REACT Group PLC (REAT) Earnings Call Transcript & Summary

Good afternoon, and welcome to the REACT Group PLC 2023 AGM proceedings. [Operator Instructions]. I'd now like to hand over to Mark Braund, Chairman. Good afternoon.

Thank you, Paul. Good afternoon, and welcome to everybody. As you probably all know, this is a script. We have to read the script or I will be reading the script. So excuse, rather still approach, but I will press on. So ladies and gentlemen, I'd like to welcome you today to the company's Annual General Meeting. I'm Mark Braund, your company's Chairman, and I will be chairing this meeting today. Thank you very much indeed for making the effort to attend today's meeting. The notice of Annual General Meeting was issued on the 24th of February 2023, and due notice of the meeting has accordingly been issued to the company's members. We have a number of other shareholders in attendance at this meeting by the Investor Meet platform. But as set out in the letter from the Chairman of the company, which accompanied the notice of the Annual General Meeting, none of them will be able to vote on the matters to be considered at this general meeting. There are also a number of people attending this Annual General Meeting in person who are not members of the company, including certain of our advisers, unless anyone has any objections to the attendance of such nonmembers, I should continue by formally opening the meeting. No objections? Brilliant. We'll move on. Quorum. The quorum of this meeting is 2 members present in person or by proxy. Having checked the number of such persons present, I declare that the quorum is present, and I further declare the meeting open. Voting. Before proceeding to the business of the meeting, I'd like to remind you of the methods of voting at the meeting. Resolutions will be decided on a show of hands unless a poll is demanded in accordance with the Articles of Association of the company before on the declaration of the result of a vote on a show of hands. On a show of hands, every member or corporate representative who is present, either in person or by proxy has 1 vote and on a poll, every member or a corporate representative present in person or by proxy has 1 vote for every share of which he or she is the holder. A poll may be demanded by me as Chairman or at least 5 members of all their proxies, having the right to vote at the meeting. Any members or members present in person by proxy and -- sorry, or in person and/or by proxy, representing, in aggregate, not less than 10% of the voting rights, total voting rights of members having the right to vote at a meeting or a member or members present in person or by proxy holding shares of the company, conferring a right to vote at the meeting being shares on which in aggregate sum has been paid up equal to not less than 10% until some paid up on all the shares conferring at that right. With your permission, I propose that we take the notice convening the meeting as having been read. Is this agreed? Yes. Brilliant. Okay. Questions. By way of a reminder, questions can be submitted at any time during the Annual General Meeting by the Ask a Question function on the Investor Meet Company dashboard and by anybody present in the room at the end of the session. I'd now like to briefly introduce the Board. We have, to my left, Shaun Doak, the CEO; to my right; Andrea Pankhurst, the CFO. We also have in the room, you can't see him on camera, I'm afraid. Rob Gilbert, who is one of our Non-Executive Directors, an independent Non-Executive Director. And Michael Joyce, unfortunately, sent his apologies, but he's joining by the Investor Meet platform. Before starting the formal proceedings, I'd like to read you a statement on trading during the year that was released to the market via our regulatory information service this morning. So we'll read that now. Let me announce the group's results for the year ending 30th of September 2022, in February, the Board noted the new financial year has started positively with the first quarter delivering a record performance. Notably, the group has benefited from its ability to cross-sell other business services into existing and new customers. Evidence of this is the recent contract win with an estimated value of GBP 800,000 in the current financial year to provide services through a coordinated program from all 3 segments of the business to a large fast service food restaurants across all sites in the U.K. This positive contract win momentum has continued with good sales growth in all 3 divisions of the business. LaddersFree, one of the largest window cleaning -- sorry, one of the largest commercial window cleaning businesses in the U.K. continues to have strong sales performance with recent notable contract wins including a prestigious nationwide furniture retailer and another restaurant group with some of the U.K.'s best known brands. LaddersFree is benefiting from a mix of national and local customers, enabling it to deliver material growth for the group. Fidelis experienced a slightly slower start to the year, but as has won some significant new contract awards a GBP 500,000 18-month contract with a sizable Midland-based school has been agreed, alongside numerous contract renewals, which include other school, another school worth around GBP 540,000 over 3 years and an annual contract with NHS -- with an NHS Trust with almost GBP 200,000. THAT business, which provides a solution to often urgent one-off situations has had a steady period in which it has won new contracts to carry out high level cleaning projects for established facility management businesses, schools and universities. These ad hoc contracts can be valuable, but by definition, are less dependable. The group continues to benefit from further cross-selling opportunities, and the pipeline of new business is strong. Once we are witnessing good demand for our services, the Board is continually mindful of the economic environment particularly in the retail and hospitality centers and therefore, views the future with cautious optimism. That's the end of the segment. So I'd now like to start the full proceedings of this Annual General Meeting. So we'll be -- so we'll proceed to vote on the resolutions, which I will formally propose to the meeting. The full text of each of the resolutions is set out in the notice of the meeting, a copy of which you will have received. So Resolution #1 is to receive and adopt the accounts. The first resolution is to receive the top of the company is again, sorry, duplication. Annual chance for the financial year ended 30th of September 2022, together with the directors report and auditors report thereon. Are there any questions? I now propose Resolution 1. The text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. [Voting]

