Region Group (RGN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to SCA Property Group's 2020 Annual General Meeting. On behalf of the Board, I extend a warm welcome to all our unitholders participating in today's meeting. I would like to commence by acknowledging the traditional owners of the land on which we are formally conducting this meeting, the Gadigal people of the Eora Nation. Recognizing that you may be participating in this meeting on land with the other traditional custodians, I pay my respects to elders past, present and emerging of all of those custodians. Due to the current COVID-19 pandemic and in the interests of the health and well-being of our unitholders and other stakeholders, we thought it prudent to avoid a physical public gathering and to encourage alternate attendance online. We also heard that holding a virtual meeting will encourage greater participation and engagement amongst our unitholders and stakeholders. If we experience any technical issues today, a recess or an adjournment may be required, depending on the number of unitholders being affected. If this occurs, I shall advise you. My name is Philip Marcus Clark, and I'm the Chairman of the group. I've been appointed as Chair of this meeting, and I now table my letter of appointment. This afternoon, we are simultaneously holding the meetings of Shopping Centres Australasia Property Management Trust and Shopping Centres Australasia Property Retail Trust. And for the rest of this meeting, I'll refer to the business of each trust conducted as one meeting. SCP's independent directors and senior management are joining me in the room or participating via webcast today. My fellow independent directors are: Steven Crane, Deputy Chair of the Board, Chair of the Remuneration Committee, member of the Nomination Committee and the Investment Committee; Dr. Kirstin Ferguson, Chair of the Nomination Committee and member of the ARMCC Committee and Remuneration Committee.

Good afternoon.

Beth Laughton, Chair of the ARMCC and a member of the Remuneration Committee and Nomination Committee. And...

Good afternoon.

Belinda Robson, Chair of the Investment Committee and member of the Remuneration Committee and Nomination Committee.

Good afternoon.

