The Foschini Group Limited (TFG) Earnings Call Transcript & Summary

Thanks very much. Good afternoon, ladies and gentlemen, and I welcome you all to the 84th Annual General Meeting of shareholders of The Foschini Group Limited. In terms of Section 22.27 of the Memorandum of Incorporation, which I will hereafter refer to as the MOI, I'm chairing the meeting in my capacity as Chairman of the Supervisory Board of Directors. Any reference I make to the Companies Act is the Companies Act #71 of 2008. We have a quorum present, and I therefore declare this meeting properly constituted. I would also like to welcome the members of the Board who are in attendance at today's meeting, and I believe all of them are. Their biographies and positions are available on Page 108 of the annual -- integrated annual report or integrated annual report. And they are Graham Davin, Eddy Oblowitz, Professor Fatima Abrahams, Ronnie Stein, Sam Abrahams, Tumi Makgabo, Nomah Simamane, David Friedland, Doug Murray, Colin Coleman, Anthony Thunström, Bongiwe Ntuli, and the company's Secretary, Darwin Van Rooyen. Welcome to you all. The chairpersons of all the Board committees are present at this meeting. Notice of this meeting has been given in terms of the MOI and the Companies Act. The minutes of the previous Annual General Meeting held on the 16th of September 2020 have been verified by the Board of Directors. We shall now proceed with the business of the meeting. Pursuant to Clause 22.28(3) of the MOI, I determine that the voting in respect of this meeting shall proceed by way of a poll. Such poll voting shall be conducted entirely electronically as contemplated in Section 63.2 of the Companies Act and Clause 22.6 of the MOI through the electronic online facility provided by the transfer secretaries of the company, being Computershare, who are -- they are the transfer secretaries. For the purpose of the poll, I nominate a representative of the transfer secretaries present at this meeting to act as scrutineers. All the resolutions to be proposed at today's Annual General Meeting have been seconded by Mr. Darwin Van Rooyen, the Company Secretary. I will now open the voting on the electronic online facility, and voting can be performed at any time during the meeting until I close the voting on the resolutions. You will still be able to send messages and view the webcast once the poll is open, and I will allow any questions pursuant to the motions to be discussed after I have tabled the last resolution on the agenda. The first quarter trading statement or trading update was released on SENS on the 2nd of August 2021. If there are any questions in respect of the trading update, please submit these as well as they will also be discussed at the end of the meeting. A further trading update for the 6 months ended 30 September 2021 is expected to be released on SENS during October 2021. I will now deal with each of the resolutions in turn. Ordinary resolution #1. The first item on the agenda, ordinary resolution #1, is to receive and adopt the annual financial statements of the company and the group for the year ended 31 March 2021. I move that the annual financial statements of the company and its subsidiaries as approved by the Supervisory Board incorporating the independent auditor's report, the Directors report and the Audit Committee report for the year ended 31 March 2021, as well as the Social and Ethics Committee report contained in the 2021 integrated annual report be taken as read. I propose that the annual financial statements for the year ended 31 March 2021 and the independent auditors report, the Directors report, the Social and Ethics Committee report and the Audit Committee report be approved and adopted. Would you now please complete your electronic voting in respect to ordinary resolution #1? The second item on the agenda, ordinary resolution #2, is to reappoint Deloitte & Touche as auditors of the company; and Mr. J H W de Kock as the designated partner until the following Annual General Meeting. The Audit Committee has considered the reappointment of the auditors and recommends the reappointment of Deloitte & Touche. I therefore propose that Deloitte & Touche be reappointed as auditors of the company and that the designated partner is Mr. J H W de Kock until the following Annual General Meeting. Will you now please complete your electronic voting in respect of ordinary resolution #2? The third item on the agenda, ordinary resolution #3, is to reelect Ms. B L M Makgabo-Fiskerstrand, who is retiring by rotation, as an Independent Nonexecutive Director in accordance with the provisions of the MOI. Ms. B L M Makgabo-Fiskerstrand being eligible offers herself for reelection as an Independent Nonexecutive Director. Ms. B L M Makgabo-Fiskerstrand's CV was included in the notice and appears on Page 9 of the notice. The Nomination Committee has considered the reappointment of Ms. B L M Makgabo-Fiskerstrand and recommends her reappointment. I therefore propose that Ms. B L M Makgabo-Fiskerstrand, an Independent Nonexecutive Director, retiring by rotation, be reelected as an Independent Nonexecutive Director. Will you now please complete your electronic voting in