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13 November 2008
Market Update Briefing to Analysts Transcript
CONFERENCE CO-ORDINATOR: Thank you for standing by, and welcome to the Lend Lease Market Briefing Conference Call.
At this time all participants are in a listen only mode.
There will be a presentation, followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press star 1 on your telephone.
I must advise that this call is being recorded today, Thursday, 13 November 2008.
I would now like to hand the conference over to Mr Greg Clarke, the CEO and Managing Director of Lend Lease. Please go ahead.
MR GREG CLARKE: Good afternoon, ladies and gentlemen. Thanks very much for coming. I am giving this short presentation, and then followed by a Q&A session this afternoon, with Steve McCann, our Finance Director.
I'd just like to confirm that Lend Lease net operating profit after tax expectation for the financial year '09 is broadly in line with the guidance provided in August 2008, which is 10 to 15 per cent below the 2008 financial year net operating profit after tax of $447.1 million.
We are implementing a number of largely non operating and primarily non cash charges, reflecting impact that financial markets are having on the property balance sheet carrying values.
Lend Lease remains in a strong position, with cash reserves of over $800 million and a low gearing of 7 per cent of net debt to total tangible assets, less cash, as at 31 October 2008.
Management continue to focus on cash flow management and maintenance of a significant liquidity buffer, and Lend Lease has a solid long term platform across many geographies and property sectors. However, as you're all aware, we are experiencing unprecedented financial market conditions.
I think it's prudent to take proactive steps to adjust our balance sheet and investment outlook so we're in a good position to explore opportunities as and when the market recovers.
We have been prudent in the management and use of our cash and will remain cautious about new investment opportunities while the market remains so threatening, and the aim is to come out of the downcycle as and when we see it coming in a strong financial and operating position. I think over the last two or three years we resisted the temptation to gear up and take on a higher risk profile in the expectation that one day the property cycle would turn. It has turned, and we are grateful for our low levels of gearing and high levels of cash. However, we are not in any hurry to spend it.
On an operating level, Lend Lease is broadly in line to meet the August 2008 guidance. This, as you well know, included a 20 to 25 contribution from capital recycling. We have been reviewing the sale prospects of King of Prussia, and we have withdrawn this asset for sale. However, we are still in negotiation on a number of potential transactions which, if successfully completed, will enable us to meet this target.
Asset sales are a key part of our asset recycling strategy. However, we are not a distressed seller of assets, and if we don't believe we will get fair value for those assets, we won't be selling them.
So at that point I'm very happy to take any questions you have, or Steve will as well. Over to you.
CONFERENCE CO-ORDINATOR: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. And we will take our first question from John Richmond from Merrill Lynch. Please go ahead.
MR JOHN RICHMOND: Good afternoon, guys. I was just wondering in terms of your investment property revaluations what the average cap rate expansion was across the board and also specifically in the UK, and then what your expectation was, or is, for Bluewater, and then, finally, where you see those cap rates going forward.
MR STEVE McCANN: It's Steve McCann. I'll answer that question. Where we are is we have put out some guidance as to where we think the carrying value of our property investment assets is likely to be by 30 June 2009, which is some way off, and there will be two processes of independent revaluations between now and then in December and June. We have looked across our whole portfolio internationally. The UK is clearly the most affected market at the moment, but we haven't allocated specific revaluation numbers to individual assets and we have no intention to disclose that. Clearly, we don't want to lead valuers to independent valuation answers that we will be obtaining at the appropriate time. This is our broad estimate as to where we think things will head.
MR JOHN RICHMOND: Thanks for that. And on your UK Communities writedowns I was just wondering what specific projects you wrote down and then what residual investment value you have in your UK Communities projects.
MR STEVE McCANN: A similar answer. There are two components of the UK Communities writedown. One is goodwill, and the other is inventory. Goodwill we have written off for our UK Communities business, that is, the cash generating unit in the UK is the entire residential business, which is Crosby plus all other major projects, and we have taken that writedown and we have written off $100 million of inventory across the business as well. Again, we are not going to be specific as to what the carrying value of stock is, because that would be like putting a price on our head for buyers to pursue.
