Emeco Holdings Limited (EHL) Earnings Call Transcript & Summary

Thank you, and good morning, and welcome to Emeco's First Half '22 Results. I appreciate everyone dialing in. As you know, we preannounced a solid operating EBITDA of $122 million, which was in our guidance range of $120 million to $125 million. We've also provided operating EBITDA guidance for the full year of $250 million to $260 million. These results are solid and have been achieved with enormous effort for the entire Emeco team. I'd just like to thank them for their efforts. We've remained very focused on our strategy, and the business is very well positioned that will deliver growth into the future. Now Pham, who's recently been appointed as Group CFO and I will take you through the detailed outlook in more depth, and we'll take your questions. You will note that our presentation deck shows performance in both the corresponding period and the second half of FY '21. We think this gives you a better view of how the business has developed. Turning to Slide 2. The key feature of this result is a significant growth in revenue to $373 million. We achieved revenue growth across all 3 divisions with a 16% growth or $51 million in the second half of last year comprises $42 million of growth from Pit N Portal, which was up 48% on last half. We've commenced a number of new projects and some existing projects in early stages have grown strongly. As noted, operating EBITDA of $122 million is up modestly on both the prior corresponding period and last half, which is solid in the context of the labor issues that our customers have experienced, which has impacted operating utilization in the west and the impact of weather events in our Eastern rental business. In Pit N Portal, new projects and projects in the development phase are developing strong revenue, earnings like revenue at this stage and will grow in the coming periods as they move to full production. Our operating EBIT of $59 million is broadly flat on prior periods and operating NPAT is up 3% on last half at $32 million and 23% on the prior corresponding period. Our return on capital, which is calculated on the last 12-month basis, is 16%. Free cash flow of $29 million is below the last 2 halves, and Thao will explain the details, but it's a strong result. Leverage is comfortable at 1x. The Board declared a $0.0125 fully franked dividend and an on-market buyback of approximately 1%, which tallies up to 35% from this half's operating NPAT. Turning to Slide 3 for more detail. We're very proud of our segment record at Emeco and a total recordable injury rate -- injury frequency rate of 1.8 is well below the industry average. As I said, it's a solid performance with good revenue momentum across our segments, especially in Pit N Portal. Thao will give you more detail on operating EBITDA, NPAT and cash flow. As you know, we're very focused on our return on capital and 16% is below where we believe it should be. It's comfortably above the cost of capital, however, coverage assets have increased over the last 12 months as we've invested in growth to meet strong demand across the business. Given our outlook for earnings growth, our return on capital will increase in line with these earnings. Our strategy of promoting diversification continues, and at 68% of group revenue exposure in the non-coal commodities has grown significantly, although we will see growth in coal resuming in the second half. On to our operating EBITDA guidance of $250 million to $260 million. We expect strong performance from Rental and steady growth in Pit N Portal with earnings really kicking in FY '23 and continued growth in the Force workshops. Revenue and earnings from Rental will grow as our customers gain confidence, sustained by commodity prices. We also see improved pricing as the equipment market [indiscernible]. We expect margins will improve in Pit N Portal as projects develop to the production phase. Substantial earnings growth will come in FY '23. Force workshops, a very good half year, and we expect this to continue into the second half. We are monitoring the impacts of COVID on absenteeism and the potential reopening of the WA border. We're on track with our capital program, $140 million to $150 million for the year and replacement capital of $25 million to $30 million, which was within that. Turning to Slide 5. I mentioned our pride in our safety record. The safety of people will always be our priority. We've continued to remain lost time injury-free for almost 6 years. We continue to proactively manage our risk and target leading indicators. And the digitization investment in our HSE systems has really added to our performance and communication. Moving on to the next slide on sustainability. We're currently developing our long-term sustainability strategy, which will address material ESG risk and we'll present this later in the year. We'll identify ESG targets and KPIs and publish how we're tracking towards achieving these KPIs. People development continues for Project Align. Our ability to attract, train and develop people and retain quality people is key to our success. This half alone, we added around 180 people to our business, which is quite exceptional in a tight labor market, particularly in Western Australia. As we told you at our full year result, Emeco continues to probably work with our people and their communities to support local causes. I'll now hand over to Thao to go through the financials in depth.

