React Group (LSE:REAT) — 2024 AGM

0:00 Good afternoon, ladies and gentlemen, and welcome to the REACT GROUP PLC twenty twenty four Annual General Meeting. Throughout this recorded meeting, attendees will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand corner of your screen. I'd now like to hand over to Chairman, Mark Braun. Good afternoon. Good afternoon. Thank you, Mark, and thank you to those attending, both online and here in the room. As you're all aware from past AGMs, this is not a free flowing

0:31 process. Unfortunately, it's me reading a script, which can be a bit monotone. I apologize for that in advance. But if you don't mind, I will press on. So ladies and gentlemen, I'd like to welcome you today to the company's annual general meeting. I am Mark Braun, your company's chairman, and I'll be chairing this meeting today. Thank you very much indeed for making the effort to attend today's meeting. The notice of annual general meeting was issued on 03/05/2024, and due notice of the meeting has accordingly been issued to the company's members. We have a number of other shareholders in attendance at this meeting via the investor meet platform. But as set out in the letter from the chairman of the company, which accompanied the notice of the annual general meeting, none of them will be able to vote on the matters to be considered at this general meeting.

1:22 There also there's also one person attending the general meeting in person who are not who is not a member of the company. He is one of our advisers. Unless anyone has an objections to the attendance of such a person, I shall continue by formally opening the meeting. No objections? Great. Brilliant. Okay. The quorum for this meeting is two members present in person or by proxy. Having checked the number of persons present, I declare that a quorum is present, and I further declare the meeting open. Before I proceed to the business of the meeting, I would like to remind you of the methods of voting at this meeting. Resolutions will be decided on a show of hands unless a poll is demanded in accordance with the articles of the association of the company before or on the declaration of the result of a vote on the show of hands.

2:17 On show of hands, every member or corporate representative who is present either in person or by proxy has one vote. And on a poll, every member or corporate representative present in person or by proxy has one vote for every share of which he or she is the holder. A poll may may be demanded by, one, me as chairman. Two, at least five members or their proxies having the right to vote at the meeting. Or any members or members, any member or members present in person or by proxy and representing in aggregate not less than 10% of the total voting rights of all members having the right to vote at the meeting. With your permission, I propose that we take the notice convening the meeting as having been read. So it's agreed.

3:09 Yes, great. In terms of questions, by way of reminder, questions can be submitted at any time during the Annual General Meeting via the Ask a Question function on the investor meet company dashboard. I will also take questions in the room. But hopefully those will be at the end of the meeting. I'd now like to introduce the board. I have to my right, your left on screen, Sean Doak, the CEO. And to my left, your right, Spencer Dredge, the CFO. Michael Joyce and Rob Gilbert, who are both non executive directors are joining us on the IMC platform, but are not present in the room.

3:54 Before starting the formal meet proceedings, I would like to read out a statement on trading during the year that was released to the market by our registry information service this morning. So that is upon releasing the company's results for the year ended 09/30/2023, we were delighted to announce a strong performance from the group marked by robust organic growth, improved profitability and strong cash conversion. We are pleased to announce that this momentum has continued into the current financial year and the group has taken advantage of significant growth opportunities for its essential services. As a result, the Board is pleased to report that revenues for the first five months of full year 2024 were well ahead of the same period in full year 2023.

4:44 Each division has performed well and the group continues to benefit from cross selling opportunities, which not only enhance our offering, but also contribute to the organic growth. It is particularly pleasing to deliver revenue growth in a challenging market environment where our customers are always striving for the best in class that we offer. The group continues to maintain a healthy balance sheet and is able to implement a considered program to invest in people, processes and systems, the benefits of which are already bearing fruit and will be more evident in future years. Despite the economic headwinds, the board is cautiously confident about trading and will provide a trading update in May.

5:26 Okay, that was the AGM statement, which can be seen on the RF service. I'd now like to start the formal proceedings of this Annual General Meeting. So we proceed to the vote on the resolutions, which I will formally propose to the meeting. The full text of each of the resolutions is set out in the notice of the meeting, a copy of which you would have received. The first resolution is to receive and adopt the accounts. I'm sorry, the company's annual accounts for the financial year ended 09/30/2023, together with the director's report and the auditor's report thereon. Are there any questions?

