Boom Logistics Limited (GJY.F) Earnings Call Transcript & Summary

Welcome, everyone, to the Boom Logistics FY '25 results. My name is Luke Maffei, and I am from Atomic Markets. Today, management will run through the FY '25 result, and then we will take some Q&A at the end. Participants could submit their questions via the online platform, and I'll read them out. I'm pleased to introduce the current Boom executive team who have been in place for around 3 years and have presided over a major turnaround in the company's fortunes. Presenting today's CEO, Ben Pieyre; Director of Operations, Lester Fernandez; and CFO, Manny Bikakis. I'll now hand over to Ben.

Thanks, Luke. Good morning. I'd like to begin by thanking everyone who has joined us online for today's FY '25 results presentation. I also want to acknowledge and thank our Board and the entire Boom team for their continued support and commitment. We will start on Slide 3. As many of you know, Boom leads the way of complex lifting and project logistics solutions across the nation. We have our operations strategically positioned in key resources and logistical hubs, giving us access to supply, specialized equipment, engineering services and workforce solution to a diversified range of project and industrial mining services. Boom does not participate in the retail, commercial and residential construction markets in major capital cities, rather focusing on industrial and mining sectors in the regions. We play a key role in supporting Australia's critical infrastructure expansion, renewable energy transition and resource projects in commodity sector. Our national presence and scalable fleet of equipment, including cranes and travel towers, supported by a highly skilled workforce allows us to manage large on-site projects, maintenance and engineering services. Turning to Slide 4. You can see that Boom strategy runs across 4 pillars: Creating shareholder value through capital management and returns; for ESG, people capability and efficacy driven by a strong safety first culture; a leading provider in key growth area focused on renewables, resources, infrastructure and industrial sectors; lastly, driving assets regeneration through modernizing our fleet, and focusing on utilization. Whilst our strategy is focused on creating value for our shareholders, everything begins with understanding of our customers' needs and delivering exceptional service to meet them. This is central to everything we do. As you can see on the next slide, on Slide 5, our strategy is designed to capitalize on shifting market dynamics with several macro trends set to drive our growth. Decarbonization will create strong demand for complex infrastructure in remote regions. From wind farms to battery installations and transmission lines, we are delivering the specialized lifting and logistics capabilities that make large-scale renewable projects possible. Our fleet, workforce and regional expertise is placing us to win long-term contracts and positioning us at the forefront of Australia's energy transition. We are expanding our fleet and upscaling our people to service the next generation of wind turbine projects, partnering with OEMs and contractors as a preferred service provider. Investment in energy, mining, infrastructure and services remain strong. We are scaling our site-based crane operations across major mining, energy and processing hubs, securing long-term contracts, delivering shutdown services and supporting brownfield expansions such as copper mining. Turning to Slide 6. Whilst our revenue was slightly up, we had strong growth in figures that represent shareholder value creation, including earnings per share, operational NPAT, share buybacks whilst boosting the company's cash flow. We delivered the $2 million of share buyback and have announced a further $4 million in buybacks with $800,000 in dividends for FY '26 as a result of our FY '25 performance. On Slide 7, you can see in more detail the strong growth in EPS and NPAT along with several other key metrics. Our ongoing growth in our key sectors and cost control management helped to deliver a 41% in operating increase -- in operating NPAT with earnings per share up 38% to $0.22. We aim to further improve shareholder value by continuing to execute on our strategy, maintain operational excellence and further improve the business. Before we continue, I'd like to introduce Lester Fernandez, who will be taking us through the operational performance, sitting on my right. Lester is Boom's Director of Operations, leading our national performance across our crane, travel tower and labor hire service. He brings over 15 years of operational and senior leadership experience in the crane industry with a proven ability to deliver strong operational results and drive P&L performance. Under his leadership, over the last 3 years, Boom has restructured underperforming operations, improved asset utilization and expanded margins through disciplined implementation. Lester has also played a pivotal role in securing and growing major national accounts with clients such as BHP, ACCIONA and Newmont. Lester's deep industry expertise and commercial discipline have been central to Boom's current operational and financial performance. Having worked with you for the major part of the last 15 years, it's great to have you with us today.