Thanks, Ian, and good morning, everyone. Thanks for joining the call. As Ian said, we've included comparisons in our debt from both the prior corresponding period and also the last half to show you how the business has performed. On Slide 8, we show our operating profit and loss. Our message is that we have delivered steady profitability as underlying activity strengthens across the group. With an operating EBITDA of $122 million, we are within our guidance range and steadily increasing half-on-half-on-half. Ian has talked to the revenue growth and the likely impact of growth from Pit N Portal on EBITDA. He's also covered the issues that impacted building utilization across the Rental business. So I'll just take that as read. Our EBITDA margin of 33% is below where we think it will be, but it reflects the lag profitability and utilization, so it's expected to grow. Operating EBIT continues to be solid at $59 million, and our operating NPAT of $32 million is a clean result. And as you know, it includes a full tax rate. As Ian said, our return on capital is below we expected to be longer term, largely because we've increased our asset base to support strong growth in the business. The earned returns will increase with earnings growth as Pit N Portal projects enter the production phase and rental utilization recovers. Turning to Slide 9. Our statutory profit and loss is now closely aligned to our operating results, and we expect this will continue given the simplified capital structure. You will recall that our FY '21 result included the expenses incurred in our recent debt refinancing. On to Slide 10, the cash flow. Cash conversion for the period was very strong at 93%, with operating EBITDA of $122 million converting to operating cash of $113 million. We invested $9 million in working capital to support the group, especially in Pit N Portal, and we achieved the full benefit of lower interest costs achieved from our refinance last year. In our previous 2 half, free cash has been around the $40 million, and this half, we generated $29 million. So similar to the prior corresponding period when adjusted for the working capital investment. Sustaining CapEx pool $72 million, comprising almost $60 million of rebuilds and $12 million of replacement assets. Our guidance for sustaining capital of $140 million to $150 million for the year is unchanged as is the replacement CapEx portion, which is $25 million to $30 million. We invested $12 million in growth CapEx largely to support the Pit N Portal growth, and we'll soon settle the Borex acquisition during the half. As I noted, whilst the refi expenses were taken to the P&L in the FY '21 year, we incurred the cash expense this half of roughly $24 million. Our net cash outflow of $13 million largely reflected and we comfortably covered our capital management with cash. On to Slide 11 on the balance sheet. Our balance sheet is in good shape. We've now leveraged at 1x the ability to fund capital management and also meet our requirements for sustaining capital. We had $158 million of liquidity at the half, including $61 million of cash, and I've explained the decline half and half there, and then also an undrawn revolving credit facility of $97 million. Our capital management package of $11 million then will be funded out of cash flow this half. We have said our assets have increased to close to $700 million as we have invested for growth and working capital is well managed. Our debt maturity profile gives us 4.5 years of tenure. So in summary, we're pleased with the results. We've generated strong free cash and funded our capital management and other requirements of the business. The balance sheet is in excellent shape and allows the flexibility with the strong liquidity we have. Back to you.

