18 questions asked at the 2021 Estia Health AGM

November 12, 2021

Below is the text of 18 online questions asked at the 2021 Estia Health AGM held on November 11. All but 2 of the questions were asked.

1. As the CEO of Heritage Lifecare, a NZ care provider with 11 sites, does Norah Barlow have the time to contribute fully as an independent director of Estia, plus sit on other boards? When was she last in Australia on Estia business and when will she next be visiting Australia on Estia business.

Answer: enormous experienced, the closed border has been difficult and will stay on the board as long as continue to have time and add value.

2. Did any of the 5 main proxy advisers in the Australian market - ACSI, ASA, Ownership Matters, Glass Lewis and ISS - recommend a vote against any of today's resolutions, including the remuneration report? Which of the proxy advisers are covering us and has their been a material proxy protest vote against any of today's resolutions? Will you disclose the proxy votes before the debate on today's resolutions so shareholders can ask questions if there have been any protest votes?

3. A question for Seven Group board nominee Warwick Smith. When Seven Group bid for control of Boral and ended up spending $3.6 billion, it decided to sell $120m worth of listed investments in July this year. Could Seven nominee Warwick Smith please comment on why Seven didn't sell its Estia stake and is this all of the residual $63 million of other listed investments noted in the 2020-21 Seven Group Holdings annual report. Also, why didn't Seven buy more shares last year like it did with Boral and Beach Energy?

Answer: never asked.

4. The chair is predicting big consolidation in the sector. The Catholic Church recently paid $588 million for Japara Healthcare through its Calvary operation. Did we have any discussions with either Calvary and Japara and where do we now rank in its terms of the top 5 players in residential care sector which now has 217,145 government funded beds.

Answer: Surprisingly, the CEO didn't seem to know where Estia ranked and the chair said any Japara discussions were confidential.

5. Dr Weiss is currently Chair of Ardent Leisure, Estia Health & Cromwell Property Group, whilst serving as Executive Director of Ariadne Australia, a Non-executive Director of Hearts and Minds Investments, Thorney Opportunities Ltd, the Victor Chang Cardiac Research Institute & The Centre for Independent Studies. He is also a Commissioner of the Australian Rugby League. This is an enormous portfolio & makes him arguably busier than any other Australian director. Could Gary & the lead independent comment on why this continues?

Answer: great director who turns up. No problems.

6. Why haven't we made the mandatory ASX JobKeeper announcement and how did we play JobKeeper. Did we claim any and do we refund any. Are we aware of what the practice was with JobKeeper across the aged care sector? Was there a reluctance to take it up because we are already approximately 75% government funded?

Answer: we didn't claim any JobKeeper and therefore don't need to make the ASX disclosure.

7. Given the range of interesting discussions across a range of topics today, including this constitutional item, could the chair undertake to make an archived copy of the webcast plus a full transcript of proceedings available on the company's website. Given the class action settlement & loss essentially reflected disclosure failures on our behalf. Can we please now adopt standard best practice AGM disclosure, which involves both an archive of the webcast & a transcript to be provided to all shareholders, staff & stakeholders.

Answer: Only the webcast will be available.

8. A question for the Auditor and Audit committee chair: Our current market capitalisation is $550 million, yet we claim to have net assets of $615 million. Please comment on why further write-downs weren't taken this year, particularly given the uncertainty surrounding the sector after the Royal Commission. Isn't it better to be conservative when it comes to book values and write-downs?

Answer: predictably, the auditor said the account are in accordance with the accounting standards and the chair pointed to the big write-downs in the previous year.

9. Given the staff shortages, how did we manage the issue of staff working at multiple centres during the various lockdowns. Do we allow staff to work at centres outside of Estia or just multiple centres within Estia. Do we have firm limits on the amount of hours an individual staff member can do in a single shift or over a week? Finally, do we have many staff shareholders to assist with retention?

Answer: Yes, staff can work at multiple sectors and we can't control what staff do outside of Estia.

10. Please comment on vaccination rates and policies at Estia. How many of our staff or contractors refused to get vaccinated and do we have many residents who have refused to get vaccinated?

Answer: we lost 100 staff who refused to get vaccinated but residents were allowed to decline.

11. Given all these predictions of corporate activity in the sector, is a 10% buyback really sensible given it reduces our financial capacity. Are we at all worried that a rival operator such as Regis or the Catholic Church might snap up a strategic stake at a discount to net assets. Also, did we go to a competitive tender before appointing UBS to conduct the buyback?

Answer: we think our stock is undervalued so a buyback makes sense.

12. Follow up on Gary Weiss tenure: Thank you for the earlier answer on Gary's workload. Is Gary intending to renominate again as a director when his current term expires at the 2022 AGM and does he believe the next chair is currently on the board or will we looking outside for the next chair?

Answer: We'll tell you closer to next year's AGM.

13. Why have we continued to push on with the proposal to only have online AGMs when a number of other issues pulled similar proposals in light of shareholder objections. If the against vote is material, wouldn't it be more appropriate to pull the resolution?

Answer: we're pushing on with this. It was defeated.

14. Could Karen Penrose please comment on the process through which the chair's performance and workload is reviewed each year and what the process will be leading up to next year's AGM when the chair's current term expires. Is she prepared to insist that the workload issue be dealt with before lending her support to any board endorsement of his re-election?

Answer: Garry Weiss is a good director and we will diligently assess all issues.

15. Thank you for reading out all of my questions without any editing. When disclosing the outcome of all resolutions, including the constitutional change, will you publicly disclose how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and was a disclosure initiative recently adopted by Metcash and Southern Cross Media after their AGMs.

Answer: we'll stick with the usual system.

16. I did lodge a question earlier to Warwick Smith about Seven Group's shareholding and was hoping that could still be read out. That said, could Norah please comment on why she supports the idea of a 10% shareholder being given a board seat, as has occurred with Seven. Surely it should be at least 15% before a board seat is granted.

Answer: chair said Seven's nominee Warwick Smith is a fantastic director, partly because he was a former Federal Aged Care minister.

17. Well done to the CEO for sticking with the business in very difficult circumstances. Could he comment on how important this LTI grant is for retention and also whether he's aware of many other CEOs in the aged care sector joining "the great resignation".

Answer: CEO Ian Thorley wasn't happy this question was directed at him, saying “ohh, Garry”. He then sent it elsewhere but later claimed but unaware of other CEO resignations in the sector.

18. This constitutional amendment item appears to have been defeated given it required 75% approval. Why wasn't it pulled earlier and did Seven Group vote in favour and given they have board representation?

Answer: wasn't asked as filed it too late.