WAM Global Limited (WGB) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Third WAM Global Annual General Meeting. We are focused on the health and well-being of all our shareholders, and therefore, this meeting is being held virtually in this period just to really protect our shareholders from the risk of the current coronavirus pandemic. We understand and recognize the significant limitations of holding AGMs in this format, and we look forward to seeing you all in person as soon as possible. I'd like to begin by acknowledging the traditional owners of the land on which I'm speaking to you from today, and that's the Gubbi Gubbi people and pay my respects to elders, past and present. As we're unable to meet in person together, I also acknowledge the traditional custodians of the lands from which our shareholders and fellow directors are currently viewing and listening to today's AGM. Wunya ngulum. It's welcome to all our shareholders. Thank you for joining us and for your continued support of WAM Global. I'm Geoff Wilson, Chairman of the Board of Directors. I'm joined by my fellow directors here today, Gabrielle Trainor, Caesar Bryan and Kate Thorley. Acting in the capacity as moderator, we have our CFO of Wilson Asset Management, who's Jesse Hamilton. He's Joint Secretary -- Joint Company Secretary of WAM Global, and he'll be assisting in any questions. Scott Whiddett, who is a representative of our auditor, Pitcher Partners, will be here to address any questions on the financial statement. As it is just after 12:00 and a quorum is present, I declare the meeting open. The Notice of Meeting has been circulated to shareholders, and in the absence of any objections, I'll be proceeding on the basis that the notice has been taken as read. We'll do our best to use technology to replicate all of the key features of a physical meeting by keeping the meeting as succinct and as informative and as interactive as possible. I encourage you to read the Chairman's address, which has been announced to the ASX. Shareholders who have logged into the webcast with your username and password will have the opportunity to submit questions online or ask audio questions as well as vote on the resolutions. Questions can be submitted at any time. Please note that while you can submit questions from now on, we will aim to answer the questions at the various appropriate time relating to the specific topics. Voting today will be conducted by way of a poll at all -- on all items of business. In order to provide you with the ample time to vote, I'll shortly open the poll for all resolutions. If you have already submitted a proxy form or voted online prior to this meeting, you will not be required to vote. When I open the poll, the voting icon will appear on the navigation bar. Once you click on this, a list of resolutions will appear on a screen with voting options. Simply select one of the options to cast your vote. If you change your mind, simply select another option. You can change your vote as many times as you wish until the closing of the poll. Your vote will have been submitted when the voting option icon changes color. There is no submit button. I now declare voting on all items of business open. You can vote at any time during the proceedings and until I declare the voting closed. The votes cast online during the meeting will be combined with the votes submitted before the meeting in the proxies. Please note that only shareholders, proxy holders or representatives -- or shareholders' representatives can vote. For those who have logged into the webcast as a guest, you'll be able to view our webcast but not submit questions or vote. The -- Okay. Just a little bit of a malfunction, technological malfunction. Here we go. In terms of the details -- now I'd like to go through the formal -- sorry, the Chairman's address. WAM Global, as you'd be aware, announced a record operating profit before tax of $137 million for the full year 2021 and a record operating profit after tax of a little under $96 million. That's really reflected a strong performance in the investment portfolio over the period. The WAM Global investment portfolio increased 30.7%. And that performance was an outperformance of the MSCI World Index in Australian dollars of 3.2%. The solid investment performance was achieved with an average cash of about 5% over the period. WAM Capital's pretax profit, and that's after tax paid and dividends -- and adjusted for dividends, that -- and taking out other costs, management and performance fees, et cetera -- or actually, there weren't any performance fees, the other costs, was up 24.1% over that 12-month period. And now that included a $0.09 fully franked dividend, which was paid during the year. There was a bonus option announced on the -- sorry, on the 10th of February, the Board of Directors announced a 1-for-1 bonus option. So each WAM Global shareholder got a bonus or a free one-for-one option, the exercise price, which was then NTA, which was $2.54. And so anyone who wanted to turn an option into a share could do so by exercising, not by paying $2.54. Those options are traded on the market, and they will be trading on the market until just before they expire. I think they finish trading about a week before they expire and the expiry date is Monday, the 12th of September 2022. So it actually gives the shareholders an option but not an obligation to buy another share if they so desire at $2.54. You'd be aware recently that WAM Global, latter part of last week, went ex dividend of $0.05 fully franked. And that's why the share price has -- was adjusted by the payment of that $0.05 fully franked dividend. In terms of total shareholder return, and that's the -- really the share price and the dividends paid over a 12-month period, that was a very solid performance. And that -- the total shareholder return for WAM Global over the last 12 months was actually 45.9%. And that's because the shares, 12 months ago, were trading at a discount and a large discount. At the end of June, they were trading at a lot smaller discount. The Board declared a fully franked dividend of $0.05, bringing the full year dividend at $0.10 over the over the 12 months, which represented a significant increase on the 2020 dividend. It was actually a little over a 40% increase, which is a very solid performance. So far, since it's listed, WAM Global has paid $0.10 in fully franked dividends. And as of now, after the payment of the $0.05 dividend, WAM Global has -- in its profit reserve, has $0.388. Wilson Asset Management, the investment manager of WAM Global, is very focused on making a difference, making a difference in terms of managing