to be voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

The fifth item of business is the approval for the company to grant a total of 1,000 -- sorry, 116,721 performance rights to an executive director, Thomas Reardon under the company's PRP in recognition of his contribution in financial year '21 and for the issue of fully paid ordinary shares on vesting of those rights. These performance rights form part of Tom Reardon's agreed remuneration package and are to be awarded given that certain key performance metrics in respect of financial year '21 were achieved. Under ASX Listing Rule 10.14, no director or associate can acquire securities under the employee incentive scheme without shareholder approval by ordinary resolution. Further details about this resolution are contained in the explanatory memorandum that accompany the Notice of Meeting. Are there any questions from telephone participants? Thank you. Are there any questions coming online? Thank you. I advise that the proxy votes that are eligible to be voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

Sixth item of business is the approval of a giving of financial assistance to the company by Vision Surveys Queensland under or in connection with the company's acquisition of Vision Surveys Queensland, which completed on the 31st of July 2021. Directors have considered the giving of financial assistance and are of the opinion that there are reasonable grounds to believe that it is in the best interest and for the commercial benefit of both the company and Vision Surveys Queensland. Further details about the resolution are contained in the explanatory memorandum that accompany the Notice of Meeting. Are there any questions from telephone participants? Any questions online? I advise that the proxy votes that are eligibly voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

Final item of business is the approval to the change to change the company's name to PeopleIN Limited. In addition, minor changes are required to be made to the company's existing constitution to reflect the change in the company's name. The Board considers that the change of name is reflective of the revised simplified branding, which has been successfully adopted by the company. Further details about this resolution are contained in the explanatory memorandum that accompany the Notice of Meeting. Do we have any questions from the telephone participants? And we have no questions online? Thank you. I advise that the proxy votes that are eligible to be voted on this resolution are as displayed on the screen. [Operator Instructions] [Voting]

Are there any final questions from the telephone participants or online of a general nature? Thank you. And online, any general questions? If you have not done so already, shareholders participating via the virtual meeting website should now submit their votes for all those resolutions by clicking on the Submit Vote button at the end of each of your voting card. The poll will close in 5 minutes. Poll results will be released to the market through the company announcements platform as soon as possible,which is expected to be later this afternoon. Ladies and gentlemen, that concludes the business of the meeting. On behalf of the Board, I'd like to thank you for your ongoing support, and I now declare the meeting closed. Thank you for your attendance and for your participation in the meeting.