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

Welcome, ladies and gentlemen, to the Acrow First Half '23 Results Presentation Conference Call. [Operator Instructions] Thank you all for joining us today. I'd now like to hand over to CEO, Steven Boland; CFO, Andrew Crowther; and COO, Matthew Caporella.

Thank you very much, and thanks for joining us this morning as we present our first half Q3 results, again, very proud of the results the company has generated for this period in my view of the best and most balanced results that the company has presented in our history as a public company. Joining me today is Andrew Crowther, our CFO; and for the first time Matthew Caporella, our COO. We'll talk about that, particularly about the engineering focus of the company, which has obviously been one of the major factors in our growth story, and Andrew will walk through the financial results. So just walking through the investor presentation that we published last night. Firstly, yes, great momentum in the business is continuing. So record financial results over the 6-month period, all generated by our organic growth initiatives. We have a record higher contract win and also pipeline, which is extremely important as we continue to grow over the coming periods. To me, the most important and the best thing will be in this 6-month period is the return on equity jumping to 26.1%, so more than done over a 4-year period. It's a great endorsement of our capital program. I'll talk more about that shortly. And we're pleased as a result of these results and what we see in the forward pipeline and secured work. We're pleased to upgrade our FY '23 earnings guidance. Continued advantages of the company continue to be what drives the profitability of the company. We are proud of the position we've established, especially in the Australian forward market, where we're a clear leader now, and it's driven by our engineering expertise and the quality of our people across the whole of the business, not just in engineering but in all facets of the Acrow staff, we've been really proud and the position we've been able to get to with the quality of the people in the business. We do have an unparalleled product range in our industry, and we also have an unparalleled geographic footprint. So the combination of those 4 factors is what's driving our growth and goes to the division that we've been able to establish in our markets. Fee achievements for the first half is into numbers, I think pretty much speak for the sales revenue up 14% EBITDA and had up 52%. I'll talk to a mix change there between revenue and EBITDA that a lot more of the revenue in this half has been generated out of higher as a percentage of the total, and I'll talk through some of that shortly how that generates that EBITDA growth. As I mentioned, return on equity of 26%, the most pleasing expected this result for me. Our higher contract secured up 28%, pipeline stronger, up 34% based on the same period last year. And within the business, I'm extremely pleased with the Natform growth. We're now seeing the fruits at some very hard work over the last 4 years in getting that business into its position where it's producing the best of results in that particular division's history. And in the forward area, Queensland continues to do extremely well off the back of a very high market share and actually market share gains and also strong activity. We're starting to see, again, the New South Wales was of similar to that form is starting to come through definite market share gains in New South Wales over the last 6 months. Having mentioned WA there, but I shouldn't live shortly is that if you see the numbers that are coming out of WA. And in terms of the long-term -- medium- to long-term growth, entering the unformed market and seeing the first revenues out of that particular product in Acrow has been very pleasing in this first 6 months as we seek to grow that to be a very significant part of our offering into the future. In terms of the safety results, again, very pleased to see that they're all trending in the right direction. In fact, in the first half of '23, we didn't have any LTIs. We have had only 1 in these first 2 months in January every had 1. But for the first 6 months, 0 LTIs in the business, strong focus has to be, and we're very pleased with the performance of the business in this category. In terms of the key financial metrics, I think again, they speak for themselves. I will talk here about the mix change. So we've got a far greater percentage of revenue coming out of higher than we've had in the previous period. It's now -- the total higher revenue as a percentage has grown gradually from 50% to 60% of our revenue in this period. And that's where I mentioned in some previous presentations, you're putting in our AGM. Now I've got a far better line of sight actually about EBITDA than I do around revenue because the EBITDA is being generated by higher at the moment and not really through the growth of sales. However, that we said we've got some tremendous sale of product opportunities that presenting themselves at the moment that we hope to be able to secure in the next few months. NPAT, 43% statutory impact underlying 52%. EPS now heading -- pushing up towards a $0.10 annualized EPS. Pleased to be declaring that the 1.7% dividend, 85% franked. As I mentioned, the return on equity. So I want to go a bit more detail of the return on equity. So I think those of you who have been following our story for the last few years, we've now we have been embarking on a very aggressive capital growth program, and this is the result of that program. All of the capital we deploy goes into generating higher revenue. So we've gone from 10% to 26% return on equity over a 3-year period. That 26% is obviously a very strong result in anyone's terms. And if you go to the next page of the presentation, see what that generates. So that's generated an improvement in higher revenue from $17 million in the first half of '20, up to $36 million in the first half of '22, and that trend is continuing. As we go into the second half of '23, the number will be higher than $36.2 million again. So I think all of this to me goes to answering any question there would be about the validity of our capital program and our ability to manage capital profit. We've always talked about 40% hurdle rate. Andrew will show later that our actual achievement in return on investment on our capital program is down into the 50s. So it's -- this is the result of that program. And if you look at the sales contribution bridge over 3 years, 77% of the growth from 23.4% to 48.4% in sales contribution over 3 years, 70% of it has come from higher revenue. So again, we are very pleased to be able to see the fruits of the efforts that's going to very smart, in my view capital investment program. In terms of the -- our favorite graph on transport infrastructure, it looks pretty much the same as it always had where there's a peak doesn't happen for a few years. And I'll say that I always say, it won't happen like is the people will be lower and longer, which is very, very good news for us. I think the -- there's a couple of things I want to point out about the transport infrastructure projects. Firstly, and Matt, we will talk a bit more about this shortly. A couple of our big projects, especially the Victorian CP Rail project and the Western Distributor Road project, they're actually entering their peak period now. We've got packages that we have won that will start generating revenue in the next few months. That actually will be the biggest revenue we've generated from those projects. So that's very pleasing to see. But there is another generation of these significant infrastructure projects now coming through, and I mentioned some of these here on the right-hand side of this page. Suburban railed Victoria, that's probably a 10-year project to generate that kind of revenue. North Lease Link is a far bigger road project benefit to the Western Distributor areas. And then we go to the Inland Rail in Queensland. That's going to start probably in the next 6 to 12 months. And a couple of these Sydney projects where we are already winning packages. So those projects will kick in and will replace things like the Cross River Rail in Brisbane that will probably be fully operational with is sort of 2 to 3-year period. CYP is probably 18 months to 2 years, Weston is probably the same period. And then you've got another whole iteration of generation of projects coming in that again gives us the confidence of a 5- to 10-year outlook with very strong results in this area. On Page 4, you can see the results we enter state-by-state forward. So our actual national growth in for over a 2-year period is 57%. The growth in spend in the national infrastructure over that period is 24%. So we continue to outstrip the growth without growth across our tire business. Clean point is really doing very, very well. But both in market share gains, where they already had extremely strong at position that they are winning more market share, and they are growing as well as the market share gains in line with the general growth in that activity in that market. New subbies a very good story for us, been talking for some time that we would start to see growth coming through, and it's all is in market share. So you're going from $8 million to $11.2 million year-on-year, very good result. Whilst Victoria looks flat, again, those finding with a story that comes off a very low base. So 5 years ago, we had basically next to no revenue coming out of this area. We've now got a consistent level. And now as I mentioned, we're going to see increased revenues coming out of CP and Western distributor in the next 6 to 12 months that will hit that revenue again. And we didn't mention WA earlier, but I probably should. You can see up western Australia's form of revenue has more than doubled over a 2-year period, making incredibly profitable branch. In terms of higher wins and pipeline, again, the trajectory continues, 27.5% up in the same period last year. Wetherbee's basically forward growth. Commercial scaffold is a little softer in terms of wins because we're focusing now on drive high and I'll hit that perspective that's a very good story within the 6 months. The pipeline is at record level is $108 million. Snowy is one of the new key drivers. We have now got the first transparency over formwork packages, significant forward packages the Snowy and that forms part of our pipeline. And as I mentioned earlier, we've got really strong organic growth across most of that, but we expect to see and we know we will see off the back of secured contract with real strong growth in the New South Wales numbers over the next 6 to 12 months. I'll now hand over to Matt Caporella, and we'll give an update on engineering. And I think mainly Matt's going to talk about the evolution of what's been quite a journey for our engineering group over the last 4 years. So on to you, Matt.

