Sequoia Financial Group (ASX:SEQ) FY20 Results Presentation, August 2020

Company Presentations

Sequoia Financial Group Limited (ASX:SEQ) CEO Garry Crole presents the company's FY20 results, discussing performance and outlook for FY21.

Garry Crole: Welcome to our results presentation for 2020. I am not going to go through the presentation which we announced at the ASX verbatim, but I'm certainly going to refer to it as much as I can. And I really certainly would like to take this opportunity to thank shareholders for their support over the past 18 months as we have been looking to turn the business around and implement our new strategy.

I'll move to the first slide and talk to our highlights. I think the major recovery is, obviously, moving the EBITDA line up from $1.1 million to $4.8 million over the last 12 months. And we spoke at the last annual general meeting and we've spoken to the market on several occasions about looking to move the operating profit levels up to a 15 per cent return on our equity, and it's very pleasing that we've been able to do that in this particular period, and we would like to now move closer towards 15 per cent of profit after tax longer term, but certainly be in the financial year looking forward to more than 15 per cent return on $33 million of equity. We've grown the equity from $31 million to $33 million in the last 12 months. And have that as our benchmark minimum target for the future in all of our divisions.

The strong momentum to achieve that came from a number of things. Primarily, it's all about, for us, financial advice distribution. And having the advisor numbers increase from around 230 to 400 by the end of 30 June 2020, and then growing again into July, is core to that, and being out of spread costs across the group with greater scale gives you the opportunity to make a profit.

There's a lot of ASFL holders in the market who are between 50 and 100 advisors, and really to provide the type of service you need to be providing to the advisor network at a premium level. That level of scale is not sustainable. You need to have high levels of compliance staff. You need to have high levels of practice development staff. You need to have high levels of technical support staff. You need to have really strong administration, legal support. And unless you've got 250+, you're not able to provide all the types of levels of service that you need to be brought to to be operating a financial planning licence at a scale that we think is necessary. So, our move from that 250 level towards 400 is really talking to the reason why we've been able to move to profitability.

The second was our investment in the Morrison Securities business. As shareholders would be aware, we made an investment in this business almost two years ago now. And it's a challenging business, and it's very much like a toll road business. You have to build the road and build capability to be able to deliver to the client, the end client, which is an AFSL holder or a financial planning firm or people who do broking, the type of services they require, and you compete with other providers. We built the scale and, fortunately, and as a result of having a very high-quality team coming from a lot of our competitors, you know, we've got staff that are coming from Pershing, we've got stuff that have come from CMC, we've got staff who've come from CommSec, and we've been able to put together a team that we think is at the top level, and the clients and the customers have joined us as a result of that.

There's a lot of talk about these are high volumes in the market at present, and that is true. People are talking about Robinhood traders and all those sorts of things, but that is not our market. We are providing services to financial planning licences and financial advisors whose volumes have been a little bit up, but not aggressively up, and are actually quite stable. So our growth has actually come from, not necessarily the market increasing in volume, but because we've been winning more and more customers into that particular area and we're picking up much larger customers as well. So that that talks to where the volume is.

Third, the other strong momentous point which we picked up, and that's really only picked up in the last three months, is the corporate team. So we picked up a group of six and we've been looking at a number of these parties over the last 12 to 18 months and trying to encourage them to come to Sequoia. And in the last three- to six-month period, in particular, we have picked up a very strong corporate team, led by Alex Fabbri, who, a lot of investors would know, who's been... He was Head of Corporate at Shaw's and was at Lodge Partners more recently. We have Mark Simari, Michael Locaso, Richard Rouse, Chris Eldridge. So, a very strong team in all facets of the corporate market. And we see that as an important add-on because we're looking to provide our financial planners, our brokers and all those licensed by us, a competitive edge in respect to the type of product that they can offer their clients.

