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

Ladies and gentlemen, thank you for standing by. Welcome to Acrow full year 2021 first results conference call. [Operator Instructions] Please be advised that this call is being recorded today, Wednesday, 25th of August 2021. I will now hand over to your speaker today, Mr. Steven Boland, Chief Executive Officer. Please go ahead, sir. Thank you.

Thank you very much, and thank you folks for joining us this morning. I'm very pleased to be presenting and announcing the full year results for Acrow Formwork and Construction Services for the '21 financial year. It's another year of growth for the business. It's actually the eighth consecutive year going back to when it was pre being a public company of growth in our EBITDA. By eight consecutive years now, we've had growth every year, which in my mind, sort of defies the issue of sort of the cyclical nature of the business. This business is proving itself to be able to continue to grow irrespective of many cycles through the wider construction industry. Incredibly pleased with these results. It's a testament for the staff of Acrow and their ongoing commitment to our customers and the services they provide. The highlights -- the key financial highlights, I'm going to walk through the investor presentation that we've provided. I won't go into every single dot point but pick out the areas that I think are of most relevance to the results for the year. So in terms of the financial results, all the metrics are in the right directions. Our revenue was up 22%, $105.7 million for the full year; EBITDA, $24.3 million, up 25%; pretax profit, up 35%, $10.2 million. Margin continues to be solid with EBITDA, so 60 basis points, 23%. I'm very pleased that we are announcing a full year dividend of $0.019 fully franked. So we paid $0.75 in the half year and $0.0115 further now. We will have a 5% DRP in place. And as I said, it's a fully franked dividend. In relations to both NPAT and underlying EPS, while we did have 10% growth in NPAT and a flat EPS, I'll let Andrew Crowther, our CFO, who will walk through the financials little later, talk about the factors involved really in those numbers being relatively flat versus our other metrics and how we know that those -- both those numbers will change significantly in the new financial year. In terms of the achievements within the business across the year. The first one really around our hire revenue contracts. It is the core key lead indicator of future performance in the business. We are primarily still a project-based business. So we need to create winning work. Over the course of this year, we picked up $39.3 million worth of new hire revenue contracts, which is up 34% on the previous year. I'll go in a bit a little detail about that later. But we've had, in the course of the last year, our 4 best months in the history of the business. Over the 8 years I've been involved in the business, about the 4 best months in terms of new contracts won over this period, 3 of those have been in the last 6 months. This is probably still a very good sort of 3- to 6-month lead indicator. But all of the other key achievements -- actually, I just want to point out quite strongly that over the last 3 years, since we've become a public company, there's been 4 key initiatives that have effectively changed the Acrow business that was listed in April 2018 to what it is today. The first of those initiatives was around pivoting our business away from residential markets and concentrating on civil infrastructure formwork markets, primarily on the East Coast and primarily expanding what was already a strong Queensland business into Victoria and New South Wales. The -- what's happened in the last 3 years, and there's a bit more detail later on in relation to the Melbourne formwork is an absolute, I guess, verification of that strategy. We have successfully been able to penetrate that market to become -- from a very low market share company, we're almost probably the market leader in the northern formwork civil infrastructure market. So number one, formwork pivot successful. Number two was the acquisition of Natform. We bought that business in August of '18. And we were absolutely committed to how that business could expand nationally out of its primarily New South Wales base, and also what it would do for the business and enable us to offer packages of various services on jobs that the screens would have sort of give us an introduction to. It's fair to say that business has had a relatively slow start for the first probably 12 to 18 months but it's gone at a cracking pace over the last -- since last year. Revenue is up 31% in the prior corresponding period through expansion in Queensland and Victoria, and also consolidation in New South Wales, and is now a very important part of what we do. And is achieving results far superior to at any time in its previous ownership structure. So second key point, Natform acquisition is successful. The third key initiative is really the Uni-span acquisition that we made in November of '19. This business has transformed Acrow in terms of our relationship with a European manufacturer of formwork equipment, ULMA, and now we've been able to introduce that equipment now nationally. And also has introduced us strongly into the industrial services market that we previously didn't really participate in, and is now a very important part of what we do going forward. And it's also, I guess, give -- through the ULMA relationship, given us an opportunity to participate in the sale of formwork systems into the market rather than just the hire, which I'll talk again a little bit later, how important that is. So the fourth one is around the industrial services -- scaffolding business that was Queensland-based at the back of Uni-span. We set that 12 months ago with a mission to expand that business nationally, and that's now been incredibly successful, basically doubled the revenue in the last 12 months and will be going up another 50% in the next 12 months. So 4 key initiatives pivoting formwork and growing across the East Coast, the Natform acquisition, Uni-span acquisition, and the Industrial Services growth nationally all ventured successfully. And that has now enabled us to have a wide footprint of services and products that we can offer across all of the Acrow geographies, which is every state in Australia. And that's one of the key advantages for our business now is that we can -- we've got a range of products, and operate in a range of geographies with a number of our competitors to provide. In terms of the markets that we operate in, it's fair to say that the civil markets across the country continue to be incredibly strong. And on the page where we sort of give you the traffic light, green and the red picture, we actually have a double green and then we have a double green on Queensland civil. At the moment, that market is about to take off in a very strong fashion, which is great news for us given their predominant market share position in that -- in Queensland. The only really soft market that we see in the country at the moment is residential in New South Wales, and we don't really participate in that market to any degree any further. So across all of the markets we participate in, we're in either good or very, very good positions going forward into the new financial