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22/05/19
15:47
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transcript - done AI so will be errors so refer to video
00:19
all right good morning everybody it's a
00:23
pleasure to welcome you to the 2019
00:25
annual general meeting event Vitas
00:28
Limited covering the January to December
00:30
2018 period my name is John Siever
00:34
chairman of the board and I will chair
00:36
the meeting today my fellow directors
00:38
seated with you today our mr. Wayne
00:40
Patterson managing director and CEO and
00:43
Steven denaro non-executive director and
00:47
company secretary unfortunately miss
00:50
Alicia and John dr. Wendy goo and dr.
00:54
Yin Tang Wu are not able to join us
00:56
through today due to competing business
00:58
commitments also in attendance today is
01:01
Marcus own audit partner hlv man Judd
01:05
the format of the morning will be to
01:07
open the meeting to complete the
01:09
business of the meeting set out in the
01:11
notice of the meeting during which I
01:12
will present the report on the year just
01:14
god Wayne will give a presentation on
01:17
the company as its activities for the
01:19
last financial year the final poll
01:22
results will be lodged with ASX
01:24
following the meeting this meeting is
01:26
being recorded and a copy of the
01:28
recording will be available on the
01:30
Company's website after the meeting
01:31
accordingly participants that the
01:34
meeting are asked not to record the
01:36
meeting in uniform it is now just after
01:40
9:30 a.m. and I've been informed by the
01:42
company secretary that a quorum is
01:45
so I declare the meeting properly
01:48
constituted and open proxies have been
01:52
received representing 297 million
01:56
357,000 671 shares or fifty point four
02:01
percent of the issue capital at the time
02:03
of providing notice of this annual
02:07
general meeting of five hundred eighty
02:09
nine million nine hundred and forty two
02:11
thousand eight hundred three chairs this
02:15
meeting has been called under the notice
02:17
of meeting date at 12th of April two
02:19
thousand nineteen which was sent to all
02:21
shareholders if there is no objection I
02:24
propose to take the notice as read the
02:29
minutes of the last AGM held on the 24th
02:32
of May 2018 are available on the table
02:35
at the back of the room for shareholders
02:37
to inspect if they wish the meetings
02:41
have been signed is a true and correct
02:42
record of the proceedings
02:45
I'd now like to make just a few comments
02:48
about the year just passed and speaking
02:52
for management and for the board we
02:53
appreciate it acknowledged that it's
02:55
been a bumpy year for shareholders and
02:57
we are working hard and smart to reward
03:00
your patience the company has followed
03:03
its stated strategy and vision for the
03:05
past two years which is to transform the
03:07
company into a single focused structural
03:10
hire company capitalizing on the
03:12
significant clinical and competitive
03:14
advantages of our adapt subpoenas we've
03:18
now divested our two peripheral
03:20
businesses and subsequently have a
03:22
singular focus on our structural heart
03:24
company the vision two years ago was to
03:28
enter the tavern valve space as we
03:31
understood our technology particularly
03:33
our anti calcification benefits would be
03:37
valuable as the Tavor market shifted
03:39
into the lower risk younger patients as
03:43
of March 2018 there's been a veritable
03:46
perfect storm for our technology as both
03:49
Edwards and that tronic presented data
03:52
at the American College of Cardiology
03:54
comparing tambour results versus
03:57
surgically placed valves and Tager
04:00
prepared very favorably to those
04:02
surgical valves on the younger healthier
04:05
lower risk patients now please allow me
04:09
to pontificate for just a moment make
04:11
use of all this gray hair that I've got
04:13
on the strength of the Tapper market
04:17
four years ago I was asked to write a
04:19
paper on transformational leadership I
04:22
wrote about two CEOs that I knew who had
04:25
transformed their industries Dale
04:28
Spencer at SCI met now deceased
04:32
Simon was ensign that is now owned by
04:35
Boston Scientific dill transitioned his
04:37
business from a stagnant provider of