6:11 Okay. I propose resolution one as an ordinary resolution. All those in favor, raise their hands. One, two, three, four, five. Five. All those against? None in the room. I hold 26 proxy votes representing 603,318,284 shares in favor. There were no shares at the chairman's discretion. There are three proxy votes representing 647,949 shares against and one representing 15,000 shares withheld.

6:57 I therefore declare the resolution has been passed. The second resolution relates to the reappointment of Dane's LLP as auditor of the company to hold office from the conclusion of this annual general meeting until the conclusion of the next annual general meeting at which accounts are laid before the company and gives the directors authority to determine their remuneration. Are there any questions?

7:24 None? Okay. I propose I propose resolution number two as an ordinary resolution. All those in favor, please raise their hands. Five. All those against? None in the room. I hold 26 proxy votes amounting to 602,338,376 shares in favor. There are no shares at the discretion of the chairman. There are four proxy votes amounting to 1,627,857 shares against and one of 15,000 shares withheld.

8:10 I therefore declare that resolution has been passed.

8:16 The third resolution relates to my election, and I will hand over the chairmanship of this meeting to Sean Doak for the consideration of this resolution. Thank you, Mark. So the third resolution relates to the reappointment as a director of Mark Braun, who's retiring in accordance with the articles of association and being eligible is offering himself for reelection at this annual general meeting. The board has recommended that Mark Braun be reelected as a director. Are there any questions? No? And I'll propose that resolution three as an ordinary resolution. All those in favor, please raise their hands.

8:56 Two, three, four. All those against? No. Brilliant. I hold 26 proxy votes equating to 603,257,553 shares in favor. No chairman's discretion votes, three votes against which equates to 648,680 and two withheld equating to 75,000 shares. I therefore declare that the resolution is being passed. I now hand back the chairmanship the chairmanship of this meeting to Mark Braun. Thank you. Cheers. The fourth resolution relates to the reelection of Sean Doak, who is retiring in accordance with the Articles Association and being eligible is offering himself for reelection at this general meeting. The board is recommending that Sean Doak be reelected as a director.

9:55 Any questions? Nope. I now propose resolution four as an ordinary resolution. All those in favor, please raise their hands. That's four. All those against? None. I hold 26 proxy votes amounting to 603,257,553 shares in favor. There are no shares sorry. There are no votes at the discretion of the chairman. Three votes against amounting to 648,680 shares against, and two representing 75,000 shares withheld. I declare that this resolution has been passed. The fifth resolution relates to the reelection of Spencer Dredge. She was appointed since the last AGM and is required to retire in accordance to the articles of the association.

10:49 However, being eligible, Spencer Dredge is offering himself a reelection at this general meeting. The board is recommending that Spencer Dredge be reelected as a director. Any questions? Nope. I now prepare resolution five proposed resolution five for the election of Spencer Dredge as an ordinary resolution. All those in favor, please raise their hands. That's four. All those against? None. I hold 26 proxy votes amounting to 603,257,553 shares in favor. No discretionary votes for the chairman. Three votes of 648,680 shares against, and $275,000 shares withheld.

11:35 I declare that a resolution has been passed.

11:41 The sixth resolution relates to the consolidation of every 50 existing ordinary shares of 0.25p each in the capital of the company into one new ordinary share of a 12.5p in value and the authorization of the directors to deal with fractional elements to the shares. Are there any questions? Do you have questions now or do want afterwards? If you don't mind, we'll stay online and we'll take the question afterwards if that's okay. Were you happy? Yeah. Yeah. Brilliant. So we will take a question on this resolution at the end. I now propose resolution six to approve the consolidation as a special resolution. All those in favor, please raise their hands. That is four. All those against is one.

12:30 I hold 25 proxy votes representing 602,951,862 shares in favor. No chairman's discretionary votes, five votes equating to 1,014,371 shares against and one representing 15,000 shares withheld. I declare that the resolution has been passed.

13:01 The seventh resolution relates to proposed capital reduction by way of the cancellation of all amounts standing to the credit of the company's share premium account and its capital redemption reserve. Are there any questions? No. So I'm just going to pause for a second. Hi, sir. Would you mind just filling the form at the back? And also, you mind just closing the door? Thank you. Apologies for that. I now propose resolution seven for the approval of the capital reduction as a special resolution. All those in favor, raise their hands. One, two, three, four, five. Sir, would you like to vote in favor of Yes. Yes. That's six, please. Thank you very much.

