React Group (LSE:REAT) — AGM

0:02 Good morning, ladies and gentlemen, and welcome to the REACT GROUP PLC AGM. Throughout this presentation, investors will be in listen only mode. Questions are encouraged. It could be submitted anytime via the q and a tab situated on the right hand corner of your screen. Simply type your question and press send. Company may not be in a position to answer every question it receives during the presentation itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor me company dashboard. I'd also like to remind you that this presentation is being recorded.

0:33 Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mark Braun, Chairman Sean Dope, CEO Andrea Parker, CFO along with Non Executive Director, Michael Joyce. Good morning, Mark. Good morning, and good morning, ladies and gentlemen. Thank you for joining us today. I'd like to welcome you to the company's Annual General Meeting. As Paul mentioned, my name is Mark Braun. I'm the company Chairman. I'll be chairing this meeting today. And, obviously, we appreciate you taking this rather strange or or perhaps not quite normal approach to joining us at the AGM. Obviously, it's due to the measures introduced by the government in respect of COVID nineteen.

1:21 My normal style is not to read, but unfortunately, the formality of an AGM is such that I've got a very long document to read through just to make sure that I get it accurate. So I hope you forgive me for having my eyes on the document and and reading rather than perhaps doing it through a, you know, normal presentation format. But, anyway, I'm gonna I'm gonna make a start. The notice of the annual general meeting was issued on the January 26, this year, 2021, and, due notice of the meeting has accordingly been issued to the company's members. The UK government has introduced certain social distancing measures aimed at controlling the spread of COVID nineteen. As explained in the letter from me as chairman, which accompanies the notice of the annual general meeting, we're holding this annual general meeting with the minimum number of shareholders legally required to be present in order to form a quorum under the company's articles of association.

2:12 These shareholder, these shareholders are, each directors, officers, or employees of the company. We have a number of other shareholders in attendance at this meeting via the investor meet company platform. But as it's set out in the letter from me as chairman, 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 during the meeting itself. Instead, voting has been made aware made available by the normal proxy approach. There are also a number of people attending the annual general meeting who are not members of the company, including certain of our advisers. Unless anyone has objections to the attendance of such members nonmembers, I shall continue by formally opening the meeting.

2:58 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 proceeding, to the business of the meeting, I'd like to remind you of the methods of voting at this meeting. Resolutions will be decided by a show of hands of the members present unless a poll is demanded in accordance with the articles of the association before or on the declaration of result of the vote on a show of hands. On a 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 representing, in person or by proxy has one vote for every share of which he or she is the holder.

3:49 A poll may be demanded by me as chairman. At least five members or their proxy having the right to vote at the meeting. Any member or members present in person or by proxy and representing an aggregate not less than 10% of the voting rights of all members having the right to vote at the meeting, or a member or members present in person or by proxy holding shares in the company conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to or not less than 10% of the total sum paid up on all the shares conferring that right. With the permission of the members present, I therefore propose we take the notice convening the meeting as having been read. Is this agreed?

4:35 And just have, guys show a hand, please. Yeah. Everybody's agreed. By way of reminder, questions can be submitted submitted at any time during the annual general meeting via the ask a question function, on the investor meet dashboard. I'd now like to reintroduce the board. You have Sean Doak, who is our chief executive, Andrea Pankhurst, who's our chief financial officer, Michael Joyce, who's one of our nonexecutive directors. He's actually the senior nonexec director. And, unfortunately, Rob Gilbert, who is the other nonexecutive director, is unable to attend to me today's meeting, but he does send his apologies. Before starting the formal proceedings, I would also like to read out a statement on trading during the year that was released to the market by our regulatory information service first thing this morning.

5:29 That statement, I'll just put it up on screen for you. REACT has continued to trade well since the period ended 09/30/2020 with profit and cash generation continuing to be stronger than the prior year. Margins and operational efficiencies have also continued to improve. The impact of the current COVID nineteen pandemic continues to be unpredictable. However, we remain well positioned to support our customers' critical requirements and have a growing pipeline of business to execute on. We remain cautiously optimistic for the remainder of the year. Our strategy remains to build a leading position across our business through organic growth and if the right opportunities present themselves via strategic acquisitions to support our goal of becoming the country's most trusted name in the provision of specialist cleaning, decontamination, and hygiene services.

