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

Welcome, ladies and gentlemen, to the Acrow FY '23 Results Presentation Conference Call. [Operator Instructions] Thank you for joining today. I'll now hand over to Steven Boland, CEO; and Andrew Crowther, CFO. Thank you very much.

Thank you, Lisa, and good morning everyone for joining us. Very proud to present our FY '23 results. It was another great year for our business across all facets of our operation. I'm going to walk through the presentation that was released on the ASX last night and just focus on some of the highlights of the year and also talk about the FY '24 year and what we're expecting to see. So great news for the business across all facets. We've had a tremendous run over the last 3 or 4 years. The momentum really continues in FY '23, as you'll see, we've had record financial results in every category. Really importantly, we've opened up new channels to revenue with jump form, some additional screen purchases, purchase of initial panel systems, our organic growth initiatives. There's all fresh revenue as a big feature of the year we've just passed. The higher contract wins for the year is at a record level and so is the pipeline. I'll point out shortly the absolute relationship between higher revenue wins in 1 year and what happens to the total higher revenue generated in the business the following year. It's quite remarkable how exactly linear those 2 numbers are. I think one of the real features clearly in the year is the return on equity of 32.7%, that's doubled over the first 4 years because many businesses are certainly -- in 30 years of managing businesses I don't think I've seen too many [indiscernible] been responsible for too many that have had better than 30% return on equity. So that's a great indication of the success of our capital investment programs, and we're very pleased to be providing very early guidance for the FY '24 year of a 29% improvement in EBITDA at the midpoint of our guidance range. So just to reiterate the competitive advantages for Acrow, they've been in place for some time now. We're really honing on these. And as a review goes past, they continue to be stronger. We have a superior product range and that is just getting better now with the introduction of a second screen system, another panel system and now as you move into this year, as I'll talk later on about the designing and then getting manufactured in our own formwork products. The geographic footprint that we operate across every state, every capital city, no other formwork and scaffolding company operates across the network that we do with that range of products. Clearly, our engineering expertise, which has been really the major factor I'd suggest in the growth of this business, the success of this business over the last few years, as we've grown at engineering function and would change the way the function operates and how it interacts with our client base. And then in general, the quality of the people within Acrow, who are really proud to lead. We have a fantastic service ethic, a fantastic team spirit and all those factors together have got us to the position where we are, the clear market leader in Australian formwork sales and hire market and the aspirations to do the same on the industrial services market. Some of the key operational achievements through FY '23. I have mentioned the secured contracts and pipeline. I'll talk a little bit about that a little bit later and give some color to that. We did make 2 very important asset-only acquisitions that have been come along with contract revenue right at the end of the financial year, one in April, one in June. So in April, we purchased a premium screen system [indiscernible]. And that system complements strongly the existing Natform screen system that we have. And then in June, we purchased Ischebeck decking system panel system again, it came along with contracts that again complement strongly with our existing product offerings. Look, the most exciting thing for me and for the future of the business in this year is entering the Jumpform market. We had 2 active jobs in that year. We wanted to see how those jobs were undertaken and make sure that the system that we've got rights for the jacking systems model. We've got the [indiscernible] is working well. Pleased to say it's exceeding expectations, and I'll talk further about how we're now going to grow that business across the country in the next couple of years. Irrespective of even just purchasing that second screen system. The existing screen system with the Natform system that we purchased about 5 years ago, had a record year in revenue. So we had $13.3 million of revenue in screen, $11.3 million of that was in the traditional business. It was the first time we exceeded $10 million organic growth. And I'll talk about the relationship between screens and Jumpforms going forward later in the presentation. Just general organic growth, new products and new territories. It's been a factor in the growth of the business for the last couple of years, bringing products that we have inside the Queensland market, the New South Wales market into markets like South Australia, Western Australia and Tasmania. That continues to be a very strong part of the growth story of the business and we're still going forward. There is still significant untapped opportunities for us in that space. And then the Marquee civil infrastructure projects, which we've become the go-to supplier on most of the major infrastructure projects across the country. Safety, obviously, fairly important business had a very good result of safety. We only had 2 lost time injuries in the year, which is obviously too, too many and we're focusing on getting that number down to 0. But good improvements, great focus in the business probably in [indiscernible] area. Key financial metrics. So you can see every one of those is heading in the right direction. I'll talk a bit further about the revenue in a second because revenue of 14% okay up by 47% EBITDA but only 14% of revenue. It's a significant mix change. And when I get to the 4 operational numbers, you'll see, we actually made -- we had a greater growth in our sales contribution number in total than we did in our revenue. So it's an indication that there was a very big change of mix towards higher revenue in the numbers. Strong numbers in NPAT growth, both statutory and underlying EPS at $11.7 is a pretty good number, I think. I'm very pleased to be declaring a $2.7 fully franked dividend for the second half of the year, bringing this to $4.4 for the year, up 63% on last year. And most importantly, the return on investment -- sorry, return on equity number of 32.7%. As you see on the next slide of the presentation how that's grown over a 4-year period. As I said earlier, I've been sort of in management roles in business for now some 30 years. I know I haven't been responsible for a business that had that kind of level of return on equity that we got to in Acrow. Andrew will talk later about our capital investment program, our vertical rates what we're achieving, the disciplined approach we take here. It's really paying off, as can be seen both in these numbers and the general profit numbers. Higher wins and pipeline. You can see we are up against 34% in hire contracts won year-on-year. The first of our Jumpform