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

Thank you for standing by and welcome to Acrow's Half Year 2025 Results Conference Call. [Operator Instructions] Thank you for joining us today. I will now hand the call over to Steven Boland, CEO; Andrew Crowther, CFO; and Matt Caporella, COO. Please go ahead.

Thank you very much, and good morning. Steve Boland here, and welcome to another half year presentation from Acrow. I'm joined by Andrew Crowther, our CFO, and Matt Caporella, our COO. Once again, I'm very proud of the tremendous result for the business. It's been another great 6 months, and we've really taken this opportunity in this period and over the course of the rest of the financial year to position the business for what we know is absolutely going to be ahead of us in the next couple of years as a minimum. So highlights of the first half. So revenue was up 25%, and that's a record 6 monthly revenue contribution for the business. EBITDA was up 11%. We've been enunciating for some time now the strategy about significantly growing our industrial access presence. That business has performed off the charts really in this 6-month period. It's now 50% of group revenue. And this is before we see any benefits yet from the recently -- recent success we've had in winning the Perdaman contract in Karratha, Western Australia, which gives us a very strong beachhead into the Western Australian industrial market and will generate $40 million to $45-odd million of revenue and significant profits over the next 2.5 years. We continue our strong focus on product development. And in that regard, one of the -- and Matt will go into more detail on this, but our most recent addition to our fleet in terms of product development is our own Uni Ring, which is a Ring Lock Scaffold that will be used on Perdaman as its first venture and in the industrial access market more broadly. Cross-selling, especially now in the commercial formal sector in the likes of jumpform and screens and Acrow Deck product is becoming a strong feature. We've had a great 6 months in terms of winning work. The pipeline continues to grow. I'll go into more detail about that shortly because there are some factors that have affected the ability for contracts to be won to be generating the revenue you would normally expect them to in this financial year, primarily in Queensland. I'm going to spend a bit of time going into the detail around that. We've chosen to have a very aggressive 6 months in terms of capital expenditure, and I'm going to go into more detail about that as it absolutely fits in line with our strategy that I'm also going to outline shortly. And I'm pleased that we're announcing full year guidance of 27% up in revenue, 14% EBITDA, 11% NPAT and 2% EPS growth, all with the midpoint of our current guidance. Acrow overview has changed a bit, but not much. One of the big changes here is the number of people that we employ and our full-time equivalents is up to 424. That's primarily off the growth of the industrial access business. What is not on this map and probably should be now is a nice red dot indicating Karratha, because the operation up there has now commenced. Our competitive advantage continued to be exactly what they've been for the last few years, the quality of our people, our engineering expertise, the range of products we've got and the geographic footprint that we operate across. Journey so far, one thing that's been added to this, and we haven't announced this, we haven't announced it because -- I mean, it's not actually a material announcement in terms of what its profit impact is, but it is very important to our business in terms of what it now gives us as another strength to our bow is, just this month we purchased a business called ATEC. ATEC is a registered training organization, is a trainer of scaffolders primarily based in Southeast Queensland. So we bought that business. It has a revenue stream that goes along with it. It's, Andrew, $1.1 million acquisition?

Yes.

