Lycopodium Limited (LYL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Lycopodium FY 2024 Full Year Results presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Peter De Leo, Managing Director. Please go ahead.

Thank you very much, and thank you for joining us for our full year results presentation. As the operator said, after the full presentation, there will be some time for questions. So certainly encourage any questions. This morning, I also have with me in the room Rod Leonard, our Chairman; and Justine Campbell, our CFO. So I'll run you through the presentation and give you an update on the business of the company for FY '24. So founded 32 years ago and headquartered in Perth, and ran across the mineral resources, rail infrastructure and industrial processes sectors, and so I'll talk a lot more about the work and the specific activities we have been undertaking across here. We retain a long-standing and stable board. And at the close of market yesterday, the price of our share in the company was $14.02 with an earnings per share of $1.276. We've declared a second half dividend of $0.40 to take our full-year dividend to $0.77. The dividend has been the case across our history, will be fully franked. Our share register remains stable and consistent and breakdown between institutional investors, board and management and retail investors. We continue to provide full project evaluation, delivery and optimization services. We also continue to seek new ways of broadening these services, as I will talk to later in the presentation, and we'll talk a little bit more about strategy. We service our clients globally with offices in Australia, in Asia, Africa and the Americas. And the latter has been strengthened this year with the opening of our office in Lima, Peru. By way of company snapshot for FY '24, the company again achieved record revenue and profit on the back of a higher level of activity, high staff numbers and high utilization within the business, reflecting a robust markets within which we have worked. We retain a high-quality team of professionals delivering quality services for our clients and managing an outstanding portfolio of projects and studies across all the sectors in which we operate. As always, we have in the past year, remained focused on ensuring the safety and wellbeing not only of our 1,300 personnel, but of those working on our controlled construction sites across the world. We have managed almost 17 million man-hours equivalent on an average workforce of 6,000 people working across 15 major construction-based projects. A lost time injury frequency rate of 0.06 and a total reportable incident frequency rate of 0.88. Both of these are well below industry standards not only globally, but in Australia. By way of financial highlights, we generated revenues of $349 million. As I said, that's record revenue for the business and a net profit after tax of $50.7 million. Cash in bank at 30th of June was $67.6 million. And I'll talk more about this later, but based on our closing share price yesterday and on our results, we are trading currently at a P/E, price earnings ratio of 9.8. In terms of sectoral split, we continue to be predominant in the mineral resources sector with 93% of our revenues generated in this sector, with the balance split evenly between rail infrastructure and industrial processes. We've introduced into our presentation a slide this year, showing our financial performance of recent years. A slight change in earnings per share across the last 8 years, dividend across the last 8 years, as I said earlier, always fully franked, price to earnings ratio and return on equity. The graph show traditionally strong focus on the return to the work we perform and the profit that we make in particular, across the last 3 years. I also note that across FY '18 to '21, our share price reflect a price-to-earnings ratio of around 14 higher than that which we've seen in recent years and are certainly higher than that, that we've seen this morning. In terms of split of revenue by project geography, this remains generally in line with prior years with the predominant amount of our revenue related to projects in Africa, followed by Australia, the Americas and the other geographies. We retain a very strong balance sheet with negligible debt and net tangible asset per share of $3.05. Lycopodium remains able to leverage its own balance sheet to conduct its business and pursue its strategic initiatives and has never had to arrange capital post the initial flow from 2004 or to our new existing shareholders. I think this is an important note to be aware of with regard to business. I'll now move on to operational highlights. I'm pleased to report that there have been many operational highlights from the past year. And I'll just run through some of these because it has been a very busy year-over-year of brand success. But in terms of projects and our own resources, projects, which have been commissioned or been completed during the year. Happy to report that we have completed the Kathleen Valley project for Liontown Resources, in Western Australia, Lithium, the Sabodala-Massawa BIOX Expansion Project in Senegal, Endeavour, and the Lafigué Gold Project in Côte d'Ivoire. We also earlier in the year, completed the Langer Heinrich Mine Restart Project that was done by our team at Cape Town and that project was [indiscernible] in Namibia and the Mutamba Mineral Sands Pilot Plant in Mozambique done by our team at Rio Tinto. In terms of projects, which are progressing, the Ahafo North Project for Newmont gold in Ghana, the CGP3 project, Talison Lithium in Western Australia. Batu Hijau Expansion Project copper expansion project in Indonesia, the Goulamina Lithium Project Mineral Resources in Mali, the Kiaka Gold Project with African Resources in Burkina Faso and the Anglo American