respect of ordinary resolution #3? Ordinary resolution #4. Ordinary resolution #4 is to reelect Mr. E Oblowitz, who is retiring by rotation, as an Independent Nonexecutive Director in accordance with the provisions of the MOI. Mr. E Oblowitz, being eligible, offers himself for reelection as an Independent Nonexecutive Director. Mr. Oblowitz's CV was included in the notice and appears on Page 9 of the notice. The Nomination Committee has considered the reappointment of Mr. Oblowitz and recommends his reappointment. I therefore propose that Mr. E Oblowitz, an Independent Nonexecutive Director, retiring by rotation, be reelected as an Independent Nonexecutive Director. Will you now please complete your electronic voting in respect of ordinary resolution #4? The fifth item on the agenda, ordinary resolution #5, is to reelect Professor F Abrahams, who is retiring by rotation as an Independent Nonexecutive Director in accordance with the provisions of the MOI. Professor Abrahams, being eligible, offers herself for reelection as an Independent Nonexecutive Director. Professor Abrahams' CV was included in the notice and appears on Page 9 of the notice. The Nominations Committee has considered the reappointment of Professor Abrahams and recommends her reappointment. I therefore propose that Professor F Abrahams, an Independent Nonexecutive Director, retiring by rotation, be reelected as an Independent Nonexecutive Director. Will you now please complete your electronic voting in respect of ordinary resolution #5? The sixth item on the agenda, ordinary resolution #6, is to elect Mr. E Oblowitz, an Independent Nonexecutive Director, as a member of the Audit Committee. Mr. Oblowitz's CV was included in the notice and appears on Page 10 of the notice. The Nomination Committee has considered the appointment of Mr. Oblowitz and recommends his appointment. I propose that Mr. E Oblowitz, an Independent Nonexecutive Director, be appointed as a member of the Audit Committee. Would you now please complete your electronic voting in respect of ordinary resolution #6? The seventh item on the agenda, ordinary resolution #7, is to elect Ms. B L M Makgabo-Fiskerstrand, an Independent Nonexecutive Director, as a member of the Audit Committee. Ms. Makgabo-Fiskerstrand's CV was included in the notice and appears on Page 10 of the notice. The Nominations Committee has considered the appointment of Ms. Makgabo-Fiskerstrand and recommends her appointment. I propose that Ms. B L M Makgabo-Fiskerstrand, an Independent Nonexecutive Director, be appointed as a member of the Audit Committee. Would you now please complete your electronic voting in respect of ordinary resolution #7? The eighth item on the agenda, ordinary resolution #8, is to elect Mr. R Stein, an Independent Nonexecutive Director, as a member of the Audit Committee. Mr. Stein's CV was included in the notice and appears on Page 11. The Nomination Committee has considered the appointment of Mr. Stein and recommends his reappointment. I propose that Mr. R Stein, an Independent Nonexecutive Director, be appointed as a member of the Audit Committee. I will now -- will you now please complete your electronic voting in respect of ordinary resolution #8? The ninth item on the agenda, ordinary resolution #9, is to elect Ms. N V Simamane, an Independent Nonexecutive Director, as a member of the Audit Committee. Ms. Simamane's CV was included in the notice and appears on Page 11 of the notice. The Nomination Committee has considered the appointment of Ms. Simamane and recommends her appointment. I propose that Ms. N V Simamane, an Independent Nonexecutive Director, be appointed as a member of the Audit Committee. Will you now please complete your electronic voting in respect of ordinary resolution #9? The tenth item on the agenda, ordinary resolution #10, is to elect Mr. D Friedland, an Independent Nonexecutive Director, as a member of the Audit Committee. Mr. Friedland's CV was included in the notice and appears on Page 11 of the notice. The Nomination Committee has considered the appointment of Mr. Friedland and recommends his appointment. I propose that Mr. D Friedland, an Independent Nonexecutive Director, be appointed as a member of the Audit Committee. Will you now please complete your electronic voting in respect of ordinary resolution #10? The 11th item on the agenda, ordinary resolution #11, is to endorse by way of a nonbinding advisory vote the company's remuneration policy as set out in the Remuneration Committee report on Pages 139 to 147 of the integrated annual report. I propose that the company's remuneration policy be endorsed. Will you now please complete your voting -- your electronic voting in respect of ordinary resolution #11? The 12th item on the agenda, ordinary resolution #12, is to endorse by way of a nonbinding advisory vote the company's remuneration implementation report as set out in the Remuneration Committee report on Pages 148 to 156 of the integrated annual report. I propose that the company's remuneration implementation report be endorsed. Will you now please complete your electronic voting in respect of ordinary resolution #12? Anthony, can you chair the next resolution, please?