Thanks, Thao, and congratulations on your recent appointment as CFO. Let us move on to Page 13. Rental performance was solid with continued growth in the West and improving momentum in the East. While the Western Region achieved solid growth, the utilization of margins are hampered by the skills and labor shortages the industry has experienced. Our customers that were unable to extract hours they typically achieve from our fleet as they are impacted by difficulties in hiring and then time to actually train operators. In the East, improving the momentum was hit late in the half by wet weather, which caused significant disruption to planned customer activity. Neither of these 2 issues should be unfamiliar given they've been a feature of many companies reporting so far in the south. However, overall, the Rental business is well placed to benefit from strong commodity prices and a tightening equipment market. On Slide 14, a little more detail on the Eastern Rental. EBITDA was on flat revenue and steady margins, which is pleasing given the cost pressures. In addition to the Sydney event -- weather events, we also experienced some late customer operator that's in season due to COVID, which also impacted utilization. The team has performed well to manage through these challenges and with a well placed to grow earnings as customers gain confidence in respond to higher commodity prices. We expect that we'll win new work in this half and build on momentum created prior to the weather events in the first half. Slide 15 and Western Rental. Customer demand remains strong and our equipment remains well sought after. As noted, we had the benefit of assets transferring in the half. But in fact, the life in the West, given the labor shortage, is that our customers couldn't utilize their equipment at the rates they typically achieve. So utilization was than lower demand would have indicated. We consider this a short-term issue that was somewhat relieved when the WA border is finally open. We've spoken about the benefit of moving our equipment to double-shift operations. We thought maybe this has not happened at the rate we would have liked. But again, we expected this to improve as borders open and labor becomes more available. Earnings improved as there more equipment at work, but margins declined. This is explained by lower-than-planned utilization and create a cost particularly in labor and costs associated with transfer and preparation equipment. However, our priority is to grow and we're confident in improved pricing given the tight market. We are monitoring the border situation, and we'll manage accordingly as our customers seek to improve activity and utilization. Slide 16, Pit N Portal. When we acquired Pit N Portal, we knew it had the ability to be a substantial larger business. The team has done an exceptional job and won new work with several new projects won and commencing this half. And as you know, we're in the early phase of a number of large projects which commenced in FY '21. So revenue growth is strong. Profitability is [indiscernible]. We've stood 140 roles in this half to meet new projects, which is particularly impressive in the Western Region at the moment with the labor markets. And the package of equipment that we purchased in the second half of '21 for underground rental spend has been deployed into customer growth service projects given that demand has been so strong. Our strategy to increase customer tenures for Pit N Portal does come at a low margin, but we are confident that current margins will improve. The decline in EBITDA and EBIT margin underscores the growth in revenue and the early stage of these projects and the cost incurred and set up and ramp-up phase. Pit n Portal will deliver us very strong earnings in the future, but right now we're focusing on executing on existing projects. As we've said, we expect to see good growth really come through in FY '23. Now on to Slide 17 on the Force workshops. Force provide Emeco a strategic advantage, both on the cost and the quality of our equipment and is central to our mid-life asset model. It also underpins our ability to acquire and rebuild mid-life asset and to maintain them at the highest level of operational performance. This half, our internal activity was strong as we prepared equipment for deployment to customers. Demand for the Force workshop services from external retail customers is very strong, up 20%. The quality of our work and then -- continue to -- of strong service levels underpins this solid earnings growth of 7%. Our acquisition of the [indiscernible] business Borex was completed in the half, and we're seeing not only the benefit of this capability, but the introduction of new retail customers. We remain positive on the outlook and continued growth in Force. On Slide 19, and a quick review of our strategy. This is our new slide and I think it's worth reminding you of the pillars of our growth strategy. We'll continue to build sustainable and resilient business that generates long-term value for shareholders. For our balance sheet strength and strong cash flow, widening of the value proposition, being the lowest cost, highest quality provider, which is particularly important in tight markets, and to build a balanced and diversified portfolio. Slide 20 summarizes our priorities. After a number of very busy years, we've established the building blocks of our strong and well-positioned diversified business. We are very grateful for our investors' support through these years as we have acquired integrated businesses that enabled us to improve our core capability and widen our value proposition. We are well positioned for growth and strong shareholder returns. To achieve these goals, we'll be focused on the following initiatives. We'll capitalize on the opportunities we're seeing in the East and deliver growth as activity levels improve in a tight market. We'll manage through the labor issues that the industry faces in the West and position for margin improvement, especially as double shift projects become possible. We'll manage the extraordinary growth in Pit N Portal, ensure we execute on delivering profitability on return on capital that we have invested. We'll continue to grow Force and manage the internal retail and retail customer demand to maximize returns. Our internal capital management and maintenance capabilities are key to this success and we'll continue to invest here. We will grow EOS and digitize our operations. We remain committed to striking the balance between capital management and accretive growth options. We've invested in the business and positioned to deliver good earnings growth in the second half and into FY '23. Thank you very much. I'm happy to -- we're happy to take questions.

