Boom Logistics Limited (BOL) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us. For those less familiar with Boom, we're Australia's only ASX-listed crane and lifting company operating nationally across 17 locations. Cranes and lifting remain at our core, but we're increasingly more than a crane business, combining our fleet with engineering, workforce solutions and technology to meet the broader needs of our customers. FY '26 was a strong year for the business, particularly across earnings, margin, cash generation and how we're managing shareholder capital. Let me get straight into the results. We're delighted to present the FY '26 results. There are a few numbers I particularly call out. Revenue increased 2.4% to $271 million. Underlying EBITDA increased to $53.3 million and underlying NPAT increased 37.6% to $12.8 million. Underlying EPS increased 48.2% to $0.329 and free cash flow increased 83% to $18.3 million. Importantly, margins improved. We're generating better earnings and stronger cash from the business while also strengthening the balance sheet. We're very pleased with that result, and it reflects the improvement we're seeing in the underlying business and how we are managing shareholder capital. The next slide puts that FY '26 result into a longer-term perspective. Stepping back from the FY '26 result, the 3-year progression is equally important. Revenue has grown from $260 million to $271 million. EBITDA has increased from $46 million to $52 million and EPS has more than doubled from $0.16 to $0.329 with the on-market buyback also contributing to the FY '26 EPS result. The important point is the relationship between those numbers. We're growing the revenue base while seeing stronger growth in the earnings and returns coming from the business, being supported by better utilization, improved margins, the quality of the work we're taking on and how we're allocating capital. When I look at the 3-year progression, I see a business producing more from its revenue base and generating better outcomes for our shareholders. That's the direction we are focused on continuing. On to the next slide, the portfolio has also evolved over the year. Resources remain at our core and represented 55% of FY '26 revenue, supported increasingly by long-term operational and maintenance work. Infrastructure has grown to 20% of revenue with transmissions becoming an increasingly important part of our infrastructure business. In Renewables, we've deliberately moved to a more selective model, primarily focused on crane and lifting scopes where the commercial terms, risks and returns are right for Boom. Industrials also remain an area where we see opportunities to build longer-term customer relationships. The change in mix reflects the deliberate choices about the work we want to do and the returns we expect from it. I'll now hand over to Pieter to take you through the financials.

