Perpetual Equity Investment Company Limited (PIC.AX) Earnings Call Transcript & Summary

I'm Nancy Fox, I'm Chairman of the Perpetual Equity Investment Company. From now and I'll refer to it as PEC, which is what we call it internally. It's 2:00 p.m. I've been advised that a quorum is present, and I declare the 2022 Annual General Meeting open, and I welcome you to PIC's hybrid meeting. So there are also people online. We acknowledge the traditional owners of the land we are present on today, the Cadigal people of the Eora Nation as the custodians of this land, recognizing their connection to land, waters and community. We pay our respects to Australia's first peoples and to their elders past, present and emerging. We would like to extend our respect to and welcome any aboriginal or tour Straight Island to people who are joining us today. We also acknowledge the traditional owners of the many lands where our attendees are situated today, both here in Australia and overseas. I'd like to start by welcoming our shareholders, proxy holders and guests. It's great to see you in person after 2 years, has it really been 2 years? And we are pleased this hybrid format continues to provide an opportunity for more shareholders to participate regardless of their geographic location. I'd also like to take this opportunity to introduce to you those who are present with me today. In the room, I am joined by Amanda Gillespie, our Executive Director, our Company Secretary Sylvie Dimarco, Virginia Malley, a Non-Executive Director and Chairman of the Audit and Risk Committee. And lastly, John Edstein, not really lastly, but at the end our Non-Executive Director and Chairman of the Nomination and Corporate Governance Committee. Karen Treo, many of you might have met in the past, is in charge of PIC's Investor Relations matters and she'll be the facilitator for the Q&A for the investment manager update, and Karen is present with us here in Sydney. I'd also like to welcome Karen Hopkins from KPMG, who is the company's auditor. Karen is available to answer any questions that shareholders may have in relation to the financial year, 2022 financial statements and the auditor's independence -- and Danny as well sorry. Before we move on to the formal part of the AGM, on behalf of the Board, I'd like to share with you some of my observations on PIC's activities and performance this past year. Following that, I will ask PICs Portfolio Manager, Vince Pezzullo to deliver the investment manager update, and Vince will be joined by equities analyst Alex Patten. Welcome, Alex and Vince. At the end of Vince's presentation, there'll be an opportunity to answer your questions. I'll now move to a discussion on PIC's performance in FY '22. And I note that the prepared AGM addressed from me has been released to the market. Starting with our results. This year presented many challenges with inflation, central bank activity, geopolitical tensions and the COVID-19 pandemic, all being contributing factors to market volatility. For PIC, these economic conditions impacted investment portfolio performance, and resulted in the company posting a net operating loss after tax of $17.9 million. Net investment portfolio performance for FY '22 was negative 6.7%, although that outperformed the benchmark by 0.1%. Over a 5-year period from June 30, 2022, the company has delivered on its investment objective of providing long-term capital growth and returned 8.9% per annum, outperforming the benchmark by 2%. More so than ever, your Board has maintained a strong focus and commitment to paying dividends to shareholders twice a year that are, as you know, fully franked or to the maximum extent possible. For FY '22, the total dividend declaration was $0.061 per share, fully franked which comprised of an interim dividend of $0.028 per share and a final dividend of $0.033 per share, which was inclusive of a $0.05 per share special dividend, our first ever. This represents an annual dividend yield of 5.3% and a gross debt dividend yield of 7.5%. Moving to capital management. Over recent years, we, your Board have been focused on retaining more capital for investment, building a healthy profit reserve and maintaining an appropriate level of franking credits for future dividend payments. We are mindful of the potential for the volatility in the markets to impact the company's profits and believe this prudent approach reflects the maturity of the company. We are pleased our execution of this has enabled us to announce ordinary dividends and a special dividend amidst the challenges experienced in FY '22. We know many of our shareholders have been with us since inception in 2014. And have a primary goal to seek income. We are proud to have paid $125.6 million or $0.385 per share in fully franked dividends since listing on the ASX. In June 2021, the company issued bonus options on a one-for-one basis and no additional cost to eligible shareholders. It is unfortunate that market volatility impacted the company's share price and the majority of those options lapsed unexercised last month. We do thank the option holders that did exercise their options into shares and continue in our efforts to boost the share price. Looking ahead, the Board is focused on growing the company and progressing its strategy to deliver a sustainable income stream to shareholders. At June 30, and after taking into account the final dividend, the company's profit reserve is $85.5 million. This equates to $0.227 per share and represents over 4 years dividend coverage. Now let's look at the share price to NTA. Your Board consistently monitors where the share price is trading relative to the net tangible assets of the company. We were pleased to see the share price discount to NTA narrow over the past year. As at October 14, however, PIC's share price is trading at a 4.5% discount to NTA pretax. I've said this before, I'm sure, we typically regard investment performance, dividend yield and shareholder communications as the key drivers which support the share price to trade in line with the NTA. Firstly, looking at investment performance. While market volatility continues to persist, the portfolio has outperformed the benchmark over the short term. In particular, the first quarter of FY '23 saw investment portfolio performance returning 1.8%, outperforming the benchmark by 1.4%. Notably, the manager continues to deliver solid returns over the long term. Your Board has full confidence in the manager, Perpetual Investment Management Limited, which has a long history of investing across all market cycles. It maintains discipline around its investment approach of investing in companies of quality and value based on its 4 quality filters, quality business, conservative debt, sound management and recurring earnings. The portfolio manager is Vince Pezzullo here today and he is supported by 17 other portfolio managers, analysts and responsible investment personnel. Your Board also believes that the company's flexible investment strategy, our ability to invest up to 35% in global listed securities and our active management style position the manager well to seek out the best opportunities. Your Board actively questions and challenges the manager on investment performance. The manager is required to report to the Board on a quarterly basis or more frequently as required, and provides detailed portfolio updates, industry insight and how environmental, social and governance factors are integrated in this investment approach. Our next key driver is the dividend yield. As noted earlier, we have a strong focus on delivering a sustainable income stream and believe the current dividend yield is attractive for shareholders. Our last key driver is shareholder communications. During the year, we uplifted our marketing and advertising efforts and also reached new media channels with Vince featuring on nabtrade and Equity Mates podcasts. We have also sponsored conferences hosted by Morningstar, the ASX and the Shareholders Association. We are also always encouraged by the level of engagement from our shareholders and prospective investors, and thank you for your participation in events during the year. And of course, we encourage you to stay informed by visiting the company's website for a range of resources and insights. We believe these 3 key drivers will ultimately align the share price and the NTA as investors realize the company -- what the company offers. Looking ahead, we are confident in the manager's experience, skill and judgment. Their active investment approach and focus on quality and value positions the company well to invest across multiple market cycles to deliver attractive returns to shareholders. We continue to prudently manage capital, which includes discussing how the profit reserve is applied when declaring dividends. These are key components to the growth of the company and the delivery of a sustainable long-term dividend stream to you, our shareholders. The nonexecutive directors of the Board and the portfolio manager are all current shareholders in PIC. On behalf of the Board, I'd like to thank you for your continued support of our company. You're allowed to clap. You can clap for Vince and Alex. They're probably a little more interesting talking about stocks than I am. In a moment, I'll hand over to Vince for the investment manager update. We will take questions following the update. Any questions related to the AGM resolutions will be addressed later in the meeting. If you are present in person, there will be an opportunity to ask questions following the update. For those of you attending online, and I think there's over 100 from what I last heard. If you are a PIC shareholder, you can ask a question or post a comment by clicking on the Ask A Question box on your screen. A box will pop up and you are required to select the text question button. In the regarding section, please select investment manager update for participants who are not shareholders, you will be asked to ask a question over the phone. You can submit a question at any time during the update, and it will be addressed at the end. And now that we got the housekeeping out of the way, I'd like to hand you over to Vince Pezzullo.