year. We rolled this out on a regular basis, but it's really the next page that's probably the most relevant point here. However, I will point out some things on this page. Over the last 3 years, the growth in civil infrastructure spend in the country has only actually been a growth of 16% despite forecasting of being far superior to that. Over the next 2 years, it's forecast to go up by 74%. I don't believe it for a minute. Those projections will not be accurate. These projects will go longer and flatter. However, there's no doubt there will be an increase in activity over the next period of time. A longer flatter cycle here, this is very good news for us. But on this major infrastructure projects post, the main thing that I want to point to are projects near the top of this chart, increasing the Bruce Highway and Cross River Rail, in the black at the top, Brisbane rail. They're all Queensland-based projects, and they are happening right now. And especially from the Bruce Highway, that's becoming -- will become probably the biggest infrastructure project, the biggest generator of revenue that Acrow will have over the next couple of years. But on the next page for me is really the story around what's happening in this space. I'll take you to the middle graph. You can see that, that infrastructure has been depicted graphically. So you can see it's only gone up from $12 billion to $13.9 billion, sorry, over the last 3 years, 16%. Forecast to go up 74% for the next couple of years. Again, I don't think that will be the case, but it certainly will be greater than 16%. The story is that macro has grown in excess of this -- of that same -- that same growth pattern. So bottom right-hand graph, the national formwork revenue for civil infrastructure in Acrow has actually gone up 73% over that same period in '18 to '21. And you can see in the top right graph, Victoria has been -- we've gone from basically nothing, $2 million of revenue in '18 to $13.8 million of revenue in '21. For next to no market share, probably 35% market share. New South Wales, it's always been sort of a troubling state for us in terms of not giving enough representation for the size of the market. Whilst that's still the case, you can see that from between '19 and '21, we've almost doubled out our civil infrastructure formwork revenue in New South Wales. So we're now starting to get real penetration across some of the most significant projects in Australia where I'll talk about a little bit later on. But I think the real story for us this year, and for the next couple of years, is going to be Queensland. So again, in that top left-hand chart, you can see in, '19, our formwork revenue in civil infrastructure dropped to $11.7 million. We've just come off a year where it's $19.6 million. And on a half-to-half basis, the second half of '21 was over $11 million. So it's going -- cracking ahead of the pace now, and I expect that to have significant uplifts over the next couple of years. In terms of our success this year in winning new contracts. Top graphs will show that 33% that we talked about earlier. So up from 16.3% in second half to '20 to 21.6% in the second half '21 and up, on a full year basis, $21.3 million in '20 to $31.3 in '21. As I said, again, it's a very, very strong lead indicator. One of the most pleasing aspects of this growth is Natform nationally was up 61% year-on-year in secured contracts. So it's a great -- and the Queensland business in Natform was up 150%. So we went from really nothing. We were doing about $50,000 a month of hire revenue in Queensland screens about 12 months ago. We're now doing $250,000 of hire revenue screens in Queensland. In terms of the pipeline, so whilst the pipeline really shows a decline, I should point out strongly that in the June '20 number, we had a $15 million tender that we had put in for a Cross River Rail package that we were unsuccessful on. But that obviously skewed significantly how much work is in the pipeline at that point. And so if you take that out and look, there's nothing anywhere near that size currently that sort of stands out as one huge package like that. So whilst it looks like it's gone from 76.3% to 73.5%, I would point out there was a one copy -- one tender work, $15 million, that we didn't get over that period. But overall, again, as a lead indicator for future success, 3 to 6 months, we indicated it's the most important thing that I look at on a month-to-month basis in terms of making sure that we continue to win in share, and we certainly are. We've averaged -- in the second half of '21, we averaged $3.6 million worth of new work, one per month. By now that part of the business is about $2.8 million. That $2.8 million will hold their own, and $3.6 million in a month, we're going to be going further ahead. The next point is around the pivot from residential focus into other focus of civil infrastructure, and now our burgeoning Industrial Services business. So this figure is complete. Discussing residential and macro is basically an irrelevant point now. It's less -- it's 16% of the total revenue and sales contribution of Acrow. It used to be 60% 3, 4 years ago. Formwork and Industrial Services now make up 84% of our contribution, and that will just continue to go up over the next 12 months. And certainly, Industrial Services grows by another $10 million in revenue from $20 million to $30 million over the course of the next year. So our capital investment focus is in the areas of Formwork and Industrial Services. The second graph on this page shows that -- how much further contribution we now get out of product sales as well as hire. Acrow has a smallish product sales business prior to the acquisition of Uni-span. You see we're doing sort of $16 million a year, and now doing $36 million a year. The important point to make is that the Uni-span business, in the year before we bought it, did about $10 million in this space. So we've grown that $10 million on top of the Acrow $16 million to $36 million in the last year off the back of -- obviously, we're a national -- the national Acrow slot. Our ability to sell products across all of the markets in Australia rather than focusing on the Queensland market as did Uni-span. The important thing here is that it did not take away from our hire revenue. It accentuates our hire revenue. So there are a range of especially formworkers across the country that like to buy equipment as well as hire. You tie them into your product, they buy your product as their formwork system, they top that up with hire, and then they top it up further with further investment in sales when the economics make sense to them. So these 2 things are working very well hand in hand. Next, I want to just point a few of the projects that we worked on just to show the sort of things that we do in Acrow that are not normal straightforward, meat and potatoes you'd expect a company of our nature to do. First project here is the Melbourne Metro Rail State Library Station that we've been incredibly successful on the whole Melbourne Metro Rail project. This particular project highlights the highly technical nature of the work we do and the engineering smarts that our people are involved in. This system is effectively a gantry that travels 250 meters in the length -- along with the cabin that's being formed over the course of this project. So it's on rails as you can