Thanks, Steve, and good morning, everyone. Yes. As Steve said, on first going to cover sort of the transition of the engineering teams as taken over the last 4 years from 2019 when we listed to where we are now. And it's really just a pivot into these more complex engineering projects where the solution is definitive about sort of 4 to 5 years ago, we were more of a scaffold focused company. The biggest change is really in the engineering team on the lab is the engineering split. So we're now 7 years in a detergent in the business. And from that, we now have 10 charter engineers, which is a great number. It's nearly 25% of engineering team is now revise chartered engineers, which is probably once the engineering insolvency. From that, we now -- our expertise is now being valued by a line and we're actually now charging for the engineering services. So where our engineering before was a free service to buying products. We are now more of a holistic approach. So from that in our sites, they're doing new sections were providing certification from those encharged engineers of the designs to offer and acquire the full solution turnkey men equipment. We're really focusing now on those contract problems in solving the client's problems using these engine solutions and the new product mix that we have as well has been a big change, looking at these kind of projects being more complex suite starting the next couple of pages. We're really now changed the outlook of the engineering where we've now got departments. So we have a dedicated product development team here. So we've got a couple of people on this team developing products for the future, looking at the existing products, improving on our product mix and idleness developing our own IP. So we own the products within the site manufacture the product, the data for the products and control of the future of those products. We took all our testing internally now as well. So we've developed in Geotech facility. So as an importer of products now, we have taken that step on trying to fondness and we do that now on all the incoming sites. We've now got so certification in the generating, which is a big change over the last 5 years. And it's really a requirement on these Tier 1 project to the tackled. And probably one of the those changes in the engineering team is the function of engineering. That's changed over the last 4 or 5 years. The kinds now more customer focus and customer facing. So where those engineers 4, 5 years ago were just a function of the sales process. We're now going into the fund of the business, and they're talking to customers and selling the products. Kind of couple the current process, and we engineering best really come through. So the first project I talk about is a Natura project. It's a pure talent. So not square, very internet and where we're really able to differentiating our engineers really shown on this project was using our system and meeting with 100 raptor items. So there's no customers on this project, even though there's not a standard billing. So cowered different size springs. And we don't want to work with the builder doing integration trails. So we see topics a lot of work done on the installation of the screens and how it's going to meet all the other parts of the process. Big pages project to is the engineers have developed over the last 12 months, some really good access solutions. So on Acrow now they're putting on an emergency access Snowy Hydro is just another bit to the screen product. The metrics on so little focus probably one of our marketing projects at the moment. This is a really leading project that probably hasn't been done in Australia mobile before, where it's a concrete art, but just to make this one difficult, it's 12, 13 meters in a year. It's on an 11th price. So we're able to engineer in tea team to bring a couple of different systems which is a new product we've got in in the last 18 months and our lender system and put that together and created a bespoke solution using proprietary items with very little extra fabrication that jacked it set up the arch. Fixing of the integration as well, it's really been focused engineering in any of our clients is off-site sale. So we're doing a lot of work on staging and assembly of the lines. This particular project was stable to long and outside of Melbourne and then truck in modules. So reducing that on-site labor in soft line and giving the client a solution where the model comes in cost the tunnel they're working within a couple of days. This is really a showcase that we button how it really differentiates itself from the traditional state we're in the hole. There's a lot more in this is now on seamless engineering design and making sure that the solution we plans working for the trade in site. So we do pretty rolling, as you can see, working with the client to make sure we stacked exactly 50 for the trades that we're using. Using this project uses our renal system. So we've been able to eliminate a lot of the anchors into the structure. We've been able to create openings allow the support of the ventilation back and also building their access. So there into the reno product and able to tailor the proprietary system in a secular hole, which is audited. We really pride ourselves probably on using proprietary systems as much as we can. But when they don't work with on definitely per a 100 expertise to use bespoke format. So the brakes that I want to highlight here is the west bacon. So this is a project for listen. This project has been going on for nearly 3 years at the moment. But what we're able to do for this particular project is not to a plane solution where they have procured in custom steel, but we can see sort of that 3 years into the future and design and still so we've worked on multiple situations throughout the core state fabrication costs and procurement costs. But looking at developing that foresting project really saved them over 40% on the project and weaseled -- so -- when the propriety systems aren't exactly suited or the client wants to be under correction, we have that versatility now to offer multiple different offers, even if it's a bespoke custom solution. And we are clean resets a part is our is design a system to procuring ourselves and to fly alternately package to those clients. Just covering a couple of market projects that Steve has to before. So [indiscernible] is quite large in the industry stage at the moment. We did the first formal package on this with the TVN Barings really the one is project backlog not using any tough ones. So the full proprietary system to incur, which is very united for the Sasol system. Metro Tunnel, this is still -- yes, it's just peaking at the moment. We've got 13 packages at the moment that the engineers are delivering well into FY '24. First 5 grant. So this is bridges that have been made a couple of years, but are still coming out of the ground now. We're working on that or the areas of Brit, which is one of the largest structures. We're coming up at ground and doing a very spoke proprietary system to a new stable net up in here. of 35 rigs have done all 3 coverages, and that's still a lot of work doing well in FY '24. WestConnex projects were same thing. This is probably just peaking at the moment. This is still very good 2 years to run this. We're now being various structures directly to the sector is not going into various subcontractors, including bridges, ventilation structures and actions into the tunnel. Cost of the rail, this is -- we've now got projects on all 4 station boxes, but mainly focusing on Alastair's got our Dumont system and a high gold Cross Yarra the station boxes Cross Yarra still got a couple of good years to run on and we've got to have a lot of different systems in this project here system to Canfor. And then City Gateway, this is the connection from the A to the international and domestic terminals. We just started sending a on this project, and we've got 3 file with the first part was a lot of the corn season bespoke custom still. So we've been able to design to supply a solution to the client. And then now we're going into a lot of the motor systems we supply 100% proctor solution to their bridge decks. There's over 3 fill meters of this prospect to be installed. So we've been able to plan for our bit system that they can reuse and there's no customer items in it. Thanks.

