Acrow Limited (59Y.F) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Acrow Full Year 2020 Results Conference Call. [Operator Instructions] I must advise that this conference is being recorded today, Wednesday, the 26th of August 2020. I would now like to hand the conference over to your speakers today, Mr. Steven Boland, Chief Executive Officer; and Andrew Crowther, Chief Financial Officer. Thank you, and please go ahead.

Thanks very much, and thanks for joining us this morning. Folks, I apologize for the delay. We had a technical breakdown at the crucial moment. So we're doing the call now over mobile. So I hope the -- hope it’s coming out of loud and clear. So it's my pleasure today to be able to announce the Acrow results for the 2020 financial year. It's a year that I'm extremely proud of the efforts of everybody involved at the Acrow Group to put the business in a position to announce what I believe is an outstanding result. I'm going to walk through the investor presentation that we put out last night on the ASX site, and we'll emphasize some points in this. So I won’t just go through dot by dot point, but I'll just give the highlights as I see it across the year. So firstly, this year really continues the last 2 years of trajectory of the business in focusing on the highly value-added parts of our industry in Formwork and now also in Industrial Scaffolding since the acquisition of Uni-span. We've now got 75% of the sales contribution of the business coming out of those 2 areas compared to 25% in the Commercial Scaffolding area, and that's basically a complete reverse of the situation that the business was in 2 years ago when we became a listed company. So that transition now is pretty much complete of focusing on the highly value-added parts of the business. One of the things before I get into the financial highlights, some of the other areas, particularly proud of the injury and safety records in the business over the last couple of years. The lost time injury frequency rate has dramatically dropped from 19.7 in '18 to 2.4 impact across the whole of the '20 financial year. We only had 2 lost time injuries in the whole of the group. So that's a record, I'm particularly proud of, and something we'll continue to focus on in the business and then the safety of all of our employees is paramount in everything we do in the business. I want to just reiterate the Acrow strategy that we announced since we became a public company and give some, I guess, some updates on how we're tracking across the implementation of that strategy. Firstly, our aim is to become the leading engineered Formwork Sales & Hire Equipment Solutions provider in Australia. That's a position that we've had in the Queensland market for some time. Certainly, the acquisition of Uni-span further enhances our position in Queensland. And I'm really proud to say today that from almost a 0 position of 2 years ago, I would suggest we are now that -- we're in that position now in the Victorian market. We've done a very, very good job in penetration of the civil infrastructure market in Victoria. I'll give some more color later in our presentation this morning in relation to this. We've still got some work to do in New South Wales, although we've been successful in getting a really strong foothold on major civil infrastructure projects in New South Wales. But obviously this is an upside. We've been able to deliver the results that we have today for last year knowing we've still got considerable room for further improvement in penetration in the New South Wales market. Our second part of our strategy, which is really become extremely prevalent in the business. And importantly, the business is the acquisition of Uni-span is to further develop the Scaffold Solutions business to the Industrial Scaffold market. And you'll see later in the presentation, the returns that we're making out of that business since we purchased Uni-span all just coming out of Queensland. So we're taking some significant steps now to grow that footprint across the rest of the country. It's a large market. It's a market where safety and quality are highly regarded, and we're now going to be leveraging very strongly off the experience and reputation we have in that market also in Queensland. Third point is about recruiting and training and retaining the best management and engineering talent to drive the business. I'm going to say that I've been involved in sort of 30-odd years now of senior management level across a range of businesses. And I've never seen a better group of young managers and engineers in the business that we have today in Acrow, again, a position that has changed dramatically over the last couple of years. The profile of our senior team and also some of the younger people that are coming through in the business has dramatically changed, and we now have some very, very talented people working in our business. A National Engineering Manager, Matt Caporella, is a 30-year-old guy who has come through the business over time. Now is leading a group of upwards of 30 engineers. Our Queensland State General Manager, Jan Pienaar, who is running our Australian business, that is almost half of the size of our business is a guy in his mid-30s. And there are other significant examples. The guy who is now running our New South Wales Natform business is a 29-year old who is doing a remarkable job already. So we've got some really biggest examples of a very broad group of very talented people, and we continue to now become, I think, now the employer of choice in this industry from a position of 6 or 7 years ago, where we were far from that. In terms of high return on investment organic growth, the main thing here now really for us is that we've now got a broad range of products through the acquisitions of Uni-span and Natform to be able to grow the footprint of those businesses nationally, and we're doing it successfully. So we've now got a Screens business in Victoria, where Natform and the operators is going very well. And we now actually have Uni-span product in every state. So we previously -- I mean, Uni-span was 90% Queensland and 10% New South Wales. We've now got Uni-span products in Victoria that's really enhancing our ability to further penetrate that civil market, and we've now got Uni-span products in Tasmania, South Australia and Western Australia. So that's still in its infancy. So great opportunity to grow that footprint of the gears that we've got through Uni-span and Natform. The last point here is an interesting one. We've never -- we've said that our primary focus on growth has been in Formwork in our Industrial Scaffold. But there’s a really interesting situation now arising in the commercial residential scaffold space, and I'll elaborate probably more on the next page. But there's no doubt that that market is under some pressure. And because we don't rely on that market for a large percentage of our earnings now, we find ourselves in a position where we might almost be in the last group standing of service providers in that particular space. So there's a lot of companies that are just focused on that that are now under a fair degree of duress. So we're looking at some interesting opportunities, just in terms of our growth profile and our profile in general in that particular part