Thank you, Ben. It's great to be here. This is my first investor presentation and I'm genuinely excited. I've been with Boom now for almost 3 years and the crane industry for 15 years. Over that time, I've worked my way up to operational and leadership roles, which has given me a strong grounding on how this industry works. Now this happens without our people, and I'm proud to lead the team of dedicated professionals across the country who make these results possible. Across my career I've been fortunate enough to be involved in some of the country's largest projects from the Pilbara through the Central Queensland and through South Australia at Olympic Dam. Those experiences have reinforced the scale of Boom's operations, and the results that our team deliver every day. Today I'll be taking into Boom's operational performance for FY '25. On Slide 9, we've executed strongly against our operational plan, and the results speak for themselves. We've lifted operational NPAT by 41% and maintained labor efficiency at 86%, all while keeping utilization steady and consistently high levels. The way we've achieved this was through disciplined execution, matching the right assets with the right jobs, keeping our fleet productive and managing our labor as quite tightly. Its activity that converts directly into shareholder returns. We've shown we can deliver consistent performances across different market conditions, and that gives us real confidence in our ability to continue to deliver going forward. On to Slide 10. One of Boom's key strengths is the breadth of our operations. Around half of our revenue comes from resources, close to 30% from renewables, and the remainder from industrial and infrastructure projects. That spread gives us balance across markets and resilience through cycles. Within Resources, our contract portfolio is anchored in iron ore and gold, while copper is also playing an important part. This mix provides both scale and stability across the portfolio. Diversification is critical. We're not just dependent on a single client or a sector. It means we can relocate our people and our fleet quickly to meet demand where it's growing fastest. And that's exactly what we've done across some of Australia's largest projects like Jimblebar, the Pilbara or the $2.8 billion Alkimos Desalination Plant in West Australia. And we also contributed to the Energy Connect project in New South Wales, which New South Wales government has put a $4.1 billion into. 3 very different environments and in each case, we continue to deliver on schedule and profitability. That depth and width of capability gives us real confidence that Boom can continue growing across multiple markets at once. On to Slide 11, Safety and ESG aren't just compliance requirements for us. They're part of how we run the business every day and they directly support our ability to operate profitably. On safety, we recorded no lost time injuries in FY '25 with a TRIFR of 5.7. But there's always more work to do, and we'll continue to strengthen our critical risk controls. Tragically, we lost a member of our team at Clarke Creek in July. That incident remains under investigation, and we're committed to seeing that process through to completion. On ESG, our biggest contribution is what we deliver for our clients. The infrastructure we help build, transmission lines, large-scale energy and water projects. These aren't just contracts, they represent Boom's role in helping shape the future of Australia's energy and infrastructure landscape. Safe, sustainable and profitable operations while helping build Australia's tomorrow, that's the combination we're committed to delivering. That concludes the operational performance update. I'll now hand over to Manny, our CFO, who will take you through the financial performance that underpin these results.