That's 5 out of 5. Thank you very much. Sorry, all those against? There are -- there is nothing else to vote. So I hold 22 proxy votes, representing 620,476,220 shares in favor of this resolution. There are no votes at the Chairman's discretion on this account. And there are 2 votes against representing 780,000 shares and none are withheld. I therefore declare that this resolution has been passed. Resolution 2 appoint auditors and to determine their remuneration. The second resolution relates to the appointment of Dains LLP as auditor of the company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting, which accounts for laid before the company and gives the directors authority to determine their remuneration. Are there any questions? None, okay. I now propose Resolution 2, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. [Voting]

That's 5 of 5. Thank you very much. They are none against in the room. I hold 22 proxy votes, representing 620,521,220 shares in favor. Again, no shares of the Chairman. 2 shares -- 2 votes against, representing 735,000 shares and none are withheld. I therefore declare that this resolution has also been passed. Next resolution is to reelect the director. This relates to the reelection of Michael Joyce, who is retiring in accordance with the Articles of Association and being eligible, is offering himself for reelection at this Annual General Meeting. The Board is recommending that Michael Joyce to be reelected as a Director. Are there any questions? No. I now propose Resolution 3 for the election of Michael Joyce, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. [Voting]

That's 5 out of 5. There's nobody in room with vote left to vote against. I hold 22 proxy votes amounting to 620,351,220 shares all in favor. No Chairman's discretionary votes. There are 2 votes against, representing 780,000 shares and 1 vote representing 125,000 shares, which have been withheld. I therefore declare that this resolution has been passed. The fourth resolution, which relates to the authority to allot shares and grant rights to subscribe for or to convert any security into shares of the company. Before the directors are able to issue shares or convert any security into shares they must first be authorized by shareholders to do so. The maximum number of shares that may be allotted under this authority is limited to an aggregate nominal amount of GBP 264,412.13, being approximately 10% of the normal value of the company's issued ordinary share capital, excluding treasury shares as at 23rd February 2023. The authority will expire at close of business on the day falling 18 months after date of passing this resolution or if earlier at the end of the next year's Annual General Meeting. Are there any questions? No. I now propose Resolution 4, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. [Voting]

That's 5 out of 5. All those against, there's nobody here to vote against. I hold 21 proxy votes amounting to 618,727,888 shares in favor. There is 1 vote by the discretion of the Chairman, which is 3,332 shares, which I vote in favor. And 4 votes 2,525,000 shares against none are withheld. I therefore declare that this resolution has been passed. The final resolution gives the directors authority to allot equity securities for cash without first offering them to existing share in proportion to their existing holding of shares. This authority should be limited to: CREST, for one, the allotment of equity securities in connection with the rights issue or other preemptive offer; or 2, otherwise, the allotment of equity securities or sale of treasury shares to any person up to an aggregate nominal value of GBP 132,206.6, representing approximately 5% of value of the company's issued extraordinary share of capital, excluding treasury shares as at the 23rd of February 2023. The authority will expire at the close of business on the date falling 18 months after the date of the passing of this resolution or if earlier at the end of next year's Annual General Meeting. Are there any questions? No. All those in favor, please raise your hands. [Voting]

That's 5 out of 5. Nobody else left in the room to vote against. I hold 20 proxy votes, representing 618,724,888 shares in favor. One Chairman's vote -- sorry, one Chairman's discretion vote, 3,332 shares, which are voted in favor and 4 proxy votes representing 2,527,000 shares against and 1 vote representing 1,000 shares withheld. I therefore declare that the resolution has been passed. That concludes the formal proceedings of the meeting. And I, therefore, now declare this general meeting of the company closed. We will be answering questions shortly. The results of the meeting will be announced to the market through our regulatory information service and posted on our website as soon as practical. Thank you very much.