contracts, significant wins in screens, significant growth in formwork and then a really, really impressive number is that the pipeline has gone from $83 million to $142 million year-on-year. Very large factor of that is in Jumpforms. Now the story there is that we want those first 2 contracts we won. We wanted to make sure that we've got those under our belt comfortably, and we did. It was only really in May that we started actively marketing Jumpforms or tendering the Jumpform contracts. We've secured 3 in the last sort of 6 to 8 weeks. And the pipeline, the Jumpform is now into the $20 million range from 0 over a space of about a 8-week period. The next slide is really important. I mean we haven't put this out this before, but I think I would like to think investors start to understand this, as to why we place so much emphasis on secured hire contracts as the key lead indicator, while we can talk with a high degree of confidence about guidance that we give. But giving guidance, obviously, very early for this new financial year, we're giving it 6 weeks into the year. And this is one of the major factors. Because of the higher revenue you win the contracts 1 year, translates to actual revenue in the business the following year. And you can see it's a consistent trend over a 5-year period. It's not fluke. This is what actually happens. So if you can see the number we're saying we've actually -- that's actually a miss, it's $67 million worth of hire revenue contracts [indiscernible] the FY '23 year. The $74.5 million revenue for the year actually relates to the $50.4 million of contracts from the previous year rolling through. So the $60.7 -- sorry, the $67 million that we won in '23 will roll through into '24 at a much higher level. I know, for example, right now, in July, the high revenue that we generated in July '24 is the greatest number in any single month in the history of the business and is up about $1.5 million, what it was in the previous July. So you get that roll through of the growth [indiscernible]. I'm never going to undersell this KPI. It's key to how we manage the business. And if you can see that number going up, you know we're going to be making more money. Matt Caporella is not with us today. He is having a very well-earned holiday. He has been extremely hard and spending a period of time overseas, supervising the manufacturing of new Acrow products. But I will touch on a number of the feedback as an engineering. Firstly, just on the evolution of engineering, we've talked about this over the last couple of years, the growth in numbers of engineers roughly at 45 people work in the department. We now have a steady-state engineering group that focuses primarily on complex design. We have engineers that are chartered. We charge customers for the engineering service we provide. We have dedicated site engineers. We have internal testing facility, ISO accredited, et cetera, et cetera, et cetera. This is an engineering business now. This is the absolute guts of how Acrow operates is on the back of the expertise in engineering. Where that's going through now, though, which is to me incredibly exciting, is that we're going to -- we're designing our own products across a range of areas in formwork. They are designed for the Australian market conditions, they are being manufactured across a range of factories in China. Matt visited twice in the last couple of months, where he's almost sort of directly supervising, making sure that they're being manufactured to the level we want. They will be at least as good if not better than the European equivalents in the Australian market, and they will be at an extremely competitive cross-point. So the advantages here are clearly -- they are designed for the Australian market by an Australian company who understands this market better than just about anybody. We own the IP. We totally control the supply chain, and we have a very strong price competitive position. So this will be a significant change in Acrow over the next couple of years, and I'll talk a little bit further about how I think that's going to be an issue later on. Just an example of projects. Absolute market project for us has been the CYP project in Melbourne, these underground rail network. We are basically the only formwork [indiscernible] seller on that project now. Every package is basically being awarded to us without going to tender. This is one specific example of work where we designed a system off-site manufacturer to put it together offsite, transform in basically the middle of the night to the middle of Melbourne and got it installed. And you can see the quote from the Project Director of that particular part. It's been a really successful engineering project. Another example, Cross River Rail in Queensland, very similar to the work we're doing at CYP. One of our first 2 Jumpforms. So this is one of the [indiscernible]. We're doing quite a complex Jumpform at Albert Street railway station on Cross River Rail. This is a more traditional Jumpform. Monaco, it's a multistory unit block built on the Gold Coast. The feature of that is it has got screens as well as Jumpforms in that setup. [indiscernible] there's basically almost not one screen quote that we are putting out that doesn't have a Jumpform quote going out with it. These 2 systems go absolutely hand in hand, and that's going to be strongly in our favor going forward. And then just in this category also, just a bit on the equipment that we purchased in the last 3 months of the financial year. They're really like quality assets. So the screens that we purchased, we're classifying them as our premium screens offering, our Natform system, we could call a standard screens offering. This is a more heavy duty, more expensive system that this purpose sort of build the Tier 1 projects. All of the Queensland market at the moment we're going to be rolling the system out across the country. And we think it's going to be a great complementary offer to the existing system, same as the issue with panel system we purchased. Again, probably the most utilized panel systems worldwide, all in the Queensland market at the moment, and we will be able to roll that out -- complementary to our business. And finally, we go into the detail of Marquee civil projects [indiscernible]. It's pretty much is the one that we don't have a major feature on now across the country. Going to the results. So I mentioned this in the -- it's a [indiscernible] So I just want to point out that revenue went up by $20 million year-on-year. Sales contribution went up by $23.2 million. See the contribution went up by more than the revenue because the split of high versus sales was a significant change. So I will take higher revenue growth every day of the week. It's the purest form of revenue. It's the one that generates the most profit of the business, as these numbers absolutely show out. And then you can see a contribution margin of 62% is quite extraordinary and the growth of that number year-on-year. Very modest increases in costs in both yard and labor for a business that grew substantially as we did. 8% in yard related costs and 9% in labor. The other is a big increase. That's the bad debt. We've been talking about that all year. We did have a significant increase in bad debt of around $3 million. 