Smartgroup Corporation Ltd (SIQ) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the 2021 Annual General Meeting of Smartgroup Corporation Ltd, our first hybrid meeting. I'm Michael Carapiet, Chair of the Smartgroup Board. I'd like to begin by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation. I pay my respects to their Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people here today. I also acknowledge the traditional custodians of the other lands from which people are joining the meeting virtually today and their connections to land, sea and community. We pay our respects to their Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people joining the meeting virtually today. We are conducting this meeting in accordance with the rules and restrictions for Greater Sydney announced last week to protect the community from COVID-19. I'm addressing you now without a mask because it is important that all attendees of this meeting are able to clearly hear what I say. Our Managing Director and CEO, Tim Looi, will do likewise when he comes to speak, and we invite shareholders raising questions from the floor to remove their masks when asking questions. Otherwise, I respectfully ask that all people present wear a facemask at all times during the meeting unless you are eating or drinking or have an illness, conditional disability that makes wearing a mask unsuitable or another exemption from wearing a mask applies to you. Regretfully, we have also taken the decision to cancel the refreshments that we were planning to provide after the meeting. As it is now after 11 a.m., the nominated time for the meeting, I have been advised by the company secretary that a quorum is present, and so I am pleased to declare the meeting open. The Notice of Meeting was given to shareholders and lodged with the ASX on 7 April 2021, and I propose to take the notice as read. Shareholders were also provided with a voting form and a virtual meeting online guide providing instructions on how to ask questions and vote at this meeting through the online platform. I will remind shareholders of the arrangements for questions and voting when we get to the formal business of the meeting. If you're attending today's meeting via the online platform and you lose connections to the meeting at any time, you can log back into the online platform by returning to the link log-in page and following the prompts. You will then receive an automated e-mail and a recovery link for you to click on. Click on this link to reconnect to the AGM. Alternatively, please call our share registry provider, Link Market Services, on 1300-554-474 for assistance. That number is also printed at the bottom of the virtual meeting online guide. Joining me here in Sydney today are Gavin Bell, Nonexecutive Director and Chair of the Human Resources and Remuneration Committee; John Prendiville, Nonexecutive Director and Chair of the Audit and Risk Committee; Ian Watt, Nonexecutive Director and Chair of the IT and Innovation Committee; and our other nonexecutive directors, Carolyn Colley, Deborah Homewood and Andrew Bolam; Tim Looi, Managing Director and Chief Executive Officer; and Jonathan Swain, Joint Company Secretary. Joe Sheeran, the audit partner from our auditor PricewaterhouseCoopers, is also present here today and will be available to answer questions from shareholders at the appropriate time in the meeting. I will now make some brief comments about the company's performance in 2020 and so far in 2021 before handing over to Tim to take you through these matters in more detail. I'll remind shareholders that our 2020 Annual Report is available on our website at www.smartgroup.com.au. In 2020, we were confronted by the business and community challenges brought on by the global COVID-19 pandemic. The Board is proud of the business resilience that our company showed and the individual resilience of our people who continue to support our clients and their employees, many of whom were at the front line of the challenges throughout a difficult year. Smartgroup remains a strong and customer-focused organization. However, we could not fully escape the impacts of the deterioration in economic conditions nor the pandemic-related restrictions on normal business activities. Revenue of $216.3 million represents a reduction of 13% on our calendar 2019 results. Operating earnings before interest, tax, depreciation and amortization also reduced 19% to $95.4 million. Net profit after tax and amortization reduced 20% to $65.2 million, and statutory net profit after tax was down 33% to $41.3 million. Despite these impacts, the Board is pleased that we have been able to deliver investors a strong fully franked final dividend of $0.175 per share as well as additional fully franked special dividend of $0.145 per share. Delivery of these dividends reinforces the confidence that the Board has in the core business and our commitment to continue to support all those who have invested in Smartgroup and in what we do. I would like to take a moment to share with you some key statistics on Smartgroup's performance since it publicly listed in 2014. Smartgroup has delivered total shareholder returns of around 550% from the IPO until today and returned more than $280 million in net cash and franking credits to shareholders. Whilst we expect more moderated growth going forward, we are proud of what we've been able to deliver for our investors and continue to strive to provide sustainable and growing total returns for our shareholders. Like so many other businesses, the last year has required us to incorporate flexibility into how we work. Our ability to do that while maintaining good customer service is a testament to our culture of innovation and