Apiam Animal Health Limited (AHX.AX) Earnings Call Transcript

Good morning, ladies and gentlemen. On behalf of the Board, it's my pleasure to welcome you to Apiam Animal Health Limited's 2020 Annual General Meeting. I thank you for your attendance this morning via our teleconference facility. I'm Professor Andrew Vizard, Chairman of the Board, and I will also chair the meeting today. Allow me to begin by introducing my fellow directors, all of whom are in attendance. Dr. Chris Richards, our Managing Director; and your 3 Non-Executive Directors: Richard Dennis; Jan Tennent; and Michael van Blommestein. Also in attendance is Matthew White, our Chief Financial Officer; and Brian Scutt, our Chief Operating Officer. The Company Secretary, Mr. Todd Richards, is also in attendance, as are the company's auditors, Grant Thornton, represented here today by Crystel Gangemi, the partner responsible for the company's audit for the 2020 financial year. I also welcome Cam Philpot, representative of the company's share registry, BoardRoom Pty Limited. As you are all no doubt aware, today's meeting is being held online via the Lumi platform. This allows shareholders, proxy holders and guests to attend the meeting virtually. In addition, shareholders and proxyholders have the ability to ask questions and also submit votes during the meeting. Questions can be submitted at any time. [Operator Instructions] We encourage shareholders to submit any questions they may have on the resolutions that are on the agenda for this meeting as early as possible, so that we can receive them in time and respond to them at the time the relevant resolution is put to the meeting. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be amalgamated together if we receive multiple questions on the one topic. It is past 9 a.m., and the Company Secretary advises me that we have a quorum present, so I now declare the meeting open. The notice for this annual general meeting was circulated to shareholders within the required period, and further copies of the notice are available electronically via the BoardRoom investor service portal. If there are no objections, I would like to move that the notice be taken as read. I would like to describe the voting procedures that will apply to this meeting. In accordance with my right as Chair of the meeting and as recommended by the Australian Securities and Investments Commission, I have determined that votes on each resolution will be taken by way of a poll. It's pretty hard to have a hand shown any case here today. The results of the poll will be notified to the ASX following the meeting. Only Apiam shareholders or their duly appointed representatives or proxies are eligible to vote at this meeting. The screen you are now viewing has the photo of who is speaking and the company slide presentation on the right-hand side of the screen and the voting section on the left-hand side of the screen. This meeting guide provides a step-by-step approach on how to participate in this meeting. As this is a virtual meeting, the meeting platform provides for electronic voting. [Operator Instructions] We will let you know as we approach the close of voting, but it will be 5 minutes after the close of the meeting. Please make any changes to your votes before or during this time. If you are having any technical difficulties and the online meeting guide isn't addressing them, please phone the toll-free number on the top of the web page. This number is also on the bottom left of the second last page of the online guide. If we experience technical difficulties, and I hope we don't during the meeting, that prevent us from continuing, we will adjourn the meeting and release an announcement to the ASX on when the meeting will recommence or when we will hold another meeting. If you are a proxyholder, you must comply with the directions of the shareholder if you wish to lodge a valid vote. If a shareholder or its proxyholder votes today in relation to a shareholding for which a proxy has been appointed, the earlier proxy will be revoked in favor of the new vote. Do any proxyholders have questions regarding the voting procedure? And Todd, have there been any questions or any comments about this?

No, there are no questions received.