Good afternoon, everyone. Today, I thought we'd do a -- we'll just briefly go through the process. So for any new shareholders, just explain how we look at the market and how we value companies and what gets included in our quality universe of stocks effective of the hurdles. We'll also just review just briefly what's performed in the last 12 months and then move on to some of the many challenges that most of you obviously can see globally, these macroeconomic and also geopolitical issues and just highlight some interesting points about that and then move to how we're positioned in the portfolio, in particular, some of our biggest exposures, why we're there and why we think they're the right place to be at the moment. And then we'll hand over to Alex, who's going to go through one of the stocks in the portfolio. It's a significant position. and then we'll return back to just cover off on performance and then move on to Q&A. So first slide, please. Nancy mentioned the team, that's pretty much everyone in the team is 6-odd portfolio managers there and a full suite of analysts. We actually added another analyst yesterday, a senior analyst joined the team. So we continue to invest in our research capability as we see that's our ability to protect the capital through the cycle and also take advantage of opportunities when most of the market won't. So with the -- [ PIC ] has been investing in the team for years. We've got a very stable and direct way in which we train our people and the culture within Perpetual is very different in a sense that there's a certain way we invest. And the only way you can do it is by working in it. And it takes a while to become a portfolio manager at Perpetual, it can take you a decade, if not longer. And that's after you get screened basically. It can take quite a bit of time. Moving on to the next slide, please. So I mentioned before about the process we go through, just consider investing in a company. And so it's the quality filter. We've got 4 quality filters I'll briefly go through them. So we look at the quality of the business. This is the returns, the industry, the ease of entering exit of new capital, the position of the company in that industry, the likely returns going forward, what are the threats to that industry. Conservative debt, and I expect today it's very important people understand why having a conservative balance sheet is really important. We don't like companies that are geared excessively. We have very -- it's a very quantitative measure of 50% net debt to equity or EBIT interest cover. So basically, how much earnings do you have to cover your interest bill every year. of 3x or greater for cyclical companies, you want to be above that. Moving on to sound management. This is a bit of an experience issue, still can be caught out, but that's understanding the management's quality the strategy that they're trying to implement for the company doesn't match. We check all their histories. We look at whether it does fit the company. Also, the Board, in trying to understand is the Board acting the best shareholders. And on occasion, we'll use our size to potentially influence the Board in trying to bring on directors with the right amount of skill or ensuring that the strategy does match the nature of the company. And finally, Perpetual doesn't invest in concept stocks. We don't invest in things that don't make money. Every company we earn or we own that's in our universe, especially has to be profitable. It can be cyclical. Resource companies are quite cyclical, but you need to be able to finance yourself and generate a profit because we get paid -- dividends come from profits. So the last several years, it didn't matter whether you generated a profit when the cost of debt is very low, any concept, any ID can get up and get funding. Next slide, please. Okay. I thought we'd just discuss last year FY '21. The performance -- the best performance were part of the normalization trade coming out of COVID, the beneficiaries were companies like Qantas, Crown, the discretionary retail stocks like Premier, et cetera. And they are the basic winners, significant stimulus, both from the central banks and the government through fiscal policy led to some pretty optimal conditions for the consumer. It's pretty much -- it was the quickest rebound from a recession we've ever had, it took 18 months to get the growth prior to COVID. As some peculiarities occurred as well, people's income went up and expenses went down. So we had no inflation and anyone got a pay rise effectively due to the transfer payments, very unusual. That doesn't usually happen in recessions. It's the opposite. So -- and the consumer did actually save a bit, put a bit away. What that whole event covered was the transfer of debt from the private sector to the public sector. That's what transfer payments were. So that was FY '21. FY '22 was a little bit more bumpy because now we're having to deal with the cost of extreme amounts of stimulus, both on a monitoring and fiscal basis. That is inflation. So last year, we were preparing the portfolio. We talked about it, I think, in the last briefing, inflation is going to be a problem. Because there are other aspects which we'll go through at some point that we're baking inflation into the system, which had nothing to do with COVID, okay? It was in most of the basic materials and oil and gas. So the last 12 months has been more about moving away from those covered winners, those sort of stocks and moving towards positioning itself for more of an inflationary tone and you're trying to focus on companies which have a bit more power at their disposal to manage their own outcome. So that's like a -- they call idiosyncratic risks, less worried about what the market and the economy does, they control their sort of destiny. Companies like Bapcor and Helius and a2 are some of those that we've been investing in. Now some of those had more management issues where the Board, they've had management turnover or the board was a bit unstable a lot of turnover at the Board level and there are some probably suboptimal decisions being made. So we've taken positions in those stocks and engage with the Board to try and assist with CEO selection, not directly positioning a CEO, but what we're sort of looking for, the sort of characteristics of the CEO, but also a lot of boards are a little bit tired. There's -- members have been on the board for a bit too long, and we'd like to see a bit more refreshment of the board occasionally, particularly when we think that you can add more skill to the Board in particular areas, which can benefit the shareholders. So that was the last 2 years effectively. So where are we today? You have -- fiscal stimulus is now, again, a bit of a dirty word because we've got this issue with inflation. And fiscal stimulus is a hammer when it comes to generating the economy, it can really drive growth. When applied correctly, it can generate lots of GDP growth. The problem they've got is people have forgotten that when you do fiscal policy measures in a world where we are globalized, and we're happy to trade with one another. You're doing it at the last cost. We're buying materials from the people that produce that material at the last cost possible, the laws of comparative advantage. It's an old economic term, but they were holding up for the last 40 years. So geopolitically, that's sort of been thrown out the window. Everyone's drawing lines as to what side of the fence they want to be on. And with fiscal stimulus and the geopolitics occurring, you have a deglobalization occurring right now. So it's not about the loss cost. It's about certain assets are more strategic in value than they were before. And we talk about this as the people are conflating a few issues, but they're missing the bigger picture. So inflation was set up years ago that's coming now. And covers sort of accelerated. What COVID did was it brought forward several years of demand into 2 years. And now we're trying to clear that out. The problem is we're trying to clear that while the global systems are a lot less efficient. And when there's less efficiency, that's cost. So the inflation is being baked in. So we obviously -- we believe that inflation will probably normalize at some level. I think 2% could be a bit of a hope more than anything else. But you will see -- you starting to see it now is the good side of the economy, is starting to normalize. The supply chains are starting to unclog bit, materials are starting to move. We haven't seen it in global shipping rates, global shipping rates are starting to normalize materially. There's 100 ships off the port of Los Angeles basically 3 months ago, that's pretty much cleared. So those sort of things as systems sort of moving through and dealing with it. The problem is when you look at inflation and CPI, there's 2 elements, there's goods and services, Goods is 30% of CPI, services is 70%. The services part is things like wages, the services wages, housing like rental rent for housing. That's about -- I'm talking in a U.S. context. It's about 40% of the services component is rent. What's happening to rent. And if that's continued going up, and that's usually a lagged outcome. Rent goes up as house prices go up but it lags for a while. So we can say the service side of the economy is going to take a lot more time to normalize. So the 2 issues we're talking about today is we had the COVID pull forward of demand. And the 1 major issue that people have sort of glanced over and didn't realize there's a major issue. They're sort of blaming the Ukraine-Russia wall is that the energy structure globally has shifted materially. And with all this did, all COVID really did and the Ukraine Russia war was bring it forward. We're always going to go to some sort of edgy crisis. And the reason is you have to go back 2 decades, right? So if we look at '90s post -- I'm going more than 2 decades, obviously. If you look at the '90s, in the '80s, you had significant post the removal of controlled inflation, they got on top of inflation, significant investment in commodities and oil and gas and those sort of things. You had a high oil price in the service for such a long time, it's always going to trigger a supply response. So you get to the '90s, a bit of a slowdown post the market crash in the early '90s recession, we've overproduced commodities again. There's too much oil and gas around. So prices collapse, traditional business cycle. So you get to 2,000 a decade of underinvestment in all these commodities, oil and gas and China rises as an economic power for 10 to 12 years, significant industrial growth. There's not enough oil and gas and copper and nickel, et cetera, in the world to satisfy that demand. So significant investment occurs again. So you get to 2010 post-GFC and what is oil and gas. And now we've added the mix of renewables and carbon or on carbon, et cetera. So oil and gas companies are going, well, we've got enough of this, we're going to stop investing. We're going to harvest what we've got and return capital to shareholders. That's been going on for several years. So now when you take out a major oil player like Russia from the global oil system, right? There's 100 million barrels of demand every year, every day, sorry. That's how much we pretty much produced per day. you take out 5 million or 6 million barrels, and there's no replacement because the last 10 years, we have not invested in oil and gas because we've had -- everyone knows the shale gas oil revolution in the U.S. That sort of paid over the underinvestment by traditional conventional oil and gas players. Those guys are running out of money because for the last several years, when you got 0 rates and very low cost of debt, if you were shale oil operator, you can produce because you don't have to pay the debt back, right? You didn't have to generate a profit. Remember we talked about, we like companies that generate profit. Were there people prefer companies that didn't generate profit. It's more about the theme than anything else. But now it's a very different world because the cost of debt is materially higher. The cost of equity is materially higher. So if you're a shale operator today, you have to generate return on capital, you have to generate free cash flow and pay back your debt holders. So now they were actually not producing as much as they used to. So we're in a situation today where conventional oil and gas are only investing on purpose because the price signal is telling them at $50 to $60 a barrel, they can bill it, they're covering their costs. So the pricing will need to be around where we are today to generate some investment. Now the problem with the oil and gas, conventional oil and gas is the lead times for investment are very long, to be a shortage globally. So one other issue which I thought I might tie into it is that renewables as a concept and people hear about our renewables are a cheap form of energy, they were cheap, when you have the oil price at $40 and the copper price of $2 a pound and everything was very cheap, and the cost of capital was 0 because you could actually invest in businesses without having to make a return. Today, that's all flipped. So we're in a higher-cost world. Renewals will be just as expensive as traditional forms of hydrocarbons and energy, and that's baked in now. It's going to be very hard for us to return back to 2% very quickly. It could take up to a decade. Now we've had no productivity growth globally for almost a decade in the developed markets. You tend to sort of need high inflation to get rid of inflation, you need high inflation for a while. So we're going to have to basically suffer through this in that period. The second issue is the trade war itself. It hasn't gone away. It's gone very quiet, but it stood itself up in the last 12 to 18 months because what we've discovered is, the West doesn't actually refine a lot of anything. Most of the refining of rare earths, et cetera, is all processed in things like cobalt and rare earth and nickel and those things is processed in China. So the refining capacity or the value-added component of what we need to decarbonize doesn't even exist in the West. So we're now into a period where the West will onshore significantly more industry. So there's going to probably be a lot more CapEx spent onshore in the West because they need to become self-sufficient because now it's actually an asset. In a world of inflation, the commodity -- who owns the commodity rules. So fortunately Australia has a lot of commodities. We don't process a lot here, though. But that's changing. We've got a position in a company called Iluka, which has a significant amount of rare earth. The Australian government has given them a low-ish interest nonrecourse loan, develop a refinery up in WA, which will take the next couple of years to build out. But that's 1 of the first, I think, North America, they've realized the actual process anything. They're actually quite short a lot of the battery metals they need and in particular in the refining aspect. So the inflation Reduction Act, which was passed several weeks ago was all about addressing that, about trying to bring onshoring manufacturing. So this is this -- I talked about the laws of comparative advantage. It's laws of the loss cost. We're going the other way. okay? So this is what we're talking about inflation. So the other issue we have right now is the Fed -- Federal Reserve is being very determined about achieving positive real rates. So real rates are your normal interest rate less your inflation rate. And they're quite determined to get there. Now the problem with that is, is that will pretty much -- any company that's listed in the last couple of years, that's required very low-cost debt or an ability to tap the equity market at will because people were willing to look past a period of no profit, probably will not survive. And this is part of the cycle we need to actually get through. It's a part of the cleansing process of removing dead capital, almost like Zombie companies. We have to get through that before we get to the other side to where there's very productive companies. So that's where we stand today. So how are we positioned? We are expecting, as I said, higher rates of inflation. There are potential recession risks. It's very unusual that yours have unemployment at such a low rate today at 3.5% on average in Australia in the U.S. To get that to move particularly high to the Fed can only -- can't impact geopolitical events. They can't impact the trade war. They can't impact a lot of the structural reasons for inflation like the energy market. All they can impact is demand. And the other way they do that is by basically crushing the ability of anyone to consume by lifting rates to such a point that people actually have to cut their discretionary spending down, which is counterproductive because it's actually you do far more damage than what you're trying to solve for. So what we're sort of positioning in today is we're looking at the metal sector because it's actually underperformed quite a bit recently. Metals as an investment historically, everyone ties it to the cycle when the cycle -- business cycle rolls over, commodity stocks do quite poorly, et cetera, et cetera. History suggests that's actually not true. Because it's best to focus on the capital cycle of, as I mentioned earlier, the capital cycle of the commodity sector. When are they over investing and when are they under-investing? And you want to own the commodity sector when they're under investing, which is the last 10 years. Because as you can see, OPEC's announcements, they want to keep the oil price at $90 and above, and they'll cut supply to achieve that. A lot of copper price has fallen from $4.50 down to about $3.30. Most of the copper miners are actually cutting production. And the reason they can do that is actually, they've actually got very good balance sheets, all of them, either net cash or they generate a lot of free cash flow. And at much -- they generate free cash at much lower prices. So the commodity stocks actually do a little bit better in a higher inflation through the cycle period. Insurance, we think you need to be -- have a mixture of quite a bit of defense, not defensive materials, but defensive type companies, those attributes. We've talked about insurance before. We like IAG, it's a bit boring. The last several decades -- several decades, sorry, several years with very low interest rates, that actually damages insurers because, they collect premiums every year. The technical reserves, which are held in fixed income, only virtually 0 because government bonds were very close to 0. So they're actually not making a lot of money on these funds. But as rates go up, they get a bit of a free kick. It's more of a tailwind. Also, as most of us know in the room, your home premium and car premium has gone up probably 15% this year. So there's a hardening cycle in premium rates. So they get a bit of a double benefit out of that as well. And it's quite defensive -- in particular, IAG, we think they've announced a buyback on Monday of $350 million, we think there's more to come. I mentioned energy. We quite like energy for those other reasons. We think that it's a tight market. And Santos is more of a gas operator. et cetera, we think there's a global shortage in gas, which could last for 5 to 10 years, at least, because no one has announced a new LNG scheme at all, even with prices where they are. And LNG schemes, as we all know in the room, takes -- can take up to a decade to develop. I mentioned idiosyncratic as in more company specific. So Icon Plc, which we took a position in last year and we're building steadily. There's been a management change there. David Wallace has done a great job he's come in there. He centered the business, developed a business strategy, reinvesting back into distribution into China. [indiscernible] former this business is what it does. And the results are starting to show. And it's about 5% of the PIC. We quite like the management. It's got a net cash balance sheet of $900 million. The market cap is $4 billion. So nearly 1/4 of the market cap is sitting in cash. That's a sort of business if you like, in particular, when the operations are turning around. There's Bapcor, but I'll leave that up to Alex. He'll discuss Bapcor. I mentioned REITs because REITs have been one of the worst performing stocks. As interest rates go up, as cap rates, capitalization rates go up. The value of property typically will go down relative. And the REIT sector has been 1 of the worst performers, but now they're actually trading at 20% to 30% discounts to replacement value and these are land businesses. So we've avoided most of that the degrading of the multiple on the REITs, but now you're at a point where they're trading at such discounts. The balance sheets are pretty good in all of them. But don't forget, most REITs have CPI-linked rent. So once you take the hit on the valuation, as long as the revenue is protected from -- by inflation because they've got CPI-like rents, that can actually grow from here. still and continue to pay the dividend more importantly and grow the dividend from you. And lastly, we've got long-term structural growth companies, where I mentioned flutter. These are international stocks flutter. These companies are very cash-generative businesses. And in a world where the cost of debt is going up and the cost of equity is very high now that you can't actually raise equity. You want to be in these companies that actually have a structural growth advantage, and the competitors aren't listed. A lot of competitors in the U.S. are not listed, actually rely on debt to survive. So that makes things tough for them. They can't compete. So having said all that, I'll pass it over to Alex. Alex has been with Perpetual for 7 years. He's come successfully through the team. He's a deputy portfolio manager with a small-cap strategy. And fortunately, it covers Bapcor. Alex?