see it moves along with the requirements of the construction timetable. We're using ULMA MK systems here that has so much versatility and use across a range of different products -- rather, a range of different applications, sorry. And the customer here, which is the CYP, Cross River Partnership with Metro Rail, they've now engaged us to supply an additional 2 gantries on other parts of the construction due to the success of this project. Now this is not -- it is highly technical equipment. It's basically our engineering team being able to put together the various components of the Acrow system to be able to come up with a solution specific to what the customer needs on a project of this nature. Second one I want to focus on looks a bit more bland in nature, but it's actually a very, very great use of a brand-new Acrow product. So we -- our engineering -- national engineering manager, Matt Caporella, and the business in general, we noticed that we had, I guess, a gap in our product offering to the market and it is in a real heavy-duty propping sort of market. So we've developed this Powershore 150 product over the last 6 to 12 months. It's now the heaviest duty crop in the market. We left with the photo, that there is the first application of it nationally from a brand-new product, which was only commissioned 6 months ago. And this is propping up an underground carpark that is having a multistory tower built on top of the carpark. So whilst that's going on, they require a very heavy duty cropping arrangement to keep the carpark in place while the construction is going on top of it. We should note that this particular application, which is on a job in Duncan Street in the Fortitude Valleys in Brisbane, we're getting basically 90% return on the investment of the product on this job -- on the first job. So this is something that we designed in-house, we commissioned in-house, we've got it manufactured overseas. It comes in at a cost. And on this first application, first job we're getting 90% return on investment. So look, a great effort by our engining to come up -- to understand the gap that we have in our product offering, and this product will now be rolled out nationally for Acrow. In terms of the major projects we're involved in, you can see they are all the top notch projects in civil infrastructure across the country, Sydney, Melbourne, and Brisbane rail projects. The Melbourne Western distributor continues to be a very strong project for us. But I want to highlight the last 2, Bruce Highway and Snowy Hydro. Bruce Highway as I said, I think, will be our biggest project in the next couple of years. We've already secured revenues on that project in upwards of $3 million. I'll talk a bit about that in a second and then we look at some of the major contract wins. The Snowy Hydro is only really just starting to get cranking. And we've only, in the last couple of months, going into this current financial year in terms of product -- work won and also from both hire and labor providers on the job, and products we've sold on the job, something -- somewhere around $2.5 million worth of work we've won just in the last sort of few weeks on that project. And it's a speck of sand on Bombay Beach in terms of what that project will generate over this course. The main points that I want to focus on in terms of the overall segmental breakdown and profitability of the business, as you can see, 86 -- $87 million to $105 million in revenue. Total sales contribution, $52 million to $61 million. Our contribution margin remaining constant. We're respecting the fact that a lot more of our revenue now comes out of sale of product. In our yard costs, we'll be able to maintain it at a good level despite an extra period of time with the Uni-span business. Whilst the labor -- internal labor has gone up, we're investing a lot of money and effort in the growing engineering capability. I don't apologize for that one iota because it's clear to me is that it's a major competitive advantage that Acrow has. So investing in high-quality engineering -- the mega engineering team of more than 30 people. And we continued investing in this area. It's making a considerable difference to Acrow against our competitors across a broad range of the markets that we operate in. So one thing that I will point out on the underlying EBITDA of 24.3%, that number has basically doubled since we listed 3 years ago. So the business is producing excellent results in that area. Across the segments, the main thing is to focus on in our formwork area, is a 19% increase in revenue, a 20% increase in contribution margin. So you can see that our margins are maintaining while we are growing. So rates are not being reduced to win work. Tremendous results in Melbourne civil, tremendous results in Natform, 84% growth in Melbourne revenue year-on-year. Product sales in our future being 41%. We see that our core business now -- and a very profitable core business. In terms of our Industrial Services division, so this really is actually the story of the year for us and going to the new financial year. We set out on a mission to penetrate the New South Wales Industrial Services market. The market, in general, has very similar dynamics of formwork and you see the returns are very similar in terms of it being highly engineered work, not straightforward perimeter scaffold as you would know in a high story -- high-rise construction. This is a very heavily engineered safety-focused reputation, customer experience. It's all of that -- it's all of the things that make their formwork market so attractive to us, also makes this market attractive. So we've grown that business from $10 million turnover to $22 million just out of '22 in turnover. You can see we've basically maintained our margins around the 47% mark. But the real story is how we've expanded that -- expanded our business out of Queensland now into primarily New South Wales. We've also won contracts in South Australia and Tasmania. So it's a New South Wales story. Just in the last few months, we've won contracts with Mount Piper power station, Eraring Power Station, Bayswater Power Station, the Visy Tumut kraft paper mill and also the Snowy Hydro project. So we're targeting another 50% growth in revenue and contribution this year from this businesses. We expect to be over $31 million in revenue, and the sales contribution is more than $15 million in the new year. To give you an example of the sort of work that this new business does, it's not easy to take photos of the sort of things we're showing here because it doesn't photo very well inside of phones. But you can see in -- this is the Mount Piper Power Station job that we've won, that we are on now, and we'll go for probably around about a couple of month period now and started getting in the new financial year -- or sorry, the new calendar year. There have been some delays, some reductions in the current scope of the project due to COVID that will then kick back in, in the second half of the year. But overall, you can see, practically what we've shown here, this is our -- this is scaffolding equipment sitting inside a furnace schematic that you see here. But you can see it's far from straightforward. Specialized equipment, leading the big design in such a way that its sits in the throat of the furnace and allows the work that needs to be done for the maintenance of