But more importantly, it then goes hand-in-hand with the development of our new training facility in our Mackay depot, which will be up and running in the next few weeks. So obviously, as we continue to grow our industrial footprint, it's really important that we've got access to labor. And one way of doing that and shoring up the future is basically breeding your own, finding people that want to become scaffolders, putting them through training programs, becoming accredited in what they need to do, operate on big industrial plant. And so it's a strategic investment and a very good one, I believe. I'm going to outline now some things around our strategy. I didn't talk about this at our AGM, but I think it's worth reiterating exactly what are the main characteristics of Acrow's growth strategy. So firstly, broadly, it is a clear strategy now that we've been adopting for at least the last couple of years as we've seen the opportunity in industrial access and as we've also grown our product development capability. So a very clear strategy about profitable growth for the business. It's about diversification of revenue streams across the core product group and service offerings. We've done a really good job over the last 7 years to become the premium formwork higher end seller in the Australian market. We've done particularly well in the civil infrastructure space, and we continue to do so. But we've seen the requirement, I guess, and also the strategic benefit of growing fresh revenue streams. And the vast majority of our capital investment at the moment is going into things that we weren't doing to any great degree 2 or 3 years ago. We now place an equal importance on both formwork and industrial access businesses. We're maintaining a very disciplined approach to ROI on both CapEx and M&A. And just to give you a full flavor of the way we approach M&A, we actually have, unfortunately to a degree, a $400,000 cost in our statutory NPAT for the year at the moment for an M&A exercise that we terminated. Now we terminated on the basis that the business that we were looking at after some months of evaluation, just wasn't going to fit the culture that we required within Acrow, and frankly was not going to be the right acquisition for the business. So we could have plowed ahead with that regardless and put it into our stable. But, to be frank, it wasn't going to work. And so we're not afraid to make those kinds of decisions, whilst we spent $400,000 in the process. Sometimes this is why you do due diligence. So we're still evaluating other opportunities, but we have a very disciplined approach. And then developing this Acrow way across safety, people development, engineering, product development, superior customer service outcomes and being best in breed. We'll touch on a number of those things across the course of the presentation. Now being more specific about formwork, the strategy in our formwork business is to focus on organic growth. So diverse product ranges, geographic reach and a specific focus on cross-selling. So that is still maintaining the current position that has been so successful for us in growing the national footprint. We have a strategy to increase market share in all state markets. And we are still doing that to a large degree, certainly in New South Wales, and I'll talk on New South Wales a little bit later because whilst the numbers don't show an improvement over a 6-month to 6-month period, there certainly has been an improvement, and it will be by year-end. We capitalized on industry-specific market-specific tailwinds, and there's going to be plenty of them. And again, I'm going to talk about Queensland in the presentation because if you find what's going on in Queensland in terms of the construction industry to any great degree, you can't not see what's ahead of that particular industry in that state. So there's a significant opportunity for Acrow to capitalize on those tailwinds. And then the product development program that is headed up by Matt is definitely giving us a competitive advantage, both in quality of the gear and just as importantly, the cost of getting new equipment into Australia versus buying it from a competitor or buying it from a European or offshore supplier. We're seeing the real benefit there in getting product into the country at a cheaper price. In Industrial Access, we are the market leader in formwork. We want to become the market leader in industrial access services, clear goal of the business. We want to develop a national footprint off the back of both M&A activity and targeting major contracts. Perdaman is a classic example of that. There are some other very sizable industrial contracts that are reasonably close to being secured. And we continue to look at opportunities for growth in M&A. We have nothing to announce, and we've still got a little bit of work to do, but we are an acquisitive business. We weren't put off by the one that didn't work, which was an industrial business. We've still got others that look like they're quite promising. We've got a really unique set of experiences and talents now across the branch network, and we've got to harness that to develop the Acrow way of operating in industrial. Perdaman, again, is an example of leveraging the operational scale, we've now got to win larger contracts. That's the second biggest contract we won in the industrial space behind the Snowy Hydro project. And in line with what I was talking about the ATEC acquisition, developing a best-in-class training and development program that means we develop our own talent in this particular area. Now the next page is about our capital spend. Now we have spent more money on capital in the first 6 months of this year than we have in any other 6-month period. We did it for a reason. It was budgeted, it was targeted. It was planned. So the whole opportunity here was, firstly, we renegotiated good terms and very favorable terms with our bank. And we're very pleased with the continued support we get, which gave us the ability to bring forward our capital investment program. Andrew will talk later about what headroom is now available within our debt facility. It's front ended because we know what's in front of us. So we absolutely know what's in front of us. And so this is a specific front-ended 6-month capital spend. We're targeting to spend $34.5 million this year, of which $28 million will be growth. And we're expecting next year, and we're actually working back to a targeted budget, targeted spend in capital next year of $20 million, down from the $34.5 million this year. Now if you look at that pie chart, $26.7 million out of $34.5 million are products that we are buying that are completely complementary to our strategy as previously outlined. So only the other $1.2 million and the nongrowth $6.7 million are not part of opening up new channels for revenue and diversification of product and profit ranges within Acrow. So we've made a deliberate choice, and I'm going to go into some examples, especially in jump form. We've made some deliberate choices here about growing new businesses basically from scratch. And that's what the capital program is going to be all about delivering within this year. In terms of key operational highlights, the industrial business is tremendous. So revenue up by 119%, sales contribution up 128%. More importantly, most of that growth is organic. So we'll talk about that a bit later. We certainly just have a pass-through of the revenues from MI and Benchmark acquisitions, but there is -- more of the revenue growth is coming out of the business organically, and this is before Perdaman, as I mentioned, kicks into play. Our secured hire contracts and pipeline for the 6 months are significantly up, and I'll talk about that shortly because there is a lag effect now, again, primarily because of Queensland, which I'm going to go into more detail about. Jump forms and screens are working hand in hand. We just won our biggest ever combined jump form and screen contract just pre-Christmas, $4.5 million with Meriton on the Cypress Palms development on the Gold Coast. I'm going to talk about that project specifically, but that's a massive scale operation that requires very heavy engineering input and again, goes to the capabilities we have. In the infrastructure space, there's a lot of movement now in marquee projects. I'll go into more detail about that, and clearly, getting that renegotiated facility with our bank has given us significant uplift in headroom and allowed us to grow at the rate we wish to. In terms of safety, the numbers are still very good. Whilst we've got a TRIFR increase, and reportable injury increase, we'll say to you that that's not surprising given that we've now got so much more labor working in the industrial access space than we previously did. Now we don't want to injure people, and we've got a very strong focus on this particular area as you have to. But our exposure -- and we've got to be on our game because our exposure to this area has increased because of the amount of work we do in industrial access, but the record, I believe, is still very good. In terms of the overall business overview and metrics and guidance, a couple of things I want to call out specifically. I'm going to go straight to the NPAT statutory number here because if you look at it, you're going to go what the hell has happened here. We're a victim of success in this particular line. So with the MI acquisition, when we made that acquisition, in the opening balance sheet for that business, we had to estimate what we believe our earn-out payment would be based on the performance we expected from it. We undercooked that by $2.7 million. That business has grown at a level that we didn't anticipate when we first purchased it, which meant -- which actually means now we've got to expense that additional $2.7 million as a one-off. That's what's in the half. There's also just under $1 million worth of amortization of intangibles for both MI and Benchmark. Andrew can go in more detail about that shortly. You can see EBITDA revenue up 25%, NPAT up by only 1%. EPS down. It's a half thing, right? When you flow this through to the full year, that's why we've added this column, you can see EPS will be up by a minimum of 2% year-on-year. And that's despite us having a lot more shares actually in action at the moment than we did at the same time last year. NPAT will be up 11%, EBITDA will be up by 14%. So on a full year basis, all of those key metrics will be in the right direction. The other thing to point out there, obviously, is the dividend. So I'm pleased to announce a $0.029 fully franked dividend for the half, which is up on the last half and clearly heads us to a direction we'll show a full year dividend of higher than what we had the same period last year. Securing high contracts, our key forward indicator. A very good performance of 39%, up year-on-year. Pipeline also just happens to be 39%. The absolute thing I want to point out here is that we've always had this linear relationship between winning contracts in one period and then in the following 6 months, seeing that translate into actual high revenue. This year is different. So there is $5.2 million worth of work in Queensland that we have won on Queensland hospitals projects where those packages will go ahead and our revenue will be generated. We expect that all that revenue to be generated by now. We're not going to see any of that this financial year. So again, if you fast forward that through, that's a huge uplift, a $5 million uplift straight into next year's numbers. And if you put that into what our full year should have been based on the previous history, we have -- because this is all 100% profit, this higher revenue, it would have been another $5 million of EBITDA being generated this year. We believe it's a one-off, and I'll go into more detail about that for you in a second. Okay. I'll now hand over to Matt to give an update on engineering.