our inclusive workplace. Our efforts in these areas have seen us named as an Employer of Choice for Gender Equality as well as being one of a select group of companies named as an Inclusive Employer by the Diversity Council Australia for 2019/2020. In February 2020, Tim Looi was appointed Managing Director and CEO following the retirement of Deven Billimoria, Smartgroup's previous Managing Director and CEO. Tim had developed a detailed knowledge of the business working alongside Deven in his role as Chief Financial Officer over the previous 10 years. He has always shown the drive and insight to manage this business through an unprecedented year while laying the foundations for us to continue to build business success through our ongoing focus on customers, digital capabilities and simplifying Smartgroup's activities. I will now make some brief comments about the company's performance so far in 2021. We're pleased with the start to this year. In the 4 months to 30 April, Smartgroup has made a sound start to the year, reporting revenue of $71 million and net profit after tax and amortization of just under $22 million. We have some important client renewals as well as a significant client win, including a new health sector client that was onboarded in April with approximately 8,500 packages, with our total salary packaging customers increasing by 12,000 packages, which is about a 3% growth since December 2020. Tim will provide a more detailed update on 2021 performance later. We're also pleased to announce that the Board has resolved to establish a Board subcommittee dedicated to environmental, social and sustainability matters at Smartgroup. This committee will be formally established this year and reflects our focus on the importance of our environment and community in our operations. Finally, I would like to welcome to the company's executive team Anthony Dijanosic, whose appointment as Chief Financial Officer was announced last week. Anthony has been Smartgroup's Deputy Chief Financial Officer since April 2016 and has acted as Interim Chief Financial Officer since December 2020. In Anthony's 5 years with Smartgroup to date, he has driven and led many key projects, including acquisitions and integrations. And with a strong background in finance, he will strengthen our executive team as we continue to simplify our business. In conclusion, I would like to thank Tim, the entire management team and all of our employees for their focus and commitment in a year that has tested us all. I would also like to thank our loyal clients, suppliers and shareholders for their ongoing support and to take this opportunity to also thank my fellow nonexecutive directors who have provided invaluable support and wise counsel during these unprecedented times. I will now hand over to Tim.

Thank you, Michael. Good morning, everyone. This morning, I will first introduce a bit about Smartgroup, and then I'll talk to our 2020 results and provide an update on our performance to date for 2021. Finally, I will talk to the initiatives we're working on and the investments that we're making to drive organic growth within the business. Smartgroup is one of Australia's leading employee management services business with approximately 700 team members managing over 360,000 customers and 90,000 cars in both novated and in fleet. Our investment proposition to shareholders is underpinned by our capital-light business model. It is through this business model that we are able to generate strong cash flows and pay fully franked dividends. We don't need any recurring capital investment for growth generation. Now underpinning our business is our relationship with our clients. Most clients are on multiyear contracts, and our top clients have been with us, in some cases, more than 15 years. Now at Smartgroup, we provide and simplify a range of employee management services for Australian employees. Our services range from salary packaging through to workforce optimization. We contract through employees typically on an exclusive basis to provide benefits to their employees. We are a national organization, and we service some of Australia's largest employers, such as government departments, through to smaller not-for-profits and also corporates. One of the key strengths of our business is the long-term relationships we have with key clients. Typically, contracts are long term with 3- to 5-year average tenures. Among our top 20 clients, more than half have had a relationship of 10 years or more with us, reappointing Smartgroup through multiple renewals. 43% of our customer base is in the PBI non-health. So think of national, state and local based aged care, disability care and charitable organizations. Public hospitals account for around 30% of customers, and government and education around 25%. All are attractive segments with stable employee bases. Smartgroup is really conscious of its role we play as part of the broader community. Our strength as a business comes from the diversity, the experience and the skills of our team members. In 2020, Smartgroup joined 1 of only 119 Australian companies recognized as an Employer of Choice for Gender Equality by the Workplace Gender Equality Agency. Our workplace diversity is also reflected in our rating as an Inclusive Employer by Diversity Council Australia. In service excellence, Smartsalary continues to maintain its high standings with the Customer Service Institute of Australia, the peak body for service quality. And the work done by the Smartgroup Foundation this year reinforces our commitment to supporting the not-for-profit sector and the communities that we work with and service. The Foundation supported 11 organizations and their grassroot projects, from