Our executive directors are: Anthony Mellowes, our Chief Executive Officer; and Mark Fleming, our Chief Financial Officer. Joining us in the room is Mark Lamb, our General Counsel and Joint Company Secretary, who will be acting as moderator. We have Andrew Coleman from the group's auditors, Deloitte, as well as representatives of the group's registry, Link Market Services, joining us today. I've been informed by our company secretaries that a quorum is present, and I declare the meeting open. The agenda for the meeting will be as follows: the Chairman's address; the CEO's address; formal business of the meeting, which includes the resolutions of the meeting; and general business questions. Voting on the resolutions will be conducted by way of poll. Unitholders attending the meeting online will be able to cast their vote using the electronic voting card received when online registration is validated. Please refer to the virtual annual meeting online portal guide or use the help line specified in the guide. Following the voting, general business questions will be taken. [Operator Instructions] I do encourage unitholders to send their questions through as soon as possible. General business questions received from unitholders prior to the meeting will be addressed during the general business questions period. [Audio Gap] There's 4 areas. First, I'll overview SCA's financial performance and return to unitholders. I'll outline our response to the COVID-19 pandemic, then some brief remarks on governance matters. And I'll conclude by looking ahead. As I've done at recent AGMs, I'll present some metrics which give a long-term perspective to our performance. Our CEO, Anthony Mellowes, will provide more detailed commentary on FY '20 results in his presentation, which will follow mine. Anthony will also update you on FY '21. And while I don't want to steal his thunder, I think you'll be pleased with what he has to say. Our commitment to unitholders is to deliver secure earnings and distributions which grow over time. You can see from this slide that we've delivered earnings and distributions which have grown over the years until the pandemic struck in 2020. In FY '20, we were traveling well until the COVID-19 pandemic. We reported a strong result for the 6 months to 31 December 2019. This was reflected in a record unit price of $3.17 on 19 February 2020. However, the unit price fell as low as $2.05 on 19 March as the impact of COVID was felt. The price recovered some ground and closed to $2.18 on 30 June 2020. [Audio Gap] It traded in the -- and has recently traded above $2.40. I remind you that in December 2012, at the time of our initial public offering, the unit price was $1.40. Total unit holder return measures both unit price growth and distributions. SCP's total unitholder return has outpeformed the ASX AREIT index by 11% over the last 5 years. Distributions to unitholders increased every 6 months since 2014, except for June 2020, which was impacted by the pandemic. Our management expense ratio, which measures corporate costs as a percentage of total assets, is low. That's because we maintain tight control over corporate overheads. We are a low-cost operator measured against our peers. Capital management. Our weighted average cost of debt is currently 3% per annum and continues to be among the lowest in the sector. Our average debt expiry is 6.2 years and again has consistently been amongst the longest in the sector. We have our CFO, Mark Fleming, and his team to thank for those excellent outcomes. I'll highlight 4 of the many responses we made in response to COVID. Firstly, we strengthened our balance sheet. In April 2020, in response to the onset of COVID, the group raised $250 million by way of an unwritten institutional placement, which was followed in May 2020 by $29.3 million unit purchase plan offered to our retail shareholders on the same terms as the placement. The UPP once again demonstrated the Board's commitment to equal opportunity for retail unitholders in capital raisings whenever that aligns with our capital management strategy. Institutional demand for the placement was 3.5x oversubscribed with final demand at $889 million. Demand for the UPP was more subdued, given the prevailing uncertainty. The purpose of the equity raising was twofold: First, to strengthen the group's balance sheet to provide a buffer against future shocks such as the second wave of the pandemic and more stringent shutdown, as subsequently occurred in Victoria; secondly, to provide funding flexibility to continue to deliver on the group's strategy of investing in convenience-based, supermarket-anchored shopping centers as suitable opportunities arise. Anthony will update you on the implementation of our acquisition and development strategies. In addition, we secured $200 million of additional lines of credit, thereby assuring that the group had adequate funding to meet the repayment obligations of the medium-term note, which was due for repayment in April 2021 but has now been repaid to reduce interest expense. As a result, I am pleased to report our balance sheet remains strong. We reduced gearing from 34.2% at 31 December 2019 to 25.6% at June 2020. Also at June 2020, the group had $622.8 million in cash, cash equivalents and undrawn facilities. Secondly, we stuck to our strategy: sustainable tenants paying sustainable rents. We discharged our responsibilities to tenants by providing rental assistance to our specialty tenants in accordance with the National Cabinet mandatory code of conduct. Anthony will provide more detail. We did not apply it for JobKeeper, even though we may have been entitled to do so due to a technicality in our arrangements for paying corporate expenses. The Board did not consider that taking advantage of that technicality was the right thing to do in the circumstances where we were able to retain and pay our staff without JobKeeper. We also showed restraint in KMP remuneration. We exercised restraint on executive bonuses and remuneration. Given the group's financial circumstances, the Board decided, in consultation with our key management personnel, not to pay short-term incentives in 2020 nor to increase KMP remuneration, including directors' fees, in FY '21. Steve Crane will provide more detail when he delivers the remuneration report. Governance matters. First, our management team. At the opening of the meeting, I introduced our key management personnel: Anthony Mellowes, our CEO; Mark Fleming, our CFO; and Mark Lamb, our General Counsel and Joint Company Secretary. Our KMP is supported by a relatively small but very capable team. We have a good combination of experienced managers, supported by some very talented young people. I'd like to take this opportunity to introduce our senior managers and acknowledge the great contribution they make: Campbell Aitken, our Chief Investment Officer; Greg Inkson, Head of Corporate Finance and Funds Management; Janene Kellaway, HR Manager; Erica Rees, Senior Legal Counsel and Joint Company Secretary; Michelle Tierney, Chief Operating Officer. During 2020, our management and staff have been subjected to abnormal disruption and demands. That has created stress and anxiety not just in their working environment but also in their personal lives. I'd like to take this opportunity to acknowledge them and to thank them for the way they have responded to those challenges, for their commitment and for their hard work. The Board. Philip Redmond retired as a director effective 30 September 2020. Phil had been a director of the group since before we listed in 2012. Drawing on his extensive knowledge and experience as a former senior investment banker, Phil has made a great contribution as a director, particularly to our investment and capital management strategies. Phil also made a significant contribution as an effective Chair of our Audit, Risk Management and Compliance Committee, the ARMCC. One of the minor highlights of my year was presenting Phil with an unusual farewell gift, a beehive for his farm. On behalf of the Board, I thank Phil for his contribution and wish him well in retirement. Beth Laughton, who joined the Board in December 2018, has been appointed to chair the ARMCC. Beth is an experienced director with strong accounting and financial credentials. Steve Crane has been appointed Deputy Chair of the group. Steve also joined the Board in December 2018 and came to us with extensive management and Board experience and strong credentials as a director. Since joining the Board, Steve has helped ensure that the Board has met the challenges of a particularly difficult operating environment, and I welcome his appointment. Significant demands were made on the Board members during the year, and they have all risen to the occasion. I take this opportunity to thank my Board colleagues for their contributions and their hard work at numerous extra meetings. The directors and staff are sharing the financial pain felt by unitholders. Most of our staff own SP -- SCP units, and all of our directors have significant holdings in SCP. We have also suffered a diminution in the value of our investment and a reduction in distributions during the year. That hurt, even though we did perform -- outperform many of our peers in the retail property sector. Sustainability strategy. Anthony will report on our sustainability strategy, but I particularly wanted to acknowledge the progress we've made this year in implementing and reporting our sustainability programs. The Board strongly supports those programs, which discharge our social responsibility but also strengthen our business and deliver good outcomes for unitholders. The impact of the COVID-19 pandemic has already been significant and no doubt will endure for some time. Who knows how long? The pandemic will change the way we all live, work and shop for years to come. This is something we, at SCA, acknowledge as a challenge and embrace as an opportunity. Our opportunity is to make our centers even more relevant to their local communities and to make them locations where our tenants can conduct viable businesses. The Board remains committed to our key objective, which is to deliver secure earnings and distributions which grow over time. Our strategies have served us well. But in times like these, we know we need to respond to a changing world. So our Board and management will keep our strategies under close review. Finally, I acknowledge that 2020 has no doubt been a difficult and stressful time for our unitholders. In closing, I would like to thank you all for your continuing support and to thank you again for taking the time to join us here today via the Internet. I'll now hand over to Anthony.