of the industry, where we're a player. It's not the key part of our driver. But because we've got so much penetration and growth coming out of the other parts of our business we could be in this last group standing in this particular area. Next part of the presentation is just the map of Australia and where we operate. But the thing I wanted to stress here is really about that last point. We're actually in a unique position in the Australian market. There are -- there is no company that operates like Acrow across the geographies that we operate and across the various disciplines that we operate in. There's no national provider that operates in Formwork, Screens, Industrial Scaffold and Commercial Residential Scaffold, no other company. So we are in a great position to be able to change tax depending on what markets are strong in what particular time. We now have enormous number of levers that we can pull to enhance our profitability. And that's just being accentuated by the Natform and Uni-span acquisitions as well as the capital program that we've undertaken in the last 2 years to get us further penetration in the civil market. So I feel particularly good about this. It's something that I'm -- we regard with great agility now that we're in this position that I think is unique in the Australian market. I'll go through quickly now the key highlights of the business and the key achievements across the year, especially into the second half. We've now completely integrated the Uni-span business that we bought in November of '19. We've now got going into the ‘21 year, $2.2 million of annualized cost savings, which is in excess of what we initially were looking at. I'll go in a bit more detail as to where those savings are coming out from shortly. But that business is now 100% integrated into Acrow. We all know that we've gone through a very challenging period, not just for Australia, but the rest of the world, but certainly in Australia in terms of COVID-19. And again, I'll go in more detail, but we got on the front foot very early in terms of undertaking some cash saving measures that we -- that have resulted -- will result in upwards of $6 million in reduced cash outflow by September of this year. And as at June '20, $3.2 million of that $6 million have been achieved. So I'll go into more detail about that shortly. Tremendously for our business over the period of COVID, we've actually had a record pipeline and secured contracts. We're up 62% in secured contracts over FY '19 levels. And the majority of this has been in these last 3 to 4 months actually since COVID has been kicking in. So it's been tremendous for our business to be able to achieve this result, give us our -- sort of our run rate now into '21 in a period that's been obviously very difficult for the economic environment of the country. I mentioned earlier about the expanded operating footprint as of now integrating Uni-span, ULMA, Natform and Acrow products across all states. It's now part of what we do; it’s part of our DNA. There is another -- there's a great opportunity that's opened up for us in becoming a strong sale product business as well as a hire business that I will talk a bit further about later on. So we feel like, again, we're in this great unique position now to have the range of products that we can offer across all the geographies. We've had a very, very good 6 months in terms of our cash position. And I'll offer a few things. Firstly, obviously, the very strong cash flow we've generated in second half '20, the COVID-19 mitigation measures that we've undertaken. But one of them again, remarkable results in the business, given the environment that the country is operating in, is our debtor days have actually come down 7 days on a like-for-like period last year. Now that's our -- that's great credit to our credit team and our debtor team and the management supports that. So that puts us in a really strong cash position going in this new year. And again, very pleased to say the acquisition that we made 2 years ago Natform has just had its best quarter over the 2 years that we simply purchased that business. I'll go in more detail again about that shortly, but that's very pleasing to see. That business is now completely integrated into Acrow and to see a result that we did in that fourth quarter and also going into this new financial year is very pleasing. Key financials, we're now -- we had $87 million of revenue for the year. Annualized revenue for the business now is circa $100 million. So it's good to sort of break through that $100 million barrier and hopefully continue to head north. Normalized EBITDA of $15 million, up 30% on last year. Normalized NPAT of $9 million, up 20% on last year. Net debt of $14.6 million. Whilst it's up $10.9 million, that's all -- primarily of the back of the Uni-span acquisition. Our sales contribution margin has held. We're very pleased to be able to announce that we're going to be paying a $1.05 fully franked dividend based on last year's results. Operating cash profit of $11.2 million. And then you can also see then on the next page of the presentation, just how strong that second half was. So $48.9 million, which gets us to this 100 -- circa $100 million of annualized revenue, $9.5 million of EBITDA for the second half, 6.5 -- $6.6 million of NPAT, et cetera, et cetera. So a very, very strong second half to the year. Next page is the presentation of the executive summary. A few things that I'll point out here primarily that I haven’t already touched on is in the bottom right-hand side of that presentation, which is the chart, you can see that in second half '20, we had an EBITDA margin of 19.4%, the highest that the business has ever recorded. So that's obviously very pleasing. In terms of the chart above that, you can see that 42% of our revenue comes out in Queensland, 29% out of New South Wales, 14% out of Victoria. And what seems like a low number of Victoria, but it's because it's primarily almost coming out of civil infrastructure work in Victoria. The other thing that I want to just mention here, I've already gone through some of these other numbers. But our increased focus on equipment sales means it is now representing 17% of group revenue, which is significantly higher than it has been in the past. We're aware of current broker estimations and results for this year. Our statement here is that we're comfortable with those at the moment in terms of the '21 financial year. Just to give a bit more detail now around the COVID-19 response and also the integration of Uni-span. So as soon as the whole issue of COVID-19 came into the Australian economy, so we acted quickly go onto the front foot in terms of discussions with our banking partner, Westpac, who were tremendous in giving us support for a 6-month deferral of principal repayments on our debt. That finishes at the end of September. That 6-month deferral has just been added to the end of the debt. So we don't have to catch that up in terms of increased cash flow. It just means we've got the debt for 6 months longer than we otherwise would have. So that we're very thankful for the support we've got from Westpac in that regard. We have lost no days, and we've had no cases, touchwood, so far of COVID-19 across any of our operations. Our operations have continued to operate