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

Thank you for standing by, and welcome to the Acrow FY '25 Results. [Operator Instructions] Thank you for joining us today. I will now hand over to Steven Boland, CEO; Andrew Crowther, CFO; and Matthew Caporella, COO. Please go ahead.

Thanks very much, Steven Boland here, and thanks for people who have taken their time this morning to in a very busy period of the year, obviously, to go through the Acrow FY '25 results. I'm joined by Andrew Crowther, our CFO; and Matthew Caporella, our COO, who will assist me today with the presentation. I'm going to walk through the investor presentation that was released to the ASX last night. And obviously, we'll be happy to answer questions at the conclusion of the presentation. So firstly, just the overview of the business. Competitive advantages remain as they have been a number of years now around engineering expertise, general quality of our people, our product range and geographic footprint. A few things that I'll point out here that significantly changed with our greater impact now of our industrial access business, 17 depots in the business now across 6 states, an average of 921 FTEs, which is obviously significantly up with the penetration we've had in the industrial business and the service -- the sectors that we service. We've got a growing emphasis now in areas of utilities, defense and marine, and we'll talk quite a bit about that as we go through the presentation as it refers to the industrial sector. Obviously, 2 acquisitions last year, actually 3 -- sorry, if we include the training business, ATEC that we purchased. So since we listed in April '18, the business has now made 6 acquisitions and we've made 4 industrial acquisitions in the last 18 months plus the training business. So it's been a very busy period for us in that particular area. The strategic sort of direction and principles of the business, I don't think they've ever played out stronger than they have in the year just passed and also as I think going forward. But the strategy of the business to diversify our revenue streams across a range of areas and placing an equal importance on our Formwork and Industrial Access business has significantly paid off for us in the last 12 months. It's fair to say now that we service 2 specific sectors across the broad Acrow business. We service the construction sector via our Formwork business, including our Screens and Jumpforms offerings and then the smaller commercial scaffold business. And then we service the broader industrial sectors and across a range of different areas through our Industrial Access business. So I think those on the call who would be looking at construction service-orientated businesses over the last 12 months would see that most have had a modest but reasonable decline in earnings over that period. And I think for Acrow, that would have probably also been the case if we hadn't diversified as strongly as we have into the industrial sectors. We're maintaining a disciplined approach to return on investment, both on CapEx and M&A. We're still maintaining a 40% hurdle rate for capital. And in terms of the acquisitions, over the last -- well, certainly over the whole journey, but these last 4 acquisitions in industrial that we've undertaken, including all of the costs -- upfront costs of due diligence and adviser fees, et cetera, and then the cost -- significant costs that we do incur on integrating those businesses into Acrow. I you fully load all those costs into those businesses, the average return multiple on EBITDA that we're getting is about 3.7 so our sort of hurdle rate for acquisitions is about a 4x multiple. We're doing better than that if you fully load in also costs for upfront for adviser legals, et cetera, and also for integration costs. The Acrow way of operating, we've spoken about this a fair bit. It's around safety, people development, engineering, internal product development, customer service and having a best-in-breed approach. That's certainly still the case. So moving to then what the last year has really been about for us. It's been a year of positioning ourselves for what we know is ahead of us. So there is significant growth going to happen in the core business of formwork certainly over the next 5 years and probably in the next 12 to 18 months, we'll start to see strong evidence of that. But we've earned the right through what we -- how we've been able to develop that business to invest in other areas that have just made us a stronger overall business over the last 12 to 18 months. Firstly, in our capital program. So we spent a total of $32.7 million on growth CapEx last year. $25.2 million of that was spent on growing our industrial business, our Jumpform business and our Screens business, which are all currently growth engines of the business. As we move into the new year, we expect to spend around $22 million on growth capital in the new year and $21 million of that will again be in those core areas. So it can be seen that in the -- in the existing, if you like, core formwork business that's undertaken significant growth over the last 6 to 7 years to get us to a position of being the market leader in this country in the hire and sale of formwork. We're actually not investing much money and capital in that area at the moment. We anticipate in the next few years as activity levels significantly lift, there may be a requirement to change that profile. But at the moment, we've taken the opportunity to significantly grow industrial Jumpforms and Screens and maintain a 40% hurdle rate. The industrial business has been -- is really the story of the last couple of years and the story of this year. So you can be seen on Page 7 of the preso how the revenue for that business has grown from $40 million in FY '23 to $132 million in FY '25. It's both via acquisition and organic. It's a business that we now really -- we think it's got significant still growth path in front of it. It provides annuity earnings, provides stability of earnings, long-term blue-chip contracts. It is less capital intensive when it's in growth mode than formwork is when formwork is in growth mode. As I said, it's both by acquisition and organic. We acquired Above scaffold and Brand in May. Very exciting opportunities off both those businesses, opening up new sectors for us, especially in the areas of defense and asset maintenance. I'll talk a bit about that as we go through the presentation further. We've taken the opportunity to grow this business primarily by debt. So in the 4 acquisitions that we've made over the last 18 months, around about $70 million of those -- the cost of those acquisition has been funded by debt. It's been a specific choice of Acrow to do that rather than go to the market and raise capital and dilute shareholders. This business this year is pushing towards $200 million in revenue. It has around about $130-odd million basically secured in contract work as we go into the start of the year. And of course, one of the major impacts this year or last year for us that flows into the next few years was the Perdaman Project in Western Australia, which was the first major contract we won in the industrial space in WA. That's about a $45 million contract over about a 30-month period. They are the 2 major growth channels for the business that Jumpforms and Screens, and they work together here and they are working every day more and more together. Jumpforms, we started from scratch in '22. We're now up to $10.5 million or $10.4 million worth of revenue in this area in '25, up from $3.6 million last year. You can see now the spread across the country of work. And you can see primarily there a lot of work in Western Australia, and I'll get to that -- the relevance of that as it now applies to the Screens business. In the Screens business, while you do see a $1 million reduction in revenue year-on-year, you can see that there's an $11 million uplift in work secured in the Screens business that will flow through into '26. In the Screens business, the dynamics are that we're getting significant market share gains in New South Wales. We're always strong. We're now by far the market leader in New South Wales, and we're now a national business. Now WA, I think, is the burgeoning story as it relates to Screens and it's off the back of our penetration in Jumpforms. Just last month, we won a $900,000 Screens job in WA, the biggest job we've had in that particular area that also has Jumpforms and traditional formwork included in the package. It's about a $2.3 million job overall. So I think we expect to see a significant uplift in revenue coming out of our Screens business in Western Australia. I'll hand over to Matt and Andrew now to talk about the sort of the workforce issues, training development, supply chain and back office growth issues. So Matt, over to you for the first please.