Thanks, Vince. Good afternoon, everyone. Yes. As Vince mentioned, the stuff that we wanted to talk to you about today was Bapcor. So Bapcor has been operating in the automotive aftermarket segments since the early 1970s, and it listed on the ASX back in 2014. At that point, the business was solely a trade-focused distributor of parts. So in simple terms, Bapcor has a large network of stores throughout Australia and New Zealand, from which it supplies mechanics with a range of automotive replacement parts and consumables. So things like brake pads and oil filters. The trade business remains the largest and most important segment for Bapcor, but since the IPO management have expanded into other automotive aftermarket segments. Most notably, Bapcor owns the Autobarn retail store network, which is a combination of company-owned as well as franchise stores. They also own a range of specialist wholesale businesses, which manufacture import and distribute under brands that include federal batteries and bearing wholesalers. So in total, Bapcor has 5,000 employees across 1,100 sites. Bapcor has been a mainstay within our investable universe at Perpetual since its IPO, and it comfortably meets our quality filters. So firstly, the business has a very strong competitive position within the automotive aftermarket industry. The factors that drive demand for their products, including kilometers driven and the number of used cars on the road throughout Australia are resilient through economic ups and downs. Bapcor is conservatively geared with net debt to EBITDA of about 1.2x at the last reporting date, and EBIT interest cover well in excess of our thresholds. In terms of management, whilst there's been a recent change in the CEO, we regard his replacement is high quality and also have a really positive view of the broader management team. And then finally, Bapcor meets our recurring earnings quality filter. It's consistently delivered positive earnings and cash flow since the IPO. And in fact, earnings per share has increased at a compound annual growth rate of 16% through that period. Just moving on to the next slide. So PIC bought an initial position in the stock back in December last year. And the opportunity came about following the transition of a long-standing CEO. So the timing of that transition was a surprise to the market. The stock was sold off quite aggressively. And at that point, we've obviously been following the company closely for a long period of time, but we engaged with the Board and ultimately formed the view that the broader management team underneath that CEO was strong and motivated and committed. And fundamentally, the business hasn't changed. It remained a high-quality business regardless of the change in the CEO seat. So the share price overreaction in our view, provided a really attractive entry point at that point. And the attraction of the business centers on the strength of their competitive position within the automotive aftermarket industry, the nature of that industry as well and then also Bapcor's proven strategy. The industry structure of the core trade business is highly concentrated. So Bapcor and Repco are both roughly the same size. And together, they have about 2/3 of the market in terms of share. Scale matters in that business and we think that they'll both continue to take share of the independents over the coming years. And the nature of the industry is very attractive for us as well. The number of cars on our roads is growing consistently. The average age of those cars is continually increasing. And as you can appreciate, the complexity of cars is also increasing, which makes them -- which flows through in terms of the repair and maintenance requirements for them. And that caused value to the mechanic stems from its large physical store network and extensive range of parts. And their customers are essentially the mechanics and the mechanics are much more focused on getting the right part quickly rather than on price. So ultimately, that means that Bapcor has a high degree of pricing power. And as Vince mentioned, that's an attribute that is increasingly important in the current inflationary environment that we find ourselves in. And finally, Bapcor has an established improvement strategy in place. putting those factors together, I guess the outworking of that is a very strong earnings growth profile. I just wanted to provide a little bit more detail around Bapcor's strategy and why we have conviction that they can deliver an attractive earnings growth profile with a relatively low level of risk. So as I mentioned earlier, the business has grown very strongly since the IPO with EPS growth of 16% per annum. And that's been a function of both organic growth as well as a number of successful acquisitions. Bapcor has a well-established and relatively simple strategy, which is backed by the management team. Firstly, they will continue to roll out new stores in their trade and retail networks. There's still a long runway of new sites and the return on capital that they generate from rolling out these stores is extremely attractive. Secondly, Bapcor will continue to increase the proportion of their own branded products sold through the various businesses. Bapcor has established a strong and well-recognized in-house brands. And these sales typically come at a significantly higher gross margin relative to sales of third-party products, as you can appreciate. The proportion of their own brand sales has been steadily increasing, but remains well below U.S. listed peers. There are a range of other growth drivers available to the business, including further consolidation of their supply chain network and warehouses as well as additional bolt-on acquisitions. And we're also optimistic around the opportunity to increase the earnings and margins in the Autobarn business. They've been buying back their franchise stores and converting them to corporate-owned stores progressively in recent years, which gives them a lot more control and efficiency around pricing and promotions and costs as well. So just putting it all together, we think Bapcor's strategy is well considered. and should contribute to an attractive earnings growth profile for the business. And valuation is, of course, always extremely critical when we're considering investments. The stock is trading on about 15x consensus post-tax earnings for the upcoming -- for the current financial year, which we think is very attractive relative to the quality of the business and the growth profile. So thank you.