normally. We mentioned in excess of $6 million in reduced cash outflows. One of the major things other than the banking arrangements was that we renegotiated a range of our property leases. Now this wasn't deferring rent and paying the rent later. This was taking the opportunity to renegotiate rents based on properties that were coming up for renewal in the next 1- to 2-year period, and there was a number of those. So extending the leases on properties that we knew we were going to want to stay involved in long term and getting -- taking the advantage of rent-free periods offered by the landlords as part of the compensation for entering into a longer-term leasing and giving them security. So again, this is not a deferral of an expense that we'll have later on. It was just an opportunistic time for us to be able to renegotiate rents. And we did cancel the dividend we were going to pay for the 6 months up to June, but we're now very pleased to be able to pay a dividend into the new 6-month period. In terms of the Uni-span integration, it is complete. It was complete on schedule. I've mentioned the cost savings of $2.2 million. The vast majority of those savings actually come out of closing 2 depots. So we closed the depot at Huntingwood in New South Wales, and we closed the depot Yatala in Brisbane and consolidated them completely into existing Acrow depots, saving circa $800,000 just in rent alone. The sales and engineering teams are fully integrated. And the expertise coming out of Uni-span in both of those areas just further enhances the expertise that's already been in our business, especially in that engineering area. And 2 areas where it's fair to say Uni-span were better than Acrow was in purchasing and in marketing. So we've now inherited and brought into the business great expertise in purchasing, where we're already seeing benefits on capital equipment and stock purchases. And in marketing, we've, again, got enhanced capabilities in marketing due to the expertise that's come out of Uni-span in that area. I mentioned operations have been significantly expanded in Victoria. We've now got the full range of Uni-span products being employed on some of the biggest civil projects in the country in Victoria. That's given us, again, the opportunity to get to the market position we now have in that area. And I mentioned also that we've now got Uni-span products in all of the country. And we're just starting in that area in Tasmania and Western Australia and South Australia, but already, it's giving us excellent results into that. So fully integrated, very pleased with the acquisition and it’s all systems go for us from there. In terms of the markets, we like to roll out our major transport infrastructure project list because it continues to show the trajectory of that market. And one of the big things for us on this list is, and one of the real major changes has been the focus on rail projects. We've got great penetration on the Melbourne Metro Rail project. We -- the major successes we've had in Sydney Formwork have come off the Sydney Metro Rail project. The Queensland Cross River Rail project is just in its infancy. We expect to see significant revenues coming out of that project for us over the next 18-month period. And also the Perth Metronet Rail project, we've got our first significant order in relation to that project, but it's actually a car park at one of the stations being built Where we've got about a $400,000 order, a hire order on that project. A couple of projects that aren't mentioned here, one in particular is the Snowy 2 project. It's not on this list, but we have the first formwork equipment on that job. We've just provided Acrow equipment to act as the launch pad for the tunnel boring machine for the first part of the Snowy project. That's the sale of equipment onto that project. But it's considerable revenue, but more importantly, it gets us as the first Formwork provider to what's going to be probably the largest Formwork project in the whole of Australia over the next 3 to 5 years. In terms of the state of the markets in our stock-go mode here, civil is certainly very strong in Queensland. It's stable in New South Wales, but I doubt they get strong again. So a lot of the major projects are sort of coming to a halt. And then the market -- and then you can see if you live in Sydney, things like the Rozelle Interchange is just starting to get going, the cranking up of that. That's going to be a major contributor for us. South Australia is stable; Western Australia is good; Tasmania is stable. Commercial is all quite reasonable in the country except in Western Australia at the moment. Clearly, industrial is good in Queensland, and we are going to get some penetration this year in New South Wales. Residential in Queensland and New South Wales is definitely soft. And I'll talk a little bit about that later on. That's the area that's probably going to be under the most pressure in terms of the COVID-19 issue in the country. In terms of hire wins and pipeline, you can see tremendous result over this last 12 months. 5 contracts won and has gone up by 62% on a like-for-like period. It's up 21% on the first half of this year, and our current pipeline is up 63% on a like-for-like period. Clearly, part of that story is now Uni-span and what Uni-span brings to Acrow. But just in general, we've got a lot better penetration of all the markets that we're operating in just about without exception. So that gives us a great springboard as a key indicator into the new year. In terms of the next -- the segmental breakdown in Acrow, again, you could see the change that's happened with Formwork and total Formwork. So our sales have gone up in Formwork from $39 million to $50 million between '19 and '20 [Audio Gap] fragmented probably going to be a market in decline. And then you'll see the new entry of Industrial Scaffold, which has contributed just in this year, $10 million in revenue and $4.8 million in sales contribution. So you see, it's a very high-margin business, similar to Formwork. In terms of cost control, certainly, we've had a very good result in terms of our yard management over the last year, even despite bringing Uni-span into the business. And half-on-half, our yard costs actually reduced. Labor and other costs have gone up in line with the acquisition of Uni-span. So we had an increase of $1.6 million between half 1 and half 2 in labor in that area. It is all overhead labor to do with the management and staff that we brought along with Uni-span as part of that growth despite the significant number of reductions that we've made there that are able to give us some cost savings. So you can see underlying EBITDA, $11.5 million up to $15 million on a year-on-year basis. In terms of divisions. Again, Formwork, total revenue of $39 million to $50 million. You will see a very significant contribution now in product sales, which was part and parcel of the Uni-span business, but is now also becoming part and parcel of the Acrow business. But the theory here is we sell new product primarily, but also some second-hand product. But we sell products to formworkers on the basis that they then are tied to using our kit versus one of our competitors’ kit. You then get further sales opportunities as their businesses grow and you get higher