MR JOHN RICHMOND: So what's your residual investment value I could probably work it out, but you know off the top of your head after those writedowns are taken in UK Communities?
MR STEVE McCANN: We are not disclosing that number at this point either, because, again, this is a point in time estimate of what we think the impairment has been on the carrying value of inventory.
MR JOHN RICHMOND: Of your targets for asset sale profits of circa 20 per cent of total profit, how much of those have you achieved to date, and also how many, I suppose, what percentage of those have you identified in terms of potential assets to be sold and potential buyers, I guess?
MR STEVE McCANN: Your questions are, unfortunately, all a bit too specific for me to be able to give you the answers that you're looking for. We have given you guidance at 20 to 25 per cent. We flagged that King of Prussia is no longer one of the assets available for sale because we don't think it's the appropriate time to sell it, but we have reiterated that we are in negotiation and discussion on a number of different transactions, and we obviously have a various we have a number of different levers to pull in that context to try and achieve our earnings guidance. At this point in time we are comfortable that we remain in line with that guidance based on those expectations, but if that changes, we would update you, but we're not going to be specific on individual transaction.
MR JOHN RICHMOND: Thank you. And just one last question. What's your intention with your stake in FKP?
MR STEVE McCANN: On FKP, we acquired that stake over a period of time via an instrument which gives us exposure to the movements in FKP shares. We don't actually own any FKP shares, and we will just take the decision as we go forward. We do not intend to make a takeover bid for FKP, which is what we've previously confirmed.
MR JOHN RICHMOND: Thanks very much.
CONFERENCE CO-ORDINATOR: Thank you. We will move to our next question from Alistair Reid from J. P. Morgan. Please go ahead.
MR ALISTAIR REID: Hi, Greg, hi, Steve. Just a couple from me, if I can. Outside of any asset sales that you do, to what degree is your current guidance predicated on no further deterioration in your key markets; and has the fall in the Aussie stopped you from downgrading your guidance further?
MR GREG CLARKE: Well, I think one of the things that we know is this business had as to work hard because it has 80 per cent of its profits offshore. Last year we got completely hammered by the Aussie. I think it cost us $22 million $23 million. This year it's helping a bit. You know, you write your budget on the basis of a number, and it gets better or worse, but you still have to deliver your number. So I didn't apologise for getting hammered this year, and I'm not going to apologise for getting helped this year.
So, on that point, the business is capable of absorbing a reasonable amount of further weakness from the market. It can't absorb cataclysmic change. For example, we have seen in the UK, and to a certain extent in the US, collapsing cap rates of commercial property assets office retail, et cetera and also a collapse in house prices. We wouldn't be capable of surviving our current profit target if that happened in Australia, for example, but we can take reasonable degradations around the world, we can take reasonable degradations in our market, but we're not giving any assurances that if the economy fundamentally takes a turn for the worse that we could preserve our profit target.
MR ALISTAIR REID: And just on the Crosby inventory position, what confidence do we have that you won't be writing down inventory further? You know, from memory, sort of three months ago you said that statutory would match operating profit out of Crosby. Could you just give us some colour there about how that would be
MR GREG CLARKE: It's very, very different. Yes, sure, I'll give you some colour. I mean, most of the UK house builders are on the verge of going out of business, and we have seen house price declines of 30 per cent plus, we've seen Taylor Wimpey decline to 2 per cent of their original market capitalisation of a period of over a year. You see that across Barretts and all of the other major players, and there's a number of reasons for that, one of which was that the liquidity for mortgages has completely dried up.