Thanks, Lester, and good day to all of you on the call. You've heard the key highlights and the broader story of the year. So let me get straight into the financial results. Our revenue up 2% to $271 million. EBITDA increased 4% to $51.8 million, and EBIT increased 11% to $18.6 million. The statutory NPAT comparison needs some context. FY '25 included the recognition of a $14 million deferred tax asset, which materially increased statutory NPAT in that year. Also in 2026, we separately identified $2.3 million of costs associated with the Clarke Creek incident, a net $800,000 recoupment relating to the misuse of company funds and a $300,000 loss on asset sales. Therefore, on an underlying basis, NPAT increased 38% to $12.8 million and underlying EPS increased to $0.329 compared with $0.222 in the previous period. The improvement reflects stronger margins, utilization and cost discipline across the business. Turning now to the cash flow on Slide 8, please. Strong operating cash flow and improved cash conversion increased our capital management flexibility to invest in the fleet, manage the balance sheet and deliver shareholder returns. A strong opportunity pipeline and diversified revenue base provide a foundation for organic growth. The improvement in earnings translated into materially stronger cash generation during FY '26. Net operating cash flow increased 42% to $52.8 million and free cash flow increased 83% to $18.3 million. Stronger cash generation gives us greater flexibility in how we allocate capital across the business, maintaining and investing in the fleet, managing debt and returning capital to shareholders. During FY '26, we purchased $7 million of shares through the on-market buyback and an unfranked dividend of $0.02 per share totaling approximately $800,000 was paid during FY '26. Furthermore, a $0.0225 unfranked dividend has been declared, which will be paid in September, representing an uplift in the dividend paid compared to the previous year. We continue to target returning 40% to 60% of prior year's NPAT to shareholders through dividends and/or on-market buybacks, while retaining flexibility to invest where appropriate returns are available. Turning now to our debt and funding position on Slide 9. Our balance sheet also strengthened during FY '26. Cash increased to $24.7 million, while the debt reduced from $93 million down to $85 million. We finished the year with $77 million of undrawn facility capacity and remain compliant with all financial covenants. Net gearing was approximately 40% within our target range of 35% to 45%. Combination of a stronger cash generation, available funding capacity and our existing facilities gives Boom flexibility to fund the business while maintaining a disciplined approach to capital allocation. Our flexibility is important as we balance the ongoing requirement of the fleet with selective growth investments where returns meet our hurdle rates. Turning now to Slide 16, I'll take you through the fleet and asset position before moving to our return on net assets. Boom finished FY '26 with a fleet of approximately 295 lifting and ancillary assets and a value-weighted average fleet age of 5.9 years. This is within our target range of 5 to 7 years. Therefore, we now have a fit-for-purpose portfolio where we are well below the midpoint of our fleet lifespan of 15 years and hence, do not have to make investment decisions under pressure. FY '26 net CapEx was $16.7 million, comprising $21 million of gross CapEx less $4.6 million of asset disposals. Labor efficiency and asset utilization both remained around 86%. Our sustaining investment will continue to focus on safety, productivity, technology and customer requirements with growth capital deployed selectively where returns meet our investment hurdles. Slide 11 shows that operating and capital discipline translate into our focus on improving returns. Return on net assets is a key measure on how we're effectively using the capital investment in the business. RoNA improved from 6% in '24 to 8% in '25 and now is at 9%, reflecting the progress we have made through improved utilization, stronger margins and disciplined capital management. Our aspiration is to deliver sustainable double-digit returns over the medium term. We see a number of levers to get there, improving our asset utilization, strengthening our margin discipline, redeploying assets to higher return markets, rationalizing underperforming assets and also improving working capital efficiency. Importantly, growth investment will remain disciplined. We will deploy capital where customer demand is clear and where the expected returns meet our investment hurdles. Ultimately, RoNA brings together margin utilization and capital discipline. I'll now hand back to Lester to take you through the broader strategy behind these disciplines.

Thank you, Pieter. Let me now take you through how we're positioning the business going forward. Long-term contracted work anchors this business, giving us greater earnings visibility and supporting utilization of our fleet and people. Around that base, we're selective about the growth opportunities we pursue, looking at commercial terms, risk and expected returns. Returns over volume is central to how we're thinking about growth. We want profitable growth, supported by a strong utilization and disciplined capital allocation. And underpinning it all are our people and safety. How we grow the business matters just as much as where we grow it. These are some good examples of the strategy in action across resources, infrastructure, renewables and industrials. What I'd also call out is the technology behind the capability. We're continuing to invest in modern equipment and technology that improves safety, productivity and the solutions we provide our customers. And that's increasingly important as our customer requirements evolve and is another way we're extending our capability beyond providing cranes. Let me now turn to FY '27. Safety is at the heart of how we operate at Boom. We never lose sight of the fact that behind every job are our people, their families and the communities we work in. That brings a responsibility we take very seriously. We're always learning and looking at how we can improve, and we continue to invest in our safety systems and the way we plan and execute work. TRIFR improved to 2.0 per million hours worked. That's encouraging, but we're very conscious that safety can't be defined by a single measure. Our focus is on preventing serious harm and making sure our people go home safely. Strategy is only as good as our ability to execute it, and it starts with our people. We have some of the best people in our industry, and we are continuing to invest in their development and leadership capability to make sure that we have the skills and capacity to support our customers as this business grows. Our social license to operate is equally important, particularly given the regions and communities in which our work takes place. Our Reflect RAP was endorsed during the year, and the focus is now turning that commitment into meaningful indigenous engagement, employment and participation opportunities. We're also preparing for our FY '27 sustainability reporting requirements. For us, these aren't separate ESG initiatives. They're part of how we look after our people, build stronger relationships with our customers and communities and maintain our license to operate over the longer term. Looking ahead to FY '27, we entered the year with a solid foundation. Our focus is on continuing to improve earnings quality, growing our base of long-term contracted work, protecting margins and maintaining strong asset and labor utilization. Resources remain the anchor, and we continue to see good opportunities across infrastructure alongside selective participation in renewables and in industrials. We expect to invest more in our fleet in FY '27, supporting customer demand and growth opportunities where the returns make sense. We're also budgeting for continued EPS growth. Alongside that, we're targeting up to $7 million through the share buyback, subject to Board approval. We have the balance sheet and cash generation to invest in the business while continuing to focus on the returns to shareholders. We're well positioned entering FY '27 and focused on continuing on the progress that we've made so far. So to bring it all together, we believe there's a very good story here for our shareholders. We're improving earnings quality and cash generation while maintaining shareholder capital -- while managing shareholder capital more effectively. Have national scale, modern, specialized fleet, strong customer relationships and broader capability across engineering, Workforce Solutions and technology. We're positioned across markets where we see -- where we continue to see long-term demand and opportunities for profitable growth. Ultimately, our focus is on translating that into continued EPS growth, sustainable return on the capital we deploy and long-term value for our shareholders. That brings me to the end. So thank you for your time. Pieter and I are now happy to take any questions.