opportunities off the back of their predominant kit that they use in their business is Acrow/Uni-span/ULMA equipment. So that's now -- that's part and parcel of what Acrow now does, and you'll see that all the time in our business going forward with greater focus. Our hire revenue grew 17% year-on-year despite New South Wales being relatively stable. One of the major reasons there is we actually made a strategic decision to stop servicing our biggest -- our previous biggest New South Wales Formwork customer. We used to generate around $1.5 million to $2 million a year in hire revenue. We stopped servicing that guy Because he was a significant bad debt risk and he's actually business is going into [ distribution ]. Now we made the decision 9, 10 months ago to stop servicing him and it was a very good decision to do so. But that did have some impact on revenues that we previously experienced. You can see we've added Cartage here. We've added cartage to the Formwork business as a number. We've always had a small element of Cartage. But the Sun-metals job that we have undertaken, which is probably the best job that we've been involved in over, certainly my 7 years with Acrow, there was a considerable amount of revenue generated in movement of equipment out of Brisbane into Townsville. That did generate a good profit margin for the business. So we've reflected that effort here. The Formwork business has had a great year in terms of winning contracts and extending contracts. I've mentioned Sun-metals, the Queens Wharf commercial project in Queensland, where we've got SuperCuplok, and also now Acrow Powershore is propping on that job, it’s the biggest commercial project in Queensland. And you all saw -- we’ll talk a little bit later more about that project, but it’s considerable revenues going into the ’21 year from that project. Melbourne Metro -- Melbourne and Sydney Metro Rail and Melbourne Western Distributor projects. And I'm really pleased to say in Natform we've -- well, I've mentioned 2 projects there. But over the last 3 months, Natform nationally has won $4.4 million worth of new projects in 3 months. The national revenue budget for that business is $8.5 million. So we've achieved more than half of that in new sales in the last 3 months. And late-breaking news was yesterday, we won a $1.1 million screen contract for a Meriton tower project in Parramatta that starts in November. So that business is now going extremely well. Commercial and residential scaffold, you'll see that if you look at the chart, there is the -- we had $7 million of revenue in that area in '19 and $3 million of contribution down to [$520,000] to complete things in that business. If you actually take that -- our part of the story, though, we've actually had some growth in our divisional revenue, about 6% growth outside of exit of that particular part of the business. Prices in this market certainly continue to soften. And as I mentioned, this probably -- that's the area of our business where there would be some question around what the effects of COVID-19 will be. The way I'm now looking at Acrow and looking at our markets is, if you're doing a space where you're involved in government-funded projects as we are very strongly, you're going to be in for a good time. If you’re in a space where you’re primarily dependent on privately funded projects, it's going to be more challenging. So we feel like that pivot that we made 2 years ago towards infrastructure that we always view as a good decision for the business, has just been even further accentuated now by the issues of the COVID-19 bringing to the Australian market. And then lastly, here, the Industrial Scaffold division. As I mentioned, you can see it's a very strong generator of profit, very strong generator of contribution margin. It's just a Queensland based business at the moment. We've got some early contract wins in New South Wales. We just announced last week that we've resecured the Origin Energy contract in the Surat Basin, which is an absolute core part of that business will contribute $2 million to $3 million a year of revenue. It's very specialized, it's highly technical, it's a safety orientated business, and we've got strong ambitions to grow this business nationally. To the key contract wins. I'll ripe through these. Sun-metals, Townsville. We've mentioned that many times. It's pretty much wrapped up now at the end of June, but it's contributed about $7 million in revenue and high profit for that second 6 months of last year. We did a very, very good job on this project, and we're getting strong recommendations from everybody we were involved in. Sydney Metro Rail. We have got $4.5 million worth of revenue. A combination of hire equipment onto the Marrickville and Chatswood stations and a little bit to Waterloo and Victoria Cross. And the large revenue contributor, there was a $3.2 million sale to BKH contractors who are the formworker working on the Barangaroo Station. The last of that equipment will be provided by about November of this year. So of that $3.2 million in sales, $2.5 million was in the last financial year. $700,000 of it will be in this financial year. I mentioned Queens Wharf, where we've now got a combination of SuperCuplok and Powershore on that job. That's just really starting now. And it's going to be going for another 2 years and there's far more revenue to be generated out of that job out of time. Melbourne Metro Rail. $3.5 million to date. And again, significant opportunities for more you can see across a range of products in a range of areas, and it’s sale of product as well as hire. $438,000 of the $3 million is sale of product. The Melbourne Western Distributor continues to again to go well for us. And again, that there are further revenues to be experienced out of this over the next 2 years. $3.5 million of work secured to date and I would expect that number to double over the next 2 years. I've mentioned here 2 large Natform contracts in New South Wales because you can see they are large contracts worth $855,000 and $700,000, respectively. And then the contract we're securing is the biggest of the lot at $1.1 million. So happy to be operating, and we're really kicking goals in that space. The Opera Residences. We mentioned that here primarily because it's a great example of Acrow and Natform working together where we've got the full suite of products. Perimeter scaffold, SuperCuplok for propping and also Natform screens, but that has one package on that job. And just to show that we're not just an East Coast company. Launceston, $460,000 job won for our Waterfront Hotel Complex that's commenced. That's a very big contract of Tasmania. And in a business where our total hire revenues are normally around about $150,000 a month to get 1 job that would contribute $460,000 in the next 6 months is very strong. And again, just again to mention Perth, that job is on a car park on the Metronet. So we are a national company, although we're getting -- although we've obviously got the majority of our revenues on the East Coast. Tasmania, South Australia and Western Australia are very good to have for us and are all profitable business that contribute. So I'll hand over now to Andrew to go through the detail of the P&L and also to go through the detailed balance sheet and cash flows.

