Future Generation Global Limited (FGG) Earnings Call Transcript
May 7, 2024
Earnings Call Speaker Segments
Good morning, and welcome to the Ninth Future Generation Global Limited Annual General Meeting. This is a hybrid meeting held both online and in person here at the Museum of Sydney. I would like to begin by acknowledging the Gadigal people of the Eora Nation and pay my respects to elders, past and present. Thank you for joining us and for your support of Future Generation Global. Before we begin, a disclaimer is displayed on the screen for you to read. I am Jennifer Westacott, Chair of the Board of Directors. Joining me today in person are my fellow Board members, Kate Thorley; Kiera Grant; Geoff Wilson; Jonathan Nicholas; and joining us online are Sarah Morgan and Geoff R. Wilson. I'm delighted to also be joined by Caroline Gurney, CEO of Future Generation Global. Acting in the capacity of moderator is Ophelia Lam, Finance Manager at Wilson Asset Management, who will assist in addressing any questions received during this meeting. Sandra McIntosh from Acclime Australia and Sylvia Wallace, a representative from our auditor, Pitcher Partners, are also with us; and Sylvia will be available to address any questions relating to the company's financial statement. As it is 10 a.m. and a quorum is present, I declare the meeting open. Notice of Meeting has been circulated to shareholders, and in the absence of any objection, I will be proceeding on the basis that the notice has been taken as read. I encourage you to read the Chair's address announced to the ASX. Shareholders who have logged in to the webcast with your user name and password will have the opportunity to submit questions online and ask audio questions as well as vote on resolutions. If you are joining us online, questions can be submitted at any time. For shareholders joining us online who wish to ask a verbal question, an audio questions facility is available during this meeting. For those shareholders joining us in person, please raise your hand and wait for the microphone to be brought to you. Voting today will be conducted by way of a poll on all items of business. When I open the poll, the voting icon will appear on the navigation bar. Simply select one of the options to cast your vote. If you change your mind, select another option. I now declare voting open on all items of business. You can vote at any time during the proceedings and until I declare the voting closed. I will give you a clear prompt later in the meeting to warn of a close in voting. In 2023, the Future Generation Global Investment portfolio increased 16.7% over the period and drove a record operating profit before tax of $78.9 million. This led to the Board of Directors increasing the fully franked year dividend, consistent with the company's objective of paying a stream of fully franked dividends to shareholders. The fully franked full year dividend of $0.072 per share represented a fully franked dividend yield of 5.6% and a grossed-up dividend yield of 8%. The fully franked dividend yield is significantly greater than the average global equity market yield of 2% and the average U.S. equity market yield of 1.5%. In 2023, Future Generation Global made our eighth annual social investment of $5.4 million, bringing our total social investments since inception to $38 million. We are incredibly grateful to our fund managers for managing Future Generation Global's capital entirely on a pro bono basis, and in doing so, foregoing fees worth $7.2 million in 2023. Similarly, our service providers, Board of Directors and Investment Committee also waived their usual fees, which amounted to $1.8 million in 2023. These combined savings of approximately $9 million, or around 1.6% of net assets of the company, exceed their annual investment to our social impact partners. The 31st of March 2024 numbers are presented now on the screen. We shall now conduct the formal part of the meeting. There are 5 items of business for the AGM today as set out in the notice of meeting. Four items are to be voted on. The notice of meeting and explanatory memorandum was circulated to shareholders, and in the absence of any objection, I will proceed on the basis that these items are taken as read. Boardroom are the returning officers for today's meeting and will conduct our poll. I further note, resolution 1 is subject to voting exclusions as outlined in the notice of meeting. The Board recommends approval of each resolution, and I, as Chair, will be voting all open votes provided to me for each resolution. We will advise the ASX as soon as the results are determined, which will be later today. You may submit any questions or comments you have on the financial statements and reports now. The first item of business is to receive and consider the financial statements, the directors' report and the auditor's report for the company for the year ended 31st December 2023. Sylvia Wallace is a representative from our auditor, Pitcher Partners, is present to answer any questions. No resolution on this matter is required. We will pause now to allow for any questions. If you are joining us online today, please send them through the question function or request to speak. Let me begin by asking, do we have any questions in the room? Do we have any questions online? There being no further questions, we come to the items of business for which a vote is required. Resolution 1 relates to the adoption of the remuneration report. You may submit any questions or comments you have on resolution 1 now. The proxies are on the screen. With the open proxies which have been granted to me as Chair, I will be voting in favor of the resolution. We will now pause for any questions. Do we have any questions in the room? Do we have any questions online? As there are no further questions or comments, I now 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, could you now please complete your vote on resolution 1. [Voting]
Resolution 2 relates to the election of myself as a director, and Geoff Wilson will handle this resolution.