Thank you, Matt. Okay. So just don't give the segment breakdowns, Page 22. So firstly, the numbers, again, I think they sort of speak for themselves. The revenue up by 14%, but the contribution up by a significant grade percentage by 29%. It is clearly, as you can see here, a function of the total high revenue in the business being actually going from 50% to 59% of our total growth. 60% pass-through of sales contribution to EBITDA. We talked about that fairly regular as being our target. So contribution up by $10.7 million. So the net up by $4. And you can't -- we understand you just can't expect to grow at that level and not have overhead increases, but the margin going up by $6 million out of 10. So we're getting that 60% pass-through business at some import of the business. And a couple of things to hold off, a 61% sales contribution margin. And I think more importantly, 29% EBITDA margin, which I think is quite a phenomenal number. So good numbers across the board here. The sales contribution breach again shows most of the profitability growth is coming out of the equipment higher. 87% of the growth in this period came out of a quickly higher revenue off the back of our capital program. We did get a $1.9 million improvement in net product sales, but it is a combination of improvement in formwork and reduction in industrial, which I'll talk to in a second. And you can see in the former division, High revenue activity levels include the New South Wales WA, primarily driving that. Product solar growth of 41% is off the back of the higher revenue really. I think it's a function of generating better high revenue. It's not the sale of systems. It's sale of primarily consumables that go hand-in-hand with our hire new growth. The pipeline in this area is tremendous, especially in New South also Victoria, always mentioned and is low off the back of those projects that Matt was just referring to. We'll talk about that for because we've had that business now basically for all but 3 months of being a public company. It did have a slow start in that grade. It took us some time to really understand what we needed to do differently to get to the sort of numbers we're now getting to. As you can see, we will get to $11 million in revenue this year, which is over $2 million better than that business has ever done in the past. The drivers of the growth in this business have been #1 is national footprint. So this is a primarily New South Wales business that we bought. The revenues out of Queensland now going into this next 6 months will be almost getting to the levels to be soaring Sunrise. We've got business in Victoria. We've got contracts in South Australia, and we're just about to win our first drop in WA. So very much now as a national footprint. The giant in this division have done a really, really old product development [indiscernible] of that stuff on one of the other jobs we spoke about earlier. So the innovation of product development is a strong part of the drug. And it's cross-selling now it's surely part of Acrow. So it's very rare now that we're doing screens on a job where we're not providing other products on the site. We've got a lot of ambitions for this particular division. We want to grow it further across the whole of the national footprint. But it's now absolutely full steam ahead the screens business as part of the [indiscernible]. In Industrial Services, while you can see, we've definitely had a reduction in both in product sales over this period, which is really due to inflationary pressures. So we are definitely seeing now that the cost of new material being sold is going up significantly off the back of inflation, which is driving people higher more than to buy, which is pushing up our volume and our RAC high. So it's not a bad story for Acrow, but I'll make the point that in the reverse applies, we're in the great position that if the cost of new material reduces, we can sell it and make our marginal sales. So we've got a great flexibility to move between either to the environment are operating in. So irrespective of the fact that the revenue reduced by 70% in this period, the margin went up at 40. I think it's very important that gets understood that we have a mix issue here that's enabled us to get far better revenue and higher and has pushed up the overall profitability by millions in this division in the 6 months. The labor higher, whilst the margin has reduced. The revenues growth, the margin is reduced. That's off the back of a lot of revenue now coming out of Snowy where the margin is lesser than I on some other projects but is such a big project, but we're still making an average of 18% on labor. And none of this stuff again is like some. It's all do in charge. Snowy is probably at the lower end of it, but for a project of that size that it's important we're prepared to take a slightly lower margin but still over still averaging 18%. The other thing just in industrial this period is that the shutdown sort of cycle that works then we are -- we don't -- we do work in a regular cycle. We shut down. In these 6 months, there's actually no shutdowns for the Mount Piper power station, and they won't be in the coming 6 months, and then there will be a very big shutdown and if we are successful with it into the next financial year. Last point I tale 2 fiber shutdowns within this period. So there is a bit of a flow that works in that and that just again goes to an FY '24 confidence about further growth. And commercial [indiscernible] similarly to Industrial Scaffold. There's a bit of dirt or material in the market at the moment, which is brought about by people not following you. So scaffolders are not buying equipment because of the price, which is pushing up the price of higher, and we're taking advantage of that. So you can see fire revenue going up by 54% over this period. And whilst the revenue was flat to down, down 6% the total profit contribution for commercial scaffold by 29%, get really important to understand the move into more dry higher. As you can see, labor and cartage margin and revenue, significant reduction, but more than offset by the significant improvement in scaffold hire. So we've been questioned in the past about always stay in this divisional is why you stay in this division because in times of inflationary presses, you'll get really good margin growth at this division. Going on to our people in coal chart. Again, we're very proud of the work we've done in this space, and we've been in the last 6 to 12 months, we've actually evolved this quite significantly. But really strong emphasis on employee development. I'll talk to you about more in a second. Again, attracting the best new talent. The examples there are people who have come into the business in the last 6 months on new Victorian GM with great credentials from the previous experience. Our national business development management Canfor, Kim Brown. He comes from one of the major jump providers in the country and now trying to work for us. And Peter Ryan has been really crucial to our learning and organizational development I'll touch on in a second. So we continue to attract really high-quality people into the business. The trial through the business is well established. The prouder the culture we have established is ingrained in the business now. It's how we operate. just coming right through the exercise we are doing about refreshing our brand. So we're going through a point intensive program at the moment about refreshing and relaunching our brand, which we will do in the FY '24 period. And it's been really pleasing I think for the team that's involved with sort of steering this that the research that we're doing both with clients and the stakeholders, the clients and employees is actually really reemphasizing that what we -- what our policy to be is actually how people are seeing our culture, and that will come through the way we resource this brand into the next financial year. I mentioned leading organizational development is an incredibly important initiative and recruitment of Peter Bellden as the management here has been the driver of this. So really focusing on developing internal staff capability, training, coaching performance and have a far broader graduate program. So we've had a pretty good -- in fact, we have a very good gradual program in engineering function over the last 3 to 4 years. We're not granting that across all the aspects of the business. Succession planning. We have -- and we'll have that will roll out now a complete full talent and succession plan for roles in 2 levels belongs based on individual development plans for the key talent. And importantly, the values and support that we now offer the people in the business, including having a mental champion program for those that need it. This is -- we have to understand it's an environment, not just in the in our business, they're distributed like at the moment. We're people challenged and we're proud to be able to provide the systems so they are a challenging situation. We're all very passionate about this program and the value it's going to create that ensures the long-term stability of our culture and success of the business in the future will be about the people and how we develop the people. I'll now pass it over to Andrew to run through the financial performance.