Thanks, Steve, and welcome to everyone online. So if I get on to Slide 24, the profit and loss statement. Now I just -- this is a Pre-AASB 16 profit and loss statement. So we ignore the impact of IFRS 16. So the cash rents within the EBITDA, but we take out the IFRS 16 depreciation and interest. So our NPAT underlying for the year increased from $7.5 million to $8.6 million or $8.7 million -- sorry, from $7.5 million up to $8.982 million for the year. And I'll just take you through the components of that. Steve has already gone through the increase of EBITDA from $11.55 million to $15 million, which basically was the result of the transition from what we work forward to the company what we are today, which includes the 12 months of Natform and the 8 months of Uni-span, which was an outstanding result. But that also was offset by the reduction in the two-story residential loss of EBITDA in that. Now from a depreciation point of view, you'll see our non-IFRS 16 depreciation increased from $3.3 million up to basically $5 million. That's an increase of 53%, but it’s pretty much in line with our property and equipment increase of 62%. Now our Uni-span increase of $25 million plus last year's roughly $9 million of CapEx and this year's just over $12 million of CapEx was the result of -- basically resulted in that increase. Then we get down to tax expense, the tax lines. So last year, we had a $59 million tax expense. This year, we have a $321,000 tax credit. Now that's the combination of a couple of things. Basically, we have some tax paying entities within the group now being Natform and Uni-span, and we're able to make use of certain deductions, including, importantly, accelerated depreciation that basically reduced their tax payments to negative. Also, but most importantly, the main part of this credit is, as you would have been -- as would have been discussed before, we have extremely large tax losses within the Acrow group, which we've been able to continue to use to offset any tax expense and tax payable. These we’ll be able to use for the foreseeable future. And as such, we had a tax expense credit of $321,000. And just as importantly, we have no tax payable for the 2020 year, this year. Now going forward, we expect very minimal taxes to be paid. But also most -- more just as importantly, we expect there's going to be some research and development credits that will flow through to these results as well, but will definitely even improve that. Now taking all that into account, we get to an NPAT underlying of just under $9 million. Now our earnings per share increased from $0.044 per share to $0.0462 per share, which is an outstanding outcome, given the fact that our weighted shares increased from 172 million to 195 million. Now getting down to our actual NPAT reported this is pre-IFRS 16, we reduced from $4.9 million down to $4.1 million. Now the majority of this difference is because of the significant items. So significant items of $3.5 million for the year. That was almost all entirely related to the acquisition and integration of Uni-span. Basically, $3.3 million of that was the Uni-span acquisition and integration. Now as you can imagine, there's 10 depots, and in particular, some very large ones that were integrated, and it's a very expensive process. So the way we see this, this was an investment into the integration, and that won't be repeated in the following years from a Uni-span perspective. That is fully integrated and basically from the ’21 year onwards. The EBITDA coming from that business won't be impacted by this. Just below, as Steve has already mentioned, we have -- we announced today a fully franked dividend of $0.0105 per share. Now that basically translates to a $0.015 unfranked dividend. Now that franking credit is a pretty good thing, given the fact that we're actually not paying any tax for the 2020 year. And below that, we've just issued -- we've put in a table that basically shows you what the result would have been and how it relates to the actual financial statements themselves, if we'd taken out the actual lease payments of $4.4 million and then we included in the depreciation and interest from an IFRS 16 perspective. So our EBITDA would be $19.4 million, and our NPAT reported would have been $3 million. Moving over to the balance sheet in Slide 25. So the balance sheet is basically being impacted by 2 very, very large things, which is the IFRS 16 implementation and the acquisition of Uni-span. I'll just hint on the IFRS 16 firstly, just to get that out of the way. As you know, we have to bring all the future payments discounted to today on to balance sheet. Now at the first -- we haven't -- we didn't change the comparative in 2019. So as of the 1st of July, on the right-of-use assets, we took on $17.8 million. And from a lease liability point of view, we took on $18.4 million. Now as already discussed, there was a lot of renegotiations of our leases as part of the COVID response. And because they were quite long-dated leases between 5 and 10 years, all of those commitments are being bought online. So our right-of-use asset increased from $17.8 million up to 32 -- just over $32 million, and our lease liabilities increased from $18.4 million to just over $34 million for the year. Now from a -- as you know, we at 31st October, we also -- we acquired the Uni-span business and the main adjustments that occurred on the balance sheet from that, we took on property, plant and equipment of $25.2 million. And also, we took on debt of $13.75 million. That is down as of 30th of June to $12.6 million. Now going from -- if we have a look from a net debt perspective, our net debt went from 7.1%, up to 20% for the end of the year. That was down from 24% in December. Now our net debt included within that debt is $7.2 million of cash. Now that cash which Steve's already talked about, the increase in cash was a result of a very good second half EBITDA outcome. Some very, very good debtor days reduction. So it went down, what, 7 days, down to 58 days. As of today, that's actually reduced even further down to 56 days, so that's a great outcome. But also the COVID-19 mitigations that Steve's already talked about. Also within net debt is obviously the loans and borrowers themselves. Now that -- the big increase in that was basically Uni-span and some increase in our finance. And net EBITDA -- net debt-to-EBITDA is now just below 1, which we're very, very comfortable with and that will continue increasing -- decreasing, sorry, through the following year. Now if I get down, I just want to highlight one other thing within the balance sheet, which is the tax liabilities, just to reiterate that $5.284 million in tax liabilities, that is not the current tax payable. What that is, is the deferred tax liabilities that will unwind over the following years. And most of that is from Uni-span and some from Natform as well. So I'll move over to the next page, Page 26, our cash flow. So the top page is our operating cash profit. As you know, we -- the way we define operating cash profit is underlying EBITDA less maintenance CapEx. Now that's been increasing each year. And FY '20, it was $11.2 million operating cash profit basically from an underlying EBITDA of $15 million less the maintenance CapEx of $3.8 million. Now maintenance CapEx basically increased by essentially the increase in depreciation that occurred during the year. Now if we get down to the actual -- what happened to our cash flow during the year, our net debt started at $3.6 million and finished at $14.6 million. Now the adjustments in between this, we had $21.6 million of cash flow from operations. Now the way that you would reconcile this with the financial statements that we provided previously or yesterday was we had cash generated from operations of $16.3 million plus proceeds from the sale of ex hire here at $5.3 million, which we classify as just an operational amount, so $21.6 million. Now -- so this $21.6 million as I said before, was because of the outstanding EBITDA second half, the COVID response and our reduction in debtors days. Now then, obviously, we did spend $3.3 million -- $3.5 million in significant items that came out. So we see that as an investment amount. We had cash payments on leases at $4.4 million. Finance cost of about $1.4 million. We did have investment into CapEx of over $12 million and obviously, the acquisition of Uni-span of $12.2 million of cash. We also had a Natform deferred payment of $2.25 million. The second Natform deferred payment will be occurring at the end of September, the beginning of October, which will also be $2.25 million. We had a capital raise at the -- in December of 5 -- just under $5 million net after costs, and we had a cash dividend of $1.4 million. That was net of the DRP that was the final dividend 2019, which got us to $14.6 million of net debt. Getting on to the next slide, capital expenditure. So what this graph on the top left shows us is that capital expenditures obviously increased a lot from the ’16 year through to '20. But as Steve was talking about before, this business has been through a very large transition to where it is today. From a fairly small amount of CapEx spent previously, F '19 had $9.6 million and this year, $12 million. Now that basically, we don't expect that to continue at those levels ongoing. We probably see -- we've got a CapEx budget, which we see going next year of the 2021 year of about $7 million, and that's probably more sustainable amount. Now maintenance, this $12 million was broken up between the maintenance CapEx, which basically has increased in line with annualized depreciation, which we already talked about, and $8.2 million of growth. Now the majority of that actual growth CapEx, $7.2 million, was spent in the second half of the year. Now we've included the amount of what the main items of that -- of the growth CapEx were on the right. But it's important to point out that $3.1 million of SuperCuplok, just to give you an example of how this -- how growth CapEx works. That was -- most of that was deployed on the Sun-metals job, and that's already coming off and that paid that gear off, that Sun-metals job. That gear is now being redeployed to another site. I think I'll leave that there and hand back to Steve.