an early literacy program for children living in disadvantaged communities to supporting young mothers in continuing their education. Now in 2020, Smartgroup delivered a good set of financial results in light of the disruption caused by the pandemic. Now we're all aware of the broad impact that the pandemic has had on our economy, our society and the changes it has brought to our ways of working. Like most businesses in the country, we've had to deal with the rapid onset of operational challenges and the financial impact of this crisis. We implemented cost containment measures early. We quickly transitioned our workforce to remote working. We replaced face-to-face interactions with our customers with phone, digital and the web channels. So it is a testament to the dedication and the hard work of our team, the strength of our business model, that in a challenging year, Smartgroup was able to deliver a good set of results for 2020 while continuing to progress simplification and efficiency initiatives in all aspects of our business. So the highlights from the 2020 results are as follows. First, we delivered revenues for the full year of $216 million and NPATA of $65.2 million. So our top and bottom line numbers were down on the prior year by 13% and 20%, respectively. Now our business did not require any JobKeeper assistance. We introduced a number of cost containment measures, and we remained profitable and cash flow positive in each and every month of the year. Second, we continue to make steady progress in what was a challenging operating environment. We renewed or extended 100% of the top 20 client contracts maturing in 2020. Packages, novated leasing and fleet metrics were steady. Third, we continued to simplify our business operations, resulting in $4 million of annual cost savings. We also continued to streamline our systems, and we made good progress on the ongoing rationalization of another legacy system. And finally, our capital-light business model means we generated a strong level of free cash flows. After-tax cash flows were 115% of NPATA. This strong financial position allowed us to declare a final as well as a special fully franked dividend to bring total dividends for 2020 to $0.49 per share fully franked. Now in 2020, we operated much of the year with reduced in-person site visitations and client interactions. Now this traditionally has been a strong channel that generates interest and demand for our business. Now despite the material downturns in visitation, our customer base for salary packaging remained stable over the full year, with some growth in customers experienced in the second half of 2020. In late 2020, we onboarded a new health client with 3,500 packages, and we were also added to several government department panels for novated leasing. Our novated lease and fleet vehicles under management remained relatively stable throughout the year. Now I'd like to give you an update on our business and its progress so far in 2021. So we're off to a solid start for 2021. We are really pleased with what we have achieved so far in the first 4 months of the year. We onboarded another new health client, over 8,500 packages, and we were successful in renewing a long-term government education client contract. Clients are engaging well with us for renewals and a tender is in progress for the largest client. We've also seen good salary packaging growth, around 3,500, excluding the health client win. In over 4 months, that's pretty strong, and we're pleased with that. The tight vehicle supply market, unfortunately, is still impacting our business. However, our volumes are progressively improving month-on-month with our vehicle order pipeline at record levels. We are cycling through the insurance partner repricing that took effect 1 July 2020, and novated yields are down 2% from the last half primarily from lower insurance product attachment rates. So after 4 months, revenue is at $71 million and NPATA at $22 million. Our balance sheet remains strong with a small net debt position. I would like now -- I would now like to outline our program to drive organic growth for the next few years. I will explain the rationale for it and also the benefits and the outcomes we are expecting. Over the last several years, we have acquired more than 10 private salary packaging and fleet businesses. These acquisitions have helped us build a large client base that extends into the not-for-profits, private schools and corporates. Smartgroup is a B2B2C business. This means we contract with employers to provide benefits to their employees, in most cases, on an exclusive basis. So we are uniquely placed to deliver education, awareness and services. So we estimate that within our existing client base, we are able to reach up to 1.5 million employees. We also estimate that those 1.5 million employees own up to 1.2 million cars. Our largest clients are in education, health, disability and aged care as well as government. Employment in these sectors is stable and growing, and their employees typically drive to work. Now within this addressable market, we have approximately 360,000 customers. And after 20 years of operations and multiple acquisitions, we manage only 65,000 cars. We think there's room for good levels of organic growth over a medium term. So how do we intend to do this? We have long recognized great service as a key requirement to increase uptake. Customer experience is a natural extension to complement service. The delivery of great customer experience will increase client and customer advocacy, will increase referrals as well as promote cross-sales. For the last 2 years, we've been integrating multiple salary packaging acquisitions. At the end of this year, the