Solutions 30 SE (S30) Earnings Call Transcript & Summary

Good morning, everyone. My name is Robert Ziegler, and I'm the Chief Transformation Officer of Solutions 30 since April 1. I'm very pleased to be here with you today to talk about our transformation plan for 2021. On the following slides, I'd like to explain how we plan to marry growth stemming from our markets with a transformation that is needed in Solutions 30 to sustain this growth. Since its inception, Solutions 30 has never seen a year without double-digit growth. In the past few years, this profitable growth has accelerated to bring the company to where it is today. My job will be to sustain this growth trajectory and achieve our ambitions for the coming years while maintaining current levels of profitability. We, as a management team, understand that operating at a level of $1 billion-plus in revenues requires additional discipline. Discipline needed to assure that we can sustain this growth without exposing ourselves to risks from the increased size and therefore, complexity of the organization. At the same time, the DNA and strength of Solutions 30 is its entrepreneurship and the drive of its people at all levels of the organization across Europe. Therefore, the challenge we seek is to become more structured and have stronger internal and external controls while preserving the entrepreneurial spirit at the heart of our teams. A very pragmatic transformation approach is needed, which will be driven by the top management and reach into the very details of our operations. We need to do this without creating an obstacle to our continued growth. Therefore, my approach to transformation will be twofold, focusing first on the continued growth of the business. It will support -- I will support this growth actively as part of the team, which is highly committed to deliver quality services to a loyal customer base. All that within a healthy and proven business model. The financial strength of Solutions 30 will allow us to fuel that growth with a very agile organization and with short decision-making processes. To give you an example, I'm currently deep diving into the German business, and I'm driving the growth there. We're building a stable platform to grow organically in our core markets of telecommunication and energy. We're also seeking opportunities to capture the current market momentum in Germany. We're investing into capabilities to bring new fast Internet to homes and businesses. The main challenge is to build resources and capabilities fast, all that in a market that is characterized by very high demand and a constant lack of supply. In order to bring additional resources to the German market, we're applying several strategies. One example is that we've built a supplier sourcing platform. This platform will allow us to source supplier companies from all over Europe. It will allow us to offer them projects or ongoing work all over our European entities. This platform will evolve into our main tool for managing subcontractors. In terms of our second priority, we will take steps to improve our structures around governance, risk and compliance. We're continuing to implement on a number of quick wins in this area. We're introducing new risk controls and compliance policies, which we're rolling out to all countries and all managers. We're building a digital platform for managing subcontractors and for monitoring all transactions with related parties. We keep strengthening our governance and governing bodies. We're continuously improving the legibility of our organization. 14 subsidiaries were merged in France in 2020 and we will keep reducing the numbers of subsidiaries. We're also improving our commitment to ESG. And for the first time in 2021, ESG criteria will be part of the management's bonus targets. Beyond the quick wins, we're starting a project with an external consulting firm, whom we've already selected. The project will focus on building a comprehensive governance, risk and compliance framework. We've chosen to implement the best practice model called GRC or 3 lines of defense. This framework covers governance, risk and compliance instead of looking at them as separate topics. It is centered around the first-line of defense, which are the core processes of the company. This means it is grounded in the business rather than a layer on top of it. We want to use GRC not just as an approach to fulfill external norm, but also to prepare the company for the coming growth trajectory. GRC will help us strengthen our structures and improve our internal controls. We do this, first and foremost, to protect our business and avoid mistakes in a fast-growing organization. The second line of defense are the internal control systems, which interact with our co-processes. We want to avoid those becoming a burden. We will, therefore, immediately implement easy-to-use workflow technology to facilitate the introduction of those internal controls. This system will support us on steering decision-makers along the process. It will document all relevant decisions and make them auditable. The challenge will be to design this in a way to stay agile while being more rigorous and disciplined at the same time. Once the first 2 lines have been implemented, we will activate the third line of defense by auditing whether we're doing the right things and whether we're doing the things right. In terms of organization, we will broaden the powers of the group Executive Committee, which will take our day-to-day task from the group management Board and help run the company more smoothly across geographies. There will also be regular interactions with country Executive Committees, and each country will follow a similar template for its organization. We will, of course, allow for differences in size or other local specifics. We have already significantly improved the integration of ESG matters into our strategy. The improvement in our ratings shows this. Solutions 30 was ranked by Vigeo to be the second most improved company on the Euronext Paris. Awareness for ESG has strongly increased throughout the group over the last year. And clearly, today, our customers are expecting their key partners to commit to sustainability. In 2021, we intend to go further, and for the first time, make ESG part of our managers' performance targets. We believe that this will further improve integration of ESG into our daily operations. The business will also increase its green revenue by growing the e-mobility charging networks throughout Europe. New initiatives will support human capital development. But last but not least, our own fleet will become more sustainable. Our first ESG report will be available in the coming weeks. When we look at the time line for our transformation plan, we expect the quick wins to be implemented by the end of Q4. The next stage growth plan and GRC implementation are expected by the end of Q4, beginning 2022. We also plan to follow-up our GRC efforts with an external audit on GRC in the first half of next year. In a nutshell, we want to deliver a stronger organization with stronger control for a stronger outlook. Thank you for your time and attention. I now leave the floor to Gianbeppi.