Okay. Thanks, Andrew. So just on our outlook into the new year. And again, some of the priorities of the business has -- first quarter '21 slightly down on what was an exceptional fourth quarter '20, mainly because the Sun-metals contract has sort of come to a practical completion. But still very, very strong results into the first quarter. Worth mentioning the current Melbourne lockdown, absolutely no operational impact to date. We continue to operate where we see permits to be essential providers to civil infrastructure. But definitely, there are delays in new privately funded projects. Thankfully for us that's a very small part of what we are involved in these days. Clearly, the record new sales I mentioned earlier provides a positive forward indicator. The things that will help us further grow our profitability into '21. Clearly, the 12-month contribution from Uni-span, the spread of our products across the geographies, across the markets, including Uni-span and Natform products now. What we believe will be further increased activity levels from government-funded civil projects in all states. The new product sales I've talked about. So we are now a business that still gets 70% of its revenue for new product sales. We're about to launch an online platform. It's effectively a click and collect style program that will make working with Acrow in the sales area far easier. There were a number of industrial maintenance contracts that were delayed that are now starting up again and will help our Queensland Industrial Scaffold business. And we really look like we're going to have, but we will have continued growth in our Natform business, both in New South Wales and Victoria. There is a softer outlook for privately funded commercial residential projects. We've talked about where we think our forecast for this year is; we're comfortable with the current range. And overall, as we said, transport infrastructure will continue to be strong through all '23. And finally, I just want to take you through sort of the real key wheel, if you like, of things that will make the Acrow business tick, and will continue to make us tick into the future. I've talked about the new clients in the markets expanding and promoting our Formwork capabilities across the country. Developing a national footprint for Industrial Scaffold is key, further enhancing our product sales through the online platform and greater focus in the business. We would expect that to grow as part of the business. Commercial scaffold is interesting because whilst it's a market that is probably in decline, still believe there's opportunities for Acrow to actually grow its business here because we think we will be amongst that group of last men standing. And certainly, there are things that are coming up at the moment that are proving quite interesting as, as I mentioned before, competitors are really challenged by -- when they're only operating in that business and don't have other markets that they can profit from that are strong, while this is not a strong area. And all of that comes through the major competitive advantage of Acrow being our tremendous engineering team who've got great expertise and are absolutely focused on customer outcomes and our flexible and a really bright team of people here there that make the Acrow difference. And again, this is your employing high talent and professional. We continue to be attracting very, very good people. I think almost we're picking great people coming into our business now. And the vast majority of people coming into the business have an incredible can-do attitude. I mean I'd like to say the way I state is they just get it. They understand how to make money. They are profit-focused, they're customer-focused. They understand the balance of that and it just makes it a very exciting time for me to be the Managing Director of this business. So I thank you for your attention, and I guess we'll now open up for any questions that might be coming from the participants today. Thank you.