integration work is expected to be largely complete. This means we can then focus on an investment into digital. This investment will be made across a smaller footprint of systems following completion of the integration work. And this digital investment, together with a focus on streamlining operations to reduce and eliminate complexity, will see us build capability to grow revenue from across a broader client base as well as reduce our cost to serve. Our goal is to build a great customer experience enabled by technology, delivered by engaged team members, to build out our brands and to build scale within our business. So over the next 3 years, we will be investing in customer experience, comprising a refresh of client and customer portals, our websites, our apps. We'll also roll out a standardized CRM across the group. Now given the amount of transactional data we hold, we intend to streamline data and reporting as well as continue to invest in a few core systems for scalability and efficiencies. We're making good progress on the introduction of a digital experience platform as well as mapping out our API requirements. We have started to roll out experience training to all frontline team members as well as customer journey mapping. On the digital front, we continue to consolidate acquired businesses, allowing us to retire legacy IT platforms. We have also formed an in-house intelligent automation team to reduce manual work, increase accuracy. And in the areas of simplification, our organization structure has become less complex with duplicated roles removed through the restructure in mid-2020. We refreshed our company values late last year to reflect our One Company, One Team culture. Our new values -- accountability, care, team -- that will help us strengthen our One Team, One Company culture or foster positive, respectful working relationships or give clear direction on what we stand for. We've also undertaken a comprehensive review of our remuneration structure, replacing a complex set of incentives with a simpler, more transparent measurement program. We're targeting up to $20 million of annualized EBITDA uplift from the full implementation of the Smart Future program with approximately 2/3 expected to come from revenue expansion and the remainder from sales and service efficiencies. We expect this to be on top of system growth. We estimate a $5 million to $6 million spend per annum over the next 3 years. The integration work we are doing for brand consolidation will reduce at the end of 2021, and we are targeting a $2 million per annum pretax reduction in operating expenses. Now with an addressable market of 1.5 million employees from existing customers alone, the Smart Future program can only enhance and accelerate our goals of increasing customer and client advocacy, growth from within our broader client base, reducing our cost to serve and increasing our customer -- employee engagement. In conclusion, we have delivered a good result in 2020 given the circumstances, and we are pleased with the start to 2021. Vehicle supply has been tight since half 2 2020, and it is expected to remain so for the remainder of the year. The rest of 2021 will see us focus on continued integration as well as progressing the Smart Future program. The team has positioned our business well through the pandemic, and we are excited to commence working on building capabilities that will see us grow the business organically. I'd like to extend my thanks to all our team members and the executive team for staying focused and engaged throughout the last 12 months. And on behalf of Smartgroup, we are excited about the business. I can say we're confident that our business model, our well diversified, long-standing client base, our strong customer engagement, all position us well for ongoing success. Thank you, Michael and the Board members, for your support throughout the year. I'll now hand back to you, Michael, for the formal part of the meeting.

Thank you, Tim. Ladies and gentlemen, we will now move to the formal part of the meeting. I will start by explaining the arrangements for asking questions and voting on the formal items of business. For those shareholders and proxyholders who are present at the venue here today, I will invite questions from the floor in the usual way. Only shareholders and proxyholders holding yellow voting cards or blue nonvoting cards will be entitled to ask questions from the floor. Visitors holding red visitor attendance cards are not entitled to speak at this meeting. If you wish to raise a question from the floor, could you please hold up your yellow or blue card. When I call on you to ask your question, could you please move to the microphone in the center of the room and then identify yourself and if you are a proxy or representative of another shareholder, the name of that shareholder. You may then ask your question. [Operator Instructions] Online questions will go through to our Joint Company Secretary, Jonathan Swain, as moderator for the meeting. I will then identify the person asking a question and then read out the question. I will then either answer the question or pass it to the most appropriate person to answer. [Operator Instructions] We reserve the right to rule out questions that do not relate to the business of the meeting. We will also not answer questions that are the same or substantially similar to questions that have already been answered. Otherwise, we will endeavor to answer many of the questions asked as we can. For each item of business, I will address questions from the floor first to allow as much time as possible for shareholders who wish to ask questions via the online platform to submit those questions. In accordance with