6:27 Okay. So onto the formal proceedings. I'd now like to start them, the formal proceedings of the annual general meeting. So we'll proceed to vote on the resolutions which I formally proposed 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 will have received.

6:51 So the first one, the first resolution is to receive and adopt the company's annual accounts for the financial year ended 09/30/2020 together with the director's report and auditor's report thereon. Are there any questions from the members attending? No. I now propose resolution one, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise your hand.

7:24 One, two, three, four. Those against, zero. I hold 235,951,002 proxy votes in favor. I also hold 1,360 votes to be placed at the chairman's discretion, which are placed in favor of the resolution. There are 610,000 votes against and a 100,000, withheld. Therefore, I declare this resolution has been passed. You'll see on the screen, I've put the numbers up for those that can view the screen. The second resolution relates to the appointment 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, which accounts are laid before the company and gives the directors authority to determine their remuneration.

8:24 Are there any questions?

8:28 No? Okay. I now propose resolution two, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. For in favor. And those against, none

8:48 I hold 235,000 I'm sorry. 235,951,002 proxy votes in favor. I also hold 1,360 votes, to be placed at the chairman's discretion, which are placed in favor of the resolution, 610,000 votes against and 100,000 votes have been withheld. I therefore declare this resolution has been passed.

9:18 We now move on to, resolutions three to six inclusive concerning the reelection of me, Sean Doak, Andrea Pankhurst, and Michael, Joyce, each of whom is retiring in accordance with the Articles Association and being eligible is offering themselves for reelection at this general meeting. The board is recommending that each of the retiring directors be reselected as a director. Each resolution will be put to the meeting separately. Are there any questions?

9:51 No. Then as this this next resolution relates to my own election, I'll now hand over the chair to Michael Joyce to take you through that resolution. Thank you, Mark. I now propose resolution three for the election of Mark Braun, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands.

10:23 All those against? I counted five for sorry. All those against? I count zero against. I hold 235,924,142 proxy votes in favor with zero votes at the chairman's discretion and six hundred and thirty six eight hundred and sixty votes against with 100,000 withheld. Therefore, I declare that the resolution has been passed. And with that, I'll hand you back to Mark. Thank you, Michael. Just one correction there. There were one one thousand three hundred and sixty votes at the chairman's discretion. But, obviously, as chairman, I'm choosing not to not to vote for myself using those.

11:14 But anyhow. So moving on. Just put the result up for the next one. So I now propose resolution four for the reelection of Sean Doak, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. Okay. I count five. All those against are zero. I hold, 235,924,142 proxy votes in favor.

11:59 There are also 1,360 votes at the chairman's discretion, 300 636,860 against, and 100,000 withheld. I therefore declare this resolution has been passed.

12:17 I now propose resolution five for the election of Andrea Pankhurst, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, raise their hands. That's five. Those against? Zero. I hold 235,924,142 proxy votes in favor. A 100 and 1,360 votes at chairman's discretion, which are voted in favor, 636,860 against, and 100,000 withheld. I declare that this resolution has also been passed.

13:03 I now propose resolution six for the reelection of Michael Joyce, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. I count that as, four five. Sorry. Five. All those against?

13:23 Zero. I hold, 235,951,002 proxy votes in favor, 1,360 at the chairman's discretion, 610,000 against them, 100,000 withheld. I therefore declare that this resolution has also been passed.

13:45 Okay. Now we move on to resolution seven, which relates to the authority to allot shares and grant rights to subscribe for for or to convert any security into shares of the company. Before the directors are able to issue shares or convert any security in shares, they must first authorize be authorized by shareholders to do so. The maximum number of shares that may be allotted under this authority is limited to an aggregate nominal amount of £249,254, being approximately 20% of the nominal value of

14:17 the company's issued ordinary share capital, excluding treasury shares, as at 01/25/2021. 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 next year's annual general meeting. Are there any questions?