Thank you, Todd. So we can move on. Each resolution will be tabled in turn, and we will allow time for questions and answers regarding the resolution before proceeding to the next resolution. If you wish to ask a question relating to the business items stated in the Notice of Meeting, please do so by submitting them in the speech bubble icon on your screen. I will endeavor to give all shareholders who wish to ask a question a reasonable opportunity to do so. However, in order to allow for an effective meeting, may I ask that you please keep your questions related to the matter at hand and as succinct as possible? At this meeting, there will be 4 items of business, including 3 resolutions. Each resolution will be proposed and voted on as a simple majority to be carried. There have been proxies received in respect of today's resolutions, which I intend to disclose when those resolutions are considered. As mentioned in the Notice of Meeting, it is intended that any undirected proxies given to the chair will be voted in favor of the relevant resolution. Only people who are actually registered here as shareholders or as proxies, representatives or attorneys for absent shareholders are entitled to ask questions. As previously mentioned, shareholders can submit questions or comments at any time during the meeting using the speech bubble icon button on your screen. Where appropriate, I will call on specific directors, management, the auditor or other advisers to respond to shareholder questions. However, I do ask that all questions be put through to me as Chair. There will be an additional opportunity for questions on each resolution that relate to that particular resolution. But before we move on to the formal business at today's meeting, I would like to address shareholders in relation to company performance and our objectives going forward. I will then invite our Managing Director, Dr. Chris Richards, to deliver a presentation to shareholders. A copy of my address, the Managing Director's address and the Managing Director's presentation having lodged with the ASX and will be published in the Investors section of the company website. So I will start my presentation now. The past financial year was extraordinary. It began with much of Australia in the midst of extreme drought. Then devastating bushfires followed. And the year ended with the world in the midst of an unprecedented pandemic. In the face of such extraordinary headwinds, it is pleasing to report that Apiam delivered substantial growth for our shareholders. Our revenue in financial year '20 increased 6% to $118 million. Our net profit after tax was $4.2 million, up 32% on the previous year. Our final dividend was 50% higher than the financial year '19 final year dividend. How did we achieve strong growth during such extraordinary times? Let me highlight 5 contributing factors. Firstly, Apiam's business diversification strategy, a strategy we have been executing since our formation in 2015. The combination of a variety of businesses in different locations around Australia, servicing a range of animal species and operations and having other complementary areas such as consulting and product distribution has created a business model with an in-built portfolio effect. It is a strategy that expects, as the old saying goes, that every dog has its day. And in 2020, that is literally the case for Apiam. An unexpected outcome of COVID has been generally strong growth in the companion animal markets. And through our purposefullly significant exposure to that market, we were able to reap rewards. A second factor contributing to Apiam's strong growth are our new initiatives such as our ProDairy consultancy program, the exclusive distribution agreement with Zoono Animal Health and the launch of the Best Mates companion animal program. These are all new business initiatives developed and implemented by Apiam's management team during the financial year, and they all produced strong revenue streams and good earnings opportunities. Our Managing Director, Chris Richards, will talk to these in further detail during his presentation. The third factor I'd like to highlight is our investment during the previous 3 years in modern, scalable management systems for the company, particularly our enterprise planning software and our practice management system software systems. I do thank all investors for the patience showed while these systems were being implemented. It did take longer than we initially planned, but the rewards are now being realized. These systems are helping to deliver revenue growth and particularly significant cost savings, both at the clinic level and the corporate level, as we operate more efficiently, whilst also allowing us to grow efficiently and fully leverage the benefits of our scale. Fourthly, I highlight the success of our acquisition strategy. Since listing, we have made, I think, 9 acquisitions to grow our business or add specialized skills and expertise to our offering. These acquisitions have also been very successful in diversifying our revenue streams and protecting us from industry volatility that is often a feature of single regional businesses. In the financial year '20, we completed 3 strategic acquisitions being ACE Laboratory Services, Grampians Animal Health and Devoted Vets in Warragul. Each of these businesses featured a compelling rationale, either the addition of a specialist service offering that was attracted to our customer base or a new regional exposure. All 3 acquisitions made during the past year have performed extremely well and are making a strong financial contribution to our businesses. You may have also seen that last week, we announced the acquisition of Don Crosby Veterinary Surgeons, a leading Dubbo-based companion and mixed animal veterinary practice. This was identified by management as having an attractive acquisition rationale for Apiam, given its exposure to the strongly growing companion animal segment. It also provides a meaningful market presence in a fast-growing regional population center. Chris will provide you with more details about this acquisition during his address. The fifth and final factor that I wish to highlight as contributing to our growth during such difficult times is probably the most important. It is our people. I thank the entire Apiam staff who, without exception, faced these extraordinary times with a degree of professionalism, flexibility and teamwork that made me and my fellow board members, proud to be part of the Apiam team. Their commitment to delivering sustainable and increasing returns for our shareholders, whilst at the same time, looking for ways to stand alongside and support our diverse regional and rural customer base, is the foundation stone on which we are building an ever stronger, bigger and better Apiam. Looking ahead, while COVID-19 may well present ongoing challenges into 2021, I want to reassure shareholders that Apiam's business model as a provider of essential animal health services is robust and well placed. The veterinarians' hygiene and safety have always been at the forefront of what we do. Our safety protocols are well established, and our teams are experienced in managing risks presented by infectious agents. Importantly, the fundamentals of our business remain unchanged. Our scale and geographically dispersed business model across rural Australia provides Apiam with the capacity to remain resilient in the face of changing and unexpected conditions. We, therefore, enter financial year '21 with confidence. And our most recent year-to-date results support that confidence. From July to October, the first 4 months of this new financial year, we have performed strongly. Again, Chris will provide the details around this shortly. In the year ahead, we will continue to execute on our core business strategy. Our investment in our infrastructure will continue to pay off and is expected to deliver greater efficiencies in earnings growth as the scale of the business continues to grow. Expect to see further strategic acquisitions. It is also important to note, we also have a very solid balance sheet and are supported by stable cash flows. This has allowed us to continue to pay dividends at a time when many others cannot. Before closing, I just want to touch on what we are doing to support the communities we operate in. We feel strongly about supporting them through their recovery from the challenges they have paced -- they have faced over the past year. To assist with this, Apiam donated $135,000 to our Fur Life Charitable Foundation (sic) [ Fur Life Foundation ]. This, together with other donations raised by the foundation, was donated through to Rural Aid to support its mental health assistance program as well as to 3 regional wildlife organizations working to improve native animal well-being in the areas most affected by last summer's bushfires. To close, I take this opportunity to thank my fellow directors and to reiterate my thanks to Apiam's committed team of management and employees for their very substantial contribution and dedication to Apiam's future. I also thank our shareholders for their continued support and commitment to our business strategy. This has allowed us the opportunity to begin delivering the earnings growth we knew the Apiam business was capable of. I will now hand over to our Managing Director, Chris Richards, to make a presentation on Apiam's activities and financial results for the financial '20 year as well as an update on the financial year '21 trading to date. Thank you.