1.8% of sales though should be understood. It's a very low percentage of sales. And whilst some people would look at that and say, geez, that's a big increase in bad debt. And it is. What I say is, we've had -- we got a $17 million improvement in EBITDA, in spite of having a $2.5 million to $3 million increase in bad debts. Obviously, 31.6% EBITDA margin significantly up again. That's a lot to do with mix. And one of the most important factors from being here is that $23.2 million of sales contribution margin got us $16.9 million of bottom line improvement, which means we had a 73% pass-through of revenue -- revenue margin contribution into profit. So I've spoken before of wanting to hold a number into 60s to be -- have a 73% improvement in sales contribution margin being passed through to profit is a really, really strong result. Next page is the sales contribution bridge, which just shows $18 million of our growth came at a high revenue, which is the key number and will continue to be the key number in Acrow going forward. And our Formwork division. We cracked the $100 million in revenue for the first time in our history, up from $78 million last year. Really good growth in Queensland and New South Wales, very pleasing in New South Wales. First, revenue and of our Jumpform business, about $4 million of revenue for the year in Jumpforms. And then a modest contribution out of the acquisitions of the screens and panel systems that happen in the last April and May and June, about $2 million worth of contribution from those 2 systems. [indiscernible] contribution margin, up by 28%, and the pipeline continues to be incredibly strong in this space. [indiscernible] look, the key factors here are great growth in Queensland, which is market-based. We've got -- well, [indiscernible] our market share has probably gone from 60 to probably the high 60s now in Queensland. The most pleasing increase, as you can see, the New South Wales going from $17 million to $23 million of revenue in that -- in the year. That is market share growth. Victoria obviously come off a very low base in '20 to very consistent results in '21, '22 and '23. I would say that Victoria has had an absolutely cracking start in '24. We just expect to see record numbers in our Victorian formwork business in the month of July. And it's a testament to that team down there has done a remarkable job. The Victoria business, I'm very, very pleased. And you see, obviously, WA, another year of growth off the back of really substantial growth between '21 and '22, that trend continue. So great results across every state in the operation. In Industrial Services, I really want to point out something strongly. So again, you see here the revenue is down $5 million. So on [indiscernible] 11% decrease. The contribution margins hardly moved. So again, this is a mix issue. Hire revenue went up, labor margin dropped slightly. Product sales dropped dramatically in terms of revenue, but increased in margin. So we went from $14.4 million down to $9.7 million of sales revenue, but we only dropped margin from 3.1% to 3.7%. So I will look at this as a year for consolidation in this business. Certainly, the profile for shutdown work was not as strong in '23 as it was in '22. It's going to be much stronger at '24. So I know going into '24 we've had, again, a really strong start to the year. We've just announced in the last few days, our success in a 5-year contract of Snowy Hydro, which is tremendous for the business, gives us great stability in this part of the business and also gives us a great foothold on that project in terms of other opportunities that will present themselves. We're in the bidding for a couple of other very large contracts that we have to be making some announcements shortly in that regard. And we really are very strongly focused also on M&A in this space. So a year of consolidation, and I know in FY '24, it will be a year of reasonably substantial growth. Commercial Scaffold, the one we never like to talk about except I'm going to talk about it. It's up by $9 million in contribution year-on-year, and it's all to do with rates, and it's all to do with focus on dry hire and getting out of poorly performing contracts. So you can see there, for example, in FY '22, at $15 million of labor and cartage revenue, we made $900,000. That dropped to $10 million this year, and we made $2 million. So must be the quality of the work we're doing in that space. But the story here really is around price growth. So what we're doing at the moment is locking in prices with a range of our major customers for projects that will go for extended periods of time that will give us certainty on our price going forward for the next couple of years. In a market that -- this is the cycle part of the Acrow business. I don't back away from it. It's a supply and demand market. But the rates we're gaining at the moment, we are locking in for the medium term to ensure the continued stability of the profit out of this division. And then the most important thing in the business is people, culture and brands really. So it is our people who make the difference. We have a very diverse and inclusive workforce. We're bringing all of those -- the employee, staff et cetera, in Acrow all under the one banner now. Maybe -- in Acrow, we purchased Snapshot 5 years ago. We purchased Uni-span 3.5 years ago. They are all now united under one Acrow brand. I'll talk about that a bit further, but we are rolling that out in September. And you'll see one Acrow going forward. Strong purchases now on training, development and an organizational development in general, but a very, very good graduate program mostly focused on engineering. But now we're broadening that to include sales and administration. Importantly, for a business that's as successful as we've been and for our size now, we've got a very, very good succession plan in place and training programs for right after the senior executives, some of the absolute key people who report to me across the business have been getting some strong external training to assist them with their succession planning -- within the succession opportunities within Acrow. And we have a mental health champion program. It's important that these days, it's become a very -- it's become factor in business these days and in life, in the times we live in today and having that program in place is an important initiative. Our culture remains as it has for some time. It's about customers, being solution-focused, focusing on being the employer of choice and setting and then exceeding those standards of the industry, being open, honest, constructive and being one team, which leads to the brand. So we are relaunching the Acrow brand in the first week of September, that's being rolled out at a national sales and engineering conference we'll be holding in the first week of September. So the people in Acrow will get to see, feel, smell, touch the new Acrow brand before anybody else and then it gets rolled out to the industry, to our shareholders, to our customers, to the general market throughout the month of September. The brand will encapsulate. We've done a lot of work on this, the brand and what it stands for will represent and encapsulate our position as the leading Australian formwork company. And that's -- that will be the crux of the Acrow brand going forward. Okay. I'll now hand over to Andrew, who will go through the financial results.