money on your behalf, making a difference in terms of being advocacy -- being advocates for retail investors, investing back into the community and giving back to the community, and being accountable to our shareholders. On the advocacy side, we've been very focused on what we believe some important issues, more recently the talk about only allowing companies to have virtual AGMs rather than in-person AGMs. I actually think that's incredibly disappointing from the current government, where shareholders own the company and all shareholders are asking is for 1 day in the year that the directors and the Board and the management stand in front of shareholders and are accountable to answer their questions. One of the problems with virtual AGMs, as you'll notice today, when you just don't have that strong interaction -- and also, the power has moved from -- away from the shareholders and to the Board of Directors. Also, we've stood up over the last 12 months for what we believe is an opportunity for the government to level the playing field with shareholder -- with investors, with retail investors. We think it's very unfair that the retail investors can miss out on capital raisings when they're done at a discount or NTA via placements. Now that is not the case in New Zealand. New Zealand saw the light in 2013 and changed that legislation. Unfortunately, Australia still hasn't seen the light. We'll continue to do that. In terms of shareholder engagement, remember, we're only here -- we love what we're doing as a Board. We really enjoy serving you as shareholders. And as the investment manager, we are very passionate about investing the money on your behalf and making a difference for you. So this is your company where we report to you. Please, if you've got any questions or answers or suggestions, feel free to call us, e-mail us or contact us. In terms of looking at the year ahead, 2022, in terms of an update and probably -- and an outlook, the -- WAM Global has achieved a solid start to 2022. Through a continued focus on undervalued growth companies in international markets with a catalyst, the investment portfolio has increased a little over 2%. And in that period, we've actually -- well, the MSCI World has actually increased more than that. And that's really -- it's up about a little over 5%, and that's really been about our portfolio positioning. The -- and I'll come back to that a little later. Effectively, since inception, WAM Global has performed what we believe is a solid -- as the Board, a little over 12%. On the 29th of September was a significant day for WAM Global. Templeton Global held a scheme meeting, where the Templeton Global shareholders overwhelmingly voted to merge with WAM Global. Shares and options in WAM Global were issued to the TGG shareholders on the 29th of October under the scheme. And we really do offer our sincere -- we'd like to welcome and acknowledge those additional shareholders. What it has done for WAM Global is made it one of the largest global LICs that are listed on the Australian market, which really, over the medium, long term, we think, will be a significant competitive advantage. In terms of the outlook for this financial year, the -- with '21 coming to a close with -- effectively when -- the coming of the close of '21, there was a resurgence in economic growth facing challenging -- facing the challenges posed by the -- effectively the new coronavirus variants. And all the eyes are on central banks in the U.S. and globally in terms of what decisions they're going to make. Returns for the financial year, last year, were driven by consistent application of a really rigorous investment process. And that's focusing on investment in companies with solid earnings growth potential, high-quality management and strong industry positions. We took advantage of various dynamic market conditions, identifying cyclical-exposed businesses, which have been oversold during the initial onset of the pandemic. We believe these names will continue to recover and outperform companies that lack valuation support but have benefited, and a lot of those companies that lack valuation support benefited from that really strong -- or incredibly low interest rates and strong monetary stimulus. In addition to those positions, we have consistently held a significant portion of the portfolio in companies that are placed to benefit from long-term structural trends, including those accelerated by the pandemic. They include areas of health and wellness. Obviously, e-commerce has been a significant area, automation, and probably also in other areas is the underbilling of infrastructure. The portfolio manager and her team have taken a balanced approach to portfolio construction and geographical spread. And they really remain focused on finding businesses to invest in that offer compelling upside without excess valuation or leverage and really continue to find exciting opportunities around that. WAM Global -- now the assets are $947.2 million and has 17,123 shareholders. The investment portfolio currently has 70 equity positions at the end of October, and that's spread around the globe. Now ladies and gentlemen, I'd like to move to the formal part of the meeting. There are 5 items of business for the AGM today, as set out in the Notice of Meeting, and 4 of those items are to be voted on. As mentioned earlier, we'll conduct a poll on all resolutions. And as you'd be aware, the poll is now open. In terms of your voting, if you make a mistake or change your mind, please just select your preferred voting method again. I note boardroom running -- sorry, the returning officer for today's meeting and will conduct our poll. A further note that resolution 1 and 4 are subject to voting exclusions, as outlined in the Notice of Meeting. The Board recommends approval of the first 3 resolutions. As the Board has an interest in the outcome of resolution 4, they have refrained from making a recommendation on this resolution. As Chairman, I'll be voting all open -- all on votes provided to me for each resolution. Well, I'd advise the ASX as soon as possible when the results have been determined. You may submit any questions or comments you have on the financial statement or report now. The first item of business, to receive and consider the financial statement, the directors' report and auditor's report for the company for the year 30 June 2021. Scott Whiddett, as I mentioned earlier, from Pitcher, is our auditor -- representing the auditor today. No resolutions on this matter are required. I'd like to pause now and allow for any questions that may have been submitted. Jesse, are there any questions on this matter?