the furnace to carry on. And we've invested very significantly in the sort of equipment over the last 12 months. It gives us the ability to have a complete turnkey approach to this kind of work, where we can provide the furnace work, we can provide the other access requirements around the other parts of the plants that requires to be maintained. And this is a lightweight scaffold that we're using, the new, and then you can see, it's not straightforward, highly engineered, and is making a considerable difference to the offering we have in that market. We still do -- we do participate in commercial scaffold, and we will continue to participate even though it continues to be a problematic business. You see in the numbers, you can see the hire revenue considerably dropped by $3 million year-on-year, plus the labor and the cartage number up by $1.4 million in revenue. That's indicative for volumes. So volume is strong. Rate continues to be very challenged, especially in the New South Wales market. So I mean, look, we're not focusing on this business. We'll continue to operate in it because it will turn. This is a cyclical business. It's part of our offering. And so we'll stay in it. We do very well and in some markets like Victoria, South Australia, an actually Tasmania. New South Wales does remain challenging, and in a sense, now a small contributor to the overall Acrow business challenged by rate and -- but not -- so again, something we will stay in because there will be opportunities to grow margins in this business over time. I'll run through the major contract wins quite quickly. You can see just -- I'll just give you some of the highlights, some of the different types of things we're doing. So I know in Metro Rail, 75% of the package is being lit and winning. We started from scratch there. We've just developed a great relationship with not just the head contractors, but also the subbies that we're using on this probe -- on this overall project. It's a combination of hire and sale of equipment, and $2.5 million plus revenue. And we continue to generate hundreds of thousands of dollars a month for us at the moment, and there's another 18 months or 2 years to run. The Caboolture Hospital redevelopments, et cetera, it's basically, that's one very large package of work we've won with one commercial formwork in Queensland that is indicative of the Queensland commercial market for formwork picking up. Melbourne Western Distributor, again, sort of in the case of the stickiness of the customers that you start to work with here. We were doing -- many -- most of the packages being lit. That project was supposed to go for 3 years. It's probably going to go for 5 or 6, but we're still generating only a couple of hundred thousand dollars a month of revenue. The next 2 I wanted to highlight because they are indicative of package sell-in for Acrow. So both the White Residences and the Capital Court Towers are both jobs that we are providing a range of products on, including screens. So the Queensland growth in our screens business has been a lot to do with being able to offer packages to builders around their formwork requirements, their primitive scaffolding requirements, and the screens requirements and both of those jobs are indicative for that. The next project is the Crows Nest metro station through the Sydney Metro project. Just, an indication of penetration to the New South Wales market on an $800,000 package that we've won on that job. And the last one here, I mean, it's actually the job that we looked at earlier, the Powershore 150. $750,000 plus in revenue on that job, not just the Powershore 150 but again, a range of other products that enable us to offer that package. We wouldn't have been able to do this without the introduction of the Powershore 150. And the Kolan River Rail bridge is a civil infrastructure project in Queensland. And then the next one is actually the big one really for us. So the Bruce Highway, Cooroy to Curra, part of this project. There's something like 40 bridges that have now been awarded to different subcontractors to construct on this project. We will be on all 40. So at the moment, the packages that have been lit there at 100% strike rate on what's going to be a very, very large project. The next group, busy now Piper, Snowy, Eraring, all in that Industrial Services space, all contracts we've secured in the last few months will add considerably to our FY '22 results. And the last 2 are screens contracts, one in Queensland and one in Victoria. Large contracts. Again, just wanted to indicate, the growth of our business in the screens business, and that form business outside of it's traditional New South Wales home following contracts of this nature and that include Mainland Victoria. Next, I just want to I guess, talk a little bit about the Acrow team and the culture within our business, and how that's developed over the last few years. We've got an absolute focus now on succession planning. It's something that I spend a lot of my, I guess, speaking time around making sure we've got the right focus and the right plans in place here, developing the depth of talent across the business that will -- it's so important for a company with our growth aspirations that we continue to inject new blood and make sure that our people have been developed for the -- have got the right career development opportunities, especially in the engineering space that I said is so important to Acrow's overall competitive advantage. We've had some recent appointments that -- sort of tracking some of the best talent, a new Victorian G in Brad Craven. Brad comes out of a large -- a long experience of managing sizeable businesses, servicing the construction sector in Victoria. And Peter Belden who came on board in the last few months has been absolutely crucial in our Industrial Services. In fact, Peter was a 40-year veteran of one of the major industrial services providers in Australia and made the choice to come and join the Acrow team, has been absolutely instrumental in assisting us with that growth. And just in terms of our culture, just we've got a much broader culture document than this, but I just wanted to pick some points out of it. But these are the things that we absolutely believe in. Safety first. We're a safety first acquirer. We are a customer-focused company. So they're a part of everything we do. It's about providing solutions to customers. It's not about meat and potatoes working although there's certainly an element of that, that's coming up with the best potential solution for a customer for their specific needs of their project. We want to set industry standards. We aspire to actually exceed whatever standards we're currently in the -- both inspected formwork and industrial services markets. Internally, we have a culture that's -- it's very entrepreneurial and it's very direct, but it's always open, honest, and constructive. And we do have a one-team approach. Whilst Acrow operates across a series of a branches with the branch network, the way I describe it is that we have a common approach, a common strategy in the business with very strong local ownership. That's the way I believe businesses run best, when there is a common focus, that there is at the group, that high degree of local ownership. That's all for me for the moment. I'll hand on Andrew Crowther to walk through the financials.