Footprint Reduction Project at Mogalakwena platinum, palladium concentrator in South Africa with all those projects progressing very well. We're also ramping up and continue to ramp up the feasibility study and basic engineering works on the Reko Diq Copper Project for Barrick in Pakistan. The study for Lumwana Copper Project in Zambia for Barrick. Boto Gold Project management at Senegal, Yanqul Copper Project, Mazoon Mining in Oman and the Twin Hills Gold Project early works for Osino Resources in Namibia. I'm also very pleased to report that our pipeline in Australia remain strong, and this is an important indicator for what our future business line profile. In terms of industrial processes, we've had a very successful year as well, having progress in some places completed, a number of projects including the CSL Seqirus influenza vaccine manufacturing facility, Nutrien Ag, a new manufacturing facility. We helped Pilbara Minerals' the Mid-Stream Project and largely completed that engineering works as you've seen today, Yarra Valley Water Bioenergy Plant, Green Hydrogen to Energy Project, Queensland and the Thales CNA Tank Farm back into the defense space as well. And in Rail Infrastructure, we continue to provide design engineering, technical advisory and RIM services for key clients within ARTC with a number of important bridge including the Southern Highlands Overtaking Opportunities Project and Pacific National where we continue working on our 3-year contract, which commenced in '23 to conduct all rail infrastructure inspections at 57 of PN sites across Australia. So again, our Rail Infrastructure that business remains profitable. In terms of company highlights, there have been many, but some of particular note, we released our inaugural Sustainability Report in November of '23. As I mentioned earlier, we opened our office in Lima, Peru, initially at the modest number of 14, 15 people, and we're still growing and will be doubled in size by the end of October and forecasts growth further beyond that to emulate really what we have in Manila. We rolled out a new enterprise resource planning system, ERP. That really is a critical and important system that is rolled out, it is well advanced, and it's doing very, very well and replaces Oracle, where -- which has been used in a large part of the business and in some parts of the business, it is the first time that a singular ERP system is being introduced. So again, we consider critical and important to ensure that we have one single source of training processes. We've also in the people space, expanded our Learning & Development initiatives, including our Emerging Leaders Program, Graduate Development Program, Summer Vacation Program for technical students. And we also facilitated our first virtual Technical Summit across all our businesses, across all our offices, showcasing technical prowess within the business, which, of course, is germane to being a successful engineering project delivery business. Innovation is embedded into everything we do. And we have on this slide a snapshot really of the innovation or some of the innovation-focused initiatives, including digital engineering, which is being championed here in Perth as well as in Cape town in particular, with a number of very specific projects being undertaken to improve our journey well in digital engineering space. We remain involved with Future Battery Industries CRC and are looking at other CRC opportunities that are relevant to our business and relevant to our sectors of service. We have commenced Pod Equipment Company, which really seeks to altogether a lot of the innovative equipment and designs that we have in the business. Of note, we have a PodBolt System, which is an innovative bin liner fixing system and which mitigates a lot of challenges around replacing bin liners. We have liners to be in the bins and counters a lot of the safety and operational issues that are often placed in doing that. That's one example but there are others [indiscernible]. We also continue to focus on R&D aspects of energy storage and particularly through our Lycopodium Process Industries business. We're doing quite a bit of work across the year and continue to do in that space. Orway IQ, Orway is our fully owned subsidiary, the IQ MillROC product, it's an online platform providing cloud-based customized data analysis, optimization of mineral processing plants that really continues to grow from strength to strength. And we've a number of other items, I think that's all on that slide [indiscernible]. We continue to be involved within the innovation space. We consider it important to support the communities with inventory work, and we generally do this by the Lycopodium Foundation. This year causes which we have initiatives supported by the foundation have included the Clontarf Foundation, the Murlpirrmarra Foundation as well as BASICS International. We this year kicked off the Ubuntu Football foundation in Cape Town that is emulated in some regards [indiscernible] in particular. There's a number of other foundations and charities, of course, which we continue to support. Our support, as it says on the slide, is aligned with the intrinsic philosophies and values of the business. We enjoy many long-term client relationships and repeat business. We do not take this for granted, and we strive to overperform all our commitments, which we make. And you can see across resources, rail infrastructure and industrial processes, many familiar names. Many of those companies, we've worked for a very long time and many for over 10 years, some for over 20 years and delivered many, many projects and services for them. Just on the major projects, I'll just talk to some of you that have or both of you that have seen our more recent presentations, you would have seen this slide, really, I won't go into the detail. It