Cash flow. We had a very strong cash flow. And I would like to talk to the negative of our balance sheet if you like. So it's a little bit confusing. So I thought I might just point out the cash component that sits on our balance sheet. It shows that we have S22 million cash. That's a little bit confusing. We actually have $6,350,000 of other people's cash in there. So, that's when we're providing services to other AFSL holders, we often take a bond or we take client deposits in a form of a bond.

So, of the $22 million cash that we have sitting on our balance sheet, $6,350,000 is actually not really ours, and it sits as a liability on the balance sheet as well. But we have net cash at any time between $14 million and $16 million. So, the balance sheet is very, very strong, and over the last 12 months we were able to pay down debt. Of that net $16 million that we had at 30th June, we’ve made some payments for the Phillip Capital acquisition and the Total Cover acquisition, and, as I said, we're sitting between $14 million free cash and $16 million free cash on a monthly basis. And as our accounts show, we're cash flow positive every month, and we continue to look to build our cash.

The acquisitions that we made this year have all been positive. They've all been integrated very, very well, and that is our strategy. We do want to own 10 per cent of the financial planning advisory market within the next five years, and each one of those acquisitions being with Libertas, Yellow Brick Road advisors, the Phillip Capital advisors and Total Cover. That's what that strategy is all about.

10 per cent of the financial planning advisory market. What does that mean? There's 23,000 advisors in the market at present. It's been going down. So we're swimming in a river that's against the tide somewhat. However, we think that there'll be a short-term dip over the next one to two years as the numbers will go down to 20,000, but then over the longer term, as more and more Australians need financial services advice, we think those numbers will pick up and those advisors will need to be with a group that has the type of support that we have, and you can only provide that type of support with scale. So 10 per cent of the financial planning advisory market opposed to 10 per cent of the broking market is an important differential. We see that there'll be 13,000 to 14,000 financial planners in the market, and 8,000 to 10,000 brokers. We're looking to have relationships with 10 per cent of the advisors. So 1,300 to 1,400 advisors is our target. We're at 400. So we're looking to triple the number of advisors that we're looking to license over the next five years.

As I said before, we're looking to achieve that 15 per cent return on equity in the direct business, which was the only business that didn't achieve that, and we're looking to exceed that for our wealth professional services and equity market. And we paid a dividend this year, which we're really pleased with, of about 25 per cent of our net profit after tax. We're looking to continue to pay dividends now into the long-term future and slowly increase the dividend payout ratio.

We're in a growth phase, so we would like to be reinvesting our cash back into the business so we don't have to raise capital for acquisitions that are of a size that we can afford to use our cash, but we do want to grow the dividend payout ratio over the next five years slowly and steadily, up maybe 10 per cent per annum once we get to the 50 per cent and then move towards 60 and 70 per cent once we're a much more mature business and have 1400 advisors and the type of revenue that's delivering the numbers we want long term.

And just looking at the numbers very quickly, the two divisions that drove most of the contribution were the wealth arm and the equity markets arm. I'll talk a little bit later what they are but, primarily, that's the financial planning advisors and the specialist investment business, and the Morrison business is the equity markets, and direct and professional services made up $0.9 million of our result.

The net profit was $1.9 million on $85 million of revenue, which shows how difficult a business this is. You know, we've got a 2.3 per cent net profit after tax on gross revenue. So margins are tight, but scale is the key, and we've gone past that key scale point now, and over the next 12 months to 24 months it's very important for us to move the net profit after tax number up from 2.3 per cent. That's too low. But we're taking little steps. The first step is to get to 15 per cent return on our non-cash equity. The second step is to get 15 per cent return on all equity. And now the third step is to move the net profit after tax number up to a higher percentage of revenue. And we did that with operating margin expansion. Our operating margin's gone from 1.3 per cent to 5.7 per cent. We'd like to see that increase, and then move the net profit after tax margin up as high as we can. And it all comes from scale, and that's what we're looking to do.