the company's constitution and as stated in the Notice of Meeting, as Chairman, I have determined that voting on each of the resolutions will be conducted by a poll rather than on a show of hands. In accordance with the company's constitution, the Board has determined that shareholders entitled to vote on a resolution at this meeting may exercise a direct vote on that resolution. The Board has approved rules governing direct voting, which are available on the company's website. Shareholders were given the opportunity to exercise a direct vote before the start of this meeting by lodging the voting form that accompanied the Notice of Meeting. Shareholders were also able to use the voting form to appoint a proxy to vote on their behalf at this meeting. As set out in the Notice of Meeting, I will vote all directed proxies in accordance with the directions provided by shareholders, and I will vote all undirected proxies in favor of all resolutions. Shareholders who are attending via the online platform and who have neither exercised a direct vote before this meeting nor appointed a proxy to vote on their behalf may cast a vote during this meeting using the electronic voting card received when you registered via the online platform. Those shareholders may cast a direct vote at any time from now until 5 minutes after the close of the meeting. If you have any questions about casting your vote online, please refer to the virtual meeting online guide, which can be accessed from the download section at the bottom right-hand side of your screen, or call the help number 1800-990-363 also showing on your screen. Shareholders and proxyholders who are attending this meeting in person today and who have not exercised a direct vote before this meeting should have received a yellow voting card on entry to the meeting. If you did not receive a yellow voting card, please see the representatives of Link Market Services who are located at the registration desk just outside this room. Shareholders and proxyholders holding yellow voting cards will be invited to cast their votes on all resolutions by completing the voting cards and placing them in voting boxes. Representatives of Link Market Services will circulate the voting boxes after all resolutions have been discussed and before the poll closes. Shareholders will be asked to consider the 5 resolutions set out in the Notice of Meeting dated 7 April 2021. As I've previously explained, voting on each resolution will be by poll. The poll for each resolution is now open and will close 5 minutes after the end of the meeting. For each proposed resolution, I will introduce the resolution and display a slide showing the total direct votes and the proxy votes received on that resolution prior to the meeting. There will be an opportunity for shareholders to ask questions on the resolution in line with the process that I have just described. We will then move to a vote on the resolution. Each resolution will be approved if a majority of the votes cast by members entitled to vote on the resolutions is in favor of the resolution. The results of the poll will be released to the ASX company announcements platform and made available on the company's website as soon as possible after the close of the meeting. The first item of formal business is to receive and consider the company's financial statements and reports for the financial year ended 31 December 2020 as set out in the 2020 Annual Report. This item of business does not require shareholders to vote on a resolution or to formally adopt the accounts. Shareholders or their proxies may comment or ask questions about the financial statements and reports or about the management of the company. Shareholders may also ask questions of the company's auditor, PricewaterhouseCoopers, in relation to the conduct of the audit, the preparation and content of the audit report, accounting policies adopted by the company and the independence of the auditor in carrying out the audit. I will now address any questions relating to this item of business or any general business questions. Are there any questions from the floor? Please.

[ Brian Allison ], shareholder. Firstly, I'd just like to thank Tim for stepping up to the plate. It must have been a [ dawning ] decision. You're replacing a very well-regarded CEO at the most difficult possible time, and thank you for doing that. And those results do look quite good under the circumstances. We'd also like to thank the company for maintaining very close to their dividends. As everyone is probably aware, people who depend on dividends have been hurting in the last 12 months, and it's much appreciated. Now when I've read analyst reports about Smartgroup and the business in general, they've often suggested it's very fragmented and there was likely to be some amalgamations or takeovers and that sort of thing. I haven't seen anything happening in that regard. So I was just wondering what Smartgroup's opinion is on that -- in the industry.

Thank you very much for that question. The issue of consolidation between the various players has been on the agenda now for a long time. It gets written about. The reality is we've made a number of acquisitions over the years. We're happy with where we are right now. And as Tim has pointed out, the focus really is on organic growth going forward. However, we don't resolve from opportunities that may arise. But there isn't anything for us to discuss with shareholders on that topic presently. If there are no more questions from the floor, I will now address any online questions relating to this item of business or general business. There are no questions? As there are no further questions, we will now move to the next item of business.