14:39 No? Okay. So I propose resolution seven, the text of which has been set out in the notice convening the meeting as an ordinary resolution. All those in favor, please raise their hands. I count five. All those against is zero. I hold 235,923,615 proxy votes in favor. 1,360, votes are at the chairman's discretion, which are placed in favor. 610,000 are against, and 127,387 are withheld. I therefore, declare this resolution has also been passed.

15:21 The final resolution will give the directors 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, one, the allotment of equity securities in connection with the rights issue or other preemptive offer, or two,

15:42 otherwise, the allotment of equity securities of sale of treasury shares to any person up to an aggregate nominal value of £124,627 representing approximately 10% of the nominal value of the company's issued ordinary share capital, excluding treasury shares as at 01/25/2021. 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 next year's annual general meeting. Are there any questions? No. I now propose resolution eight, the text of which has been set out in the notes convening the meeting as a special resolution. All those in favor, please raise their hands.

16:29 I count five, and those against, zero.

16:36 I the I hold 235,369,533 proxy votes in favor, 1,360 votes at chairman's discretion, are also placed in favor, 614,800 against, and 676,669 are withheld. I therefore declare that this resolution has also been passed.

17:04 That concludes the formal proceedings of the meeting. And accordingly, now declare this annual general meeting of the company closed. Results of the meeting will be announced to the markets through our regulatory information service and posted on our website as soon as practicable. Thank you very much for attending. I now hand back to Paul and the team at Investor Meet. Mark, thank you very much. Thank you, Sean, Andrea and Michael as well. Ladies and gentlemen, please do submit your questions using the Q and A tab situated on the right hand corner of the screen. Simply type your question and press send, and we'll just keep that open just to see your questions come through. But in the meantime, I'd like to remind you that recording this presentation along with a copy of the slides and the published q and a can be accessed via your Investor Meet company dashboard on the investor meet company platform.

17:53 Mark, perhaps if I could just suggest that we give it a few minutes just to let investors type in their questions. If you have any, we'll keep that open. And if it, remains as we are, perhaps just ask you for a few final words to wrap up and redirect investors with feedback. Yeah. We would welcome any further questions. I think, though, many of the people attending have probably met the team in the last two, three weeks. We've had two events. Obviously, the announcement results on on this platform, and we also attended the Mellow event. And we've had some quite exhaustive questions, which we've not only answered all the platforms, but we've also published full answers to on this platform and on Mellow's. But we're very, very happy to answer any other questions. I can see one's come in. I'll just wait for see if there are any others.

18:41 Let me let me start by asking the question that's here, and it's it's one for for Sean and Andrea. It's from David b. It says, how does spillages and accidents translate into recurring revenue for REACT? I think this is something that you've actually tackled before, Andrea, in terms of the nature of our contracts. They're exclusive, and we have trends associated with with the unfortunate things that happen in in some of our customers. Okay. So, for our, contract, reactive customers, we provide a a service where they can call on us when they where they have an emergency. So we have a defined SLA and pricing with them, and that they'll call us out as needed.

19:31 So, you know, that that revenue is recurring because they they they call us out multiple times over a time period whenever they have a spillage or other cleaning that they need to take on. Is there anything else you want to add to that, Sean? On only that you know, what you said is quite right, but only that those opportunities and those framework agreements that we have often lead to bigger opportunities downstream, some of which are recurring in nature also. Yeah. Yeah. I think I think the the core of this question really is, you know, if you're on call out, you know, how does that translate to recurring revenue? I think the answer is that these contracts are quite large. They cover a multiple of of sites in the in the on the highways, in the railway, in the health service, in the judiciary.

20:26 And notwithstanding, you know, COVID, which obviously has put some some negative effects on that as well as positive, there's a there's a constant trend. Unfortunately, you know, most cells need cleaning on a regular basis. You know, unfortunately, there are animal strikes on the railway, and there are, unfortunately, other fatalities on the railways that just happen on two regular basis. And therefore, we can see the trend of these contracts and what they're roughly worth on an ongoing basis. And they vary fairly little year on year because of the size and nature, and they are long term. So in our view, we we view this as once we've got that contract, it's an exclusive contract, and the revenue is going to be recurring.