Thanks, Steve. I'll talk about engineering and move on to product development. So we continue our engineering team development strategy. We've successfully embedded our cadets and graduate program into the business now. So that's resulted in 4 cadets in the last 12 months graduating into full-time engineers in the business. This program now that we've got in the business for the graduates and the cadets is developing our future engineers from the start of their career. And like Steve said, it's into the Acrow way of doing things. So this is the most important and probably successful strategy that we've done in the past with multiple cadets now holding senior roles in the business. Our focus on innovation continues as it's key to delivering the best solutions to our clients. So our internal testing facility, ISO accreditation, the internal product development team, so maintaining -- ensuring we're industry-leading standards and most importantly, our systems are tailored to the Australian market as well, which is critical. We now have 57 engineers and designers. A large portion of those engineers and designers are client-facing now. We've got a nationwide focus on that. So we've got guys on the ground in each of our markets available for meetings, for example. Most of our expertise now in the growth in the engineering team is in areas like the jump form screens and industrial access, so strengthening our position as leaders in engineering solutions. We're now focusing mainly on technology as well in the engineering team. So it's now becoming a key differentiator of our offering as we transition from the old 2D layer way of doing things to 3D Inventor. So by the end of FY '25, we'll actually -- majority of our designs will be in 3D, enhancing our accuracy and efficiency. So our designers are exceeding -- our designers are now exceeding our client expectations, providing value and opportunity for us to charge for these resources now. So in this space, it's typically treated as an engineering function as a free service to company that hire us. Automating -- doing a 3D design is further automating materials list and advanced task detection. So it's getting more seamless installs on site, but it's reducing our delivery times and improving our delivery of projects. As we move now to the product development side of the business, so as we said before, there's 5 key strategies here in the internal product development team: So ensuring a sustainable return on investment year-on-year in our products. We want to own our intellectual property and control the supply chain, solve industry challenges and these are mainly local challenges, so making products that fit the Australian market; focusing on multi-use products to improve our overall utilization, so having products that can be used in different applications; and enhancing and cross-selling opportunities like the jump form and screens for example. We've successfully developed and implemented solutions like the bridge brackets, module stairs, the Powershore 150, Acrow Deck Soldier System that we've spoken about before. And these products have strengthened our position in the market for providing safer, more efficient and scalable solutions. As we now progress into the second half of FY '25, our focus has shifted on to things like our Uni Ring that Steve mentioned before in our loading platforms. The Uni Ring in particular is a scaffold product and it's been in our development pipeline for about 4 years now. So we've taken our time now to complete and basically develop a comprehensive product to meet the requirements of our Tier 1 clients in this space, in this industrial space. And this has been a key thing for us on the Perdaman project. So we have 8 containers of this material now arriving over the next couple of months, all being sold on to the WA Perdaman project. As we look forward beyond FY '25, we're actively working on new solutions like our column climber, which you'll see back in -- when we talked about the Meriton project to be debut -- debuting on that project in the Gold Coast latter half of this year. And then we're looking at -- we've mentioned before, like ground shoring solutions for deep excavations and that's in the building and infrastructure space. Our product development pipeline is not just about introducing new products. There's an emphasis on integrated solutions of our new products. So jump form, screens, Acrow Deck loading platforms, all cross-selling synergies that strengthen our position as a one-stop supplier. Thanks, Steve.