Resolution 1, which is the nonbinding and advisory vote on the company's Remuneration Report for the year ended 31 December 2020. The Remuneration Report is set out at Pages 51 to 64 of the 2020 Annual Report. After the resolution has been moved, there will be time for comments and questions. I now move that the Remuneration Report for the company for the year ended 31 December 2020 be adopted. I will now address any questions relating to this item of business. Are there any questions from the floor? As there are no questions from the floor, we'll now address any online questions relating to this item of business. As there are no questions, I will now put the resolution to the meeting. The direct votes and proxy votes received for this resolution are shown on this slide. If you wish to vote on resolution 1 online using your electronic voting card and you have not already voted, please vote now. We'll now move to resolution 2, which is for the reelection of Mr. Andrew Bolam as a director. Andrew is required to retire this meeting in accordance with the company's constitution, and being eligible, offers himself for reelection. Information relevant to Andrew's proposed reelection is set out in the Notice of Meeting, and I note that each of the other directors supports Andrew's reelection. Andrew will now say a few words.

Thank you, Michael. Good morning, ladies and gentlemen. I'm very pleased to be here today standing for reelection as a director of Smartgroup. I first joined the Board of Smartgroup in 2012 whilst it was still a privately-held company and have continued to be a member of the Board since its listing on the stock exchange in 2014. I have a background in finance, general management and strategy across a diverse range of sectors, including financial services, media and the oil and gas sector. In addition to my role here at Smartgroup, I'm also an Executive Director and CFO of Media Innovations Holdings, a privately-owned company that operates the Fetch TV business here in Australia. I've also previously held several senior executive roles both in the Usaha Tegas Group of Companies and the Shell Group of Companies. In addition to being on the Board of Smartgroup, I'm also a member of the Audit and Risk Committee and also the IT and Innovation Committee. The knowledge and experience gained in the various roles I've held in my career have equipped me with the necessary skills and experience to make an effective contribution to the Board of this company. I have very much enjoyed my role at Smartgroup and look forward to continuing to work with the rest of the Board and the executive team to realize the full potential of this company. And finally, I'd like to thank you for your support.

Thank you, Andrew. I have pleasure in moving that Mr. Andrew Bolam, who retires in accordance with the company's constitution and being eligible, offers himself for reelection, be reelected as a director of the company. I will now address any questions relating to this item of business. Are there any questions from the floor? As there are no questions on the floor, I will now address any online questions relating to this item of business. We have no online questions. So I will now put the resolution to the meeting. The direct votes and proxy votes received for this resolution are shown on this slide. If you wish to vote on resolution 2 online using your electronic voting card and you have not already voted, please vote now. We'll now move to resolution 3. As this resolution concerns my own reelection as a director, I will pass the chair to Mr. John Prendiville, the Chair of the Audit and Risk Committee, for this item of business.

Thanks, Michael. Michael Carapiet is required to retire at this meeting in accordance with the company's constitution, and being eligible, offers himself for reelection. Information relevant to Michael's proposed reelection is set out in the Notice of Meeting, and I note that each of the other directors supports Michael's reelection. Michael will now say a few words.

Thank you, John. Ladies and gentlemen, I joined the Board of Smartgroup in 2014 and have chaired the company since that time. I've been very honored to be the chair and to be standing for reelection to the Smartgroup Board. I retired from Macquarie Group and executive life in 2011 after over 30 years in banking and have been a nonexecutive director and personal investor during the last decade. I'm the Chair of Link Administration Holdings, an ASX-listed entity, and have previously served as a nonexecutive director on other public company boards, including Southern Cross Media Group Limited and various Macquarie Group listed entities. I also Chair Adexum Capital Limited, which is a boutique private equity business that is in the process of winding down. I have been a director of various federal and New South Wales state government entities, including as a Director and Deputy Chair of Export Finance Australia; a Director of Clean Energy Finance Corporation and a Director of Infrastructure Australia; and Chair of SAS Trustees, which is the trustee entity for the New South Wales government state superannuation fund, and Insurance and Care New South Wales. I have no other significant public director roles currently other than my role at Link, and I believe that I have the necessary time and expertise to continue serving you as the Chair of Smartgroup. I've enjoyed my role as Chair, and I'm committed to the business as evidenced by my material shareholding in Smartgroup. I thank you for your loyal support and look forward to continue assisting Smartgroup provide investors with excellent returns.