Great. Thanks, Steve, and thanks, everybody. We're talking the 2022 the year-end results of how in that year, we achieved scale. It took a while to get there. This year, or this half year, it's continued. So the combination of the large higher mix that we've had in the 6 months, the cost management and scale we've seen the 6% of revenue is actually flowing straight in TDA. So as Caporella about, our revenue coming million, up 14%; contribution, up 29% to $48 million and EBITDA, $23 million, up 38%. Let me get into depreciation. Depreciation is obviously higher because we've made $15 million of capital expenditure in this half, and that was in addition to $21 million in the last year. So net interest increased by $6,000, that's $2.2 million. Now that increase was a combination of both volume and rate. We all know that water going up on a PCP basis, our loans and our average debt for the persons outside $12 million higher. So that sort of explains that difference. So from a bold perspective, the interest was up by about $0.3 million on volume and $0.4 million or increases of debt itself. So pretax profit of $13.3 million, up 52%. From a tax expense perspective, obviously, we have carried forward tax losses that we've talked about before. Our profitability is increasing quite dramatically in last year that's continuing to this year. So our tax expense has remained steady at about 9%. And we've seen other reasons for that to change too dramatically and for the rest of the year. So 9%, however, because of our profitability, there's probably that most probably about 2 years left of tax losses that we'll be utilizing that's changed dramatically, as I said. NPAT underlying, $12.2 million, up $52. Significant items in share-based payments go through to NPAT before 43% up for impact before to $10.5 million and $70 per share, 4.72%, up 24% for CP was pretty good about that look. And as the already talked about. We have made an announcement of a 1.7% interim dividend. We've up from the final last year from $0.015 and also in the previous interim of 1.6 million, and that's 85% franked. We see that start getting towards more than 100% franked as the next 12 months. Over to the balance sheet. You can see our balance sheet continues to improve. Net debt has actually increased by $4.6 million. That's compared with a $15 million capital investment. Net gearing was up 0.6% to 28.9%. However, we've kept net debt-to-EBITDA at 1.1x. There was an improvement in net current assets during the year period by $1 million, up to $4 million. Working capital did actual increase in the 6 months by $4 million, up $36.9 million. Now that's about a 23% working capital ratio of sales. June is about 22% haven't changed a huge amount. However, we see that starting to reduce that down towards at least 20% by the end of the year. Now the one thing that is a talking point in the industry at moment is that debt. There's -- obviously the situation in the industry is changing. We increased interest rates and the labor cost and so forth. Our bad debt was 1.5% of half year revenue in this half. So about $1.2 million expense. Now that -- we're not immune to the rest of the industry view. This is sort of across the bar. However, the one thing for sure, we're very focused on this and the situation is being managed very closely. And one of the things that Steve talked about or Matt talked about before, we're making all the opportunities we can of having our arrangements directly to builders, which will take away potentially some of the risks within our direct customers. We're actually doing a lot of deals where we're securitizing directly the debt against the equipment. The credit team is obviously changed focus now to the situations change. So in relation to getting security directly into customers. We're following more secure as the payment type deals as well when customers start having a bit of a flow. And obviously, the whole pivot towards higher-quality customers with pivot towards that we continue forward will cushion us quite as well. Moving over to the funding quickly. The -- consistent with June '22, we've got good headroom in our funding, which we still have a very good partner with Westar banking partner and they've got continued confidence in us and where we're going. We increased took the option increased our trade finance facility from 8 million to 12 million during the period, just the increased volume of sales, labor, et cetera. We also made the opportunities to buy some Scaffold business. The case is a surprise. I mean we've got an additional line of $4.1 million, which is an amortizing loan over 3 years through the period. So we grew $5 million hero the end of December compared to $13.2 million at 2022. At the end of December, we also have -- we have an over facility of 6.6%. That was totally untouched during that period, and we had $1.7 million of cash. As I said, net debt decreased 4.6% basically from capital expenditure of $15.1 million. In pleasingly, all of our comment type metrics are well -- haven't changed much. So 28.9% gearing, 1.1x debt-to-EBITDA and interest cover at a very healthy EBITDA. Over to cash flow. Our operating cash profit, which we defined as pre-AASB16 EBITDA, less cash tax and maintenance CapEx was $16.6 million, up from $10.2 million, which so 63% increase on PCP. Our cash flow from operations, which is our per financial statements, our cash -- our operational cash flow plus the cash sale of our IG was $19.6 million, and that translated to an 85% cash provision rate, which is pretty healthy percentage. You remember in 2022, that was a 52% conversion that got impacted by a $20 million working capital costs in the 2022 year. Moving down to the net debt bridge. We started the period $2.8 million we finished at 37.4%, up by 4.1%. That you can see that basically, in fact, we have $23 million of EBITDA, and the impact was essentially the CapEx of $15.1 million and then those plans of working capital. But this graph really shows you know what happens when we do decide to pull back on the CapEx. Cash flow will start pouring out of this business. And over to the next slide, capital expenditure. This shows you just the where we're heading for the full year. So we expect $3.1 million up in September. We basically front-ended all our CapEx this year because of the amount of work in the first 6 months and moving to the second 6 months. And our forecast coming is $21 million of us CapEx, which is almost right in line with the previous year between 1.1%. That's worth saying, even though it's relatively well over CapEx, from a percent of EBITDA, this year's will be around 43% compared to 58% pre-year 66% in the previous year before that. So even though, yes, we're going to have that CapEx when you put it into context, it's actually getting smaller, and we're getting more return out of it. Importantly as well is our hurdle rate was 40%. This is almost changing a little bit. We're continuing to get more out of these assets. At the moment, we've got 52% return on these assets on an annualized basis. So from a capital perspective, we're definitely managing capital, and it's been shown in higher revenue flowing all the way down to NPA.