The meltdown in the UK banking sector, where effectively they lost two of their six largest banks, there's been a huge government bail out, and there is no liquidity, has happened in the last three months since we gave that forecast. That has an inevitable impact on our ability to get fair value for those apartments, and we've just reflected the recent collapse. I think Mervyn King, the Governor of the Bank and England, said in his speech at the end of October, "We came very close to losing the British banking industry in October." That has had a little fall out for Lend Lease Crosby.
MR ALISTAIR REID: If I can just on asset sales, I guess one of the more attractive areas for you guys to achieve asset sales would be in your UK PFI Equity stakes. Can you just explain to me your confidence if you were going to go down that road, your confidence in being able to achieve a sale agreement with an interested party before June 30, given current market conditions?
MR GREG CLARKE: Yeah, I can explain very simply that we're not going to comment on any individual assets and their prospects, because every time you put an asset in the shop window people think you're a distressed seller
MR ALISTAIR REID: Yeah.
MR GREG CLARKE: and the more it gets talked about the more they think you have to sell it, and it's directly against the interests of our shareholders to engage in these conversations, which is why we don't do it.
MR ALISTAIR REID: Maybe if I rephrase it this way. You've pointed out that you're not a forced seller, you won't sell at suboptimal values.
MR GREG CLARKE: Yes.
MR ALISTAIR REID: Could you explain if PFI Equity sales are on the table why you view them as optimal, in inverted quotation marks, in this current environment?
MR GREG CLARKE: Well, I won't engage in any
MR ALISTAIR REID: Is that market holding up?
MR GREG CLARKE: I won't engage in any conversations about any specific asset class. All I will say is we hold our assets for sale across a number of property asset classes and a number of countries in order to maximise the chances that some of them are attractive to potential buyers at prices we think are good for our shareholders, and we're having some success in advanced negotiations in getting traction on that, which leads us to reiterate our guidance. Should I lose confidence in being able to sell those assets, I would immediately update the market.
MR ALISTAIR REID: Thank you.
MR STEVE McCANN: I might just add one comment to that on the PFI Equity assets, in particular in relation to the market. What we have in relation to those assets is a price that we believe is a fair price at which we would engage a potential buyer and below that sort of price we would not, and that price is materially above our costs. Those assets have materially increased in value over time and in terms of will that market hold up in the UK, as interest rates come off dramatically, which they have, arguably, that sort of asset class ought to hold up reasonably well.
Now, having said that, the market is changing daily, so we're not suggesting that it's immune to the downturn, but that's the sort of asset class that current indications suggest holds up pretty well. But that reinforces our view that we should only sell assets like that if we get the right price for them.
MR ALISTAIR REID: Okay. One final one, I guess, conscious of everyone else on the line, but can you just explain to me what the rescheduling and reprioritising you've done on your pipeline looks like? I think it's one of the last marked points of the announcement.
MR STEVE McCANN: Again, I'll try and avoid specifics, but, clearly, in the UK market we've had to pull back a little bit on timing of developments as opposed to, you know, specific developments. There are a couple of retail developments, like Stockport, which we announced some time ago that we've withdrawn from, but in terms of our development book as it sits today, we are talking about reprioritising the timing of delivery. So, for example, the major residential developments in the UK will come out a bit slower than we had originally anticipated, apart from, obviously, Stratford, which has a pretty firm drop dead date, and, likewise in Australia, we will be monitoring that on an ongoing basis, and we do have a very broad geographic exposure here with a number of projects, which enables us to be quite selective in what sort of product we try to bring to the market at different points in time.
We have also been pretty rigorous in going through our forward business plan and saying which of our uncommitted capital expenditure programs can be put on ice for the time being, and we've been pretty proactive in that so that we have a pretty clear view of where our liquidity will be over the next three years, and that's the approach we've taken.
MR ALISTAIR REID: Thank you very much, guys.
CONFERENCE CO-ORDINATOR: Thank you. Our next question will come from Andrew Gibson from Goldman Sachs JBWere. Please go ahead.
MR ANDREW GIBSON: Hi, guys. A few for you. The first one: I understand your gearing is very low and cash high, et cetera, but given that you're likely to report a statutory loss this year, is that going to be an issue for any covenants? That's the first question.