[Operator Instructions] Our first question is from Alex Lu.

Just a few questions from me. So maybe to start with the hire pipeline. So that's been up 63% versus FY '19 levels. But can you just remind us about the projects or the identified projects that are included and not included in that pipeline, please?

Alex, we only include projects in that pipeline that we've actually got a live tender in. So where we don't have a live quote or tender for them, we don't include it in our pipeline because -- and that will include a whole range of things like the next part of Snowy, for example. We've got no Snowy revenue in the pipeline because there's no more packages coming out for the next the 3 to 6 months. We've won the first package, but that is only live quotes. Now I think in the past, we've spoken about the fact that we get a conversion rate in forward and screens of somewhere around 40% to 50% of everything we quote on. And our conversion rate in scaffold is more like 30% to 40%. So that's the dynamic. But it's fair to say that the vast majority of work in the pipelines relate to the formwork part of the business and the screens part of the business.

Okay. And in terms of projects and, I guess, start dates, are you noticing any delays at the moment? And if so, and how long?

Not in civil at all. So civil infrastructure is going completely the reverse way, Alex, at the moment. They're being sped up rather than slowed down. And in Melbourne, clearly, yes, with Melbourne being absolute lockdown, as we all know. But the major civil projects we're working on there being the Metro Rail and the Western Distributor are actually speeding up their requirements rather than slowing them down. So that's obviously great for Acrow being in the space we operate in. I mentioned earlier, privately funded projects is another question. So there's a number of schools who thought around what is going to happen to privately funded projects, whether they will be continued to be delayed if they have not already commenced. Or whether once we get hopefully, out of some of the current restrictions that a lot of us are facing, that they actually see some pickup. I'm not going to speculate the hard one to answer because I don't think any of us have any idea at the moment, when is Melbourne going to come out of lockdown. Hopefully, the rest of this aren't going to go into that same situation. But again, I say, fortunately for us, where we get the vast majority of our earnings these days is going in the reverse, it's actually speeding up rather than slowing down.