Thank you, Andrew, and welcome, everyone, to our first virtual AGM. In what has been an extraordinary year and despite the many challenges faced by regional communities and the broader economy, I'm pleased to report that Apiam has delivered strong financial growth. We've also pursued strategic opportunities, making acquisitions and launching new business initiatives, all of which have been important drivers of our performance. I will start this morning by reviewing the FY '20 financial year before updating you on our growth strategy and year-to-date FY '21 performance and outlook. As you know, we reported our full year FY '20 results in August. At this time, we reported strong and resilient revenue growth even in the face of COVID-19 challenges and varying industry conditions. This growth was underpinned by Apiam's diversified customer segments. We remain committed to our long-term business strategy and successfully executed expansion of our product and service range and 3 important acquisitions during the financial year. I'll talk to these shortly, but I want to highlight that these initiatives were important drivers of our financial growth and reaffirm the success of our financial -- of our strategic framework. In FY '20, we also saw our operating efficiencies and cost savings from our previous year's investments in our systems and infrastructure. This, in combination with improving gross profits, has driven margin expansion and has helped to create a material earnings uplift, as our cost base has been increasingly leveraged. And as a result of our earnings growth and strong balance sheet, we're able to increase our final dividend this year. I'll now run through a snapshot of our profit and loss, where we can see the results of our hard work and strategic decisions this year. Revenue in the year to 30 June 2020 was up 6% to $118.4 million. Gross profit was up 13.8% to $64 million. And net profit after tax was up 31.8% to $4.2 million. This NPAT growth demonstrates the operating leverage that I was just referring. We have also had a pleasing start to financial year '21, with Q1 FY '21 revenue, being the revenue from July 20 to September 2020, up 14.1% on the prior corresponding period, and our gross profit for the same period has been up 21.2% compared to the prior corresponding period. I'll now provide a more detailed profit and loss performance summary, and this is a slide that we presented to investors as part of our results. You can see that at the top line and despite the headwinds and uncertainty the economy has faced in FY '20, Apiam delivered 6% revenue growth. This was driven by a very strong performance in our dairy and companion animal segment, particularly in the second half. Our like-for-like revenue, which excluded the benefit from acquisitions during the period, did fall 5.1%, but this was due to a strategic reduction in low margin wholesale sales in the pig segment and the decline in beef feedlot numbers, which has occurred industry-wide, and I'll talk to these industry revenue drivers more on the next slide. The year saw a strong uplift in our gross margins, up from 50.3% in FY '19 to 54.1% in FY '20, and this is for a number of reasons. Firstly, as Andrew mentioned, the rollout of our practice management system across the entire clinic network was completed in the first half of FY '20, and this system has very quickly increased efficiencies in our clinics and captured revenue. We also optimized our business mix during this period, reducing lower margin wholesale business and as well have had the benefit of the attractive acquisitions we've made, many of which operate in higher margin segments. Operating costs have remained relatively flat on FY '19, with only a 3.9% increase in costs on a like-for-like basis, largely due to the normal salary increases that occurred. Finally, our depreciation and amortization expenses slowed as our corporate infrastructure upgrade was completed, with most of the spend in earlier periods. This combination of factors has driven a 31.8% increase in our statutory NPAT for FY '20. Now I want to provide a bit more context about some of the industry revenue drivers this year. Looking at each of our business segments separately. We can see that each has followed its own story in FY '20, being affected by different underlying factors. Dairy and companion animals was a very strong segment, with companion animals benefiting from double-digit growth in most clinics. Part of this was due to the COVID-19 pandemic and the rapid growth in pet ownership observed since the early lockdowns and travel restrictions around Australia. We've also experienced favorable weather in H2 of FY '20 and particularly higher rainfall, which has driven very strong growth in our dairy segment. The launch of ProDairy has also delivered further growth in this segment. Industry conditions in our pig segment have remained varying and challenging in some regions. In response, we have reduced our exposure to the lower margin wholesale pig business and have refocused on higher value