Thanks, Steve. As Steve said, we're positioning for growth. So 4 of these categories are the workforce, our training and development, supply chain and the ERP. With the workforce, we currently now have over 500 scaffolder skilled labors consistently working across the country. So we've got the ability now to draw on this pool of labor and provide confidence in delivering on the larger scale projects. A prime example of this was probably the WA Perdaman Project, which now has 75 scaffolders rotating on site. So we're able to scale this up within 6 months, starting effectively from 0 in WA. So we had no scaffolders in WA in December. Another key differentiator in the labor force is our engineering team. So we're up to 63 engineers now across the country. This is probably the single largest formwork and industrial access design team in the country, which allows us to turn around projects quickly and on short notice as well. Training and development. So our cadet program and grad program now is in its third year of official infancy. High retention rates and success rates in this program, too. We had over 80% last year. So we're getting 2 to 3 cadets transitioning from cadets into grads each year and this is across engineering, HR and finance. One of the biggest achievements last year really was the acquisition of ATEC in Southeast Queensland. That's a registered training organization. So ATEC is well regarded in the industry as providing high-quality, real-life scaffold training. It's not just a tick and click business. So we now have expanded on this into Mackay in July. So we opened a new facility on the back of our MI premises dedicated to training scaffolders. This is allowing us now to build our lab pool by upskilling scaffolders, but also providing realistic real-world training. So the complex and skilled work we do in the industrial access space. So not just -- it's not just standard scaffolding, it's quite complex. On the product supply chain front, we've now developed a pretty flexible and well-developed supply chain. So this is on the back of pushing into developing our own product and owning the IP -- and the same thing here with the Perdaman Project, we're able to deliver 1,000 ton of [indiscernible] onto that project in a short time frame within a few months from contract award while maintaining price competitiveness and high quality. I'll pass over to Andrew to talk about the ERP.

Thanks, Matt. So one of the things that was identified pretty quickly is we've secured our labor and supply chains, and it got pretty outstanding training and development. But we haven't spent a huge amount of money on our back-office systems. So our main enterprise resource management system is over 20 years old. And it's fair to say it needs an upgrade. So the Board has made the decision that we need to start doing an end-to-end review of our business systems, and this is basically end-to-end. So we've kicked off a business-wide business process project, which includes the ERP system and other ancillary systems. And our objective here is basically to digitize, have a system that's scalable and basically provide us efficiency and looking into the future because at the moment, when we get an acquisition, and we have had a few acquisitions, as you know, there's a lot of work, and it is a little bit inefficient to get them on to our current system. So we're going to be investing between $1.5 million to $2 million to put these systems in and basically, this will see us into the foreseeable future and have us really positioned for growth.

Okay. Thanks, Matt and Andrew. So you see in those categories, there's an upfront capital spend. There's a real drive into industrial. There's a real drive in the Jumpforms and Screens and then sort of the support to that in terms of people, systems and product. In terms of the FY '25 highlights, spoken a fair bit about this stuff already. So quickly, obviously 50% of the group revenue now comes from industrial, significant growth. The Perdaman contract, renewing the BMA contract from Mackay was a major achievement, underpins the profitability of that business going forward. The Above and Brand acquisitions in May, Jumpforms and screen. So we've had some real success now on winning work on the Gold Coast with Meriton in Screens. And we've now won a significant Jumpform contract that is significant in terms of both the size, but the complexity of the job. Matt, I might just hand back to you now quickly on that particular Jumpform because it is industry -- potentially industry changing when it gets up and running.

Yes. In this market, this is a 77 -- sorry tower that we're working on the Gold Coast called Cyprus. With these larger towers, the differentiator is they have what's called Mega Columns around the external. So there's 16 columns that on this project, we're actually forming these columns all at once and climbing every single column at the same time without Screens below them. So effectively, you push a button and the whole system will climb in one operation. So it's going to provide safety, efficiency on site and speed. So we're using a lot of our own standard kit that we've already developed in the Jumpform system with a few new products that we've had to develop. But this is fully hirable reusable system. So we've developed this that can basically be replicated on any future large-scale multistory tower.

