08 Apr 2021

2021 AGM Chairman address

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Good morning fellow securityholders and guests.

On behalf of the Board of Scentre Group, thank you for participating in today’s online AGM.
I hope you and your families remain safe and well.

We appreciate your understanding as we continue to consider the COVID-19 pandemic in planning events.

Needless to say 2020 was a disrupted year.

Despite this we were proactive and decisive in supporting our customers, our retail partners and our people and in enhancing long-term value for securityholders.

The Board was actively engaged with management in overseeing our response to the challenging operating environment.

We met frequently during the year - 23 times as compared to the 10 meetings originally scheduled for the period.

Committees including Human Resources, Audit and Risk and Nomination also met more frequently to consider key impacts and decisions.

We are proud of our people and their ability to remain agile and focused throughout the period. We thank them for their efforts and contribution.

Our priority was to ensure our customers, retail partners and our people remained safe, connected and engaged throughout a period that was challenging on multiple fronts.

Unfortunately, some of our people were impacted by redundancy, stand-by or reduced hours as part of our cost reduction measures.

Despite this our employee engagement remains strong when one considers key talent retention, low levels of voluntary turnover, high candidate Net Promoter Score and exit data which confirms that more than 96 per cent of our people would recommend Scentre Group as an employer.

Throughout the year, we played a leadership role in our industry through the Shopping Centre Council of Australia of which Peter is Chairman to support government engagement and public policy development.

We focused our case-by-case support on those that most needed our help which were our small to medium sized or ‘mum and dad’ retail partners.

We did not claim or receive any financial support from the Australian or New Zealand governments including the JobKeeper program.

Our ability to make decisions through the cycle has underpinned investor confidence and support from debt capital markets when we needed it.

We acted quickly to secure additional funding, ensuring we were in a strong financial position to see the Group through and beyond the volatile period.

Our capital management actions were focused on preserving value for the long-term and we did not seek equity from our securityholders.

Our long-term objective to create sustainable returns for our securityholders is consistent with our approach to being a responsible, sustainable business.

During 2020, we announced our target to achieve net zero carbon emissions by 2030 and committed to the Task Force for Climate-related Financial Disclosures.

Our standalone Responsible Business Report and our first Modern Slavery Statement were released on the 31st of March 2021 and are available online.

The Board and the Human Resources Committee, chaired by Andrew Harmos, has invested much time on the topic of remuneration.

While the poll on the remuneration report for item 2 has not yet been taken, based on proxy votes already received, we expect a substantial vote against it.

We are disappointed given the time and focus the Board devoted to these important issues on your behalf and the consideration we have given to the outcomes the Group and management delivered in the most uncertain and complex operating environment.

I would like to make some comments on how, as you would expect, the Board exercised judgement and addressed the issues raised.

There has been a very substantial reduction in earnings for our team.

The fixed remuneration for senior management and base Board fees were reduced by 20 per cent at the height of the pandemic and remained at that reduced level for three months. No increases were given to management, in fact, our CEO has not had an increase since taking on the role in 2014.

The short-term at risk remuneration reduced substantially for senior management and the long term at risk remuneration for the years relating to 2018, 2019 and 2020 lapsed. That is, there will be zero payouts for those three years, thereby eliminating our long-term retention strategy.

Our existing remuneration structure was not designed to cater for the unprecedented circumstances we faced.
The Board considered the changing operating environment and exercised its judgement to build a remuneration structure for 2020 that responded and allowed us to adapt to the continuing complexity and uncertainty.

Key to our ongoing success is attracting and retaining high-performing people and retention is a key element of our long-term at risk remuneration plan.

Given the loss of our retention strategy, the Board determined it was in the best interests of securityholders to mitigate the risk of losing our very well credentialled key senior executives during very different times and to retain the best management team to lead our business through this uncertain period and beyond.

We have spent a lot of time talking with many of our major investors and they understand the issues we faced during this unprecedented period and the complexity of the issues the Board needed to consider in determining our approach. The Board believes we appropriately responded to the circumstances and achieved the best outcome for the Group and you, its investors, with this pandemic specific remuneration structure.

As a result, and as announced to the ASX in September 2020, the Board made a one-off issue of equity-based retention awards to members of the senior leadership team, including the CEO and CFO, whose services are integral to the Group’s response to the pandemic and beyond, steering a course through recovery and accelerating initiatives to support future growth.

These awards will vest in the next two to three years subject to executives remaining and achieving individual performance requirements.

These awards were not intended as, and did not come close to, compensating executives for the zero vesting of three years of long term awards – and they serve a different purpose to the short term at risk remuneration which is intended to recognise current year performance and outcomes.

The Board remains committed to regular and critical review of our remuneration philosophy and framework on an ongoing basis and as such, has considered a number of factors when determining FY21 long term at risk remuneration hurdles.

For FY21, we have retained a reduced ROCE hurdle of 50% and introduced a relative total shareholder return hurdle (30%) and a strategic measure hurdle (20%).

We will continue to review the LTAR hurdles as the economic recovery continues to ensure STAR and LTAR continue to meet our remuneration principles.

We value the views of our securityholders and the Board will consider all investor feedback as we make our decisions in 2021.

The Board is committed to continuing to ensure that we appoint directors with an appropriate mix of skills, knowledge, experience and diversity, including gender.

We are in the process of addressing further representation of women on our Board and hope to be in a position in the first half of the year to make a further appointment.

During the year we were pleased to welcome Michael Wilkins and Guy Russo to the Board. Carolyn Kay and Margie Seale are standing for re-election and Guy Russo will stand for election, all with the full support of the Board.

In addition to Board succession, there is a substantial process underway including external advisers to assist us with assessing and further developing the skills of our people to ensure that when the time is right, we have appropriate senior management succession in place including looking outside the organisation.

Thank you for your continued support of Scentre Group. 


 

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