Region Group (RGN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the SCA Property Group 2022 Annual General Meeting. On behalf of the Board, I extend a warm welcome to all of our unitholders, proxies and guests participating in today's hybrid meeting. My name is Philip Marcus Clark, and I'm Chair of the group. I've been appointed Chair of this meeting. I'd like to commence by acknowledging the Traditional Owners of the land on which we are formally conducting the meeting, the Gadigal people of the Eora Nation. Recognizing that some of you may be participating in this hybrid meeting on the land with other Traditional Custodians, I pay my respects to elders past, present and emerging of all of those First Nations people. If we experience any technical issues today, a recess maybe -- or an adjournment may be required depending on the number of unitholders being affected. If this occurs, I shall advise you. This afternoon, we are simultaneously holding the meetings of Shopping Centres Australia Property Management Trust and Shopping Centres Australia Property Retail Trust. And for the rest of the meeting, I'll refer to the business of each trust conducted as one meeting. I'd now like to introduce our independent directors and senior management personnel who are joining me today. First, my fellow Independent Directors, Steven Crane; Beth Laughton; Belinda Robson, Angus James; and Michael Herring. Our Executive Directors are Anthony Mellowes, our Chief Executive Officer; and Mark Fleming, our Chief Operating Officer; Head of Funds Management and Strategy; our General Counsel, Company Secretary, Erica Rees, is also in attendance as is Andrew Coleman from the group's auditors, Deloitte Ross Tohmatsu. We also acknowledge representatives of the group's registry Link Market Services joining us today. Link will be moderating the webcast platform. I've been informed by our Company Secretary that a quorum is present, and I declare the meeting open. The agenda for the meeting will be as follows: the Chair's addresses, the CEO's address, formal business of the meeting, which includes the resolutions of the meeting. and general business questions. This year marks 10 years since the group's IPO in December 2012. Our key achievements during this period include the acquisition of over 60 shopping centers for more than $2.5 billion, with the group now managing over 100 convenience-based centers across Australia; growing distributions from $0.11 per unit in the group's first full financial year being FY '14 to $0.152 per unit in FY '22; decreasing our management expense ratio from 0.65% in FY '14 to 0.38% in FY '22; and most important, delivering total unitholder returns since the IPO to 30 June '22 of over 225% (sic) [ 234% ], which compares to the S&P ASX200 A-REIT Index return of 116% over the same period. I'm proud of the significant progress the group has made since the IPO and the profitable group we've seen in our business -- profitable growth, sorry, we've seen in our business over this time. At the group's AGM in 2021, I foreshadowed that I intended to retire from the Board following the 2022 AGM. We have now announced that subject to reelection of Steve Crane at this meeting, he will succeed me as Chair of the Board from 1 December. Steve has exceptional leadership credentials at executive and Board level. I'm very confident that the group is ready to embark on a new chapter led by Steve, and that I'm leaving the group in very good hands. I'd like to take this opportunity to thank our management team and my Board colleagues, past and present, for their contributions and for the support they've shown me over the time. It's been wonderful working alongside them. Lastly, I would like to say that I feel really privileged to have chaired the group, and its represented unitholders since 2012. And I'm very grateful to our unitholders for the support that they've shown me during this time. I look forward to watching the group's continued success as it pursues its growth ambitions into the future. I'll now hand over the Chair to Steve Crane for the remainder of this meeting. Thank you.