The missions. I've touched on them already. The long-term missions are the most important. One of the challenges that we have with being an ASX-listed company is shareholders and the like that wants us to have short-term results. So, that drives our short-term share price. We're looking long term, and we see ourselves as a tortoise. We're looking to slowly grow shareholders' wealth, and we're trying to act as a ASX-listed company but think as a private company as much as we possibly can, and build long-term foundations. The premium thinking is that we want to build a brand for advisors the community recognises as the premier financial advisory business in the country.

I've been in financial services for 40+ years, and I don't think in the advisory market there is such a thing at the moment as the premier brand, and I think there's an opportunity for companies like ours to be considered by the broader community of Australia to recognise a particular brand as a market leader. So, when mum or dad wants to get some aged care advice, they think of Sequoia. When mum or dad wants to get some superannuation advice because dad's been put off, they think of a Sequoia brand. And that's really where we want to try and build the brand to, and that comes from having the right type of advisors under our licence and providing them a competitive deal on their fees, but also providing them the type of tools and support levels that we possibly can.

We also see ourselves as being able to provide services to other AFSLs. There is a push in the market for some people to be self-licensed, and there's also a need for many licenses to provide more services than what they currently do, and when they're at a scale of between 25 and a 100, they really need to outsource a lot of their functionality, and we want to be providing those types of services to other AFSL holders, and that touches our self-administration business and the Morrison business, and so on.

As we've said before, is we definitely want to provide the market 10 per cent of the above, the wealth advising market, and we want to have meaningful relationships with accountancy practices. At present we touch 25 per cent of the 10,000 accountancy practices in Australia, but we're just touching them. We don't have a meaningful relationship with 2,500 accountants. We do some business with 2,500 accountants, but we want to move that so that we've actually got a significant relationship with more accountancy practices across the country. What we currently do is we provide the professional indemnity insurance for about 1,600 accountants, and we provide a company trust in the super fund establishment business for about another 1,500 accountancy practices, and we license around 200 accountants for their financial planning. So, we're touching 25 per cent, but we would like to be doing a lot more with the practices we already work with. But we'd also like to grow that part of the market for ourselves.

We’re also beginning to interact with more sophisticated and self-directed investors. We've added research capability in-house to the group. We're strongly unbiased, if that’s a word. No one's independent, but from a financial planning point of view we're looking to provide advice to the community without bias, and we have introduced our own research in-house, but we also support Morningstar, SQM and Lonsec independent research for the group, and that's an important thing because the sophisticated and self-director investor is looking for that, and we are looking to provide that.

Long term, we want to increase net profit towards 5 per cent of total revenue. As I said before, it's 2.3, and it's 2.3 per cent of $80 million. We don't want to be an $80 million revenue company. We want to be much larger than that. But we also want to be not earning 2.3 per cent on a much larger revenue base. We want to earn 5 per cent on a much larger revenue base. And, as I touched on before, we want to increase the dividend towards a meaningful dividend. This year's dividend, 0.4 per cent, a 26 per cent payout ratio, is small, but we just wanted to give shareholders who've supported us for quite long time a little bit back and just let you know that we are looking to share the profitability with shareholders and reinvest the majority, and slowly getting that towards 50:50, and then once we’re mature, the typical type of payout ratios that you’ll see of mature companies at 65 to 70 per cent.

This small chart talks about where we've come from, late 2018, and I think we've been very consistent with our messaging. We talked about the challenge that we had and the change in management, the change in board we've had for long enough, and late 2018 we put a line in the sand and said, "We need to change. We need to review staff, relationships with providers and review our strategy," and in early 2019 we started to deliver on that. And as you can see by the operating EBITDA, it's growing nicely, and a lot of that came to fruition in the second half of 2020 with operating profit up to $3.4 million.

I will just say that the second half is always stronger than the first half. So the jump is probably larger than it really looks. We don't expect to make $3.4 million in the first half of next year, but we certainly will expect to make a lot more than we did in the first half of this year, and we certainly expect to make more in the second half of next year than the $3.4. So we're going in the correct direction, but the chart is a little bit distorted, in my opinion, even though we did it. I just don't want to build expectation that that line is going to shoot up as quickly, but it's certainly going in the correct direction, for sure.