Thanks, Andrew. Okay. So just to wrap up with our some short to medium-term opportunities in our outlook. So these are the sort of items that we are the most relevant to what will happen in the second half of this financial year, but then also provide the springboard to another year of growth in FY '24. So we will be expanding our Acrow business across a national footprint. We're confident that picking up some contracts in a couple of states at the minute, but we'll keep us to the '24. This was for me, as I mentioned, we'll have definite growth. There's 2 very significant projects at City Gateway in M2. We have one project, probably the biggest the new South wealth businesses that ever won. And the revenue will start to kick in from April 23. And we're currently tendering to the first significant form of that, which as Matt mentioned that we did some forward package a company years ago. These are significantly bigger packages than the first relevant ones that were rolling through Snowy. Victoria [indiscernible] we've talked taken a couple of times about the work executed on West Gate and CYP probably at the peak of what we've skewed on this project, that revenue ticking from March 23, that form was sent towards its best ever 6 months and I would think that the FY '24 year will be a strong year again in that form. And whilst our product sales have been relatively slow for the first 6 months, there's a couple of really big opportunities out there at the moment, but we're in the midst of seeking secure. I mentioned Snowy and there's some various Perth Metronet Rail based Australian government-backed projects that are on the agenda and that we're roughly sort of the pointing of seeking to win. So I'm pleased to provide an upgraded -- updated guidance off the back of the results for the half year and what the forward forecast looks like. So we're not forecasting a better revenue number than we previously had because of the mix change. So we've got a strong, far stronger, higher revenue outlook. That gives us the confidence to be able to increase our EBITDA number up between 48% and 49%. So that would be a 34% improvement on last year at the midpoint. Impact, again, up by a similar sort of percentage to what we to previous, a lot numbers, so $2.5 million effectively HPA upgrade. You will see a 46% jump on last year, and we headed to $0.10 EPS. So business 2 years ago is running at reroute files we've doubled the EPS in around a 2-year period. So again, that this forecast is underpinned by work that we won in FY '22 work that we've got in the first half of FY '23. And we've got great visibility over these results. We've got detailed forecast on high review at least at the end of April and then may sort of May and June in a similar trajectory. So again, we put this forecast out with a high degree of confidence that we'll be able to move this guidance level. So I want to thank you for attending the discussion today. Thanks for the staff at Acrow, again, tremendous 6 months from everybody. You guys continue to amazing the performance that you put in. I mean we see to keep up our momentum pitot down, and we're confident we'll continue to provide improved results over time. So that's the presentation. Happy now to take any questions from the participants.