Thanks, Phil. Good afternoon, ladies and gentlemen. My name is Anthony Mellowes, and I'm the Chief Executive Officer of the SCA Property Group. Phil Clark has outlined the group's achievements since listing. And this afternoon, I'll run through some of our key achievements for FY '20 and update our outlook for FY '21. For those of you not familiar with the SCP portfolio, as at the 30th of June 2020, it consisted of 89 managed shopping centers across Australia, being 85 on SCP's balance sheet, plus 4 managed properties in the SURF, which is SCP's unlisted funds management business. Approximately 48% of our income is derived from Coles, Wesfarmers and Woolworths with average lease tenures in excess of 10 years. And as at the 30th of June 2020, our portfolio was valued at approximately $3.18 billion. And we now have approximately 1,840 specialty tenants with total occupancy across the portfolio in excess of 80 -- of 98%. I'll now take you through some of the key highlights for the financial year ended 30th of June 2020 and, towards the end of my presentation, the outlook for FY '21. In FY '20, our earnings were negatively impacted by the COVID-19 pandemic. We delivered funds from operations of $0.1465 per unit, a decrease of 10% on the prior financial year. This enabled us to pay distributions to unitholders of $0.125 per unit, which was a decrease of 15% on the prior year. This represented a payout ratio of around 100% of AFFO. Our total funds from operations was $140.8 million for the year, which was a slight decrease on the prior year. Our gearing at the 30th of June 2020 was 25.6%, which is well below our stated policy range of 30% to 40%. Our NTA at the 30th of June 2020 decreased slightly to $2.22 per unit, down from $2.27 per unit at the same time in the prior year. This is due to transaction costs, stamp duty paid on our acquisitions and some COVID valuation impacts. Our portfolio occupancy was 98.2%, which represents a specialty vacancy rate of 5.1% at the 30th of June 2020. This included all of our acquisitions. Due to strong pricing for neighborhood centers over the past 2 years, SCA remained disciplined. However, we did take advantage of an opportunity to acquire Warner Marketplace in Brisbane, and we also completed stage 3 of our Shell Cove development. We disposed of Cowes in Victoria in February 2020 for $21.5 million, which was 10% above our June 2019 book value. Our key achievement for FY '20 was how the team dealt with the impacts from COVID-19. It affected all aspects of our business from our capital management initiatives. Our ability to charge and collect rent was compromised through to how we had to adapt very quickly with respect to how we cleaned and operated the centers. I'd now like to run through in a bit more detail how the pandemic affected the business and how we responded. The balance sheet. When the pandemic hit Australia in late February 2020, SCA took immediate steps to strengthen our balance sheet. We initially put in place some additional debt capacity and then undertook a capital raise that was well supported by both institutional and retail unitholders that raised $280 million. SCA was the first REIT in Australia to raise capital. On income. As the crisis was unfolding, relevant industry bodies such as the National Retailers Association and the Shopping Centre Council of Australia, together with the federal government, developed a code of conduct as to how landlords and retailers would deal with small to medium enterprises, or SMEs, as the crisis unfolded and as certain businesses were forced to close due to social distancing measures. Effectively, the code of conduct was a set of rules as to how tenant rental would or could be abated or deferred, and the landlord's ability to enforce the leases was reduced as well. At SCA, we called this Project Assist. And during FY '20, we abated approximately $8.8 million of rent to our tenants. April 2020 was the height of the pandemic at SCA with approximately 24% of our retailers closed. Costs at the center level were also affected. Our pandemic cleaning regimes were enacted, and this meant not only additional hours of cleaning but also additional types of cleaning products were required. We also engaged extra security at our centers to ensure that social distancing measures were enforced. These increased measures, which were absolutely necessary, cost approximately $1.6 million for the FY '20 year. And the recovery process. As the pandemic took hold, it became clear that the local convenient centers in the suburbs were, in fact, showing strong signs of recovery. Some of our sales categories never decreased their sales but increased them at levels not seen in Australia before. Supermarkets are a good example. Our marketing tagline for the past 5 years of Love Local, Shop Local, Act Local has never been more relevant. With respect to our existing centers, the supermarkets Coles and Woolworths continue to perform strongly, increasing their moving annual turnover sales growth at June 2020 to 5.1% per annum. Our discount department store category increased to 7.6%, and our specialty stores reduced slightly by 1.1%. However, since June 2020, the sales growth has accelerated. Notwithstanding the lockdowns experienced in Victoria, the September 2020 quarterly sales for supermarkets were 10.5%, up on the previous -- on the corresponding period of the prior year. Discount department stores were 14.1% up, and the specialties were flat. If you exclude Victoria, which is approximately 18% of our portfolio, the supermarkets were 9.4% up. Discount department stores were 22% up, and the specialty stores were 7% up on the corresponding period last year. The October 2020 sales have followed similar trends with a strong rebound in Victoria's specialty sales. The key statistics for our specialty tenants remain relatively robust with an occupancy ratio of only 10%. We concluded 232 renewals at a slightly negative 1%, and our retention rate was 76%. We continued to lease to new tenants throughout the pandemic, and we concluded 148 new lease deals at a negative 7.7% for the FY '20 year. And we're seeing similar numbers in FY '21. Our rent or cash collection rates have been improving since the pandemic hit in March 2020. Our collection rates hit a low in April 2020 at 69% and have improved each month. In October 2020, we collected 85% of the rent invoiced in October and collected a further 11.5% of the rent invoiced in prior months. Although we are not yet back to pre-pandemic levels, our progress has been steady and shows the resilience of our portfolio. With respect to our currently identified growth opportunities of acquisitions, development and funds management. Acquisitions, as outlined earlier, we completed an acquisition at Warner Marketplace in Northern Brisbane for $78.4 million and disposed of Cowes in Victoria in February for $21.5 million. As previously announced, we also settled Bakewell in the Northern Territory for $33 million on the 30th of September 2020 and contracted to acquire the adjoining petrol station for $6.4 million in October 2020. This acquisition rounds out the entire block. On Thursday, the 19th of November 2020, we also announced the acquisition of Auburn Central in Sydney, New South Wales for $129.5 million at a yield of 6%. We anticipate settling this asset early in 2021. With respect to our developments, we completed stage 3 of Shell Cove, which is just south of Wollongong in New South Wales, for $4.8 million. Our funds management business continues to be active. SURF 1 was launched in October 2015 and successfully sold the 5 assets, consistent with the product disclosure statement. Our fund generated an internal rate of return, or IRR, of 11%, and the fund is now in the very final stages of being wound up. SURF 2, which comprised 2 assets, being Katoomba, Woolworths and Big W; and Mittagong, Dan Murphy's, Mittagong was sold in June 2020 for $9.7 million, and the proceeds were used to delever the SURF 2 balance sheet. And this fund continues to distribute in line with the PDS. SURF 3 was launched in July 2018 with 4 properties. Swansea was sold in July 2020 for $15.6 million, and the proceeds were used to repay debt and strengthen the balance sheet of SURF 3. As SCP has matured over the past 8 years, so has the planning and execution of our sustainability practices. We have 3 pillars to our sustainability strategy which guide the investments and initiatives that we implement each year. Our sustainability strategy will continue to deliver positive outcomes for our customers, our retailers and our investors. The first pillar is stronger communities. The second pillar is environmentally efficient centers, and the third pillar is responsible investments. I'll now go into a little bit of detail on each of those. Stronger communities. 