really is to demonstrate that there is a strong pipeline of studies, which continues to see our early-stage on-site delivery and late-stage delivered projects see there. I've touched on many of those in the operational highlights across to you, so. The mix of commodities across the mineral sector, in particular, which, as I said earlier, it's still greater than 90% of our or generate greater than 90% of our revenue and earnings, which we're currently involved is shown on this particular slide, and you can see that [indiscernible] and relevant to market outlook. In terms of market outlook, we continue to see strong long-term demand for minerals and rails relevant, in particular to the ongoing energy transition. The energy transition is something -- I mean, in the past, we've seen -- we appreciate was largely cyclical sector. But certainly, what has been a little different this time across what has in the last couple of years been a tough market for juniors and in some commodities, is that the energy transition has really changed that. And we'll continue to attract capital to build global supply. So certainly not seeing any let up in the demand [indiscernible] in that regard. Demand for gold remains high. And again, we are accompanying with over 30 years of experience in doing gold projects across the world. Demand for iron ore is expected to continue and just kicked off a project with Mondium joint venture with Monadelphous for Rio Tinto, in that space. So they'd still be involved in the iron-ore space. In terms of our rail infrastructure business, railway construction and maintenance activity outlook is strong for a number of reasons, but certainly supported by significant publicly funded projects. In terms of our industrial processes business, we see domestic manufacturing remaining strong after COVID, which has been good. It's -- business is doing well, and it's firing on all cylinders. But it also is an important part of how we support the energy transition. And what I said earlier, what we are doing in the energy space is through our processes business. They're also moving and we have worked in the recent times with waste and recycling, water and wastewater, and we work in hydrogen. All those areas remain very relevant. And really, as I said earlier, that transformation of the global energy sector from fossil-based to zero-carbon sources represents a period of opportunity for our company, for what we do. So we firmly expect that our expertise will remain sought after, given that I've just described. In terms of strategy, they remain fairly consistent. And the course heading remains consistent underpinning the success we've had. Geographic reach, we continue to expand that and look at opportunities for taking our services to those new geographies where we consider that will be valued. We continue to operate and to deliver a balanced portfolio of projects. And again, that's really around our traditional EPCM delivery, but also with smattering of EPC style projects and contracts where we seem to get a little bit more return from the risk management project. We stay firmly focused on attracting engaging, inspiring and retaining high-performance team, quality professionals. We continue to mature our processes and our initiatives in that area. I've spoken around the Emerging Leaders Program, various coaching efforts, online training, etc. Knowledge Management as with any business at our age, we've developed a lot of IP over the years, and we certainly want to make sure that we can access that well. We invested in systems to drive efficiency and to facilitate worksharing across our various businesses globally, and this has proven to be very, very successful across the last few years and certainly was pivotal to us getting through those years when in the last few years, we've worked from home and other things to come. Innovation I've already spoken about, we remain involved with a number of industry bodies as well as our own internal innovation awards. And as I mentioned earlier [indiscernible] this year. And we remain aware and try to seek opportunities to grow our activities in terms of engineering and project delivery in the energy transition space. So it's a steady course, sustainable course. Of course, it has seen us historically be able to sail very, very successfully through calm waters, but also the old stormy water. So very proud of what we've achieved this year as business. The team has done exceptionally well as I said across the globe, and I think that we're poised to doing the same. That is it for the formal presentation. And I thank you all for calling in this morning and for listening. And now if you've any questions you're certainly welcome to ask questions. Thank you.

[Operator Instructions] Your first question comes from Greg O'Keefe with [ Tyco Super Fund. ]

Thank you for the opportunity to speak to you. Rather than a question, I would just like to compliment the Board on the clarity of its reports. I really appreciate the simple well-constructed language by comparison are in so many nonsense reports full of gobbledygook language. It's just refreshing to have well-constructed plain speaking clear language. So that's all I'd like to say. Thanks again for the work you've done this year. I'm very impressed with the management and the Board. And that concludes all I have to say.

Thank you very much, Greg. Much appreciated, we strive to do that, so let us just save that way.

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

Well, again, thank you, everybody, for calling in this morning. I really just appreciate, your support is appreciated, and your interest in our businesses is appreciated. We continue, as I said earlier to do what we've been doing and been successful in that aspect. So we -- so thank you again, and if there's nothing else we will close today's session.