[Operator Instructions] Our first question comes through from Rushil Paiva from Ord Minnett .

I start off with guidance and the updated earnings guidance in particular, I just wanted to find out what your thoughts were in terms of what drives both the bottom end and the top end. You've obviously mentioned a couple of contracts that are potentially going to be one in the second half of the year, which I assume aren't included within the guidance. But if you can give a little bit of color on what you think might drive results towards the top end and conversely to the bottom end, that would be great.

Thanks, Rushil. Look, I think, as I mentioned, we've got very, very good line side around higher revenue. So the current guidance is basically based on what we see as higher revenue taken us through to the end of June. And what we know will happen with some product sales, but not -- it's not the full potential, but we can't forecast for that. And I would caution against being too aggressive about factoring in the product sales of a great level. When they happen in license, the notice they have. There's certainly some opportunities there at the moment, but there's nothing new secure. So we push for those as hard as we can. And that will drive more revenue and probably a better EBITDA result. But right now, we are guiding to what we know will happen with some sales that are already locked in and a very, very strong forward outlook on our high revenue that takes us to that number.

Great. And just sticking with the higher revenue, you mentioned earlier in the presentation that higher revenues around about 60% of total revenue for the business. Just wondering if you had a target over the next couple of years as to what that could get to and consequently, what that translates into from an EBITDA margin target over, say, FY '24 and '25.

It's very hard to forecast that number because it depends on what happens to sizes. So we just know that the trajectory of the total high revenue, so talking about the percentage of revenue in this 6 months is really relevant because it's been such a bigger percentage of the total revenue, but it's really driven the sales contribution margin and the EBITDA margin up. There is environment at the moment that there's not as much activity in selling, but that could change. So we could be talking about significantly higher revenue off the back of product sales, higher revenue -- sorry, total revenue because of product sales, that will then look like the client revenue was a lower percentage of the total. All I'm focused on what the team is focused on is keep growing that number. So you can see it's -- when we talked about earlier, how much the higher revenue has gone up every single 6 months for the last 3 years, especially in the last 18 months. We're totally focused on continuing to grow that number. Now what that becomes as a percentage of the total revenue is really dependent on what happens to the sale product. So again, I'll make that point strongly, Rushil. It's easier for me to forecast EBITDA than it is to forecast total revenue.

Our next question comes from [ Greg Douglas from Asan Investments ].

I just got 2 questions, if I might. Firstly, I know the loans are going up, and I understand the reason why and it was explained last year. And you can see clearly that the salable products like the Board and everything else that you said that there was a gap in the market for and clearly filling that gap in the market, it's great to see. So I'm just wondering at what point will we start to repay the debt?

Well, I mean we are repaying that all types. There's a lot of shifting around with rolling down the debt we're paying back over time. If we stop -- Obviously, if we stopped acquiring CapEx like we are now, that debt would fall off extremely quickly. But -- so it's a hard question to answer because as we're growing, the reality is we're still going to draw a debt. I mean, it'd be trading not to with our cost of equity. I mean even though interest has gone up by 2%, so it will probably continue going up by if you listen to back to another 0.5% probably really going to do with equity and so forth in the next 24 months. But one thing for sure, debt is still cheaper than equity. And our debt is still at a level that's extremely manageable.

I think Greg, I think we've stated at this before, one of the keys to this business that we're in is cut your investment back in our getting to the top of the cycle and then what's the cash just rip through. We're not at the top of the cycle yet. And we certainly still have -- we've got a lot of growth in our Jumpform business, which is -- and that's going to be capital driven, but it's huge returns. It's 50%, 60% return on investment on growing that business. So whatever we can continue to manage the cash as well as we are and the growth is generated, like you can see, it has over the last couple of years. I think it would still be not right for us to say that we're going to be pulling back dramatically on our capital spending over the next few years.

I appreciate that. And it makes sense. A lot of things. I just want to get it right in my own head because you can see the growth going over time and the discussions that I've had with you guys before, it was a and you can see it's going exactly the plan. I just wanted to get myself going forward to say will get that makes sense. Now just this next question. Look, it's not a big one, but you talked about bad debts and stuff like that. I'm just wondering, a very simple thing really, and you probably got it. But is there a maple in the contracts of large you take back the product if somebody is not paying the bill?

Yes, it is absolutely. It's a sale of product. We've got PBS in the gear. So on sale as the player, we don't get.

And the other thing is actually expecting that rig. So we've got some high revenue customers who have also got equipment that they bought from us on in the past, and now they are promise. We're now getting security over the previously sold equipment against the high revenue.

Our next question comes from Alex Lu of Morgans Financial.

So just a couple of questions from me, please. Can I just ask firstly on the Jumpform business? And I think you won a few contracts in Queensland about 6 months ago. So -- and I think there's a few in the pipeline as well. So I just wanted to just, I guess, get an idea of how those are going. And I guess, what gives you the confidence that Jumpform can generate that, I guess, $20 million annualized revenue within the next 30 months, please?

Yes, that's been the driver of the Chatham business in the company. So yes, over to you, Matt.

Yes. Thanks, Alex. We sort of took an approach with the drug for that we did skew a couple of those projects 6 months ago. And we have just been a little bit of holy projects of a proven concept a little bit. I'll be now we actually do to our first comp last year with one of the Jumpform. So the success is there now. We've got a good pipeline now. We've got a good business development manager in facing and the next thing now is to regrow that business that we will deliver these couple of projects by successfully.