Operational highlights. We touched on this. I won't read it. But we reviewed each division's cost base directly. So, we have four operating divisions. I'll touch on those just in a tick. But we were having a head office allocation and not having a really good handle on what the actual divisions were costing in respect to share cost. Our new CFO, Lizzie Tan, has been absolutely sensational in delving down into the businesses, delving down in the budgets and the forecasts for each divisional head, and then actually understanding exactly what our share costs are, allocating those back to the correct division and then making people accountable for expenses and budget and performance. And 2020, in the second half in particular, we're beginning to see the payback for that investment that we made in our finance team, and the shared model is working really well.

One of the other things that happened in 2020, which is exciting, is that we moved from four silos to one business. There were some challenges in getting four different teams to interact and not compete, and we've been able to achieve that, and the business is now really working very well as a single unit with four divisions. And that's really pleasing, I think. That was headed by the finance team and Lizzie and the four divisional heads primarily.

What do we do? I think people on the line will have a good understanding of what we do but, basically, we do four things. The wealth division provides licensing for advisors. We've got a multi-brand approach. We have advisors that are predominantly accountants and financial planners in the InterPrac licence. We have advisors that are predominantly equity specialists in the Sequoia Wealth Management and Sequoia Asset Management licence, and we have specialists in the Libertas licence, so they might be specialist fund managers or specialist aged care or specialist something else in that licence. And the core licence is the InterPrac licence, but we're certainly looking to grow all of them. And if we do make more acquisitions, it's possible we might add an additional licence for a risk-type licence, but more likely we’ll continue to grow the InterPrac licence business as the key growth licence, and look to build that up towards a thousand advisors in that and maybe a hundred odd in the other one.

Equity market is our structured investment business, the Morrison's clearing business. It's purely just an administration business, and it's clearing more shadow brokers, AFSL holders and sophisticated investors and, as I've touched on before, our volumes have skyrocketed, and if you look at our annual report, the toll road effect is that we needed to get to a particular level of monthly clearing in the early part of the second half of this year. Around February we started to kick over that number, which is around 15,000 contracts per month, and we are now well, well above that on a monthly basis and winning a lot of new business, and that particular part of the business is now generating strong cash for us.

The structured investment business has been very strong for a long time at Sequoia. Revenue's dropped in that particular area of this business because we weren't confident in the market value as the ASX200 shot above 6,000, and the S&P500 in the States was at an all-time high. We weren't as confident to release as much product to market this year, so we took a defensive stand and that meant a drop in revenue. But the other divisions, as I've mentioned before, their revenue is very strong, and as market opportunities come back we will look to introducing new thematics for that investment business.

Professional services. COVID-19 certainly was challenging for that. A lot of accountancy practices and a lot of the community stopped buying companies trusts and super funds because they weren't establishing new companies and so on. We did have a downturn in that area of the market in the second half. Our self-managed super funded administration business has continued to be solid, and our general insurance business has been very strong.

We do expect the companies trust and super fund business to grow very strongly. We invested very heavily over the last 12 months in technology, and we believe we're the first to market in being able to white label accountancy practices’, legal firms’ own document, and we'll be looking to launch a business doc centre, which is, so that a specific accountancy practice or a specific legal practice can white label their own documents. Instead of having to have manual labour, they can use our technology solution, and we can white label their documents or they can buy our legal documents off us and then just white label those for their practice. So, that is the positive of COVID. So our IT team has been able to work on that program, and it's ready for launch at the moment, so that's very exciting.

The direct business is an online advice broking business. That's a very competitive market. We've got an advantage because we're a clearer, and we may look to grow that business a little bit more, but we're not looking to go against the advisor network. We're looking to provide services to the advisor network, and if they want to put some of their clients into a no-advice, low-cost broking arm, they certainly can.