Thank you, Robert. We have received several questions from our shareholders. We have added the answers during the presentation. We have grouped the others per theme. First, for the audit. We received several questions related to audit and the measures put in place for the accounts and the control of the accounts. Since 2 years, and especially since the adoption of the IFRS standards, the desire for improvements have been required to solidify the accounts. We have a time line that is very precise for all the teams of the group and the auditors. This time -- this agenda was followed during 2020 and the first month of 2021 until our reviser in May published its report as we know it, and which was included in the presentation. We have several questions that led the reviser not to emit an opinion, the super -- the auditor, and we haven't talked about it. So we are binded by confidentiality clauses that, unfortunately, do not enable us to answer precisely to these questions. But I'd like to be very clear, and I'm saying it with the most strict firmness, we all -- we -- all the documents in our possession will be shared. The work has been very thorough, and we never asked the auditor not to look into it. So the -- as we have said it at several times, we are in deep disagreement with the auditor, and we do not agree. So the new auditor of the company will institute on the company and there will be a revision of the quarterly accounts and the strength and audit of the report opened in January 2021. If the 2020 accounts are approved during the general assembly, they will be provided to the register of trade commerce. And once again, these accounts are audited, even if they weren't the object of an opinion provided. Under the governance of the group, we also had received questions of 2 nature, some shareholders wanted to go back to the sale off of the shares. It was done in full transparency, 5% to the CCSF (sic) [ CSSF ]. These declarations are available on Solutions 30 website and were disseminated in the strict respect of the regulations. The notifications of the -- when the threshold was gone over, this is done by the stock exchange in Luxembourg. Not being -- having left the supervisory -- the Board of Directors, Karim Rachedi, no other notes to bring, but remains an important shareholder of the group. We were also asked about the confidence in the governance of the group and potential changes. As soon as the situation is normalized, the shareholders will be able to strengthen the Supervisory Board in terms of competence, audit compliance and so on and also looking at gender equality and considering new governance. Several shareholders have been asking about looking for a reference shareholder and potentially pulling out of the quarter. This is -- it's too early to say the coming in of a reference shareholder could take us out of this rating, but this is not the case now. And if we pulled out of the rating, we would have binding rules to protect the shareholders. And if such an operation was to be considered and implemented, then an offer would be sent to all shareholders to offer to buy back their shares according to specific terms, and they would be free to agree or not. We also considered a share buyback program and also we considered the dividend. And as you know, Solutions 30 is growing strongly and therefore, the cash flow is dedicated to the contract for the social interest of the group. Also, due to the crisis that we are going through, we have to -- we need the support of our banks, and they expect our cash flow to be managed extremely cautiously, which means that it needs to be dedicated to the growth of operations, which is why we cannot consider a short-term buyback program. And it's the same for paying our dividend. Regarding buyback from the members of the Governance Board, we obviously can't fall into the trap of insiders knowledge, and so we can't go into this. We answered most of the questions that you asked. And in 2 words, coming out of the health crisis is going well. Our activity continued throughout the second and the third lockdowns. The market is very buoyant, and the effect of the recovery plans are going to be felt soon. We're going to communicate on our 5-year plan towards the end of the year or towards the start of next year. The priority of the group is to capture the growth of our markets and to position ourselves as leaders of buoyant markets with strong recurrence as it is the case for fiber connection, markets, maintenance and support of final users. Our M&A policy is on standby considering the situation, but we have a pipeline of operations that is very good on a very fragmented market. And I think I have now answered all the questions that were asked. Teams of investors relations and shareholders relations are available, and I'm now going to give the floor to Pierre-Alexandre.