Great. Thanks, Lester, and good morning, everyone. It's great to be here. And on behalf of the management team and in fact, the entire Boom family, I'm very proud to present our FY '25 results. Starting with our profit and loss. For the past 3 years we have focused on the business fundamentals, specifically labor and asset management and bottom line profitability, by business, by customer, by person and by asset. It's included focusing on core profitable sectors, improved pricing and margin management, disposing of underperforming businesses, depots and assets, driving high labor recovery and asset utilization, ensuring that all new asset investments are returning double-digit returns. And ultimately, it's all about using our cash and our financing wisely. At $9.3 million net profit after tax, an 8% return on net assets and an EPS of $0.22, we're up approximately 40% on all those measures over the year. This is the best financial result this company has produced in the last 15 years. If we add the underlying impact from the buyback program, i.e., when buying back our shares at roughly $1.50 whilst the NTA is around $2.78 (sic) [ $2.87 ], there's a notional benefit of about $1.38 per share or nearly $1.8 million to $2 million. That's the equivalent of 1.5% RoNA. I think it's fair to argue if we add this notional benefit to the reported 8% RoNA that we've reported, it brings our total returns to 9.5%, so almost double digit. Everyone at Boom has worked very hard over the last 3 years to achieve these results and achieve the turnaround that we've achieved. Given the size, experience, risk profile and the level of investment, we are very confident of further continuous improvement. As I just shared, we're getting close to making our double-digit returns in the short term, and our goal is to increase this to 15% in the medium term. Turning to the next slide, I'd like to talk about our balance sheet strength. Our net assets continue to improve in underlying value at $180 million, that's up $7 million on last year. Our net tangible assets or NTA per share is $2.87, up from $2.65 previous year, that's up $0.22. And the value average age of our fleet is well placed at 6, ensuring we have a modern and efficient fleet. Our debt financing facilities of $150 million are up $10 million on last year, all at lower rates and with Tier 1 banks. We believe this has created a competitive advantage for this company. It's also created a lot of flexibility and ensures that we are in control of our own destiny. Our debt levels at the 30th of June peaked at $98 million. Now 100% of our borrowings are finance and operating leases, typically 3 to 5 years in length. We've drawn down 65% of our debt facilities with our gearing levels remaining stable at 42.5%, well within the 35% to 45% preferred range, giving us plenty of headroom. We have no short-term working capital debt, and we have no long-term borrowings. In regard to the asset regeneration program that we've all talked about, our new CapEx and operating leases for the year are aligned with the asset strategy, supported by regular divestment of underutilized assets. Our gross CapEx for the year was $35 million, offset by $10 million in disposals, thus giving us a net CapEx number of $25 million. That's $10 million below last year. Our asset investment, in fact, will further ease in FY '26 as we move into a steady-state mode, which will free up additional cash and lower our debt. The last slide I've got is on cash and debt or net debt, if you wish to combine them together. Our operations generated $43 million of cash after interest costs, driven by the quality of our revenue, pricing and margin improvements we've made, and the high utilization of our people and our assets. Our working capital increased slightly, which was purely a timing effect due to some customers paying us on the 1st of July. Over the year, our underlying working capital has reduced substantially versus last year, driven by tighter customer terms. Remember, we have no working capital borrowings and no debt factoring facility. If we look at our gross debt, it increased by $56 million in the year, primarily due to financing last year's CapEx and operating leases. So in summary, if you take the cash generated by our operations, offset the gross debt movement, the result is a $17 million movement in our net debt. We also spent $2 million on our share buyback, which was 50% up on the previous year. Thus, our net debt rose by $19 million overall to $98 million you see on the screen there. As stated earlier, this is a peak debt position given the asset regeneration program we've been all undertaking over the last 3 years. Given we are now in a steady state mode, on our asset requirements, this debt level will now start to reduce and will be below the 40% gearing level very soon. If I could also point out the $14 million in cash in our bank account at 30th of June, it's increased $10 million operationally for the year, less than $2 million utilized to -- for the share buyback, it's an $8 million increase in our cash at bank. That's a great position to be in, and it's the highest level we've been at for many, many years. As you may have seen from our ASX announcement this morning, we are also pleased to announce a $0.02 unfranked dividend per share payable on the 30th of September. This is incremental to the $4 million in share buybacks will be undertaken in FY '26. We appreciate certain shareholders have diverse capital views, but we are trying to respect and listen to all our shareholders. With that, I'll pass back to you, Ben, and to give us an update on the outlook and our priorities for FY '26.