2020 has been a challenging year for the communities that we serve. Extreme weather events and COVID-19 has seen the need for SCP to support our retailers and local communities in new and varied ways. Through rent relief for COVID-19 restrictions, shelter for affected communities and partnering with charitable organizations, SCP has endeavored to improve the engagement and relationship with our customers and the communities in which we reside. During 2020, SCP formed a corporate partnership with The Smith Family. The Smith Family is a national, independent charity helping disadvantaged Australians to get the most out of their education so that they can create better futures for themselves and believe supporting a child's education is the best way to help break the poverty cycle. The Smith Family works across 91 communities in Australia, where the communities have been identified as having higher concentrations of families living in economic disadvantage and are across all Australian states and territories. The Smith Family targets and supports disadvantaged youth through education, allowing these youth to participate fully in their education, giving them the best chance of breaking the cycle of disadvantage. We have committed to a 3-year partnership with The Smith Family that will provide opportunities for our staff and our center teams to provide volunteering assistance and participate in charitable activities in support of disadvantaged youth. I look forward to building this relationship and being able to provide positive examples of collaborative activities delivered between SCP and The Smith Family. Interest in sustainability performance of our centers continues to grow with the impacts of climate change on our communities such as fire, drought and extreme weather conditions increasing in frequency. We recognize the need to continuously improve the efficiency of our centers' consumption of natural resources while minimizing waste and emissions productions. We're pleased to confirm that we exceeded our 3-year target for the reduction of energy consumption. Our target was 4%. Actual was 8% and met our target for the reduction of GHG emissions. Our target was 8%, and our actual was 7.5%. We're developing future targets that will focus our efforts on further reductions across a range of areas such as water, waste, energy and carbon emissions. The specific focus areas will include: Renewable energy generation and storage, reviewing current market practices for on-site renewable energy generation, developing technologies such as batteries and sourcing renewable energies from external sources to move towards a low carbon operations; building automation, the continued installation of smart building controls, managing the energy consumption of the building's systems such as air conditioning, lighting and energy demand; and waste management, working with all of our retail partners to ensure waste production is minimized, encouraging active participation in recycling programs, new shop fit-outs utilizing recycled or repurposed materials and food waste diverted from landfill through technologies such on-site treatments. Climate change and the need to manage climate risk is an evolving area for SCP. Earlier in 2020, we engaged in an external party to complete a climate risk assessment across all of our properties. This risk assessment focused on future climate changes and the possible impacts they may have on our portfolio. The assessment focused not only on the physical impact of extreme weather, it also reviewed management capabilities in dealing with weather events. Our teams are well prepared in this area and have demonstrated a positive spirit and a professional approach in managing extreme weather events. SCP will further the risk analysis by moving into the second phase of the assessment, which is assessing further identified higher-risk properties during 2021. With regards to disclosure and transparency on performance, we have recertified the portfolio under the Green Building Council's rated tool, Green Star - Performance. We maintained our 5.5-star NABERs energy rating for our head office, and we'll continue our participation in external investor and adviser benchmarking of our ESG performance through GRESB. Results of the annual GRESB benchmarking are expected shortly, but we acknowledge that there is still work to be done, and this process will be an ongoing one. In summary, I'm really pleased with our ESG results to date and believe that our focus on supporting our local communities and partnering with legal -- with leading social charities such as The Smith Family place SCP in a strong position for future growth in the area of environmental, social and governance performance. Our strategy has remained unchanged since we listed 8 years ago, and a lot has changed in 8 years, particularly the challenges facing the retail industry as a result of the pandemic. My senior team and I, in conjunction with the Board, have spent a lot of time challenging ourselves as to whether, in fact, we have the right strategy or whether we should vary or change it. I'm pleased to say that we are uniform in our belief that our strategy is, in fact, the correct strategy for these challenging times in the retail industry. We will continue to deliver defensive, resilient cash flows to support secure and long-term distributions to our unitholders. We will do this by continuing to focus on convenience-based retail centers, which are weighted towards those nondiscretionary retail segments of food, pharmacy and medical and retail services. These are the necessities for the everyday spend of households. The benefits of these retail categories is that there is a very low volatility, and they are required by all demographics every day of the week of every year. We'll continue to have an appropriate or conservative capital structure, and we'll continue to seek out growth opportunities which suit our risk profile in a disciplined way. We'll continue to deliver on our stated strategy in FY '21, which assumes a continuation of the current economic environment of low inflation, low interest rates and relatively low unemployment. We'll continue to focus on optimizing our core business by focusing on sustainable tenants at sustainable rents. Our asset management teams are exploring additional new income opportunities across the portfolio; and all teams, whether at a corporate or center level, managing our expenses to grow at a level that is no greater in percentage terms than our income growth; and commence work on our sustainability project to reduce the environmental footprint of our buildings while continuing to be a central component of the communities that we serve. We'll also focus on our growth initiatives by continuing to seek value-accretive acquisitions consistent with our strategy and investment criteria and continuing to progress the identified development pipeline. We'll continue to actively manage our balance sheet to maintain diversified funding sources with a long weighted average debt expiry and a low cost of capital, consistent with our risk profile. Of course, if there's any material change to the current macroeconomic conditions, our strategy will need to adapt to these changes. But at this stage, I believe that maintaining our gearing at the lower level of our preferred range is the appropriate setting. Finally, I'm pleased to reaffirm the SCP guidance for December 2020: it's that for distributions per unit of between $0.055 to $0.057 per unit, and the second half DPU will be greater than the first half. Thank you for your time this afternoon, and I will now hand back to Phil.

