APM Human Services International Limited (APM) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the APM First Half Financial Year '24 Results Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Before we start the presentation, I'm going to ask Group CEO, Mike Anghie, to make some comments.

Thank you. Good morning, everyone. Before we move to the results presentation, I wanted to touch on the announcement we made this morning regarding an updated nonbinding proposal from CVC. At the highest level, the offer is $2 per share, and the independent Board committee have granted CVC a period of 4 weeks exclusivity, being 2 weeks without any fiduciary carve-outs and 2 weeks with. The reason for this period of exclusivity is to allow CVC time to complete confirmatory due diligence, complete its debt refinancing and execution of transaction documents. The offer will be subject to regulatory approvals. In the absence of a higher offer and subject to an independent expert report concluding that the proposal is in the best interest of shareholders, the Board proposes to recommend the offer to shareholders. Under the offer, all shareholders will be given the option to receive all or part of their shares in cash or [ script ] in a future private company. As a requirement of the offer that Megan Wynne, Executive Chair, and key management elect to receive all or substantially all of their consideration in private company shares. In addition, Madison Dearborn Partners is required to accept the [ script ] alternative for approximately 75% of its shares. Should the transaction be successfully completed, it's envisaged that CVC will hold approximately 33% of the new private holding company. From a business perspective, Megan and the leadership team remain committed to running the business and all of the priorities that will be outlined in the presentation today. We're focused on supporting our people to deliver the highest quality services for our clients and stakeholders and continue to execute on our strategy. We'll move to Q&A after the results presentation, and I'll now hand over to Megan to commence the presentation. Thank you.

Welcome, everyone, and thank you for joining us today for our first half financial year '24 results presentation. Before we commence today's formalities, we at APM would like to acknowledge the traditional custodians of the land on which we live. We pay our respects to elders, past and present, of all Aboriginal and Torres Strait Islanders nations. Globally, APM recognizes the significance of indigenous people's communities and the important role they play within our own workforce and the world. My name is Megan Wynne, and I'm the Founder and Executive Chair of APM. I'm joined today by Mike Anghie, our Group CEO; and our CFO, Matt Cooper. We thank you for your support as shareholders, and today, we'll present our H1 FY '24 results and share how we, as management, see the business, the market, and future outlook. APM is a leading global provider of health and human services, assisting our government partners in the delivery of their most important social programs. After 30 years of expanding the depth and breadth of our service offering, APM delivers services across the life span through delivery of assessment, Allied Health therapy and psychological services, medical psychosocial and vocational rehabilitation, vocational training and employment assistance, and community-based support services. Today, we're a passionate team of over 15,000 people in 11 countries operating from 1,430 locations, supporting our clients every day to positively transform their lives. Our global presence is important both from a strategic perspective as it allows us to leverage our capabilities to bring continuous improvement, innovation and evidence-based practice to the markets in which we operate, as well as from a diversification perspective where we believe that, over time, we will build a more resilient business less directly exposed to specific markets or programs. Most importantly, our client-centric focus and the caliber of our team who are truly embedded in local labor markets and communities where clients have established personal support networks allows us to think globally and act locally. APM Services delivered sustainable social impact. Our services help people with injury, illness or disability, children through to older adults, unemployed people and those facing hardship or harm to positively impact both their lives and the communities they live in. Predominantly, our clients are individuals who require additional support to find sustainable and meaningful employment. Beyond Employment Services, however, we deliver health and wellbeing services across the disability, aging and mental health sectors. The National Disability Insurance Scheme in Australia represents a meaningful growth opportunity for APM. Our NDIS services are delivered across each of our business lines. And in H1 FY '24, NDIS-related revenue was $89 million, organically growing by 13% during the half. We've been purposeful with how we've established our platform in this sector and actively participated in and support the recent outcomes of the NDIS review, which will create a higher quality and more sustainable scheme in the future to deliver better services and outcomes for people reliant on the NDIS to optimize their lives. We continue to believe that a transition to a more regulated program focused on registered providers with high levels of compliance positions us favorably. Thank you. I'll now pass you to Mike.