consultancy services. Our performance in feedlot has been solid. But from a year-on-year perspective, it has slowed because of the record FY '19 growth year for beef feedlot industry-wide. We've also seen a reduction in animal numbers as a result of reduced beef export demand due to the COVID-19 pandemic and its impact, particularly on food services in these markets. Before we move on to the strategy section, I'd just like to touch on COVID-19 from Apiam's perspective, given that this has been a major issue for many industries this year. In the second half of FY '20, Apiam, like all businesses, had to respond to the COVID-19 pandemic and put in place appropriate COVID-safe processes. Apiam was proactive in adjusting to this, and we've implemented changes, such as remote consulting technology, modified COVID-safe clinic services and online bookings where appropriate. As Andrew said earlier, however, managing viruses and infectious agents is -- it's a core skill for vets and veterinary clinics. So we really were very well placed to deal with the pandemic challenges. As a provider of essential services even during the strictest lockdowns, our business was resilient and our business continuity practices worked. And this is proven by the strong financial results I just talked through. We, of course, continue to monitor changing guidelines around COVID and comply with all COVID-safe recommendations. But I want to reassure you that as a business and with our understanding of infectious disease, we are very well placed to navigate this area. Let's move on to the next section, our strategy and outlook. When we formed Apiam, we knew that to grow successfully, we needed the right foundations in place. In 2016, we planned our strategic framework with our target of growing earnings and shareholder returns, and this resulted in our 3-pillar strategic approach. Firstly, we needed our operations to work efficiently. We invested heavily in our technology and systems, and the final piece of this foundational investment, being the practice management system, was completely rolled out across our whole clinic network and completed in the first half of FY '20. We have seen the benefits from the practice management system, with increased revenue capture and growing gross margins. Our broader investment in company infrastructure that took place over the past 3 years is now also providing the efficiency dividends we knew the business was capable of and this is what our strategy was centered around, growing revenues without growing our cost base. This has been delivered in FY '20, and I would like to thank our shareholders for supporting us on this 3-year journey. We also set a target to grow our animal numbers under management, and this has been steadily achieved over several years. This year, Best Mates and ProDairy have been fundamental to this growth. As has our ongoing acquisition program, our greenfield clinic strategy, under which we have a number of new clinics planned in FY '21, will also help to take us to the next phase of growth in animal numbers. Product and service expansion has been a key focus for us for the past 2 years and is another driver of growth at Apiam. And this area of the business is continually evolving. This year, we've commenced the rollout of our private label strategy. We've also entered specialist vaccine and diagnostic markets via the ACE acquisition, and we've already seen a great uptake in demand for these products and services across our customer base. This next slide summarizes the key strategic initiatives we've undertaken in FY '20 and some more recent updates subsequent to the financial year. Many of these initiatives represent a new product or service offering that enhances animal health and well-being. Best Mates and ProDairy were launched earlier in the financial year, and I'll talk to these in more detail shortly. As you may remember, we entered into an exclusive product distribution agreement with Zoono Animal Health in November last year to distribute their proprietary disinfectant products that are used in livestock, agriculture and veterinary purposes in Australia and the U.S. And since that time, we've been working to develop the Zoono surface protecting and sanitizer market in these regions. In the U.S. market, initial sales in the second half of FY '20 was strong. However, extreme challenges in the U.S. pig and poultry industry as a result of COVID-19 has seen a reduction in the ability to have sales meetings in these segments. I am pleased, however, to report that laboratory services -- sorry, laboratory studies at Iowa State University to determine the effectiveness of Zoono Microbe Shield on contact against the 2 main pathogens to the U.S. pig industry as being porcine reproduction and respiratory syndrome virus and porcine epidemic diarrhea virus, the latter being a coronavirus, these have been highly successful. We're currently undertaking further studies at ISU to establish the residual effect or the duration of efficacy and expect these results in the coming