MR STEVE McCANN: The answer is: no. As we have for some time communicated to the market, we set a gearing target of 30 to 40 per cent gross debt to total tangible assets. We're sitting at 7 per cent net debt at the moment. We also have a target interest cover ratio of about six times, but that's well above the covenants that are actually within our facilities, and we are still clearly above our interest cover target of six times. We're well above that today, and that's, as I say, materially above the covenants in the securities themselves.
MR ANDREW GIBSON: Even if you report a statutory loss?
MR STEVE McCANN: Yes.
MR ANDREW GIBSON: Okay. So the covenants, obviously, are on operational earnings rather than statutory earnings?
MR STEVE McCANN: There's a range of different ones. So, you know, there's quite a different covenants that we're applied to, but on an interest cover basis we're comfortable.
MR ANDREW GIBSON: The second question: just relating to Crosby, are you able to give us a bit of a feel as to how many units have actually been sold to date and what you expect to sell over the balance of the year, if any, or are you looking to maybe rent out some of the completed apartments?
MR GREG CLARKE: We have three strategies, one of which is to rent apartments, which currently is ahead of target. The second one is to engage with individual buyers, which is normal stuff, and that's actually reasonably ahead of target. We're also talking to people about bulk purchases of, 50, 100, 150 units, and we're engaging with our usual buyers of bulk apartments on that basis, and we are hopeful of meeting our targets, but, like everybody else in the UK, they're watching the sort of macroeconomic environment and scratching their heads and trying to figure out what to do. Broadly, the business is moving ahead.
MR ANDREW GIBSON: Are you able to give a feel for how many apartments you're looking to rent versus how many you're hoping to sell this year?
MR GREG CLARKE: Not really, because it's a dynamic equation.
MR ANDREW GIBSON: Sure.
MR GREG CLARKE: As I say, we're beating our rental targets at the minute. That's going really well. The individual sales are going really well. The bulk purchases there's a number of them in the game. None of them have leapt in and bought a lot of apartments yet. I think we could well mislead you by giving you a point-in-time estimate, and we'll probably update you at the end of the half year in February when we've finished the selling cycle, because the sales window in the UK, as you're probably aware, opens only for about three months every six months, so it's spring and autumn in the Northern Hemisphere, so September, October, November. So in December we'll sit down at the end of the year and see how it's gone, because I don't really like giving a one data point in time approach.
MR ANDREW GIBSON: Just on the asset sales now, I'm reasonably aware that you are reluctant to make any comment there, but I'm just thinking about the contribution from the Global Fund this year: (a) can you give some guidance as to how much you expect to drop out of that; and (b) have the assets all now been sold, so what's left? Is that just performance fees? So, will that be included in the 20 to 25 per cent of asset sales proceeds or treated somewhere else?
MR STEVE McCANN: The Global Fund, in total expectations this year, is probably less than $10 million, and the bulk of that is performance fees. There is one asset, I understand, they still have to sell, which may or may not occur this year, but that's not a material impact on our numbers.
MR ANDREW GIBSON: And just two very last quick ones. Are you seeing any interesting distressed asset opportunities out there at the moment?
MR GREG CLARKE: Yeah, lots. The big problem with distressed asset opportunities I think I spoke about this six months ago when we get offered a $600 million land package for $600 million in the States and it went down to 60 before we could blink. So what looks attractive today could be half price tomorrow. There's a lot of people who bought Centro shares at 50 cents who are wishing they hadn't, and what are these things going to be worth at some point in the future? Who knows? So we are being very, very cautious. Nobody knows where cap rates are going to be in the Australian market in six to 12 to 18 months time, and we are taking a very prudent view to forecasting which assets will be worth a lot of money and which operating businesses will be worth a lot of money. We have no intention of going down the road of anything other than infill acquisitions of a very small scale because we can get our arms around those, we know they're a long term fit. We don't like the idea of being exposed to cap rate decompression on a large scale.