Thank you, Megan. Moving to Slide 9, we wanted to use this opportunity to spend some more time on the operating environment we're in. Over the next few slides, I'll lay out what we're seeing in terms of industry activity and then bring it back to how we're measuring our own performance given this backdrop. On Slide 6, as Megan said earlier, today, 73% of our revenue comes from Employment Services. And as such, unemployment is a key macro driver of our business. It goes to client volumes, caseloads, staffing mix, client demographics and, in turn, outcomes. Both Australia and the U.K. are 2 key volume-exposed Employment Services markets for APM. The markets are currently benefiting from very strong economies with tight labor markets and resulting low unemployment. Both markets saw unemployment drop below 4% for the first time in 50 years in early 2022, and we've seen those levels largely maintained since that time. While our business does have some natural hedging in most cycles between upfront caseloads and back-end outcomes, in an unusually extended low cycle of unemployment like present, that has clearly had some impact on our business. So what does extended low unemployment mean for client flows? On Slide 10, we've presented available public data on caseloads in Workforce Australia, Australia's mainstream unemployment program, together with the public data on the clients operating within the online system before coming to a provider. Two things I will call out here, case flows have declined year-on-year, as you would expect in a sustained period of low unemployment, and you can see that on the right-hand side of the page. While volumes are lower, we believe we're starting to see the signs of stabilization and growth. Some comments. Firstly, you can see in the data that unemployment in Australia has increased slightly in January with January's 4.1% level for the first time back above 4% since March 2022. This is further supported by the fact that, in December 2023, across Australia, there were 65,000 jobs lost and more than 106,000 full-time jobs, the most since May 2020. Secondly, Workforce Australia volumes and indeed our own client flows are showing signs of improvement, albeit only incremental at this stage. Finally, if you look at online caseloads in the chart on the left, we're seeing the uptick in unemployment manifesting in increased participants in the online system. Online caseloads have increased 15% since September 2023, and provider caseloads have increased 2.4% in that period, noting that there is a lag in the release of those participants to providers like APM. We believe that this is a leading indicator to mainstream provider caseloads improving. The other key element of APM's revenue in our key volume-exposed markets of Australia and the U.K. is outcomes or placements. As this cycle has extended, our caseload has evolved to represent some of the most vulnerable and disadvantaged job seekers, many of whom are long-term unemployed and furthest from the labor market. Many of our current clients are managing multiple and interconnected barriers that may hinder their path to employment. These barriers may include lack of access to services, secure and affordable housing, substance misuse or domestic violence amongst other matters. This is where APM does its most valuable work. Our highly committed frontline team are there to provide wraparound support to help link our clients with a range of relevant services that go beyond the task of just securing employment. In an environment like it is today, it's critical that we go above and beyond to ensure the client has the best opportunity to secure sustainable, meaningful employment, given the increased opportunity in the market, and that they have the greatest chance of breaking the cycle of disadvantage to participate economically and socially in their community. We'll continue to deliver this individualized and holistic support to address the complex needs and circumstances for each client. In such an environment, we do continue to place our clients at the center of everything we do by retaining our high-quality supports and services when they are most in need. So how are we measuring our performance given the more challenged opportunities that we're presented with? Clearly, we are focused on performance. Slide 11 is the department's assessment of performance ratings across all Workforce Australia contracts nationally. In the last review, in September 2023, APM stood head-and-shoulders above our peers as a high-performing provider. 48% of our contracts were rated high versus the industry average, excluding APM, at 9%, and APM held 44% of all the high-rated contracts across the program. We would note that this result is due to the strong start to the contract and our people's experience in mobilizing and commencing new programs. Over time, we would expect to see providers normalized into the moderate category, but we are pleased to see that our people, systems and processes continue to position us well. Going forward, our focus is on removing the low-rated contracts, which we're confident will be addressed in the next performance period. These performance ratings are the only public third-party metric assessing and comparing performance and demonstrates the above-industry quality performance that APM's people deliver each day. This performance is also important as it positions us well for future programs, demonstrates our ability to mobilize and execute on large contracts and performance provides a base for business reallocations in the future. Moving to Slide 12, one part of our strategy that we would also highlight as important to our development as a more diversified and resilient business is the evolution of our geographical contract and fee mix. With the Equus acquisition in late 2022, we meaningfully expanded our footprint in the U.S. market in particular. While the U.S. market is typically lower margin, our contracts there are not as exposed to volume shifts, meaning less variability through cycles, and are often less capital intensive with more assumed infrastructure and lower start-up costs, meaning that even for a lower margin profile, we can still generate a reasonable return on our capital invested. We're clearly continuing to pursue programs where high performance gives us the opportunity to generate higher potential margins in return for exceeding industry average performance outcomes for our clients and stakeholders, but believe this portfolio approach to our book of business will, in time, generate more predictable and stable shareholder returns. We expect that, as the market normalizes across Employment Services and Health scales matures, we'll see margins improve across the board. Moving to Slide 14, before handing to Matt Cooper, our CFO, to take you through the details of the financial results for the half year, I wanted to touch on the main points. In line with what we announced on 17 January 2024, revenue for the half has increased 31% to $1.1 billion, primarily due to a full half contribution from Equus but also due to organic growth in our health and wellbeing business. Underlying EBITDA for the half declined 12% to $148 million with underlying NPATA for the half down 36% to $55 million, predominantly due to the economic factors discussed previously with NPATA further impacted by higher debt costs associated with high interest rates and increased leverage than the prior comparative period. Underlying EBITDA margin was 13.2%. The decline in margin was mainly due to a combination of the shift in business mix with the U.S. now contributing a much greater proportion of our business and lower margins in our volume exposed Employment Services markets, as described. With respect to dividend, the Board has decided that. while reiterating that the existing dividend policy of 40% to 60% of NPATA per share remains in place, they've deferred announcing the payment of an interim dividend until the end of the financial year, given the status of current discussions regarding a corporate transaction and the fact that they'll become more certain by that period. I'll now pass to Matt.