21:12 It may differ from year to year, but but relatively modestly. Yeah. I think I've I think that's the key mark that we this is an exclusive agreement. We're not one of three or four or five. We are the go to company for this kind of work. So as you said, you know, we can we've got visibility to to a degree of what it looks like month on month. Yeah. Okay. We've another question up here from William w. William, I I may need you just to clarify this, but I'll read it as it is. Profits, cash generation and margins are all good news. Thank you. Any chance of giving year on year figures? Now we did give figures at the last two presentations. Andrea, I don't suppose you've got them the the data in front of you so you can cover the just the top line numbers year to year.

21:59 Yeah. I do have a few in front of me, actually. So year on year, so just from 2018, 2019 to this year, we've just reported on, revenue was up 41%. And of that revenue, 80% of it is recurring in in one way or another. Our gross profit was up by 64% year on year, and our margin is now just over 33%. In the last two years, in fact, so just looking back yet another year, we've more than doubled our gross profit and we've increased our gross margin by just over 50%. So and then our cash balance at the end of this year was 1,800,000.

22:46 Obviously, of that, the placing has quite a significant impact. It has a a net impact of 1,100,000. But even excluding that, we've got a a net increase year on year of £300,000. So I hope that those are the key figures and those the ones you were looking for. Yeah. And and just to say, it's the first time we've actually generated cash as a company. First time we generate a profit as a company is is this year. Yeah. Hopefully, that answers that question for you, William. I don't see any other questions having come up. Hopefully, everybody has exhausted their questions, and we've answered them for you. If not, you know, you you do know how to contact us. Ah, here we go. Hang on. William, I meant 2021 versus 1920 revenue. Okay. So what you're looking at is forecast.

23:37 The forecast is available via our via our broker, Allenby. It is online and and available to everybody. From memory and and somebody's gotta correct me if I'm wrong. I think we're I think they are forecasting us on revenue at 5 point something million. Can you remind me, is it 5.4 or 5.1? 5,000,000. It's an 18% growth year on year that we're forecasting on revenue, and we're forecasting to more than double our EBITDA. That's it. Yeah. Yeah. So so 5,100,000 of revenue with an EBITDA, they're forecasting at 550 k of that order. So it's beginning to demonstrate the, you know, the the the the operational gearing that's available to the company as we add more revenue. But we we tend to focus a lot on the gross profit contribution because revenue can often, you know, sort of, you know, be misleading. I think gross profit contribution is is key for us, and this is how we incentivize and measure everybody. That's why you've seen us, you know, improve our margins over the last couple of years because we're focused on value, and and that's what they've delivered. So that's the number I think is is probably fundamental in terms of all the metrics we look at is what is our gross margin and then what's our operating margin. And, obviously, with the forecast we've given, we'll be taking our operating margin from what was 6% last year

25:08 to hopefully, you know, good solid double digit margins. So unless there are any other questions, I don't want to hold anybody up from from their day. Actually, Mark, I think I think unless there's anything else further coming through, if any further questions are submitted, obviously, the company can review, those questions. And as Mark highlighted earlier, we can publish responses where appropriate to do so. Mark, just before I redirect, investors for some feedback, perhaps I could just ask, you, Sean, Andrea, the team, or collectively just a final couple of words to wrap up, please. Yeah. I mean, I'll just summarize to say, look, the company is in is in very good health and a very good position to move forward.

25:54 And I think we are looking forward to continuing to be open and transparent about reporting on our progress in in the weeks, months, and and years to come. So, yeah, thank you very much for spending time with us, not just now, but on previous presentations, and we look forward to pro reporting on progress next time. Fantastic. Thank you very much for the REACT team for updating investors today and, putting your AGM online. Could I ask investors not to close the session? It should be automatically redirected for the opportunity to provide your feedback. If you've accessed this meeting from our website, the feedback page will appear in front of you. If you've accessed it via the link in the email, you'll be asked to log in and give your feedback. It takes just a couple of seconds, but it's great for the company to have an understanding of your views and expectations.

26:41 On behalf of REACT GROUP PLC, we thank you very much for attending today's AGM presentation. Thank you, good morning.