Right. Good morning, everyone. Thank you very much, Jennifer. Now Jennifer, I mean, before we start, I mean, would you like to say a few words about your experience? I know most of Australia is very aware of it, but it's probably good corporate governance, and then we'll do the vote.
Well, thank you, Geoff. And obviously, I seek the agreement of shareholders to join as a director of Future Generation Global. As many of you know, I've had a long career as the Chief Executive of the Business Council of Australia from 2011 to 2023; prior to that, as a senior partner in KPMG; and prior to that, as a senior public servant at the Secretary level in Victoria and New South Wales. During that time, as the CEO of the Business Council of Australia, I was also a nonexecutive director of Wesfarmers Limited and a director of many organizations, including the Cyber Security Cooperative Research Centre. I've worked with both domestic and international companies. I've worked on regulation and policy in my role as the Head of the Business Council. I have a deep understanding of business. I have a deep understanding of the role of investment funds in financial markets and the power to change within and across economies. I also spent 7 years chairing Mental Health Australia. I have a profound personal commitment to changing mental health services and mental health perceptions in Australia. What I know from that time and my time as a public servant is that the system is woefully fragmented and underfunded. And I know the critical importance of early intervention and prevention. And this is what we're about at Future Generation Global. So I'm privileged to be asked by the Board to Chair this body. It allows us to bring together the traditional financial instruments of a listed investment company with what I call the doubling dividend of fund managers forgoing their fees and allowing us to redeploy those through a very rigorous process to fund services, particularly focused on youth mental health. And to me, this is a world-class model for philanthropy in Australia, using existing instruments such as shares designed to deliver that double dividend, returns to shareholders and betterment of our community. I am very proud to serve your interest as shareholders and of course, to serve the many Australians who suffer from living with a mental illness. Thank you.
Well, thank you very much, Jennifer. Now do we have any questions in the room for Jennifer? No? Do we have any questions online? Thanks, Ophelia. Sorry, do we have a question? Excellent. Thanks. Well, we'll know in a second when you vote. So the proxies received are on the screen. To the open proxies which have been granted to the Chair, I'll be voting in favor of the resolution. The -- I'll now put the motion that Ms. Westacott be elected as set out in the notice of meeting. If you are a shareholder or a proxy holder and eligible to vote, could you now please complete your voting resolution -- sorry, your vote for resolution #2. [Voting]
I'll now pass back over to you, Jennifer. Thank you.
Well, thank you, Geoff. Resolution 3 relates to the reelection of director, Kiera Grant. Kiera, would you like to make a short statement in support of your reelection?
Thank you, Jennifer. For those of you I haven't had the pleasure of meeting, my name is Kiera Grant. I joined the Future Generation Global Board back in 2018, having had a long-standing involvement with equity markets for most of my professional life. With over 12 years' experience as a nonexecutive director for a number of listed, ASX-listed companies and also a number of unlisted companies, and I also have had over 15 years' experience as an Executive Director at UBS. As an independent nonexecutive director, what I feel strongly I bring to the Future Generation Board is an intimate knowledge of capital markets and equity investments. I also understand what good governance looks like. And I'd also think I bring strong, strategic and financial risk assessment experience to the Board. I have always been a strong -- I've always had strong empathy for mental health advocacy. And with this team, business model and also the strategy we have in place, I really feel strongly that Future Generation has an excellent future, and one that I look forward to continuing to be part of should I have your support today. Thank you.
Thank you, Kiera. You may submit any questions or comments you have on resolution 3 now. The proxies received are on the screen. All the open proxies which have been granted to me as Chair, I will be voting in favor of the resolution. We will now pause for any questions. Do we have any questions in the room? Are there any questions online? There being no questions or comments, I now put the motion that Ms. Grant be reelected as set out in the notice of meeting. If you are a shareholder or proxy holder and eligible to vote, could you now please complete your vote for resolution 3. [Voting]
Resolution 4 relates to the reelection of director, Kate Thorley. Kate, would you like to make a short speech to support your reelection as a director?