Thanks, Mike. As Mike outlined, we've experienced strong revenue growth of $263 million, or 31%, from the prior period. Revenue growth was delivered in part through acquisition with a full half contribution from Equus in North America, acquired in November 2022, and Everyday Independence in Australia, acquired in February 2023. Strong organic revenue growth was achieved in the Australian Health business, excluding Everyday Independence, and in North America through Canada and the U.S., excluding Equus. The organic revenue growth was delivered through new contract wins and scale in the Health business, but offset by the impact of lower client flows in Employment Services relative to the prior period across Restart, Workforce Australia and DESb. EBITDA of $147.8 million was down 12% on the prior half, and underlying NPATA was down 36% to $55 million in H1 FY '24, attributable to lower client flow in performance-based Employment Services contracts. The change in the mix in earnings with our U.S. business contributed to a greater share of revenue with 19% contributed in H1 FY '23 compared to 37% in H1 FY '24. The U.S. business, although characterized by lower-margin cost-plus contracts, provides diversity in earnings and a footprint in a large market providing opportunities for growth. Additional interest expense also translated to a reduction in underlying NPATA to the tune of $9.5 million. Moving to Slide 16, balance sheet movements against June 2023 reflects continued investment in our business and programs as part of our organic growth strategy. Key observations include working capital movement being flat with a reduction in current assets and current liabilities, largely consistent with operating activity, namely in Employment Services. Accrued revenue and debtors as a proportion of trailing 12-month revenue was 21% in December 2023 compared to 34% in June 2023. This partly reflects the maturing of contracts as historical receivables are converted to cash, but also the level of activity in the period. Going forward, this metric will fluctuate through the employment cycle or as we mobilize new contracts. Similar to working capital, other movements were reflective of operating activities such as noncurrent assets were being lower contract intangibles and capitalized IFRS 15 costs are amortized in line with their respective economic life. We will [ then ] commence the process to refinance the first tranche of our debt facility with $523 million maturing in July of 2025. With our full covenant headroom and growth opportunities from key contracts coming online in FY '25, this timing presents a good opportunity to reengage with our banking partners. Moving to Slide 17, underlying cash conversion for the half was 96%, up from 59% in the first half FY '23 and remains a key focus for APM. You might recall that, in H1 FY '23, cash conversion was impacted by working capital requirements and the timing of seasonal U.S. debtors. In the first half FY '24, we had similar seasonal impacts, although we recovered these balances in December rather than January, as anticipated. Pleasingly, we set targets to improve our collections, which has resulted in average DSO in H1 '24 of 78 days compared to 124 days in the prior period H1 FY '23. Free cash is flat half-on-half as we settled completion acquisition payments, invested in software to support our integration efforts and continued investment in our service delivery platforms, including new contracts such as functional assessments in the U.K. and the existing supporting framework for [ right fit for risk ] in Australia. Moving to Slide 19, the ANZ segment experienced revenue growth of $35.2 million to $424.6 million in H1 FY '24 with underlying NPATA lower at $17.3 million. The full half revenue included organic growth in the Health business, along with a full half contribution of $45.9 million from Everyday Independence acquired in February 2023. This was partially offset by a reduction in revenue from imported services due to lower client flow in DES and Workforce Australia. The impact on margin is in part due to the reduced contribution from performance-based Employment Services contracts, which have been impacted by sustained historic low levels of unemployment, as earlier stated. Our focus continues to be ensuring those [ harvest to helping ] program during this cycle receive the best possible service. The incremental interest expense, bank interest expense of $12.3 million impacted underlying NPATA by $8.6 million, which reflects the debt being booked within Australia. Moving to Slide 20, North America has experienced revenue growth of $268.3 million to $494 million in H1 FY '24 with underlying NPATA increasing $16.8 million to $29.7 million in H1 FY '24. In addition to the incremental revenue contribution from Equus in the half of $235 million, there has been strong organic growth of 12% from new contract wins in the U.S., some of which are still mobilizing and will contribute to growth in future periods. Canada also reported strong organic revenue growth of 22% in the half, in part from the RSVP contract, which commenced in December 2022, and an increased contribution from contracts awarded under the Ontario Employment Transformation Program. Margins in North America remained relatively stable half-on-half, reflecting the more structured contract form and long-tenured program that make up earnings in North America. Moving to Slide 21, the Rest of the World segment in the first half FY '24 delivered revenue of $198.2 million and NPATA of $8 million compared to $238.6 million and $28.6 million in the first half FY '23. Revenue was lower due to client flow in the U.K. Restart Scheme and the end of the short-term COVID-19 relief JETS program in the U.K., which finished in the first half '23. This was partially offset by an increase in contribution from the Work and Health Program and the Justice program in the U.K. NPATA was impacted by a reduced contribution from performance-based Employment Services contracts and lower margin in Health and our EAP business as we invest for growth. I'll now pass it back to Mike.