13:55 All those against? None. I hold 25 proxy votes amounting to 602,952,593 shares in favor. No shares at the discretion of the chairman. Five votes amounting to 1,013,640 shares against and one representing 15,000 shares withheld. I declare that the resolution has been passed.

14:23 We now come on to resolution eight, which relates to the authority to allot shares and grant rights to subscribe for or to convert any security into shares of the company. The maximum number of shares that may be allotted under this authority is limited to, firstly, an aggregate nominal amount of £889,707 and 2, a further aggregate nominal amount of £1,779,414 reduced by the allot amount of any allotment under one above. The authority will expire at the closed business on the date falling eighteen months after the date of the passing of this resolution or if earlier at the end of the next year's annual general meeting. Any questions?

15:12 Nope. I now propose resolution a as an ordinary resolution. All those in favor, please raise their hands. That's six. All those against? None. I hold 25 proxy votes amounting to 603,087,553 shares in favor. No chairman's discretionary votes, four votes amounting to 878,680 shares against and one, amounted to 15,000 shares withheld. I declare that this resolution has therefore been passed.

15:56 Resolution nine will give the directors authority to allot equity securities for cash without first offering them to existing shareholders in proportion to their existing holdings of shares. This authority shall be limited to firstly, the allotment of equity securities in connection with a rights issue or other preemptive offer. Or secondly, otherwise, the allotment of equity securities or sale of treasury shares to any person up to an aggregate nominal amount of £166,912. The authority will expire at the close of business on the date falling eighteen months after the date of the passing of this resolution, or if earlier at the end of the next year's of next year's general annual general meeting. Any questions?

16:42 Okay. I now propose resolution nine as a special resolution. All those in favor, please raise your hands. One, two, three, four, five. Those against? One. I hold 25 proxy votes, 602 representing 602,704,036 shares in favor. No votes at discretion of chairman. Five votes representing 1,196,506 shares against and two representing 80,691 shares withheld. I therefore declare the resolution has been passed.

17:31 Resolution 10 will give the directors further authority to allot equity securities for cash without first offering them to existing shareholders in proportion to their existing holding of shares. This authority shall be limited to the allotment of equity securities up to an aggregate nominal amount of 266,912, but only in connection with the financing or refinancing of an acquisition or other capital investment. The authority will expire at close of business on the date falling eighteen months after the date of the passing of this resolution, or if earlier, at the end of the net of next year's annual general meeting. Any questions? No. I now propose resolution 10 as a special resolution. All those in favor, raise their hands. One, two, three, four, five.

18:17 Those against?

18:21 Those against? None. None. Abstained. Okay. Thank you. I hold 25 proxy votes of six hundred and two million seven hundred and seventy four thousand and thirty six shares in favor. No votes at discretion of chairman. Four votes, representing 1,126,506 shares against and two representing 80,691 shares withheld. I therefore declare this resolution has been passed. Okay. On to the final resolution, which is resolution 11. Resolution 11 will give the directors authority to make market purchases of the company's ordinary shares. This authority shall be limited to 2,135,297 ordinary shares following the share consolidation becoming effective and will expire at the end of next year's annual general meeting.

19:13 Any questions? I now propose resolution 11 as a special resolution. All those in favor, please raise their hands. That's six. All those against, please raise their hands. None. I hold 25 proxy shares proxy votes, sorry, representing 603,697,284 shares in favor. No chairman's discretionary votes, two votes representing 97,949 shares against and three representing 186,000 shares withheld. I declare that this resolution has been passed. That concludes the formal proceedings of the meeting.

20:00 And accordingly, I now declare this Annual General Meeting of the company closed. The results of the meeting will be announced to the markets through our regulatory information service and posted on our website as soon as practical. Thank you very much for attending. So that's the end of the formal proceedings. If you just allow us to gather our thoughts for two seconds, I'll then move on to q and a. Now there are questions in the room. But if you don't mind, the first one we'll deal with is the ones online. It's there's only one online. So it should hopefully not take very long. The question is from Andrea M. The AGM statement says the board is pleased to report that revenues for the first five months of full year 2024 were ahead of the same period in full year 2023.

20:47 Does this mean that year to date trading is in line with market expectations?