Okay. I'll now walk through the segmental breakdown of the different division results for the first half. So firstly, in the overall business, as you can see Page 21 of the preso, $126 million of revenue, up from $101 million. Absolute points I want to make here are around the mix and the mix you're going to see on an ongoing basis between Formwork and Industrial Access in the business. So you can see a contribution margin, you see a deterioration of 7.5%. But it's absolutely 100% a factor of how well we've done in industrial to grow that business. So just a couple of examples here. The contribution margin in Formwork is 72%, because the majority of that is hire with some sales. The contribution margin in Industrial Access is 39%, which is a combination of some hire, a lot of labor and some sales. So obviously, as those -- as there is a shift in more revenue coming out of industrial, that number is going to change. What I would suggest to people if they want to do the exercise is to compare our 39% margin in industrial access to some other companies that play in that sort of labor provision space. Not necessarily direct competitors with Acrow, but that 39% is a superior number to, I think, just about anybody else I've seen who operates in the public company space in a similar style of business. We're doing incredibly well on margin generation at our Industrial Access business. The only other thing that I will -- and that obviously then has a flow-on effect to EBITDA margin because a lot of our increase in revenue which you can see, $34 million, is coming out of industrial. The other comment that I will just make about the result at this sort of macro level is 57% pass-through sales contribution to EBITDA is low. We would normally be wanting 60% to 65% as a minimum. By the full year, we will get back to that level. Sales contribution bridge, you can see $12.7 million of the growth from $64 million to $71 million came out of Industrial Access, $4.9 million in hire and $7.8 million in labor provision. Specifically the formwork division, so you've got a $6.6 million deterioration in revenue half-on-half. I'll go into the -- you'll see on the state split up what that's made about. But the majority of this is actually -- well partly in Queensland, and I'm going to go a lot of detail about Queensland. But we do sell product. And you get -- you might sell product in one half and then you not in the next half. So for example, in New South Wales, there was a $3.5 million -- $3.7 million product sale in the first half of the previous financial year that didn't get replicated this year. Now in the second half, we've got a $5-odd million product sale in New South Wales that's already locked in that didn't -- will be -- in that half of this year, that didn't happen in the last half of that year. So that can swing stuff quite dramatically in this area, okay? Now I'm going to go into detail about some states. So you look at Queensland, Queensland dropped by $2 million half on half. $4 million of that was in products that we bought specifically for what was going to be the Queensland Hospital sort of surge that didn't happen yet. We should have been $5 million higher than that number on work that we've secured that we should have started and should have generated revenue in that half. You won't see it in this financial year now, and I'll be back to give you the detail of why, but that will flow through in the following years. New South Wales is only because of that one-off sale. The actual New South Wales formwork business on a day-to-day basis now and by the end of the financial year, is performing at a far better level than it was over the last couple of years and has grown and will show significant growth. South Australia, likewise, one sale of $1 million. We don't get a lot of the equipment sales in SA. We had one for $1 million in the half year. Other than that, SA was flat. WA was flat, Victoria was flat. Victoria being flat was actually a very good result, given that we were cycling off a couple of the larger infrastructure projects in Westgate and CYP and primarily replacing them with Northeast Link. Okay, Queensland. It's our biggest market. Biggest revenue base and also we've got 65%, 70% market share. There's some things going on in Queensland that if you follow the press you would know about. But if you don't, you would be surprised by it. So firstly, you've got the Olympic review. So new state government comes in, they're reassessing all of the Olympic plans. They are announcing on the 25th of March what their plan is for Olympic infrastructure venues, et cetera, and venues and associated infrastructure. That's significantly delayed from what it should have been and puts the program back quite a bit. But the end result out of all of that will be a significant uplift in work in Queensland, that will be kicking in from the next financial year. The second one is a very interesting one. So I'm going to go on politics of this, but the previous state government had what they call best practice in construction. Paraphrasing best practice in construction, it meant that you couldn't -- on any state government funded contract, you had to use CFMEU labor rates and a range of other things, but that's the long and the short of it. The new government has come in and said, and that was adding probably 20-odd percent at least to the cost of projects being funded by the Queensland state government. New government come in and said, we're not doing that anymore. So any government project that had not already been late, is being retendered and the tenderers are being advised that they don't have to use best practice in construction rates. So the cost of these new projects to the state government and the taxpayer of Queensland will be significantly reduced. Now that doesn't directly impact us, except for project delays, because we're not providing labor on these projects. We're providing equipment. So our equipment hire contracts remain in place when these projects start, but with a significantly reduced labor cost for the bills around the form workers, et cetera. The third one is the capacity expansion review. So the $10 billion of Queensland is forecast to spend on hospitals, will now need to be spent on a smaller group of hospitals. Now that's delayed, again, in line with best practice in construction, a range of these projects getting cranking. Now what is for us is, as I've outlined there and I mentioned earlier, there's $5.2 million worth of packages there we haven't got the revenue from. Now that revenue will kick in and will kick in, in the next financial year. We won't see it this year, but that's an automatic uplift in EBITDA for us next year. And the last one is around civil infrastructure. So whilst there's not as much delay in civil infrastructure, there is also a delay. And there's some projects there that, again, we would have expected to see revenue on, now that are only now starting to get leg and will kick in next year. The other thing that's not mentioned here is in the commercial sector. Now the biggest commercial multi-rise project in Queensland is the Dexus Waterfront project being built by John Holland. That was supposed to start 18 months ago. Hasn't done anything yet. We are now getting phone calls from the suppliers asking us to start not just quoting them but providing equipment to them on that project into the next financial year, that could also just on that one project be an uplift of sort of $3 million to $5 million to $6 million of revenue for us next year. And that -- so finally, that project, which is not government funded, but has been significantly delayed, it's going to get cranking. So the marquee projects, the good additions there are Sydney Metro West, we've got some great packages on some of the stations being built for the Sydney Metro West Program. Cross River Rail is still going, West Gate dropping back a bit, Snowy Hydro. And this is from the formwork perspective in its infancy. Coomera Connector, Stage 1 almost complete, Stage 2 starting in a few months and then you have Stage 3. Metro Tunnel just about complete, North East Link only just now kicking in and the Kidston power hydro project in Queensland is also now just kicking in. I now want to talk about our Jumpform business. So you can see that on the previous pages, the biggest spend in capital is in jumpforms. This is because we are now -- we're a victim of what is a raging success in getting this division cranking. We've now won 23 projects since we launched. We've got $8 million of committed revenue this year, but we will get that up to $11.5 million by the end of the financial year; 8 of those projects include supplying screens. Just this month alone, we've won 4 new projects. So we've been going for 3 years and won 23. In the month of February, we've won 4 by itself. You can see the capital program here going from $5.1 million in '23 when we started to $15 million to $29 million by the end of this year and then by the end of next year, when we see the thing capping out at what we think the market capability is, at $41 million. So what needs to be understood here is we've made a conscious decision to grow this business organically. We didn't go and buy someone even if there was someone to buy. We made a conscious decision to make it to organically grow a whole new business unit from the ground up. And that requires capital, it requires people, it requires you to convince customers to use your system. And it's now being what I would classify as incredible success story. By end of '27, we expect to have a $15 million of EBITDA on the $41-odd million investment, and then we're probably at a level where we can keep going. Great cross-selling opportunities with screens and Acrow Deck proving successful, huge pipeline of work. And really importantly, I mean, we've attracted some of the best jumpform people in the industry into working for Acrow. Our divisional General Manager who is based in Perth was the previous state manager of the biggest jumpform supplier in WA. Our East Coast construction manager for our jumpform business was the 2IC previously in the biggest jumpform provider on the East Coast. Our Victorian business development and operational focus guy in Victoria, who's only started with us recently, was the previous 2IC for one of the other major national suppliers of jumpform systems. We're getting the right talent. This has been a critical part of our strategy, and it's going incredibly well. But you can see that it's capital intensive and then it gets to a point where we stop because we got what we believe our market share will be and will be an ongoing business. Moving on to Industrial Access. So obviously, the success story of the business in the 6 months, up 109% in revenue, up 128% in contribution margin. But the key factor here is you can see there's a full year pass-through of additional revenue from MI at 13.4% and Benchmark of 4%, but the majority just under 50% of the growth in our sales contribution margin -- revenue -- sorry, in revenue has come out of organic growth. So that's organic growth generated by the existing Acrow business and additional growth that we've been generating to what the MI and Benchmark businesses traditionally did. We're making massive inroads now into this particular part of the industry. And I say again, this is before Perdaman. So Perdaman starts to kick in some revenue in the second half this year, but the vast majority will be seen in future financial years. There are some other significant contracts pending. And then M&A features strongly in this business. The one we didn't go ahead with was in this space. There's a couple we're evaluating at the moment. They are in this space. It's now a national business. If you go to the next Page 29. We've got 4 branches in Queensland. We've got now established branch in Karratha, but we've got operations across all of the country except the Northern Territory. We've got contracts in every state, Tasmania included in this space, except the Northern Territory. It's a blue-chip customer base. It's recurring revenue. We really like it. We seem to be getting very well regarded by the customer base here, and it's going to continue to grow. And the market contracts in this particular area, some of the biggest industrial customers and projects in the country, Snowy Hydro, Kidston Hydro, Perdaman urea plant, the Ampol's refinery upgrade in Queensland, then ongoing contracts for the Visy Tumut New South Wales paper mill, Origin Energy in Queensland, Hay Point, which is the BMA coal loader in Mackay and Sun Metals, which is zinc refinery South of Townsville. They are all -- some of these top 4 are construction-based projects, the bottom 4 are all ongoing industrial maintenance plants. And finally, just on this point, commercial scaffold is a reduction that was always going to be. It's now only 7% of our overall revenue. I don't fret about this thing. One year it will do $11 million of sales contribution, 1 year it will do $16 million or $17 million. It's going to shift around with what the activity is like. The people and culture, Matt spoke about cadetships and grad programs, vital part of what we do these days, the learning and development. It's more broad than just cadetship. Basically, every senior manager in Acrow is getting some external assistance in terms of developing their own capabilities as a senior manager. We've now got a very strong sales training module in-house that all of our sales guys, whether they be new recent additions or long-standing, are getting upgrades in their training through the sales development program. And then the third one is about the training facility. So I've mentioned the acquisition of ATEC. We've now got that business. It is currently based in Southeast Queensland. However, we will have a Mackay part of that business end of March, early April. It's absolutely significant to us in being able to make sure that we can breed our own guys and girls in the scaffolding space that get trained the way we want them trained, get accredited the way we want them accredited, because it's such a large part of what we do and our customers insist on absolute quality in this area. Okay. Over to you, Andrew, on financials.

