Superloop Limited (SLC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Peter O'Connell. I am the Chair of Superloop. Thank you for joining our 2022 Annual General Meeting. I would like to acknowledge the traditional custodians of the land in which we meet today, the Gadigal people of the Eora Nation. We pay our respect to their elders, past, present and emerging. It is now 2:30 p.m. Sydney time, the nominated time for our AGM. I have been advised by our company secretary that a quorum is present, and so I'm pleased to declare our 2022 AGM open. As this is a hybrid meeting, shareholders can participate either via the online platform or physically at our venue today. With me in Sydney, I have Paul Tyler, our Executive Director and Chief Executive Officer; Drew Kelton, Non-Executive Director; Vivian Stewart, Non-Executive Director; Stephanie Lai, Non-Executive Director; Tony Clark, Non-Executive Director; Tina Ooi, our General Counsel and Company Secretary, Luke Maffei, ESG and IR Manager. Also joining us today are members of the management team, including CFO, Luke Oxenham. We also have [indiscernible] Deloitte and Darren Pocock and Adrian DeBruin from Baker & McKenzie, our external law firm. [ Tina ] is available to take questions on the conduct of the audit and the preparation and conduct of the independent external auditor's report. This afternoon, I'll make some introductory remarks regarding your company's performance in the 2022 financial year and then comment on more recent achievements. We will then conduct the formal business of the meeting before handing over to our Managing Director and Chief Executive Officer, Paul Tyler, who will provide a more detailed review of Superloop's activities during the 2022 financial year as well as some observations about the outlook for the company. I joined the Superloop Board in November of 2021 as independent Chair and I'm delighted to be a part of such a vibrant and growing organization. My experience in the consumer telco space complements the Board's existing strong experience in the business and wholesale markets. FY '22 marks the halfway point from the implementation of our 3-year growth strategy, which commenced in January of 2021. I am very pleased with the progress we have made and even more excited about the future. To date, we have substantially improved our balance sheet and have exceeded our FY'22 EBITDA guidance range of $23 million to $25 million. We've also simplified the business into 3 segments based around customers, leveraging our significant fiber networks, and allowing us to broaden our product scope, delivering a lower cost to serve. Consistent with our strategy to simplify the business, build scale and improve return on invested capital, FY'22 saw the divestment of Hong Kong and certain Singapore assets, and the acquisition of Exetel and the Acurus businesses. As part of repositioning the business, several new appointments were made at the executive level, bringing a wealth of experience and expertise. The Exetel and Acurus acquisitions have enabled us to increase asset utilization by adding customers and scale, positioning us well to accelerate our growth strategy. The recent VostroNet acquisition will also assist in that regard. In addition, the simplification of our three reporting segments: Consumer, Business and Wholesale, has provided greater clarity in terms of financial reporting, customer-centric focus, roles and responsibilities within the organization. Our strategy is clear and simple. We are leveraging our quality telecommunications infrastructure assets to support the challenges in our market, Superloop included, to gain a 30% share of the Australian interconnectivity market. Following significant progress made in FY'22, Superloop is now a far simpler and attractive investment, underpinned by organic growth momentum, growing EBITDA and a strong balance sheet with capital flexibility. Superloop will continue to deploy capital prudently whilst evaluating M&A prospects where appropriate as well as investing in organic growth opportunities and maintaining sound financial metrics. Consistent with this approach is our recent acquisition of Smart Building provider VostroNet and the preferred network partnership with Uniti announced yesterday. On a pro forma basis, as at 30 September '22, assuming the completion of payments made under the VostroNet and Uniti transactions, Superloop has available liquidity of approximately $75 million. Paul will expand on capital allocation later in his presentation. Turning to Board matters. At the last AGM, we farewelled Bevan Slattery, as Chair of Superloop. Bevan made an enormous contribution to Superloop and remains a significant shareholder of the company, and I thank him on behalf of us all. The process of succession planning and Board renewal is ongoing, as is our long-term commitment to diversity of representation in our non-executive director ranks. The Board now comprises 6 Directors with 4 Non-Executive Directors who are assessed as independent. I am confident that your Board has a strong mix of relevant skills and experience to successfully pursue the next phase of your company's growth. While discussing people, it is also appropriate to discuss remuneration arrangements at Superloop. Following a comprehensive review of Superloop's executive remuneration structure, the Board has introduced a new executive performance rights plan and a new general performance rights plan. In addition to the items of business relating to the financial statements and reports, the remuneration report, the election of a director, the Acurus acquisition, and an increase to the non-executive director fee pool, you will shortly be asked to approve both the executive and general performance rights plans, as well as a grant of performance rights proposed for our Chief Executive Officer, Paul Tyler. Under Superloop's proposed new executive performance rights plan. I would like to take this opportunity to provide you with some context for the new incentive structure and how it will apply to the CEO. The executive performance rights plan has two key objectives: First, to facilitate executives building a meaningful shareholding position in the company, subject to appropriate performance hurdles being met, so that they are aligned with the interests of shareholders generally; and two, to provide incentive for the sustainable and maintain long-term financial performance and growth to enhance shareholder value of the company. The Board believes that it is in shareholders' interest to provide the CEO with an equity-based long-term incentive to ensure there is alignment between shareholder outcomes and CEO reward, and we ask that you support this resolution. Similarly, Superloop has introduced the general performance rights plan to offer eligible participants across the Superloop business, the opportunity to become shareholders of Superloop and enhance employee engagement by aligning employees' interests with Superloop's performance and the interests of shareholders. We ask that you support this resolution also. Under the general performance rights plan, Superloop has offered all employees, excluding executives; 2,000 performance rights in recognition of their hard work while the business has undergone significant changes in the 2022 financial year. Superloop is also seeking shareholder approval at this AGM to increase the maximum aggregate of remuneration that can be paid