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

Ladies and gentlemen, thank you for standing by, and welcome to the Acrow First Half Financial Year 2022 Results Conference Call. [Operator Instructions] I must advise that this conference is being recorded today, Thursday, the 10th of February 2020. I would now like to hand the conference over to your speaker today, Steven Boland, Chief Executive Officer; and Andrew Crowther, Chief Financial Officer. Thank you. Please go ahead.

Thank you, James, and thanks, folks, for joining us this morning as we go through our investor presentation that we released last night in the relation to our first half FY '22 financial results. So I'm very pleased to present our unaudited interim results for the first half of FY '22. I'm extremely proud of the team across all departments and all of the branches in the Acrow business, and the really strong growth we're experiencing is clearly a testament to their commitment, providing our customers with first-class products and engineering services. Firstly, the key financial metrics. Clearly, we're really happy that they're all going in the right direction. Strong revenue growth of 38% from the prior corresponding period, up to $69 million for the first half. EBITDA up 51%, up to $16.7 million. NPAT, up 118% to $8 million underlying impact. Again, very happy with our EPS growth of $0.0328 per share for a half, up 94%. Also pleased to be clearing a $0.012 partially franked dividend for the first half results. And I'm especially pleased with our return on equity continuing to improve, going north, which is a clear justification that the appropriateness of our capital investment program over the last few years is certainly showing dividends and paying -- the result clearly shows that the returns in the business are improving off the back of that capital investment program. In terms of the key achievements for the first half of '22. That key lead indicator that is so important to our business and also to our future forecasting and success of securing hire contracts. We had another very good result. We're up 33% year-on-year in secured hire contracts, $23.4 million for the half. That's continued already in the second half. We had an excellent result in January, where we were up another couple of million dollars on the previous January. So that's all going well for us. Pleased to say that the improvement in the results this year is all at the back of organic growth. Not -- the impact for acquisitions is now over 2 years since we made the Uni-span acquisition and 3.5 years since we made the Natform acquisition. They are blended in completely part of Acrow. And so this is a sort of slightly off the back of organic growth. And we have had, I mean, we've sort of declared this quite frequently about what we were expecting to see in Industrial Services over the last 6 months and going forward. Our revenue up 158% year-on-year, sales contribution up 76%. I'll talk a bit further about what that's come off the back of and how important it is to provide this very strong balanced earnings in the business to complement our Formwork earnings. We have been planning for some time that we would be going to see significant growth in Queensland Formwork, which has been our flagship Formwork branch for a long period of time, and we have definitely seen 80% growth in hire revenue compared to the same period last year. And again, I'll talk a bit further about the -- what's been driving that. The next point there about WA, SA, Tas is probably one of the things I'm most pleased about in this 6 months. One of the real pushes in the business has been to get ex Uni-span/ULMA product into markets where we didn't previously have the opportunity to hire those products out. And that's primarily with Western Australia, South Australia and Tasmania. So we've been really successful and continue to be successful in getting -- opening up new channels to revenue off the back of our wider product range and between those 3 branches. Revenue was up 62% and sales contribution was up 118%. So that's a really important thing in terms of generating further growth in the business. And the last point around supply chain. Look, it's a very challenging area clearly globally at the moment. We're not immune from that issue. But we've taken some really significant steps to minimize the impact. And our approach is let's try to turn this negative into a positive. And I'll talk about that a little bit later. And clearly, in some very strong areas, we have actually turned this into a positive in terms of generating more revenue and more profitability. In terms of major transport infrastructure projects. I'm not going into sort of project by project, that we may have rolled out in the past. But that's the dollars projected to be spend in major transport infrastructure. You can see we're not predicted to hit the peak of this until FY '24 and we'll state levels we are in FY '22 for the rest of the next 5 years. And this is -- we're talking transport infrastructure projects here. We don't include things, for example, like Snowy Hydro, which is the biggest infrastructure project in the country probably in the next 5 or 10 years. Very pleased that we are getting significant revenues out of pretty much every one of the major transport projects in the country. Our biggest revenue-generating project for the year, this year, will be the Bruce Highway - Cooroy to Curra in Queensland. We've won 2 very significant packages on that project, and we provide hire equipment. We have -- we're selling consumables and also providing labor across that project. And that will generate over $10 million of revenue in our business this year. Melbourne Metro Rail, we're pretty much betting almost 100 at the moment on winning every new package that gets left on the Melbourne Metro Rail. It will generate more than $5 million of revenue for us this year. Western Distributor has been going for some time and continues to operate for us of $3 million this year. And the Sydney Metro Rail, I think the important thing here is that we've -- whilst we've done $2.5 million on the existing Metro Rail project, is what we're looking forward to now with the next 2 -- the Inner West Metro and then the Sydney West Metro that -- those projects are kicking off in the next sort of 12 months is what we think we'll be able to generate looking forward, significantly more revenues than what we've done with Sydney Metro. And Cross River Rail is still pretty much in its infancy for us, but we will do $2.5 million plus revenue on that project this year. Our Formwork revenue by state, which is obviously one of the key drivers for us. You can see the great growth in Queensland year-on-year from $10 million to $13 million. You can see Victoria has continued to halt from that dramatic growth that we experienced over 18 months ago. New South Wales, that number is a little bit -- of the stock, it's not really representing the true picture, the New South Wales' hire versus total revenue that we're showing here. But the New South Wales hire revenue has actually doubled over that period. In the '21 year, New South Wales got the benefit of a lot of revenue from sales of ex-hire equipment as part of the rationalization of our fleet when we