[Operator Instructions] Your first question comes from [ Nicholas Ronson ] from Jefferies.

The first couple from me are on the East Coast. Metal and thermal prices have been both been pretty high for some time now. Does it feel like that's starting to translate into higher coal volumes in Q3? And could you just comment on the supply-demand dynamic for equipment?

Yes, [ Nick ]. Thanks for the question. Yes, look, I mentioned in the past that we're seeing our customers develop confidence in the higher commodity prices and particularly new [indiscernible]. We haven't seen a small throughput through the Force, but we'd expect [indiscernible]. And we thought we really are seeing that start to -- that confidence to come through on that demand and the pipeline of work. So as far as our [indiscernible] activity, we saw some momentum improvement in the Eastern Region in the first half that we worked around a little bit with [indiscernible] and New South Wales and Queensland. But our team are working really hard at the moment and is securing some new projects, so we're feeling pretty confident. And we're also feeling that the supply/demand is favorable to us looking forward.

And for the coal contracts, are you seeing minimum contract hours or rate starting to increase at all?

That's been pretty steady for us. We've been pretty disciplined around minimum hour requirements on contracts. So that has really [indiscernible] faster at most times. So I would say that's pretty steady. And we were quite [indiscernible] with our customers to understand their demand. One other thing that we have done as a business, [ Nicholas ], is we've really invested in people over the years. I mean we've grown what has been in a tight labor market from 3 years ago, about 300 people to over 1,300 people now because it's a large [ industry ] workforce, and we really are quite differentiated in regards to our ability to provide maintenance services to our customers. So that's what we're really focused on as we're looking at new projects in the East is or just put the equipment in a room, et cetera. But how do we add baggage to those projects and how do we make them [indiscernible] going through for our additional maintenance services, which we feel differentiates us from our competitors.

Just the last one on the East Coast. You mentioned utilization was impacted by weather and customers' ability to hire people. Could you estimate how much these factors impact the utilization?

I suppose utilization, yes, it certainly impacted us. But I reckon it's a -- it dropped a couple of million bucks of EBITDA off our East Coast earnings in the second half -- late in the second half -- first half, well, late in the first half. Yes, no [indiscernible]. I just said there are some good momentum building in that Eastern Region business through the first half was really quite encouraged by, and we'll see that pick back up. We have a little bit of COVID absenteeism to manage through, but particularly proud of our team and how they're managing through these obstacles. Excellent bunch of people.

Just the last one for me. Would you mind talking to the supply-demand dynamic on the West Coast for equipment? And maybe give us some idea on the magnitude of the scope for pricing increases going forward?

Yes. Look, supply/demand for equipment is quite around the country, whether it be in the East Coast or the West Coast. The West Coast [indiscernible] will look like more favorable in regards to [indiscernible]. So there are more pricing opportunity. Long term, I don't see that there should be a differential in the margins between the East Coast and the West Coast as the factor of [indiscernible] double shift projects. I mean we are very, very focused on building maintenance services to be [ able to get ] rental as the value add. So you've seen our margins in the East as we progressed them to come down that part, stabilize around the early 60s. I can see the West Coast pushing out for that [ recent ] oversight as we get double shift projects in place, and we've [ started ] our contract. So the short-term utilization issues caught through labor in the West Coast, we'll see them easing over time, and we feel good about that business. We feel well positioned. Over the last couple of years, we've transferred that. You see pieces from the Eastern Region to the Western Region. I feel like we've used this opportunity created by COVID and the disruption in the last couple of years to really reposition our business. And we were at 80% East Coast, 20% West Coast. There is a repositioning and it will get us to at least 65-35 and the corresponding commodity diversification. So there's been a bit of churn and certainly some cost and impact on margin as we move equipment around. I'm very confident with our investment in people and the realignment of our fleet that we've set this business up for sustained growth and balanced growth and a very healthy business moving forward.

