Boom Logistics Limited (BOL) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to this investor webinar for Boom Logistics first half results. My name is Gaby, and I'm joined this afternoon by Boom's CEO, Ben Pieyre; and CFO, Manny Bikakis. Before I hand over to Ben and Manny for the formal presentation, just a reminder that this webinar is being recorded. [Operator Instructions] Thank you. All right. Over to you Ben and Manny.

Thank you, Gaby. Good morning or afternoon, everyone. Welcome to the first half results for Boom Logistics for financial year 2025. My name is Ben Pieyre. I'm the CEO and Managing Director. Joining me today is our CFO, Manny Bikakis.

Good afternoon, everybody.

So Manny and I are in different locations for operational requirement as we continue to actively drive our business being a national business, which is a good segue to the first slide on who we are. So starting on a quick recap. Boom is one of Australia's leading providers of lifting services and project solutions to the mining, industrial, infrastructure and renewable industries. We provide specialized equipment, engineering services and workforce solutions to a diversified range of operations and projects throughout Australia. Boom has a national presence, an extensive fleet of cranes and equipment, skilled labor and a proven capacity to manage large-scale activity. We are playing a key role in supporting Australia's critical industrial and infrastructure development, renewable energy transition and resource extraction projects. Starting with a summary of the highlights for the half year. Our revenue of $131.7 million was driven by strong project activity, particularly by wind farms and transmission lines projects. Our EBITDA continued to improve due to our ongoing efforts to grow margins, tight cost control management and ensure operational optimization is maintained. The 32% rise in operational NPAT to $5 million is a result of our underlying focus on delivering improved shareholder value by implementing our strategic initiatives. Our statutory NPAT result of $19 million includes an additional $14 million of deferred tax benefits. Given the confidence that we have in our future earnings, we are bringing these tax benefits on to our balance sheet. Net cash flow of $8.5 million has been delivered through our improved operations and focus on working capital. The share buyback scheme has brought back circa $1.4 million in shares in the first half. Earnings per share has also improved considerably by 31% to 12% per share. On Slide 5, we demonstrate our recent track record on improving returns to our shareholders. We have delivered increases in our revenue, EBITDA, NPAT, return on net assets, earnings per share and net tangible asset across FY '23, FY '24, and we are forecasting to leave these metrics again in FY '25. Our positive operating outlook and our continued delivery for our strategic road map places us in a strong position to achieve our goals of delivering double-digit returns on net assets for our shareholders. Turning to our strategic delivery for the first half. We have strengthened the balance sheet and improving shareholder returns through efficient use of capital and driving operational performance. For sector-focused profitable growth, we sustainably grew our Renewables business and secured more than $29 million in new and renewed contracts throughout our business. Our focus on asset regeneration continues, resulting in asset utilization of 87% for the half and a value-weighted average fleet age of 6 years. On the labor front, we have a solid labor efficiency rate for the half of 86%. We continue our focus on safety, environment, talent and governance, resulting in no lost time injuries for the half. Our revenue increase is being driven by our diversified exposure in growth markets. A softer performance across Resources and Infrastructure was offset by growth across Renewables and Industrials due to strong demand for the energy transition in Australia, a key driver for future growth. Having said that, Resources and Infrastructure continue to be core sectors as we focus on key clients with profitable opportunities. A little bit about our key partners and projects. On this slide, we will showcase some of our key partners and projects which we service. The activity at an iron ore mine site in the Northwest, the Clarke Creek wind farm project in North Queensland, a large transmission line project in New South Wales and a desalination plant just outside of Perth in WA. This is just a small sample of the complex and diverse customers and large-scale projects that we are involved in. A bit about our progress on the ESG front and safety for the first half. We recorded no lost time injuries and a total recordable injury frequency rate of 5.0 per million hours worked. We completed a greenhouse gas emission assessment, reinforcing our commitment to assessing and mitigating environmental impact. We also conducted a materiality assessment to identify key environmental, social and governance issues, ensuring our focus aligns with key stakeholders and business objectives. I will now hand over to Manny to talk to the financial performance of the business.