Thanks, Anthony. Ladies and gentlemen, we will now progress to the formal business of today's meeting, matters requiring resolution, which are outlined in the Notice of Meeting. The resolutions for consideration today may only be voted on by unitholders, proxy holders and unitholder company representatives. Unitholders participating online through the virtual meeting website will have the opportunity to ask questions or make comments on each matter being put to unitholders. I've been informed that the Notice of Meeting was available online to all registered members within the notice period required. I now table the Notice of Meeting. And unless there are any objections, I will take the notice convening this meeting as read. A reminder that we are simultaneously holding the meetings of Shopping Centres Australasia Property Management Trust and Shopping Centres Australasia Retail Trust. And although only one resolution will display on the presentation slides and you will only be asked to vote once on each resolution, your vote will be taken as a vote for each trust. In accordance with the Corporations Act, as Chairman of the meeting, I demand a poll on each resolution to be considered in this meeting. I'll endeavor to give all unitholders who wish to comment or ask a question a reasonable opportunity to do so. I do ask that you please keep your questions or comments related to the matter at hand and as succinct as possible. [Operator Instructions] Resolutions 1, 2, 3, 4 and 5, set out in the Notice of Meeting, are ordinary resolutions and, as such, must be approved by a simple majority of the votes cast by unitholders entitled to vote in voting on the resolutions. Resolution 6, set out in the Notice of Meeting, is a special resolution and, as such, must be approved by at least 75% of the total votes cast by unitholders entitled to vote in voting on the resolution. I have demanded a poll on all resolutions. You should record your vote by selecting the for, against or abstain squares for the relevant resolution shown on the electronic voting card. We will announce the results of the vote to the ASX following the end of the meeting. I now open the poll. I appoint Link Market Services as scrutineer for the poll. In accordance with the Corporation Act, each member will have one vote for each dollar of the value of the total SCP securities held by them. Link have the details of this value per security. I've been advised by Link that all proxies received have been checked. And those that have been found to be properly completed, I declare valid for voting at this meeting. I will disclose proxy votes on the screen prior to the vote being taken for each resolution. These figures will be at the closing time for receipt of proxies, which was 2:00 p.m. on Monday, 23 November 2020. These figures may change if a unitholder who previously submitted a proxy has joined the meeting online today and revoked their proxy. I remind the meeting that the Chairman will vote all undirected proxy votes in favor of all resolutions. All voting by the Chairman is subject to the voting exclusion details included in the Notice of Meeting. The first item of notified business is to consider the annual financial report, directors' report and the auditor's report for SCA Property Group for the financial year ended 30 June 2020. There is no resolution in respect of this item of business. But if there are any questions or comments on the annual report, you may submit them now. Mark, are there any questions or comments on the management of the group?