Thank you, Matt. We recognize that this has been a volatile period for our share price. But in the next few slides, I'd like to spend a short time on why we're confident in the long-term outlook for our business. On Slide 23, we believe APM sits at the intersection of a series of demographic megatrends and how governments around the world will respond to them. Forces that are shaping the world are driving demand that companies like APM are well positioned to provide. We're seeing changes in the world of work, all economies seeking to lift workforce participation rates and bring people from outside labor markets into employment. These are the clients who APM work with. Aging populations in all developed economies and lower birth rates are changing the available workforce. There's an increased demand for community-based and in-home care to relieve the burden on the health care system, which will also drive future employment opportunity on the back of training. Similarly, rising inequality and the importance of social inclusion are leading to programs aimed at supporting underserved populations to build a more diverse and inclusive society. There's a heightened focus on the health and well-being of people with disabilities in prevention, early intervention and the pursuit of meaningful and sustainable employment. Australia has been a global leader in this regard. And finally, AI, decarbonization and digitization are impacting on the workforce, changing the opportunities available and highlighting the need to reskill and reposition potential workers to the market. All of these are already drivers of our business today, but we see sustained opportunity for our global platform from the tailwinds that these seismic shifts will create. So how do these long-term trends translate to APM? Slide 24 highlights the pillars for long-term growth where we're currently investing. Firstly, we remain focused on capitalizing on in-market opportunities where our business is already operating. In our core markets of Australia, the U.K., Canada, and the U.S. especially, we're seeing a range of government-led initiatives across employment, health, and community services. We'll quantify the depth of this pipeline later in this presentation. Secondly, we're still in the early stages of investment to establish the leading disability services platform in Australia. The redesign of the NDIS established a more sustainable scheme that meets the needs of those people it supports. APM is well placed to support the key pillars of the future NDIS in a compliant manner on the back of proven evidence-based practice and high-quality services. In time, we believe our NDIS business has the potential to be as large as our current Employment Services business. Getting it right by ensuring our platform there is well-designed, scalable, and sustainable is a huge focus for our organization. Thirdly, we're actively assessing new markets. We'll be selective and ensure that, when we venture into a new market, we do so in a derisked and cautious way, ideally at the invitation of a new government partner or in conjunction with the implementation of new social programs where we have a demonstrated experience. Our experience in Canada shows just how effective we can be when we bring evidence-based practice and track record to a new market. On Slide 25, this demonstrates what we have achieved in Canada with our people and team in that marketplace. Since APM acquired WCG as part of the acquisition of Ingeus, we've collaborated with our local team there to support organic growth. As a measure of our progress in the recent Ontario Employment Services Transformation Program, APM has successfully been awarded the [ catchments ] of Peel and York and Ottawa in each of the first 3 rounds of bidding, and we eagerly await the announcement of the final Phase 3 of the program. This growth has been organic and demonstrates our strategy on having a market entry point which provides a platform to bring the best of global to local market conditions to drive success. Turning to outlook on Slide 27, we're acutely aware of the environment in which we're operating. Some of our priorities remain strategic. That is our investment in our people, our investment in recruiting and retaining Allied Health talent to support our Health and NDIS businesses, the mobilization of recent contract wins in existing markets, and the focus on winning