20:53 We haven't said that in our statement, and therefore, you know, we need to be very cautious about what we do say. But I think it's suffice to say that what we have said in our statements is very clear that we are actually in line. And therefore, you know, there is nothing else to be said. That I'm afraid is fairly formal way of answering the question. But when it comes to these things, we have to be quite quite strict. I hope you will understand. But we're happy with our position as we declared in the rns this morning. So, Mark, I'm going to take a couple of questions in from the room. Would you advise to keep the line open for those or?

21:41 I'm very happy to Mark and we can close it off once you've concluded the q and a. Thank you. Thank you. Okay. So questions in the room? Just about share consolidation, really. Couple of questions, really. Can take them one at a time as I'll repeat them on here. What is the company's investigation to do it? Or did the advisers investigation to do it? Or did it come from a larger shareholder? So the question for everybody's, I'm going to paraphrase and tell me if I get it wrong. The question about the share consolidation was, was it motivated by either the company, shareholders or advisors?

22:28 Is that fair? That's fair. The answer the question is, it was directed by the company. It's something that we thought we needed to do as we started to grow and get bigger. But we obviously sought the guidance and advice from advisors and from shareholders. And what people will recognize is we do have some high quality investors on our register, those that you can see. We also have some that you can't see that sit below the 3% threshold.

22:59 And I think as is the norm, institutional investors do like to see, removing some of the volatility that's associated with a penny stock, especially now we've got to a certain size. And there are other benefits, it's not just about positioning the company is no longer a sort of a penny stock, we want to build credibility for the company now it's reached this size. And we've got significant ambitions for the future. We believe it will improve liquidity in the stock, which I think is important. And we also think it will make it more attractive to a much wider or broader range of investors. So those are the reasons why we've done it. And those investors we've spoken to directly, and our advisors have all concurred.

23:50 And we also appreciate that there are some challenges with doing this, but we have recognized those and are obviously trying to do things that will mitigate those risks. Okay. As a shareholder, I've seen this many times. I know it's a fairly small market cap at the moment, but I'm pleased with that. I've seen erosion of share prices with other relations on many, many, many, many occasions. Correct. Yep. So I think it's got to be very careful with that. Yep. You state that liquidity. I mean, there's plenty of liquidity at the moment. And there has been over, I've been watching the last couple of months, for instance, when one of your shareholders, institutional shareholders, sitting down. And and there's plenty of liquidity there. I I think you will lose the retail element of it.

24:44 I don't know what your thoughts are going ahead, but maybe it'll be more institutional based. I don't know. But I think we also want to keep the retail involved in it. I think what happens when a consolidation happens, I think people like punting in, you know, penny shares, which is fair enough. There's nothing wrong with that. But I do think that there are people with holdings now in stock. Since you announced, the share price has gone down about 10%. I think that you might find that some of the retailers get out and the share price might come under pressure. And I think that hopefully the advisers have got some buyers in or have some ideas to mop some of their stock up if that happens.

25:34 Regarding the spread? Can I answer that? Mark, we picked that question up in full so we can hear the gentleman. Thank you. Okay. So carry on then. What else? Regarding the spread, at the moment, you've got a 7% spread. I don't know what, you know, what your spread is going to be, but, you know, it can be more than 7%. That's something you've got to be aware of. You know, saying it here that increased liquidity. Whatever you mean by liquidity, disagree with that slightly. There's plenty of liquidity at moment. There might not be liquidity after this.

26:12 Also, spread, we don't know what the spread is going to be. So it's just like the quips. No, well, thank you for that. And Mark has suggested, Mark Downs from Investor Meet has made it clear that your question has been heard by the audience, which is great. So look, I've also done this before. And there are lessons to be learned. And I would like to think that we have taken those lessons into this process. I think there are a couple of things. One is that I don't think you need to look at the shares over the last few weeks or months. You need to look at them in the long term. And this is a long term business opportunity. We should recognize where we've come from. Now, four and a half, five years ago, the share price was a fraction of what it is right now. It was 0.165 per share.

27:07 And that obviously relates to where we are now at 1.3 or whatever it is today. I believe that what we as a company need to do is focus on our business performance. There is value, lots of value here in our opinion. We think it's underrepresented by its current share price. And therefore, we really can't sway our longer term strategy based on the here today, especially in markets that are fairly challenged by other reasons other than what we're doing. So we ask people to look at our performance as a company, our value versus our fair value, and look at the track record we've built over four or five consistent years of performance as we presented before, and recognize the direction, you know, we're intending to be a very positive one. That's the first thing.