Thanks. And it's fair to say once this is proven, it's got massive applications across a range of other jobs that currently don't have that kind of system in place. And then we also had another good strong year in hire contracts secured at 27% up. I'll talk a bit more about that in a second because the dynamic of that in terms of where we won that work has changed quite significantly over the last couple of years. In terms of safety, very strong results again, especially when you consider the increased activity in the industrial access labor area. The financial metrics, 23% up in revenue, EBITDA, 8%. Look, I'm not going to sugarcoat it. It's actually absolute testament to the diversification strategy of the business that an environment when the core construction sector was actually relatively soft, we were still able to improve our profitability by 8% via the growth in industrial and also Jumpforms and Screens. 4% up in net PAT underlying. I will say on the NPAT stat that is down, $6 million of that reduction relates to an earn-out payment for MI that we had to expense in the first half and also a range of costs that we incurred for both upfront adviser fees and due diligence, et cetera, for the acquisitions, including about $750,000 through an acquisition that we didn't then go ahead with. I talked about in the first half. We made a decision that culturally, it was wrong and it was wrong to go forward even though we did spend a lot of money on the process. It was better to pull out when we did. So you can see that without the acquisition style expenses, the NPAT would have actually significantly -- statutory NPAT would have significantly increased year-on-year. EPS was relatively flat for the year, down 3%, and we're declaring a dividend for the full year of $0.0585, exactly the same as what it was last year. It's now really important for our stakeholders and shareholders to understand the differences in margins generated by formwork and industrial and how they will influence the overall result for Acrow. So as our industrial revenue becomes a greater proportion of our mix, you can see that the industrial margins are around 36%, 37% at a sales contribution level, where the Formwork are in the 70s. This is purely because they're so much higher in Formwork 100% pass-through. There is a lot of labor, obviously, in the industrial business. Now I think the thing that I want to point out, I've been pointing that out for some time, but I hope it's understood. We're making a 25% margin on the labor in our Industrial Access business. I would challenge anybody to show me a business that is a labor business that makes a 25% uplift on its labor. So that business like-for-like is performing incredibly well. But there is this mix between those 2 businesses that changes that contribution margin from 62% down to 54% year-on-year. The actual margins in both of the divisions are basically flat. We're not cutting prices, reducing margins in either formwork or industrial. In terms of the financial track record of the business, again, you can see good growth in revenue and EBITDA CAGR. The return on equity reduced year-on-year. It's off the back of the reduced profitability that came out of the core business this year versus the previous year that we know that will return itself the other way in the next couple of years going forward. It's been pointed out before, but I'll just point out one more time for the sake of it. The EPS between '23 and '24 had a significant impact of tax of about $8 million. It is flat year-on-year this year, which is basically off the back of some additional shares being issued, but the big change was that we paid about an $8 million more in tax that we used to pay between '23 and '24, and dividends were flat year-on-year. Secured higher contracts were up 27% which was in total about $21 million. Now $14 million of that growth were in Jumpforms and Screens. So this is to understand that dynamic change between what we've always seen as you win at 1 year, you get the higher revenue than next. But you're predominantly winning work in Screens and Jumpforms, there is a far longer gestation period for that work than general formwork. So Screens job, the job I mentioned in WA that we won last month, that won't start from May next year. So you get about 6 to 9 months traditionally with Jumpforms and screen from winning a job to starting, whereas with traditional formwork, you win a job, you start it within 4 weeks. So that will return itself as the formwork market starts to pick up as it will over the next 12 months. We've got an number here now for the labor hire forward order book. We've got $230 million of secured labor hire in our industrial business going forward. This year, that number is in excess of $100 million just for this year. And you can see the pipeline at $217 million continues to be strong. In terms of the divisional breakdown and operational update, I think, Andrew will go through a bit more of this. The things that I will point out primarily on Page 18 of the preso is that you can see clearly, we did get a $6 million reduction in our formwork contribution with a $20 million increase in our industrial access contribution. We did a fantastic job of maintaining the costs in our yards. So despite increased activity in industrial, the reduced activity in formwork that we were able to keep our yard expenses reasonably flat. And the labor increase in overheads is just -- we're positioning this business for the next surge. So you will go through years when you're going to need to invest more in safety, you're going to need to invest more in accounting, you need to invest more in engineering, and that's what Acrow has been doing over the last 12 months. That won't replicate itself this month -- sorry, this year. And then we did also have quite a significant reduction in bad debt expenses year-on-year last year of about $1.2 million. You can see in the sales contribution bridge, again, the growth in industrial to offset the softer conditions in the core business. [Technical Issue] divisions, I've called this out, and I'll call it out again. It was a soft year, primarily in Southeast Queensland, although WA were also soft in that year and are now turning around as we go into FY '26, but the margins are consistent in this business. Across the states, Queensland, whilst it shows a small increase from '24 to '25, that's in the Jumpform business. If you take the Jumpform revenue out of that in Queensland, the core Queensland formwork business reduced by about $4 million to $5 million. Victoria, those of you who are following our story know we've done significant work on a couple of the major infrastructure projects with that big uplift from '23 that went from $17 million to $28 million. The [ hold ] of the $24 million last year, we're actually very, very happy with that result. We are transitioning in Victoria from Westgate and CYP Metro Rail on to Northeast Link and suburban rail, and we'll talk about a little bit about those in a second. New South Wales continues to do well, going from over a 3-year period, basically doubling its formwork revenue. And then you can see the reductions in SA and WA. Now both of those markets are turning around this year. In the case of SA, primarily off the back of the T2D projects, so the Torrens to Darlington motorway project, where significant revenues are now kicking in. In WA, it's off the back of now cross-selling Jumpform Screens and formwork where we'll see the majority of our growth in the next 12 to 18 months. In terms of the Marquee projects, just to give this -- this was across the journey of the last few years, Metro Tunnel is finished. Westgate Tunnel is finished. Cross River Rail is finished. Northeast Link is going. Sydney Metro is going. Snowy Hydro was going. Coomera Connector Stage 1 is finished. Stage 2 and 3 yet to commence. Kidston is ongoing. As we go forward, we'll talk about the new projects that are going to kick in, in this space. Industrial Access, I mean the good -- one of the great things for me here is the labor margin is 24.6% this year versus 23.5% last year. The reduction in contribution margin is just a function of the mix between labor and hire and sales and the revenue. Great to see that it's not all acquisition-related growth in the revenue. There is $25 million of organic growth in here, which incorporates Perdaman. Obviously, we've called out that the BMA contract for the Bowen Basin renewal and just recently now the Origin Energy contract Surat Basin renewal. Marquee contracts in this space are all ongoing. Snowy, Kidston, Perdaman, Ampol, Visy Tummit, Origin, Hay Point, Sun Metals, they are all ongoing contracts. All of them have probably a minimum of 2 to 3 years to run. Some of them are a lot longer than that. And this group of 6 contracts is generating circa $100 million in baseline revenue in this year. Commercial scaffold, I don't want to be rude, but it's a rounding error to be honest. It's a commodity business. We talk about it all the time that there's a baseline revenue, it can be up from that, down from that. I would call it at the moment about par. It will probably go up again, probably not this financial year, but next financial year. And as we start leading towards that Brisbane Olympic Games area, where there will be a shortage again, rates will start to go back up again. But I would encourage people not to look at this number and expect it to be -- I think that sort of the $12 million contribution is about a par number. Some years, it will be lower than that. Some years will be higher than that, but that's about par. Over to Andrew.