our pipeline of identified opportunities detailed on the next slide. We're very aware of the need to be efficient and optimize our business for the current environment. On this front, we're focused on efficiency and effectiveness across our business, which we expect will provide a 5% uplift to underlying NPATA per share on a full year basis in financial year '25. And like our shareholders, we're also very focused on our balance sheet. And as Matt mentioned, we need to extend or refinance our July 2025 maturity. And to this end, we've begun that process. On Slide 28, for those of you who have been with us on our journey, you will know that we have continued to be awarded new contracts and programs on the back of our track record of strong performance and high-quality, evidence-based program delivery. In FY '24, the estimated total contract value of awards and extensions was $875 million, of which approximately $450 million was realized in the U.K. and $375 million in the U.S. The contracts have various initial terms, generally of between 2 to 5 years, with options to extend. We will note, as always, that the terms of our contracts are frequently extended, amended and reinitiated under a different title as evidenced by the fact that the average tenure of APM in its current top 10 contract is over 10 years. Looking ahead, we have over $1.5 billion in estimated total contract value currently in tender and a much broader pipeline that we're pursuing across our business. Moving to Slide 29, as you'll note, we took the step towards providing guidance in our trading update in January, and we'll continue to evolve our market disclosure to ensure we're adopting and implementing best practice and enabling our shareholders and market to understand our business trajectory more clearly. Moving to Slide 29, as you'll note, we took the step towards providing guidance in our trading update in January, and we'll continue to evolve our market disclosure to ensure we're adopting and implementing best practice and enabling our shareholders and the market to understand our business trajectory more clearly. Consistent with prior commentary, we reiterate prior guidance and continue to expect the second half 24 EBITDA and underlying NPATA will be higher than the first half FY '24 with a second half earnings skew consistent with prior periods. We recognize the complexity of our business [indiscernible] and understand the components of our outlook for the second half. We expect flat earnings contribution from Employment Services in Australia assuming no material change to current flows and performance. Weaker earnings contribution from the U.K. Restart Scheme based on current observed flows and performance outcomes. And offsetting this, we expect modest organic earnings growth in Australia across the Health and NDIS-related businesses and a stronger contribution from the North American segment. Looking into FY '25, we'll update the market at the full year result based on the prevailing operating environment at that time. Identified business that we expect to contribute in FY '25 includes functional assessments in the U.K., which we've previously announced will contribute an estimated $720 million in revenue over 5 years and commencing in October 2024, the Ottawa catchment in Ontario Employment Services Transformation, which is in mobilization currently and will come into full effect in the '25 year, and the Job Corps contracts that we've been awarded in the U.S. where 4 recent contracts have been secured and commenced in the first half of '24, which will reach full effect in FY '25. In addition, we expect the expansion and extension of the Restart Scheme in the U.K. will come into effect in the financial year '25 and '26, but we'll update the market further as the timing becomes clear. We expect ongoing growth of the Australian Health and NDIS-related businesses, as described elsewhere in this presentation. And we'll see continued benefits from our focus on operating the most efficiently and effectively we can across our business. In closing, whilst this is a half year presentation on financials, I want to acknowledge our team in our 11 countries. The work they do each day to ensure the clients who need us most receive best-in-class support is what makes APM and what ultimately delivers the financial results. Every life matters, and thank you for the work you do each day. Thank you.