Okay. Just briefly address performance. This is till September, but I'll just coming up to June at least for the financial year. So the biggest contributors to the PIC in the last 12 months have been our investments in Santos, so oil and gas, Western Areas, which is a nickel operator, which actually got taken over by Independence Group, which is a -- want to get exposure more nickel, but as a lithium player, et cetera. That has taken over at about a 40% premium. Crown. Everyone knows about that. That was a pretty significant position, again, taken over by early this year and else completed. So we had a couple of takeovers in the last 12 months. And finally, Jervois, which is a company people don't know a lot about, but it's a cobalt mining and refining business. It's listed in Australia. None of the assets are in Australia. The assets are in Finland, where their refineries for cobalt refining. It is the largest single cobalt parting site outside of China. -- and China is 60% to 70% of global refining cobalt. So it's actually a significant part of non-Chinese refining capacity. It also owns a refining -- a refinery in Brazil. which has been shut down, which they paid virtually nothing that they bought it from effectively the administrator. They paid $25 million for that, but they've actual now they're going to restart that facility. It's a nickel and cobalt refining facility. But more importantly, they own the only permanent cobalt mine in North America, which will hit first ore. So first will be extracted in the next quarter, I believe. So that's pretty important because -- the U.S. is not very self-sufficient in any of these materials. And they've got the [indiscernible], which is actually permanent and it's very difficult to get permitting in the U.S. for any sort of mining operation. So that's been a significant contributor last year. What's costs us though, has actually been our global positions. So flutter is up till June 30, cost was a bit worse performer. That's -- there's been a few issues there with the industry itself but also the derating in the market as caught a bit of flutter and dragged it along. FDJ underperforming as well last year, which is a French lottery operator. And it was mostly due to there was the European Union's asked the French government to justify what the license value of FDJ's luxury license was, and there's a bit of a spec going on about that. Again, another 1 of those companies we really like. They have not missed an operational beat for 2 years at any listed 2 years ago. They've actually upgraded guidance at almost every result. And again, another 1 of those companies has got about EUR 900 million of cash -- net cash and a market cap of EUR 7 billion. So a very liquid business and the lottery assets we quite like. And it's got very low digital penetration in France, lottery assets. So we quite like that over the long term. What I can say is since June 30 and today, we've recruited most of those losses, [ flutters ] has outperformed. It's our biggest contributor in the last 3 months. It's up 30% in the last 3 months, and FDJ has done about 15% to 20% as well. So we did add to those positions in the last 12 months. And particularly in the last 3 months, we've added -- we doubled our flutter exposure, and we increased our FDJ exposure as well. So as the prices came back, we do have a discipline around valuation. We have a definitive view of what something is worth. When we get significant discounts to that value, we will typically utilize our cash, which we did have at the time, all sell positions, we think they have become too expensive to take advantage of those mispricing opportunities. And just lastly, just on the allocation today. As it stands today, got up to 80% in domestic securities at the moment, are 14% in offshore. And I mentioned 2 of the positions for offshore, and cash has come down a bit since then because I've actually allocated some of the cash. But international has gone up to at least 32%. Remember, the maximum cap is 35% and going international. At the moment, we're at less than half of that. We are identifying opportunities and the market has been extremely volatile offshore compared to Australia, but that has thrown up some opportunities, and I suspect there might be 1 or 2 new names coming in the portfolio in the next couple of months. But we are, as I said to you, it's a slightly different world. It is a higher rate, higher inflation world, which means you shouldn't technically be paying as much as you used to for equity. The higher inflation, the lower the multiple you should pay for a company. So we're being very disciplined around the price we're willing to pay for things and very selective if we can buy a really high-quality business at a fair price, we'll do that. I'd like to also say thank everyone for your support this year, the last 12 months, but I believe we're now going to move to Q&A. Is that correct?