Thank you, Michael. The 13th item on the agenda, special resolution #1, as set out in the notice convening this meeting is to approve the remuneration to be paid to Nonexecutive Directors for the period 1 October 2021 to 30 September 2022, all details of which are contained in the notice. I move that special resolution #1 as set out in the notice convening this meeting be taken as read. I now propose that special resolution #1 as set out in the notice convening this meeting be approved and adopted. Will you please now complete your electronic voting in respect of special resolution #1? Thank you. Michael, I'll hand back to you.

Thanks very much, Anthony. The 14th item of the agenda, special resolution #2, is to approve that the company may provide direct or indirect financial assistance to a related or interrelated company or corporation provided that such financial assistance may only be provided within 2 years from the date of adoption of this special resolution and subject further to Sections 44 and 45 of the Companies Act. I move that special resolution #2 and the reason and effect of special resolution #2 as set out in the notice convening this meeting be taken as read. I now propose that special resolution #2 as set out in the notice convening this meeting be adopted -- approved and adopted. Will you please complete your electronic voting in respect of special resolution #2? The 15th item on the agenda, ordinary resolution #13, is to authorize any Director of the company or the Company Secretary of the company to carry out and to do all such things and matters as may be or are necessary in connection with the subject matter of the ordinary resolutions 1 to 13 and special resolutions 1 and 2 at the company's Annual General Meeting, including without limitation, being authorized to make, amend and sign all and any such necessary documents, letters, applications, announcements and affidavits as may be required for purposes of and in connection with any such resolution. I propose that ordinary resolution #13 be approved and adopted. Will you now please complete your electronic voting in respect of ordinary resolution #13? The last item on the agenda is to transact any other business that may be transacted at an Annual General Meeting. Notice has not been received of any other business, and this, therefore, concludes the matters upon which we are required to vote. I will now allow any questions pursuant to the resolutions tabled at today's Annual General Meeting to be discussed before closing the voting. Mr. Van Rooyen, have you any questions -- do you have any questions that have been raised pursuant to the resolutions tabled at today's meeting?

Mr. Chairman, no questions have been raised.

Okay. Well, thank you. Darwin, have any questions of a general nature being raised?

Similarly, no questions have been raised, Mr. Chairman.

Okay. I now close the voting, and the results will be shown shortly. I declare -- I think I'm right in saying, Darwin, is that so the -- are the results up yet?

No. We're still waiting for them, Mr. Chairman.

We need to just wait a moment. Is that right?

Correct.