Great. Thanks, Steve, and thanks, everyone, for joining us. Turning to the P&L. It's already been through the EBITDA increased from 36.3% up to 53.2%, along with a very large increased EBITDA margin. [indiscernible] at the moment is consistent with last year is 8% of our EBITDA growth is flowing directly down to pretax profit. So it's a good outcome. Moving down. Depreciation was up 16%, which is on the back of a $23.4 million of CapEx and also, we had the acquisitions of screens and panels right at the end of the period, 23.5%, which obviously didn't have a huge amount of depreciation. Our interest up by 37% or up from $3.5 million to $4.8 million. Obviously, our gross debt went up [indiscernible] at the moment. So our average gross debt through this period was $40.5 million compared to last year of $28.7 million. And obviously, increased interest rates across the [indiscernible] of the economy. Our interest coverage ratio is exactly the same as it was last year so 12x. Moving further down, pretax profit, up 68% from $20 million up to $33 million. Now tax expense. Our underlying tax expense -- so consistent with last year. Underlying tax expense was 8.3% compared to last year is 9.9%, and that was a mix between our tax paying entities and nontax-paying entities. So from an NPAT and underlying NPAT, increased 71% from $17.8 million to $30.5 million during the period. Now moving down. Our NPAT quarter was $15.7 million, up to $23.5 million. Now the difference between the underlying and reported, we had significant items of $1.2 million. Now we've done a large yard change, but the large yard movement up in Queensland has a significant cost of that movement. Plus we've had some restructures relating to that and others. And we also had a -- which you would remember from our balance sheet, we had an investment in a legacy [indiscernible] entity from pre-listing, that's now being written off. So that's gone through significant items. Moving down to significant items to tax. We've obviously had some very large tax losses that have been carried forward for many years. Now profitability is obviously being outstanding, and these tax losses have been used up quite rapidly. What's happened this year is the tax losses in our nontax planning entity have now reduced below what the deferred tax liability. So we've actually bought those deferred tax balances on balance sheet. And to do that, we've set $2.6 million accounting tax expense essentially. So this is not a cash expense. This is an accounting tax entry. But what this means is that going forward, we will now basically have a 30% tax rate from an accounting perspective. But clearly, we still have about $5.5 million of cash losses carried forward. So whatever our cash expenses next year, we still have $5.5 million to offset these. Then we had $3.2 million of share-based payments, which, as I said, goes to [ $23.5 ] million. And from EPS, EPS increased by 63% on an underlying basis, up to 11.7. And even our EPS on a statutory basis went up by 42%, which was is pretty good. As Steve mentioned before, final dividend announcement of $2.7, 100% franked. So on the very recent $0.09 share price on a cash point of view, that's a 5% yield. But when you take into account the Franking that's a pretty healthy 6.8% yield on $0.09. Moving over to the balance sheet. Total assets increased by $33.6 million in the year, and that includes the full CapEx of $23.4 million, plus the very recent acquisitions of around $23 million. Now we'll get on to the CapEx in a moment. Net debt. Net debt went up by $13.5 million to $46.4 million. So our gearing is our net year is 31.1%, up from 28.3%. Debt-to-EBITDA was 1x. Now that's reduced from last year's 1.1x. But what needs to take into account is the premium screens and panels that we acquired so the $23.5 million in April and June, that came in $16 million of debt and very little EBITDA came from that towards the end. If we haven't actually done that, we would have been at 0.8x that -- so that was a very light acquisition into our debt. So we're very comfortable with 1 term debt to EBITDA, but it would have been better without that $16 million. But obviously, next year, that comes with a lot of extra EBITDA. From a cash flow from operations, $44.9 million, that's an 84% conversion rate. That's significantly up from last year's. If you remember last year, we had a very large restructure of our working capital essentially and that's what we did the last year. So we're sort of moving very steadily on a working capital point of view. Working capital now, 23% of sales revenue steady to last year. We see this basically continuing on into the future. Total -- if we look at the net debt bridge, we start at 32.8%. We finished at 46.4%. Now what I want to point out here is this really gives a very good indication of what our cash flow from operations actually generate, compared to if you saw it last year. So we had [ $52.2 ] million of EBITDA. We've got a working capital in cost of around $6.7 million. Lease payments, so cash lease payments. We had [indiscernible] and max CapEx. Basically, if we -- then we had dividends of $7.4 million. And if we've actually not done the growth CapEx and the cash acquisitions, our net debt would have been down towards the $13 million level. And we choose to make those CapEx -- those growth CapEx and the acquisitions. The cash of that was $33.8 million. So that's a pretty healthy outcome from a net debt point of view. And now as getting back to the working capital side as well, as Steve mentioned before, one of the big changes in other expenses this year was our bad debt expense, which was about 3. Now we did take into account that was -- even though that was an elevated level and we don't see that happening again this year, that was 1.8% of revenue. That's pretty -- that's not a bad outcome. Now debt is where overall pretty comfortable with our debtors at the moment. We have seen no deterioration of the debts at all as we're moving into July. And we have it in the second 6 months of the year either. And [indiscernible] days moved up to 21% from 15% last year. But the majority of that was actually negotiated sales where we've got a long tail of repayments. So they're not actually [indiscernible]. We actually had a $1 million season back just in July soon after year-end. So overall, we're pretty comfortable -- we have a provision for bad debt 6.4% of the debtor's balance, that's up from 4.1%. We took the opportunity at the end of the year to bump that up a bit just from a conservatism point of view. Moving over to capital expenditure. As we said, our capital expansion program really has proven to be quite successful. We've got a 32.7% rolling. We continue to take a very disciplined approach on CapEx with everything we do. So we've traditionally had a 40% in returning capital. We're really not looking at too much now that's under 50%. So we've -- in the year, we spent $23.4 million in growth CapEx, $17.8 million of that was growth and $4.6 million on our normal sustained business CapEx. Now when we do the -- when we've done the review of how much we're actually making some hire revenue over the period of time on a growth CapEx. This year, we're at 57.9%, now that's up from 49.8% last year. This -- in reality, this has been impacted quite greatly by the extra percent on Jumpform during this year. So we probably won't be that high in the next year, but still going to be quite elevated considering we're really [indiscernible] now. Moving over to funding and liquidity on the next slide. We continue to have a lot of support from our banking partner. The main changes in our banking facilities this year is we increased our working capital facility essentially by 3.6%. We took the opportunity to buy some [indiscernible] prices during the period. We drew down $4.1 million during the first half of the year, and the balance of that is just under $3 million at the end of the year. We also got an extra $16 million to acquire the premium screens and panels right at the end of the year. Our headroom has increased from $13.2 million at '22 up to $16.6 million. And when you take into account the cash on hand at $4.9 million, we had $21.5 million liquidity available essentially at the end of the year. And [indiscernible] start at 1 where -- I mean [indiscernible] given everything held steady, I'm setting that level at probably around 0.75 next year. So this business really is pumping out a lot of cash. And with that, I'll hand back over to Steve.