MR ANDREW GIBSON: So basically what you're suggesting is the cycle has still got some way to play out so you're not comfortable pressing the button yet?
MR GREG CLARKE: Well, it's one of those things. I do very simple evaluate risk analysis in my head, and I look at an asset class and think, "Is there more upside or downside from going forward?" And I think in a lot of property valuations there is more downside than upside, so what is the incentive to move quickly?
MR ANDREW GIBSON: And my final question: just the 50 million of one off cost to reduce overheads, can you give a feel as to how much you expect overheads to come down?
MR GREG CLARKE: Well, the overhead reduction is built into our earnings guidance this year. We have been reducing our cost base since the end of the last financial year. We sat down with the management team about Easter and said, "Look, 2009 looks like a challenge. We need to attack our overhead, we need to attack non essential activities, we need to take out whole activities that we don't deem to be essential in a downcycle, and we've been reducing head count and reducing activities and reducing external controllable spend accordingly, and that was built into our earnings guidance.
MR ANDREW GIBSON: I might slip in one last one, just on Bovis, just how you're seeing things just across your different geographies, just by way of backfill of the order book?
MR GREG CLARKE: It's moving around a lot. Australia is very healthy. The UK backlog is moving from private sector backlog to public sector backlog. Most governments are engaging in Keynesian countercyclical infrastructure investment. We'll get our share of that. The commercial office market in London is terrible, but they've got a healthy backlog in the UK. We've got a reasonably healthy backlog in the US, we've got a cracking backlog in Singapore, and I think a record backlog in Australia. So, I anticipate Bovis performing strongly in the short to medium term. By "short to medium term" I mean 2009 2010. For 2011 onwards it's going to rely lots on the orders, and we've got to win our fair share of public spending to get them.
MR ANDREW GIBSON: Thank you for your time.
CONFERENCE CO-ORDINATOR: Thank you. As a reminder, if you would like to ask a question, please indicate by pressing star 1 on your telephone keypad. And we'll now take a question from Simon Thackray from ABN Amro. Please go ahead.
MR SIMON THACKRAY: Thanks. Good afternoon, guys. You largely answered a question on Bovis, but I might just explore that a bit more. I guess, you know, hearing what you're saying there, Greg, is that you want to be seeing additions to that work book at a reasonable clip to maintain some kind of trajectory for those earnings. This year will clearly be strong; next year, might have a bit of risk around it, but sort of looking beyond that to '11 might start to look a little dicey, just given where global property markets are. I mean, what are you currently seeing obviously I hear what you're saying about public sector spending what are you currently seeing in terms of domestic non res and people pulling out of construction for commercial, industrial and other?
MR GREG CLARKE: We are seeing a reticence across the world that's not fair. We're seeing a reticence in the UK, the USA and Australia to commit to what I would term commercial development in terms of raising finance to redevelop a shopping centre or an office block, that sort of thing, to a greater or lesser extent. That will be largely a facet of people's view on cap rates and their access to development finance. We've had a couple or three projects cancelled in London from commercial development partners, but, on the other hand, we're shortlisted for about four or five PFIs. We're down to the last two in a billion-pound deal in Birmingham. We closed another deal at Lancashire Schools. So whilst we're seeing softness in commercial development, we are seeing increasing strength in the government pushing hard across the world to drive infrastructure PFI deals forward.
MR SIMON THACKRAY: Regardless of funding? I mean, it's one of the issues we're seeing domestically, and even the governments are questioning where the hell they're going to get the money from for a lot of those things?
MR GREG CLARKE: I don't, I'm not putting myself up as a global economic expert.
MR SIMON THACKRAY: No.
MR GREG CLARKE: It's hard enough to kind of run a company.
MR SIMON THACKRAY: Yeah.
MR GREG CLARKE: But my view is that the governments have no choice but to find the money.
MR SIMON THACKRAY: So, whether they're government bonds or whatever.