Thank you, Jennifer, and good morning, everyone. For those of you who I haven't met, I'm Kate Thorley, and I'm actually the CEO of Wilson Asset Management, but I've also been a director of Future Generation Global and Future Generation Australia for many years, but I also serve as a director of 7 of our listed investment companies across the WAM LICs. My background is as a chartered accountant, but I have spent sort of the last almost 20 years at Wilson Asset Management. And I often say that one of my career highlights has been working on Future Generation when we first launched this model. I absolutely love the fact that we're bringing together some of Australia's and global -- some of our best fund managers together within this model to make a difference to so many young Australians in terms of the social impact. So I feel very proud to serve on the Board of Future Generation Global, and I really hope I can continue to do that and that I receive your support. Thank you.
Thank you, Kate. You may submit any questions or comments you have now on resolution 4. The proxies received are on the screen. For me, open proxies which have been granted to me as Chair, I'll be voting in favor of the resolution. We will now pause for any questions. Do we have any questions in the room? Do we have any questions online? We might move to this [indiscernible] item, and then I'll address that in general business. As there are no questions or comments on motion 4, I now put the motion that Ms. Thorley be reelected as set out in the notice of meeting. If you are a shareholder or a proxy holder and eligible to vote, could you now please complete your vote for resolution 4. [Voting]
Perhaps then this would be the time to take any general questions. And you have a question?
Section 7 of the corporate governance statement. Is the share price discount seen as significant business risk? If so, how does the Audit and Risk Committee assess the adequacy of the control environment for this risk? If not, why not?
Perhaps if I begin by saying it is considered -- sorry, I beg your pardon. I beg your pardon. Sorry. All right. Is this better? No? Perhaps if you move hop over here, Ophelia.
No. Sorry. The question is from the [ DM and Hunt Super Fund. ] And the question is, "Per section 7 of this corporate governance statement, is the share price discount seen as a significant business risk? If so, how has the Audit and Risk Committee assessed the adequacy of the control environment for this risk? If not, why not?"
Well, thank you for the question. Perhaps if I begin by saying it is considered a business risk. It's part of our risk appetite statement, and we have a very active process for examining it. In respect of how we're tackling it, I'll hand over to Geoff Wilson to go into that in more detail.
Now the good thing is, I don't even need the microphone, but I think it works. And look, thanks for the question. And do we have any other questions? Was that the discount one? Okay. Yes, obviously, as all fellow shareholders, we'd feel a lot better if the share price was trading at NTA around that $1.60 mark, which we think is close to the live NTA at the moment. And unfortunately, it's not. The -- in terms of what is our strategy and our plan to get it to trade at NTA. I mean, first of all, you just look at, yes, both FGX and FGG, but FGG, we're talking about today, has traded at a premium to NTA. And the -- I mean, Caroline, as CEO, she's been -- she's been in the job for the last couple of years, been really working on the brand and the awareness. As you'd be aware, with FGG, there's been a restructuring of the money that goes to this mental health area focused on prevention and to really make a greater impact. What we -- what the plan is for the next -- and maybe I could pass to Caroline -- but from my perspective is that we will get both Future Gen entities back to NTA. The plan over the next year, 1.5 years is to do some -- probably some more work on the market positioning because in the end, it's supply and demand, as simple as that. But if everyone who's a shareholder is comfortable with the -- very happy and comfortable with what they've invested in, and here, you've got the smartest fund managers that we can assemble, overseen by a professional investment committee -- But if everyone is happy with what they've invested in, then you'll end up having -- you'll end up going back to equilibrium. And equilibrium is the NTA. I think what we've -- and part of that is also sort of repositioning, finding a better way to communicate. And you'll see with the monthly NTAs, we're slowly -- we're just starting to work on them. In the next couple of months, you'll see a new NTA format. In terms of the underlying performance of the managers, we've changed the portfolio quite a bit over the last couple of years, and we're very happy with the management we've got. And what investors have to -- or we have to communicate clearly to investors is that you've got a combination of managers. The equity market -- the international equity markets have been very strong. And the portfolio we've got here has underperformed over the last 12 months, and that is because a fair degree of the portfolio is -- are more absolute in terms of how they manage their money. So they're trying to position the portfolio. So if things don't go that well, you've got incredibly good positioning. So to me, it's -- we're just in the -- we're in the early phases of tightening the discount. At the moment, like with the performance of the market in the last couple of days, the international market, our guess -- and it's only a guess -- is the discount's closer to the 20% mark. When we announced our NTA last month, it was around 18%. And that's too big a discount. And obviously, for anyone buying, it's a great opportunity because you're buying $1 of assets for $0.80. And as I said, we're very confident that at some point in time, like it has historically, the share price would trade at full NTA, if not a premium. You actually could argue that these entities should have an implied premium to NTA once the supply-demand equation is offset. And that's because -- Jennifer took you through the numbers earlier. If you invested this money with these fund managers, then they would charge you, then it would cost you more. This is even after the 1% that goes to -- goes to the -- this mental health area. So it's actually -- you can argue, for a listed investment company, it should have an implied premium on it. And I'm very confident that, as I said, we've been at premiums before, then we'll get back to a premium. Unfortunately, it's nearly like hand-to-hand combat. It just takes time to tighten up the share register. But yes, I'm very confident we'll get there. Thank you.