Steve, thanks very much. So over to Slide 27, the P&L. Steve has already gone through the EBITDA increasing from $74.6 million to $80.2 million and the EBITDA margin slightly reducing from 34.7% to 30.3%, which was purely about sector mix rather than actually losing margins itself. Getting down to pretax profit, depreciation was up 15% from $20.7 million to $23.9 million. Now that was just basically a function of last year's total full year PP&E depreciation of $30.4 million and this year's CapEx plus the acquisition. So our average PP&E went from $154 last year to $188 this year. So the actual average depreciation has actually come off a little bit, but it's pretty standard to the past. Net interest up 34%, $7.8 million to $10.4 million. In general, that's because our -- this is the case of the acquisition and the increase in debt from the CapEx and acquisition. So our average debt -- bank debt went up from 60.2% to 95.6%. So the actual weighted average interest rate was up a little bit, but it's relatively flat. So pretax profit, 46% up to -- or pretty flat at 46% to 46%. Tax expense, tax expense as a percentage of stat pretax profit is about 33%, and that was pretty flat for both years. Now the reason that's above 30% is because of the share-based payments and some other black hole acquisition expenses that are of a capital nature. So the pretax expense -- sorry, the tax expense was pretty flat. So we get down to NPAT underlying $33 million last year up to $34.3 million this year. So from an earnings per share, it fell from $11.54 down to $11.17. Now the reason for that fall was actually the denominator, the weighted average shares increased from $2.95 up to $3.13. And that was a function of last year's equity issue. So we had -- when we acquired MI, we issued 18 million-odd shares, plus we did the DRP underwrite last year. So that was the full year impact of that, plus around $5 million of LTVR shares this year that were transferred into shares. So it was actually a denominator impact of the EPS this year. When we then get from underlying down to stat, I mean, it's pretty obvious. You can see there was a lot of significant items this year, and I'll start below. So Steve has already mentioned the MI contingent consideration. When you make an acquisition, you have to make a call on these contingent earn-outs about what payout you're going to do. Now we did some analysis on this that ended up being wrong in a good way. So we assumed it was going to -- the earn-out would be paid out at about 50%. It ended up being paid out at the full amount. So because of that, we had to expense the difference. So that's the $2.6 million expense there and significant items. Also, amortization of intangibles went up from 900 to 1.9. Now that increase is because of the year's amortization of non-goodwill intangibles in Benchmark and MI plus the 2 months of Brand and Above. So the intangible assets have gone up from $16 million to $22 million. That gets amortized roughly around over 10 years. So we had share-based payments expense, $3.3 million down to $1.1 million. We did a reversal of $1.5 million during the year because of the earnings per share. Our LTVRs are split between a TSR outcome and EPS outcome. And obviously, because of the EPS, the EPS part did not fulfill the requirements, and that was written back. Then we had other significant items of $5.4 million. Now almost most of these related to acquisition and integration. So as Steve said, we acquired Above brand. We also acquired ATEC and there was due diligence and so forth. We also did all the integration of MI and Benchmark. Even though we acquired those in the previous year, there was a lot of integration, yard integrations, system integrations, and this stuff is extremely expensive. Plus we had the failed acquisition that was roughly $750,000 in that number as well. Plus we had existing depot relocations and this stuff is very expensive, plus the ERP. So this was a year of a whole lot of consolidation acquisitions that came along with significant items. From a dividend point of view, $5.85, so still a dividend yield of 6%. Moving over to the balance sheet, Slide 28. So as before, this year, the balance sheet and cash flow as a result of a lot of movement in the year from acquisitions of Brand and Above and in particular, funding these things from debt. So the balance sheet was moved. We had CapEx of $40 million. We had acquisitions of the Above and Brand of about $34 million from an asset point of view. And these were all funded from debt. So we didn't raise any equity in the year for this. So that's why you see our assets going up from $312 million to $405 million, but our debt -- our net debt increased from $68.6 million to $123.3 million. Now that increase, we chose to do this. It meant that our net debt to EBITDA went from 1.1 to 1.8. Now that was a choice. We could have raised capital, but we didn't feel at this point in time that, that was necessary given where the business was. So where we see from a forecast point of view, without any acquisitions and with just normal cash flow, we believe that net debt to EBITDA will head down towards 1.4 at the end of the year. From a conversion -- cash flow conversion rate, we had around 71% conversion rate compared to 76% last year. Also, working capital to sales was around 26.7%, 27% to last year's 23.5%. Now it's very important to point out, we had a lot of -- we had a bit of timing issue on this. We had 2 of the biggest sales or revenue months of Acrow's history in -- sorry, the 2 biggest of Acrow's history. We had -- if you had to look at it, the average -- what we had, the average sales of May and June is 31.3. -- if you look at the previous 10 months, it was $20.2 million. So it was around $22.3 million of extra revenue in those last 2 months. Now when you adjust the -- both the EBITDA and you adjust the working capital for the impact of that, we had actually had receivables go up to $20 million. If you actually adjust for the impact of that, our working capital to sales would have been closer to 20% and our cash conversion would have been around just below the 80% mark. So it was heavily impacted by those last 2 months. Now when you get down to the net debt bridge, we've obviously gone from $68 million up to $123 million. But if you look at the third column, that's the working capital impact. So that $20 million was very heavily impacted by those last 2 months. So that was about a $20 million increase in receivables. Now when you move over to the right, you can see that we've had growth CapEx, acquisitions net of cash and the deferred payments and earnouts. So that's about $58.2 million. So of that increase from $68 million to $123 million, you can see there's a $58.2 million impact from growth initiatives, including growth CapEx and acquisitions. And that's a choice. Moving over to the debt finance quickly. So we did 2 restructures during the year of our debt. So both in October, which we talked about in the half year of $56 million and May of $20 million. So the reason we did this was to provide flexibility for any acquisitions we did. And that's why -- that's the reason we did these acquisitions of Brand and Above with debt. Now even at the end of June, we still had a $40 million headroom, which we're very comfortable with. And the thing about that is that provides a lot of flexibility for our Industrial Access business and the upfront payment of labor. But it did come with a net debt to EBITDA of 1.8. Now if we take off the trailing EBITDA of Brand and Above, the pro forma is it's just under 1.6. So still probably higher than what we want, but it's still with -- all of this is still within what our expectations are with net debt to EBITDA. And with that, I'll hand over back to Steve.