Thank you very much, Gianbeppi. Sorry in advance it's going to be a little bit technical, and I'm going to be reading. As you know, the agenda was the following: presentation of the management report and the consolidation report, the lack of opinion from the auditors; and the approval of the 2020 account; the approval of the consolidated account for the same year; allocation of results; the discharge to the members of the Management Board and the Supervisory Board; and the reelection of a number of members of the Supervisory Board, Mr. Jean-Paul Cottet, Ms. Caroline Tissot, Mr. Paul Raguin and Mr. Francesco Serafini, as members of the Supervisory Board for a period of 4 years ending at the date of the Annual General Meeting called to approve the annual accounts for the financial year ending 31st of December 2024; and the creation of additional Supervisory Board subcommittees; the appointment of new approved statutory auditors until the Annual General Meeting resolving on the approval of the annual accounts; and the submission of the remuneration report for advisory -- for advice. Regarding the voting formalities, all shareholders were invited to vote, through proxy vote, sending by the 21st of June midnight, their proxy vote duly completed and signed. The only shareholders holding shares on the record date, which was 16th of June 2021, were entitled to participate and vote in this general meeting. In my quality as the scrutineer teller, my team and myself have been counting all votes cast in the proxy and voting forms received prior to the general meeting. The process and the methodology have been verified by a bailiff, which -- who was able to ascertain the method and use the consolidated list of votes cast. In compliance with the law, the votes counted do not include votes attached to shares for which shareholders abstained or cast a blank or null vote. First resolution is the following, is the approval of the account of the company for the 31st of December 2020. The approval of the annual accounts of the company for the financial year ending 31st of December 2020 Annual General Meeting. After having reviewed the management report of the management Board, the disclaimer report of the approved statutory auditor and the observation of the statutory Board approves the annual accounts for the financial year in their entirety showing a net profit of 21 point -- well, you see the figure on the screen. Then you see the votes, 29 million -- 29,200,835 votes for, and 13,000 -- 13,339,677 votes against. So the resolution is adopted. Second resolution. The second resolution, approval of the consolidated financial statements of the financial year ending 31st of December 2020. So the net profit of EUR 35,844,373. You see the results on the screen. And so the resolution is adopted with a majority of 68.17%. Then the third resolution on the allocation of results. The Annual General Meeting acknowledges a net profit of EUR 21,240,366, and you see the allocation on the table on the screen. And the votes are also on the screen. The resolution is adopted by a majority of 99.57%. Fourth resolution. This is for the discharge to the members of the management Board and the Supervisory Board. And the resolution can be read as such: the Annual General Meeting decides to grant discharge to the members of the management board and the members of the Supervisory Board for the performance of the mandate for the financial year ending 31st of December 2020. And you see, again, the results on the screen. So over 28 million for, over 17 million against and about 9 million abstained. And so the resolution is, therefore, adopted by a majority of 61%. Fifth resolution, the reelection of members of the Supervisory Board. And so Mr. Jean-Paul Cottet, Mrs. Caroline Tissot, Mr. Paul Raguin and Mr. Francesco Serafini. The general meeting decides to reelect Mr. Jean-Paul Cottet, as member of the Supervisory Board of the company for a period of 4 years ending at the date of the next Annual General Meeting called to approve the annual accounts for the financial year ending 31st of December 2024. For, over 45 million votes; against, 770,000 votes; and we had an abstention of 5 million votes roughly. So the resolution is adopted by a majority of 98.35%. The sixth resolution concerns the mandate of Mrs. Caroline Tissot. The Annual General assembly decides to reelect Mrs. Caroline Tissot as member of the Supervisory Board of the company for a period of 4 years ending at the date of the Annual General Meeting called to approve the annual accounts for the financial year ending on 31st December 2024. The votes are expressed in the following way: for, 49,818,435 votes; against, 23,617 votes; abstention, 1,740,676 votes. The resolution is adopted by a majority of 99.95%. The seventh resolution concerns the mandate of Mr. Paul Raguin. The Annual General Meeting decides to reelect Mr. Paul Raguin as member of the Supervisory Board of the company for a period of 4 years ending at the date of the Annual General Meeting called to approve the annual accounts for the financial year ending on 31st December 2024. The expressed votes are: for, 44,333,098 votes; against, 2,064,946 votes; abstention, 5,184,684 votes. The resolution is adopted by a majority of 95.55%. Finally, the eighth resolution concerning the mandate of Mr. Francesco Serafini. The Annual General Meeting decides to reelect Mr. Francesco Serafini as a member of the Supervisory Board of the company for a period of 4 years ending at the date of the annual meeting called to approve the annual accounts for the financial year ending on 31st December 2024. The expressed votes are the following: for, 44,691,074 votes; against, 1,561,797 votes; abstention, 5,329,857 votes. The resolution is, therefore, adopted by a