Great. Thanks, Steve. Steve has already gone through the EBITDA, up 11% from $35 million to $39 million. Now below that, depreciation increased 17%, up by $1.7 million. Now that was brought about by the last year's CapEx annualized and also the elevated CapEx in the 6 months, plus, of course, the acquisition of MI and Benchmark that bought their own yield. Now below that, you'll see that we -- in this period, we had quite a bit of FX loss, so $646,000 of FX loss, which was about $1 million swing from last year. And as you can imagine, that was about a 10% swing. We buy most of our overseas gear in U.S. dollars. So that was a 10% swing for us. That's something that we will swing around in the next 6 months has already happened. Below that tax, as we've discussed before, we're now a 30% tax payable entity. So the days of tax loss benefit in the profit are gone. And that gets us down -- sorry, and then interest, interest increased by 53%. Now interest -- we'll get on the debt in a second, but our debt increased from 52.6 -- average debt $52.6 million to $80.5 million, so about 50%. And also our rate went up approximately by 0.53% as well. So that's the increase in interest. Then we get NPAT underlying, which was relatively -- or up by 1%, relatively flat. From that NPAT underlying, we get EPS, which was a reduction of 8% from $5.87 to $5.38. Now that reduction is all because of the annualized shares on issue that were really based from the share issues from last year. So that was a 10% increase in shares on issue, and that's the reason for that reduction in EPS. Steve has already talked about how we're pretty confident that that's going to increase in the second half. Now below NPAT underlying, we've got significant items. So $2 million of significant items, down from last year, $400,000 that was because of the acquisition we decided not to go ahead with. We've got some depot moves in that. We bought MI and Benchmark systems over to our systems, which we had to do. And we're also starting an ERP discovery or a new system discovery that we're going through that process now. We'll talk more about that in the year-end. Below that, amortization of intangibles. When we acquired MI and Benchmark, one of the things you have to do is try to identify intangible assets, not goodwill. And we identified customer contracts and in the case of the MI brand. So there's about $17 million or $18 million of that, and we'll be amortizing that over the period of 10 years. So annualized, that's about $1.7 million per year that will be ongoing. Contingent consideration, Steve has already talked about this. When we first acquired MI, we accrued about $2.1 million that we expected to be paid in the first earnout. They've actually achieved full earnout, which is a great outcome of $4.95 million. So we had to expense the difference, which is the $2.7 million. So economically, we're exactly where we would have been, but this unfortunately has to go through expenses. And then we have share-based payments down to the NPAT reported reduced from $12 million down to $9.3 million. But obviously, without that contingent consideration and without the amortization, that would have been a slight increase in last year. And as we've announced $0.029 dividend. Balance sheet and cash flow, next page. Net debt up by $23 million to $92 million. Steve has already mentioned, we chose in the 6 months. We had very heavy investment in 6 months, and that was both from a CapEx point of view and a working capital point of view. So our CapEx has been brought forward a lot. And in fact, we'll get on that in a moment. And working capital when it came down to sales that we've made in the first half that had extended terms and in particular, industrial service expansion that actually comes with a lot of working capital cost. That also -- so net debt up by $23.3 million, but our net debt to EBITDA is still very comfortable levels, 1.1x at June last year, 1.3x now. Ongoing, our forecast is that gets down 1.2x or less. So we're pretty comfortable where we are with debt levels. Cash flow from operations, $23.5 million. So that's a 70% conversion rate, which is down from just over 8% in June for last year. Now that was impacted greatly by, as I said before, negotiated sales. So our extended sale, that means that we've sold gear and we're not going to get the cash for, say, 6 months. But with a lot of this because we've had to replace a lot of this gear. So that's had a bit of an impact on us. We've -- and as I said, industrial access, we have to pay our labor weekly, but we get this on average back about in 6 weeks. So because of the expense of industrial labor, that is quite hard. And if we go down to the cash flow bridge down the bottom, this explains how we got from $68.3 million net debt in June up to $91.9 million in December. To move along, obviously, one of the big differences to last -- the first half last year is we're now paying full cash -- full cash tax, so $6.6 million versus $2.3 million last year. We've had a big working capital hit this year of just over $8 million. But in particular, the growth CapEx, the growth in acquisition CapEx is about just over $9 million, plus the MI actual cash payment for the earn-out of about $4 million. So that's, call it, $24 million of that. The earn-out for MI will not be recurring again in the next 6 months. It will next year, but not in the next 6 months. And our growth -- our CapEx for the following 6 months is around $11 million. So there automatically, we go from $24 million down to $11 million of growth in the second half. Moving over to the capital expenditure. So in the first half, as Steve said, we brought forward most of the CapEx we planned. This was a planned thing of $23.5 million, not including ex-hire. So most of that was growth of $9.3 million with stay in business of $4.2 million. Now the vast majority of that growth is in areas where we're trying to grow the business, new revenue sources, Jumpform plus Acrow Deck, Screens and any particular Industrial Access equipment. So total budget importantly, you'll see in the graph we've got there, the total budget spend we have -- we're forecasting for full year is $34.5 million. So that's another $11 million for 6 months versus $23 million for the first 6. Now we have an investment hurdle of 40%. We've had that for the first few years. But because we're starting to move into the jumpform in the Ring Lock area, we've had to take a bit of a head cut on this. Now it's important with Ring Lock, when we do these investment hurdles, we're only looking at hire. We're not looking at any other ancillary revenue or profit items. With Ring Lock and Industrial Access, we don't take into account all the profit we're making from hire here. Just a little…