Thanks, Andrew. So I'll just go through -- I think are the key factors into this year in terms of our growth and then talk a bit about the guidance at the end. So I'll roll out our favorite track on civil infrastructure [indiscernible] because it's going to have a longer and flatter tail. We're not the only people saying this. I mean I've read recently all the results, we are obviously extremely good and they talk about this because it's a key factor in their business as well. Sort of some [indiscernible] presentations recently. And the same, same thing we are. It's a longer and flatter tail, and that is good for everybody. The key thing here is that how much of the revenue was ahead of us not behind us. And 68% of the 10-year spend is to come within the period of '23 to '27. So I'm sorry, but anybody who thinks that this is [indiscernible] it is about the decline and the whole thing is going to fall over, is just listening to media garbage, it's not the case. We [indiscernible] every day, and we understand this better than the newspaper reporters do. In terms of the major projects going forward, these are projects that are starting. But I want to point out here because it looks relatively small by comparison, which is Coomera Connector at $2.2 billion project for us. It's absolutely key. [indiscernible] it's connecting road between Gold Coast and Brisbane effectively for those people who know the area, it's the extension of the [indiscernible] that comes across from mid switch and then will now bypass the Pacific Motorway and go in, go sort of -- sorry, closer to the coast to provide a connection to the northern areas of the Gold Coast and takes the way [indiscernible] traffic smile that is there every day of the week. We have already won many millions of dollars' worth of work on this project, and it's only just started. So if you look at that compared to say, something like a Suburban Rail Loop, it was a $30 billion project. We'll get more revenues out of Coomera Connector that will get out of Suburban Rail Loop in the next 3 to 5 years. This will be one of our marquee projects going forward. Second is the Jumpforms. So as I said, we've won 3 new contracts in the last 8 weeks. So we had 2 so both in Queensland. We've now won 2 in Western Australia and 1 in New South Wales. Importantly, every one of those 3 contracts that we've won has also got screens package attached to it. So we really see there's 2 parts of the business working hand in hand. As I mentioned, the pipeline after a very short period of time is in the $26 million worth of work that we're quoting on. We're only just starting here. And I firmly believe that this target of getting a $20 million annualized revenue over 2.5-odd-year period is absolutely within our great possibility. Jumpforms definitely is a key part of the Acrow future. And then it rolls into the screens. So we've now got 2 screening offerings, the traditional standard Natform screen and the premium screen. The premium screens are more heavy duty, they are more expensive to hire of every jobs, especially in sort of the major Tier 1 with a build-out or formwork or wants this kind of screen that previously would cut us out of that part of the market. We're experiencing tremendous growth in this area. We haven't done -- we've never done a screens job in Western Australia, for example. We've now got 2 off the back of the work that we've won in Jumpforms. So we are absolutely got -- I think we've got 3 at the moment operating in Adelaide. We are now absolutely a national screens provider. This is a high-quality, high-margin product, and it goes absolutely hand in hand with our jumpsforms another key part of our growth. And then the thing that I think we've yet to see the benefit of, it's about to really kick in a big way. Certainly for the second half of this financial year into the next year is the product development we're bringing products to the Australian market that we've designed for our conditions, where we've got control of the supply chain. We've got control of the pricing point, and we know they're going to be [indiscernible] we have got better than our European equivalents. So the major one that we're focusing on the moment is Acrow deck. It's a basic panel decking system commercial formwork. We haven't got 1 deck in Australia yet at the moment, and we've got $1 million order in South Australia for the system. So as an example, that's a South Australian order, not New South Wales, Victoria, Queensland, probably the smallest market in the country and we've got just under $1 million order. This will be a significant change to the Acrow business going forward, and we'll be rolling this out as part of our new brand launch in September. We'll have products that will be able to show our customers across all over the country. As I mentioned, our IP, our design, we control our supply chain, control the price, and it's going to be a great avenue for the growth through Acrow. And then also Industrial Services, as I mentioned, a stable year in '23, but absolute growth expected in '24. We've really grown this business dramatically over a 2- or 3-year period to get what we've got in '22 or '23. Now we're going to go to the next level. Snowy too is an absolute key to that. We've announced $56-odd million worth of work over 5 years. It will be more than that. We believe that, that -- just that package of work along with some additions that will be -- will have along the way will potentially be as much as $75 million worth of work. There are some significant other contracts that we are currently bidding on and expect to have some success shortly that we will probably be announcing to the market. And we are very active in M&A in the space. Now we've broadened that scope. We're always looking at Queensland -- sorry, Western Australia, South Australia. We now think the North Queensland market is also very interesting here. So we don't operate any great degree out in that area. But it's got similar sort of market characteristics to Western Australia and South Australia. So we've got an active interest in that part of the world. All of that leads to our outlook and guidance. We're guiding to revenue between $190 million and $200 million, up from $168 million, and we're guiding to EBITDA of midpoint 68.5 up 29% on FY '23. We're doing this up to 6 weeks. This is underpinned by the secured hire revenue contracts that we know that has an uplift of 35% compared to last year. The asset acquisitions that we made at the tail end of last year as they roll through will contribute an additional circa $8 million of EBITDA this year to what they did in '23. The revenue and profit that will come through the '23 capital program as we go, the '24 CapEx of $23.5 million that will generate growth and through -- as we go through the year. And I want to point out too that in here, net debt and debt-to-EBITDA is going to decline. So all things being equal, without any other dramatic acquisition or anything else that may or may not happen in our business, just based on our growth profile and our CapEx at the moment, we will see a reduction. So I mean, I guess, in summary, this is a business that's doing better than 30% return on equity. It's doing better than 30% EBITDA margins, 35%. It's guiding to 30% growth in its profit. It's getting 57% return on its capital investment and it's got a 1 turn of debt to EBITDA probably declining to 1.8%. So I think it's a pretty healthy business and a business that we're very happy with, and we look forward to another successful year in FY '24. I'm happy to hand over for questions.