Yes. I was just going to say, I think a round of applause, thank you. Thank you. Yes. Thank you, Phil. It's been a great pleasure to work alongside you, and you'll be greatly missed by your fellow Board members and the SCP management team. We wish you all the very best in a well-earned retirement. My presentation today will cover the following: SCA's financial performance and returns to unitholders, our strategy and our report on governance matters. Our commitment to unitholders is to deliver secure and sustainable earnings and distributions, which grow over time. Notwithstanding the lingering impacts of COVID-19 pandemic on our business, our financial year '22 results were very pleasing, and these include funds from operation or FFO was $192.7 million, up 21.2% compared to last year. FY '22 FFO was $0.174 per unit, an increase of 17.9% compared to last year and the highest since the group's IPO. The FY '22 distributions to unitholders totaled $0.152 per unit, an increase of 22.6% compared to last year. Our key priority for FY '23 is to continue to build a platform that can deliver sustainable and growing earnings over time. Our centers are well positioned to benefit from inflation over the medium to long term through turnover rent from our anchor tenants and increased affordability of rent for specialty tenants as their sales increase. However, rising interest rates may dampen growth in distributions in the near term, and this was reflected in our guidance we issued in August this year of FFO per unit of $0.17 per unit and distributions at least $0.15 per unit. Our unit price at the 30th of June '22 was $2.75. At the time of the group's IPO in December 2012, the unit price was $1.40. So our unit price has almost doubled while paying distributions every year. And again, great credit to Phil and his leadership of the Board and the management. Unfortunately, recent general economic uncertainty and recessionary fears have negatively impacted on our unit price along with other REIT peers. Our unit price has recovered somewhat, however, with units recently trading above $2.60, I think about $2.70 today. As you know, total unitholder return measures both unit price growth and distributions. And in the last 5 years, SCA has delivered total unitholder returns of 63.5%, outperforming many of our listed retail property peers and outperforming the ASX 200 REIT Index, accumulation index. We have grown the total value of our portfolio to over $4.4 billion with net tangible assets per security per unit increasing to $2.81 as at the 30th of June '22. While our core strategy remains unchanged and has served us well, we will keep our strategy under review, and we'll continue to adapt to take advantage of suitable growth opportunities. Our focus is on serving our local communities for their everyday shopping needs. We will do this by partnering with our supermarket anchor tenants to provide convenient local supermarket offerings, including last mile logistics for online fulfillment, click and collect and pickup facilities, actively managing our centers to ensure that we have sustainable specialty tenants, providing predominantly nondiscretionary goods and services and paying fair sustainable rents and implementing our ESG initiatives. We will continue to pursue stable accretive acquisition opportunities, utilizing our management expertise and extensive industry knowledge and our strong balance sheet. We are continuing to explore opportunities to expand our funds management business, which fit with our -- with and enhance our strategy to broaden and diversify our revenue streams and provide growth opportunities. Above all, the Board remains committed to our key objective, which is to deliver secure and sustainable earnings and distributions, which grow over time. In that sense, we're boring. We just like to keep it simple. And importantly, we believe we have the right management team to deliver that outcome to unitholders. At the beginning of the meeting, Phil introduced our key management personnel, Anthony Mellowes, our CEO; and Mark Fleming, our COO, and Mark moved into the position of COO and Head of Funds Management and Strategy on the 1st of September 2022, having previously held the position of CFO since 2013. We are currently undertaking an executive search process to appoint a new CFO with Greg Inkson currently acting in this role. Anthony and Mark have worked together for a long time now and they are particularly capable and experienced team and their skills complement each other, and they work well as a leadership team. Their collective knowledge and experience has helped get SCA to where we are and successfully steered us through the challenges posed by COVID-19 over the last 3 years. Anthony and Mark are supported by a relatively small, but capable and effective team. I take this opportunity to acknowledge our team and to thank each of them for their commitment and hard work and for the results they have delivered in sometimes very challenging circumstances through the lingering effects of COVID-19. And I can only attest to the number of Board meetings and conferences we had certainly early on in this process and how the management team came to the party with that. Anthony will report on our relaunch sustainability strategy, but I particularly want to acknowledge the progress made in the last 12 months. We are now 1 year into our new sustainability strategy, and we have made significant progress towards meeting our commitments and targets, including our commitment to net zero carbon emissions by 2030 for Scope 1 and Scope 2 emissions. The market response to our sustainability strategy from both institutional and retail investors, analysts, proxy advisers and from the communities we serve has been gratifying. The Board strongly supports our sustainability strategy, which discharges our responsibilities to society but also strengthens our business and delivers good outcome for unitholders. During the year, we continued our Board renewal process with Angus James and Michael Herring being appointed to the Board. Angus was formerly the CEO of ABN AMRO Australia; and Michael was formerly General Counsel at Macquarie Bank. The Board is certainly benefiting from the skills and experience that both Angus and Michael bring. And subject to their election today, we look forward to their continued contribution to the Board. I'm also pleased to report that we are well advanced in the search to identify and appoint an additional female Independent Non-Executive Director to replace Phil following his retirement on the 30th of November, and this person will have extensive property background. That was the key ingredient we were looking for in the next appointment. And finally, I would like to thank all of you for your continuing support, and thank you again for taking the time to join us here today, whether in person or virtually. And I'll now hand over to Anthony for his presentation. Anthony?