Profit on labor.

Sorry, on labor, profit on labor. So we're about 42% at the moment for 6 months. It is higher than that when you bring in labor without a doubt. Moving over to funding and liquidity. We currently -- as we said before, we're currently at drawing down debt $95.1 million. We have headroom of $54.1 million at the end of December, including a $31 million acquisition facility. Now we got this specifically. So if it was appropriate, we would fund any acquisitions we did through debt rather than raising equity. Now our banking partner, Westpac Corporate has been a very, very close partner with us, and we appreciate that. And that will continue on. So from a funding and liquidity point of view, we're very well within banking covenants, and we're very comfortable from a debt point of view.

Thanks, Andrew. So just wrapping up on the outlook. So firstly, we've got the construction activity forecast page. It shows still that every state is expecting to have an uplift in activity. It's showing that most sectors are having an uplift. The one thing that -- we've seen some numbers recently, we're trying to verify them and they came out of the Queensland Industry Group. And it sounds about right from what we understand. So the total value of commencements in the total construction industry in Queensland in the last quarter or, say, Q2 this financial year was $5 billion. The current forecast for construction commencements in the total industry in Queensland for Q1 next financial year is $25 billion, a 5x uplift. Now obviously, that's got a lot of Olympic game work in it, I would assume, to get to that number. But it just gives you a flavor. But what is -- this is ahead. This is absolutely going to be ahead of everybody who's operating in the Queensland construction industry, and we are a major player, certainly the vast -- the biggest player in the form work area in Queensland in space. So it's going to happen. It cannot -- we can't -- we've got Olympic Games we're building, we've got programs around hospitals that have sort of been half let. So we know what's ahead of us in this particular space in the next couple of years. In terms of major projects that are kicking in, there's a range there. I won't go through them in detail. North East Link is already proving to be very successful for us and will continue to be. Torrens to Darlington is a close watch for us that hasn't commenced yet. And then obviously, the Brisbane-based projects. I want to give a couple of examples of things that we've done recently that are going to add significant profit to the business in the next period of time. This Meriton Gold Coast Towers project on Page 42, it's a very unique jumpform project in that we're jumping the size of the building, not just the core of the building. It's 4 towers, 2 projects that were in the building there. We've got screens on all 4 of them, and now we've got the jumps on Tower 2 of Cypress. It's -- in general, the overall revenue for us over these 4 towers of Meriton building is sort of $8 million to $9 million plus other -- and that's just in jumpforms and screens, plus other things that we know that we're going to be able to do as the projects get kicking in. This is a really critical strategic thing for us to get the Meriton business and their formwork subcontractors using our screens and jumpforms, which they really haven't done to a large degree before, especially not in the jumpform space. It's strategically really important. And then the second one is Perdaman. I spoke a lot about this. This is what it's actually all about. The things moving. We've now got -- I think we've got 10 guys on site at the moment. That number will go to 40 or 50 and maybe double that depending on who you talk to. It is the second largest Industrial Access contract we've won, and that gives you some flavor around this. Vitally important to get us into Western Australia and establishing a branch. This gives us an opportunity to grow other industrial contracts off the back of winning the Perdaman contract. That leads us to our guidance. So the medium-term outlook is ridiculously strong really, both in terms of contracts won and the pipeline. Industrial is going to keep growing. We will see the commencement of Perdaman. We're going to see very, very strong growth in the second half in jumpforms that will take us then into the new financial year and then new channels for revenue being opened up in Acrow Deck screens and other. Acrow Deck is an example. At sort of Christmas time, our total utilization of our Acrow Deck fleet was like 20%. Within the next -- by end of April, that's going to be 100%. So that's a significant uplift. So in terms of the guidance, revenue and EBITDA guidance remain consistent with what we stated at our AGM, 27% uplift in revenue, 14% in EBITDA. We've now added NPAT and EPS guidance to show that we'll be up in both those categories again across the course of this financial year. That's it for me for the moment. I'll hand back to the moderator, and then we'll take any questions the attendees have.

[Operator Instructions] The first question comes from [ John Sanford-Hynd with Petra ].

Congratulations on the results. Obviously, a volatile period. I just wanted to get a little bit more color on just the guidance firstly. There's obviously delays to formwork, which were out of your hand during the period. Will there be any catch-up? Can you clarify, is there any catch-up in the second half of this period? Or does it all roll through into FY '26? So I guess what I'm asking is in that guidance you've given us, does that exclude any of those delays that happened in this half?

Yes, it does. That's what -- over $5 million worth of profit, John, that should have been generated this financial year and probably most of it in the first half. So we're not going to see that $5 million this financial year of contracts that we already have won. So we've already factored that in, and we're not taking -- we're not factoring any of those -- that $5 million coming forward. That will be an FY '26 uplift for us.

Right. And then I guess, moving that discussion forward one-half, was there anything that was baked into your guidance in second half '25 that's been delayed and is pushing out as well?

What's happened effectively is we expected to get a lot of that -- when we did our guidance, we probably thought we'd get some of that revenue. Subsequent to that, we won Perdaman, and we're guessing at the moment of what we think the Perdaman profit contribution will be for this year. We won a very large jumpform contract where some of that revenue you'll see only a portion of it. So those 2 things enabled us to keep our guidance at the same level despite the further delays in Queensland of things that we will see next year.