[Operator Instructions] Our first question comes from Ed Woodgate from Jarden.

Can you hear me okay?

Yes.

Yes. So just wanted to clarify one of your comments regarding the July hire revenue, and it was like up $1.5 million [indiscernible]. Does that include any of the new contract with SNOWY HYDRO [indiscernible]?

SNOWY HYDRO contract is not hire revenue, and it's all labor.

Okay. Labor hire there, right? So yes.

When we talk about hire revenue it's hire revenue. It's the hire for the product. The Snowy contract that we announced doesn't have any product hire in it, it's all labor.

Okay. That's helpful. And then you just kind of talk through it again with how you reach your guidance. I mean, if I kind of go through it on the back of the envelope, it feels like maybe it's a little bit on the lower end just with [indiscernible] acquisition $20 million Jumpform pipeline that you're saying the hire revenue momentum, Snowy, like a bunch of other things. So I was just wondering, is there some sort of mix shift going on there within the revenue line or has there been any softening in the core revenue line [indiscernible] contribute so strongly in '23 or this just kind of conservatism?

We're 6 weeks into the year. I think it's the first point on that. Second point is that we don't -- it's impossible for us to guide for product, large product sales that may or may not happen. We can't do it. [indiscernible]. Yes, we would provide -- and it's always a factor -- yes, last year, for example. We did announce it -- we made [indiscernible] engineering in May that generated a couple of million dollars of EBITDA in [indiscernible]. I don't have a forecast sale of that size in our current guidance, but [indiscernible] I mean there's plenty of items in [indiscernible] but I can't put that into the forecast. It's one of the reasons why we do have as many sort of changes that we do across the year as those things materialize. So that's very much the case. So we're comfortable where we're going at the moment. I think we've got to be, again, mindful of the fact that we're 6 weeks into the year.

Yes, sure. Okay. That makes a lot of sense. [indiscernible] conservatism. Okay. And then just finally, so you might have talked about a bit. Can you just provide some color on the growth CapEx for '24. Should we be expecting that to come down or?

We provided the number, and that's our budget number. And [indiscernible] growth CapEx number that we provided is very heavily slightly towards Jumpforms and the new Acrow deck product. So [indiscernible] something on Jumpforms. You mentioned that in your [indiscernible]. There's not a 6-month lead time from winning contracts to getting revenue in Jumpforms. We didn't start quoting again till May. So I think we've always alluded to the fact that it's going to be a GAAP. We had those first 2 contracts that we won. We wanted to make sure the system worked properly. It does, and then we started getting active. That was until May. So you're going to have a very back-ended growth in our Jumpform revenue. At the moment, it's actually quite low. As I talked to you today, the revenue per month at the moment, Jumpforms is quite low. But then you start when you work, you get into an operating rhythm, and then that just -- and then off she goes. So it's actually the second half of this year, and they're really in the next financial year, you're really going to see the growth coming out of Jumpforms.

Our next question comes from Rushil from Ord Minnett.

A couple from me. Just regarding -- you mentioned in your presentation that about 60% of the uplift in the total contribution of gross profit was from market share gains and new product development. Just wondering if you can provide a little bit more color there, particularly on the market share side of things? I know during the presentation, Steve, you alluded to Queensland being sort of high 60% market share now up from about 60%, I'm just keen to get your thoughts on maybe just your market share gains in some of the key states. New South Wales have been underrepresented in. So maybe just some updates on those key states as well from a market share perspective?

Well, Queensland. Look, in our traditional formwork market in Queensland, we've maintained, if not grow our market share, but one of the things that changed this year is the first 2 -- the $4 million for the Jumpform revenue was in Queensland. The screens acquisition and the panel acquisition is all in Queensland. So [indiscernible] our new products in the Queensland market, where we're already very strong. So that's part of the growth story of Queensland. That's got nothing to do with cycles. That's got nothing to do with simple infrastructure. It's got to do with products that we've now more or introduced in a market where we're already strong. New South Wales is market share. At the moment, New South Wales and Victoria are both getting market share gains. They are not really benefiting from new products into those markets. That's one of the stories for us in FY '24. We will be bringing products, the Acrow deck product, for example, that we don't have anything like that system in New South Wales and Victoria is a major opportunity in those markets for us. South Australia, I mean, so I think you mentioned South Australia. South Australia in the months of June and July has done record hire revenue by miles giving indication and [indiscernible] massive numbers maybe, but we would consider $300,000 a month to be a good month in South Australia in hire revenue traditionally. That would be really our budget number. We did over $500,000 in June and July in that market. That's an incredible result. And it's got absolutely nothing to do with cycles. That's all to do with market share gains and new products in those markets. And in Western Australia, the same story. We've doubled our framework revenue in Western Australia over a 2-year period. Nothing to do with cycle. Nothing to do with anything except market share growth and new product development. So we've done the work and have a look at it. The vast majority of our improvement in profitability is coming about -- is coming through organic. It's coming organically. It's not coming out of market activity.

Perfect. And just on the working capital, Andrew, is a question for you, but the working capital, you mentioned there was steady around about 23% of sales. I know in the past, the last year, you mentioned that the target was 18% to 20%. So just wondering, has that target changed? And are you able to just provide a little bit more color on what your expectations are for FY '24 in terms of working capital?

Yes. No, it hasn't changed. We're obviously always trying to get it down. If you actually have a look at the breakup and [indiscernible] in the financials, our debt is basically went up according to the -- I think it's [ 14% ], which is pretty similar to what the sales were. Our inventory actually went down from last year. So that was a part of that organizing this. But the big decrease was [indiscernible]. We actually reduced our credits by $6 million. There was a few reasons that we had some [indiscernible] we had to make the CapEx, et cetera. So overall, a $6.7 million increase, it was relatively online with activity increases. Yes, either in '21, '22, I don't see any -- in working capital whatsoever. The only thing debt will actually -- I mean debt is going to go up by according to sales. Creditors, we try to manage our creditors to extend it as much as we can, but it's going to be somewhere in that line...

We just negotiated a significant change in trading terms with our biggest timber supplier. So we haven't really run that through the numbers [indiscernible], but it's substantial.

Yes, that's a very good cash.

It's very good. So this is our timber supplier who we probably spend -- we spend $1 million a month.

Yes.