The Sequoia Asset Management business is a good business for us, so we have a lot of self-directed investors who just want some technical support or some general advice, so we have a business there in our Sydney and Melbourne offices. And the Finance News Network is a business that complements our corporate advisory business and also provides our large client base with daily news and updates on managed funds, updates on CEO interviews and is just a resource, an independent resource for market news.

Go national. Our chairman, when he looked at this picture, he asked me what the different colours were. At the time, I didn't know, but the colours represent where our offices are and which compliance manager looks after those practices around the country. We have 405 advisors, as I've mentioned before, around the country, working from 245 offices. So, some offices have four or five advisors. Our Sydney office, for example, has around 10. Our Melbourne office has around 25 in one location. But our offices are all over the country. Unfortunately, we've got no one in Darwin yet. And we have a few in South Australia, but not too many, and a few in Perth. We're certainly looking to grow the South Australian and WA market, and we're looking for acquisition opportunities in those markets as we speak.

The numbers are growing. That's what it's all about. I think I've touched on this already. I'm certainly happy to take questions later if people want to compare us to other groups or where we see the growth coming from. We're looking to get growth, both organic and through acquisitions. We did four acquisitions in the last 12 months. We will continue to look out for a quality acquisition, but we also are growing organically, with groups leaving the bank-owned licences and AMP and so on, and they're calling us. And we have practice development managers in Melbourne, Sydney and Brisbane. And they're fielding calls from advisors from all of those parties. And we're putting on, or adding, around about a new advice per week organically.

Businesses themselves. We have four businesses. I've touched on this, but in the results I think the key number is that the revenue growth in the wealth arm went from $28.7 million to $42 million. We're looking to continue our growth in that area at $42 million, at least 20 per cent to 25 per cent in the next 12 and 24 months, that type of growth rate. So this is not a business that's anywhere near mature. Growing the advice and numbers and growing the contribution to the profit result is core to what this business is all about. The $42 million revenue in full year '20 is not a full year of what we already have. The Libertas acquisition was August. The YBR acquisition was January. The Phillip Capital acquisition did not hit these numbers at all. The Total Cover numbers did not hit this at all. So from the four acquisitions we've got, we've only got some contribution in 2020, so we expect this number to continually grow and be very, very strong. And as I've touched on many times, we're looking to get towards 10 per cent of the overall advice market under one of our licences.

Equity market is the Morrison’s and SSI business. Again, we touched on this. Most important component of this is, now, we've built capability, and the clients are coming. The revenue increased, now, $1 million to $10 million to $14 million. We expect it to move to $20 million in full year '21. We are picking up a new client almost every week. And what I mean by "a new client", that’s a new AFSL who might have anywhere between one advisor and 100 advisors. We're picking up big groups. We're picking up a number of superannuation funds. So what I mean by "superannuation" is corporate superannuation funds who have a lot of equity turnover and they're beginning to use our services. We're talking to fund managers to use our services at wholesale rates, but most of the growth is coming from AFSL holders like our own, and AFSL holders are third parties who have got between one and 100 advisors who want to clear through a competent clearing and executing broker, and they can deal with the debt and get the type of support and get the type of rates and back office support that they're looking to do.

There's a number of providers in this market. It's rumoured some of them are leaving. I think we've got the premium service in this market now, and I think the market's beginning to wake up to that and see us for what we are, as now we've invested heavily and we've got a great team. And now the business, as I've said, is we're picking up around one new AFSL per week, and that's seeing our numbers grow, and it's really a toll road business that we're past the critical number now and the rest is very strong margin business for us.

Sequoia Direct we've touched on. Financial news business went down into lockdown. A lot of the business that we obviously... The news is easy. Now we do the news every morning, lunchtime and evening, so that didn't change. What has changed dramatically in COVID is that we don't have an ability to go out, our journalists don't have an ability to go out and meet the companies as often as we did, and do remote interviews, and we certainly haven't been able to do event centre presentations where we invite two or three hundred clients along to see three or four CEOs and have them present. But what it did do, is it allowed us to bring that online, and it's actually adding more value to the customer. Instead of having 200 people come to an event, we're getting far more numbers through to our online event, and they're a little bit more targeted as well because the events tend to sell out.. Not sell out, because they're free, but they tend to be restricted to a particular number, and the same people tend to turn up a little bit. So the online event is essentially working better for the client base, and we’re now starting to re-engage with fund managers and CEOs of small companies to deliver that type of service.