Thanks very much, Steve, and good afternoon, ladies and gentlemen. My name is Anthony Mellowes, and I'm the Chief Executive Officer here at SCA Property Group. Phil Clark and Steve Crane have outlined the group's achievements since listing. This afternoon, I'll run through some of our key achievements for FY '22 and a bit of an update on our outlook for FY '23. But before I start, I'd really like to thank Phil Clark for his time and leadership as Chair of the SCA Property Group over the last 10 years. And subject to Steve's reelection today, I'm really looking forward to working closely with Steve in his new capacity as Chair. I'll now take you through some of the key highlights for 30th of June 2022 and towards the end of my presentation, the outlook for FY '23. We delivered funds from operation of $0.174 per unit an increase of nearly 18% on the prior year. This enabled us to pay distributions to unitholders of $0.152 per unit, which was an increase of over 22% on the prior year, and this represented a payout of approximately 100% of our adjusted funds from operations. Our total funds from operations was $192.7 million for the year, which was an increase of 21% on the prior year, and our net profit after tax was $487 million, which was an increase of 5% on the prior year. Our gearing at the 30th of June was 28.3%, which is slightly below our stated policy range of 30% to 40%. Our NTA at 30th of June was $2.81, which is up 11.5% on the prior year, with our portfolio weighted average cap rate, which is a capitalization rate of 5.43%. And our portfolio occupancy was 98.1%, and our specialty vacancy remains stable at 5%, which is pretty consistent with our prior years. And FY '22 was again another active year for acquisitions. We completed 7 centers, and we also bought 1 vacant lot and a childcare center for $347.5 million. And we also contracted to buy a further 5 centers in FY '22, which also settled in July 2022 as well. Optimizing the core business. We're starting to see inflation and interest rate costs impacting consumer confidence slightly, and we're also seeing this mitigated by the high employment and household savings levels. Our convenience-based centers demonstrate their resilience with comparable moving annual turnover growth being up on pre-COVID levels and with our customer positioning of Love Local, Shop Local and Act Local, continuing to remain extremely relevant. The location of our centers away from mainland central business districts mean that our tenants continue to benefit from our customers staying and shopping local. Our supermarkets are performing very well. We recorded 2.4% sales growth compared to FY '21 and 9.7% sales growth compared to pre-COVID levels. And we now have 41 out of our 92 supermarkets in turnover rent with collections increasing each year. Additionally, our specialty tenants demonstrated remarkable resilience during the year with sales productivity and occupancy costs remaining stable across the portfolio. And as a result of these strong trading performance, most of our tenants were able to resume paying their full rent across the entire financial year, and we were able to collect 98% of our invoiced rent. Now the consequence of our tenants' strong sales growth was the positive rental reversions that we were able to achieve in the second half of the period with renewal spreads of 2% for the year, including 3.3% in the second half of the year, and we're confident of continuing to achieve this rental growth in the future on account of our rents being low compared to our peers with a specialty occupancy cost of only 8.7%. Our sustainability strategy, which we launched in FY '21 is also progressing well. All centers now have LED lighting, and we've installed solar panels across all of our Western Australian assets during FY '23. With respect to our growth opportunities, the SCA Metro Fund joint venture with GIC was successfully launched in April 2022 with $284 million seed portfolio, and we also acquired Beecroft in July 2022. We wound up our SURF 3 fund in December 2021, achieving an IRR of 11% per annum for those unitholders as well. The acquisitions, as I mentioned earlier, we acquired 7 convenience-based centers for $347 million, and we also divested 8 properties for $307 million in FY '22, including 7 of those seed assets into the SCA Metro Fund with GIC. During the period, our valuations increased by $354 million or nearly 9% on a like-for-like basis. And our balance sheet remains in a very strong position with our gearing at 28.3%, which is below our target range of 30% to 40%. At the 30th of June, our average debt maturity was 5.3 years, and following a swap restructure in August 2022, 81% of our debt is currently fixed. And finally, our funds from operations per unit of [ $0.174 ] increased by 18%, and our distribution of 15.2% increased by 22% all over the same period last year. Sustainability. While Love Local, Shop Local, Act Local has remained a core focus for us. We also understand that loving local communities means acting on climate risk that could impact those communities. Within our sustainability strategy, we are continuing to target 6 key areas that we can have maximum impact on being, energy and carbon, water and waste, climate risk, leading local, health and well-being and diversity and inclusion. The key highlights for FY '22 for us are: energy and carbon, we spent approximately $18 million installing solar panels in all of our Western Australian centers, depleting R22 gases or replacing those R22 gases, and we now have 100% LED lighting in our centers. With climate risk, we completed a portfolio-wide climate risk exposure analysis. And our diversity and inclusion, the target of 40:40:20 gender balance has been maintained. With our energy rating, we achieved a 6 star NABERS rating for our corporate head office. In our sponsorship, we have supported 128 children through our partnership with The Smith Family. Our key focus areas for FY '23 are energy and carbon, climate risk and alignment to the principles for the TCFD. Our core strategy is unchanged -- it has been unchanged for 10 years, and a lot has changed in that 10 years, particularly the challenges facing the retail industry as a result of the pandemic. But looking forward, our core strategy remains unchanged. We'll continue to focus on those convenience-based retail centers with a strong weighting to the nondiscretionary retail segment, and we'll continue to be seeking long-term leases to really quality anchor tenants such as Woolworths, Coles, Kmart and Bunnings, which are owned by Wesfarmers, and these are again demonstrated by our latest acquisitions. We'll continue to explore both our core business growth opportunities, as per our development pipeline and acquisition opportunities with our fund management role with GIC. And we'll continue to have a conservative and appropriate capital structure, and we'll continue to see growth opportunities which suit our risk profile in a really disciplined way. With respect to our key priorities and outlook. Again, we're going to continue to deliver on our strategy in FY '23, focusing on optimizing our core business by serving our local communities for their everyday needs, partnering with our supermarket anchors to improve their online offer, actively managing our centers to ensure that we have successful specialty tenants paying appropriate rents and also executing on our sustainability initiatives. We'll focus on our growth initiatives by continuing to explore value and earnings accretive acquisition and divestment opportunities consistent with our strategy and investment criteria, progressing our identified development pipeline, including our sustainability initiatives and growing our SCA Metro fund. We're going to continue to actively manage our balance sheet to maintain our diversified funding sources with long weighted average debt expiries and a low cost of capital consistent with our risk profile. We'll also actively manage our interest rate risk in the current volatile market and they are gearing to remain below 35% at this point in the cycle. Of course, as there are any real material changes to the current macroeconomic, our strategy may need to adapt. I believe that maintaining our gearing below that lower level of our preferred range is the appropriate setting for us at the moment. Our FY '23 FFO unit guidance is $0.17 per unit, and our AFFO or our distribution guidance is $0.15 per unit. This guidance assumes no further acquisitions, and we haven't made any acquisitions since June, either on the balance sheet or in the Metro Fund. And the weighted average 3-month BBSW for FY '23, which is the forward-looking cash rate, will be 3%. During these volatile times, we're going to continue to deliver on our clearly stated strategy and objectives. We're going to focus on and optimize our core business with a particular focus on rent collection and continued deal flow on our renewals and reducing our vacancies. We've built really solid foundations to enable us to continue to seek out and execute on growth opportunities that are consistent with our strategy and risk profile. FY '22 was another challenging year for our team. However, the strong rebound experienced in the second half reinforces our strategy, and we don't see any reason to deviate from it. With respect to the future, while our core strategy remains unchanged, we're on a great journey, and we're marking and celebrating a really strong 10-year growth trajectory. As we embark on our continued growth plan across the next 5 years, we have decided to explore a rebranded name change as part of this evolution. Tomorrow, Thursday, the 24th of November 2022, we will be changing our name and rebranding to [ Region ] Group. Quite a few people may ask, why rebrand? And the decision to change our name and rebrand provides a platform for us to unlock some future potential, including evolving our very literal current name, Shopping Centres Australasia Property Group to a name that could unleash wider opportunities. We want to signal a brand evolution that marks our 10-year anniversary. We have just broken into the ASX 100, and we want our brand to be aligned to the maturing of our business. We really want to improve our brand identity and a cohesive look and feel across all of our communications and channels. It's not just about a name change. It's about evolving all parts of our brand so that we better support the company's evolved vision, which is about supporting better communities through life's essentials. I'm now going to play a very short video that will highlight our brand vision as [ Region ] Group. And for those unitholders on the virtual platform, you can view the video on the home page of our website. [Presentation]

So from Monday, the 28th of November, we will be called Region Group and all SCP units will automatically upgrade to RGN units so the ticker changes from SCP to RGN, and we expect the ASX to implement this change on Monday as well. I look forward to updating our results to you under our new name, Region Group, in the future. And I'd really like to thank you for your time this afternoon. And now I hand back to Steve.