Great. Thanks, Ben. I'm going to cover our key financial statements, which is our profit and loss, our balance sheet and our cash flow. So I'll start with the profit and loss statement. We're very pleased to keep improving the quality of our earnings through the continued focus on margins, costs and operational efficiencies. And hopefully, you can see that on the graph in front of you. Our underlying operating profit for FY '25 was up 32% for the first half to $5 million. The statutory profit that you can see in front of you, we've included $14 million of deferred tax benefits, which is about 50% of what we actually have available to us. But this is a step towards our confidence and illustrating the confidence that we have in our future profit projections and profits that are going to remain tax-free for many, many years to come. As indicated, our first half was up 32%. And now if you do the math for the second half, we forecast to about another $4 million for second half. That's equally going to be up about 42% on prior year. So we're up 32% in the first half, 42% in the second half, which averages out about 36% for the full year. So I'll turn to the balance sheet, which has been a very key focus for us over the last couple of years, and it's very important that we continue to build a strong balance sheet and resilient balance sheet. On the asset front, we are continuing with our asset regeneration program, modernizing our fleet. This fleet gives us -- meets the customer demands. It delivers lower downtime. It provides higher labor and asset efficiency. To this end, our CapEx for the first half was $21.3 million. This has all been front loaded this year, i.e., it's been -- most of our CapEx is actually coming into the first half of the year. This is really due to the improved supply chain that we've had. So we've been able to bank all -- most of our CapEx for the year in the first half. This allows those assets to be operating in the year of purchase, thus helping on the P&L front as well. So our forecast for the second half CapEx is very, very minimal given a lot of our CapEx is coming to the first half. From a debt financing point of view, you can see there, we've lifted our facilities to $150 million. This is all through first-tier providers, NAB being our #1 banker and supporter. This provides us with a lot more flexibility and a lot more headroom to take care of -- take on opportunities as they arise. Our net debt is about $100 million, $99.7 million. So we're 2/3 drawn of that $150 million. So there's lots of headroom there. Our gearing ratio is 43.5%. This is well within the guidelines we've put out. We want to be somewhere in that sort of 40% to 50% mark. So we're being responsible with the use of debt. What is pleasing is that during the half, we've been able to pay down any general debt or working capital debt or debtor factoring, however you want to term it. So the 100% of our debt is now asset financing. So the operating and finance leases across our key assets, and that's the way it should be, and that's the way we want to sort of move it forward. Our net assets grew to $129 million for the half, partly due to our improved P&L, our rejuvenated assets on the balance sheet and the recognition of the deferred assets. Now turning to the cash flow statement. Now I appreciate we've had feedback on this. People assess cash flow in a number of ways. So always open to feedback. But the way we measure cash flow is actual cash generated, less cash that went out the door. So you start the year with some cash, you generate some cash flow through the business, which leaves you some cash in the bank at the end of the year. So if you take our definition of cash flow or free cash for the year, that was $8.5 million versus $1.6 million last year and previous years, we were sort of in those low digits as well. So vast improvement on what we've been able to do in the past. As I mentioned, on the cash CapEx perspective, about $5 million of that CapEx was actually -- we actually use cash to pay for that capital. So about $5 million was by cash. The other 80% of it was effectively by our asset financing leases. They typically tend to be 4- or 5-year sort of leases on our equipment. So the largest portion of our cash flow, as you can see there, has gone to meeting our bank obligations. So we made $23 million from the business, $4 million from cash from asset disposals. We spent some on CapEx and $14.7 million was actually spent on paying back the banks on our finance leases and the $1.4 million on the share buybacks. I think that's pretty much it for me. Ben, I'll hand back to you to go through the FY '25 priorities.