Geoff, we've got a general question that has come through, but we'll address that at the end. But no other questions at the moment.

Yes. Okay. Thank you. Resolution 1 relates to the adoption of rem report. And you may submit any questions or comments you have on the resolution now. The resolution has received proxies to -- sorry, 10,600,372 in favor of the resolution; 8,317,113 against; and 3,061,051 open, of which 1,697,770-ish have been granted to the Chair. And for those, I'd like to vote in favor of the resolution. I'd just like to pause now to see if there's any questions on the rem.

No questions at this time.

Okay. Now I'd just like to point out, the bulk of the votes against the rem are from one shareholder, which we have a good relationship with, and they just have a company policy of voting against rem -- various rems under certain circumstances, and we respect that. I know there's one shareholder that -- with another company, the [ 15 ] companies that actually pay no one, was voting against the rem. And I rang him and spoke to him and said, "Why bother voting against the rem," and he said, "I actually vote against the rem on every company that I own." So I mean various people have their reasons, and we respect that. The -- in terms of -- as there are no further questions or comments, I'd like to put the motion be approved as set out in the Notice of Meeting. If you're a shareholder or a proxy holder and eligible to vote online, could you please complete your vote now? Resolution 2 relates to the reelection of Kate Thorley. Kate would like to obviously put herself up for reelection and would -- now I'd like to call on Kate, if you can say a few words. Thank you, Kate.

Great. Thanks, Geoff. I was just saying it feels a lot more formal being virtual, so very much looking forward to meeting in person, obviously, when it's safe to do so. But good afternoon, everyone. I'm sure I've either spoken to or met quite a few of the shareholders already. But for those of you who are new to the company and perhaps new, coming across in the Templeton Global merger -- and I sort of spent most of yesterday talking to quite a few shareholders. I do spend a lot of my time not only as CEO of Wilson Asset Management, which I've been since 2011. I joined Wilson Asset Management back in 2005, and have a background in accounting. So I'm a chartered accountant and have done other various courses and graduate diplomas, et cetera. But as I said, I've been at WAM now for almost 17 years. And a big part of our business but a big part of my role is engaging with shareholders, which we absolutely love doing as a team and are very much looking forward to getting back out on the road and meeting in person because I think that's just such an important part of what we do. And as shareholders of this company, you're trusting us to manage your capital. And I think it's really important that you get to know the team, not just the investment team, but the broader business of very talented individuals that I work alongside. We're all really passionate about what we do, passionate about the market, passionate about engaging with you as shareholders. So I just wanted to also acknowledge the wonderful directors that we work with on this Board also and thank shareholders for their support.

Thank you. Thank you very much, Kate. Okay. So where am I on my little script here? Thank you. The -- in terms of the proxies -- we probably should have done the proxies first then give you a little bit more confidence. But look, Kate, you do a fantastic job. To me, this is a Board that really works well, and you're an integral part of it. And on behalf of all shareholders, we'll be excited to have you back on the Board, and thank you for all your efforts. The company in terms of the proxies the company received, at 30,318,763 in favor of the resolution; 8,162,727 -- oops. What's that one? Is that right? I think I've just done a -- I think I've got a breakdown in my proxies. Okay. The -- 8,162,727 against; 3,057,594 open, of which 1,684,220 have been granted to the Chair. And of these, I'll be voting in favor. Of course, that's that one -- I assume that's -- those proxies is that one shareholder that's voted against. Is that correct? I can't see the proxies on my screen. Did I read the proxy correctly?