Your next question comes from Hamish Murray from Bell Porter Securities.

Congratulations, Thao, on the new position. Can you guys hear me?

Yes.

Yes.

And just a quick one, just the first one. You dropped out just when you said the West Coast would be pushing up towards. Did you provide a utilization number there? Just what did you say? I didn't...

No. No. No, I don't -- I was just referring to the margin, Hamish, and saying that the West Coast is [ accounting ] for some I believe short-term issues around utilization of their equipment that would particularly get 500 hours per month to getting 300 hours. I mean everyone in the West is going through a pretty high put labor at the moment. Strong customers who utilize equipment very well, having to sort of recruit new operators and train them up. So that's impacting, but we structurally, I think, we're really, really well set up in the West to capture growth moving forward and increase utilization as these labor issues taught themselves.

Now to the real question. Thanks for clearing that up, I just missed it. But just a quick one, I guess, on the guidance. You implied that, that sort of implies that it's going to step up to $128 million to $138 million in the second half. I was just wondering whether you could talk us through, I guess, some of the assumptions to that, where you're currently running on that and how much of the fourth quarter deployments or contracts that you're -- or projects that you're talking about securing come into that? What are the swing factors? And I guess, where is the business currently running at? If you can give us any clarity.

Yes, Hamish, I'll give you a broad overview. Look, it's a pretty tight range and we're obviously confident in putting out that range and I like providing the market that sort of guidance. I think it's a reflection of the confidence that we've developed in this business and our ability to execute on this business. So a bit of upside, yes, we've won some jobs on the East. It's the rate that we get those jobs to work and ramp them up. In the West, it's assuming that this labor market will remain pretty tough. Hopefully, borders will open at some point in this half, but we're certainly not factoring in significant -- prior to people coming in and helping out with this [indiscernible] issue. [indiscernible] we need to work through that over time. We've made some assumptions around absenteeism, COVID-related issues, but we feel pretty comfortable within that range, Hamish. It's not dependent on we've got to win a heap of work or anything like that. It's more around execution and management, and that's what we specialize in.

And so is it fair to say that, I guess, if those fourth quarter projects were secured and deployed and maybe it all went smooth to plan, there's a bit of upside to that on those -- they're not -- it's not contingent on going upper range and contingent on you landing those.

No. I bet they'll continue [indiscernible] on landing work. It's contingent on some executing that and managing COVID-related absenteeism.

No worries. And just a quick question, just I guess around the Rental business. One, I noticed that you've added -- the revenue is almost back to where you were pre-COVID in the second half, yet the EBITDA is still well below. I think it's about $17 million below. What's going on there? And what should we expect from margins? Because, I mean, I do -- if you back out the intersegment revenue, you do get back a slight increase in margins, but what was the in-segment revenue as well? And are you confident you can get that $15 million to $17 million of EBITDA back with the current asset base?

Yes, mate. I am, I am [indiscernible] with a [ smooth plan ] [indiscernible] yesterday. I mean if you look at what we've done over these last couple of years, I touched on this earlier, Hamish. We've looked at -- we've taken this COVID situation and the impact that COVID had on coal prices and coal demand. And we've really worked hard to reallocate this split. We were a bit heavy East Coast to West Coast, so it was about 80%, 20%. Now we've moved about 60 large assets. We've won the cost and the churn, all of that. That's impacted our earnings and our margins. I mean when coal prices have gone, maybe we should have set it there and waited it out. But I do feel like what we've done and the way we've managed this and the work that we've done to position this sets us up for the long-term sustainability and sustainable growth of this business for the operational and commodity and customer diversification. I think our run rate coming through the second half, we've closed that gap of getting back to earnings. And I think we'll recover back to where we were at sort of peak rental around that sort of -- in FY '23-ish into '24, but it will be a much more sustainable, well positioned, more diversified business. Margins. Look, margins reflect -- there's a couple of issues there. I mean the churn and the cost of transportation, et cetera, certainly has impacted the West. And I mean you've seen margins in the East come down a bit, but stabilized. This reflects where we balance the business. And I'm sure growing this workforce from 300 to about 1,300 in the last 2, 3 years in a tough labor market. Our model is to acquire mid-life equipment, rebuild it with excellence through Force, have a cost advantage on our competition in that life cycle cost of our equipment. And then also have a real value proposition and have skilled people and putting gear out to work and managing that gear, managing the risk of that equipment and availability of that equipment. That does have an impact on margins versus us putting it out and letting customers maintain their own equipment. But we're all about sustainable growth and value add and contributing to our customers' projects. And so for us, it's around return on capital, mate. That's what we focus on. And if we add some additional services on top of our equipment, the headline EBITDA margin might come down a bit, but what you'd find is that the project can -- is in sustainability and sustainable growth of the business is a real path, that's what we're looking at.