We'll now answer any questions received from shareholders or interested parties on the investment manager update. A reminder that any questions related to the AGM resolutions will be addressed later in the meeting. Firstly, I'd like to address the preregistered questions relating to PIC's dividend stream, and then we'll come back to the presentation. We received a question from Dennis. Could you please discuss the rationale behind holding 4.1 years of dividend reserves? Certainly, the ability to maintain a dividend stream through difficult times is good, but over 4 years does seem a bit too much. And we also have a question from Mark on a related issue, Mark asked, the dividends have reduced in the last 2 years, where are the LICs maintained or increased dividends, prefer to have more income than growth as previous pick strategy. So I'll address those 2 now. I will say this has to be probably the biggest question of the year for the Board and probably the most interesting discussions that we have in the boardroom because the Board is very focused in our structure in actually providing regular, sustainable income streams for you. And that's what we've been told by our shareholders and what our policy has always been. So we combine -- if we look at a whole group of different types of variables, the level of the profit reserve. We talked to -- sorry, we talked to Vince and Alex about the market, what are you seeing in volatility. You've heard from him about looking forward, some of the issues that we have to contend with. We look at the franking account balance, and see what's available because we try to pay fully franked dividends. We look at future earnings, our capital requirements and the future prospects that Vince informs us of, we weigh all that together, and this year, we determined we could continue to pay $0.028 dividend and then we had our first special dividend at $0.05. So I would say the Board is probably conservative because what's coming up, the volatility in the market, which is not that sure about, but that's where we arrived at that amount. So I'll leave it at that for now. And I'll move on to the next questions that we have. [Operator Instructions] So Vince and I will now respond to online questions -- oh, sorry, no, I didn't handle the room first. My apologies. So do we have any questions in the room for Vince and myself? Please, sir.

Brian Allison, shareholder. Just on the stocks that you were listening as promising a notice day to milk. It's 1 that I've had for a long time, and I find it's a perpetual disappointment. So I hope you have better luck with it than I have. The history of it is that the directors sold at and announced that to the New Zealand Stock Exchange. However, they did not announce it to the Australian Stock Exchange. So the Australian investors were puzzled as to why the stock was coming down so quickly and the New Zealand investor knew. And that's something that I think the ASX should take up if they're going to list overseas companies I mean, I know they can't exercise the control that they do over Australian companies, but I think that was a bit beyond the pale. But even more recently, although they've changed the management directors there -- they -- I did try and sell it a couple of times, and it always fell away from the price that I wanted. And so they just seem to perpetually miss opportunities when they did make a statement by 1 Annual General Meeting, several years ago that now that they were in profit. They should start returning something to the shareholders. They've never done that. Although they've indicated already that they've realized it. And secondly, when the U.S.A. needed baby formula, they went to Bubs milk and I believe a2 milk made some representation to them but never got anywhere. So they just seem to be a company that never achieves. And I just -- I know that it's probably not your special area, but if you had some rationale as to why you think it's going to be better in the future?