[Operator Instructions] The first question today from the phone comes from James Tracey from Blue Ocean Equities.

The question for me is about the outlook for FY '27. I think the notable thing for the FY '26 year was the very high growth in profit relative to sales. You've got 2% revenue growth, NPAT 38% and then you've got EPS, which is 50% with the buybacks. Could you just give a bit more -- you've been doing a lot of work sort of beneath the surface around margins utilization, cost discipline, capital allocation, this whole concept of profitable utilization as opposed to just having the assets being used but not making a profit on them. Could you just give a bit more color on that and how much scope there is to go to continue doing that work in '27 and maybe some of the things that give you confidence in your outlook for continued EPS growth into '27?

I'll start before handing over to Pieter, James. Thank you for your question, by the way. Look, the first point I want to make is we've got a really solid foundation. And as we spoke earlier and as I addressed earlier, we are budgeting for continued EPS growth. I'm confident in the direction that the business is going. And obviously, we're not putting a specific forecast around that today. We also just announced a few weeks back that -- sorry, at the back end of June that we've got a significant contract with Olympic Dam, and it's future-facing and it's copper. So on that note, I'll stop and say solid foundation. There's opportunities that are coming. I mean they have to meet the hurdle rates, but I'm pretty confident that we're going to be in a decent position going forward.

Yes. And James, I'll just add to that, that as you've called out, there's no -- really no single driver, but that double-digit RoNA that we want to get to is really going to be looking again at utilization, what we can improve. And I think in a previous conversation with you guys, we've talked about what a small percentage increase in utilization makes to the underlying performance of the business. So we'll continue to work on utilization. We've had a long discussion yesterday and the Board around our metrics around that, our definitions around that and what we want to do in the year coming to sort of get some more focus on that. But I think the important part, and again, the free cash flow that came in despite the revenue uplift only 2%, but despite that, the underlying EBIT has just continuously sort of benefited us and our shareholders because we -- I hate using the word chasing revenue, but we're definitely not doing that anymore. We are looking at profitable business. And therefore, sometimes we're selective of the work that we take. But we're taking work that we know we can make money and we can do the work safely. So asset deployment, underperforming assets, yes, we've done a lot of that. You saw we had some losses on the sale of assets this year and where we've had profits on the sale last year, but it's to that point where we actually get rid of the stuff that's not bringing the levels or the hurdle rates that we set ourselves.

I take some comfort that the assets will go where the margins are the best, have wheels and will travel.

Just a quick follow-up on that point. When I visited you up in Brisbane, there was a whole lot of equipment that was going out to do work on electrical transmission lines. And I also noticed that, I guess, transmission is a more prominent part of your presentation this year versus in the past. Could you perhaps talk to maybe that segment of the market and then the pipeline you've got and maybe any work that's going on generally in the sector that what's your advantage in being able to address some of that demand?

Glad you're not asking me to give away all my trade secrets there, James. But no, you're right, transmission...

Only the ones that you [ turn ].