Okay. And I guess, the $20 million number in the next 30 months, I mean I presume that's based on the pipeline that you can see at the moment?

2 things. It's the pipeline and just our general understanding of the market, Alex, this is a big national market. But -- and now basically now that we've got the system matched to the confidence. The system works the way we expected it to. And that level of confidence is evolving all the time, been rising all the time. It's just a function of a function of capital and then the structure that we put into place to be able to service that size of this that is well down the track with what a national jump all business looks like doing that level right through to where we would locate the main depo and how it will start with the half being a business.

Yes. And it's definitely a natural thing as well. So we've got these projects in pipeline. Our pipeline has projects in every state, including online. So it's all over Australia and spread and the pipeline is not just centric on Cleveland. It's across a range geographies.

Yes. Okay. That's helpful. And then just my second question on Snowy Hydro, please. So I think you're currently tenuring on the first formwork packages for the project. But obviously, there's been a bit of noise around the collapse of cough and cost blowouts over the past few months. So I just wanted to just hear what you guys are seeing on the ground there?

Well, flights be bought by evil. So that's happened. So the plus business in Australia, which included Snowy, I think Brand Rail project as a map and also some Palladium Apartments, which one of the major ones being an Australian government-funded defense base on Mansion. Weibo that business. So they're footing ahead with those projects. And there's certainly site issues at Snowy, but for us, it's a bit of a struggle. That's a problem for the evils a problem for the site. It's probably a problem for the site budgets for us.

Our next question comes through from [ Tina Wilson at AMA Capital ].

Just wanted to ask whether you think about the utilization rate for equipment hire. Is that like a measurement or consideration in how you plan the budget.

Thanks, Tina. Look, absolutely. It's fundamental to the way our business operates. And I'd say, Matt, there's a chief operating officer. He's, I guess, the key part of equipment utilization and what we need and what we locate in each state and what we did need to purchase to make sure we can make the opportunity in front of us, we're running at a really, really high utilization rate on our general scaffold equipment at the moment. It's been the 80s to mine with extra. It's incredibly high utilization at cap. Across all work, it's more difficult to talk about because there's 21 different systems. So you have a system that's got really high utilization and others that are more specialized that might only go out once or twice a year. But generally, at the moment, we're very highly utilized across almost every system that probably less in an unparalleled position for the business.

Yes, correct. And then the estate as well, not just in enter seeking every state, it's got high utilization of pro business.

So it's really important. It's one of the advantages of being a national business, and that's against tight CO. He sort of is the ticker of the box on Gigi's moved from one state to another based on the market conditions and also the what we need to be investigating capital.

So you're saying you prefer the moment almost but then that's why you've got or CapEx to buy new equipment is sort of what you are.

Also, we're improving rates all the time as well. So we've still got revenue growth opportunities just in rate increments because across most categories of the whole industry at the moment, equipment is very highly utilized.

Our next question comes from a private shareholder, [ Michael Mons ].

I had a couple of questions. The first one was regarding growth CapEx. Looking ahead, can you give us an indication of how you see the spread of growth CapEx between your various segments?

Yes. And maybe Matt can also tack it on some I'll just say, Michael, that it's going to be -- it won't be highly new towards the Juno business, I think, over the next couple of years. I don't ever want to say that we're not going to be still growing out the table stuff. There's a prime example right now where our older equipment, which is probably our most -- most versatile sort of meeting to say there's all a bit of cash. We still another 800,000.

But to do the projects in New South Wales and Victoria. We have a metric.

Yes. So that came up. Everyone on contracts and the main payback, it's like 75% to 80% of Abandon project. So I would suggest, though, that in the next couple of years, it will be very highly orientated to worlds growing at jump.

Okay. And just perhaps following on from the question on $20 million revenue. Can you give us -- and I know this is hard because it depends on the building. But what sort of scale of revenue do you get from Jumpform per building roughly? Like what's the order of magnitude?

It's a good question. I mean the 2 projects on at the moment, ones around 600 around $3 million.

Yes. It's a very big gap. The bottom line is around $350,000 mark for a very small story liability. And then you go well into the $2 million to $3 million of these larger 30 to 50 store hours.

Yes. Okay. Good. That's helpful. And the last question I had is there's been a lot of talk about labor shortages, staff retention and so on. What can you comment in terms of those sorts of factors on your business?

So in terms of white collar staff, no issues at all really. I mean there's the odd person that leaves either by choice or by our choice, but there's not a lot of turnover in our will start. In terms of our local staff, it's actually starting to release. So it was very difficult over probably a 3- or 4-month period leading up to Christmas. But the feedback on getting from our guys in the depots is are starting to ease. We don't get a lot of people leave in general, even in our own blue collar staff. But it was getting hard to replace them for a period of quite a few months. But the past of Christmas for whatever reason is to leave.

And our final question comes from Danny Younis, Shaw and Partners.

Andrew. Look, congratulations on a fantastic result. I've got 3 or 4 questions, if I can. The first one, just RIPET results from formwork and across the group, your sales were up 34%, your EBITDA was up 38%. And your margins, which you described is phenomenal at 29%. What's the long-term EBITDA trajectory? I mean, is this as good as it gets?

Well, I think if you're talking about percentage of EBITDA to revenue, Dan, it goes back to that mix question we've got before. So if we have -- the minor numbers flow is that higher revenues are basically 100% passive almost, right? Sales revenue was averaging somewhere in the sort of the 30% to 35% pass-through and waiver revenue, which is just in our industrial business is around 18%. So to both depend on the mix in terms of the percentage of EBITDA to total revenue. In terms of the trajectory of the total EBITDA, look, my view is, and we've done now for 10 years in after I've been rooting for 10 years in May. Every year, we've improved our profitability from the previous year, we've found a way to do it even through whatever cycles people to get their ICare in the next few years why that should change. I'm not going to say we're always going to grow by 35% every year. That's pretty ambitious. But then I didn't think we'd grow by 35% from last year to this year. So look, I'm very strong to the gut to the management team that we always need a final way to grow our profitability every year. But in terms of percentage of that to revenue, it really gets back to that mix point.