purchased the Uni-span business. So that was all done. That was completed. That contributed around about $2.5 million to $3 million in that number in the first half of '21. So say, in actual pure hire revenue, the revenue has doubled. And as we go into the second half of the '22 year, the New South Wales business is really going ahead leaps and bounds. And I think by year-end, you'll see a significant uplift in revenues coming out of Formwork in New South Wales. And in Western Australia as an example of those 3, what we call smaller states, you can see that Western Australia revenue has doubled between '21 and '22. And its profit is significantly higher. So we continue to grow our Formwork revenues. We are growing in every single state, including New South Wales. As I said, you'll see where we get to sort of full year '22 numbers. And this is still the key profit engine of the business. Our hire equipment wins, as we mentioned earlier, up [Audio Gap] Securing work and a very strong picture in terms of what's in the pipeline going forward. Sorry, I'm just going to note to say the call's just cut out. It's back on. Sorry, sorry. I apologize. I was just going to text this to someone saying the call must -- just dropped out and it's come back on. Talking now about our engineered systems and services. So the absolute key to the change of focus and the results of the business over the last 4 years has been our focus on engineering. Now 85% of our revenue comes from what we have classified as engineered systems, Formwork and industrial rather than 43% 4 years ago. We really are focused on providing our customers with engineered solutions to save them time, crane time, labor time, all things that are obviously very expensive items on projects. And becoming more expensive, the cost of materials and labor, et cetera, on construction project is clearly going up. We have invested a lot of, I guess, effort into our strategic investment into people and our engineering capabilities over the last 4 years. We've doubled since listing the number of engineers working in Acrow and that continues to this day. So it's a totally commercially focused team. The whole focus on engineering was led by Matt Caporella, who has been the National Engineering Manager for the last 2 or 3 years. He's recently been appointed now as the Chief Operating Officer of Acrow. And we've brought into the business as the National Engineering Manager working under Matt, a gentleman by name of Evan Field, who is going to take us again to another level here. Evan ran his own engineering consultancy business in Queensland for a number of years, very successful, very well regarded by both their customers and actually some of our competitors. And Evan is going to help drive a more broad approach to providing turnkey solutions to our customers across a range of all products, not just the Acrow service offerings, but also providing advice about general engineering services to each of our customers. So this is the key. It is absolutely the key to the growth of what's been the growth to turn around in the business. And I'm very proud of the engineering team that we got within Acrow. I mentioned earlier, we are on all these marquee civil projects. So you can see we are -- where all the key projects in the country. We also mentioned Snowy, I'll talk a bit more about Snowy in a second. Giving some of the best examples of our engineering expertise, how they apply in the field. So the first project, which is the part of the Western Distributor. This example, it was a very unique Formwork requirement. And it was clear that we weren't going to be just able to utilize existing Acrow kit to provide the solution the customer wanted to this particular part of the project. So we came up with a specific design manufacturing equipment. It is a bespoke fashion just for this project that we sold on to the project and is working extremely well for the customer, providing a very good return for us. And again, it's an example of -- we're not just looking at solutions that use our hire equipment. We will come up with the solutions that require some manufactured equipment and then we'll go ahead and manufacture the equipment and sell them on to the product -- on to the project. The second, which is, if any of you drive over the edge of that bridge, you can't miss this now. The vent shafts on that project are standing at very high into the sky. And I think this is almost like the opposite to the first project that we mentioned on the Western Distributor. This required us to come up with a solution using existing Acrow equipment. So the customer didn't have to go and buy a whole range of manufactured product as it would have added a lot of expense to this particular project with the vent shafts because of their quite unique design. So our engineering team came up with a solution using our own gear, adapted in a certain -- in such a fashion that, again, the client here, which is Seadar Constructions on this part of the project, were able to not have to spend a lot of money on buying specialized equipment that was just being used on this job. They instead had basically a hire solution by adapting our Acrow fleet onto the job. And the last example we give here is just what -- this is really a classic example of now the combination of Acrow, Natform, Uni-span into one business. So this project, the landmark project started off as a screens job for us, and it was quite a complicated screens job that we needed to design specifically for the design of the building. But off the back of the screens, we finished up providing, basically, the whole range of our commercial Formwork products to the cuplock, Uni-mesh, CC-4 Formwork as well as screens driven by hydraulic units and also handrail system. So this is a classic example of bringing those 3 -- what would 3 disparate businesses together now as 1 unit and providing complete solutions to customers such as this example. Supply chain management is clearly a challenge. It's a widely understood, I mean, global issue. And it's certainly, as I said before, not without challenges for us, but we're turning it into a positive for the business. So in 3 particular areas, we've got clearly extended delivery times on new equipment due to logistics issues and also availability of raw material. So it's sort of pushed us to go and see whether we could find good quality secondhand material on the global market especially in the CC-4 category, which is a very strong Formwork category for us. And we found a supply of very good quality equipment in North America that we've been able to get our hands on at a significantly reduced price to the cost of new product, and it's basically almost as new. So that's given us both an advantage in terms of getting the gear here earlier than we otherwise would and also in terms of the cost of the new capital coming into the business. There's clearly as well a sort of shortage of shipping containers and a lot of increased freight costs across the globe. We've come up with a way by -- basically bypassing intermediaries and we're dealing directly with shipping lines to secure availability and competitive pricing. Now our cost of containers is still going up significantly, as everybody's in the world has, but it may not