Thanks, Anthony. Ladies and gentlemen, the resolutions for consideration today may only be voted on by unitholders, proxy holders and unitholder company representatives. Unitholders release participating in person or online will have the opportunity to ask questions or make comments on each matter being put to unitholders. We did not have any unitholder register -- sorry, we did not have any unitholders registered to ask questions by phone, and I've been informed that the Notice of Meeting was sent or made available online to all registered members within the Notice of Meeting period. I will now table the Notice of Meeting, unless there are any objections, I'll take the notice convening this meeting as read. A reminder that we are simultaneously holding the meetings of Shopping Centres Australia, Australasia Property Management Trust and Shopping Centres Australasia Property Retail Trust. And although only 1 resolution will display on the presentation slides and you'll be asked to vote only once on each resolution, your vote will be taken as a vote for each trust. Voting on the resolutions will be conducted by way of a poll. In accordance with the Corporations Act, as Chair of this meeting I demand a poll on each resolution be considered in this meeting. For those unitholders participating in the online portal, you will need to register your vote by clicking on the get a voting card button on the bottom of your screen. Once you have registered, your voting card will appear with all the resolutions to be voted on at this meeting. You may need to use the scroll bar on the right-hand side of the voting card to view all resolutions. Following the voting, general business questions will be taken for, and for [Operator Instructions] I encourage unitholders to send their questions through as soon as possible, and voting will close 5 minutes after the close of the meeting. Unitholders attending the meeting here today may vote using voting cards provided from the Link registration desk. Members who are entitled to vote should have received a yellow voting card. A copy is on the screen there. Members who have voted before the meeting should have a blue admission card. And those in possession of either a yellow or blue card are welcome to ask questions, while those with a red visitor card are requested to only observe during the meeting. If you have not received the correct card, please go to the registration desk where a Link Market Services representative will assist you. I will endeavor to give all members who ask a question or make a comment reasonable opportunity to do so. And I ask that you please keep your questions or comments related to the matter at hand and as succinct as possible to allow all participants an opportunity to ask questions, which I would ask to be limited to 2 per participant please. [Operator Instructions] General business questions received from unitholders prior to the meeting will be addressed during the general business questions period. Each resolution set out in the Notice of Meeting is an ordinary resolution and as such, to pass must be approved by a simple majority of the votes cast by unitholders entitled to vote and voting on the resolutions. I demand to poll on all resolutions, as I just mentioned. And you should record your vote by searching for the For, Against or Abstain squares for the relevant resolutions shown on the paper or the online voting card when I put each motion to vote. The voting cards will then be collected at the end of the meeting and the votes tallied. We will announce the results of the vote to the ASX following the end of the meeting. If you have to leave before all resolutions are voted on, you may provide your completed yellow voting cards to a Link representative on your way out. I now open the poll. I appoint Link Market Services as scrutineer for the poll. In accordance with the Corporations Act, each member will have 1 vote for each dollar value of the total SCP securities held by them, and 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 are declared valid for voting at this meeting. I would disclose proxy votes on the screen prior to a vote being taken for each resolution. These figures will be as at the closing time for receipt of proxies, which was 2:00 p.m. on Monday, 21st of November. These figures may change if a unitholder who has previously submitted a proxy has joined the meeting today and revoked their proxy. We will disregard any votes cast on the relevant resolutions by those persons set out in the voting exclusion section of the procedural notes section of the Notice of Meeting. I remind the meeting that the Chair will vote any undirected proxy votes in favor of all resolutions. All voting by the chair is subject to the voting exclusion details contained in the Notice of Meeting. The first item of business is to consider the annual financial report, directors' report and auditor's report for SCA Property Group for the financial year ended 30th of June '22. There's 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. For this item and for those that follow, may I request that you take time to identify yourself before asking your question. And in the case where you're a proxy holder, please identify on whose behalf you are holding the proxy. Are there any questions or comments on the management of the group or the financial statements and reports? I'm first going to look to the room. Moderator, do we have any questions via the online portal?

Chair, I have one question. What financial effect has the recent COVID-19 world pandemic and its associated lockdowns had on SCA Property Group?

Anthony, do you want to -- Mark, yes?

There are really 2 ways in which the COVID pandemic has directly affected our earnings. One is we gave rental assistance to many of our tenants, and that was partly due to mandated requirements by governments under what they call the code of conduct that we had to give rental assistance to tenants if they weren't able to trade during the COVID period. And secondly, we had increased tenant arrears during the COVID period. That's now been with us for 3 years. So in FY '20, the impact of that on our earnings was about $20.5 million. In FY '21, was $7.3 million. In FY '22, the most recent financial year, we gave $3.7 million of rental assistance to tenants. Looking forward to FY '23, we're actually not expecting there to be any material impact of COVID, and that's obviously subject to there being no further lockdowns, which we don't currently expect there will be. So that's the answer to that question, I think, Steve.

Thanks, Mike. Is there any other questions either in the room or...

No further questions online, chair.

Thank you. Okay. Are there any questions or comments relevant to the conduct of the audit or preparation and content of the auditor's report for the directors or for the auditor? I think I've only heard one question in my entire 20 years of somebody wanting to talk to the auditor, but okay. Anything on the?

There are no questions online, chair.

Okay. Thank you. All right, then thank you very much, ladies and gentlemen. I'll move to the Adoption of the Remuneration Report, and the resolution is displayed on the screen, and I take it as read. This resolution is advisory, nonbinding ordinary resolution and does not bind the Directors of Shopping Centres Australasia Property Group RE. On behalf of the Board, I would like to take this opportunity to thank the Remuneration Committee, the newly appointed Chair, Angus James, and each of the members for all the work they have done. I would now like to hand over to our Remuneration Committee Chair, Angus James, to present the report. Angus?