months. In Australia, we've achieved an excellent response to preventing clinical rotavirus infections, and we continue to undertake trials to establish production performance benefits in pigs during their life cycle. We've also been busy on the acquisition front, with 3 acquisitions completed during FY '20, being the acquisition of ACE Laboratory Services, Grampians Animal Health and Devoted Vets in Warragul. The largest of the 3 was ACE Laboratory Services, which we paid $16 million. All these acquisitions have performed well and added valuable skills, services or an expanded regional exposure for Apiam. I also want to highlight 2 more recent initiatives announced just this month. Firstly, in November, we entered into a partnership with Ceva Animal Health in Australia to distribute Forceris, which is Australia's first single-shot combination of gleptoferron and toltrazuril, which prevents iron deficiency anemia and controls coccidiosis, which is a parasitic disease,of the intestinal track in newborn piglets. This will deliver Australian pig farmers and labor-saving technology solution as it reduces a 2-stage process to 1 stage and will enhance piglet survival. It was made available to Apiam's pig clients in November, and all Australian pig farmers will have access to this product in the coming days. We also, last week, announced the acquisition of Don Crosby Veterinary Surgeons, a strong regional mixed animal practice located in Dubbo in New South Wales, and I'll talk to this more on the next slide. As you know, Apiam has maintained a strong acquisition pipeline and has consistently executed acquisitions to support its growth framework. We have a strong track record on M&A execution, and in the past 3 years, have completed 6 acquisitions, comprising of 8 veterinary clinics. Each of these acquisitions has helped the business to grow and diversify. We continue to maintain strict acquisition criteria, and we are well practiced now at integrating the businesses efficiently. Every acquisition must have attractive regional exposure, a leading product or service expertise and, of course, meet financial return thresholds, including the availability of synergies. The Don Crosby Vets acquisition announced to the ASX last week brings a number of these benefits to Apiam. It expands our regional footprint. It has an attractive companion animal exposure, the segment that has done so well in FY '20. It has strong financial metrics and is led by an excellent team with a proven track record. There are also important scale benefits and synergies which can be achieved, particularly as Apiam has an existing small presence in the Dubbo area. We look forward to completing this acquisition and expect settlement to occur on the 30th of November 2020. Now I'll talk to some of the other strategic initiatives we have implemented. As I said earlier, pet ownership has been growing rapidly this year due to COVID-19, either with families being at home, spending more time with their pets or individuals needing company during lockdown periods and acquiring pets. In line with this market-wide trend, Apiam's companion animal business has also grown strongly, and I believe some of the initiatives we have introduced have positioned us well and allowed us to capture additional market share. Our Best Mates program, which is only 18 months old, is a subscription-based animal wellness program and has had a good year with very strong growth in subscriptions. If you look at the chart, you will see a strong upward subscription trend, particularly over the last 3 quarters. Around 4.5% of our active patients were Best Mates members at the end of FY '20, leaving us plenty of room to continue to grow the program. We have also put in place an updated greenfield clinic strategy over the past few months, and we plan to open clinics in fast-growing regional areas during FY '21. New sites due to open in the coming quarters are planned for Shepparton and Torquay North, both in Victoria. The Torquay North clinic will occur under our joint venture with PETstock, whereby we operate a co-located vet clinic at a PETstock retail store. Apiam have an 80% interest in these clinics. Our existing co-located clinics in Bendigo suburbs, Epsom and Golden Square, which have both opened in the past 2 years, are performing well, and we expect further clinics to do the same. Turning now to another successful initiative we introduced in FY '20. Our ProDairy business was launched just over a year ago and it's an innovative service model, offering dairy farmers an end-to-end service that extends across areas, such as staff training, direct ordering capability and risk management. Since launch, the program has grown strongly, and we estimate farmers representing approximately 10% of Victoria's dairy cows, which is Australia's largest dairy region, have subscribed to the program, leaving further growth to come in many areas. The images to the right provide a snapshot of the media campaign we launched in April this year, across targeted radio, social media and television