be -- it might've done some sort of benchmarking with some people I know who work in the logistics game about what we're paying for containers directly building the shipping lines and we're paying less than a lot of global logistics companies that are specifically paying shipping lines. And the third area is really important to our supplier trades. And clearly, we've had a working capital in costs off the back of increasing our sales and also in terms of decreasing cost of logistics. But we've been able to actually minimize that impact by having strong negotiations with a lot of our suppliers on trading terms. And where do we turn this into a positive? Especially it's coming out in the category of timber and ply sales. So our timber and ply sales have gone up dramatically in the last 6 months and, especially in the last few months, and still going forward into the second half of this financial year both in volume and margin. That doesn't come without working capital impacts, but our margin on timber, which used to be lucky to be sort of 10%, 12% is now running at around 30% on vastly increased volumes. So we turned this global issue around supply and supply of timber into a benefit into our business. In terms of the numbers and the breakdown of our segments. You can see Formwork -- total Formwork revenue up $4 million; Industrial Services, clearly, the big generator, revenue growth, $13 million; and Commercial Scaffold was up $850,000. Contribution margins, though, as you can see, Formwork margin up by $5.8 million. This is the big profit contributor off the back of the hire revenue growth. But Industrial Services including the $3 million in 6 months is a great result and a flat result in Commercial Scaffold, I'll talk a bit about that later. When you grow the business to this degree, you are clearly going to have increases in costs, both in your yard expenses and in labor because we are employing more engineers and actually more salespeople. About 65% of the sales contribution is passed through to profit. So I think that's a great result when you can grow to the level that we are and still get 2/3 of the improvement in your sales contribution pass through to your bottom line. Our sales contribution bridge. So this is what -- this is what I want to say. I want to say that where we're investing our capital is where we're getting the growth. So we're investing our capital in Formwork equipment. We're investing our capital in some Industrial Services. We've had $6 million of Formwork higher growth in this period. That's basically all off the back of capital investment. And we've had combined between scaffold -- industrial scaffold hire and Industrial Services labor hire. We've had a $2.2 million improvement in contribution over this period. And again, we wouldn't have got that without the capital investment program that we've undertaken. In terms of the segments. Again, you can see Formwork hire, as I mentioned, is the big generator. Product sales, whilst it shows has been flat, that is again because of a lot of the sales in the previous 6 months, previous financial year. We generate it out of split rationalization from excise sales off the back of the Uni-span acquisition. So all macro equipment that we didn't do, we are able probably going to sell and rationalize that fleet. But that's been significantly offset by, as I said, primarily the timber revenue and margins that has increased so significantly over this period and is continuing to do so today. So again, good growth in revenue, great growth in contribution and very pleased to see the growth at the beginning out of Western Australia, South Australia and Tasmania, as I mentioned earlier. Industrial Services is obviously the story in terms of total revenue growth, $13 million. Clearly, a lot of that revenue comes in labor hire, which generates around about an [ 18% to 19% ] margin for us, which is still very good, very happy with that business. Product sales, whilst -- the margin has taken a bit of a tumble this year. Now a key to that, and you can see the number of $8.4 million is a very high revenue in product sales. We made a strategic decision to sell quite a lot of new equipment onto the Snowy Hydro project at lower margins that we would normally sell to. Now we're still talking 15% to 16% margins on very big sales, of which all we do effectively is place an order and then it gets shipped. But we've made a decision to take a lower margin to get a strategic footprint on that project. It's going to be such a huge Formwork project into the next few years. But for us to be such a strong supplier of equipment and [ labor ] on to that job already, you're going to be able to make 25% to 30% margins on that project selling new equipment. So we've made that strategic decision. We're betting at about 100 here on almost every contract, every contract we're targeting. The key project wins are Visy, I mentioned Snowy, Mt. Piper, which we're just building a shut now. It wasn't forecast to happen until the first quarter of the next financial year, has been brought forward. We've mobilized that in the space of about 3 weeks. That shut is going to generate about $3 million of revenue and about $800,000 of EBITDA that we didn't expect to have until first quarter of next financial year. So a great story and that we're continuing to push here. It's certainly part of the Acrow story going forward. It's a very stable earnings platform, complements what we do in our Formwork business. Commercial Scaffold has been flat, which is not bad. But I think, look, one of the things I want to point out here is we had continued to do a number of reasonable scale projects. And as you can see, the labor and cartage margin year-to-year has deteriorated. We've made a decision across the Eastern Seaboard states, Queensland, New South Wales and Victoria, we're just not going to bother. Now in tenuring on large-scale Commercial Scaffold projects in those states, it's not worth the effort. And we can get far better returns, just focusing on dry hire and small-scale projects. And there'll be reductions in costs of moving gear around and also in labor internally by just focusing on small stuff. It's too competitive at the high level. And recently, there was a large project in New South Wales that we were interested in compared to the 1 at a price, it was like 50% lower than we would have been, almost our breakeven point. So it's just not worth the effort. We'll still generate good profit and revenue at a dry hire and smaller projects. Key contract wins. I won't go into these, but you can read those at your leisure. But I think the main point that I'd make here is that is across all sectors and geographies. Industrial Services, Formwork, commercial -- there are some Commercial Scaffold projects in Queensland with Hutchinson Builders. And then screens projects in New South Wales. Screens -- well, in [ Flemington ] on the second page, a very large screens project in South Australia, which will only be our second ever project at this nature in the South Australian market. Tasmanian projects. So we are winning good sized new contracts across all sectors and across all geographies. I'll now hand over to Andrew to run through the financials before I wrap up on our forecast and our outlook.