to non-executive directors each year. The annual fee pool, from $750,000 to $900,000. Increasing the annual fee pool will provide the company with flexibility to expand the size of the Board during transition periods, as part of an active Board renewal and succession planning process. Introduce additional committees or advisory boards if requested, and continue to attract and retain non-executive directors of the highest caliber by maintaining market competitiveness of directors' fees. We ask that you support this resolution, which is allowable under the company's constitution. We are well positioned to continue to deliver sustainable growth in financial year '23 and beyond to drive shareholder value. We are confident about the future of Superloop. Looking ahead in financial year '23, the group will continue to focus on its growth strategy. This will be delivered by leveraging our assets, including the Exetel and Acurus acquisitions, and investing in our brands, products and customer experience. Enhancing customer experience is of paramount importance, as we seek to increase asset utilization of our high-grade fiber networks. In closing, I'd like to thank my Board -- my colleagues on the Board for their contribution and commitment during the year. On behalf of the Board, I would like to recognize the dedication and contribution of all Superloop employees to the company's ongoing success. Finally, I'd like to thank you, our shareholders, for your continued support, and I look forward to engaging with you in the future. We will now move on to some of the procedural matters. But before we can move to the formal part of the meeting, there are a few housekeeping matters I need to address. I will now summarize the shareholder questions and voting procedures, which will apply to this meeting. As set out in the Notice of Meeting, there are 8 resolutions to be considered today. The resolutions have been outlined and explained in the explanatory memorandum that was included in the notice of meeting. Each resolution will be put to the meeting. Shareholders' questions, which are submitted online, which are relevant to the resolution, will be read out by Tina Ooi, our General Counsel and Company Secretary, and addressed by myself and Paul Tyler. I will then advise the number of proxy votes received on each resolution before moving to the next item of business. Any questions that come through relating to the general business of the company will be noted and addressed after the formal proceedings have been dealt with and the meeting is closed. Ladies and gentlemen, may I remind you that only shareholders, their appointed proxies or corporate representatives of shareholders are entitled to make comments, ask questions or vote. Turning now to Slide 4. For shareholders joining us online, instructions on how to lodge a question online are set out on the screen. The online guide is also available at the bottom right of your screen. I encourage shareholders who join us today via the virtual meeting platform to submit their questions as soon as possible. Shareholders are also able to ask their questions only through the question and comments facility -- sorry, orally. As stated in the notice of meeting, shareholders are required to call 1-800-990-363, to obtain their unique pin before calling the question and comment facility today. For further guidance on how to join in on this facility, please refer to the last page of the online guide. [Operator Instructions] The phone operator will introduce and prompt you to speak at the appropriate time. All the questions should be directed to myself as Chair of the meeting, and I will then invite other directors and/or relevant persons to respond as appropriate. We will address questions received from shareholders attending this AGM in person here in Sydney first, before moving on to shareholders' questions from the questions and comments facility. And finally, questions received through the virtual meeting platform. I hope you've all got that. The proxy votes received are reflected in our presentation slides today and will be displayed on screen at the appropriate time. All resolutions we put to the meeting today will be determined by a poll. All undirected proxies will be voted by myself in favor of the resolution to the extent that I'm permitted to do so. Shareholders here in Sydney who hold a white voting card can mark their votes for each resolution as we consider them today. Representatives from our share registry, Link Market Services, will collect them from you at the end of the meeting. Shareholders participating online may submit their votes at any time by clicking the submit vote button at the bottom of their online voting card. If you need further assistance, please refer to the instructions that are on screen and in the online guide available on the virtual meeting platform. I'll just pause for a moment so all listeners on the virtual screen can consider that slide. I think it's just gone off the screen actually. Slide 7, formal business. All of the resolutions, except for Resolution 3 in the Notice of Meeting, are to be considered as ordinary resolutions. And as such, must be approved by a single -- simple majority of votes cast by shareholders entitled to vote and voting on that resolution. Resolution 3 requires a special resolution, and we need -- and we will need to be approved by at least 75% of the votes cast by shareholders entitled to vote and voting on the resolution. Although Resolution 1 is advisory only, the Board will take today's discussion into consideration when determining Superloop's remuneration policy. Shareholders can submit their votes online until 5 minutes after the meeting closes. Once the voting has closed, our share registry provider will tabulate the results, which will be released to the ASX as soon as possible today. Our notice of meeting and explanatory memorandum has been released to the ASX and published on our website on 9 September, 2022. It sets out the details of each resolution being considered at today's meeting. If there are no objections, I'll take our notice of meeting as read. Slide 8, financial statements. The first item of business is to receive and consider the company's financial report, the director's report and the auditor's report for the year ended 30 June, '22. There is no vote on this item of business. A copy of the statements and reports were published in our 2022 annual report and sent to those shareholders who requested hard copies. Shareholders have also had the opportunity to view statements and reports on our website. The purpose of this item of business is to provide an opportunity for shareholders to ask questions and make comments about the company's performance, operation and management. For those who may wish to make a comment or ask a question regarding remuneration, please bear in mind that we have a separate item in our remuneration report, which will follow next. I will now invite questions and comments on the financial statements and reports. Questions may also be asked of the auditors about the conduct of the audit, the content of the audit, accounting policies adopted by the company and the independence of the auditor in carrying out the audit. Questions that have been submitted regarding other items of business will be held over until we come to those items. And the general business of the business of the company will be addressed after the meeting closes.