Thank you, Michael. I have pleasure in moving that Michael Carapiet, who retires in accordance with the company's constitution and being eligible, offers himself for reelection and be reelected as a director of the company. I will now address any questions relating to this item of business. Are there any questions from the floor? Seeing nothing, if there are no more questions from the floor, I will now address any online questions relating to this item of business. Seeing nothing in online questions, no other questions, I will now put the resolution to the meeting. The direct votes and proxy votes received for the resolution are shown on this slide. If you wish to vote on resolution 3 online using your electronic voting card and you have not already voted, please vote now. I will now pass the Chair back to Michael.

Thanks, John, and thank you, shareholders. We will now move to resolution 4, which is to seek approval for the issues of securities under the company's loan funded share plan pursuant to paragraph (b) of Exception 13 in ASX Listing Rule 7.2. If that approval is given, securities issued under the plan during the 3-year period following the passing of resolution 4 will be treated as having been issued under an exception to ASX Listing Rule 7.1. Detailed information about the plan, including a summary of the terms of the plan, is set out in the explanatory notes to the Notice of Meeting as required by the ASX Listing Rules. In summary, if shareholders approve resolution 4, then any issue of securities under the plan during the 3-year period after this AGM will not count towards the company's 15% limit on issuing equity securities without shareholder approval under ASX Listing Rule 7.1 provided that: firstly, the number of equity securities issued under the plan after this AGM does not exceed 6,649,041, being 5% of the total number of ordinary shares currently on issue; and secondly, there is no material change to the terms of the plan. The Board believes that the plan encourages participants to focus on creating value for shareholders. It links reward with the achievement of long-term performance in the company. It encourages participants to remain with the company by providing them with the opportunity to hold a financial stake in the company and assists in the company attracting high-caliber employees. I will now address any questions relating to this item of business. Are there any questions from the floor? As there are no questions from the floor, I will now address any online questions relating to this item of business. There are no online questions, so I'll now put the resolution to the meeting. The direct votes and proxy votes received for this resolution are shown on this slide. If you wish to vote on resolution 4 online using your electronic voting card and you have not already voted, please vote now. We will now move to resolution 5, which is for the approval to issue shares to Mr. Tim Looi, the company's Managing Director and CEO, under the company's loan funded share plan. Detailed information about the proposed issue of shares, including a summary of the terms of the loan funded share plan, is set out in the explanatory notes to the Notice of Meeting as required by the ASX Listing Rules. In summary, if shareholders approve resolution 5, then the company will issue to Tim 431,655 ordinary shares, which will vest at the end of a 3-year vesting period ending on 31 December 2023, subject to the satisfaction of the performance hurdles and other vesting conditions described in the explanatory notes to the Notice of Meeting. The performance hurdles are based on total shareholder return and earnings per share over the 3-year vesting period, with vesting of 75% of the shares tested against the earnings per share hurdle and the remaining 25% tested against the total shareholder return hurdle. Any shares that do not vest at the end of the vesting period will be forfeited. If shareholders approve resolution 5, then the company will also loan Tim an amount equal to the total issue price of all shares to be issued to him with the issue price taken to be the 20-day volume weighted average price of shares traded on the ASX up until today. Tim cannot sell any shares that vest at the end of the vesting period until any outstanding balance of that loan is repaid. The Board believes that the performance hurdles strongly align Tim's ability to derive any value from the loan funded shares with Smartgroup's financial performance and the interest of Smartgroup shareholders. I will now address any questions relating to this item of business. Are there any questions from the floor? As there are no questions from the floor, I will now address any online questions relating to this item of business. As there are no online questions, I will now put the resolution to the meeting. The direct votes and proxy votes received for this resolution are shown on this slide. If you wish to vote on resolution 5 online using your electronic voting card and you have not already voted, please vote now. Before I close the meeting, can I please confirm that no further questions have been received through the online platform? Nothing has been received, so that ends the formal part of the Annual General Meeting, and I now declare the meeting closed. As I said earlier, the poll will remain open for a further 5 minutes and shareholders who have not already voted may lodge their online votes during that time. Would all shareholders and proxyholders who are present here at the venue and wish to vote on the resolutions proposed today, please now complete your yellow voting cards and then place them in the voting boxes being circulated by representatives of Link Market Services. The results of the meeting will be announced on the ASX company announcements platform and will be available on the company's website as soon as possible after the close of the meeting. Thank you all for participating in our hybrid meeting today, and we look forward to continuing support in the coming year.