Professional services we've mentioned. And the corporate overview. So that's who we are. We've got 125 million shares on issue. Our market cap is $33 million. I want to get a 15 per cent return on equity on that $33 million in respect to operating profit. I want to grow the dividend. We've got very strong shareholding support. 35 per cent of the company's shares on issue are owned by management, the board or staff. It's a high priority of mine to have as many staff and as many advisors of the company owning shares in the business. I see that as ideal. But certainly we're beginning to also see some institutions hop on our register and actually recognise there is a large opportunity for a business like ours post-Royal Commission, where the advice that the community needs is growing but the providers are reducing, and groups like us with scale have got a real opportunity to deliver that.

I think I've talked enough. I'm very happy to take any questions if you have some questions.

Operator: Thank you. If you wish to ask a question via the phones, you'll need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the "Ask a question" box. We'll just pause for a moment to allow questioners to enter the queue. Once again, that's star one on the phone for questions.

We have a webcast question asking, "What kind of multiple are the financial planning groups being acquired on? Also, can you talk about excelling opportunities you see?"

Garry Crole: Sure. So there's two different types. There's two answers to the question. So the financial planning multiples is actually the advisors themselves, who might be selling their own client book, and we are a buyer. So, we have a direct division. So, one of the companies that we compete with, or we're friendly competitors with, is Fiducian, and Fiducian and us and a couple of others have been buying retiring advisors' practices. The market is about two-and-a-half times recurring revenue, or four to five times EBIT.

In respect to AFSL, so licensees with advisors, we're happy to pay three to four times EBITDA if the AFSL is of a quality, at a level that we're looking for. So, we're not looking to buy advisors for the sake of buying advisors. We're really, really selective about who we would like to be licensed through us, and the EBITDA multiple of four would be at the top end, and we would have done a lot of due diligence on all of the advisors within that particular network that we think would meet joining a licence such as Libertas or Sequoia or InterPrac.

The cross-marketing opportunities are very significant. Firstly, from the advisor's point of view and the licensee's point of view is, because of our scale, a typical advisor would be giving advice on multiple areas. So, they would be doing equity trading. So before they come to us they might be doing their equity trading through CommSec or Bell Direct or SelfWealth or one of the other providers. If they come into an InterPrac or a Sequoia licence, we can certainly set them up with a white label Morrison account.

Secondly, is a lot of those advisors' clients would have self-managed superannuation funds, would be setting up trust companies and super funds. They would be buying general insurance. They would be buying finance. And they would like to have some media access. So, all of the Sequoia brands provide that type of facility to the underlying advisors of our clients. The key message for us is we don't force that on anybody. We want to provide a service, whichever one of the services it is, so it's premium, and the advisors can select to either use us or not. We do have advisors still using CommSec, we still have advisors using self-managed super fund administrations from other providers. Our role is to be premium and encourage them to have a look and use our services if they choose to.

I hope that answers that question.

Operator: Thank you. The next question has two parts: "Two years ago there were some rumours that the SEQ share price may hit AU$1 in a few years. Is this a real target for the business? And (b), at what share value will the SEQ share trading become more liquid?"

Garry Crole: Very difficult question. I don't know about the rumors. I think from the board's perspective and my perspective I look at the share price, but it's not something I focus on every day. My focus is to have the business operating efficiently and as good as it can, so that the market can determine whether they think the share price is worth 10 cents, 20 cents, or even that dollar figure. My thinking is, in five years' time once we're a mature business, that the market will determine us to have a PE multiple of possibly 10, so in the growth phase I would expect it to have a much higher PE than that, but certainly once we mature, a PE of 10 would be the sort of PE that I would think would be reasonable.