Yes. And just on the $8 million of intercompany, that's the first time we've seen a big charge like that comes through the Rental business. Where was the -- where were the assets going? Or was that maintenance to Force? Or was it the rental going through Pit N Portal?

Pit N Portal has done a couple of opening up projects and so Western Region renting into Pit N Portal. It's actually really interesting for us, mate. You talk about labor being a limiting issue in the West at the moment. Pit N Portal is doing some open part work in additional to the underground, just provide that customer that increased value again. So Pit N Portal's operating capability, combined with our equipment, our ability to maintain equipment and our EOS production technology, I think, is a pretty interesting combination for us and certainly a value add for the customers in the prior labor market.

Yes. I'm conscious that I've asked a few questions, so I'll just ask the 2 last ones. Just always one, and you can answer them both as quickly as you like. But one, you're guiding that you expect some growth in Pit N Portal top line, but really a stabilization of that growth and margins to improve strongly in FY '23. Can you give us any sense of where that falls between where we're at right now, which is 13%? You've given us a lot of clarity that you expected those high start-up costs to come. So that's fine. But where we were 12 months ago at 26%, where you expect those margins to fall even a range? And then the second question would just be, you'd be having strong cash flow even now come through in the first 6 weeks, how does that impact how you spend that cash flow in a sense of, I guess, reinvestment in growth versus buybacks from here?

Thanks, Hamish. Pit N Portal, look, it's cheap fantastic growth. I mean if you look at some 40-odd percent half-on-half between first and second half '21 and then second half '22, 48% growth in revenue. It's an unrecognizable business from what we bought. If you look at the absolute growth in revenue, if you look at the distribution between rental projects and services projects, it's a very different business as well. I'm really proud of it, and I'm really excited by it. I consider it to be our growth engine. As I said, we focus on return on capital, right? And Pit N Portal business at the moment return on capital is not where it should be. It's around 14%, right? And it needs to be 20%. And it will be 20%, I reckon, in FY '23. That's a part of return on capital, right? Now when you do the projects that Pit N Portal were doing versus the Rental business, you've got that much more additional services, particularly underground people and activities that you perform. So we tend to look at what the ratio between revenue and installed capital is. It's pushing up to around the time. We -- for us, we think that to achieve our return on capital targets, Pit N Portal needs to be, I think, towards 20% EBITDA? That's what we're targeting. The 26% that you saw a couple of years ago at high proportion of rental, we've allocated these rental fleets into the services fleet aligned with our strategy. We get the long tenure, all about sustainable growth. And if you look at the way it's impacted our commodity diversification and what they allowed [indiscernible] to do with -- we've refinanced a few months ago, I think it's been really good for us. I'm excited by this business. I understand the margins are a little low at the moment, but when you think that we recruited 180 people in the last 6 months into projects in Western Australia in what could be the tightest labor market. And again, we've grown this thing from a revenue perspective. So far, I'm confident that the strong team that we put in place will get those returns on those assets where it needs to be moving forward. Sorry, Hamish, it's a long-winded answer to your first question. And your second question...