27:56 I think the second thing is that we recognize the phenomena. I've seen the track record of consolidations over the last twelve, eighteen months, two years, and it's no different than when I did it last six or seven years ago. And interestingly, I had the same CFO beside me at the point we did it. Spencer Dredge was CFO at that point at another company. Suffice to say that investors are voting with their feet and saying that they support this. And I can't say what their intentions are. But I do know that right now, we're undervalued, we're underpriced in my opinion. And therefore, I suspect that any further weakness may get supported.

28:44 I can't say it will, but I just feel quite comfortably that that's likely to be the case bearing in mind where we sit right now and our performance. So I think we have something to underpin anybody deciding to move on. I also think that retail investors fall into several categories. And as a company, and as a board, I think we've done absolutely everything we can to communicate with the smaller, as you call them private or retail investors. We do a lot of our events on IMC, which is open tool. We make ourselves available through the MELO events, which people can go to. And we will, you know, we're very transparent. We answer every question we're given in terms of our intent. And therefore, I think the the private investor who's looking for value should stay the course. The ones that we may lose are the people that speculate on, you know, small movements on a daily or weekly basis.

29:45 And to be frank, that's where we create volatility. And that's the volatility that we think is not suiting where we want to get to. So I'm hoping that retail investors and private investors stay engaged because it's all about value at the end of the day, what we're going to turn their investment into. So that's my answer to that component. In terms of the relevant or the relative liquidities and spreads, you know, that's not something we can really judge. We're being advised that we should see that become more managed, more acceptable. And I hope it will be. Does that answer the question? Brilliant. Still supportive of company, of course. Say again? I'm still supportive of the company, you know. Thank you. I just, you know, I've seen this in a lot of changes. Yeah.

30:37 I had to ask. No. I expected to get the question. And offline, I've had the question from other people. And I think it's very, you know, recognizable question that people will answer. And I say we experienced some of the challenges before as we've gone in this with our eyes open. We'll see where it gets to. Any other questions from the room? I've got another one on screen, but any other questions? Did I answer all your questions, Bob? Yeah. I did. Brilliant. Let me just ask you. So this this question comes from David s. With inflation taken into account and cost going up, would we not automatically expect revenues to be ahead and more important to have guidance on the bottom line and meeting profit expectations? Well, I'm not going to answer. I mean, Spencer and Sean, by all means, add something here. We do have some inflation linked contracts where we can put our prices up if we see inflation having an impact. And it's really not inflation because the cost of product is relatively small, isn't it as a proportion of our overall revenues? It's more about wages.

31:46 And we can track pretty much with wages. So yeah, absolutely, you will see some inflationary component to our growth. But we're also seeing good solid organic growth, as you've seen from our recent presentation. In fact, every year, and when the average organic growth over the last four years has been 24%. Now, as we get bigger, that gets tougher. But at the end of the day, we are still seeing organic growth and we're seeing that growth from new customers, but also from the cross selling that we've been able to achieve. In terms of the second half of your question there, it says, would we not automatically expect oh, sorry, it says, and more important to have guidance on the bottom line and meeting profit expectations. We would have loved to have given you that today.

32:33 But we shouldn't, and we will in May. Because in May, we'll be able to give you, you know, a trading update based on the performance of the company in the first half. And, it's no point doing it in the middle of the year. We don't have quarterly reporting of half year reporting. And respectively, as I say, we would love to give you that information. But we won't and we can't. We will give it to you in May. So please watch out for the training update. And depending on the questions that we get, you know, we may well do a quick IMC meeting following that so that people can ask us any questions about what we're saying at that point. Recognize that that won't be the full interims, the interims will be due at some point towards the back end of June.

33:20 So hopefully that answers your question, David. I can't see any more questions online. And there's no questions in the room. So from the point of view of IMC, Mark, would you mind closing the meeting? That's very kind of you. And thank you to the board for your time today. Can I please ask investors not to close the session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the Board can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the board of REACT GROUP PLC, we'd like to thank you for attending online the twenty twenty four annual general meeting. Good afternoon to you all.