And maybe if I could just ask about the Industrial Scaffold side of the business. So I think you mentioned potential sales into PNG. So can you just talk about that, please? And any other international markets you're looking at?

We do sell into PNG. So we already sell -- we sell scaffold out of the Uni-span business into PNG for the use on industrial projects. So we don't operate up there. We don't hire equipment into PNG. We don't provide labor in PNG. We sell equipment to providers in the industrial space there. Look, we did a -- as an example, we did a $1.7 million sale of gear into PNG in July. So there's -- and that's something Uni-span does across the year. They've got -- good they've got long-standing relationships now with industrial providers up there who buy our equipment to use.

And are there any other markets that you're looking at?

We have a watching brief in New Zealand. That hasn't gone the way we thought it might have at the moment. We continue to watch that space. We think civil infrastructure in New Zealand is interesting. And yes, we've got -- we don't -- I said it's more of a watching sort of brief for us in that area at the moment. But look, I don’t see -- I don't see it. And we're not going to be selling gear into Singapore or Malaysia or Asia or U.S. or Europe, that's not going to be part of our growth business. But within the Oceania region, and PNG is an example of that, we will be.

[Operator Instructions] Our next question comes from [ Michael Mantaselis ].

Very pleasing to hear about the results in financial year '20. My question is a little bit perhaps less feel or maybe not, I'm not sure. The Victorian government has floated the idea that as part of a stimulus to boost the economy, it may invest quite a bit of money and accelerate the recladding of various high-rise buildings that are vulnerable to the flammable cladding problem. Is that an opportunity for Acrow? And if so, how are you positioned for that?

Yes. Michael, look, it's an interesting one, I think, because a lot of people have been speculating about the opportunity that may come from recladding across the country over the last few years after the horrific fire in London. We really haven't seen that to any great degree yet. I mean, for us, it would be -- it's probably a scaffolding opportunity primarily because people are going to need to work at height. But look, I have to say at the moment. I don't think we've got a recladding job going on. I don't think there's not as much activity I think as was probably previously speculated about in that area. But if it does become a sped-up program supported by government, then there would be an opportunity for us to provide scaffold and probably screens to some of those such projects.

Our next question comes from Alex McLean.

2 from me. First one is, can you just give us a bit more commentary on the returns on your growth CapEx versus expectations?

It's going really well, Alex. So I've actually got a bridge that I'm happy to share, but there is a bridge about what the sort of earnings of Acrow have done over a 2-year period when -- from we were first public company to where they are today. And the reality is that we've -- over that 2-year period, we've got $7 million less earnings coming out of scaffold and coming out of residential, partly by choice because we exited residential. So if you start at a position where we made $10 million the first year as a public company, EBITDA. If we hadn't invested in the acquisitions that we've made and the capital program, we'd be talking to you today about $3 million not linked. So the capital elements are not linked to the 2 acquisitions, the capital element of growth in our profitability over this 2-year period is circa $5 million. We've spent $15 million in growth CapEx over that period. And of that $15 million, $5 million of it was spent in the last 5 months. So on an annualized basis, the return on investment on that -- from the growth CapEx is going to be sort of circa 45% to 50% which is why I think it's tremendous that we were able to get those sort of results.

Okay. And I think Andrew called out a CapEx budget, which is obviously a soft budget at this stage of $7 million for '21. Do you just want to give us some color around that? And...

Yes. I mean, look, that's linked to known projects, Alex. Over $7 million incorporating maintenance. So it would be circa $3.5 million maintenance CapEx, circa $3.5 million growth. And that's the things that we already know that we've had -- we're going to purchase through jobs that we've won. Any growth on that $7 million is really only going to be based on other projects that we win. Andrew used the Sun-metals example. We didn't -- we wouldn't have spent the money we did on that SuperCuplok, if we hadn’t have won Sun-metals. But it was tremendous that we were able to buy that equipment, have it paid for effectively on its first job, and now it goes into expanded capabilities in the country. So that's the way we approach growth capital these days. We don't spend money speculatively. We spend money on growth CapEx, specifically linked to either known projects that we’ve won or think we're going to win or general -- well, actually, no, it's actually just either 1 of those 2. We either won the contract and we need that gear, or we know that we have a strong chance of winning certain contracts, and we're going to have to have the gear ready to go. So we don't spend money speculatively these days on growth capital. So -- and we certainly don't spend growth CapEx that we're not going to get minimum 40% returns.

Yes, okay. Similar to the way you started last year, so that's fine. Final question, rent relate received across the second half, does that have any impact on the P&L?

Yes. Yes, we had -- there was a reduction due to rent payments. Okay. And that was...

What was that impact?

That will go into this year again. That's a bit. I think we had about -- we call out our rent relates about $1 million. It's about half of it was -- we're going to get last year and half that we're going to get this year.

[Operator Instructions] We appear to have no further questions at this time.

Okay. I think if that’s the case, thanks very much, everybody, again, for your time today, and thanks for your interest in our business, and look forward to chatting with you again at the half year. Thanks very much.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you all for attending, and you may disconnect your lines.