So the terms of trade have changed from 30% deposit and then the balance 30 days from [indiscernible] everything paid 60 days [indiscernible] has a significant change to the working capital profile of that particular supplier at about $1 million a month.

Yes. Perfect. That's all clear. And just one last question for me. Just regarding guidance and just sort of following on from the previous analyst, but Andrew -- sorry, Steve, in your presentation, you mentioned a couple of new contracts towards the end there that you thought the firm that Acrow might be close to announcing. Just wondering if you could provide a little bit more color on those in terms of the division that might fit in, whether it be formwork or industrial services and so on. And then secondly, do you have any of those prospective contracts included within your guidance? Or would those be incremental to what you've announced to the market today?

We've got one substantial industrial services contract that we're very close to, but it's not in our guidance. And what's this space, Rushil, we were hoping we would have had it done by now. We basically -- I mean we're in mobilization phase, but they just haven't actually given us a bit of [indiscernible]. But it's a -- well, I think it's a reasonably substantial contract [indiscernible] period.

Perfect. So I might just add on one last question to that. Just the new product that you mentioned as well, do you have much of the -- and do you have much contribution within your guidance from some of the new products that you've mentioned today?

No.

Our next question comes from Alex Lu of Morgan Financial.

Steve, Andrew. Just had a quick -- maybe can I just start with new product development, please? And you mentioned Powershore of Acrow deck. But -- and can you just talk about how the new products or how you think about new products in the future and how that complements the existing product range, please?

Well, Acrow deck is sort of the prime example right now, Alex. So we have a system in place that was a system that we used to [indiscernible]. Then we have the Ischebeck system and they're all the same application right. Now so this is -- basically, there's a panel that sit under [indiscernible] or just any sort of multiunit high rise, anywhere we've got a large state of concrete being poured. This is the most basic fundamental commercial formwork product. So we have designed our own product that is compatible with the system that we already have that, again, this is a [indiscernible] high utilization [indiscernible] that will come in at a very good price, controllable in terms of supply chain. And it's -- we're not at the mercy of a European supplier who sets the price and then tells us how much [indiscernible] supplies. We've got control of our investment in this space. So we don't even have a product, the New South Wales or Victorian markets at the moment that does anything in this space. We've got Queensland business where we would probably generate in the vicinity of $8 million a year or higher in this sort of category and the New South Wales, Victoria markets are far bigger than Queensland, and we have 0 revenue in New South Wales and Victoria [indiscernible] the month.

Keep going, Steve.

No, I'm saying that's -- we've got high ambitions, but what that product particularly could do for us in New South Wales, Victoria, South Australia, Western Australia.

Okay. Great. And in terms of sourcing product, can you just maybe just talk about, I guess, design, sourcing, supply chains and things like that, and is that a lot easier or supply chains are a lot more or less constrained than I guess, 12 months ago?

[indiscernible]. It's absolutely [indiscernible] shipping times have come down [indiscernible] months to get something in that sort of 8 weeks. So sorry, 3 months [indiscernible] 5 or 6. But we're down sort of an 8-week, 10-week turn out of China. And we're on the front footprints [indiscernible] has been twice in the last couple of months. He was there last week for 3 days. [indiscernible] last week, you better get your frequent flyer points [indiscernible] because he is going to be spending a lot of time in China with the manufacturers, just making sure the quality is what we want and the timing is what we want. It's becoming a very key to what we do going forward.

Okay. That's good. And just one last thing for me. Industrial Services so just mentioning active M&A pipeline, came to new markets and territories. So can you just maybe just talk about that a little bit more, please?

We want to grow the business. I've made it clear for a long period of time on. So what I'd really like to see is probably a balanced portfolio in the Acrow revenue of industrial services and formwork. I used to say I want to see $100 million each, but we're already in the $100 million in formworks. So I would like to see $150 million in each. We definitely want to grow. We've now -- we focus primarily on pretty much our power stations and shutdowns in that space and sort of Southeast Queensland to a degree and then into New South Wales and [indiscernible] Snowy, but we've just seen some opportunities recently in North Queensland open up. And then obviously, South Australia and Western Australia, a very strong market. So we like the space. We know we're good at it. We like the margins we're making, and it's -- I think it's always said it's a nice counterbalance to the higher-margin formwork business that still has the group's cyclicality despite what I'm saying, which I don't think we're in that cycle at the moment. But there is a -- there's no -- formwork margins are better than Industrial Services -- of Industrial Services business does, as example, Snowy give you the opportunity to get very, very long-term, good margin contracts that you can lock away and give you strong security of earnings over extended periods of time.

Your next question comes from John Price of [indiscernible] Corporation.

Steven, congratulations on the results. I mean you've painted a very positive picture. And I'm just wondering, as you look ahead, what do you see as primary risks to the business? And I guess, if you'd be kind enough to phase that by looking at each of the divisions?

Thanks, John. I think -- I mean, look, there's still an overarching risk around bad debts, right. So that's the absolute thing that comes front of mind to me. I mean we think -- Andrew, you can comment on this, but we think the environment today is actually far better than it was 12 months ago. What you've got in that space. I mean if you think about this, you had a number of contractors that entered into contracts pre-COVID at lump sums on very small margins and then COVID hit and I was stuck with contracts that they couldn't get better rates on, lots of lost hours, enormous lost hours on projects of label they couldn't recover and that's -- and then that rolls through the situation that we see in the building industry in general. People are not quoting that way going forward. There's a definite shift in that in terms of contractors are not taking the risk that they were taking previously, right? But that still is the override. I still see that, Andrew. I think that's -- and we hope to be able to get that number down this year where it was last year. We had a bad year last year for comparison, but still [indiscernible]. But across the other divisions, the Industrial Services, I can't give you one on front because it's not that kind of business. I can't give you [indiscernible] I mean maybe is there a risk that we can't get [indiscernible] required to do some of the contracts hasn't been an issue for us today. Certainly not an issue for us at Snowy. In formwork infrastructure, it's not going backwards -- again, I'll say, pretty boldly despite the nature of the media and what some going to say, it's not going backwards. We see [indiscernible] every day. So I don't see a risk in the short to medium term there. In the Scaffold Business, where we started to make very good margins off the back of supply and demand, that can change. And that can change fairly quickly. So you could see scaffold, commercial scaffold earnings revert to sort of somewhere between where they are today and where they used to be, which is why what we're doing at the moment is locking in prices for at least the next couple of years to be able to give us some cushion there. But I guess the biggest one is still the general construction industry and in terms of its debt profile. That's still, I think, the thing that we are most [indiscernible]

Just one other, if I may. You've spoken in terms of the innovation, you're incorporating in the business. When you look at your competition, what do you see there that could be potentially a threat to your growth of sales?