So our goal would be to increase our earnings to a level so that the share price then becomes a factor of that and get towards... As a mature business, if we can be paying dividends at 5 per cent or above in a market where interest rates are very low, that would be a very long-term goal but, at the moment, that is not our strategy. Our strategy is to reinvest our profit in the business and grow so we can become a mature business in five years.

I hope that answers it, the question. It's a challenging question that one because no one has a crystal ball on what people think and on respect to the value of a share.

Operator: Thank you. The next question says that, "Sequoia are the lead manager for the North Stawell Minerals IPO. How has that gone?"

Garry Crole: We are the lead manager. The North Stawell IPO closes on the 28th. According to the prospectus we're raising $20 million in the market. At the moment the prospectus is still open. We are very confident that the North Stawell resources IPO will do very well. But, again, it's like the Sequoia share price. It's really dependent on what the market thinks. But I expect that the IPO will close on the 28th oversubscribed, and gold shares and gold explorers at present are doing very well, with the gold price somewhere around $2000. The management team and the board of that particular company are very, very strong. Jerry Ellis, the former chairman of BHP, as their chair. We're delighted to have been selected to lead the IPO, and we think we'll do a very good job.

Operator: The next question has to do with the question before the last. They say, "We fully support the SEQ holdings for board and employees together with the fund managers. This does present a large per cent of sticky shareholders, thereby containing general free float, which, ultimately, with the right news flow and corporate performance results, provides the catalyst for increased share price. With more or overly tightly held shares, there is less liquidity, hence less free float and less increase in share price. Obviously, less volatility, of course, which is a benefit. How do you find the balance?"

Garry Crole: Very difficult question to answer. I think we've got the balance. I think around 30 to 35 per cent of the shares being owned by management and staff and the board is about right. I always think it's really important for a company of a market cap at $30 million, which is where we are today, for the management team and the board to have skin in the game. A lot of microcap companies have been criticised for not having skin in the game and actually being more focused on the salaries or the benefits that the small company provides the directors and those associated. I think having 35 per cent board, management and staff means that our focus is on building shareholder returns. I think if you look at the annual report and the salaries and the remuneration that the board and the management team get, it's on the lower end.

Creating liquidity is always a challenge if people don't want to sell stock. At the moment we have sufficient cash, so there's no need to raise capital. So raising capital often increases liquidity of the stock because it moves around until it meets a level. I think the share price was 20 cents. Nine months ago the share price was 28 cents. Today, as the share price moves up, people who own the 65 per cent, and even some of the people who own 35 per cent, get to a level where they think that the shares are now worth trading, and that's what creates the liquidity.

So if we can continue to perform well and continue to grow, as the share price rises I think that will create its own liquidity, and that's our answer to that. So we can't create liquidity. We're certainly not going to raise capital at a price that we think is under value to create liquidity. And we want to support those shareholders who want to hold us long term for the ride.

Operator: And we will have one final call for questions. If you would like to ask a question, please type into the "Ask a question" box. We will just pause for a moment. There are no further questions at this time. I'll now hand back to Mr Crole for closing remarks.

Garry Crole: I'd like to thank everyone for their attendance and certainly thank everyone for the questions. I didn't put a disclaimer up, but I would just like to say that I don't know any of your personal investment circumstances, so anything I've said today is certainly not a recommendation to buy shares in Sequoia.

Those people who are on the line who are existing shareholders, I'd like to thank you for supporting me and the board over the last 18 months. I think we've had a reasonable result, and I think, over time, we can continue to grow on that and move from the type of company being a microcap with very little liquidity to being a much larger company with more liquidity. And I take on board the questions and thank everyone for their attendance, and certainly thank everyone for their support of me as Managing Director and of our board.

And, lastly, I'd certainly like to thank our staff and our advisors who have supported us over the last 12 months. It has been a difficult time in COVID and a difficult time in the market altogether, and I'd certainly like to thank everyone for that, and I'm looking forward to more improvement and more sunshine from Sequoia.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.