Thanks, Steve. I would like to first acknowledge the work of the Chair of the Remuneration Committee from August 2019 until my appointment in August this year, Steve Crane. So thank you for your work on that, Steve. I'm very pleased to present the FY '22 remuneration report to unitholders. Despite the lingering effects of COVID-19 pandemic on the business, SCA performed well in FY '22, building on the recovery that started to appear in the second half of FY '21, and this is a great credit to our management team. At the beginning of the financial year, the Board directed management to continue to focus on growing adjusted funds from operation per unit or AFFO per unit and improving rental collections levels, both of which had been negatively impacted in FY '20 and FY '21 by the COVID-19 pandemic. The Board also directed management to continue to grow earnings through a focus on acquisitions and leasing spreads in line with improving business outlook. In respect to the FY '22 STI, AFFO per unit and asset acquisitions performed well in excess of targets set by the Board with performance assessed at maximum. In reviewing the hurdles, the Board was satisfied the targets were set with sufficient ambition and that executives achieved against those targets was a valid reflection of higher performance. The nonfinancial STI metric was also assessed at maximum due to executive management achievement against targets set by the Board and also due to the funds management JV entered into with GIC group. The Board had set management a goal to develop and execute a plan to expand the group's funds management business in FY '22. And the execution of that plan by entering into the GIC JV in December 2021 was well ahead of schedule and was -- and as such, was considered at performance. As you will have seen from the 2022 Notice of Meeting, fixed remuneration increases of between 3% and 5% were awarded to executives on 1 October 2022 following a benchmarking exercise undertaken by the Remuneration Committee. In Mark Fleming's case, the increase was higher -- at the higher end of the range due to the increased responsibilities bought about by the role change from CFO to CRO. But also across the executive group reflected the high regard the leadership team is held by the marketplace in the very competitive environment. for executive talent in the property sector. Each executive's total remuneration opportunity continues to comprise a significant at-risk component in order to ensure alignment between the interest of you, our unitholders and our executives. We have received a number of questions in advance of this meeting, and we have taken careful note of these questions. One of the themes that often gets asked is why do we need to pay our executives incentives at all? Why isn't fixed salary enough? There is no doubt that for many people, the remuneration of our executives may be -- seemed like a lot of money. Our policy at SCA is to reward our executives fairly and for a job well done. We also want to attract and retain high-caliber executives, so we must be competitive. Therefore, in order to make sure we recruit and retain the highest quality talent, we motivate our executives to achieve the best they can through setting targets, which are aligned and in the best interest of all unitholders. And we hold all of the executives to account to ensure they meet these targets. In addition to the base salary, a large proportion of the total remuneration opportunity is at risk, as I said before, for our executives and represents the maximum they can achieve. If they don't achieve the targets we set, they do not receive remuneration opportunity. We believe this is appropriate to ensure our executives' focus on achieving the short- and long-term goals SCA set by the Board. Further, and as I noted earlier, we regularly benchmark key management personnel, or KMPs, total remuneration against companies of similar size, complexity and structure. We take fair remuneration for a job well done incredibly seriously at SCA, and we'll continue to monitor it closely. 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 and we'll not hesitate to adjust remuneration framework if we no longer believe it is relevant for SCA's goals. On behalf of the Remuneration Committee, we look forward to your ongoing support in achieving the best results for unitholders in FY '23. Thank you.

Thanks, Angus. I'd now like to open this item for discussion. Are there any questions or comments? Moderator, is there any questions on the...

There are no questions online, Chair.

Okay. Thank you. Then the voting proxy statistics if we have no questions is shown on the screen. And so I now put the motion to vote. The directors unanimously recommend unitholders vote in favor of this resolution, and I'll now pass to the Chair to Belinda Robson for the next item of business.

Thank you, Steve. We will now move to Resolution 2 in your Notice of Meeting, the reelection of Steven Crane as an Independent Director. The resolution is displayed on screen and is taken as read. I'd like to invite Steve to make a few comments.

Thanks, Belinda. It's my truly great pressure to seek reelection to the Board. Having joined SCA 4 years ago, I've served on the Investment Committee and chaired the Remuneration Committee as well as attending all key audit and risk meetings. I've sought to play my role in the development of the company under Phil and Anthony's leadership. I believe my 20 years of broad NED experience outlined in the annual report, including chairing other publicly-listed entities will help me continue to offer the same steady governance you've seen in the past. On your behalf, I remain ambitious for us as an organization and believe we have substantial opportunities, the right mix of directors and strategic direction to grow over time. With your support, today I look forward to chairing the organization and want to personally again thank Phil for his tremendous leadership over the first 10 years of our journey. I really do. You've done a great job. Thanks, Phil. Thank you, ladies and gentlemen.

Thank you, Steve. I now open this item for discussion. Are there any questions or comments in the room? Moderator, do we have any questions via the online poll?

There are no questions online at this time.

Okay. Thank you. Voting proxy statistics on this resolution are shown on the screen, and I now put the motion to vote. The directors with Mr. Crane abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll return the Chair to Steve Crane for the next item of business.

Thanks very much, Belinda. We now move to Resolution 3 on your Notice of Meeting, the Reelection of Belinda Robson as an Independent Director. The resolution is displayed on the screen and is taken as read. I'd like to invite Belinda to make a few comments.