Thank you, Manny. And I'm sure you'll be happy to take questions on the financials after the presentation, if there are any. So in FY '25, we will continue to deliver on all our core strategic initiatives that we put in place back in 2023. The 3 key priorities remain and are meeting our increased guidance for the year with $263 million in revenue, $51 million in EBITDA and $9 million in operating NPAT. We will look to grow profitable customers and continue to invest in profitable markets in our 4 core sectors. We will also ensure fleet utilization and charge-out is above 85%, and we will invest in key replacement assets to increase our competitive advantage. I'd like to reinforce our #1 strategic focus, which is to improve shareholder value by targeting double-digit returns. We've come from 1% return in FY '23 to 6% in FY '24. We are forecasting 8% in FY '25. Boom's focus on double-digit return has and will continue to grow through our core initiatives, continued individual business improvements, investment in growth assets in key markets such as the renewables, pricing efficiency and cost management. So to end the presentation, we'll finish with a recap on our investment highlights. We look to deliver our upgraded full year guidance with an operational NPAT position of $9 million for FY '25, which is an improvement of 36% on FY '24. We have an experienced Board and management team with a track record of delivering returns for shareholders. We have a strong balance sheet and lending partners that provide flexibility and a platform for future growth. Lastly, our targeting of double-digit return on net asset is tracking well with higher returns and a bolstered free cash flow. We are very pleased with the improvement we made over the last 2 years, and we are looking forward to continuing our journey into the second half and beyond. Thank you all. We will now take any questions you may have with -- through Gaby and the platform.

Thank you, Ben. Thank you, Manny, for the presentation. [Operator Instructions] So first question for you, Manny, is, can you provide more color on your increased gearing levels?

The gearing ratio?

The increased gearing levels.

Yes. Yes. So our gearing ratio has gone up. I think it was 41.5% last year. We're now 43.5% from the top of my head. A lot of the -- like I said, a lot of our capital that we purchased this year, 80% of it was actually debt funded, so it's via finance leases. So that explains the increase in our gearing ratio, predominantly, it's the extra debt on the capital.

Okay. Thank you. Next question, it's from Richard Fakhry of Phoenix Portfolios. He says, congrats on the good results. For clarity, could you please confirm that following the recognition of the deferred tax asset, operating profit after tax excludes any assumed tax expense in the second half?

Do you want to handle that one, Ben?

Yes. No, thank you.

Yes. So this company won't be paying tax for quite a number of years. So our profit last year and the year before and this year's forecast of $9 million is fully tax-free. And given the level of prior year tax losses that we have within the group, the forecast is many, many years of 0 tax expense and tax payable to the ATO. So that's a real benefit to the organization and to our shareholders because it's a real cost that won't be incurred probably for the next quite a number of years, as I said.

Thank you, Manny. Okay. Next question is from Rob Geeves of Greig and Harrison. It says, the AGM presentation said the return on net assets target was 15%. This presentation only says double digit. Is the target now only something greater than 10%?

Yes. Look, I think the double digit or 15% is double digit as well. But the double digit was -- we want to go with double digit because it doesn't set a set target. And we don't want to be restrained by -- restrain ourselves with time and numbers. We are actively seeking the double-digit returns. We're getting closer and closer. And then -- and obviously, it will be a continued effort to reach the target. 15% is not a target. Obviously, the more returns we get, the better this business is. And so that really is -- that was really the shift in our thoughts is why limit ourselves to a fixed number rather than just going -- we're going for double digits with no restrictions, and we'll make that number as high as we can in the years to come. That's pretty much -- that was the change in our thoughts of not limiting ourselves to anything, just keep going, continue to grow, continue to make the right returns.

Thanks, Ben. Next question relates to capital management. So the attendee asked, at the last AGM, it was agreed to increase the share buyback to 20% with strong cash flow, solid results in the half and cash at bank. Why is the share buyback being so low? And what's the target for 2025?

Yes. Thank you. So look, the policy that we've installed is average -- it's the average profit over 2 years and for us to reinvest from 40% to 60%. Look, liquidity has been -- is something that we can't really manage, but we are actively looking to buy back our shares. We've actually just changed brokers. And we are working actively to -- the program actually restarted today, and we'll be actively seeking to participate in the buyback.

Excellent. Thanks, Ben...

Just to answer that, Gabby, it's the last 2 years average.

That's 2 years average.

So 2 years profit. And 50% of that profit is what we buy back, and we're actually on target to deliver at least $2 million of share buybacks, which is about 50% of the last 2 years' profit.

Okay. Thanks, Manny. Next question also relates to capital management. I mean you're obviously doing the buyback, but this attendee asks whether Boom will ever pay -- consider paying dividends?

That's something -- it's been a reoccurring comment, I guess. And that's something that the Board -- we're looking at the Board to always -- we're not setting anything. We've got a policy. We're sticking with it. We think it's the right -- it is the right policy for us now. And it's -- we're not saying that nothing is ever getting reviewed. We've got an open mind. We're looking at the performance of the business, and we're also listening to our shareholders. So we're keeping an open mind. For now, we are committed to the buyback. We think it is the right thing for us to use that capital.