Yes. No, understood. And maybe just going back to the step up in the guidance. Clearly, there seems to be a big opportunity with Natform and Jumpform. Can you maybe -- you've talked about the revenue opportunity. Can you maybe talk about sort of the returns or the margins you're getting in both those businesses?

Yes. They're finally profitable profit to revenue businesses. So both Jumpform and Natform, very similarly dynamic in terms of -- you get -- you're making 50% to 60% margins of those contracts on in that business. So yes, look, they've got very, very strong pass-through of revenue to profitability.

Okay. And with regards to the CapEx, you said the last couple of years have been around $20 million. We're already close by FY '24. And you've already said you geared towards the Jumpform business. Can you maybe quantify what FY '24 and beyond is likely to look like on an annual basis? Will it be well above the $20-odd million?

Look, I'd say again, it's a function of how quickly we want to grow out our Jumpform business. That's really got an intention. We didn't have the Jumpform business this year as a right. So we spent a...

The Jumpform business is in more business really in this year.

Yes, we took -- we were opportunistic to buy $4 million with ReWalk scaffold because somebody is selling a package of second set, which we would -- we wouldn't have otherwise were. So we bought that opportunistically, and that's chunks 5. So that's not out of the 20 coming from those 2 categories. So if we weren't really -- it's hard to answer your question specifically because it gets back to how quickly do we want to grow the chunk business. If it was to that, we'll be running probably now are in that summer between 10 and 15 sticking to next year, right. So that's really the only one that day.

Yes. No, that's fine. And in the Industrial Services division, how long do you work on the product sales of things in terms of the new at the raw materials, how long do you think that will be elevated for? Are we talking 6 months, 12 months, 18 months? Do you have any visibility as to what the trajectory there looks like?

Yes. So it's been quite in that area for the last 6 months. That's the one area that's well down in terms of total revenue for us in the last 6 months have been product sales in that area. We've got a couple of very big opportunities at the moment but who knows where they come off right I think at the moment, whilst ever inflation is where it is and the pressures on prices of new material. I think that, that area of product sales will be in a general sense, will be agreed of pressure. I think you rely on the old very big projects that comes in that wants to buy here and there's a few of those at the moment that we're working on. But I think in general sense, there's less day-to-day buying of her in that area than there was 4 months ago because of inflation. But that's helping us on the higher rate.

Okay. And just the final one well done in Queensland and New South West, New South Wales in terms of the market share gains there. Are you picking up those gains at the expense of other competitors? Or are you picking it up just from new opportunities and new customer wins, et cetera, et cetera.

I think we're definitely picking up contracts that competitors would have won 4 months ago. about that. We were meeting projects. So we are picking up market share because we're beating competitors in Sydney work previously bid. I think the market in Sydney has been good for a while, and we'll stay at this level a lot better. So I put our growth and Sydney together market share at broken Cleveland is a combination of market activity and market share.

We have had another question come through. Do we have time, team?

We have yes.

Our final question comes through from a private investor, [ Rebecca Song ].

Just be useful to quickly talk about the bad debt expenses and how they pick up. So just not sure -- I'm sure, sorry if you've already touched on this because we've been jump in between calls that. But yes, can you talk through how you're managing that? And also it was pleasing to see your sales come down. Is that -- was that in any one segment contributing to that decrease in our receivables?

No. The decrease in receivables was sort of across the board. But the -- from about that perspective, I suppose in context, it's 1.5% of the half year revenue. I mean that it's actually not a bad. We obviously got a 0 what we did previous period. But I mean, it's not that rates percentage of revenue, that's for sure. So the environment has changed quite dramatically, and we've changed very dramatically with it. So a lot of these -- the customers that have on that, these are customers that were going to be impacted in the environment, and that's exactly what's happened. So what we've touched on before with the call is what we do with money where we can, we're securitizing debt against or islet customers, so attrite -- from a credit point of view, from a credit team point of view, there's a much higher focus, although there was on security, particularly from new customers, but also on existing customers. One of the big things we're doing as well is particularly the Tier 1 sort of work is we're doing, we're hiring directly to the large contractors rather than the subcontractors. So you build and so. So that will push in a lot of this. The question is there's obviously like everyone in the industry, there's a much rates on this. We can't say it's going to happen in the next 12 months. We've probably done another 2 interest rate rises, but as the focus is pretty immense across the board in across...

I think the other thing to mention is about just our high and awareness. I think Andrew sort of touched on it a bit on the big government projects, our ability -- and in some cases, we're talking directly to the state governments about making sure that the government is ensuring that you get paid on the government-funded projects. And that's -- we've got some -- a couple of examples at the moment where we're right in with the state government about this. So it's -- I think on [indiscernible] infrastructure projects. They've got to make sure that there is a direct ability for all people participating in a government funded project to get passed.

Thank you. There's no further questions, I'll hand back over to the team for any further or closing remarks.

Okay. So thanks, everybody, for participating. And especially thank you for those that asked questions. They were always as used a very good questions, and we're pleased to be the answer them. And we look forward to another strong 6 months and in 6 months' time talking about a full year result that again will be the best that, that grows reports in its history. Thanks to answering Matt, all of your participation today. And again, thanks to all the Acrow team for a number [indiscernible] the last period of years but certainly the last 6 months. So -- thanks again, and look forward to talking to you guys again 6 months' time.

Thank you for joining, ladies and gentlemen, and thank you to the team for our presentation on the Acrow First Half Year Financial Year '23 results call. All participants may disconnect.