Yes. That's correct.

Perfect. Okay. I assume that's that one person. Okay. Now Jesse, are there any questions on the resolution?

No questions have come through.

Great. As there's no questions, I'll put the motion that the resolution be approved as set out in the Notice of Meeting. If you are a shareholder or a proxy holder and eligible to vote online, could you please do so now? Resolution 3 is the reelection of Director Caesar Bryan. Now first of all, I'd like to, a, thank Caesar for being on the Board and all his tireless work. I've known Caesar for a number of decades. Caesar's based in the U.S., works for one of -- probably one of the best value, I'd say, fund managers in the U.S., Gabelli, and has been there for a long period of time. And thank you for staying up late at night to call into all our Board meetings. Now what I'd like to do is just pass over to you now, Caesar, if you can unmute yourself and just say a couple of words. And we look forward to potentially next year having you in person.

Great. Thank you, Geoff. My name is Caesar Bryan, and I am standing for reelection to the Board of your company, WAM Global, and seeking your support. I began my investment career in London with Samuel Montagu, a merchant bank, after qualifying as a barrister. In the mid-1980s, I moved to the U.S. actually in the New York area and joined Lexington Management, a New Jersey-based investment management company. Around that time, many years ago, I met Geoff Wilson, who was living in New York City and working for a leading Australian brokerage firm. His extensive knowledge and expertise in the Australian equity market was very helpful to our clients who are invested in our global equity portfolios at that time. I believe there are 2 aspects of my work experience that are relevant to my abilities to successfully represent the interest of all shareholders of the -- on the Board of WAM Global. First, my employer, Gabelli Asset Management that Geoff referenced, is a New York-based investment management company, is the manager of 13 investment companies with about $12 billion in assets. Actually, I'm the co-manager of 2 of those companies and therefore, I believe, have considerable experience of the workings of listed investment companies, which we call closed-end funds in the U.S., albeit in a different jurisdiction. Second, as Geoff said, I've been an international equity analyst and portfolio manager for many years, and I believe this gives me some knowledge and insights to help monitor and support the manager's investment performance, objectives and mandate. More details of my background are in the exploration -- explanatory memorandum and actually in the annual report attached to the Notice of Meeting. So in closing, I do ask for your support, which will give me the opportunity to continue to represent all shareholders as a Board member of WAM Global. Thank you.

Thank you very much, Caesar. And as we said, I think it can honor that -- for all shareholders that have access to your intellect. I think in terms of when I was a young man trying to find my way in New York in the latter part of the '80s that from your guidance from an investment perspective was first class. And we both lived through the '87 crash, which is probably irrelevant for a lot of younger people, but it does help you. It gives you fantastic experiences and you do learn significantly from it. And so in terms of -- if there are any -- please, if anyone has any questions to ask Caesar, please submit them. In terms of the proxies, it's 37,572,635 in favor of the resolution; 823,164 against; 3,084,335 open, of which 1,704,830 have been granted to the Chair. And these, I'll be voting in favor of the resolution. The -- now Jesse, are there any questions?

No questions on this resolution.

Okay. And obviously, if you're a shareholder or a proxy holder, now please vote online. Look forward to keeping you on the Board, Caesar. In terms of resolution 4, that relates to the -- an increase in directors' fee cap. If -- you may submit any questions, comments you have to the resolution, please. In terms of the -- I'll go through the proxies and then we'd just -- we'll open it up for discussion. The -- in terms of the proxies, the proxies amounting to -- and if you have any questions, please submit them. Proxies amounted to 34,503,985 in favor of the resolution; 2,795,776 against; 3,061,747 open, of which 1,862,966 have been granted to myself as Chair. And for those, I'll be voting in favor. And just to give you a little bit of background, the reason why we're increasing the directors' fees amount was the logic of adding another director. And what we try to do is we try to keep the directors' fees really -- we try not to have much leeway in terms of what the directors are currently being paid. So if we add directors onto the Board, then we'd like to go to shareholders and ask for an increase. Jesse, are there any questions relating to that?

No questions have come through.

Okay. Obviously, if you're a shareholder or a proxy holder, please vote on resolution now -- on resolution 4. I now -- I'm now going to declare that poll closed and formally charge boardroom to count the votes. The results of today's AGM will be released to the market as soon as they are determined, which will be later today. We're -- now I'd like to open up for more general questions. And if we have time constraints and we can't get to your question, we will definitely e-mail you or ring you and run through your -- any questions you have. Jesse, what have we got on the general? You said there was some general questions earlier.