Great. Thanks, Steve, and thanks for joining us today. So as Steve has already talked through, this period has been a pretty large growth period, as you can see from the results on the balance sheet, which we'll go through in a moment. So what it's really showing you is that the CapEx that we've spent -- the elevated CapEx we've spent the past couple of years and the 6 months and also pivot towards Formwork and, in particular, the acquisition of Uni-span, which gave us the sale of Industrial Services business, is really starting to allow this business to hit scale, and we'll go through that in the P&L. So Steve has already gone through the EBITDA. So $11.1 million up to $16.7 million. I mean that's been bought around from the increasing contribution that Steve's already mentioned. Our actual operating costs reduced as part of contribution from 61% last year to 55%. So we're keeping a good control of cost there. When we move down, depreciation, it's basically gone up with our increase in property, plant and equipment. So that's been stable. Our net interest is relatively stable to last year. And last year, there's a bit of an anomaly because we still have the third acquisition cost, which had embedded interest in that. So our pretax profit increased from $4.2 million to $8.8 million, so 109% increase. Tax expense, as you can see here, our actual tax -- effective tax rate has gone from 12.7% down to 8.9%. As we've discussed before, we do have quite a large amount of carryforward tax losses being around $15 million of tax, which translates to about $50 million of taxable income we can offset. So we obviously structure ourselves to make the most of that carryforward tax. So a relatively low effective tax rate or a very low effective tax rate. So pleasingly, what we have, we get our NPAT underlying increased from $3.4 million to $8 million or 118% increase. Now then the difference between NPAT underlying and NPAT reported, we have 2 items, significant items. We had a bit of a hold over from some acquisition and some adjustments we had to make, some system changes and some advances, we still have to go. So that's basically the end of that part. And we also had share-based payments. So you can see last period, we had a $1.2 million expense. This period, we had just under $400,000 now. That's a bit of an anomaly. There was quite a few long-term incentives that didn't vest last year. So we're able to make the use of accounting standards. We're able to write back around $400,000 of those LTVRs in the profit. So that part is likely to be higher in the next 6 months, but still NPAT reported from $1.7 million up to $7.4 million, almost a 300% increase. So this is where we're seeing scale both at a pretax profit and from a tax and NPAT point of view. Now what that translates to is, as Steve has already mentioned at the beginning, EPS has increased from $0.0169 to $0.0328 per share or a 94% increase. Now we have to take into account -- that also takes into account in the denominator. We issued 33.6 million shares in this 6 months. That included both the $10 million -- $10.5 million share issue we did plus options and LTVR divested. So that $0.0328 is not just on the back of increased NPAT. It's also taking into account increasing the share base. So that's very pleasing. This dividend has been announced last night of $0.012, which is 20% franked. Now that's -- if you think last interim was 0.75, and last final was 1.15, but because of the profits we've delivered, that's even more than our last one. Moving over to the balance sheet. So from -- with the growth in our profit and growth with CapEx we'll go in a moment, our net debt increased from $22.4 million to $28.9 million. Now the net debt is up. We've had $13 million of capital expenditure, and we made a payment of -- the last payment of the deferred consideration for Uni-span of around $3.5 million. So that's sort of the main difference in the net debt. One of the things you remember from June, we had quite a large current deficit about just over $8 million current deficit. At December, it's now flat. So we've actually seen -- this period have seen a massive strengthening of our balance sheet which really set us up for the next 6 months and the future. Now Steve has already mentioned it. One of the things we're going through at the moment, we all know it, we're going through a worldwide pandemic supply chain issues, we've got delays in receipts and costs have gone up. Now that's obviously impacting us in our working capital. And just to go into part of that working capital. Our