as part of a strategy to increase market penetration in other geographical areas. Two new ProDairy satellite clinic locations are due to open in FY '21, and these will provide a local presence in new geographical areas. Now before I turn to the outlook, I'd just like to acknowledge what we are doing to help communities that we work within, particularly coming off the back of a very challenging year for many. This year, Apiam's Fur Life Foundation has contributed over $150,000 to support rural communities, including 3 regional wildlife charities to improve native animal well-being in areas that were affected by summer bushfires. We recently donated $10,000 to the Bohollow Wildlife Shelter in the Goulburn Valley area. This is a 24-hour animal rescue service and the funds will be used to support their operations during the peak summer period. We've also made a similar donation to the Mosswood Wildlife Rehabilitation Centre, which is located in South West Victoria. Rural Aid, who has a specialized counseling program to support rural communities, is another important organization Apiam supports. We've been particularly committed to this cause in 2020, where people, especially in rural Victoria, have come off an extended drought period and now are confronted with summer bushfires. We recently donated $120,000 to Rural Aid. As part of our ongoing in-house programs, we're committed to providing financial support to our employees that choose to volunteer in their local communities by allowing paid work days for volunteering activities. Now let's turn to the outlook. I will start by giving an update of industry conditions across our customer segments. The dairy and companion animal segment continue -- conditions remain very strong. The dairy segment is benefiting from better rainfall and the end of drought conditions, and this is expected to continue for some time. As I mentioned, the underlying fundamentals for companion animal ownership is also predicted to remain strong, particularly as the regional approach to pet ownership increasingly aligns with metro attitudes and the impacts of COVID-19 restrictions continue to be felt. While the beef feedlot industry -- beef feedlot sector has not benefited from the same growth in FY '20, this is because it came off a record year in FY '19. The impact of COVID-19 has been felt across this sector as beef export volumes have declined by around 6% to 8%. Overall, long-term confidence in the sector remains strong as there are fundamental demand drivers that underpin demand, particularly with the growth of the middle-income class in China and ongoing African swine fever impacts on the Chinese pork supply. These same factors also support demand for Australian pork, and the first quarter of FY '21 has seen growth year-on-year. Exports have increased and imports decreased over the last few months on the back of global pork shortages as a result of African swine fever. Swine industry producers are currently in an expansion phase to capitalize on these drivers, having had a difficult previous few years. Lastly and supported for all production animal sectors is a strong outlook for grain, given good rainfall across winter and into spring. Australia's grain production is expected to rebuild to pre-drought levels. As a key input for all production animal operators, this is expected to be beneficial right across Apiam's client base. The Bureau of Meteorology has also recently declared a La Niña event, which typically results in materially higher rainfall across Northern and Eastern Australia for a considerable period of time. We expect that this will also provide favorable conditions for farmers. I'll now turn to our year-to-date trading and outlook. We've had a strong start to financial year 2021, with revenue up 10.1% and gross profit up 18.9% for the financial year '21 year-to-date period, being July through to October. On an x acquisition basis, we continue to achieve very strong growth in the dairy and mixed animals business. However, this is offset to a degree by a reduction in animal numbers in the feedlot business. Like-for-like growth at the EBIT and NPAT levels did, however, remain material. We expect the business to continue to trade strongly for the remainder of FY '21 despite industry volatility and the continuing COVID-19 pandemic. The management team are committed to executing our strategic growth plan and as I've outlined -- as I've outlined today, and to delivering shareholder returns. We will also continue to invest in growth opportunities this year. However, we'll be careful to balance this against return on capital. Looking to the first half of FY '21, which we will report in February next year, we expect our revenue and earnings growth momentum to continue. I'll conclude by thanking our shareholders for your continuing support. I also thank my Board colleagues and our dedicated employees for your ongoing commitment and hard work to move the company into its next stage of growth. And with that, I'll hand it back to you, Andrew, to continue the meeting.

