Engenco : FY21 AGM Addresses


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17 November 2021

2021 Annual General Meeting: Chairman's Address and Managing Director & CEO's Address

Engenco Limited (ASX:EGN) (Company) attaches a copy of the Chairman's address and the Managing Director & CEO's address for the 2021 Annual General Meeting held on 17 November 2021.

About Engenco Limited

Engenco specialises in:

Engenco services a diverse client base across the defence, resources, marine, power generation, rail, heavy industrial, mining and infrastructure sectors.

For further information, please contact:

Kevin Pallas

Paul Burrows

Managing Director and CEO

CFO and Company Secretary

T: +61 (0)3 8620 8900

T: +61 (0)3 8620 8900

E: [email protected]

E: [email protected]

Engenco Limited

Level 22, 535 Bourke Street

T +61 (0)3 8620 8900

Follow us at

ABN: 99 120 432 144

Melbourne VICTORIA 3000

F +61 (0)3 8620 8999


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Annual General Meeting - 17 November 2021

Address to Shareholders by Vince De Santis, Chairman

Thanks Meredith and good morning ladies and gentlemen.

As Meredith has just mentioned, my name is Vince De Santis, Chairman of Engenco Limited, and on behalf of the Board and management, it's my pleasure to welcome you to the Engenco 2021 Annual General Meeting which once again for obvious reasons and very disappointingly, we are required to hold as a virtual meeting.

I'm informed that we have a quorum present today and so I will formally declare the meeting open and propose that we take the Notice of Meeting as read.

Meredith has outlined the key procedural matters for today's meeting which covers the added dimension of this being a fully virtual meeting, with some slight changes to the process we were required to follow at last year's AGM.

As I have already just mentioned, we're certainly disappointed that we cannot be together in person but at the moment, wholly virtual shareholder meetings have become the "new normal". However, we remain hopeful that by the time we come around to holding next year's AGM, a hybrid format comprising of both physical and virtual attendance options will be possible.

We really appreciate your understanding and thank you for your attendance. I would also like to extend a warm welcome to those shareholders who, as a result of the virtual meeting platform, have been able to join us for the very first time.

My fellow directors and I would normally be in the same location but as you may have guessed, that is also not possible this year.

Please let me introduce my fellow directors.

Also joining us today is Ms Suzanne Bell from our external auditor, KPMG. Suzanne is available to answer any questions shareholders may have concerning the conduct of the FY21 audit, preparation and content of the auditor's report, the Company's accounting policies and auditor independence. We welcome and thank Suzanne for her attendance today.

And finally, I'd also like to acknowledge the Engenco senior executive team which support Kevin, some of whom have also joined us today.

They are:

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As you will have seen in the Notice of Meeting, there are a number of items of business for consideration including the re-election of two directors and the ratification of a prior issue of shares.

However, before we consider the items in the Notice of Meeting, I would like to say a few words regarding Engenco's performance and financial position and I will then invite Kevin to address the meeting and provide further detail on the Company's performance, strategies and outlook.

We will then deal with any remaining shareholders questions which have not already been addressed during the formal items of business.

In many ways, 2021 has been as challenging as 2020. The shadow of COVID-19 has lingered for another year. And almost a day hasn't gone by when there hasn't been a story about the environment, climate change or energy including the call to phase out the use of fossil fuels.

Throw in the extreme volatility experienced by certain commodities markets, particularly iron ore and energy, demand-supply imbalances caused by the massive COVID-19 led rebound in global demand for shipping services and ongoing geopolitical unrest, and it would be fair to say that 2021 has just been a continuation of 2020, but with some new twists.

From an Engenco perspective it was a year of mixed outcomes:

On a more positive note, net operating cashflow remained strong and was slightly higher at just over $14.5 million compared with the $14.1 million generated in FY20.

Our net cash position of $12.1 million at the end of the year was around $2 million lower than at 30 June 2020, however we remained debt free with our undrawn $20 million NAB line of credit and continued with another strong year of capital investment.

The $9.9 million we invested combined with the record $13.8 million of capex in FY20 equates to a combined capital expenditure sum of $23.7 million over the past two years which represents an almost 80% increase against our aggregate capital expenditure programs undertaken during FY18 and FY19. The challenge is to now earn an acceptable return on that investment which certainly means improving on the disappointing return on capital employed generated during the last two years.

In recent times we have acquired two strategic parcels of real estate - the first being the land purchased in the Forrestfield rail precinct immediately adjacent to Gemco's flagship rail facility. The other more recent purchase was the Kalgoorlie facility where Drivetrain has established a branch in the goldfields region of Western Australia.

A project team has recently been assembled to oversee the design and construction of a modern new facility at the Forrestfield property which will host Gemco Rail and Drivetrain operations, as well as the Group's

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shared services functions which are already based in Western Australia. We expect this new facility to be operational by the end of calendar year 2022.