receivables have gone up by $1.2 million. Now that's only a 5% increase compared to 38% increase on sales. So we've really contained what could have happened with receivables. Our debtors days have remained stable at 56 days, which is very pleasing. We're not seeing any deterioration in that. However, when we look at the inventory amount, our inventory has gone up by $3.5 million. That's quite a large increase, about 39%. But really, that's pretty consistent with the increase in sales. However, if you look at our prepayments, up by almost $3 million. Prepayments are very -- most of that is prepaid inventory in stock that we -- basically, that we haven't received yet. So -- and also creditors have gone down by $1.7 million. Now those 2 combined, just over $4 million, that's really because of these logistics and supply chain issues. Now this could be much, much worse if our current team hadn't bettered our supply terms and basically our freight. So this is actually not a very good outcome compared to what it could be. But saying that there has been a very large working capital cost in the 6 months because of the supply chain issue and also because of the increase of our -- just in our results. What we -- the only other thing worth mentioning in the balance sheet is obviously our property, plant and equipment has increased by almost $10 million. That's on the back of $30 million of capital expenditure and, obviously, depreciation and some sales that's higher. So we'll move over to our cash flow. Along with our increasing contribution and EBITDA, our cash -- the way we define cash operating profit is our pre-AASB 16 EBITDA, less maintenance CapEx and tax. As you can see, our cash operating profit has increased from $5.5 million last -- first half '21 to $10.186 million this period, so an 84% increase. And that's basically how we pay dividends between 30% and 50% of cash operating profit. Our interim dividend is just below that 30%, but we see us getting within that range on the final. Below is our net debt bridge. So this just shows you how we get from $22.5 million net debt for June through the $29 million in December. Now our cash flow from operations of around $7.4 million was actually down by $3.3 million from the previous period. Now as I've said, as we've gone through with the logistics, just our increasing working capital, that reduction of $3.3 million, we've got to compare that to the fact that our working capital costs on inventory prepayments and creditors has gone up by $8 million. So that $3.3 million compared to an $8 million cost is a pretty good outcome. Now that is -- the other thing to mention here, as you can see further to the right of that diagram is we've got $30 million of CapEx and deferred consideration of $3.5 million. In the next 6 months, we don't see CapEx being that higher whatsoever. And we obviously won't have any more deferred considerations, they're all gone. So you can actually see that this business will start -- if we reduce CapEx and we don't have the investment like we did, this business really will start spinning off a lot of cash. Now moving over to the capital expenditure in the next page. As you see, there's been quite elevated capital expenditure in this period, and that's to take into account both this year's and what we're seeing coming up in the next year's operations. So $13.1 million of CapEx in the period, of which just under $10 million was growth. And as we've got the list of the main sort of growth items on the right side, but the reality is most of this [ fee ] is going towards the Industrial Services business and the Formwork businesses is providing us all growth. And we're still -- just to -- we commented this every results period, but we are very strong on the 40% return requirement for any growth CapEx, but we are actually getting way above that. So we did some -- and you've got to remember, this growth CapEx has a lag. So when we buy growth CapEx in every period, we're only getting about half of that return in that period because obviously, it's going to go over the full amount of period. Now we did some analysis of this and the returns we're seeing, based on the growth CapEx we've done from last year and this year, we're getting about 52% return on EBITDA and this growth CapEx. But from a contribution point of view, it's about 70%. So we're definitely getting the return on the growth CapEx. And in fact, as I was saying, 40% is our benchmark. But the reality is we really are aiming more towards the 50% at this point in time. I think I will hand back over to Steve.