Thank you, Geoff. Are there any other questions? Thank you, Ophelia. Yes, of course, of course. Yes.
The thing is -- the lucky thing is I'm an Australian analyst. So yes, I tend to look at -- yes, I was always a fund manager in Australia. So yes. Well, to me, that's the -- I mean, the -- for an operating company, they get valued on earnings, on a multiple of earnings, not on NTA. And it's not only the earnings that the company is making at this point in time, but the expected future earnings. So does that answer -- was it a cheeky question or...
[indiscernible]
Yes. And in terms of profit reserve, yes. And what we're doing is -- and thank you for that. And please, like -- remember, everyone here today, but -- everyone online, it's your company. And any suggestions you have, we're redoing the NTAs. You saw a couple of months ago, we removed the -- we had the performance of the portfolio, but we removed the performance index. Now the reason we removed the performance index, look at Future Gen Global, for example. You've got a fund manager called -- Mark Holowesko, who was Sir John Templeton's right-hand man -- has worked with Sir John. He's been in the industry for the last 30-plus years, an extremely good manager, very risk averse how he manages; more absolute in terms of what he's trying to achieve. He's trying to make sure he doesn't sort of Warren Buffett. We just had the BERKSHIRE thing. Rule #1, 2 and 3, don't lose money. And that's how he manages money. And in a market that's been up -- so the market has been up for the year just gone, up 26-odd percent, and he's up 14%. And you think, well, he hasn't done well. But when the market falls, the probability is he'll still make money. And that's -- and so we've set up a portfolio. It's nearly like more of an all-weather portfolio, where probably when FGG started, it was more -- it didn't have a lot of these characteristics that the IC, the Investment Committee has put in. And so you might look at the performance of FGG for the last year, and you really don't risk-adjust it. So -- and that's what we've done. And so we've got to communicate that clearly to investors. So when they see that, when they see the performance numbers, they think, well, that's exactly what I expected. And it's really like what is -- it's a difference between expectations. We've got to deliver on expectations, and we've got to make sure that the investors have -- understand what they've invested in. And so that's -- 7,500 -- what do we -- 7,500 shareholders. So it's a lot of communication. And now we've got a small group here, we've got a group online, but we've really got to do a lot more on that. And that's probably where we haven't done enough on over the last sort of year, 1.5 years, and that's the plan for the next 12 months, 18 months.
Thank you, Geoff. Well, there being no other questions, I now declare the 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. As there is no other formal business for the meeting, I declare this AGM closed. I would like to close by thanking our fund managers, service providers and fellow directors and committee members who generously give their time, skills and experience. I would particularly like to highlight Frank Casarotti, who recently retired from the Board. Frank made an exceptional contribution as a director of the company since its inception in 2015. I would also like to thank our CEO, Caroline Gurney, who is leading Future Generation Global and its exciting new phase of supporting our social impact partners and the prevention of increasing mental illness and the well-being of young Australians living with mental illness. And of course, she continues to serve your interest, as shareholders, as a key part of her role. Above all, on behalf of the Board and of the team, can I reiterate our thanks to you as our shareholders. Thank you for the trust that you place in us. And as Geoff said, we are always open to suggestions and ideas from our shareholders. And I look forward over the next 12 months to meeting you all, to talking to you and to getting your ideas about how we strengthen what we're doing even further. Thank you very much, and good morning.
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