Yes. Perfect. The first one is from [ James, ] and what are the advantages of being a larger listed investment company?

Yes. Well, thanks, [ James ]. The advantages are significant. Logic would tell you -- I'd normally say, well, the smaller you are, the more flexibility you have. And in terms of managing a smaller pool of capital, it's probably easier to manage a bigger pool of cap. That's what you normally think. What everyone's found is being larger in the listed investment company space is actually a major benefit because there's a means -- the ability to buy and sell your shares, there's a lot more liquidity. You tend to find the larger listed investment companies trade at NTA, if not premiums to NTA. A good example of the impact that a larger entity has when Soul Pattinson's bid for the third largest domestic LIC, Milton, more recently, the -- after they made the bid -- and all they were doing is issuing their shares for the Milton shares, both share prices went up about 20%, and that's a significant re-rating. And what you tend to find is financial planners, people are looking for exposure to, say, like global equities. We will now be the second or third largest LIC. Then they'll say, well, actually, I want liquidity. I'm a financial planner. Yes, so I want to buy -- there's no use buying a $300 million or $400 million LIC. I want a $1 billion plus LIC that I'm investing in. Also, there's economies of scale. The larger you get, obviously, the fixed cost, like the directors' fees, the auditor's fees, they reduce as well. But to me, one of the biggest benefits is that sort of the free re-rating you get. Thanks, [ James ].

Perfect Thanks, Geoff. We have another question from [ Martin ]. The WAM Global share price has fallen over the past few weeks. Was this due to the TGG merger?

Yes. The WAM Global price obviously falling last week was the fact that it went ex the $0.05 dividend and it had come down a little bit before that. What I think happened is it's -- when we announced the TGG merger, a lot of the TGG shareholders, I don't think they fully understood what was happening and they were selling the TGG shares below the value of what they would have got from rolling into WAM Global. And what that did is that gave the -- effectively the hedge funds an opportunity to arbitrage. So they were buying TGG shares cheaply, knowing that they'll get WAM Global shares. And then obviously, the second part of the trade has been occurring now. This is only -- it's a short-term phenomenon, but I'm not sure how long it will go for. To me, once that's cleared, then you'd assume WAM Global will go back to where it was, and that's trading at a premium to NTA. So to me, it's just a matter of time. It depends how much -- yes, we're trying to work through what the hedge funds, how much they bought of TGG and trying to work out when they'll have been rolled through totally. So to me, it's more a buying opportunity at the moment.

Great. Thanks, Geoff. And the last question from [ Christine ] is, has the investment philosophy changed since the takeover of Templeton Global?

Yes. The investment philosophy hasn't changed at all. The great thing about the deal is with Templeton Global, if any of the Templeton Global shareholders wanted cash that paid out first before we merged with Templeton Global and also our team had to look at the whole portfolio and whatever part of the portfolio they didn't want, then the Templeton guys sold them and turned them into cash before we got it. So we've really got a pristine portfolio, exactly the shares we wanted. And with the cash that we got, we invested back into the undervalued international growth companies that we could find catalysts for. So yes, it's really -- we just increased our holdings. And the beautiful thing is that's because of the -- it's a global fund. It probably took a minute or 2 to reposition the portfolio because there's enormous liquidity in all those global companies.

Thanks, Geoff. I just had one other question come through from [ John ] in terms of what gaps will a fifth director fill and from what jurisdiction do you plan to recruit this director.

Yes. Look, a fair question is we're looking for someone that has just another skill base, distribution, sort of shareholder engagement marketing that area. Currently, we've got some really -- our current Board might even have some legal. We just -- there's various parts we're looking at. So to me, they are the broad areas.

Great. Thanks, Geoff, and no other questions.

Ladies and gentlemen, as there's no other formal business for the meeting, I declare the AGM closed. And I effectively like to thank our 17,123 loyal WAM Global shareholders, particularly the newer ones that have joined from Templeton Global, a company that was listed in 1987. I remember when it floated. We greatly appreciate all your support in a -- what's been a challenging period. I'd also like to thank the Wilson Asset Management team who's worked tirelessly to the benefit of all shareholders -- and please, if you've got any ideas, suggestions, please approach us and contact us, as well as our fellow Board that works exceptionally well and whose guidance and expertise are making a valuable contribution to this company. So thank you.