MR GREG CLARKE: Whatever they've got to do. The UK Government started the downcycle with no money and it's spending it like a sailor in port.
MR SIMON THACKRAY: I acknowledge that. Just quickly, then, just having a look at gearing and undrawn facilities, if I remember back, Steve, $1.5 billion undrawn but committed facilities, I remember, at 30 June '08 I think that's the number there or thereabouts, and you still had plenty of cash on balance sheet. Just the status there? We had a big capital raising in the market yesterday that spooked the life out of everybody. It wasn't expected because funding they thought was available was no longer available. I mean, have we tested those lines, those uncommitted lines? Can you give us some colour there?
MR STEVE McCANN: I'll give you some broad colour. We remain in a very strong position, and, yes, we have tested those lines. In fact, we have proactively drawn down some facilities just to make sure the cash was there when we needed it and invested that cash. So we're very comfortable with where we're standing today.
MR SIMON THACKRAY: So what does that take the uncommitted facilities down to, then, from 1.5, if your cash did it?
MR STEVE McCANN: It's moving around. What we will do is come out with our 31 December number and give you an exact update, but the numbers that we're prepared to disclose today are we have 800 million of surplus cash today and we have 7 per cent net debt to total tangible assets less cash.
MR SIMON THACKRAY: Is that post the anticipated writedowns?
MR STEVE McCANN: Yes.
MR SIMON THACKRAY: So that's post the writedowns. I guess you can back out some of that. I'm just conscious that one of the features of the story has been preserved horsepower for M&A and opportunistic notwithstanding I hear what you're saying, Greg, about the timing and property values are going to get worse, so there's still plenty of time, but I guess one of the thematics that's been running with the stock is this horsepower that's available to it on the balance sheet. I'm just wondering whether we need to sort of recalibrate our expectations.
MR GREG CLARKE: I wouldn't recalibrate your expectations. I'd just say to yourself look ahead at
MR SIMON THACKRAY: How far?
MR GREG CLARKE: Well, look ahead at least at the IMF and OECD forecasts for the next three years, which both predict at least a two year recession in the UK, an 18 month recession in the US, and Australia just avoiding recession.
MR SIMON THACKRAY: Yeah.
MR GREG CLARKE: and its impact on development spending and cap rates, and ask yourself whether you would be spending your hard earned shareholders' cash on big ticket M&A.
MR SIMON THACKRAY: That answers the question. Thanks so much.
MR GREG CLARKE: Thank you.
CONFERENCE CO-ORDINATOR: Thank you. Our next question will come from Callum Bramah from Macquarie. Please go ahead.
MR CALLUM BRAMAH: Hi, guys. Just two very quick ones. Just any change or guide on effective tax rate? And the asked one would be: can you give us any guidance around what your cash flow statement might look like as in, primarily, operating cash flow?
MR STEVE McCANN: Again, I think those two numbers it's probably a bit premature to give guidance on, given we're only four months into the year, but our cash generating businesses are performing quite strongly. As Greg has gone through, Bovis looks like having another very good year this year. And, so, from that perspective, we're in a pretty strong position. And in relation to tax rate, I think I flagged after the or at the time of the full year results announcement that we expected the tax rate to start trending back upwards towards normality over time, but, again, we'll have to assess that at the half year and full year.
MR CALLUM BRAMAH: All right. Thanks a lot.
CONFERENCE CO-ORDINATOR: Thank you. Our next question comes from Steven Fahey from Balanced Equity Management. Please go ahead.
MR STEVEN FAHEY: Good afternoon, guys. Music to my ears about your views on acquisitions and property values to a degree and conserving cash, and just as part of that I just wonder if we could bring up the issue of paying out an unfranked component of dividends again. Clearly, the issue of the property trust sector pricing things on net yields is now past, so there's no need to sort of, I guess, play that game and conserving cash rather than the tax inefficiency. I just wonder if you could put some consideration to that again.