You touched on Industrial Services with the Perdaman project. It's good to see that contribution rolling through, and we're sort of getting a shape -- an understanding of the shape and size it will look like. In terms of contracts moving forward, it sounds like you are close to some others. Can you give some color on perhaps are we going to be seeing more $40-odd million projects? Is that the typical size you guys are now going for? Or is it like a $5 million to $40 million range?

Look, $40 million is unusual. It's not unprecedented. Snowy was the first one that was over that level. We've got some other opportunities that are not quite at that level, but they're more than $5 million, right? There are -- we've got a couple that are pushing towards 6s, that would be -- if we get there, they'd be very important for further growth. Some of the things we're also working on is, which is almost just as important, is getting long-term security over some of the very good contracts we've already got, right? I mean in this space, that's just important, right, to get existing contracts to be renewed. So we've got a few opportunities in growth in new contracts with growth, and also in successfully renegotiating existing contracts that give us more long-term security again.

And then with those contracts that you're looking at and you're looking at preserving, is -- how does the pull-through rate for hire work with those labor contracts? Is it going to be a greater percentage pull-through or a lesser percentage pull-through…

They are all different. Some contracts are very equipment heavy and some are very small amounts of equipment with lots of labor. So yes, you can't really apply a rule to that mate and say, okay, Acrow just won a $20 million contract and it's going to have X percentage of hire, X percentage of labor. Snowy is an example. There's almost no hire at Snowy, right? Snowy is all labor and then some equipment sales. No hire.

Probably just use the percentage and it'll go…

Yes, Matt. I mean, well Perdaman for example, at the moment, Perdaman will eventually have some hire but Perdaman in this period is going to be basically all labor and sales.

Yes. Got it. It's sort of taking that shape a little bit now what you can see. I think Andrew is sort of alluding to that behind you that what it's looking like. Last one for me. Overheads, you did pretty well there in terms of like the yard expenses, et cetera. And I'm just trying to understand, you did take on a lot of labor this period with your acquisitions. That increase in labor, which is the only line that increased, the underlying -- just to give us a good picture of how your cost control went, the underlying labor, so backing out what was added during the half, -- what did that increase on a year-on-year basis?

Yes. I mean I don't have that number really available. But clearly, those 2 acquisitions, full year pull-through had an impact. You've got branch managers and you've got administration managers and you've got staffing requirements. I mean there are some additional roles that the business has added as it's grown, especially in the industrial space because that's a big -- if you think you're doubling the business and you're not just -- it's not just the existing branch structures that both MI and Benchmark had. It's supporting a far bigger business now, organic -- with organic growth from it. So we have had to add safety resource, a couple of engineering resources. I mean there's things now -- that's now $130 million to $150 million business. So we've had to gear up from a staffing perspective in that space. That's the main area.

The next question comes from Philip Pepe with Shaw and Partners.

John has asked 105% of my questions, so I'll scramble for another one. Look, good result, I thought guidance in line, so well done. Just elaborating on Slide 36, just clarifying the working capital position or the working capital drag. I think you called out $8 million. Is this -- are these ratios a new norm because of the acquisitions? Or is it a bit higher because of the delayed revenue and future growth? Or do we just...

Are you talking about working capital or cash working…

Working capital.

Working capital overall is okay. But one thing for sure, our receivables were elevated from the previous period because of some negotiated sales we did or extended sales we did, plus also the expansion of industrial assets. But I wouldn't call it a new normal, but one thing we won't be having is a big impost in the next 6 months of working capital like we did the 6 months. It may retain around that, but we expect of those negotiated sales and other things that come through that we expect probably about $10 million of that will come in.

So we probably should describe that, Andrew because I don't think people would understand that. So Phil, in some cases, when we're selling product, we need to give extended terms to sell like maybe 6- to 12-month terms to pay the sale off. And that's, in some cases, because our European competitors do exactly that. And if we don't do that, then we don't get the opportunity to get people to use our systems. So -- but in this particular half, there's a couple of quite large sales that we've just given a specific -- you can take 4 months to pay that kind of deal, right? So that number was I think around $13 million at the half, probably down like $5 million or $6 million in the full year, Andrew.

Yes, that's right. Correct. But Phil, that percentage of working capital sales, we're probably relatively comfortable with that.

The next question comes from Alexander Lu with Morgans Financial.

Can we start with bad debts please? And it looks like you didn't have to expense any bad debt during the period. And obviously, it was a bit of an issue last year. So can you just talk about, I guess, your confidence in the systems and processes that you have in place now and your ability to, I guess, not have any more bad debts going forward?

It is very kind of you to…

You're never going to have -- you're never going to have no bad debt.

Alex, I'm a finance guy, I can tell you that. But look, we -- everything is managed well. The debt hasn't deteriorated whatsoever. And when we put it through the model, I mean we were -- part of this is always luck. We could have a big customer that goes. That's why we say we can't say that. However, we are forecasting bad debts in the second 6 months. We were just lucky and it was good management as well that we didn't have any of this in this period. So we do have a forecast, and it won't be…

It's in the guidance. There's a bad debt number in the guide. The one thing I think, Andrew, too, is that the nature of the book has changed quite dramatically with the industrial stuff that's such a prevalent part of it, right?

Yes, that's right. Yes, we won't have. It would be very bad for the country if we had an Industrial Access bad debt.

Okay. So going forward, I think it was -- from memory, it might have been about 1% of revenue last year.

Yes.

So I guess going forward, it should -- with the growth in the Industrial Access business, it should be less than 1%.

Yes, it'd be a bit disappointing if we had 1% of the 12 months revenue in the bad debt in the second 6 months.

Okay. Fair enough. That makes sense. And then just my second one on the pipeline, please. So up 39% versus last year. So where are you currently seeing the opportunities at the moment?