We have received one question prior to the meeting. The question is, why is Superloop performance on the share market so poor? Many investors are frustrated at the loss of value of this company. Firstly, let me say that we share your frustration with share price despite what we believe has been a very strong financial year. At an operational level, our turnaround is succeeding, but it is yet to be reflected in market sentiment. Superloop made a number of strategic changes over the last year, which are having an impact already, and we are making good progress forward delivering sustainable earnings growth. Our earnings are growing. We have a strong balance sheet, and we are growing market share in all our segments. I'm sure in time, this will be reflected in the share price. We appreciate your support, and we look forward to sharing the success of the company with you in the future. I will now take questions from shareholders that are here in Sydney today. Are there any questions from the floor? No, there were no questions. We have addressed all questions from the floor, so we will now move on to the questions from shareholders joining us on the phone. Are there any questions from shareholders joining us on the phone on this item of business?

There are no questions from the shareholders on the phone at the moment.

I'll now take questions from shareholders who have lodged their questions through the virtual meeting platform.

There are no questions submitted at this time.

Thanks, Tina. If there are no further questions, we will now move to the formal resolutions. As a reminder, you can place your vote with respect to the resolutions put to the meeting and at any time using your physical or virtual voting card. Item 1, we will now proceed to resolution 1 -- we will now proceed to adoption of the remuneration report. Resolution 1 is to consider the adoption of the company's remuneration report for financial year 30 June, 2022. The remuneration report is set out in the directors' report in Superloop's 2022 annual report. Please note that the vote on this resolution is advisory only and does not bind the company or its directors. Voting exclusions applied to this resolution as set out in the notice of meeting. The directors abstained from making a recommendation in respect of this resolution, and I now welcome questions with respect to the remuneration report. Are there any questions from the floor? There are no questions. So thank you. Are there any questions from shareholders joining us on the phone on this item of business?