Yes, Chairman, we have one from the Australian Shareholders' Association. I will note that I will be reading all unitholder questions and comments verbatim. "The ASA congratulates SCA, its Board and management on successfully navigating an extraordinary year of business disruption and community impacts arising from COVID-19 pandemic. We are particularly heartened by the recent trading update, showing an increase in shopping activity and rental collections over the last 3 months, even while Victoria was in lockdown."

Thanks, Mark, and thank you to the ASA for those kind words. I'll ask Anthony Mellowes to respond to that question.

Yes. Thanks very much. It was a very trying time, and we did do very well in terms of all of our responses to COVID. And it was a lot of help from the Board. We had weekly meetings during the lead-up to it. But overall, it was a very good, well-oiled response, and we're very pleased with how we've come out. Obviously, we followed the code of conduct, which was outlined by the government, which set those framework as to how we would do rental rebates to our tenants.

Thanks, Anthony. Mark, are there any questions or comments on the financial statements and reports?

Nothing at this stage, Chairman.

Thanks, Mark. And are there any questions or comments relevant to the conduct of the audit or the preparation and content of the auditor's report for the directors or the auditor?

None at this stage, Chairman.

Thank you. I'll now move on to the second item of notified business to consider and, if thought fit, to pass the following resolution as a nonbinding ordinary resolution, that the remuneration report for the year ended 30 June 2020 be adopted. This resolution is an advisory, nonbinding ordinary resolution and does not bind the directors of Shopping Centres Australasia Property Group RE Limited. We will disregard any votes cast on this resolution by those persons set out in the voting exclusion section of the procedural notes section to the Notice of Meeting convening this meeting. On behalf of the Board, I'd like to take this opportunity to thank the Remuneration Committee, the Chair, Steven Crane, and each of the members for all the work they've done. 97.47% of votes cast at our 2019 AGM were in favor of the remuneration report. And based on the proxy votes received before the start of this meeting, it looks like the 2020 remuneration report will receive a similar level of support from unitholders. I'd now like to hand over to our Remuneration Committee Chair, Steve Crane, to present the remuneration report.

I'm pleased to present the SCA Property Group remuneration report for financial year 2020. As unitholders are well aware, financial year 2019/'20 was certainly without precedent, impacting many lives and businesses, which, in turn, has directly impacted trading conditions for our tenants and customers. It's also changed the way our management and staff work. Despite these challenges, our team immediately responded to the changed working environment, both implementing new mandated COVID-related regulations, requiring rental reductions with tenants and switching to working remotely. This environment, combined with our capital raising to strengthen our balance sheet, saw us not achieve our STI financial metrics for fiscal year 2020. Additionally, given the impact of COVID-19 on the unit price and unitholder distributions, the Board exercised negative discretion in not awarding any payment for the personal component of STI. This was supported by management. While there's some increase in fixed remuneration for KMP of around 5% to 6% following our annual benchmarking review in 2019, this was the first increase in fixed remuneration since 2017. In setting STI targets for 2020/2021, we have focused on 2 metrics: AFFO and rent collection. Given the uncertainties of the future trajectory of COVID-19 and its financial impacts, we decided to split the objectives into the 2 halves of the financial year rather than attempt to predict suitable objectives for the entire year. At this stage, we've only finalized the first half targets. We intend to set the second half targets in December, January once the first half performance is clearer. Another enduring priority for the Remuneration Committee and Board is the retention of our well-respected senior management team. Consequently, we continue to regularly review the remuneration framework to ensure it remains fit-for-purpose and that the structure, design and mixture of remuneration for our senior managers fairly rewards and motivates them, having regard to the external market, their individual contributions and the overall performance of SCP. While this year has presented unique challenges, we believe our remuneration framework aligns unitholder interests with those of senior management to provide unitholders with an outcome that is fairly reflective of the current environment. On behalf of the Remuneration Committee, we look forward to your ongoing support in achieving the best results for our unitholders in financial year '21.