During what was a reasonably tough year, we once again rewarded shareholders by maintaining a total dividend payment of 2 cents per share, comprising of an interim dividend of half a cent per share followed by a final dividend of 1.5 cents per share. These dividends were fully franked however due to the carry forward tax losses which the Company continues to utilise, our franking credits are not yet being replenished and so we expect these will be fully exhausted over the next year.

Having said that, the cashflow benefit of being able to use the carry forward tax losses has been, and continues to be, extremely beneficial for the Company.

Over the past year, our net assets grew by around 6.5% but over the past four years, the aggregate percentage growth has been ten times higher at 65%. At the same time, the capital we have employed in the business has also increased considerably from just over $57 million at the end of FY17 to around $100 million as at 30 June of this year - an increase of 75%.

So again, as I mentioned earlier, the challenge we have is to increase our profits in absolute terms so that we can generate an acceptable return on that capital for our shareholders.

While we should be grateful for the role that telecommunications technologies have played in allowing us to remain in contact with each other during the many months of travel and border restrictions, we should also not lose sight of the critical value that face-to-face contact has both personally and in business, in the establishment and nurturing of meaningful relationships. People are inherently social creatures and I don't believe we are at the stage where video or other forms of electronic communications can fully replace human contact.

And with operations and people spread all over Australia and overseas, these restrictions have had an impact on the Group notwithstanding everyone's best efforts and intentions.

Over the course of this calendar year, the Board managed face to face meetings in Melbourne, Gladstone and Perth with the rest held over video calls. However, as border restrictions begin to ease, we're very much looking forward to resuming our practice of on-site Board meetings around the Group.

We have continued to focus on our "people and culture" program as we truly believe that getting this right will play a huge role in unlocking further opportunities and leading to even greater success for Engenco and its stakeholders. A recent employee survey provided some excellent and honest feedback on some areas in which we need to focus to improve employee engagement - how we respond to that feedback will be the true test on how the Board and management are assessed by our people. It is as they say, all about "walking the talk".

In order to bolster our people and culture program and the broader human resources function, we have recently created the new key leadership role of Executive General Manager - People and Culture which will form part of the senior executive leadership team with the successful appointee due to commence at the end of this month. This is an exciting development and is a reflection of how the Group continues to evolve and mature.

While Kevin will make further detailed comment shortly, on the matter of safety, I would say that while our performance has improved over the past year, we are certainly not where we want to be. Parts of the organisation have embraced a very positive and effective safety culture while there are some areas where further attention and improvement is necessary.

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As I mentioned earlier, the news cycle is almost constantly dominated by stories concerning the environment as the transition towards to a low carbon global economy gathers pace. The last couple of weeks have been a case in point with COP-26 dominating media coverage. The almost exponential growth in the number of international environmental, social and governance, or ESG regulations and frameworks in recent years, resembles the typical hockey stick revenue forecast of a business start-up. It was not that long ago when ESG was seen as a nice thing to do however many companies now rate ESG among their very top handful of risks and opportunities, and Engenco is no different.

Some of our major customers operate in what some refer to as old world industries. Others have large carbon footprints which must be reduced. For Engenco, it's about striking the right balance between supporting those customers and their existing operations as they adapt, while also keeping on the lookout for opportunities for Engenco to leverage its existing strengths and capabilities and developing new ones as Australia and the rest of the world make the transition to a low carbon economy.

What lies ahead over the next few years will arguably be one of the most challenging periods in recent history but possibly one of the most exciting as well and we believe Engenco is well positioned to successfully take on the associated challenges, and capture some of the emerging opportunities.

While we expect that FY22 will be a year of stabilisation rather than material improvement, the focus very much remains on continuing to build the capacity and capability of the Group in FY22 and beyond.

And to achieve this we will continue to focus on developing our people by creating an environment where they are safe, challenged, respected and valued. To use some licence and adaptation of a line associated with the All Blacks rugby union team, better people not only make better All Blacks but in the case of Engenco, better people will make us a better organisation tomorrow, than we are today.

In conclusion, on behalf of the Engenco Board, I wish to thank Kevin, our senior managers, and all of the Engenco team for their commitment and resilience over the past year. In particular, I would like to make special mention of those based in Victoria and NSW, where many of our senior executive team are also based. We should not underestimate the hardships our friends and colleagues have faced in those States through long and repeated lockdowns, or undervalue their contributions in very trying circumstances. Let's hope that the worst is now behind us.

And finally, on behalf of the Engenco Group, we once again extend our sincere thanks and gratitude to you, our shareholders, who entrust us with your capital. Just as we have done in past years, we are once again in FY22 working hard to reward your support.

I will now hand over to Kevin.

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Engenco Ltd. published this content on 16 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2021 22:56:09 UTC.