Thanks again, Steve. Good afternoon, and thank you for the opportunity to be reelected as an independent director on the SCA Board. I joined the Board at the time of listing in 2012, and this AGM marks the tenth year of SCA and so also my association with the company. I am very honored to have been part of the company's first decade and proud of the portfolio crafted and the financial success we have been able to create for unitholders. I'm putting myself up for reelection for my fourth and final term as a Non-Executive Director. And with the retirement of our inaugural Chair Phil Clark at this AGM, this will make me the longest-serving Non-Executive Director. I personally want to thank Phil for his support and guidance as his leadership has been instrumental for me personally, but more importantly, the company's enviable position in the Australian REIT sector today. I believe I can continue to add value to the group through my over 30-year career in all aspects of retail real estate and funds management. I have consistently been a member of the Remuneration and Nomination Committee since our listing in 2012. And until recently, I have also been a member of the Audit and Risk Committee. I am Chair of our Investment Committee, whose mandate is to shape and grow the type and structure of our portfolio. What we buy, sell and develop will continue to shape the quality of our SCA investment into the future. Subject to unitholders' voting today, I look forward to one last term as part of the SCA team.

Thanks. Thanks, Belinda. I now open this item for discussion. Are there any questions or comments? I should only say that, I think, Belinda does an outstanding job as a Chair of the Investment Committee. So I think it is truly excellent. Moderator, are there any questions online?

There are no questions online, Chair.

Okay. Then I put the voting statistics for the resolution shown on the screen, and I put the motion to a vote. The Directors with Ms. Robson abstaining unanimously recommend unitholders to vote in favor of this resolution, and I'll now move to the next item of business. And you might notice that, I should say, because it is a bit -- you might note that every Director is up for reelection. It's just been a quirk of circumstances that this has happened, but we will try and make sure that we have a bit of rotation going on from next year. I now move to Resolution 4 in the Notice of Meeting, which is the reelection of Beth Laughton as an Independent Director. The resolution is displayed on the screen and is taken as read. And I'd like to invite Beth to make a few comments.

Thanks, Steve. Good afternoon, everyone. I'm very pleased to be here today at the AGM and to seek your endorsement of my election as an Independent Non-Executive Director of SCA. Since my appointment to the SCA Board in 2018 and as a member of the Nominations and Remunerations Committee and as more recently, the Chair of the Audit, Risk Management and Compliance Committee, I endeavor to bring to the group insights from my experience. My executive experience spans over 25 years in accounting, finance and equity capital markets and as a Non-Executive Director in funds management, real estate and the retail industry. I was a Non-Executive Director of Australand Property Group for 2 years until its takeover, and I'm currently an Independent Non-Executive Director of GPT Funds Management Limited, which is the responsible entity the GPT Wholesale Office Trust and the GPT Wholesale Shopping Center trust. I'm also a Non-Executive Director of JB Hi-Fi, a leading multichannel specialty retailer in Australasia, which operates under the well-known brands of JB Hi-Fi and The Good Guys. At GPT Funds Management and JB Hi-Fi, I also chair their respective Audit Compliance and Risk Management Committees. I obviously have considerable expertise in risk management, compliance, corporate governance, sustainability and remuneration as well as in Board oversight of property investments and operations, funds management in Australian and retail. I believe I've made a meaningful contribution to the government and performance of SCA since my appointment to the Board and continue intending to work with my fellow directors and management to deliver the ongoing performance of SCA. In particular, as Chair of the Audit and Risk and Compliance Committee, which has a responsibility for the oversight of sustainability at SCA, I will lead the committee in overseeing SCA's transition to what is going to be quite a complex program of enhanced reporting under the newly expected environmental sustainability reporting standards. So whilst we've made great progress, I think we're going to have a whole range of other challenges ahead of us in the future. So I do appreciate your support for my election, and thank you. Thanks, Steve.

Thanks, Beth. I now open this item for discussion. Are there any questions or comments? Any questions online, moderator?

There are no questions online, chair.

Voting statistics for this resolution are shown on the screen, I will now put the motion to a vote. The directors, Ms. Laughton abstaining, unanimously recommend unitholders vote in favor of this resolution. I will now move to the next item of business. We now move to the Resolution 5 in the Notice of meeting, the election of Angus Gordon Charnock James as an Independent Director. The resolution is displayed on the screen and is taken as read, and I would like to invite Angus to make a few comments.

Thanks, Steve. Good afternoon again to shareholders. With your support today, I'm looking forward to representing you on the Board of SCA Property Group. I joined the Board in December '21 after having being interviewed by an external consultant and appointed by SCA and subsequently [ with a full interview ] by the Board. My executive experience, which I believe supports the contribution I can make to the company spans over 35 years of investment banking and funds management, lately, with my own advisory and fund management business Aquasia jointly founded by me in 2009. Prior to Aquasia, I was the CEO of ABN AMRO Australia and New Zealand and a member of the ABN AMRO N.V.'s Asian management team, which oversaw wholesale retailing banking activities and fund management operations in 17 countries in Asia Pacific. Throughout my career, I have been an adviser to Boards and senior management of ASX 100 companies and to governments, some of whom I continue to advise today in areas of mergers, acquisitions, equity debt, treasury issuance and products, other products. As a CEO in Australia, I had experience managing a top 5 investment bank, employing over 700 people and involving the management of substantial financial risk. While I have limited Non-Executive Director experience on public company boards, my experience -- my advisory experience has involved providing advice to some of Australia's largest companies and their Boards. Further, over the last 15 years, I've served on the Board of the Business Council of Australia, the Australian Financial Markets Association, the Federal Government's Australian curriculum assessment and reporting authority. I'm a past Deputy Chairman of the Australian Chamber Orchestra and a current share of Australian Schools Plus, a not-for-profit, which specializes in sourcing philanthropic funds to support skills in disadvantaged areas. At SCA, I have recently taken over the chair of the Remuneration Committee and also sit on the Audit and Risk and Investment Committees. I've endeavored to bring to SCA my insights for many years' experience in acquisitions and disposals, debt and equity capital markets, funds management, risk management, compliance, corporate governance and remuneration. In the short time I've been on the Board, I believe I've made a modest contribution to the governance and performance of SCA and look forward with your support today to continuing to work with my fellow directors and the SCA management team to deliver ongoing performance of SCA what will now be Region Group. Thank you for your consideration today.