Thanks, Steve. I'd now like to open this item for discussion. Mark, have we received any questions or comments in relation to resolution 1?

Yes, Chairman. We've received a number of questions and comments. Perhaps we'll start with the Australian Shareholders' Association. And that comment is as follows: "The ASA supports this resolution, notwithstanding that it would prefer to see longer testing and retention periods for LTI awards. The ASA believes the remuneration framework is appropriate in terms of quantum and testing hurdles. We acknowledge and support the Board's decision to award no STI this year in the interest of unitholder alignment, but note, this should not be seen as any reflection on the management team, which has done a very commendable job during the pandemic."

Thanks, Mark, and thanks to the ASA again for those comments. Are there any additional questions in relation to the remuneration report, Mark?

Yes, Chairman. There are still a number of questions. We have a question from [ Celestine Eckrich ]. The question is, "When will the Board eliminate the current Remuneration Committee, which is purely self-serving? All KMPs are already extremely well paid, and there is no other input for ordinary stapled unitholders as to whether the increases awarded are warranted. Further, the awarding of STIs and LTIs is unnecessary, and I ask that this practice be ceased immediately."

Thank you. And thank you for that question. Could I ask you to respond, please, Steve?

Yes. Thanks, Phil. Look, I think we understand that the amounts that people get paid are a constant discussion point. But we undertake quite an extensive review of the market, our competitive environment. And we clearly need to go out and to have -- to run a good and successful company, we need good people. And the remuneration arrangements which we put in place, we believe, are reflective of that. And quite a lot of work goes into making sure that, that is the case. So I can assure unitholders that the Remuneration Committee spends a lot of time making sure that the arrangements that we have are suitable for this team and this place and the performance that we get. So I don't know that I can offer you much more comfort than that, other than that we take our obligations seriously on behalf of unitholders.

Thanks for your response, Steve. Mark, are there any further questions on resolution 1?

Yes, Chairman. Yes. Unitholder [ Robert Ralph ] asks, "Why is it necessary to offer long-term incentives to already highly paid executives? If they cannot do their job as required, they should be counseled by the Board. And if they don't like it, they should be replaced."

Again, Steve, could I ask you to respond, please?

Yes. Well, I think actually, there is certainly a large group of shareholders who believe that long-term incentives are actually very important in the way that we remunerate our executive team. And again, we do a lot of market sounding to make sure that, that's appropriate. And as the ASA already pointed out in their response to us, they actually like to see long-term incentives even probably longer and more available. I think -- look, I think it's, first of all, important to note that this management team received no STIs this year and didn't receive any personal component of their STI, which they were [Audio Gap] But I mean, in fact, management have taken a reasonably sizable cut in their remuneration this year. And I think you actually read that in the annual report. And so I think they've done that. In terms of the other parts of the question, I think, I've probably already dealt with the issues that are raised in the rest of the question.

I agree. Thanks, Steve. Next question, Mark?

A question from [ Marie Louise Taylor ], unitholder. "With the loss of income for the renters of SCA Properties, would it not be prudent for the CEO, CFO and Board to accept half their remunerations for the following financial year?"

Again, Steve, could I ask you to respond on behalf of the Remuneration Committee?

Yes. Certainly, Phil. Yes. Look, I think I've probably dealt with this question and that reductions have already taken place and I think some reductions that could have been argued by management, and they haven't. So -- and I think they've agreed with them. So I think that's a good outcome for unitholders.

Thanks, Steve. Next question, please, Mark?

Yes. This is a comment from unitholder [ Mark Sully ]. "Hell, with all the performance rights, remuneration the directors are entitled to, don't give to directors. Use the funds to employ more people. SCA would look good in the general public arena in employing more people. The directors have enough funds to live off. The unemployed would be more grateful, A, for the job; and B, to earn some good money."

Thank you for that comment. I think Steve has already dealt with that in the comment he's made on earlier questions. Mark?

We have 2 further questions, Chairman. One from unitholder, [ John Cream ], which is, "We've lost money. How can you justify incentives over your significant salary? An idiot can make money with a lot of shareholder capital. And you were there for shareholders to ensure good governance. How do you prove your value? Executive salaries are not matched by performance."

Thanks, Mark. I will ask Steve to respond to that question.

Thanks, Phil. Yes, look, I think the performance of this company through the pandemic has actually been -- has been excellent. And I think behind the scenes, from a sense -- from a unitholder point of view, I can say that there's been tremendous effort put in. And I think as Anthony pointed out earlier, the Board and management got together at one stage on a weekly basis to make sure that we're on top of what was going on, trying to get the best outcome, trying to make sure that we adhere to a whole raft of new regulations, et cetera. So I think the management team have done a great job. And I can assure you that in the marketplace, they are very highly regarded and regarded as doing a good job on behalf of unitholders.

Thanks again, Steve. Mark, final question?

Yes. The final comment is from unitholder [ FL Schram ], similar vein, "Share price was $2.33 on the 23rd of July 2016, but the first thing you always see in resolutions is some sort of rights for management. Try taking a step back like shareholders."