Yes. We fortunately had buying at $18 . We've to own it very early. We underwent Australia get $0.70 back in the day. Then fortunately, we successfully sold it at $2 then it went up to $18. It does happen sometimes. But then it got too expensive for us. As I said, we've got this valuation around what we think something is worth, and the market was -- we actually do think they were actually under investing in the business. They'll generate significant margins, generate a lot of cash, but they weren't reinvesting for the future, more willing to live with today. That's why when they announced the movement of the CEO on and David[ boles ] has come in. He came with the strategy to take margins back down to what is sensible, which is from 30% to 20% EBITDA margins, and reinvest in distribution and market development in China, which is very important to us. And then he put out targets, which was 3 to 5-year targets I believe, of $2 billion in sales of $400 million of EBITDA, which are double where they are today. The market didn't believe him. The stocks derated materially and that -- not because of what David said, but in that period because it was a bit listless to stock. You obviously had an [indiscernible] formula oversupply in China as well. That was a significant issue. Everyone is the fastest-growing market and everyone has turned up with in a milk for mill. So there's a significant oversupply. That was the problem for the industry. But since then, things have changed, obviously, COVID didn't help either. But what's happened is this excess inventory in the channel. It's very old aged inventory. It's 12 months old age inventory in Tier 1, Tier 2 or Tier 3 cities, and it's Stage 1 and at Stage 1, 2 and 3 for baby formula. It took a while for that to be cleared. So what's happened since is that a2 has actually got control of their in the channel. So they know what sort of inventory is in the channel. They're not going to oversupply the channel, and they've got a go-to-market strategy to basically take share in China, which no one believed it until the full year result, where they've actually shown they've actually turned the business around. So we're actually quite confident they're actually on the right path. And as I said to you before, having $900 million of cash, net cash, right, allows them to actually embark on this strategy to take on the market. Because they can actually take longer-term decisions rather than worry about the next 6 months, which a lot of companies are sort of tracked when their balance sheet gets a bit tired. They're trying to satisfy the market rather than satisfy the business. So we actually think the prospects are okay. So I wouldn't sell. I think it's -- that's not a drive by the way, I can't. So -- but it's -- we actually think the prospects are okay for the company.

Yes. I guess another issue was what happened with Bellamy's where they were denied a Chinese license and then Chinese company came in and took them over at a bargain basement price. So when you're talking about China, are you facing things like that as well?

Do we have any other questions in the room? Yes, please? [Operator Instructions]

Brian Berkes, a shareholder. I did ask a similar question 3 years ago relating to the percentage invested in international shares. I think in the last investment report you released earlier this month. You mentioned about how you had invested in IAG. And I think you also mentioned you're invested in Westpac, is that right?

Correct.

What I understand is, like we have 4 major banks and we like 3 major insurance companies in Australia. But I can't believe that the best investment in an insurance company and a bank would be an Australian insurance company or an Australian bank. And related to that, when you listed the -- all the analysts, I noticed that predominantly they were dealing with Australian stocks. I didn't see any name where it had international after it.

Okay. The first question regarding the financials you talked about I hate to say that there's everyone in the room. But we live in an oligopolistic market in Australia. There's only a few competitors in each market, and they actually do quite well. Internationally financials -- sorry, U.K. banks are a minefield. It's hypercompetitive in the mortgage market. The return on capital is only about 9% for the banks in the U.K., they barely make a return of capital, heavily regulated. Insurance is worse, okay? We're actually in -- it's actually only really 2 major insurers in Australia it's IAG, SanCorp, and that's it. So you want to be exposed when it comes to financial, if you can get exposed to industries that are highly concentrated. Unfortunately, for us, the man on the people on the street is the economic rent accrues to them. I prefer those financials at the moment compared to offshore. I think our markets have been more stable, particularly in banking. Things are really tight. And for the last few years, the banks that we contend with a lot of nonbank financials competing in the mortgage market, et cetera. But once the cost of debt goes up, if you've got deposits, you win. And most of the deposits sit within the 4 major banks. And that's cheap funding source for them. So actually, mortgage market share is now swinging back to the 4 majors. So we want to be exposed to that. The balance sheets are in good shape. We've got excess capital, sort of we think we'll get some capital returns. We think the -- at least the dividends are maintainable. So that's the reason we're sort of in these markets here. And with Westpac itself, it's actually underperformed the other 4 banks. It has issues but we think the market is overly discounting those issues. And when you talked about the team, as you said, they don't cover specific international stocks. We don't sort of list it next to them, but all our analysts, if they want to, they can go look offshore. And most of them do because when they look at domestic companies, they always look at the global peers to see how our companies stack up. And from that, typically, opportunities do arise. So we don't sort of hand the analyst and we give them free rein to look at anything they want. We don't sort of like set sectors next to their names or particular stocks, it's up to them. But they're an inquisitive bunch. They like making money, the team.

Okay. Thank you, Vince. Do we have any other questions in the room? All right? If not, Vince and I are going to respond to the online questions, and I'd like to get Karen [ Trader ], please come to the front of the room to help me with this.

So we received a couple of questions on about call direct to Vincent and Alex. The first question is from Les. And the question is, what are your views regarding GUD versus Bapcor?

Fortunately, I've got Alex, so I'm going to let him answer the whole question, actually. Alex?

So I mean, GUD is a business that we've followed closely. They play in a similar space. They provide a lot of products into Bapcor that sold to the mechanics. So they own the Ryco Filters brand and some other some other brands, and it's a business that we've stayed pretty close to and invested in on and off. We had invested in it recently. Late last year, they made a very large acquisition of a business called AutoPacific group, which makes towbars. They paid -- it was something like a $700 million or $800 million acquisition and GUD at that time had an enterprise value of probably $1.1 billion or $1.2 billion. So it was a very substantial acquisition relative to the size of their business. They had to issue a lot of equity and raised a lot of debt. And in our view, we're always very cautious of businesses that make large acquisitions. And in this case, we thought that the price was quite full. So in the end, that sort of has come to pass. They've ended up downgrading earnings in the last 6 months on the back of weaker performance from that acquisition, which is not the first time something like that's happened. And so the stock has fallen a long way. So for us, I mean, we're very focused on balance sheet and also management quality. And for us, particularly around the balance sheet, that was problematic, and that's why we've had a preference to Bapcor amongst the 2 of them, but we continue to look at GUD. We just think that sort of going forward, we would need to see some delevering and to get more comfort around the balance sheet before we were interested in getting back into it.

Thanks, Alex. We've also received 2 questions regarding what is Bapcor's position -- sorry, how is Bapcor positioning itself for the growing EV market? So how have you rationalized the headwind arising from electric vehicle adoption?