Yes. Look, it is. It's an increasingly important part of our business, and I sort of moved it into that infrastructure space. We're not really worried about how the energy gets generated. So really transmission line is infrastructure. The company has to get rewired, and we have competitive advantage in that space primarily because we've assembled -- sorry, erected a multitude of 1,500 to 1,600 towers already. And we're seeing that our relationships with our clients, it's spanning across both sides of the divide. So to that end and to answer your question, it was a pet project of Pieter when he came on board to make sure that those assets went out. I'm glad to report that he's been successful in that endeavor and he sent them out. So yes, it's an area of growth for us, James.

[Operator Instructions] There are no further phone questions at this time. I'll now hand over for questions from the webcast to be addressed.

Thanks, [ Darcy ]. So Lester and Pieter, a number of questions following similar kind of themes to the ones you've just been addressing, but let me just work through each of these in terms of a number of them. First one, what does the pipeline and opportunities for material contracts look like? And how should we think about revenue growth after significant EPS growth from the returns -- from the focus on returns?

Adrian, thank you for that question. Look, there will always be movements in contracts, but what we've got in front of us is a good opportunity set. We recently announced BHP Olympic Dam and our extension there, I think with a 7-year contract. It's less about a large headline number, but making sure that the opportunities that are in front of us, we convert them and those that we convert are profitable and meet our return requirements. But again, I'm confident and quite positive going into this new year.

And I think I'll just add to that to sort of say that not every contract that we signed meets the disclosure requirements. So a lot of our smaller contracts and the wins that we make is not publicly disclosed. We're confident with the pipeline.

The next one, and you spoke a little bit about this earlier, but just slightly different Qs here. So what is NPAT and CapEx guidance for FY '27, noting that you have previously provided qualitative guidance?

Look, I'll start by saying we're in a good position, and we don't have to make big decisions under pressure. Pieter touched on that earlier. We can invest where customer demand and returns justify it. It's a 15-year life cycle value weighted average age is 5.9 years. Again, it's one of those things. Metrics are good. The CapEx, we spent around $17 million last year, pick a number between $15 million and $19 million, put it into the model, and that should potentially work, Adrian.

Next question. How would the $200 million of secured contract work for FY '27 compared to FY '26 at the same time last year?

Interesting question. Look, the most significant one was the one we announced on the back end of June. Again, I'm more interested in the fact that we're now -- we're pivoting to longer-term maintenance work, and that's recurring revenue, that's good. We're chasing opportunities that the growth opportunities that are profitable that we layer on top of that. The macroeconomics are changing. But one of the good things is the fact that we -- as a business, we've got -- within the resources space, we're diversified. We've got exposure to coal. We've got exposure to gold. We've got exposure to iron ore, and we've got exposure to copper. So that gives me comfort, and that's not mentioned infrastructure, industrials and renewables. So across the board, I think -- I'm pretty sure we're doing better, but the pipeline is looking good.

Next one, and this refers to the slide we have in the pack with respect to return on net assets. So referring to that slide, what approximate time frame do you anticipate to reach the aspiration RoNA target of 15%?

Okay. But 15% is an aspirational target. As you could see, the journey over the 3 years has been marginal improvement. So if you just want to go on that trajectory, it would definitely not be in the near term, but in the more in the sort of medium term that we were trying to get there. But I'll only keep my job as long as we get to that 15% fairly quickly. But again, like I said, at the double-digit RoNA in the space will be capital intensive is aspirational, and I'll stop at that.

There's no single lever. It's really about getting more from the assets that we currently have and being careful where we put our next dollar.

I hope you do keep your job. So just the next question, is the improvement in free cash flow sustainable?

Yes. And I think I'll preface it on the fact that the quality of the revenue that we're chasing and the deliberate decisions that we are making with regards to where do we contract, how do we do it and how do we pick the next piece of work. So yes, I think I can say that we're very optimistic. And if we look at our outlook and what we say we're going to do, I think it's something to expect that our free cash flow generation will continue to grow. Again, this is our results presentation. The outlook update will probably come in the next couple of months, but yes, positive. Can we call it quietly confident?