Thank you, Mike. Are there any other remarks you'd like to make before we open the line for Q&A?

No. Thanks, Victor. We're happy to open the line up for Q&A now. Thank you.

[Operator Instructions] Our first question will come from the line of Wei Sim from Jefferies.

Great. Thanks, Mike and Matt, for the presentation, and Megan. My first question is just in regards to the margin trends that we're seeing. Just the mix from Equus and Everyday Independence, we've seen a full half of contributions for that coming through in the first half '24. And as you mentioned, with the unemployment rate in Australia at least starting to tick upwards, is it fair to expect that margins should have troughed in first half '24? Or what other factors should we be taking into consideration when thinking about the trends of the margins of the business going forward?

Matt Cooper here. Thank you for your question. Your observation is essentially correct. We are seeing a trough at the moment, which is really the function of the mix of the performance-based Employment Services contracts that are experiencing the low periods of unemployment that Mike referred to, as well as our Health business, which we're still developing scale in that business. So whilst Everyday Independence is bringing a core contribution to our health service delivery, we are seeing that margin improve over time. So what -- I would refer to the first half '24 as a lower period of margin and would expect growth in the future for that reason.

And the second question is just in regards to how we're thinking about the M&A strategy for the company going forward. Just reading some of the press articles out there, it does seem like a good time for consolidation with the NDIS industry within Australia for some of perhaps the medium to larger size players. But at the same time, I think there have historically been concerns over the company's gearing level. So I'd be keen to understand how we're thinking about that at this point in time.

We're acutely aware of our gearing levels' need to extend or undertake a refinance in July '25 and also focus on the integration of our key acquisitions, as you mentioned, Everyday Independence and Equus, which continues today. So now, really, our focus is on our core business and on integrating and optimizing and driving the most efficient and effective business we can today. Whilst there is opportunities in the marketplace, our focus is really around the business we have, and we have a lot of runway within that core business today.

Okay. Great. That's really great to hear.

Our next question will come from the line of Tim Plumbe from UBS.

Just 2 questions for me, please, then I'll jump back into the queue. Firstly, Michael, just wondering if you can talk to how many online candidates within the Workforce Program are currently over 12 months? And then maybe, if you've got the number, how many of those are over 15 months? And I'm just thinking back to the recent recommendations about that Workforce Australia program to potentially trial 15 months in the online system. Is that happening now? Have you had any discussions with the government as to when these candidates might be released to face-to-face, please? That's the first question.

For us, we don't have the exact data on the split of online and the time in that program. What we do know is of course -- and I think it was illustrated on a lot of the slides there about the growth in online, particularly since September 2023, which I guess we're now seeing translate into growth in the overall Workforce Australia program. What I can say is that the trials are starting to commence in terms of testing what is the right period for online going forward. So, there's a number of random control trials being conducted where they're testing different periods of online with intense support. Those periods, I think, are 3, 6, 9 months. And what is proven in terms of early intervention, we've seen, of course, early intervention is certainly a critical part of vocational rehab return to work, which we do think is applicable in terms of unemployment or employment into unemployment and back into work. However, the government is running those trials, which we'll -- we and other providers will participate in and we'll get the results from those and see, going forward, as the government has announced, we think a more hybrid model of intervention plus online for those easiest in caseload, but always a real focus on supporting those further away from the labor market into sustainable employment.

Got it. Can I just clarify on that last point? So are the trials starting in line today, so we need to wait 3 months and 6 months and 9 months? Does that include that period for 12 and 15? So, is it, like, 15 months from today that they'll have the conclusion?

So, Tim, apologies, I didn't explain that very well. They're trialing the intervention for people that have been in program for that length of time. So, it's intervention with the people that have been in program 3 months, been in program 6, 9 and going out as to what is best.

Got it. So they might have wrapped up their trial programs within, call it, 3 months or so.

Well, if, I guess the trial and the aim is at -- let's say intervention at 3 months has much greater impact and positive impact on sustainable, meaningful employment than 12 months, then that might guide them towards, well, a shorter timing online, or with early intervention, there's a much better outcome. It gives more chance of long-term success, which, as we know, taking someone from unemployment into employment has considerable social benefits, but also considerable economic benefits. So, that's the reason for the trials.

And then just the second question, thinking about that $1.5 billion in the pipeline and contract tenders that are pending at the moment, are you able to give any detail in terms of composition of those, whether there's any major projects within that $1.5 billion potential timing around when you might find out if you've been successful or not?