Thanks, Andrew. So just sort of to wrap up this piece, our strategy remains unchanged, it's consistent and have consistency in that strategy is -- and the success in delivering is one of the strong attributes of the business. So you can see those points. It's about -- we are the other #1 Formwork hire supplier in the country. We got that now jealously. We've grown it out in the Queensland model and continue to be the driver. We're making greater growth for the industrial scaffold, Industrial Services. We focus continually on bringing in high-quality people and promoting within high-quality people in the business. The organic growth that we're generating across the other states now other than Queensland off the back of the range of products that we've got is clearly paying benefits. And we are continuing to be open to acquisition opportunities. We're looking at the moment for things that might be of interest of -- interest to us in the Industrial Services area. Nothing specific at the moment, but we certainly still got an eye on opportunities that make sense. The people and culture in this business. Well, the people are key. It's absolutely vital. We've got incredibly strong depth in the business now. I'm so proud of the people at all levels, in fact, on all states, all branches. Our focus on succession planning and attracting the best talent in the industry. There are examples here. Just in the last 6 months, a new General Manager of Victoria, Brad Craven; a new General Manager in New South Wales, Peter Fehrenbach, both have done a tremendous jobs in the business; Peter Bellden who came on board just in time, we really were looking at that expansion in Industrial Services as a National Operations Manager. I mentioned Evan Field earlier who started in January as the new National Engineering Manager; and Rob Parovel who also started over the last couple of months as the General Manager of People and Culture. These are incredibly experienced industry people who are adding great depth to the business. But just as importantly, the internal promotions of people like Matt Caporella as Chief Operating Officer; Jurie Roteger, the National General Manager of Industrial Services; and Jason Merjane as National General Manager of Natform. These are all very capable young people that will be providing great depth and will be the future leaders of Acrow, no doubt about it. And culturally, this is a safety first business. It's about customers and it's about being -- providing solutions to customers. We want to be the employer of choice. And I think we're certainly becoming that, if we're not definitely that in our industry. Bypassing industry standards, not just setting them, we're taking them to a whole new level. But the culture within the business is very open and honest, probably brutally honest, but remains constructive and nonpolitical and very much a one team attitude. In terms of the short term to medium term, moving into our forecast for the rest of this year, we will continue to grow Industrial Services, expand the revenue base, pushing hard in the South Australia and Western Australia market. We're having some success in South Australia. Certainly, we've got a couple of good contracts in Olympic Dam. New South Wales Formwork, you will see by the end of year results, you will see a significant turnaround in the numbers coming out of the New South Wales Formwork. We are growing market share. And we specifically focusing on these large projects, Snowy and the Sydney Metro, Western and Inner West Rail projects that are just about to kick off. We'll continue to capitalize on the project pipeline in Queensland. We will continue to push the organic growth of Formwork products into the other states outside of Queensland. The integrated engineering service, I mentioned -- I think, there's going to be quite a development here in the way we approach the market with Evan Field coming into the business with his experience as running an engineering consultancy company. And Natform, interestingly, we've actually had a pretty quiet 6 months in Natform in New South West. In terms of COVID impact, the only part of our business has had any impact due to a number of projects being delayed but that's all turning around. Our forward order book for Natform and what we're seeing for the next 6 months is better than we're going to see in the business. And I would comment on the -- despite the significant improvement in EBITDA, we've had it across the whole of Acrow. The Natform New South Wales business has actually had a soft 6 months because of the project delays. But the second 6 months, and it's already starting now and you can see it, incredible increase in revenues out of that business and set up in terms of the work on the forward order book, never been as strong as it is today. So I mean that takes us to our outlook. So we're very pleased to provide upgraded guidance. We're extremely comfortable with the guidance that we're giving today for the rest of the FY '22 year. So you can see we've upgraded our revenue forecast to $140 million, $145 million range compared to the previous $130 million, $135 million. We're now forecasting EBITDA to be between $33.5 million and $34.5 million. So effectively a $2 million increase from what our previous guidance was. Similarly, with NPAT now up to sort of $15.5 million to $16.5 million. Again, circa $2 million upgrade previous. And EPS in the range of $0.062 to $0.065. And as I said, we're extremely comfortable with that guidance, I mean, even because of a couple of reasons. Firstly, we're already through January, and we're halfway through February. So we've got a very good idea of what those results already would look like and we're pretty happy. Our secured hire revenue contracts being up for 7 months, now to January up 43% on the same period last year. And then the CapEx that we ordered off the back of the capital raise, we actually haven't seen any of in the gear out yet. So despite -- we spent a lot of money on capital in the first half, but that was already planned. The capital raise was to give us that second emphasis, I guess, for what we have now ordered for gear that won't be arriving until the last quarter of this financial year. So we will be getting, as Andrew said, minimum 40%, and our results shows better than 50%. On that year when it arrives, April, May, June, you will see some impact of that in the last quarter. The major impact of that will be in FY '23. And a lot of that equipment is destined for markets outside of Queensland. We will continue that organic growth push. And clearly in our Industrial Services, we're now forecasting revenues to be circa $43 million in Industrial Services in FY '22. So all of that picture together gives us the confidence to give the updated guidance that we had. So that's it for the presentation at the moment. So James, I can hand back to you and we're happy to answer any questions or take any comments from any of the participants.