Thanks, Manny, for positive outlook and presentation. Look, as outlined on Slide 17, our focus is to maintain our sustainable growth for the year ahead is quite clear. We'll continue to grow EPS by delivering on new and renewed contract, as well as converting strong tender activity into wins. Strategic margin growth remains a priority, supported by disciplined operation and smart asset investment. We are introducing the dividend and continuing our share buyback program to return value to shareholders. Safety, sustainability, talent and governance remain at the heart of everything we do. We are targeting labor efficiency above 85%, supported by our skilled workforce and trusted contractors whilst finishing our tech upgrade to boost productivity. We'll grow profitable customers in all core sectors with a particular focus on renewables and transmission lines. We'll invest in profitable markets where Boom is underrepresented, strengthen our competitive edge through targeted replacement assets and invest in growth assets where return meets our benchmark. Finally, we'll continue to optimize fleet performance, divesting underutilized equipment and maintaining utilization above 85%, ensuring Boom remains the crane logistics partner of choice in our key sectors. As you can see on the next slide, Slide 18, we are looking to achieve double-digit return on net assets by continuing the business turnaround and restructuring efforts, investing in growth assets in key markets such as renewables, delivering on pricing, efficiency and cost management initiatives. We are well positioned to continue to drive our performance to lead us to a 15% return on net assets. Moving to the following Slide 19. Whilst we recognize the improvement achieved in the last 3 years, we are focused on keeping our key principles leading the progression towards even better returns. This is why we believe Boom is a strong investment opportunity. We are well placed to capitalize on the long-term demand and investment in construction, renewables and mining. We have strong margin growth potential due to cost control management and improving our fleet and its use. We have diversified market exposure, which provides a stable business model during harder economic times. The team has deep industry knowledge and connections across Australia to maintain and create more contract opportunities making Boom a rare and valuable opportunity. To close on Slide 20, I want to highlight the key initiatives we are executing to enhance shareholder value. Boom is focused on strengthening our position in high-growth markets, building strategic partnerships, maintaining a flexible funding platform and driving disciplined capital management, all designed to create long-term value for our shareholders. To conclude, I'd like to thank my colleagues sitting next to me today and the entire Boom team whose dedication and talent delivered a stronger performance in FY '25 and will certainly drive further growth. Thanks, Luke. Back to you.

Thanks, Ben. That was a fantastic, very comprehensive overview of the result by yourself, Manny and Lester. So we've got some questions that have come through. And I'll just read those out as they've come in. So our first question there has come through on capital management, and in particular, how the buyback and the dividend will sort of work together and how that will play out and what your thinking is behind that?

Yes, I'll take that one, Ben. So this is consistent with our capital management strategy. The thinking is in the absence of any franking credits, we consider the buyback program to be the most efficient allocation of our capital and optimally provide better returns back to our shareholders. We've introduced the dividend for the first time this year after getting a lot of feedback from our shareholders, and we understand shareholders have different needs and different requirements. So the dividend has been introduced, will be paid in September. We're fortunate to be in a very positive position, both from a profitability point of view, but also from a cash point of view. So we've got the freedom to use that cash and return that back to shareholders at a $4 million buyback this year, that's the biggest buyback program that we have undertaken.

Thanks, Manny. I've got another question here regarding the buyback. Why hasn't the buyback -- why haven't you bought more shares since earlier this year?

Well, I'll take that one as well. Our capital management strategy is to return 40% to 60% back to shareholders, whether it be in the form of a buyback or dividends and so forth. We did that last year. We actually were in the upper end of the last 2 years' profit, I should say that. So it's an average of the last 2 years' profit. We did that last year at $2 million. We will also be in the -- towards 60% range in FY '26 where we'll buyback $4 million of buybacks, plus the $800,000 in dividends. We will always remain open and flexible given the circumstances, our position and the market dynamics. And we'll continue to evaluate that on a regular basis.

Thanks, Manny. Another question here on steady state asset regeneration. What does that look like over the next 2 years? And how long will it take to get the 35% gearing?