04:39
cardiopulmonary bypass products in other
04:42
words heart-lung machines which are sold
04:44
to cardiac surgeons into one of the
04:47
first companies in the emerging space of
04:49
percutaneous transluminal coronary
04:51
angioplasty PTCA for short and
04:54
ultimately those balloons were used to
04:56
fix stents in the coronary arteries he
05:00
did this transformed his company from
05:03
being that surgical company to being an
05:05
interventional company while still a
05:08
publicly traded company so he risked
05:10
alienating his shareholders and his
05:13
current customers company ultimately
05:15
sold for 900 million that was two and a
05:18
half decades ago approximately and it
05:21
was one of the biggest deals of its era
05:23
not to mention they saved many many
05:25
lives along the way that could not have
05:28
been changed to core cardiac surgery the
05:32
next case history Mike mussalam who is
05:35
see who was the current a CEO of Edwards
05:38
Lifesciences the largest supplier of
05:40
surgical heart valves in the world in
05:43
2004 Edwards acquired the first Tavor
05:48
Edward stock was four dollars a share
05:51
today it trades out about 180 dollars a
05:55
share that's an astounding return on
05:58
investment and it's all because of their
06:00
down in position in Tower they to risk
06:05
shareholders but they have amply
06:07
rewarded both over the last decade
06:10
ladies and gentlemen we are now and
06:12
Tavor 2.0 the next era of tavern Wayne
06:16
will share more of the size and the
06:18
overall velocity of that market growth
06:22
but rest assured the durability of
06:26
Terror devices going into these younger
06:28
healthier more active patients
06:31
durability is becoming an ultimate point
06:34
of competition and I'll pay away in the
06:38
ultimate compliment he is a
06:40
transformational leader he recognized
06:42
that we could unlock great clinical and
06:44
financial value by moving our adapt
06:47
technology into the 3d markets and
06:49
ultimately the Tavor markets and beyond
06:52
and I applaud him for that with that
06:56
overview I'll now move on into the
07:00
annual report and move on to the
07:02
remaining businesses of the business of
07:04
the meeting annual report containing the
07:07
financial report of the company and it's
07:09
controlled entities for the year ended
07:11
31 December 2018 together with the
07:15
directors report and auditors report was
07:18
released to shareholders on 12 April
07:20
2019 as no resolution is required there
07:24
will be no voting on the side of a
07:26
business representative of man Judd the
07:29
company's auditor is in attendance to
07:31
answer questions relevant to the conduct
07:33
of the audit and the preparation and
07:35
content of the auditor's report are
07:38
there any questions or comments on the
07:40
financial report or the reports of the
07:43
directors and honored I'm not sure I can
07:48
see the whole audience from my vantage
07:50
point here but I will move along unless
07:54
Wayne or Stephen tells me that there's a
07:57
question are there any questions
08:00
relevant to the conduct of the audit and
08:02
the preparation and content of the
08:04
auditor's report to be put to the
08:12
very good move along to procedural
08:15
matters now I'll turn the podium over to
08:18
Wayne who will present the CEOs
08:20
presentation while the results of the
08:23
following the tabulation of the results
08:26
I'll reconvene the meeting whereby a
08:28
decision of the requirement to vote on
08:30
item 13 will be made following the
08:33
results of the poll thank you so good
08:36
morning everybody thank you for those
08:40
that made the long trip those that make
08:42
the short trip but thank you for making
08:46
thank you again job for going through
08:48
the orders of business it's my wish this
08:51
morning to go who present a view on the
08:55
past year and a view on 2019 it's
09:00
important we look at 2018 in a lot of
09:03
ways it was a very pivotal year for the
09:05
company that may not always be obvious
09:06
externally but certainly obvious
09:08
internally I would start by a mirroring
09:11
John's comments around the share price
09:14
we have acknowledged it's been a bumpy
09:16
year for shareholders on the price I
09:19
often look at this and struggle
09:23