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

Steve and Andrew, so I've got a couple of questions. So I might just start with project delays. And you mentioned that Natform, you were seeing some project delays in New South Wales. But I just wanted to confirm, are you seeing -- with the labor shortages and supply chain constraints, are you seeing any movements in the project time line? And I guess, the other states? And also the, I guess, the Formwork market as well?

Alex, we are excluding it in our table. So if you think about what we do, I mean, we hire equipment. So if we've got jobs that are going and we've got equipment on jobs that are experiencing some delay, we just keep charging, right? So the one area that has been affected was because -- were both platforms because there was a number of new projects won that didn't commence when they're expected to in that first half. So I'll say, again, the results that we've produced despite actually have a relatively soft 6 months for that business, but that's all changing now. So we'll see a serious uplift. I think the interesting thing, too, is -- and this is post, obviously, the half year results. We all know that Australia had its round of COVID impact through January. We're way through January. We're extremely happy with the results we produced in January. It was far better than we expected it to be. And I would say -- and we had, obviously, what as you'd expect, a number of our staff infected with COVID over that January period, the Christmas and the January period, didn't interrupt their operations at all. We've got, despite having quite a degree of absenteeism, we got through very well, and people [ apply ] itself extremely well. And I'm -- I can't see anything but, I guess, upside for us through this situation because we are -- and I'll say too, in terms of our labor for the major shutdown works, again, you guys have done a remarkable job in making sure that we've got enough staff despite COVID issues to be able to provide all the requirements for all of our major industrial [ shut-ins ] in Snowy, Mt. Piper, et cetera. So -- I'll say again for us, as a hire equipment primarily, not bad situation.

And maybe if I just ask about Industrial Services, please. And that business has been strong through FY '21, expecting another very strong result in FY '22. And you've been very successful in expanding that outside of the Queensland market. So could you maybe just talk about some of the things that, I guess, setting you guys apart from your competitors and why you're winning the work?

I think I've spoken about this in the past, Alex. We were -- we've had a very strong track record of being a service provider to that market in Queensland. And we were strongly encouraged by our customers in Queensland who also had operations in New South Wales. Look in to the New South Wales market because I think the service provision that we're getting out of Queensland was superior to what they're experiencing in New South Wales. So that, coupled with bringing on some of what Peter Bellden, who's had 40-odd years of experience of running these sorts of contracts across the country, he's probably the best at what he does. He already complement the staff, the strong staff that we had. And we've made investments. So we invested in new equipment that, again, standing as a part and some of the work we mentioned before, some of the work we did in some of the power stations inside furnaces that requires absolutely specialist equipment that we were prepared to invest into. All that stuff is setting us a path. It's seriously, at the moment, there's basically not a contract that we've targeted in New South Wales that we haven't won in the last 12 months.

Okay. Great. And last one for me, just on a -- from a risk perspective and, I guess, you've obviously had guidance out there. You're very confident with that guidance. But maybe just talk about some of the risks that you see in the second half and going into FY '23, please?

COVID. Just COVID continue to play a role and none of us expected Omicron, I guess, in December. So I can remember in my December management meeting, said all the guys in the room, there'll be -- on the Zoom, it will be great to meet face to face for the meeting in February, and that's all changed. So yes, I think that continues to be the issue. I think, look, the -- clearly, we're facing challenges of working capital. We're really, really, really fortunate. We've got a great banking partner with Westpac who have been extremely supportive with helping us through working capital issues, making sure we've got absolutely more headroom than we need to facing any of those issues. And as Andrew mentioned earlier, coming into next year, we don't expect to be spending -- we would expect to be reducing our capital expenditure by upwards of $10 million into next year on what we will see again a, we believe an improved EBITDA result again into next year. So the cash generation of this business is going to improve significantly. So I don't see any -- the only risk I'm seeing is -- we're going to -- is COVID project delay-related.

And probably some macro stuff. So there's stuff going in Europe as we all know. That could impact some of our...

Supply chain.

Supply chain stuff. But that stuff is out of our problems, so.

[Operator Instructions] Our next question is from Raju Ahmed.