So I think that Steve's already dealt with that question. I would point out that the share price is now over $2.50. So things are starting to look up, which is good. So thank you for that. The voting proxy statistics on this resolution are now shown on the screen. The directors unanimously recommend that unitholders vote in favor of this resolution. I will now put the motion to vote. Please now mark either the for, against or abstain box on your electronic voting card in respect of resolution 1. [Voting]

I'll now hand the chair to Steve Crane for the next item of business. Steve?

Yes. Thanks, Phil. We now move to resolution 2 in your Notice of Meeting, the reelection of Philip Marcus Clark AO as an independent director. The resolution is to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that Philip Marcus Clark, who retires and, being eligible, offers himself for reelection as a director of SCPRE, be reelected as a director. This resolution is an ordinary resolution. And therefore, to pass, it requires no more than 50% of votes cast by unitholders to be in favor of the resolution. If sufficient votes in favor of the resolution are received, this resolution will come into effect. I would now like to invite Phil Clark to make a few comments. Phil?

Today, I'm seeking your support for reelection as an independent Non-Executive Director of SCA Property Group. I'll take this opportunity to explain why I'm keen to be reelected and what I offer the group. I've chaired the group since it was established in 2012, shortly before we listed. I enjoy my work at SCA. My role at SCA has been my top priority, and I've managed my other work accordingly. [Technical Difficulty] Sorry about that technical glitch. The voting -- the proxy statistics on resolution 1 are now shown on the screen. The directors unanimously recommend that unitholders vote in favor of this resolution. I will now put the motion to vote. Please now vote either the for, against or abstain box on your electronic voting card in respect of resolution 1. [Voting]

I'll now hand over the chair to Steve Crane for the next item of business.

Thanks, Phil, and apologies if you've already seen this or not. I'm not sure. We now move to resolution 2 on the Notice of Meeting, the reelection of Philip Marcus Clark AO as an independent director. The resolution is to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that Philip Marcus Clark, who retires and, being eligible, offers himself for reelection as a director of SCPRE, to be reelected as a director of SCPRE. This resolution is an ordinary resolution. And therefore, to pass it requires more than 50% of votes cast by unitholders to be in favor of the resolution. If sufficient votes in favor of the resolution are received, this resolution will come into effect. And I would now like to invite Phil Clark to make a few comments. Phil?

Today, I'm seeking your support for reelection as an independent Non-Executive Director of SCA Property Group. I'll take this opportunity to explain why I'm keen to be reelected and what I offer the group. I've chaired the group since it was established in 2012, shortly before we listed. I enjoy my work at SCA. My role at SCA has been my top priority, and I've managed my other work accordingly. It's been a great privilege to chair the Board. The Board has worked effectively together and with a very capable management team. I've also enjoyed getting to know many of our unitholders, large and small. I would nominate 3 highlights of my service as Chairman. Firstly, our total shareholder returns have outperformed the index by a significant margin. I think it's fair to say that we've exceeded initial market expectations. The group has grown through an effective acquisition program overseen by the Board. We've managed risk well, including the impact of COVID-19. I am proud of our achievements, but I'm also well aware that there are uncertain times ahead, and there is more work to be done. Strong leadership will be essential to successfully navigate these challenging times. I believe I am well equipped to contribute. My credentials, qualifications and experience are set out in detail on Page 62 of the annual report. My executive experience has been in industry, investment banking and over 25 years as managing partner of 2 of Australia's leading law firms. I retired from my executive role in 2005 and have since served on numerous boards, including listed companies, principally REITs; private companies; university and government boards; and not-for-profit organizations. I have chaired many of those boards and gained extensive governance experience both as a director and chair. In summary, I offer a sound track record, experienced safe hands to lead in these uncertain times and strength in specific skills which meet the requirements of SCA's Board skills matrix. Finally, I have a strong commitment to SCA Property Group. I have recently reduced my roles with other organizations. SCA remains my principal focus and my #1 priority. Also, my wife, Maria, and I have made a significant investment in SCP. We have purchased over 200,000 units. We want to see our distributions grow over time and the value of our investment increase. If that happens, there will be peace and harmony in the Clark household. I greatly appreciate the support unitholders have given me in the past, and I now seek your support for a further term.

I now open this item for discussion. Mark, have we received any questions or comments in relation to resolution 2?

Yes. We've received one question from the Australian Shareholders' Association, which is, "The ASA appreciates the commitment shown by -- to SCA by Mr. Clark since his installation as Chairman when the company was first floated in September 2013," which I think should be December 2012. "With a very able Board behind him, can you confirm if this is the last term for which he seeks reelection?"

Phil, I think you should answer that.

Thank you, Mark. Yes, I can confirm that this is the last term for which I will seek reelection.

Mark, are there any other questions?

No other questions on this resolution.

Thank you. All right. So we have now the voting proxy statistics on this resolution are shown on the screen. And the directors, Mr. Clark abstaining, unanimously recommend unitholders vote in favor of this resolution. I now put the motion to a vote. Please submit your vote. [Voting]