Great. Thanks very much, Steve, and welcome all. As Steve's already shown, our sales for the year went from $87 million to $60 million. When you add on to that very tight cost control during the year, combined with contribution margins that we maintained, we had a healthy increase in EBITDA of $19.5 million up to $24.3 million, a 25% increase. Now moving to EBITDA down to our pretax profit. Depreciation moved from $9.4 million up to $11.2 million. Now that's a $1.8 million difference, but the majority of that is caused by our friend IFRS 16. So $1.5 million of that $1.8 million increase is because of the lease amortization. So that's because, you'll probably remember, we did a lot of -- we renegotiated almost all of our leases last year, and this is basically the impact -- the full year impact of that. Now getting down to net interest. Our net interest moved from $2.5 million up to almost $3 million, or $0.5 million increase. Likewise, the majority of that is actually the IFRS 16 movement in the lease negotiations. Now here, we had a -- moving down to pretax profit. We are $7.6 million last year up to a $10.2 million pretax profit, or a 35% increase. Now the most significant move you'll see in the P&L, which I'm sure stands out a lot is our tax expense. Last year, we had a $300,000-odd tax credit. This year, a $1.5 million tax expense. Now just starting the tax credit we had last year, we go deep down into this now, last year, this credit was -- it wasn't anomaly but it was because of the -- essentially the Uni-span acquisition we had that allowed us to basically take up an acquisition sort of tax credit. So the credit we had was not, what do you say, a sustainable ongoing sort of tax expense. I think in the past, we've always mentioned that our ongoing tax expense would be between 11% and 12%. Now before I get onto this year's tax expense, I'll sort of reiterate, Acrow's -- before we took on Natform's renewed spend, we were a nontax-paying entity. So we had a lot of tax carryforward losses. And even at this stage, we have $45 million -- or approximately $45 million of ongoing profit that will be tax-free. But this only is in the Acrow, or the pre legacy business. The new entities being Natform and Uni-span are both taxpayers. So what we've had this year is we still have the non-- the Acrow business having no tax payable, but Natform and Uni-span, in particular, the Industrial Services business, have actually been more successful in the second half of the year than we essentially forecast. So what we have here, we have an underlying pretax profit -- sorry, an underlying effective tax rate of 14.8%. Now that's not bad thing. This means that the growth businesses in Natform and Uni-span is doing better than before. So ongoing, that's probably going to be a similar sort of tax rate. We obviously are always looking at this to maintain or to more efficiently use our structure but ongoing, that's probably what it's going to be. So that brings us down to an NPAT underlying of $7.9 million to a -- for this year, an $8.7 million underlying NPAT -- excuse me. And then down to earnings per share. The underlying earnings per share, which we mentioned before, was relatively flat, so $0.04 to $0.04. Now I think it's important to note, as we said last year -- this is all about tax. If you think about it, if you can have a similar tax rate last year of say 14% on the 2020, we would have had an EPS last year. Underlying EPS last year was roughly 3.3%. So we would have about a 20% increase in the year. So this is a tax issue. Going forward, we won't have that issue because this tax ruling will be -- will stay similar to what it is now. Moving below the underlying impact. We had significant items this year of $2.5 million. Now this is still mainly a hangover of the Uni-span acquisition. Included in this was some integration, IT and other sort of integration expenses. We had the final earnout calculation of $150,000 in this number. We have-- we also have another -- a number of strategic redundancies. This sort of stuff has been continuing on. However, it's actually coming to a finish now. We also had a number of maintenance and life extension expenses that we had to adjust -- that we had much to take out for some of the years that we've taken on that had we known, we would have taken that up at the first -- when we first acquired the business. Probably one of the big expenses within the significant items on -- now though is an additional tax expense of $670,000. Now the reason we haven't put that in underlying, is this tax expense relates purely to the pre-acquisition period of Uni-span being before around November 2019. So what we did when we've gone through our 2020 taxes and '21 taxes, we've had the ability to restructure some of the pre essentially asset holdings of Uni-span and essentially make the most of their pre-acquisition tax loss. And so without going into further details of it, if we've known this at the time when we acquired it, what we would have done is actually reduce -- increased the goodwill of Uni-span essentially and reduced the cost base at that time. But because we're beyond 12 months, we had to take up that $670,000 pre-served tax expense. So from an NPAT-reported $3 million last year to essentially $4 million this year. Also, as Steve's already mentioned, we've announced the final dividend of $0.0115, which takes us -- when you combine it with the $0.75 interim, that takes us to a $0.019 fully franked dividend, and we'll go into that a bit more in a moment. Now moving on to the balance sheet. From a balance sheet point of view, this is obviously pre the capital raise we have just recently done in July. Our net debt is up by $7.9 million. Now cash -- we included in that, cash is down by $5.5 million, net at $2.4 million. Now the big changes in that is we've had to pay the Natform and Uni-span deferred acquisitions back in October. We have elevated capital expenditure, which -- well, elevated for [indiscernible] in this year and obviously, dividend payments. Now from a working capital perspective, you can see our receivables are up quite considerably by $7.6 million. Now there's 2 reasons for that. Firstly, as Steve has already gone through our sales, were up by 22%. That takes quite a deal of it. And also because of the way that we're -- our sales are increasing, we've got some very light sales and we've got certain negotiated terms in those sales. So that sort of takes up the other increases there. Also, our inventory, you'll see is similar to what we were in the year. So we've made decisions to increase our inventory holdings to take into account the increased sales. But also, there is some slower often, as we all know, problems with international transport. So to a certain extent, we do have to hold more inventory. Down to the creditors, we had a big increase there. That's a similar increase to our debtors and given our sales going up, we've got more turnover of stock and so forth. We also had a lot of CapEx, which we'll go into in a moment towards the last quarter of the year. So a great deal of that credit in accrual relates to that. From a gearing point of view, the net gearing is 26.7%. Now obviously, we've just made a capital raise of $10.5 million, or $10 million after cost in July, and that net debt gearing came down considerably. Obviously, where that heads this year depends on our capital expenditure. But we do see that coming down during the year, but it will come down considerably in the '23. Moving over to page -- into the cash flow. So I'll take you through -- what this page gives us is the operating cash profit, which we -- and also our net debt bridge. So our operating cash profit is -- the way we've always defined this is our underlying EBITDA less maintenance CapEx and tax. So what you can see here, we've had to take into account that we've moved from pre to post AASB 16 that is. So for F '21, you can see we had underlying EBITDA of $24.349 million. What we're doing is we will take off the actual lease payments of $5.9 million, getting us down to a pretax EBITDA with $18.475 million. Now I just want to highlight that you can see the lease payments going from last year to $4.4 million to $5.8 million this year. We haven't got a whole lot of other leases. If you remember, we renegotiated our leases last year and included in that was cash-free period. So it's actually -- it's the same number just with more actual cash payments rather than new leases. So this year, we also had -- the next line down, we had IT and other office expenditure of $1.7 million. The majority of that was an IP one-off refresh. That won't be happening again -- happening again. We just haven't spent money on IT for quite a bit of time. Our maintenance CapEx, $4.4 million, up from last year's $3.6 million. This year, however, below our top-line marked dollars of PP&E depreciation. And we had cash tax of $556,000, that actually related to the 2019 tax. Just to give an update of this year's tax, which -- what you'd expect next year is we don't believe we'll have any tax payable for the '21 year due to lower depreciation. However, ongoing tax will start being actually paid. So it's actually just down to a cash profit of $11.833 million, however, when you take off the one-off IT refresh, we have a $13.2 million operating cash profit. Now our policy is to pay between 30% and 50% of operating cash profit and dividends. When you take into account the operating cash profit of $13.2 million, our dividend paid for the year will be approximately 34%. So that's sitting in between the 30% and 50%. And given the fact that we are a high-growth company at the moment, that is a pretty healthy dividend that we're paying out. Now moving down to the net debt bridge. You can see we started the year at $14.6 million net debt and ended at about $22.5 million at the end of the year. Now the only thing that's worth really highlighting here is that our cash flow from operations of $23.8 million. Really, most of that cash in the current year is used from a growth perspective -- from a growth perspective. Our significant items from a cash perspective is $950,000, but we've got CapEx of $17 million and we have deferred consideration of $3.6 million. So putting all these together, that's about $22 million, about $23.8 million. And as you can imagine, when you -- if you reduce your CapEx and you don't have those preferred considerations, which we won't have after this year, the cash will really start pouring in and we see that gearing level come down. Now moving on to capital expenditure. This is a similar page that we have every year. You can see that moving through the 2018, really -- we had underinvestment in CapEx. And in 2019, the Natform investment, 2020, the Uni-span investment. And also within 2020 and '21, we had the big pivots towards Formwork and now in Industrial Services, plus all the organic growth we're having. So in the current year, $16.2 million, growth of $10 million, with the one-off expenditure of $1.7 million, and we had maintenance CapEx of $4.4 million. Now from an ongoing perspective, I think you'll probably find that the CapEx profile will be fairly similar just because of the growth profile we have in front of us. To the right of the page, you'll also see just a summary of the CapEx -- the growth CapEx as we had during this year that I think confirmed that we still operate at a 40% return requirement -- a 40% ROI from the growth CapEx. And all these ones have been improving so far to be more than, in fact, that 40% return on the growth. And in fact, if you actually have a look at that growth CapEx, it's about $4 million roughly is related to the Industrial Services in Natform part of one-off going on the floor with the growth involved in those. With that, I'll hand you back to Steve.