Okay. Thanks, Ben. Next question comes from Monty Swift at Taylor Collison. He says, well done on the results. How should we think about net CapEx into FY '26 and going forward, acknowledging second half '25 will be minimal?

We have invested a lot in this business in the last few years, certainly the last 3 or 4 years at least. For us -- CapEx is for us now is getting a lot more strategic than what it was. We needed to refurbish our fleet. We need to regain confidence from our clients. And so looking forward, we will be looking at CapEx as growth investment more so than capital replacement. And so we will be a lot more strategic in the way we go. So -- but at the end of the day, we have over 300 bits of equipment between cranes and travel towers and others that -- where we generate our revenue. And with an average life cycle for these assets of 12 to 15 years, we're bound to replace a certain amount of assets every year. So we keep that in mind. But certainly, the focus will be on growth assets.

[Operator Instructions] Next question for Manny is just about -- well, for both of you, actually, the general sort of financial economic environment and probably with the advent of Trump and a lot of geopolitical things going on at the moment, possibility, the Australian election as well. What's your thoughts on these events and how they'll affect the business?

If you don't mind, Manny, I'll probably start with this one. But look, geopolitics is always there, right? Australia is a strong country. We've got the resources. We've got growth in population. We've got -- we have a lot of infrastructure to build, and it's not only renewables, it's bridges and others. We've got to build our cities literally. We've got to rebuild our rail network. There are -- there's still a lot of opportunities that are part of our core sectors, resources being one. Whilst the resources may be going -- some part of the resources may be slowing down a little bit, the production hasn't changed. And most of our activities and resources is based around the maintenance and supporting the production of any different type of ore, right? And we see opportunities in copper, for example. We see opportunities in gold whilst lithium and nickel, for example, haven't been going too great. So there are a lot of opportunities still for us. How it will affect the business? Well, that's part of myself, the team, Manny to be able to make sure that we are adaptable, that we are -- that we have the capabilities of being able to react and being part of any type of growth around Australia, any type of strong activities. Keeping in mind that we are really focusing on profitable growth. So it has to be right. The terms have to be right, and it has to be something that we feel very comfortable in delivering as well. So there are issues, but there's always issues. And so when it comes to our business, we're focusing on ourselves. We're focusing on what we need to do to deliver the returns that are required. And we feel very comfortable that we have the right team to deliver that.

Okay. Thanks, Ben. Next question is [ Coats ] recently reported a weaker outlook for infrastructure-related hire, particularly in Victoria. Are you seeing similar challenging conditions at all?

Look, we're not really involved in the Victorian market. Victorian market is very particular. It's mostly city work and which we don't highly unionize, which we don't really participate in. But for us, the activities in our sectors, again, there may be challenges, but by being flexible and adaptable, we're able to ride. You just have to look at our performance so far this year. The resources has gone a little bit down, but we find growth, which was a target and a strategic view that we had to go into, more into renewables. And renewables, we're not talking necessarily construction and projects. We're talking about maintenance. The more we build wind farm, the more wind turbines they will be to maintain, the more transmission lines we put up, the more work there will be to do on transmission line on the maintenance work. So that's just 2 examples of the many things that we do. So we -- you got to have a good look forward. We got to understand our market. And as such, we feel comfortable with where we are that regardless of what the market does.

Okay. Thanks, Ben. Next question relates to M&A. Are you seeing any attractive M&A opportunities? And how are you weighing these up versus capital returns given the low multiple?

Yes. Look, I mean, we're not actively -- obviously, we're not actively seeking anything. But just looking around in the market, there's been a few -- what you'll find is in depressed areas like the previous question, some people may want to get out and why would you go into a depressed market, right? So for us, we have assets, we move around. We are comfortable and confident with our service delivery, with our product. We have the right people. We are moving organically to new markets in order to seek, to replace lost markets such as nickel, for example, we went into gold now, and we're pushing into iron ore. So we're not really -- there's nothing really to comment about M&A outside of -- I think the people that are trying to sell right in the depressed market will be people that they need to exit and we're not. For us, we're looking for both. So we're very comfortable with what we're doing internally.