Well, our competitors [indiscernible] European manufacturers and they innovate. So [indiscernible] that's not their business is. [indiscernible] and they need to sell them somewhere, and they do innovate. But they don't develop, design products for the Australian market. They design products for the European market, where the Australian businesses are spit in the ocean of what they do in their total business. So what we're doing is designing our products to our market, and we're already getting great feedback from formworkers here [indiscernible] now an Australian company doing this, we don't have to sort of be dictated to by European suppliers. So we shouldn't kid ourselves they won't innovate because they do. It's part of what they do, but they are designed for the European market, not the Australian market.

Your next question comes from Michael [indiscernible] a shareholder.

Yes. Steve, Andrew, just following on from John's question. Really, your answer on bad debt. I wonder, is the result that you've had concentrated in 1 division, that's sort of part A. But secondly, I would imagine, given the growth story, and your positioning in the market, that the due diligence you're undertaking on potential customers now is much, much stronger and you've got -- I suspect the ability to be much more selective as to which customers you work for. Can you comment on those 2 points?

Andrew -- sorry, Andrew.

Yes, that's a great question actually. It's probably something that I should have mentioned during my part. So one of the reasons we did have some of that -- not a lot, but some of the bad debt is the situation has changed a lot. So we always bad debt, particularly the big ones we had. We had [indiscernible], but we had very small bad debts couple of years ago. So we'll probably quite relaxed [indiscernible] of the credit policy. I think it would be fair to say maybe [indiscernible] making money, making no bad debts. And then the situation changes [indiscernible] flooding in Queensland and these guys are on fixed contracts. So some of these guys went back pretty quickly from the relatively large balances. So in the last year, the application of our credit policy, we haven't changed it. We've just applied much harder. So as I said, when a new customer comes on, we're much harsher with what sort of credit to give them. If we can't be -- our customers -- they are specific type groups. But what we can do is that they don't have the credit that we're happy to do, we can just make them pay more upfront or we get bank guarantees and so forth. So the answer to your question is essentially our credit policy application, it's much harder. Still very commercial, but much harder, and that's why it gives us some comfort that we're -- our bad debt profile will be much lower.

And Michael, [indiscernible] ask your first part of the question, it's the commercial formwork market primarily. The commercial formworker who is working for a builder [indiscernible] himself into a fixed some contract to do a job and then get stuck with hours they can't recover because of COVID and flooding or other things.

Yes, okay. That's great. The second question I had, you've mentioned -- or you made the announcement on Snowy 2.0. And you did also mention in -- just before about the risk of attracting labor. You seem to suggest that, that's not going to be an issue. Can you give an indication of how many sort of people, on average, are you going to require for the Snowy contract? And it sounds like you don't see it being too difficult to attract that labor. And given it's a 5-year contract, do you have any escalation clauses in that contract? Or are you tied to a rate at the moment that you're going to have for 5 years?

Thank you because there are very good questions. So firstly, we've got about 20 guys there at the moment. We work on sort of -- I think they're sort of rolling 4-day shifts. That number will probably double over a period of time. We're not concerned about attracting the right people. We've been -- look, it's interesting with this particular case. So we are an incumbent supplier. Snowy under a very short-term contract that's now been led through a long period of time. We negotiated [indiscernible] site in conjunction with Snowy over the future generation. Our deal with future generation is not a lump sum. Every hour, we charge for -- every hour, we pay the labor, we get a margin on top of that hour. Our contract is locked in with the rise and fall that we have locked in our EBA with our employees. So it's absolutely 100% pass-through for every dollar that we pay our employee. So we -- there's basically no risk on the margin that we've got [indiscernible] going to be every month now for the next 5 years.

Right. Okay. And that contract you said doesn't include any equipment hire. I presume you are hiring equipment into that project. Is that done under a separate deal or is that done piecemeal tender by tender?

So they don't hire on that job they buy. So we would have signed and we didn't so much this year, that's one of the reason why the product sales dropped off in the industrial business. We would have sold about $5 million worth of scaffold equipment to them over the course of the last 2.5 years. And that will continue to buy from us. So we know, I mean, as I look at my pipeline at the moment, I've got sales forecast to be made to Snowy or scaffold at relatively small levels for the next few months, and we know that's going to have to pick up as the job continues to escalate. So yes, they don't [indiscernible] they buy.

Just -- okay, that's fantastic. Just a final comment. That tells us that Snowy Hydro won't be finished until at least 2028 despite all the [indiscernible]

Our next question is from [ Graham Douglas ] from [indiscernible] superannuation.

Thank you very much for great results. It's really pleasing to see it. It's good to see that there's a very good runway ahead of us as well. My question was actually about the bad debt, but you pretty all covered that off now. So I don't have any other questions.

Okay. Thanks.

There are currently no more questions. [Operator Instructions] As there are no further questions, I'll now hand back to Steven Boland, CEO; and Andrew Crowther, CFO, for closing remarks.

Okay. Thanks very much for taking time today to hear our presentation. And thanks for the questions, insightful and -- and yes, thanks, I really appreciate that. So again, proud of the results, very confident with our future and look forward to continuing to update our shareholders and interested parties on our progress. Thanks very much. Cheers.

That concludes the Acrow FY '23 Results Call. You may now disconnect.