Yes, it's obviously a very relevant question. I think within I can answer it from the perspective of different parts of Bapcor's business. So within the retail business, which is Autobarn, they're selling to car enthusiasts and trades. And I think even though the car park in Australia will transition over time to EV, People are still going to want to spend money on their cars and tinker with them and things like that. And that business, along with its competitors like Supercheap Auto, will be continually refining the products that they're stocking in their stores, and I think they'll be able to manage that transition in terms of the products within the core trade business. So this is where Bapcor's been supplying the parts to mechanics. A lot of the time when a car is sold brand-new the owner will sign up to some cap price servicing or something like that with the dealer, and they will generally take their car to the dealership to have it serviced for a period of 2 or 3 or 4 years or even longer. So the businesses -- the sort of cars that Bapcor is selling parts to be placed into are generally quite a bit older, so 5, 6, 7, 8 years old plus. So given EV sales are still probably only low to mid-single digit of total cars sold in Australia at the moment. It's going to take probably a decade before they see they see those cars start to come into those workshops in material numbers. That's not to say that the business isn't thinking about it. I mean a lot of the parts the parts that they sell, such as brake pads and air filters and things like that, adjust is relevant for EVs as they are for ICE vehicles. So a lot of the product portfolio will still be relevant. The cars will still have to be serviced. But I'm sure, over time, the acquisitions that they're contemplating will be geared towards that the sorts of products that are more relevant for EVs. And I'm sure that the private label brands that they're developing will be similarly well suited to that the EV nature of cars that are moving forward.

Thank you, Alex. And the next question is from Dermot. Vince, you spoke passionately about the quality filters. Can you explain your position in Jervois as they haven't provided a return.

They haven't returned capital at this stage, I agree. Because they are building out. It is a young company. But given its position, it's a strategic asset being -- as I mentioned earlier, the Finnish refinery is effectively 1/3 of non-Chinese refining capacity. It is cash flow positive, so it does -- it can finance itself. We've got a very high regard for the management are all ex-Glencore and Xstrata management team. And from what we can see, and we talk about EVs, et cetera, and given the relative position in North America, they're so underfunded and poorly positioned on basic materials, having the only [indiscernible] cobalt mine, which, again, it's -- they've had to finance the mine. They've got no return out of it yet, but you're about to start turning all in North America, and they'll be able to sell that into the market. So before that, just purely a refining company. Now they're actually going to be a balanced business are both along the ore as well as the refining capacity. So they're a bit more self-sufficient. They give them balance actually allows them to migrate through the cycle, so they don't get caught out because there is an inventory cycle within in materials, especially. So given the balance sheet in such good shape, I think the longer term, the market is not willing to recognize it today. But I think in the next year or 2 or 3 years, the market realize that is actually a very strategic asset that the returns will pretty much improve because they've been financing a mine, which makes no money at the moment. Once they start selling the oil, it's only going be doing 2,000 tonnes of cobalt a year, the cobalt market is quite small. So -- but once you value add it and you refine it, you're selling obviously a lot higher value. So they are the sort of businesses where if they're self-financed, good balance sheet, good quality management, but the market is not willing to recognize the value in it today, we're happy to take that on. So looking at the prospective returns in the business.

The next question is the last question online, and it's from Paul. How is performance year-to-date? And what is the outlook for the year?

Financial year-to-date, the performance. I think Nancy touched on it earlier, was I think we were up 1.8% relative to the market up 0.5%. So we've done 1.3% for the last quarter. It's -- the market is quite -- it's on a bit of a knife edge at the moment because the market is waiting for a pivot in the Fed, we're of not the same opinion that you're going to have -- people have to get used to pre-2019 low rates, the Fed's going to come and save the day. They're dealing with larger issues now. One of the questions I'm sort of dealing with right now is do governments go for full financial repression, which is -- have very -- just live with very high inflation because, as I mentioned earlier, the private sector debt has been switched on to the public sector's balance sheet. If you look at total debt, I think the U.S. is a 280% of GDP. Most western countries are at that level as well over 200%. There's no way you're paying that back. The other way to do it is you inflate your way -- inflate it away. So I have very high nominal growth with high less levels of inflation. And the prompt that is, that's sort of like I hate to say it's a bit of theft. It's -- they're selling from savers and giving it to debtors. So will governments go down that path? So these are the things we're sort of thinking about if that's where the government goes with policy, which is entirely possible, positionally in our portfolio, you would be prepared. So it's really hard to predict how to position for -- we're not in the recovery part of the cycle. We're maybe in the -- we're in definitely the topping part of the cycle, but there could be other geopolitical issues, which can interfere with the cycle as well. So we're trying to buy good quality businesses with good balance sheets because that gets you out of trouble through the cycle. So I'm not trying to make any prediction of where the market is going to be. We're not very good at that anyway. We're bottom-up stock pickers, that's what we do.

Thanks, Vince. We'll now see if there's any questions over the phone I'm advised that there are no questions over the phone. So thank you very much, and I'll hand back to Nancy.