Thanks, Andrew. Well, I'll just wrap up, folks, talking -- just want to reiterate. Our strategy is consistent. It's core. It's live. It's what the business is about. We restated this in all our presentations, and it's consistent. It's about being -- maintaining our position as the leading formwork sales and hire equipment provider, becoming a leading engineered scaffold solutions provider to the Industrial Services market. It's about people. It's about ROI, organic growth spreading in the range of products that we have across the geographies we operate in and continuing to look at acquisitions. We don't really have anything again that might apply at the moment. But if something fitted our strategy and also fitted our return of requirement, we are an acquisitive company. In terms of the short- to medium-term growth opportunities, you can see again, they're consistent. Industrial Services, tracking that market across the East Coast of Australia and I would say, I've got a very strong eye now in Western Australia. We know there's some opportunities that will probably open up there for us in the next period of time. Formwork growth in Sydney. And probably the biggest one in terms of growth, this time next year when we're talking about our results for FY '22, I'm sure we'll be talking about Formwork Queensland. 50% plus market share in a market that is really growing in infrastructure and also commercially, huge opportunity for us in the space. And certainly kicking into the second half of this financial year, I'm expecting to see numbers that going up similar where they are today. Continuing to grow the Natform market share in New South Wales, and Victoria and Queensland; continuing the spread of product range across the country; and continuing to focus on product sales of -- just in the last few weeks, very significant product sales have presented themselves to us; and we're taking advantage of that. In terms of the outlook for next year, then totally. So we have been pretty consistent in the last couple of months in saying that we are targeting 22% better than -- also better than 20% growth in revenue and EBITDA for the FY '22 year. We continue to maintain that position. But just -- off the back of what Andrew was explaining earlier around why the NPAT and the EPS hasn't moved year-on-year as much as you would expect them to do with the sort of growth we have had. That said, the tax situation corrects itself. Depreciation flattens to a large degree. And that's why we're very confident in the underlying NPAT and also our EPS been growing circa 40% plus. off the back of a similar CapEx spend in '21 than what we had in '20. We have this degree of confidence around our results off the back of that secured hire contracts number. We have successfully completed the capital raise. It assists with our development in terms of that capital growth without -- without going into further debt, which is a problem the company was quite keen to do. We were keen to continue our growth pattern. Formwork activity levels, as I mentioned, especially Queensland, further work in Natform; growing that Industrial Services business just by itself from up to $31 million and $15 million worth of sales contribution. And just finally, a comment on COVID because we have seen some COVID effect in the last couple of months with the construction industry shutdown in New South Wales for a couple of weeks and the restrictions that are still in place there at the moment. We did lose around about $300,000 to $400,000 of hire revenue in the month of July. However, that revenue will come back at parts of those projects. We don't lose that revenue, which just gets the third to win that from those projects, kick back in and get ultimately completed. So at the moment, whilst there was a short-term impact on the July profit for the business, it doesn't change on one iota in our position in terms of our forecast for the total year. So that's it from Andrew and I. Thank you. And we now would go back to any questions that -- any of the participants may have. Thanks.