Thank you, Chris. Now we move to the formal component of the meeting, which the only items of business to come before the meeting today will be those specified in the Notice of Meeting. Only questions relating to a particular business item will be taken during this time. The first item of business at this meeting is consideration of the audited financial statements and related reports for the year ended 30th of June 2020. The Corporations Act requires that the audited financial statements and related reports for the 2020 financial year be considered at the meeting. I now declare that these reports, which were made available to shareholders on 24th of August 2020 have been made before the meeting. Although shareholders are not required to formally vote on these reports, I welcome any discussion or questions on them. As I mentioned previously, the company's auditors are Grant Thornton and Crystel Gangemi, the partner responsible for the company's 2020 audit, is present at the meeting today and is willing and able to answer any questions on the conduct of the audit or the content of the auditor's report. I'm advised by the auditors that no relevant questions for their attention were received prior to the meeting. The financial and related reports have been circulated to shareholders, and I have provided an update on the financial year '20 performance and the outlook at this meeting. So no further background is required on this resolution. I will ask our Company Secretary to advise whether any questions have been received in relation to the annual report arising from my address or Chris' address and presentation. Todd, have there been any questions or other comments for us?

There have been no questions received in regard to the financial report or the auditor's report. There's one question that's been received relating to Chris' presentation. Dr. Martin Foreman, just -- is querying, Chris, you referenced the 2-year breakeven for greenfield clinics. Is that cash breakeven or trading EBITDA?

Chris, can you answer that, please?

Yes. So no, that's actually trading EBITDA. So normally, clinics in the first 12 months, as you put the initial costs in, they build up that business, and then we would expect them to be positive at an EBITDA level in the second year.

Okay. And one further question has just been posted by [ Mazira Proprietary Limited ]. The new Zoono product sounds good. What percentage of profits could be seen in the future?

Chris, I'll hand that across to you as well.

Yes. So we're currently undertaking trials. And really, it's the result of those trials and the return on investment that they're likely to deliver to pig producers, which will really determine the level of growth in that product. So until we have those trial results finalized, we would only be speculating.

There are no further questions at this time.

Thank you. I confirm the audited financial and related report for the year ended 30th of June 2020 have been received and considered by shareholders. So now we move to the next item of business, resolution 1. It's a nonbinding resolution to adopt the company's remuneration report, which is set out in the company's 2020 annual report. Resolution and details of the valid proxy votes on the resolution appear on the screen, and I will take these as being read. For those listening by telephone, the proxies received at the pre-voting cutoff time are as follows: 86.06% in favor of the resolution; 3.7% against the resolution; and 10.2% open vote. Todd, have there been any comments or questions for us?