Steve and Andrew, a couple of questions from me. The first one, if we concentrate just on December 2021, from what I can get in an industry context and whatnot, the month has been affected, generally speaking, due to wet weather and, obviously, COVID absenteeism. So I would have a guess that your labor hire revenue probably was maybe below budget or something along those lines. So the question for you is do you see a catch-up on that front in the second half of the financial year? So that obviously bolsters the revenue on that front and the earnings. What's your view there?

We actually had a crack in December, had a crack in January. But better than what our budget was for those months. But we also expect to be trading well ahead of our budgets for the next 5 months. So -- no, look, we didn't -- I don't think that was relevant to us, Raj. And I think we had lower revenues in December that will be caught up because of delays in projects. We said we had a -- we had a very, very good December. We had an extremely good January. Our forward forecasts are very strong. So yes, I don't think that's a relevant -- that's been a relevant issue for our business.

Okay. Well, that's good to hear. So in terms of the wet weather and so on, so the main risk on that front, if any, is the ability to get labor on site should there be those sorts of issues. And would that be it? Is that the only risk to consider?

Yes. So sorry, we did have about a 1-week impact on the Cooroy to Curra project. As you know, the flooding in Central Queensland around the early Christmas, early January period. So we had about a 1-week delay, but that's all it was. It was 1 week. But again, to go back to sort of the point that I made to Alex earlier, if it's a wet weather issue, whilst it might affect -- if we've got labor on a job, it might affect that. If it delays the job and we've got hire equipment there then heavy days for us.

Okay. Fantastic. And the second one around the engineers that you've got and you've sort of highlighted that the actual professional engineers count in the business has doubled over the years. Is there a correlation or something of anecdotal nature you can give us, whereby, one engineering FTE equals x dollars in revenue. Can we sort of, from an analyst investor perspective, make that sort of connection?

I've never done that comparative, Raj, but we could do it. I mean if you look at the business, when we listed, we were turning over $60 million. We're now turning over $140 million sales, right? And we've doubled our engineering team. So there might be some correlation in that, but look the sales, I'll -- Andrew, you might take that offline and we can maybe have -- chat you about that well longer.

Yes.

Yes. Okay. Now what I was trying to get to was for the benefit of the audience as well, including myself is, are you planning to add further heads into that part of the business? And how do you think about the revenues so far there?

Yes. I just think we just need to -- we will adjust that as we develop. We'll adjust that over the course of the next 12 to 18 months as we get closer to the peak of the infrastructure. We're not at the peak yet. We're gearing up to that. Look, I think we're -- partly in this area, we're actually opportunistic, Raj. And we found -- I wanted to promote Matt Caporella to the Chief Operating Officer role because it was a role that was needed in the business that we were missing in terms of complete equipment management across the whole of the country and Matt has filled that. And it was just great that we were able to find somebody who [ lives in Bolton ]. But Matt has a strong relationship with Evan Field. But to have someone of his caliber willing to effectively wrap up this business and come and join us as our National Engineering Manager was quite an industry, too. So yes, look, I think, let's just have a look at this next couple of years if the [ split ] goes, it may still require more engineering resources for the business.

Okay. The last one, around the supply chain management, I mean, it's clear that you guys did a fantastic job on that front. And I like the way you sort of -- you guys have extrapolated the issues of the remediation, and I'm referring to Slide 15 here. When you talked about you renegotiated the trading terms with suppliers and then you sort of bypassed intermediates and so on, is that now set in stone such that even then, let's say, the world normalizes with all these shipping challenges, you're still going to continue with the benefits that you've been able to extract in the last couple of months, so that as you grow as a business more and more, you get further procurement and scale efficiencies kicking in? Is that the right way to think about this?

I think, again, you've got to adapt to the circumstances that are presented to you. So we had to because we were finding it hard to get containers out of the logistics companies. So our guys went direct to the shipping lines, and that worked really well. But I think you've just got to be -- again you've got to be able to adapt to what was presented to you. We saw a working capital situation in the business presenting itself. That could have been far more difficult to deal with than what it is actually now. We saw that starting to develop and we jumped on it really quickly. And one of the major things of our supply -- negotiating the terms with suppliers, I mean we were paying for material, in some cases, up to 5 months before it was arriving in the country and we've renegotiated a lot of that. And I think -- so I think you just got to nimble. You've got to adapt and you've got to be nimble with circumstances that are in front of you. And we're fortunate we've got some very capable people in this area who do exactly that.

Raj, there's actually upside when it will normalize in the next year or so because we're still -- there are stuff -- still times still remain to be very tight. So I actually think there's more upside than downside.

We appear to have no further questions queued at this time. I'll hand the call back to you.

Okay. Thank you, James, and thanks, everybody, for taking time to hear our presentation this morning, and we look forward to the next few months, and we look forward to talking to you again come August with the full year results. And I'm very confident with what this next period will do for the business. So thank you again for your time. Cheers.

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