Look, the major one that's in the nearer term is Toronto, the final phase of the Ontario Employment Services Transformation in Canada. And that is a large opportunity that the markets are waiting to be announced. So, that's the major one in the pipe. When you go below that at the moment in terms of submitted, there are some smaller bids across the U.S., U.K. and some emerging markets which are expanding and focusing on supporting those most in need. Toronto's timing could be any -- sometime during March, we'd say.

Got it. And so, within that number there, that's the entire tranche that's being included?

Yes. So the Toronto tranche, I think, is about 6 -- sorry, it's just the Toronto tranche. That's what we bid. Toronto's got a number of catchments, but the main catchment is the Toronto catchment.

[Operator Instructions] Our next question will come from the line of Marcus Barnard from Bell Potter.

Yes, my question is more about your strategy in the what I'd call the peripheral markets. You're operating in a lot of geographies which seem to be quite a small percentage of your revenue. And even some of the other groups, the 4 groups, seem relatively small. I appreciate these might well be longer-term growth opportunities. But in a public company, they seem to be absolutely a distraction and perhaps an inefficient use of capital, particularly in the context of your forthcoming debt rollover. Could you comment about whether you are committed to those as core businesses or whether you would look to [indiscernible] any of them over time? And I'm thinking small geographies and small businesses.

Yes, I appreciate your interest in this area. Of course, I mean, I think we [ all saw ] the Canadian growth story, which was WCG Group in British Columbia, a very small $12 million. And that was well before the transformation of Ontario was coming. And that has proven what can be achieved in a small market that has transformational change happening and supporting those most in need. And now we have a business that, whilst [indiscernible] see why '23 is CAD 100 million, we'll far exceed that going forward on a full year basis. And really, being in this market, they are, one, governments committed to the services. They are transforming markets, so places like Korea, Sweden, as you know, and that regional markets that have transformation programs in play. Some of them, of course, were halted or slowed due to the disruption during year 2020, '21, into '22, but those markets will change over time and transform. So, for us, every market has its role. In terms of management time, of course, we don't commit our management time and our leadership time into those markets as much as we would into Australia, U.K., Canada, the U.S. If you think about a market like Singapore, Singapore is a highly sophisticated, very small market but tries a number of programs that face a very fast market in terms of transformation of trends in terms of workforce, whether it's professionals being displaced out of work because of technology, whether it's aged workers that are going to transition towards the end of their careers into new careers. And we've got to remember that Singapore has a great standing in the ASEAN region and beyond. So, there's reasons that we play in all these markets. So, to answer your question, no, we are not planning on changing our focus in those regional areas.

So just a follow-on, I mean when I look at some of the strains in your cash flow, you talk about the working capital needs of mobilizing contracts. And yet, there seems to be a contradiction in a way in that [Technical Difficulty] you all sat on options which are perhaps years down the line. Is that fair?

Well, we're sitting in markets for the long term. We're building a long-term business here. So we're not focused on what's tomorrow. We're focused on a long-term, sustainable business. I understand that some people are focused on short term. We have to focus on long-term biggest trends, and market trends take long terms to run. So, if we took that short-term view in Australia, for example, in some of our emerging markets in Canada, for example, in the U.K., when that market was also going through change, we wouldn't be in the position we are today. So, I think the proven track record that we have shows that the strategy that we're executing on is the right strategy.

The other point I might just add -- Marcus, I might just supplement that and just the earlier comment just around the capital drain. It's actually for those reasons that they are the capital drain or a distraction, and it is the incremental benefit that it gives us in terms of being a global business being able to demonstrate methodologies in alternative markets. That's where the real value is. In terms of being a capital drain or impacting our cash flow in a negative way, that's actually not the case. Otherwise, if that were the case, I think we would probably think differently. But that's not what's happening here.

[indiscernible] Megan here. Just to add to that, I think, also when it goes -- when we do go into procurement in those countries, actually commitment to helping establish practices, protocols, participate in pilot programs and being a part of new program development is a really important part to credentialize ourselves to go into those bids. And length of time on the ground also helps with that. So, it's very hard to just launch lobbying just before a bid is announced and then put together a winning procurement -- a winning bid in a procurement methodology. So, you really do have to invest before that happens and establish yourself on the ground and earn your credibility and trust with governments. And I think that's, as Mike said, very much the approach that has been successful for us as an organization and for many years before for Ingeus in the way they established their network around the world.