Thanks, Andrew. So just wrapping up with what the growth opportunities are. So firstly, look, activity forecast in the construction area continue to be strong in terms of like a 4- to 5-year cycle. I think we still all realize there's a lack of housing in the country, there's lack of medium density housing. Civil infrastructure was booming. There's probably been a pause, and it's about to go again probably in the next 18 months. And then clearly, especially in Queensland, activity levels, Southeast Queensland we are going to be at an all-time high within the next 24 months, 36 months. In our Industrial Access business, some really, really exciting opportunities are presenting themselves off the back of the Above and Brand acquisitions. Above have a significant contract at Garden Island in defense, which I think I can mention. But there is an opportunity to do off the back of that, look at other defense style contracts across the country. Now the defense sector, I think we're all following this -- the defense sector is going to be one of the biggest growth areas in the Australian economy over the next decade and getting into that area with maintenance of both the sort of the naval fleets and the submarine fleets and potentially the building and submarine fleets is a very important area. And off the back of Above, we think we can do that quite well. The other thing that Above brings to the table and working in conjunction with Brand is asset maintenance. The Sydney Harbour Bridge is the primary culprit in that space for us in terms of opportunity. The Above have a contract there at the moment. I might just let Matt quickly talk about one particular innovation that has not been signed off yet, but if it comes off, there's a significant opportunity for us to grow further revenues with Above on the bridge. Matt, so you want to just cover that, please?

Yes. So the Harbour Bridge is quite a complex project. We're actually scaffolding the top cores of the bridge, but that means we're actually working over the live traffic lanes. So now that they've got the access to the Acrow kit of products, there's stuff in our kit that we can effectively build effectively a crash deck over 3 lanes of the Harbour Bridge. So our current proposal now is to build effectively a 12-meter wide deck over the bridge, so we can basically work at any time, and we're not limited to lane closures and that sort of side of the bridge and really improve the efficiency of actually building the stuff because the Harbour Bridge just needs to be basically repainted. So this is only one span of what could potentially be 30 spans the bridge.

So the existing contract with a $4.5 million contract for one very small component of it -- and this issue with working over light traffic has been a prohibitor in terms of further contracts being awarded and the time it takes to do the work and coming up with a solution that above wouldn't have been able to buy themselves but in a combination with Acrow is a massive opportunity for that business now to improve its revenues on that project. We've got a lot of opportunities between Brand and Above now in terms of kit cross-pollination. It's really becoming clear -- it's clearer than it was when we were even doing the acquisitions of how these businesses can work together to open up new opportunities. We're targeting organic growth in WA and SA. We are pausing on M&A activity for this year unless something absolutely ridiculous presents itself, but there has been some opportunities that we've decided to pass for the time being. But we definitely think we can grow WA and SA organically. And part of our CapEx budget for this year allows for us to do that. We're spending roughly $3 million to $4 million on our new Uni-Ring product that Matt will just talk about in a second, primarily for those 2 markets. So actually, on that subject, I'll pass over to you, Matt, on product development.