MR GREG CLARKE: Well, yes, of course and to be fair to you, since we first met about six years ago, you have been consistent in your outrage about paying unfranked dividends, but, sadly, many of the other institutional investors are quite enthusiastic about getting any dividend they can get their hands on, franked or unfranked, and I think you met with the Chairman recently and he reiterated your views on this, which were considered by the Board. The Board will, as they do every six months, revisit dividend policy and look at dividend payout ratios and degrees of franking, and they are cognisant of your views, but I obviously can't constrain the board in how they make that decision in February.
MR STEVEN FAHEY: Sure. But I guess the point that I'm getting you know, the fact that the investors who used to value things on yields presumably have moved on from that somewhat, and there has been some real cash costs that you're incurring, being the restructuring costs and the loss on FKP.
MR GREG CLARKE: Yeah.
MR STEVEN FAHEY: And therefore, conserving the firepower in case the world does get materially worse than those forecasts you just talked about. That would seem just a rational part of that.
MR GREG CLARKE: Well, it's certainly rational to minimise the amount of tax you pay, and it's certainly something that I'll bring up with the Chairman again, and, you know, the points you make are perfectly valid.
MR STEVEN FAHEY: Okay. Thank you.
CONFERENCE CO-ORDINATOR: Thank you. As a reminder, if you would like to ask a question, please indicate by pressing star 1 on your telephone keypad. And our next question comes from Dinesh Pillutla from Southern Cross. Please go ahead.
MR DINESH PILLUTLA: Good afternoon. I'm not sure if this question was answered earlier. Much of it relates to what you've talked from asset sales and the potential for some of the sales of retirement assets. I’m assuming that you're in a reasonable position to say that the Babcock & Brown transaction would proceed, and is that part of your forecast?
MR STEVE McCANN: I'll answer that question. There seemed to be two questions. The first one: will it proceed and what position are we in. It's a two stage transaction, as we previously announced: the first stage where we essentially take an initial stake and acquire the management rights, which was subject to a finalisation of due diligence, obtaining finance consent, et cetera. We are still working through those issues now with existing management and board and with their financiers, but they're moving in the right direction. We expect to get a resolution, which we will be able to inform the market in the not too distant future. The second stage, then, requires a vote to enable us to increase our stake to over 40 per cent, and we were aiming, or we are still aiming to get that vote in front of investors by the end of this calendar year. So that remains our target.
In relation to earnings, we have previously said, and it remains the case, that our earnings guidance does not include any earnings enhancement or accretion from corporate acquisitions.
MR DINESH PILLUTLA: Excellent. Thank you.
CONFERENCE CO-ORDINATOR: Thank you. If you would like to ask a question at this stage, please indicate by pressing star 1 on your telephone keypad and wait for your name to be announced. And it appears we have no oh, sorry, we do have a follow up question from Alistair Reid from J. P. Morgan. Please go ahead.
MR ALISTAIR REID: Oh, guys, just a last one from me. Any comment on the search for your successor, Greg?
MR GREG CLARKE: Yes. It's now 15 months since I had the conversation with the board. They've updated me in terms of things are progressing well from their point of view. They are interviewing like crazy, and I have every expectation this will get a good candidate, but I reiterated to them we've just finished a board meeting as you're aware, and an AGM I intimated to them privately over dinner I said, "Look, guys, you are under no pressure from me. I will stay enthusiastically committed to this job until you wheel the new he or she through the front door and then do whatever hand over you need." So I'm trying to manage expectations to keep the heat off the board to allow them to find the right person.
MR ALISTAIR REID: Thanks very much.
MR GREG CLARKE: Thank you.
CONFERENCE CO-ORDINATOR: Thank you. And it appears that there are no further questions at this time.
MR GREG CLARKE: Thank you very much, ladies and gentlemen, and good afternoon.
CONFERENCE CO-ORDINATOR: That does conclude your conference for today. Thank you all for participating. You may now disconnect.stock exchange
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