It's in formwork mate. So the formwork pipeline is up 31% of that, so 31% by itself. So certainly, as we're growing our Industrial Access business, there's a bigger pipeline there. But if you look at that -- we're not going to lose our focus on our main potatoes business, which is formwork. That's what got Acrow to where we got to today. So we've got as much focus on as we've always had, and we've got a pipeline that's 30% bigger than it was in the same period last year. A lot of that is jumpform. And a lot of that is actually yet to go into the [ numbers here ]. But all the Queensland Olympic stuff and a lot of the hospital stuff is not in our pipeline numbers because the tenders haven't been laid. So I expect to see like Matt, you would think of a very big increase once we actually know what the projects are in terms of Olympics and a lot of the hospital stuff that we haven't already won.

Okay. So you're pretty confident that, that should continue to grow going into FY '26.

As soon as that Olympics game stuff gets leased and then they will go and gets awarded and then they're starting to go out with tenders, that's going to see a very, very large increase in the pipeline.

The next question comes from Rupesh Karavaev, private investor. [Technical Difficulty] [ Mr. Hallam ], can you hear us?

Steve, could you please provide more details about the ATEC acquisition, including the total cost valuation and the revenue and net profit it is currently generating?

Yes. So we paid $1.1 million, I think about $350,000 of that is deferred, Andrew. So $800,000, I think up/down is roughly the numbers.

Yes.

Look, it needs to be understood that this is not a business that we -- this is not a business that we bought to make a big return on investment on. It's got good revenue. It's probably going to generate $300,000 to $400,000 of revenue at a minimum. But we bought it because they've got the government accreditation as a registered training organization. That would have been quite difficult would have been a long process for us to get that accreditation. And of course, the guy that owns that business is a very, very, very good trainer of scaffolds. So between what he's already got in Southwest Queensland and then what we have already committed to build in Mackay and very close to, it's not -- it almost needs to be treated to some degree as there will be a portion of operating costs. It will generate a relatively smallish profit, but it gives us the opportunity to get absolutely cranking with something that -- you've got to think about more in terms of our ability to get more staff in the scaffolding space as we continue to grow that industrial area. So we -- we need more and more people all the time. Perdaman is an example, we started that from scratch, and we're going to need between 50 and 100 people on the Perdaman project over like a 12-month period. So it's not really -- we haven't done it on the terms of it's going to make $500,000 profit. We've done it on the basis that it gets us into this training space, which is effectively a cost of running that industrial business to a large degree, but it does have revenue that they've already got in-house, which is a nice plus for us.

The next question comes from Rupesh Karavaev, private investor. The next question comes from Rushil Paiva at Ord Minnett.

Just a couple from me. Just regarding revenue growth into FY '26, I know you've talked about it maybe if we start with formwork. You talked about the $5 million additional revenue you're expecting to occur at the start of FY '26. Just wondering if you can give us an idea of in terms of the first half '25 and are there any large contracts rolling off or when we look into FY '26, should we use the current base of formwork and the revenue being around about that $55 million rev and simply look to add on $5 million or so? Or how should that revenue step up in the FY '26 year?

I haven't done our budget yet, Rushil, but I can tell you that in terms of what's going on in the industry, so you've got that's just $5 million on contracts we've already won in Queensland. So that's not -- that's just added on to what we've already got today, that we should have been seeing that this year. Then you've got all the other uplifts that are anticipated to happen in Queensland over the course of the next 12 to 18 months. Our jumpform business, which is in the formwork area, is going to grow its revenue base. With the contracts that we won as they roll through, it will be growing next year. Our Screens business is winning work now that will be generating revenue towards the end of this year and next year. That will be growing, right? So it's -- look, I can't give you a number on what I think the formwork revenue number is going to be next year. It's going to be up.

Yes. Perfect. A similar line of questioning just on the Industrial Access division. As you noted, the organic growth is particularly strong. I can see in the presentation, you've outlined 58% organic top line growth for the division. Can you just talk to us about the organic growth prospects into FY '26? You obviously gained a lot of -- regained a lot of momentum in that division. How should we be looking at into FY '26?

You've got Perdaman starters Rushil. That will -- there is going to be some revenue from Perdaman this half, but there will be significantly more revenue from Perdaman into the next year. I would think of $6 million to $7 million to $8 million more revenue coming from Perdaman next year than this year. We've got one other large contract that we're having to win, which we're very confident of winning that would generate revenue growth next year that's in the sort of $25 million over a couple of years. There's other opportunities. Snowy is nowhere still near its peak. I mean anyone who's following the Snowy story will see delay after delay and now there was some other issue with TBM stuff overnight. So we have nowhere near the amount of labor out on Snowy at the moment that we will finish up with. So yes, I mean, we're heading towards this financial year in our industrial business, sort of circa $130 million of revenue. We've got to be heading towards $150 million plus in the following year.

Perfect. And just one last question just regarding guidance. If I use your half year results and then the midpoint of the full year guidance implies at the EBITDA level, a slight bit of margin accretion. I just wanted to ask you on that basis, how you're looking at the split of revenue and profits? Are we -- should we expect a similar -- a similar mix relative to the first half and the second half or any comments regarding mix into the second half?

No, I think a bigger contribution from formwork and a lot will be in sales. And so the sales generate 25%, 30% margins rather than higher. No, I think it's quite consistent. I think it's going to be -- jumpform is going to be significantly up in the second half compared to the first half. That's going to be good from a margin perspective. But yes, I mean, I haven't done the math to see what that means in terms of -- I just know that we've done a very detailed forecast now by branch of what we expect our branch results to be between now and the end of June. That's what pumps out the revenue and the EBITDA number. It's not -- I haven't actually gone into the detail of what percentage that means across different divisions.

There are no further questions at this time. I will now hand it back to Mr. Boland for closing remarks. Please go ahead.

Thank you, and thanks, everybody, for taking the time for hearing our results today. Again, very pleased with how the business is going, know what's ahead of us. And I think we've got some really good things going on in terms of M&A opportunities as well as new contract opportunities. And I expect the next 6 months we'll see very good improvements, both in EBITDA and then in our cash conversion position over the course of this financial year. And then in the next year, very confident in the way we're positioning ourselves for that future growth that we have ahead of us. So thanks for your time today, and look forward to talking to you all again in August.

That does conclude our conference for today. Thank you for participating. You may now disconnect.