majority of 96.62%. We also had something to discuss on the agenda, the creation of additional Supervisory Board subcommittees. The company would like to inform the shareholders that in addition to the existing 3 subcommittees from the Supervisory Board being the Audit Committee, the Nominations and Remunerations Committee, and the Strategy Committee, that the Supervisory Board following the Annual General Meeting will create 2 supplementary subcommittees, which will be a Risk Committee and an Environmental, Social and Governance Committee called ESG. On the ninth resolution concerning the auditor. After the expiration of the end of the mandate of the auditor, the company has called a tender for a new auditor in Luxembourg. The Annual General Meeting decided by an advisory vote to appoint PKF Audit & Conseil situated 37 rue d'Anvers in Luxembourg, and registered with the Register of Commerce and Companies in Luxembourg under identification as new independent auditor for the company until the Annual General Meeting resolving on the approval of the annual accounts for the financial year ending on December 31, 2021. The votes are: for, 30,308,102 votes; against, 5,415,225 votes; abstention, 15,859,401 votes. The resolution is, therefore, adopted by a majority of 84.84%. The 10th resolution concerns the remuneration report. The annual general assembly decides by an advisory vote to approve the remuneration report of the company for the financial year 2020. The votes expressed are: for, 30,609,710 votes; against, 16,188,061 votes; abstention, 4,703,957 votes. The 11th resolution and last, based on the third resolution, allocating a total amount of remuneration for the Supervisory Board in relation to the financial year 2020 of EUR 92,000. The Annual General Meeting approves the following annual fees per function that the Supervisory Board members hold. So you can see on screen, the votes expressed are the following: for, 49,214,500 votes; against, 815,144 votes; and an abstention of 1,553,084 votes. The resolution is adopted by a majority of 98.37%. This closes the process of the resolutions of this general ordinary assembly. And I will now give the floor to the President, Gianbeppi Fortis.

Thank you, Pierre-Alexandre. To conclude this general meeting, I would like to warmly thank our shareholders who have mobilized in this difficult period, and have given the support to the group, its employees and its customers. Trust is important to us, and we would like to tell you how we understand the difficulties you're going through at the moment. We are determined to find a satisfactory way to come out of this situation. We are working for the social interest of our group and for the interest of all our stakeholders. Your mobilization was crucial for this general meeting, and the contract has been fulfilled. We will be able to move forward. And on behalf of all the teams, I would like to thank you. This now ends this general meeting, and we are now going to open the extraordinary meeting.

Thank you. Gianbeppi. Thank you, President. As this is a new meeting, we have to do things properly. So let's see what was said before. According to the Luxembourg law, you have to have at least 1 share of Solutions 30 and agree to the statutes to be able to come to this general meeting. In view of the COVID-19 pandemic and the restriction on gathering that are still in force in Luxembourg, the company had to take precautionary measures, again, this year to limit the exposure of its shareholders and all the usual participants in an Extraordinary General Meeting. In this context, the management Board of the company has decided to hold this Extraordinary General Meeting without physical presence as permitted by the Luxembourg law. The management Board also decided that this Extraordinary General Meeting will be broadcast live by video and would be accessible to all shareholders registered on the record date of the 16th of June. Considering the formalities and publications, the documents relating to the regularity of the convening of the shareholders have been deposited on the bureau. The documents provided by the law and the article of the association were made available and were published in the following way: 31st of May; 10th of June for the 3D electronic gazette and the local paper in Luxembourg, Tageblatt; and the website on the company on the 31st of May, 10th and 28th of June. The notices of the Extraordinary General Meeting was sent to shareholders in name by registered letter on 31st of May. The certificates as at 16th of June and proxies and voting forms were also deposited on the bureau of the assembly of the general meeting. Concerning the quorum, in accordance with the law on commercial companies and articles of association of Solutions 30, we need a quorum, which needs to be half of the corporate capital that must be represented for any general meeting to be held valid. The resolution of the agenda of this Extraordinary General Meeting will be adopted by a majority of 2/3 of votes validly cast. Each share gives the right to 1 vote. For the calculation of the quorum as per the analysis of the documents and the consolidation of the vote validly cast by the shareholders, it appears that the corporate capital amounts to 107,127,984 shares. The required quorum was 53,563,992 shares. And the represented corporate capital represented is 51,582,728 shares, which is 48.15% of the capital. So the legal quorum not being reached, this Extraordinary General Meeting cannot be held as valid. And the notary will draw an acknowledgment deed, establishing the absence of legally required quorum and the Extraordinary General Meeting will be reconvened at a later date. So this ends this Extraordinary General Meeting. Thank you very much for listening.