Thanks, Angus. I'll now open this item for discussion. Are there any questions or comments? Moderator, are there any questions on web?

There are no questions online, Chair.

Okay. The voting proxy statistics on this resolution are shown on the screen. I'll now put the motion to a vote. The directors, Mr. James, abstaining, unanimously recommend unitholders vote in favor of this resolution, and I'll now move to the next item of business. Resolution 6 on your Notice of Meeting, the election of Michael Graeme Herring as an Independent Director. The resolution is displayed on the screen and is taken as read. I would like to invite Michael to make a few comments. It's a great way to meet your Board.

Thank you, Steve, and happy to meet everyone here today. I'm very pleased to be here today seeking your support for my election as an Independent Non-Executive Director of SCA and is soon to be renamed the Region Group. I was appointed to the Board 3 months ago and more recently to the Investment Committee, the Audit Risk Management and Compliance Committee, the Nominations Committee. It is my first publicly listed Board position. Having only recently retired from Macquarie Group as General Counsel after 12 years in that role. I was General Counsel of Macquarie and was responsible for the legal and governance group, which comprises over 350 staff who are located domestically and internationally. I was on the management committee at Macquarie and a frequent attender at Board meetings of both the bank and the group. And in that capacity, I advised on senior management matters and also Board matters and issues, including relevance to SCA in particular. I've mentioned areas of funds management, business acquisitions, capital and debt markets, listing requirements, regulatory, compliance, ESG and remuneration. Prior to my role as General Counsel, I had a very senior position at the law firm, which was then known as Mallesons Stephen Jaques and now known as King & Wood Mallesons. And then after that role as an investment banker requiring capital for 5 years, where I worked in the industrials team and also headed up the financial institutions group. In all those capacities, I frequently directed and advised leading public company Boards. I consider that I have very complementary skills to my fellow directors, including supplementing some very finally honed legal skills of a very capable inaugural Chairman who is retiring today, Mr. Phil Clark. I'm fully committed to growing my knowledge of SCA, both its business and its opportunities and meaningfully contributing to its growth and performance over the years ahead and doing so in the interest of all unitholders. Thank you very much.

I'll now open this item for discussion. Are there any questions or comments? Moderator, are there any questions online?

There are no questions online, Chair.

Okay. The voting proxy statistics on this resolution are shown on the screen, and I'll now put the motion to a vote. The directors, Mr. Herring abstaining, unanimously recommend unitholders vote in favor of this resolution, and I'll now move to the next item of business. Resolution 7 is displayed on the screen and is taken as read. I now open this item for discussion. Are there any questions or comments? This is the remuneration -- first, the remuneration executive plans. Any questions, moderator? Do we have any questions on the online portal?

There are no questions online, Chair.

Very good. Then the voting proxy statistics on this resolution are shown on the screen, and I'll now put that to a vote. The directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 8 is displayed on the screen and is taken as read. I'll now open this item for discussion, and this is the short-term incentive for executives for the Chief Executive, being Anthony Mellowes. Is there any questions? Moderator is there any questions online?

There are no questions online, Chair.

Okay. Thank you. Voting proxy statistics on this resolution are shown on the screen, and I'll now put the motion to a vote. The directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 9 is displayed on the screen and is taken as read. This is issue of long-term incentive to Anthony Mellowes, the Chief Executive. This item is now open for discussion. Are there any questions or comments? Moderator, is there any questions online?

There are no questions online, Chair.

All right. Well, voting statistics on this resolution are shown on the screen, and I'll now put the motion to a vote, the directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 10 is displayed on the screen and is taken as read. And again, this is the resolution in regard to short-term incentives for the COO, Mark Fleming. I'll now open this item for discussion. Are there any questions or comments? Moderator, any questions online?

There are no questions online, Chair.

Okay. The voting proxy statistics on this resolution are shown on the screen. I now put the motion to a vote. The directors, Mr. Mellowes and Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 11 is the long-term incentive for the COO, Mark Fleming, and it's displayed on the screen, and I take it as read. I open this item for discussion. Are there any questions or comments? Okay. Are there any -- moderator, any questions online?

There are no questions online, Chair.

Thank you. The voting statistics on this resolution are shown on the screen, and I'll now put the motion to a vote. The directors, Mr. Mellowes, Mr. Fleming abstaining, unanimously recommend unitholders vote in favor of this resolution. I'll now move to the next item of business. Resolution 12 is displayed on the screen and is taken as read. The proposal is to increase the Non-Executive director fee pool which is the first increase since listing of the group in 2012. These increases to allow us to appoint an additional sixth Non-Executive Director following Phil's retirement at the 30th of November, which I've talked a little bit about earlier on and provides headroom for future potential inflationary increases in net fees in Non-Executive Director fees in coming years. I'll now open this item for discussion. Are there any questions or comments? Moderator, do we have any questions via the online portal?

There are no questions online, Chair.

Very good. Voting proxy statistics on this resolution are shown on the screen. I'll now put the motion to a vote. The directors make no recommendation to unitholders regarding this resolution, and I'll move to the next item of business. Online unitholders are reminded that they can submit their vote online until 5 minutes after the meeting closes. Ladies and gentlemen, this concludes the formal business of the meeting. Link representatives will now collect the yellow voting cards and tally the results. I'd now like to open the floor to general questions or comments that haven't been addressed in any other part of the meeting and invite our online unitholders if you already haven't already done so to please send through any general questions or comments for the Board and management. Has anybody any general questions or comments on the floor? Thank you, sir.