[Operator Instructions] First question we have from Alex from Morgans Financial.

So I just had a clarification question on the outlook guidance, please. So revenue and EBITDA growth in FY '22 of over 20%. And then underlying NPAT and of EPS growth of 40% plus. So would that factor in the valuation from the equity raising last month? So if it does and I'll presume, unlike NPAT, would growth would be greater than EPS growth because of that dilution?

It does factor it in, Alex, as a short answer. Yes, it does.

Okay. Great.

Yes. I'm just saying -- what you're saying is Steve is right. But at this point in time, we're staying with those percentages that Steve's mentioned.

Okay. Great. And then just on the -- I was just interested in your trading for the first couple of months of FY '22. So you mentioned that the COVID impact in July was up $300,000 to $400,000. If that -- could that potentially not come back in FY '22? And maybe it's more -- it's perhaps $400,000 again in '23? Or -- yes, just interested in kind of, I guess, the risks to a potential from long lockdown in New South Wales and Victoria, please?

So the August results that we are pretty much getting close to finalizing will have no impact of any construction shutdowns in them. So the -- effectively, what we had to do, Alex, was we don't like to prefer hire revenue. We've got a view on sites. But the fact that the whole industry was shutdown for those 2 weeks, to be perfectly frank, we didn't want to reduce hire, but we've sort of forced the positions, most of our competitors or all of our competitors were. That revenue will 100% come back over the course of this year. And in terms of trading, this -- you'll see at the half year for these next few months. The month we're at the moment, and our very accurate forecast at the moment has taken that out to at least November. Very, very strong.

Next, we have Raju Ahmed from CCZ, please.

A couple of questions from me. Steve, I just -- I could well be wrong, but I suspect Acrow has more recently been a bit of a collateral damage from some of the, I suppose, commentary -- outlook commentary from Boral and [ Edinburgh ] and a couple of others saying that infrastructure environment is subdued. Can you just give us some color around what you think where the disconnect is in terms of what they're saying and what you are seeing and clearly demonstrating? Is it to do with timing? Or is it are you growing market share? Can you just give us some color on that front?

I have to say we were totally bemused by the Boral release yesterday. I mean, they are a far bigger company than us clearly, but we were -- we actually were sort of shaking our head a bit because that's not our experience at all. So I can't -- I don't really understand what's going on in their business. It's different to ours. What I do know is -- and we highlighted that in the Queensland picture. The biggest road project in Queensland through a long period of time has kicked off. We're on it. That's going to generate enormous amount of revenue for us. Well -- it will be our biggest project over the last -- over the next 2 years. Now I don't know whether they've got exposure to that job or not, but we do. The rail projects continue at an enormous pace. The Sydney West Metro contracts have been awarded. And that project won't kick off for another 12 months, delayed in late months, but the contracts have been awarded. We're in discussions right now with companies that have won head packages on that project. The Snowy infrastructure project is going ahead of pace. We're getting penetration there. I just don't understand how anybody could be pointing to that picture. I mean, the only thing I can say is that if we -- as I said it again earlier about the -- this 70% uplift because we know it won't be 70%. So if some businesses were forecasting to get back to kind of growth off the back of that, then they're going to be misled. But you've got to look at where the projects are. And I think that was the point that I really wanted to make about the chart. The projects are in Queensland for us. That's where the biggest increase is going to be in the next 2 years. And we've got 50% plus market share in Queensland. And on that Bruce Highway project, we will be bidding 100 at the moment. Every package that's come out, we've won. So I don't know what -- I don't know -- again, I don't understand how people participating in that market have been talking in that nature. But certainly, from our perspective, our pivot to civil infrastructure away from residential was the right thing to do, and we're going to continue to grow our business of the party off the back of that.

Okay. The second of 3 questions, if I may. Again, Steven, into the Queensland market, given the scale and scope of the projects that are there, like Bruce Highway, Inland Rail, and you talked about Cross River Rail and so on, do you foresee inflationary pressures? And how do you sort of transfer that into pricing and margins? Is there that opportunity as the next 1 to 3 years progress?

Look, I think one of the factors, and now our Queensland manager is very tuned into this new, and he's done a really great job even in the last few weeks with making some adjustments to his pricing. The cost of equipment is going up. So the purchases of new equipment out of both Europe and China is going up at a reasonable pace. And a lot of that has to do with freight costs. I think most people would understand that. So raw material costs are going up. The freight costs are also going up. So the cost of a piece of capital compared to what it was 12 months ago, it's probably gone up by 15% to 20%, and a lot of that's to do with freight. So our Queensland manager has been leading and charging and adjusting pricing expectations -- his customers' pricing expectations to take account of that. So I mean, I don't see this as being a negative for us. We've got very good channels still to get material in the country. We know a lot of our competitors can't do it at the moment. So it does become some kind of I guess, supply shortage or pressure on that. I'm sure we can take advantage of that. But I don't factor that in our forecast. I factor market share maintaining and current rates maintaining. And just off the back of those 2 factors, I see what the numbers potentially look like.