Capital allocation.

Yes, capital allocation, mate. We're always looking at an optimal way to allocate our capital towards [indiscernible] for us, but what is the best use of capital? I'd like to think that defines us moving forward. When we look at the options in front of us where if it's dividends or buybacks, corporates investing in growth, we run a very diligent process to assess how we manage our capital.

[Operator Instructions] Your next question comes from Mitchell Sonogan from Macquarie.

Apologies if these have been asked. I jumped on a bit late. But just talking about Pit N Portal, you've put some pretty good guidance in there. But can you maybe just dig a little bit deeper into some of the major contracts that you have been ramping up and heading towards reduction? Is it possible for us to get a bit of an update on how they're progressing? Obviously, higher than 140 net new positions is pretty positive. But maybe just give some update of what's happening at those material contracts for PNP.

Yes. Mitch, I don't want to jump in too many details on sort of customer by customer, but we've got a good blend of contracts at the moment, a good blend of responsibility sort of taking a little bit of production risk versus cost part. I think it's a well-diversified customer base and risk. There's projects, which are certainly into the development phase and our rates and our profitability change when they hit production. But overall, we've invested significantly in the Pit N Portal team. It's -- we've got some very, very capable business people into this business from an operational and an engineering and a commercial perspective. And I'm happy the way that we're managing those projects. And I think our customers have been very constructive with us, particularly around escalating labor cost, look to pass on some of those labor cost [ business ]. So yes, I'm feeling good about this Pit N Portal business. I mean it's a big business. There's lots of moving parts towards people that take broad management, but the investment and development of the team has been really positive.

Yes. And you did mention about the pricing improvement expectations in West, again, over on the East Coast. Just what are you seeing over here in the current environment and with the conversations with the customers? Any update there would be good.

Yes, mate. Well, in the East, as you know, it came off for us with coal related and COVID. The team has done an excellent job to stabilize that business. We transferred quite a few assets out of that. I saw a really good improvement in momentum in the first half, which was the rather bit with the [indiscernible]. But the team has certainly been a lot of work at the moment that we increased some good solid pricing. And yes, I feel good about that business going forward. And as I mentioned, Mitch, we're really focused on the projects where we can add value for the maintenance services that we provide along with the equipment.

Yes. And just maybe a final one, just touching on the workshops there, and pretty decent growth again in the external revenues area. Is that sort of a pretty consistent growth rate that we should expect like somewhere around that sort of 10% or so? Like is that reflective of just being able to recruit and train enough staff to keep it at mantle level? Just any sort of guidance on the medium-term outlook there of how you think about growing that business would be great.

That Force business is crucial to us, mate. It really is somewhat the secret sauce in regard to giving us a competitive advantage, being able to buy mid-life equipment and send it out, operating really, really well. What I mean, that sort of cost advantage is really important for us. So a bit of a -- how do you balance that out between greatly keeping all that capacity for our fleet, whether it be our rental equipment or underground equipment versus taking on customers' retail work. I like the retail work, I like the proportion of it. I think it is on [ fit ]. You just have to go out and compete for work and do the work for customers. It means that they're not going to be soft with too much internal work. So I encourage something like that. That growth, you'll see that it's probably a little bit capacity limited at the moment. The guys are doing a bit of work on how you reallocate some equipment and some services around a couple of different workshops in the West, which I think are -- which is clever what they're doing. So around a bit of a bottleneck, might limit growth actually in the second half, but it will come through in FY '23. But yes, it's a very good business, and I'm really proud of it. And you'll see that, over the long term, continue to grow. And then we'll continue to invest in it. It is our secret sauce. It is our competitive advantage.

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

Thanks, everyone, for dialing in. I mentioned in one of my comments on the slides that we appreciate our investors, we appreciate the support of our investors over time, particularly by investors that support us with some of our acquisitions and initiatives. We're working really hard to position this business for sustainable and disciplined growth moving forward. So I thank you all for your support, and thanks for dialing in today.

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