Good afternoon. My name is [ Keith Ready ] representing the Australian Shareholders Association and on behalf of our members, a very big thank you to you, Phil, for considered genuine and exceptional service to the company and to its shareholders. To you, Steven, congratulations on your appointment as Chair and to all the Board and to the executives on the board. Whilst you have big shoes to fill, no pun intended, I am sure you will continue to do a great job for the company, and thank you.

Thanks. Thanks very much, Keith. We appreciate that, I'm sure, Keith. So thank you very much. Is there any other? And from my part, I'll be doing the best. I do have big shoes to fill, so no, that's for sure. Any questions from the online portal?

I have 2 questions, Chair.

Yes.

The first is, what action is the Board taking to ameliorate the impact of anthropogenic climate change upon the company?

Yes. Well, I think as we've outlined, we've been quite active. So I think I'll get Anthony and Mark to probably take this question, but I think the group has got a fairly strong commitment, which is in the annual report and in our sustainability report to be net zero by 2030, and that's for Scope 1 and 2 emissions, and we have pretty specific and -- plan that we are working towards in which we already hit some milestones. So I'll pass to Anthony and Mark to talk to the detail.

Thanks very much, Steve. Look, our real benefit specifically for that is about reducing our carbon and that is about solar for our -- that's where we can make the biggest impact. Our centers are designed -- well, they're nice, flat, big pieces of land, nice flat buildings, not much shade. They're perfectly designed for solar generation. So that's where we can make the biggest impact. We have also already rolled out our lighting across all of our centers, which is really, really important. And the third area is our building management systems, and that's where you can just really make your building a lot smarter and a lot more predictive, particularly heat and air conditioning and basically making the building a lot more energy efficient. And they're our 3 really key areas to reducing our carbon. Mark, is there anything else that you think?

Yes. Just one other thing that in terms of -- the question was also the impact of the climate on our assets. So we've added a sixth pillar to our sustainability strategy this year, which is climate risk. And during the year, we conducted climate risk assessments across the whole portfolio and identified the assets that have the highest climate risk, whether that be cyclone or flooding, for example, or bushfire. And we're now going through and doing deep dives on those assets. We completed 6 climate change impact analysis on 6 assets last year. We're doing another 6 next year. And that can be things such as, for example, in a cyclone area, making sure that the strength of the bolts on the roof is strong enough to withstand high winds. So it's really about how do we mitigate the impacts of up to 2.5 degrees of climate change at our assets. And if we can't mitigate the impact, does that asset become a future divestment potential, for example. So we're doing both of those things, both the net zero but also at the asset level, the climate risk assessments.

And acquisitions?

And acquisitions, sorry, every acquisition now, we do a climate risk assessment as part of the due diligence into the asset. Thanks.

Thanks very much. Is there any -- there was another question, I think?

I have 2 more, Chair. Can you provide an update on the rebuild of the Lismore shopping center? Also, are there any impacts on any other SCA shopping centers as a result of the current flood situation in New South Wales and Victoria?

Yes. I'll pass it off to Anthony.

Yes. Thanks very much. We're well underway on Lismore. We have completely refurbished the Woolworths Supermarket and a number of the tenants on that upper level, and we're well underway on re-leasing all this, I think, we had 21, 22 shops. We've done 9 deals, and they are all existing tenants. Most of the tenants wanted to come back, which is really, really pleasing. It's difficult getting builders and contractors in Lismore at the moment. So that's holding things up, but our base building works are really well underway. And we're really excited about where Lismore is going. It's costing us about [ $15 million ] and we'll probably get about [ $12 million to $13 million ] back on insurance in that, and the difference is a bit of an upgrade to the amenities. We've taken that opportunity to do that. But we should be all completed by March next year. And other centers. We have a center down at Moama, which is on the Murray River. Fortunately, it was built at an [ RL level ] which is a level of 97.5 meters and the floods there came up to 95.5 meters and there are levee banks build, et cetera. But that center went close, but it was still 2 meters above where the flood level was, but it would have taken everything out all around our center. And we've had a couple of other areas, same centers Cave Beach Road Beach, the basement flooded and pumped that out, caused some issues with some travelators, et cetera, but nothing else to any major extent.

And the second question?

Are all SCP staff back working in the office and on-site following the COVID-19 lockdowns? Are some staff still working from home? And if so, what financial effect has this had on SCP.

I think I'll answer that one. We've got a good group of staff. We are -- I've enacted a flexible working where we expect people to be in the office at least 3 days a week. A lot of our staff are working back in the office 5 days a week. Some people can actually work from home 4 days a week, so we're quite flexible. But generally speaking, everyone is back in the office. Mondays is, I think we're pretty well back to 90%, 95% of people in the office. Tuesdays is high 80s, Wednesday's 80s. Thursdays dropped down to about 75%, Fridays is probably around 50% of people in the office. Talking to my peers, other CEOs, that's very strong because Monday is actually also quite low. So I think we're doing quite well in that respect. Has it cost us anything? I think it -- we have supplied all of our staff with the ability to work from home during COVID. So that cost a bit of money with some computers, chairs, et cetera, so they can work safely. But I think the benefits that we've got far outweigh those very small costs that we did. And it works really well. I mean, I'm very -- Interim CFO can't be here today because he's sick and I do not want people coming into the office when they're sick and they're able to work from home because they've got all the tools that they can work from home. So it works all around in that way.

Thanks, Anthony. Any other questions from the online portal?

No further questions, Chair.

Is there any questions from the meeting? Okay. Well, on that basis, I now declare the meeting closed, and I'd like to take this opportunity to thank my fellow independent directors and Anthony and his management team and to all the staff at SCI for their diligence and commitment to this business. We are fortunate to have an outstanding team. And I thank you, particularly all of our unitholders, old, new, large, small for your continued support and confidence. For those unitholders attending in person, I invite you to stay for afternoon tea, and thank you for your attendance today. Thank you very much, everybody. Appreciate it. Thank you.