sometimes to see the connection between
09:24
the internal progress which is
09:26
significant I would also add for the
09:28
benefit of shareholders because I get
09:31
emails on this topic to be very clear
09:33
you've got a bunch of executives in this
09:35
company who are working way beyond their
09:38
pay grades a lot of these folks are
09:39
working 10 12 15 hours a day factually
09:42
consistently they believe in the mission
09:44
they understand the quality of the
09:46
science that we have is competitively
09:48
significance and you know we don't have
09:52
all the heads we need all the time so
09:54
folks have got to be across jobs just to
09:55
keep us moving so I do acknowledge the
10:01
difficulty for shareholders I think
10:02
we're coming out the other side but I
10:04
also want to have everyone aware that
10:06
the folks in the company is certainly
10:07
not sitting around twiddling their
10:09
thumbs so let's have a look at the
10:11
financial overview I assume you've all
10:12
read the the financial report given the
10:16
size of our scale and the task for the
10:18
undertaking as a global company I think
10:20
the results are the financial results
10:22
incredible group revenue was obviously
10:25
at a record high in 2018 and 25 million
10:29
gross profits certainly up at 12 margins
10:32
around about 49 percent we'd like to get
10:36
SGA at about 34 there is a significant
10:40
chunk of SGA is now dedicated towards
10:43
RMD those projects are really important
10:46
to our future into the future of value
10:48
they are not frivolous projects or a
10:50
waste of effort and other incomes
10:54
including some of the revenues we get
10:56
from third parties that we work with
10:58
eBay dark 20.7 so the group revenue is
11:01
up 20% as you saw at the report from the
11:04
prior year that's again important we had
11:08
some revenue coming out of the infusion
11:10
business due to the loss of a major
11:11
supplier there so we went down on that
11:13
one and we went up on the adapt revenue
11:16
growth spot for the group of to 0.4 as I
11:19
said now importantly SGA on the adapt
11:24
side which is where we've been focused
11:25
for the last couple of years is coming
11:27
down as a function of revenue we're
11:29
spending obviously on R&D; but revenues
11:31
going up so that baseline of SGA costs
11:34
is coming lower and lower a year-on-year
11:37
and that's obviously the trend you want
11:38
to see at some point that crosses over
11:41
become lady then it becomes 70 and so it
11:43
goes on the road to profitability that
11:45
trend continues to follow I did show
11:48
this slide last year I think it's
11:49
interesting just to look at this you can
11:52
see the in 2017 the the split between
11:55
profit between infusion and adapt was
11:58
almost 50/50 the revenues were more like
12:01
33 66 in terms of top-line numbers so
12:05
you get a bit of a view on on the
12:07
profitability of the different divisions
12:08
moving the 2018 and you see that number
12:11
is really starting to move around as the
12:14
adapt revenue becomes a bigger and
12:15
bigger part of the business and now
12:18
about 40 something percent you'll see
12:20
their profits of course the kick in as
12:22
well and officer the more adapted we
12:24
sell the quicker we get the
12:25
profitability I gave just a quick view
12:28
on and I do like some of these graphs
12:30
because it's good to or important to
12:32
look at things in in retrospect to
12:34
understand that we have a continuous
12:37
improvement as we move forward every
12:39
year we've been significantly improving
12:41
profit and revenues and that percentage
12:43
of SGA continues to decline as function
12:46
of that so you know we took over this
12:48
thing particularly John and I joined
12:50
around about 2015 on the board there was
12:53
a lot of cleanup to do and it's
12:55
sometimes hard I think it still takes
12:57
two or three years to get things done
12:58
but actually it does what I do like is
13:02
you know when we look back this the
13:03
share was in three for around about 2015
13:07
that decline obviously continued but we
13:09
were already rolling down the cliff but
13:11
gross profit is up two hundred seventy
13:13
two percent since 2015 again on the
13:15
scale of size we have that's pretty
13:17
significant revenues up over a hundred