So I have 2 questions online here. The first one was sent in prior to the meeting. So I don't actually have the name of the person who submitted this, I'm afraid. The question is, have REACT changed the RNS announcement about new contracts. So higher value before RNS announcement is qualified. Now I think I know where this is coming from. Basically, in the distant past 2, 3 years or so ago, we would be announcing deals that were material to us at that time when we were a smaller company. There might be GBP 100,000 or GBP 200,000 a year in revenue terms. And of course, that would have then been material. However, based on advice, both from AIM in particular. And from our NOMAD, Singers, we've taken a more conservative approach towards announcing deals. If they are material, we're talking now in terms of deals at sort of GBP 0.5 million and up, I think, in terms of revenue unless they are very high-margin deals. Then they will not be announced on their own. They'll be scooped up and announced every 2 or 3 months when we make other announcements to the market, and we'll update you in the way we have done the last 3 or 4 announcements that have been made by the company. So we will give a general update on a more frequent basis. But in terms of specific deal announcements, you should not anticipate those coming through unless they are genuine material value. And then the other comment I'd make, which is something that we discussed at the last Investor Meet meeting, which would have been for our results was that the company is still pursuing large deals. But actually, those large deals do come at a price, and that is margin. And you'll have seen that we are now attending to improve and increase the margins once again in the business, as we did sort of 3 years ago. So there is a lot more activity at sort of the midsized deals the margins are richer. So basically, all that is code for saying don't expect to see a lot of big one-off deals. While they sometimes do move the dial, what will move the dial equally as much is good momentum across the piece in the way that we've been performing lately with a lot of good and midsized deals, especially where we involve cross-selling of higher-margin products. Second question is from Adrian Gee. I've not preread any of these. So this says has the record performance in Q1 continued into Q2. Today's RNS suggests a slight slowdown in Fidelis and REACT, but then in contrast, is a statement that positive contract win momentum has continued with good sales growth in all 3 divisions the business. Basically, I've got nothing to add to the statement we've made. Q1, obviously, with the addition of LaddersFree was clearly a record and everything was pumping on all -- fired on all cylinders. Yes, we did have some a bit of a slowdown in Fidelis at the beginning of the year and REACT has been one that has been recovering from a year or so ago. But at the end of the day, what we said in the statement rings true. The business got good momentum. There is very good pipeline isn't it, and that is only set to continue, I think. But we're obviously always mindful of the economic conditions we're working in. The fact is that the market we have to -- the ability to address is so big that even if there is a turn down, we think there's still plenty of opportunity for us to go after. So hopefully, that answers the question, Adrian. David O. Are you able to mention the cumulative value of contracts secured year-to-date? No, is the answer. That's getting into too much detail, I'm afraid. And with NOMAD sitting here, smiling at that question. I'm sorry to say the other has to be no. But there will be obviously more information as we come to turn at the half year with our interims. Same -- sorry, another question for you, David. You have mentioned a strong pipeline aided by cross-selling of the group services across a broader customer base. Is it pipeline likely to draw of contracts secured years unchanged? Well, it's all about win rate, and our win rate is actually quite strong as it has been for a while. I mean, Shaun and his team are excellent in getting from the customers and selling. I don't think I can answer that question very accurately. Basically, it's just a good, solid, strong pipeline.

Yes.

We're a bigger company now. And I guess the pipeline sort of reflects that. And we know we've got more to do and we've got more that we're mobilizing in terms of sales and marketing effort. I generally don't think I can be any more specific on that.

Yes, Yes.

I think, you have covered all.

Okay. That's the last question. Hopefully, that one answers that for you, David. Malcolm, do you have a question that is a shareholder in the room? No, no questions. So that brings the proceedings to an end. Thank you very much again for your time and we appreciate your support. Paul, back to you.

Fantastic. Mark, thank you and the team for updating attendees today. Can I please ask the attendees not to close the session, should be automatically redirected to provide your feedback in order the Board can better understand your views and expectations. This will only take a few moments to complete and it's a great value by the company. On behalf of the Board of REACT Group PLC, we would like to thank you for attending today's AGM proceedings. Many thanks indeed.