I'll probably start on a steady state. I think we have a life cycle average of an asset of 15 years. So there is a need every year to refurbish assets and get more relevant asset into the market for -- to meet our clients' needs and the market needs. So I think the steady state for us really is around the depreciation schedule and taking the life cycle of an asset being 15 years, we will have a steady state around what we're doing, what we're planning to do this year. And that's how we're going to rule. And sorry, the second part of the question was about when will it -- yes, for the gearing. Look, gearing it's -- I'll hand it to Manny.

Well, we will be below 50% -- 40% very, very soon. So I don't want to give sort of specifics, but we're very confident that we'll be within the 35% to 40% mark for the year. And as you said, Ben, we'll continually invest. We'll continue to divest assets, right? The last 3 years have been playing catch-up, and we now believe we've got an efficient modern fleet, exactly where we want it. So we're back to -- if you look at our assets, they last about 15 years, guys. So it's really 1/15 of our assets should be replenished every year. That's probably a good guide.

We've got a question here around the current competitive landscape in Boom's markets.

Look, the market -- thanks for this question. We still -- I guess we're still in the same phase with the same market, which is quite fragmented across Australia and localizing. Look for us, part of the restructuring in the last 3 years was to strengthen and enter growth markets. So we've exited nonprofitable markets, not profitable regions, reinvesting our fleet in our energy into more profitable markets. And so we're still in an area where there are a lot of businesses, but there are not many that can do what we can. There's only a handful, 4 or 5 businesses that cover Australia nationally. We are well positioned in all logistical hubs, mining hubs. We are aware the future of the Australia economic platform is going to be and that's around the mining the resources, the renewables and the large infrastructure projects. So we are quite -- very, very comfortable with where we are, and are very confident with that we are taking the right step to further grow this business.

Thanks, Ben. One more -- another question here on -- are you seeing any increased opportunities in maintenance and other recurring revenue within renewables?

Yes, look, a very good question. And it's certainly how we've placed ourselves with. By entering the construction market, we are creating the capacity and the capabilities in our business to have the equipment and the talent to be able to maintain the renewables. So that may that be wind farms or solar farms the Snowy Hydro. We are heavily involved in the Snowy Hydro now and construction will lead us to opportunities in maintenance. Just like mining, when we enter into mining, we go into construction, we know the plan, we know what equipment is required, what the sequences are, and that places us really well for the future. If you look at our business, 50% of what we do of the business currently is mining contracts and we aim now by entering that large phase of construction in the renewables is to place ourselves into that maintenance cycle that will happen. And like I said, we are positioning really well, and we are building the capacity and the capabilities to do so.

Thanks, Ben. Another 1 here. How does the tender pipeline compare to recent years across each sector?

The tender pipeline is strong as much as you can hear some negative news, if you like. If you look at mining and infrastructure investment, there's $150 billion committed over the next 3 years. Renewable energies through the transmission lines, Snowy Hydro is committed, obviously. And some of the wind farms that will start next year and further on the following years, we are seeing we are seeing a high level of activity. The Olympics in Brisbane and Queensland will also lead a lot of the tendering activities. So we're very comfortable the expansion of BHP with the copper where we have a long-term maintenance contract, we will also create good opportunities for us to tender on. So we are very comfortable in the areas where we invested and strengthened our position in the last few years. We are seeing a bit more activity, and we're certainly talking long term with some of the manufacturers and governments.

A question here on the tax benefit. Just to add some more color on that and how that flows on to the balance sheet.

Yes, I'll take that one. We loaded $14 million, we recognized, I should say, $14 million of future tax benefits in the first half of the year. We've also got roughly the same amount of unrecognized tax benefits off-balance sheet as well. We've got -- the tax benefits come from the, obviously, historic position. And really, we have -- it will be many years before this company actually pays tax. So we'll be able to use up those tax losses over the coming 3 to 5, 7 years.

It's also showing the confidence from the Board and the team on the future of this business and the profitability as well.

Yes, by recognizing...