Okay. We'll do that. And that will come on -- okay, there we go. So I think I'm correct in saying that all the -- I mean that's -- that all the resolutions and the votes are there for everybody to see. And I think I'm correct in saying that all the ordinary and special resolutions have been passed by the requisite majority. I would, though, like to turn to the results of the voting in respect of ordinary resolutions #11 and 12, the nonbinding advisory votes in respect to the company's remuneration policy and remuneration implementation report, respectively. The primary responsibility of the Remuneration Committee is to ensure an effective remuneration policy is provided and implemented as developed and proposed by the management. By indication, the Remuneration Committee is also responsible for defending an effective and appropriate remuneration policy aligned with the strategic, operational and risk mitigation imperatives of our business. The responsibility of shareholders is to act as a responsible investor and vote at the AGM on an informed basis on the remuneration policy and its implementation as well as other resolutions. Whilst we are grateful to those shareholders who supported at today's AGM the relevant resolutions relating to remuneration, in common with many other listed companies, we are disappointed with the voting outcome in respect of remuneration policy and remuneration implementation report. The voting outcome is below our expectations and also below the nonbinding 75% voting thresholds. The percentage of votes received in favor of our remuneration resolutions reflects a skewed voting outcome as 7 out of 8 -- of our top 8 shareholders have voted in favor of our remuneration policy and 6 out of the top 8 have voted in favor of the remuneration implementation policy. Our disappointment needs to be viewed in the context that, over the past year, the Chairman of the Remuneration Committee, together with the Company Secretary and remuneration specialists, held multiple separate formal engagements with our largest shareholders and indeed beyond our largest shareholders. This engagement process initiated at the behest of the Chairman of the Remuneration Committee was specifically established to proactively discuss upfront all key features presented in the remuneration report and to elicit their guidance and input into the design of all proposed significant changes to the remuneration policy prior to implementation of any such policies. Indeed, none of these engagements highlighted areas of disagreement that weren't adequately addressed and resolved. It may well be that certain institutions and shareholder bodies have different teams for shareholder consultation and voting decisions. If so, we call upon these organizations to ensure that those responsible for taking the voting decisions are adequately apprised of the consultations that have taken place. These exchanges of ideas included the key principles to be considered by the Remuneration Committee and applying the policy and the specific instances where the invocation by the Remuneration Committee of its discretion was deemed appropriate to ensure a fair and balanced overall outcome in the circumstances. Our view is that any Remuneration Committee that has not applied judgment in the last year and has not carefully considered the retention and cost of replacement aspects of key executives has not applied their mind or discharged their duty appropriately. Whilst we envisaged that it would be impractical for the engagement process to facilitate the complete alignment of often conflicting demands of all shareholders, it was, however, anticipated that this ongoing deep and transparent engagement process would yield the desired results of minimizing the risk of any misunderstanding and surprises by shareholders in relation to all remuneration matters for the year under review. The main remuneration topics discussed during our communication process with shareholders included inter alia the introduction of the new single incentive scheme and a minimum shareholding requirement; retention mechanisms for key executives; as well as our proposals for managing both long- and short-term incentive outcomes, especially given the ongoing volatile and uncertain environment caused by the impact of COVID-19 on our global operations and, ultimately, on our trading results. The sharing with these shareholders as part of the communication process of targets, forecasts and any other market sensitive information likely to affect the price of our shares is managed at all times with utmost care and discretion within the parameters of the JSE listing requirements and in compliance with corporate governance best practices. I want to add something else by reference on this whole topic by reference to a statement that I made in the recently published integrated annual report in the chairperson statement. In my statement last year, I said quote, "We will always maintain appropriate governance over remuneration in which there is much public interest given the level of inequality in South Africa. But bearing in mind the disruption and very considerable hidden costs associated with a lot of skilled people to companies seeking talent to solve their own problems, our remuneration policy must be bold and competitive." That was a quote from the previous year. I go on to say, "We ask shareholders and other stakeholders to consider and understand this point." We are grateful that this has been taken seriously. Unfortunately, competitors continue to continue their efforts to tempt away TFG's deep bench of talent. As we continue to meet this challenge, my message from last year has even greater meaning, and the continued support of our shareholders is even more important. I want to repeat that there is a substantial invisible cost to the loss of skilled people, and this must be borne in mind when considering how to vote on remuneration proposals. Shareholders can be confident that these proposals and any future ones have gone through rigorous governance oversight and represent the best view of what is in the long-range, long-term interest of the group. Finally, on this topic, shareholders are invited to advise the group of their reasons for their dissenting votes on the remuneration policy and the implementation of the remuneration policy by sending correspondence by e-mail to the Group Secretary, Darwin Van Rooyen, [email protected] by the 1st of October 2021. We welcome further engagement on these issues. And based on the feedback received, we'll schedule individual meetings with the relevant shareholders. As all the business on the agenda has been dealt with, I will shortly close the meeting. But before I do so, it is with a deep sense of gratitude and respect and with a heavy heart that my Board colleagues and I and all at TFG say farewell to Sam Abrahams after 23 years of dedicated and skilled service to the group. When Sam joined the Board in 1998, TFG was a much smaller and less complex company and its governance infrastructure was far less developed. More than any other single person, Sam has overseen a transformation in our governance generally and in the vitally important Board Audit Committee function, in particular. I've often said that TFG's approach to governance goes way beyond ticking regulatory boxes, but rather is designed to be relevant to ensure the best outcomes possible for all stakeholders. Sam personifies this approach. Through his searing intelligence, knowledge and experience as well as his no-nonsense approach, his presence has helped secure and ensure excellent governance and business outcomes for TFG. These are hard skills to find, and it is for these very reasons that we prevailed upon Sam to stay on the Board as long as he did. Without a shadow of a doubt, this has been massively in the interest of the group. Sam, at a personal level, I want to say that I will miss our interactions greatly, and so will your Board colleagues and every single person with whom you have come into contact and who received the benefits of your professionalism and wisdom right across the group. We all wish you a healthy, happy and purposeful retirement and together with Pat the opportunity to spend time with your family and on the many other pursuits and interests that you have. Once again, Sam, our deepest, deepest gratitude. History will record that you have made and left an indelible impression on TFG where you will always have many, many friends. I now declare the meeting closed, and thank you all for your attendance.