Yes. As Steve mentioned, so the Uni-Ring. So that's been the sort of the key focus with the Cypress Meriton Jumpform that I mentioned before. So the Uni-Ring, we own Uni-Ring product in our fleet that we're basically buying from someone else for the last couple of years. On the back of that, we've made the call now we've got our own product called Uni-Ring and it's fully compatible with all existing fleet. Up to date now, we've actually landed over 2,500 tonnes of this material in 6 months. We actually have been working really big on the scalability of this. So we have the ability now to land 2,000 tonnes a month if we do need to with really short lead times. So working heavily on improving manufacturing facilities and geographies as well and not just focusing on one location. The other big portion of product development that's really shining at the moment was the Acrow Deck product we bought in, in 2023. So we're now about 18,000 square meters of Acrow Deck around the country, really highly utilized now in New South Wales and Queensland, especially with a solid order book, especially in New South Wales. We've sold over $3 million worth of [indiscernible]. With this sort of product, that's good. It locks for specifically into a system, and they're continuing now to top up with higher on the back of that. And it also brings cross-selling opportunities with Jumpforms and Screens, we're seeing that now in WA with the project Steve mentioned we won in last month.

Okay. In terms of major projects, we are still a civil infrastructure company. We're not only that now, but we're sort of very proud of the position we have got ourselves into over the last 5 years in civil infrastructure. And there is a surge of projects that are either have just recently commenced or will kick in, in the next 12 to 18 months. So Suburban Rail Loop, we're on it now. North East Link, we're on it in a big way. So T2D, Torrens to Darlington, we're on it. It's just starting, and we're on it. Melbourne Airport Rail has been signed off to go, hasn't commenced. Queensland Hospital Upgrade is at its infancy. We're on it. It's got a lot of leeway in front of it. Brisbane Olympics obviously hasn't commenced. And we won't see anything really out of that probably this financial year, but we think that's -- that's going to be the big growth opportunity for Acrow over the next 2 to 3 years. Sydney Metro West, we're on it. Coomera Connector, the first stage has been completed. We were doing about $250,000 a month of revenue higher on that job. It's been completed. It stopped now. Stage 2 commences around January this year. And in Stage 3, we expect Stage 2 and Stage 3 to be the same sort of generation of revenue for us. So in terms of the observations for this year, so really, the Industrial Access division will continue to grow. I think we're going to push up towards $200 million of revenue. We could actually still exceed that with some contract wins that we're targeting in SA and WA. As I mentioned, the acquired businesses give us real cross-selling opportunities and growth in sectors like defense and asset maintenance. We're going to pursue that growth in WA and SA through organic and through contract wins rather than by M&A at the moment. The Screens and Jumpform businesses will continue to expand nationally. We're particularly excited about the opportunities for Screens and jumps in WA now. So I don't want to pause investment in those areas. They are high returning, especially Screens. Screen is probably our best returning investment CapEx project -- product that we have. I think we're going to continue to see a relatively soft general formwork business, especially across the first half. Project delays are still a factor. WA and SA is certainly going in the right direction. There is a bit of a cycle going through in New South Wales and Victoria of civil projects sort of concluding a new one starting, as I've mentioned before, around Victoria. But the medium-term outlook for this part of the business. I mean one of our directors yesterday described it as the hockey stick, and I absolutely think that's correct. We're probably at the bottom end of the hockey stick at the moment. And in the next 18 months, it's going to -- sorry, it's going to skyrocket -- it's gone from where it is at the moment, it will skyrocket in the next 18 months to 2 years. And as I mentioned, we're definitely going to have a pause on M&A. We've got a lot to do to consolidate what we've already done. We're still an acquisitive business. We'll go back to that at some point. We just don't think that this within this financial year, that's the right thing to do given we had, I said, 4 acquisitions plus the training business in an 18-month period and try to settle that down and move on. So with that, thank you, and I'm happy to pass forward for any questions.

[Operator Instructions] And our first question comes from Philip Pepe with Shaw and Partners.

Congratulations on the results and the conditions. Look, you've given us a lot of data, probably answered most of them, but your increasing exposure to labor hire. I had a few others put out results already who talked about, in some cases, it's difficult to get labor so they pay over. In other cases, it's becoming more easier, not easy, but easier in terms of accessing quality labor. How have you found that across the various divisions, please or various states perhaps?

Look, that's -- we're still maintaining 25% margin on labor. We're doing incredibly well, Perdaman. I mean that contract, we won that at a lower rate. We purposely did that at a lower rate than we would normally take on. But we found 70-odd scaffolders for something in WA that we never had an opportunity in WA like that before. And then the whole strategy around developing our own training facilities is about breeding our own for this space. Like last month, as an example, we did about 100 different training courses through our training businesses for scaffolders in the month of July. So look, it's not easy. No one's going to tell you it's easy, but we're not stressed about having to reduce our labor margins to attract talent. The fact that we've got scale now, I mean, the brand business that we bought as an example, is now going to be providing labor into Above for some of the Above contracts that they do. Our brand is based in the Hunter Valley. Above got a few contracts that are sort of central coast based and that will use labor from Brands, our ability to shift that around now with scale. It's not making it, in short I ask the guys to run that division. It's not easy for them, but we always manage to do it.

Our next question comes from John Hynd with Petra Capital.

Hoping you could help us understand the guidance commentary a little better. Obviously, Industrial Access is going to have another strong year, and you're approaching $200 million top line there, which is a great outcome. I think more clarity around how you're seeing Formwork in -- just in that next 12 months. So are the higher projects still weak? And would you expect this -- would you expect the top line to be more in line with the second half '25 or first half '25 when we look forward at first half '26 and second half '26?

Formwork or the total business?

Formwork, please.