There are no questions on the phone.

Thank you. I'll now take questions from shareholders who have lodged their questions through the virtual meeting platform.

No questions have been submitted at this time, Chair.

Thank you, Tina. I now firmly move the motion that Resolution 1 be put to the meeting in the form set out in the notice of meeting. Proxy votes received in relation to this resolution are being shown on screen. Please mark your votes for this resolution now. As you can see, there is a fairly large against vote on this item. We did receive some constructive feedback from investors on the remuneration report with respect to disclosure and transparency, and we will look to improve the remuneration report and framework in financial year '23. We will now proceed to Resolution 2, my election as a director. Given that this resolution relates to my election as a director, I'll pass the chair to Tony Clark, Chair of our Remuneration and Nomination Committee. Thank you, Tony.

Thank you, Peter. Resolution 2 relates to the election of Mr. Peter O'Connell, as a Non-Executive -- sorry, excuse me, Mr. Peter O'Connell, as a Non-Executive Director of Superloop. Mr. O'Connell retires in accordance with Rule 19.2B of the Constitution and ASX listing rules 14.4 and 14.5, and being eligible stands for election as a director. Details of Resolution 2 are set out in the notice of meeting, which we have taken as read. The directors, with Peter O'Connell abstaining, recommend this resolution be approved by shareholders, and I now welcome questions with respect to this item of business. Are there any questions from the floor? We have no questions from the floor. Thank you. Are there any questions from shareholders joining us on the phone for this item of business?

There are no questions from the phone.

Thank you so much. I will now take questions from shareholders who have lodged their questions through the virtual meeting platform.

No questions have been submitted at this time, Chair.

Thank you, Tina. As there are no further questions, I now formally move that to the motion, the resolution to be put to the meeting in the form set out in the notice of meeting, would you please mark your ballot cards and votes accordingly? And I'll pass the chair back to Peter.

Thanks, Tony. We will now proceed to Resolution 3, approval of the giving of financial assistance. Resolution 3, approval that for the purposes of Section 260 B2 of the Corporations Act and for all other purposes, shareholders approve the giving of financial assistance by Acurus and each of the Acurus subsidiaries to assist Superloop's acquisition of Acurus. And all the elements of that transaction and any other transactions that may constitute financial assistance in connection with Superloop's acquisition of Acurus. As described in the notice of meeting -- sorry, as they were described in the Notice of Meeting. Details of Resolution 3 are set out in the notice of meeting, which we have taken as read. This is a special resolution and will need to be approved by at least 75% of the votes cast by shareholders entitled to vote and voting on the resolution. The directors unanimously recommend this resolution be approved by shareholders. And I now welcome questions with respect to the item of business. Are there any questions from the floor? No questions. So thank you. Are there any questions from shareholders joining from the phone on this item of business?

There are no questions submitted on the phone.

Thank you. I will now take questions from shareholders who have lodged their questions through the virtual meeting platform.

No questions have been submitted at this time, Chair.

Thank you, Tina. There being no further questions, I now formally move the motion that Resolution 3 be put to the meeting in the form set out in the notice of meeting. Proxy votes received in relation to this resolution are being shown on screen. Please mark your votes for this resolution now. Resolution 4, we will now proceed to resolution 4, the ratification of a previous issue of shares to the vendors of Acurus partial consideration for Superloop's acquisition of Acurus. Resolution 4 seeks approval that for the purposes of ASX Listing Rule 7.4 and for all other purposes, shareholders ratify the previous issue of 3,393,665 Acurus consideration shares to the vendors of Acurus on the terms and conditions set out in the notice of meeting. Details of resolution 4 are contained in the notice of meeting, which we have taken as read. The directors unanimously recommend this resolution be approved by shareholders and I now welcome questions with respect to this item of business. Are there any questions from the floor? There were no questions. Are there any questions from shareholders joining us on the phone on this item of business?

There are no questions submitted on the phone.

Thank you. I will now take questions from shareholders who have lodged their questions through the virtual meeting platform.