Okay. That's helpful. The third question is more broadly around the business. And thinking about the link between CapEx and your revenues and earnings. Look, I don't have the exact numbers in front of me, but roughly around the 45%, 50% mark of your revenues are on the sales side and then the balances in the hire. When do you -- what is the lag between a CapEx -- a $1 CapEx decision today and revenue coming in? Is it 6 months, 9 months? How do we think about that?

Yes. It's -- you almost hit it right on the head, it's between 6 and 9 months. So we're making CapEx decisions at the broad at the moment. We've made them in the last few days. And those -- and we know that the revenue -- of course, to start -- this is this issue, I guess, now of getting product out of the market to the manufacturing market. So if we order product today, we won't see it until January, February. So we know that. So we're making decisions at the moment about further investments, knowing that we won't see revenue from that decision until certainly the second half of the year and primarily the last quarter. So yes, it is a 6- to 9-month lag in terms of the investment and when you see the -- when you start to see the return. But again, we know we're factoring into our forecast at the moment, the full year return on the products that we're buying will give us better than 50% uplift in profit.

Sure. Okay. And just to understand that with one follow-through question, is tendering activity is clearly high. So is there an expectation or discussions with clients that, look, if you want x, y, z projects to start in the course of financial year '22, the CapEx -- the orders need to be done by October. Is there that pressure building up given the high levels of project work in the pipeline? Or...

Yes, I think it's becoming a realization for a lot of our customers that they've got to work a fair way in advance unlike they're used to in terms of making their buying decisions. And certainly, especially in the Formwork area. It's not so much pressure in the industrial scaffold market, or Industrial Services market and then we can get new products there still relatively quickly and mostly from an Australian supplier. But in the Formwork area with specialized gear, and we're having these discussions with [indiscernible] with CYP, the Melbourne Metro project. There's discussion going on now on a regular basis about what the 6-month to 7-month programs look like, not the 1-month program, knowing that we've got -- it will take the time to get the equipment required to do the work. And I think that's just becoming -- that's becoming well accepted by our customers.

Next, we have [ Douglas ] from Excellence Investment.

I've just got 2 questions, if I could, and a great result. Really got the business going nice and I like to look at it. My first question is this. On the MK, you have product meant from them. What's the view going forward that we get to keep that arrangement, that franchise?

So we've got, I think, about 18 months to run on the current arrangement with ULMA. And look, we're in pretty consistent discussions with those guys about what the future looks like. Look, you can't foresee the future. But I mean, I think, to be frank, we have -- our requirement for equipment from ULMA has been outstripping their ability to supply. So I know from discussions with them, we're actually making more demands on them for equipment than they are certainly used to in the Australian market, and that's putting some pressure on them. So I don't -- I mean, that's not necessarily a negative thing to some degree. I mean, we've certainly also been able to source some very, very good secondhand, brand-new almost secondhand ULMA equipment from some other overseas markets to sort of chop up supply of equipment that they're unable to meet. So we're tied for them as our primary -- manufacturing primary formwork system supplier. They're tied to us as their avenue into the Australian market. So I'm very confident that, that arrangement will stay in place for a long period of time.

So even as your business grows and grows, they might like to just all of a sudden say, "Look, I think I can do this on my own?"

I think that's highly unlikely. I mean, they don't have feet on the ground in Australia. It's not the way they normally operate. They're different to the prairies and dockers of this world who do that. ULMA have -- they have arrangements with different contractors in, I know, in South America, for example. They've got people that work with them over there. They've got guys in the U.S. They don't have operations in those locations. They have similar arrangements they have in place with us.

Okay. All right. That's good to hear. Then, the only other question I've got is, just going forward on the significant items and the share-based payments, are we expecting anything at all or similar amounts of that in 2022?

I'll let maybe let Andrew answer, but I think, look, significant items will certainly significantly reduce outside of share-based payments. I mean, look, we have just been washing up a whole range of acquisition -- Uni-span spend acquisition issues over the last sort of 12 to 18 months, the sort of 18 months since we bought that business. So we've been washing up those issues and they're basically -- they're finished now. Share-based payments, Andrew, do you want to comment on that?

Yes. Look, share-based payments will continue on. The amount of them is a little bit hard to estimate because when we've given you new issues, it all depends on the -- detailed calculation goes into it. But it will probably be around $2 million, I would think, ongoing. But that's significant items in an investment. In general, it's an investment amount. So that should be significantly very low next year.

Okay. So you're looking for significant items of share-based payments around the $10 million mark?

I think very little in significant items, I would hope that would be, candid, in the low hundreds, really. But the share-based payments, Andrew, it's a bit -- it's hard to nominate because it's sort of I can't -- to be honest, I can't work out how we come up. It's a mathematical calculation on the likelihood of rights being granted.

At this point of time it's [indiscernible].

Okay. Fair enough. All right. That's fine.

There are currently more questions in queue [Operator Instructions] There are currently no questions in queue. [Operator Instructions] As there are no further questions, I will now hand the session back to you. Please go ahead.

Okay. So thanks, everybody, for participating. I think that's a wrap for this morning. So I know it's a very busy period of time for everybody, and I appreciate you taking the time out today to hear what we have to say about our results. And I'm extremely pleased with the way the business is running. I couldn't be proud of the people involved in it. And we're heading in a great trajectory, and that will continue. So thanks for your support of Acrow, and we all look forward to talking to you all again at the half year results. Thanks very much.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.