13:19
percent in that period and SGA is up 11%
13:22
in that period so I do get a lot of
13:24
commentary around SGA and costs and we
13:28
work with a lot of funds particularly in
13:31
cause on the Nasdaq there are companies
13:32
out there spending 30 million a quarter
13:34
and generating three and then five and
13:37
then ten very slow drip so as a
13:39
comparator we are actually pretty
13:41
undercooked on the object side you do
13:44
have a significantly smaller fuel force
13:46
that all of our competitors so there is
13:48
a view on obviously how much is being
13:51
spent in this view on how much we are
13:53
spending relative to our competition and
13:54
therefore the size of the achievement I
13:56
think this graph sums it up you know
13:59
there is growth in cost but it's much
14:00
much slower than the growth in the
14:02
important things such as revenue and
14:04
gross profit just another view of that
14:06
from a two four three and two years
14:10
compound annual growth rate again the
14:11
same trend so consistently since 2016
14:14
you know the revenues the profit are
14:16
going up and the SGA costs are
14:19
increasing of course because of R&D; but
14:22
at a much slower pace than the important
14:24
markers this graphs important I'll step
14:27
out to look at that I think it shows or
14:30
it demonstrates the history of the
14:32
company remember this was a multi prompt
14:34
company even a therapies infusion adapt
14:37
and that was probably the business that
14:40
was not focused on and probably the one
14:41
that has the biggest potential as we
14:42
know you see this curve here is the cost
14:45
curve right about 2014 we had a
14:49
significant blow out the continuum of
14:51
the 2015 which really was a catalyst for
14:55
a lot of change in management the things
14:56
that the board undertook at that time
14:58
where you were getting a big increase in
15:00
cost but not the same increase on
15:02
revenues and that's obviously not a
15:04
trend you want to support keep going we
15:06
did the so-called CodeRed restructure
15:08
around about here costs came down but
15:10
revenues went up significantly so lines
15:13
this is SGA costs including R&D; and this
15:17
line here is without our update so you
15:19
can see when we take out the rnd factor
15:21
there is growth in those baseline costs
15:24
and I'll talk about those later but it's
15:25
not dramatic and it's certainly in line
15:28
with the growth of the business and
15:30
gross profit continues to move up what's
15:34
interesting is that we've only had adapt
15:38
for a couple of years it's very young in
15:39
its lifecycle commercially speaking and
15:42
that's an important distinction we're
15:43
starting to get a trend in terms of
15:46
seasonality and a lifecycle which we
15:48
in 2016 we actually have a couple of
15:50
years now business we can see how these
15:52
things perform what's clear is q1 is
15:55
always the smallest quarter of the year
15:57
you were just seen in 2019 for C
16:01
but what's significant that this is the
16:03
u.s. adapt in spite of that being the
16:05
smallest quarter obviously we're growing
16:07
those quarters quarter quarter the way
16:09
to look at this business at the moment
16:11
if you want to you know stress test the
16:13
performance of results is not necessary
16:15
look at consecutive quarters q4 to q1
16:18
because there is seasonality in these
16:19
curves you can't do that for sure but
16:22
because we are young if you were twenty
16:24
years in business you probably should
16:25
look at that because we're young in the
16:27
life cycle it's more pertinent to look
16:29
at the quarterly quarter one verse of
16:31
quarter one quarter two and so on you
16:33
can look at both this is looking in
16:35
global adapt Europe had a fairly soft q1
16:40
and that's now changed as we got
16:43
approval for the 3d products they should
16:45
have come a lot of early about 12 months
16:46
earlier you don't always have control of
16:49
the regulators but now that's kicked in
16:50
you'll see so there's a little bit of a
16:52
drag there with regards to the global
16:54
business but every marker is working
16:56
well this is interesting you start the
16:58
single life cycle occurs here q1 2016 is
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(20min delay)