Thanks, Karen, and thanks, Vince and Alex for your presentation. You have to give them a round applause. I'll now move on to the formal business of the AGM. The virtual meeting online guide was lodged with the ASX and it's published on PIC's website. It outlines the steps to enable shareholders to participate in this meeting. Moving on to the agenda. In terms of business, we have the following items to consider. The FY '22 financial statements and statutory reports, the reelection of John Edstein as Non-Executive Director; and the adoption of the remuneration report for FY '22. The item of business relating to the FY '22 financial statements is not for voting, but for tabling and discussion. Further information about each of the items for consideration today is set out in the notice of meeting. I will take the notice of meeting as read. As described in the Notice of Meeting, proxy appointments were able to be launched up to 48 hours before the meeting. Where I, as Chairman of the meeting, have been appointed as a shareholder's proxy will become their proxy by default. Then I will vote directed proxies as directed in the proxy appointment, and I will vote any available undirected proxies in favor of each resolution. If you're participating as a shareholder and hold proxies, then you would have received an e-mail, setting out instructions for you how to vote these proxies using the voting mechanism on the online platform. Now bear with me. I have to go to the formalities on how to vote here, and it's detailed, okay? If you're attending in person, I will now outline the procedures for voting if you're in the room as a shareholder, we will be voting by a poll and not a show of hands. Nicholas O'Hagan of Link Market Services is the returning officer for the purpose of the poll. You will have all received a yellow voting card when you registered today. They will be used to cast to vote. Once counted, the outcome will be announced to the ASX later this afternoon. I'll now outline the procedures for voting online. You may cast your vote at any time during the meeting now that the poll is open. You may also change your vote at any point until I declare the poll closed. The poll will remain open for 5 minutes after the end of today's meeting. At the conclusion of the AGM, you will see a red bar appear along the top of the online platform with a countdown timer of how long you have remaining to cast your vote. You must be logged into the online platform to cast a live vote. You cannot cast a vote over the phone. Shareholders online will be able to cast their vote using the electronic voting card received to register vote, click on the get a voting card button on the web page. The adjacent slide shows the page you need to access on the online platform to exercise your vote. You will need to enter your SRN or your HIN number and your post code. If you are appointed as proxy, please enter the proxy number issued by the Link Market Services guys in the proxy details section. Then click submit details and vote button. Subject to any applicable voting restrictions, the Board recommends that shareholders vote in favor of each item. Voting restrictions for the resolutions are included in the notice of meeting. If you are experiencing any difficulties in the online platform or if you have any questions, he has a help line number 180-0990 363. And that's within Australia, and it's displayed at the top of the web page. If you have not registered to vote, please do so now. The results of the voting will be known shortly after the AGM and advised to the ASX and posted on our website. How to ask a question? I will introduce each resolution. There will be an opportunity to ask a question in the room or post written comments or questions. For shareholders in the room, if you wish to ask a question, when invited, please raise your hand as we have several roaming microphones. A microphone attendant will be with you as soon as possible, and please give them your name, so you can be introduced. For your shareholders participating online, you do not need to wait until we get to that item of business to ask a question. In fact, we encourage you to start submitting your questions now. [Operator Instructions] If your question concerns the FY '22 financial statements and reports. Please begin your question with this. Shareholders are only able to ask a question after they have been registered to vote. The Company Secretary will reads comments to questions on the meeting. [Operator Instructions]. I will then respond or designate someone to respond to the questions. How to ask a question by the phone? You can participate by phone by calling 1800 316 941. When you do that, you'll be given a unique pin from Link. And to do that, you have -- if you don't have a pin, it's 1800 990 363. The pin will allow the link moderator to verify your security holder, you'll be able to ask a question. [Operator Instructions] Following comments and questions, I will confirm the proxy votes received before the meeting. These will appear on the screen in the room and your computer screen beside the video feed. Each resolution before the meeting today is an ordinary resolution and will be passed by simple majority. We will first take questions from shareholders in the room, then shareholders using the online platform and then take questions received over the phone. We will save asking each question until the relevant item of business. So the first item of business is the presentation of the FY '22 financial statements and statutory reports. This item is to receive and consider the full financial statements, the reports of the directors and of the auditor for the financial year ended June 30, 2022. The accounts were circulated as part of the annual report in August. They were also published on PIC's website on the day we announced our full year results. I now formally table the financial report, the director's report and the auditor's report for the financial year ended 30 June 2022. There's no voting on this item, but shareholders will have an opportunity to ask questions. As I have previously mentioned, Karen Hopkins and Denny Pang from KPMG are also available to answer shareholder questions on the conduct of the audit, the auditor's report, the company's accounting policy or the independence of the auditor. All questions to the auditor should, in the first instance, be addressed to me. And if appropriate, I will ask Karen to address the question. Please note that we will focus specifically on the remuneration report later in the meeting, and we will be taking questions on that and the other specific item of business when we come to them. I note that no written questions for the auditor were received in advance of the AGM. I will now invite shareholders in the room who would like to ask a question on this item of business to raise their hand. Anybody have any questions on the financial reports? Okay, Sylvie, do we have any written questions received during the meeting.

No, Chairman. There were no questions received.

and do we have any participants on the phone wishing to ask questions? Link?

No, we do not. I don't think.

Thank you. It appears there are no further questions on this item of business. We now move to the 2 resolutions, which do require voting. For each resolution, we will show you the proxies received prior to the meeting. The final number of votes, including the votes cast in person and through the online platform voting from today. It will be collated after the meeting and released to the ASX. I wish to confirm that I am holding open proxies in my capacity as Chairman, and it is my intention to vote all available undirected proxies in favor of all of our solutions. First resolution that Mr. John Edstein, who retires by rotation from the Office of Director in accordance with the company's constitution and being eligible is reelected as a Director of the company. First -- sorry, John Edstein was last elected at the 2019 AGM and now stands for reelection. Details of John's career are set out in the explanatory memorandum accompanying the Notice of Meeting. The Board, with John abstaining, unanimously support his reelection. I now invite John to the podium to say a few words.

Thank you, Nancy. Hopefully, what I have to say is a bit simpler than how to vote and how to ask a question. As Nancy said, my name is John Edstein. I have been a member of your board since 2014 when PIC was listed. And this will be the last time that I stand for reelection, as also flagged in the materials -- my CV's in the materials. But in brief, I am a lawyer, having been admitted to practice in 1979, and having retired from the partnership of a large law firm in 2012. Since then, in addition to PIC and the 2 PIC committees, I have served on several boards in the superannuation and funds management industries. They've included committee memberships across risk and compliance, customer services, people and culture and the investment committee of a large industry superannuation fund. Turning to the work that we do on the Board. Obviously, it's widely varied. But as an indication for you, I do urge you to read the corporate governance statement, which we must issue each year, which is on our website. Obviously it is a regulated document. We do put a lot of work into it. And we -- it is -- we aim to have it as readable and informative as possible, obviously, relating to governance of the company and thereby very much involved in what the Board does. It covers various matters, including our policies and charters, our Board skills matrix, our culture and our risk management. And I thank you for your support of the Board and me to date, and I look forward to being able to continue to work for the company and now for this my final turn. Back to you, Nancy.

Thank you, John. I note that there are no written questions regarding the resolution received in advance of the AGM. I'll now invite shareholders in the room, who would like to ask a question of John on the item of business to raise your hand. Sylvie, do we have any written questions received during the meeting?

No Chairman.

Do we have any participants on the phone wishing to ask questions?

No.

Thank you. It appears there are no further questions on this item of business. I note that the proxies received are as displayed on the screen. I'm not going to read them out loud, but the proxies received are as follows, and you can see them up there. I hope it's not too small. To vote on the resolution, please cast your vote now. If you haven't already done so, by selecting either for, against or abstain for Resolution 1 on your voting card through the online platform. [Voting]

I wish they could have that Jeopardy music as people fill in that card here. We need to have something here. All right. So I presume you've all done that. Moving on to Resolution 2, that the remuneration report of the company for the financial year ended June 30, 2022, is adopted. The remuneration report forms part of the director's report and is included in the company's annual report for the financial year ended June 30, 2022. As you will note, the remuneration report contains the remuneration paid to its directors who are the key management personnel. The company has no paid employees, and accordingly, the 2022 remuneration report is simple and brief. There were no written questions regarding this resolution received in advance of the AGM. I'll now invite shareholders in the room to put up their hand if they have any questions. No? I'll now respond to any online questions. And do we have any questions on the phone? I don't believe so. Thank you. It appears there are no further questions. I note that the proxies received or is displayed on the screen for Resolution 2, you can see them there. I now ask you to cast your vote, for, against or abstain for Resolution 2 on your voting card or through the online platform. [Voting]

I will now take questions received on any other business before the meeting. Sylvie, please let me know if you've received any further questions?

No, there are no outstanding questions.

Thank you. I'll now ask Link to advise if there are any further questions from shareholders on the phone. I don't think so. Are there any further questions in the room? For shareholders in the room, and I ask you to ensure that you completed your voting card for each resolution. Link staff will now come around and collect your voting card to be placed in the ballot boxes. For the shareholders online, if you're uncertain about any of the voting procedures, please use the help line number available to the platform. Voting on all polls will close 5 minutes after I close this meeting. The results of the poll will be announced via the ASX this afternoon, and will be made available on the AGM section of our website. There being no other business, I declare this meeting closed. I thank you for your ongoing support and your attendance today. Can I invite those of you attending in person to please join his next door for some refreshments, and you'll catch members of the Board and to get more PIC -- stock PIC from Vince and Alex, I think, from what I see, any way. Thank you very much.