Thanks, Ben. Next question relates to revenue composition. Like you've mentioned resources. It still accounts for about half of your revenue, but you've mentioned growth in renewables and transmission lines. How do you go about driving that growth? What's the strategy around that?

Thank you. Look, the strategy has been -- we've created 2 different departments. So part of the restructure we've done in the last 2 to 3 years, we've exited some markets, and we created new divisions to specialize and really focus on these markets, and that's been paying off. We've -- how we -- the replacement of the fleet has been very strategic as well. We've replaced old fleet with the right fleet in order to target these markets. And we're comfortable. We have the right people, the right equipment. It was certainly a strategic focus, something that we really aimed at diversifying our business. Whilst the wind market has always been around Boom Logistics for many, many years, probably close to 15 now, I think. And we've actually erected over 1 gigawatt of power so far in wind turbines, which is quite exceptional for our business over the last 15 years. But the effort that we've put in, in the last few years to really focus on this market is paying off. We have recruited the right people, the right people that want to join us. We've got the right assets. We've got the relationships. And we're certainly marketing ourselves as such as well that we are one of the leaders in the industry in Australia, and we're being recognized as such.

Okay. Thanks, Ben. Next question. I know that we do quarterly updates, but the attendee says, there's minimal communication on contract wins to shareholders between results. What's the plan going forward on improving this?

Well, I guess the size of the contract dictate -- we can't really go out every day we sign a tender or a quote, right? So the size -- the impact of the size of the market is what we do. We have made some announcements this year, and we certainly will be guided to make announcements if there were to be any considerable size contracts to be signed. But we are guided by ASX guidelines as well with the materiality of the size of the contracts as well.

Okay. Thanks, Ben. Next question relates to guidance. The attendee says, regarding FY '25 guidance, it appears conservative given traditionally the business has a modest second half skew. Can you please comment or clarify?

Yes. Thanks for that. Look, I think we are really positive about the second half. It's an improvement -- it's a major improvement compared to last year, almost 40% from -- if you compare this second -- the forecast for the second half or the guidance for the second half and the second half of FY '24. We're keeping that guidance. We are comfortable with what we're doing. And we're very pleased that the first half has had a good impact, and we continue to work hard on it. Someone mentioned the resources. There's weather events. There's a lot of things that we take into consideration as well. But we are comfortable that we will be delivering the guidance for the full year and the guidance for the second half.

Okay. Thanks, Ben. Probably time for one last question. So guys, obviously, really good results. Everything is sort of tracking as you'd like it to be, guidance lifted for the full year. Besides those things, what are some of like the 3 to 4 key takeaways that you'd like attendees to take away from the session today?

Only 3 or 4.

Plenty, if you want.

Thank you. Look, a big takeaway for us and something that whilst the results are improved, we know there's still a lot of work to do. But the pleasing factor certainly for us is that we keep on delivering what we say we do. And that is a key factor really in the confidence that I personally have in working with Boom, the team, the Board is that our people are really invested and we are working and fighting hard every day to improve. And so that, for me, is really important to highlight because having cranes and people is one thing, but how -- what we do with it and how we've improved in the last few years, and we continue to improve is really a credit to our people and to the strategy that we've installed, the confidence of the Board with us. And also, we're hearing a lot more and more the confidence of the market with what we are doing. So that really, to me, is a key highlight. We -- from FY '23, we've continued to improve. There was a lot of work done prior to that. And now it's -- we're taking this to fruition. So it is really key. The other key is you look at our NTA, you look at the value of our share, we are still -- and I'm not saying that, of course, everything that you read and hear about us is there is some strong opportunities here when you look at Boom Logistics from our NTA to our current value, which, if anything, is very positive for everybody on the call today from shareholders to brokers to everybody investing in us. So that's really the key thing. We -- yes, I'd like to leave everybody with this is the business is doing great, but that's the investment that everybody has put in from time, energy, focus for our people to the Board backing us by allowing us to grow this business and to really focus where we need to focus to get the right return and essentially getting the return for the shareholders.

Okay. Thanks, Ben. Thank you both for your time presenting today, and thank you, everyone, for attending. Have a good afternoon, everyone.

Thank you very much.

Thank you.