Yes. Look, I still -- I think we're going to have similar results in the first half than we had in the second half of last year, probably in formwork. We are not providing specific guidance at the moment because, frankly, there's too many moving parts in that whole space. And I think to be fair, we probably got ourselves caught out by being too upfront with giving forecast way too early really in the past. And I think that's not necessarily a sensible thing to do. So we'll provide more clarity, I'd suggest around AGM time or at least half year results time. But yes, there's no doubt at the moment that the general Formwork business especially in Queensland is at probably the lowest level that we've seen in 4 to 5 years. That's being offset by Screens and Jumpform growth. We're going to go from probably a 4 to 5-year low in that area to an all-time high within probably an 18-month period. And it's not just Olympics, it's also civil infrastructure stuff like Cross River Rail and Coomera Stage 1 finishing, Coomera Stage 2 starting around Christmas time. Bruce Highway is a big contributor. The Rocky Ring Road part of Bruce Highway kicks in, in the second half of next year. We'll have significant revenues off the back of that. So yes, it just at the moment. I think it's hard for us to predict what our Formwork revenue is going to look like across the year, but we've got a high degree of confidence around industry.

Yes. That's great. What about -- when we think about debt at the moment, obviously, the way you've structured your balance sheet, you've got confidence in the revenue rolling through in '27. But perhaps what -- I think Andrew gave guidance of 1.4x net debt to EBITDA on the call. Will that be a run rate that you hit by the end of '26? Or will that be a reported number in FY '26, Andrew?

No, probably more run rate. However, look, we're looking at a whole lot of things at the moment. We're actually working with Westpac closely, which is our bank. But I think we're very comfortable with where we are now and where we're going to be and how we're going to get there. We're certainly not thinking about issuing any equity or something at this stage. We're comfortable with operating within our means right now.

I think we did some work, John, just on the debt funding the acquisitions that we have, the contribution that they've made to EBITDA, the contribution they've made to EPS versus what the debt-to-EBITDA ratio has done. So if we hadn't have done any of those acquisitions, the EBITDA for the business would be probably in the mid- to high 60s. The EPS would be about $0.03 lower than it is, but we have this great debt-to-EBITDA of [ 0.75, ] right? So we've chosen the debt fund because we don't think it was prudent to raise capital for that. Number one, we don't want to dilute shareholders from what we already think is a soft share price. And secondly, we've still got a great relationship with our bank, and we wanted to capitalize on that. But I think we've made a purposeful decision to really significantly grow by acquisition, that division over the last 2 years using debt.

Yes. No, I completely understand that, Steve. That makes sense. Last question from me. With regards to the Olympic build and the various hospital contracts that are coming up in Queensland, it's obviously going to be a very, very busy couple of years there. I mean we're sort of thinking you'll have things pick up by sort of second half '27, FY '27. Do you have enough inventory as you look through and get comfortable with the potential order books? Or do you need to invest a little bit more in the inventory to meet the demand for these projects? How do you see that part of the cycle playing out?

It's a discussion -- it's an open discussion in the business now. So it's hard to predict. I mean our gut feeling is there's going to be significant opportunities for selling products as well as for increasing our higher fleet. There's going to be a significant shortfall of both Formwork and Scaffold equipment. There is no doubt about that. And we think we're better positioned than probably our major sort of overseas-based competitors to capitalize on that. That's why we put so much effort in the supply chain and product development because we think that it's a while away yet, but there's going to be a period where getting gear quickly access to equipment at the right price is going to give you a real advantage when that significant uptick happens.

Yes. Remind me what are the margins like on sales versus hire? And then what happens when you -- when the projects are finished, you then get to buy them back as well, don't you the product? There's opportunity there...

If we want to. There's a handful of sort of sales arrangements where there's a buyback, it's only a handful. Most of the time you sell the system to the supplier and they keep it, also to the contractor and they keep it. Margins are anywhere between 20% and 35% on new equipment depending on the category, but it's also supply and demand. So if there's a significant requirement for gear and there's not a lot of supply, you're going to get a better sales margin. It doesn't drop below 20%, you might be getting better than that. So it's an open discussion. It's why Matt spent so much of his time, frankly, now in China with our Chinese manufacturing partners to make sure that when -- we're going to press a button and go quickly we can.

Yes. And I'm not sure if you touched on this on the call earlier. The contracts that were delayed, I think, in May or June when you announced them, can we think of them as rolling through in first half '26 or second half '26? Are they going to be -- are they incremental to your earnings, I guess, is what I'm asking in '26?

Yes. We've called out about an $8 million delay. I don't think we're going to see all that in '26. I think a lot of the hospital stuff, again, it's a watch this space thing. The Queensland government has got so much on its play, right? If you look at what they're trying to do with hospitals, with the infrastructure and then the Olympics, they've got a massive amount in their play. And just to give you an indication of that market, short-term, the biggest builder in Queensland just made 250 people redundant. So that's a short -- that's what they're seeing short-term. But in medium to long-term, it's going to be crazy here.

Yes. Who is that? Was that...

I shouldn't say [indiscernible]

Our next question comes from Alex Lu with Morgans Financial.

I just got a couple of questions, please. Can you start with Industrial Access and the revenue in Industrial Access was $132 million in FY -- $132 million in FY '25, and you're targeting $200 million or potentially higher in FY '26. So just wondering, is the $200 million what you're run rating at the moment with a 12-month -- say, assuming a 12-month contribution from above and brand? Or are you baking in further organic growth in markets like South Australia and WA?

It's a combination of both, Alex. So if you run the tape on a full year of brand and above, versus 2 months, $132 million goes to sort of $170 million. If you're baking in a full 12 months of Perdaman versus 7 months of Perdaman, that's probably worth another $10 million. So you got to $180 million and you've got to win some work.

Okay. That's helpful. And then just a question on M&A, please. So yes, you said you passed a couple of acquisitions for now. But just wondering, are you still -- when you get back to looking at M&A, are you still targeting the industrial access market, I guess, in particular, WA?

Yes, is the answer. We had the opportunities that we sort of passed at the moment in the industrial were actually Queensland-based. But there's people we know in WA. We sort of again passed all those discussions. There's another sort of adjacency area that we're quite interested in that we might revisit not only the industrial, it's another adjacency. We might revisit that in the next couple of years. But right today, we had another opportunity in Central Queensland that we could have undertaken that we just passed at the moment because it was the timing wasn't right.

We'll go next to Benjamin Yun with Ord Minnett.

Just a question on the Industrial Access opportunity in SA. Could you give us a little bit of color on that market and what needs to happen to capitalize on that.

I didn't hear that -- hi, Ben, can you just repeat that?

Just on your Industrial Access opportunity in SA, I was just looking for a bit of color on what you're seeing in that market and what needs to happen to capitalize on that opportunity.

Okay. So the 2 areas that we like in SA is defense. And we like it, and there's some opportunities that we might be able to capitalize on off the back of the above relationships, but that's [indiscernible]. The other one is Olympic Dam, the amount of work that's going on Olympic Dam in that area, we think we can slice a part of that for ourselves. But there's obviously other things, but these are the 2 major things that come straight to mind, Olympic Dam and then defense.

Brilliant. And just the last question on integration costs, obviously quite material in FY '25. Should we expect that to continue with Above and Brand for FY '26, please?

Yes, not at all, mate. There will be some because we haven't -- we're in the process of integrating into the systems Above. But that's -- yes, it won't be anything like...

It's no way near to the same...

Not even close.

And we'll go next to Tina Wilson with EME Capital.

Just a couple of questions on Industrial Access. Firstly, in your contracts, do you have any protection built in against cost inflation? And then secondly, if you could just make some comments on the competitive landscape, that would be great.

Thank you, Tina. So yes, all of our major Industrial Access contracts are complete pass-throughs. So they are basically fixed margins for us. So whatever we pay the employee, there's a margin on top of that gets passed straight through to whoever our customer is in that space. So there is total protection around rate. The competitive landscape, look, for the sort of stuff that we're focusing, I mean, we've now very much made the decision we're specializing in access. So we're not trying to compete with the [ SRGs and Tasmanians ] and others in this world that are doing a lot of other things. And we've -- all of this stuff is very much relationship based. And if they've had a good experience with you, it carries forward. Our customer in Perdaman is the same customer that we deal with in snowing, and we wouldn't have got the Perdaman without the relationship that was formed off the back of what we do in snowing.

Great. And just see it coming up, do you have any significant contract renewals that's coming up this year?

Not really. So we just -- in that industrial space, no, BMA has been resecured. Origin has been resecured. BD was resecured last year. They're all now -- all the key contracts have got significant tenure. There's a couple of -- we're still getting our heads around brand. There's a couple of contracts in the brand business that we've acquired that I think got probably 12 to 18 months to go, but we're in actually very, very good space in that area in terms of contract security.

Yes. Great. Just going to Formwork for the FY '26 outlook. You kind of mentioned that there's going to be a bit of a cycle in New South Wales and Victoria. Are you expecting sort of similar levels to FY '25 or actually like what sort of what are you thinking there?

I think New South Wales will be similar. I think Victoria will probably reduce.

We'll go next to Colin Ritchie with Ritchie Business Solutions.

I'm a self-managed super fund investor. And just looking -- I've been an investor now for several years. Just looking at the business, you've got revenues growing strongly. You've got debt growing strongly, but acquiring high return on investment assets. So I guess, logically, what you'd expect is NPAT to be growing strongly and earnings per share growing strongly. And I guess that's not what we're seeing over the last few years. If you look at NPAT 2023, it was 30.5%, and that's grown to 34.3% in 2025. And not surprisingly, in that sort of environment, you therefore, are not getting much earnings per share growth. In fact, earnings per share has actually declined slightly. So not surprisingly, following on from that, you would expect a fairly flat share price. And of course, over the last 18 months, that's what we've got. So I guess my interest is don't get me wrong. I like what you guys are doing. But what I'd like to see is what's the focus going to be on getting that earnings per share growth sort of moving upwards, especially with the fact that there's pretty high return on investment on a lot of the new stuff that you're looking at doing.

Again, I think, thank you for the question. I don't think we can sugarcoat this. If we hadn't been investing in the growth in Industrial or Jumpforms and Screens, that both NPAT and EPS would have declined in the core business. It would have declined over the last 18 months to 2 years. So that's the reality. And we made a decision at least 2 years ago now to give us a -- to have a diversification strategy so that we're doing a one-trick show. Now that -- those Formwork results will return, absolutely will return and will return in a very large way in the next couple of years. And you will then see the NPAT growth, you'll see the EPS growth. I mean other than the tax issue of 2 years ago that has about a $0.03 impact on the EPS from what it used to be. The reality is without the investment in Industrial and Jumpforms and Screens, we would have seen a deterioration in earnings over the last 2 years.

There are no further questions at this time. I'll now hand back to Mr. Boland for closing remarks.

So thanks, everybody, for your participation. Thanks for the questions. Great as usual. Thanks to Andrew and Matt for their input and look forward to talking to you all again at the half year. Thanks very much.

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