MAAS Group Holdings Limited (MGH) Earnings Call Transcript & Summary

Good morning everyone. It's Tim Smart here, Head of Corporate Strategy and IR at MAAS Group. Welcome to our first half '24 presentation. Thanks for your interest. In terms of the presentation, I'm about to hand over to our CEO and Managing Director, Wes Maas. In the coming days, we'll be seeing many of you. But of course, as always, if there are follow-up questions or anything, I can help with -- don't hesitate to reach out to me. Without further ado, I'm going to hand over now to Wes. Over to you, Wes.

Thanks, Tim. Good morning, and welcome, everyone, to our first half '24 results presentation. In terms of agenda, I'll run through the first 3 sections and then hand over to our CFO, Craig Bellamy, who will run through the group level consolidated financials, after which I'll wrap up, and there'll be ample time for questions. Our strong first half '24 results, which I am about to detail are a function of our disciplined investment framework and underpinned by our strategic fundamentals, namely an asset base, which we continue to invest in that is directly exposed to key Renewable Energy and Infrastructure projects. We have a highly aligned and incentivized founder-led team focused on being the lowest-cost provider in each end market. And we've demonstrated a successful track record of organic growth and accretive acquisitions. Our values-driven culture is the foundation of our success and growth. It is a true differentiator. Rather than simply act like owners and operators, we are owners and operators. Just as our culture and values create competitive advantage, this is enhanced by our strategic location of our assets and operations. Our geographic hubs are strategically located within proximity to many of the largest infrastructure and Renewable Energy projects on the East Coast and expanding Greater Melbourne hub is a region with arguably the most attractive supply-demand dynamics in the country. While our Construction Materials and Civil Construction & Hire operating businesses are the primary near-term beneficiaries of these projects, our Residential and Commercial Real Estate businesses will also benefit down the track from the associated population and economic growth that these major projects will help drive. I'm excited to announce that we are expanding our Victorian exposure through the recent acquisition of 3 additional hard rock quarries, and earthmoving business working primarily in the quarry industry and also our geotechnical laboratory. The Greater Melbourne market continues to see the most attractive supply-demand dynamics in the country, and we're confident that our expansion of scarce, high-quality quarry resources will provide substantial growth and value accretion in the years to come. Turning to our first half '24 highlights, which saw record results once again from the group, with EBITDA growth of 47% on the weather-affected first half '23 period. Our results were driven by strong performance from both newly acquired businesses as well as our existing ones with core operating industrial divisions of Construction Materials and Civil Construction & Hire delivering almost 3/4 of the overall group EBITDA. Notably, our disciplined focus on working capital saw a cash flow conversion at 110% with operating free cash flow for the half, just under $100 million. Our business is asset backed with tangible assets growing to around $1.3 billion, including the residential landbank of approximately 8,000 lots recognized on our balance sheet at historical cost of around $15,000 per lot. The strong cash flow performance has seen our leverage ratio fall further to 2.3x, below the midpoint of our targeted range. On the safety front, while we've made substantial progress in recent years, we did see an increase in our LTIFR in the first half, and it remains a top priority of the group. We remain focused on where we'll reduce this over time. We have been growing our business and capabilities through cycles for over 20 years now. Since listing, we've grown the geographic spread of our business as well as deepen the capability within our segment. It's worth calling out what we've achieved over the last 5 years. Since the first half of FY '20 at a corporate level, MGH has delivered an EBITDA cumulative annual growth rate of 34% and while the Construction Materials and Civil Construction & Hire divisions, which account for almost 3/4 of EBITDA today have grown at 38% and 42%, respectively. The safety of our people is our highest priority. While we've made solid progress in recent years, the increase in the LTIFR in the first half reminds us of the need to refocus. To that end, we're working on a number of measures to reinforce the safety culture and reduce the workplace injury with zero harm the ultimate goal. On sustainability, we're committed to operating in a sustainable way, recognizing the importance and role we play in reducing environmental and climate-related impacts. There are a number of initiatives underway across all of our businesses that are targeting reducing environmental impact and a number of cases also generating positive financial outcomes. As a company, we understand the increasing expectations around sustainability and are committed to developing the road map to meeting and exceeding sustainability reporting requirements. On people, culture and community. We are a values-driven company. We're committed to the well-being of our people and the communities we operate in. We very much have a growing our own [ Ethos ] and MAAS leadership development program. We're investing in this as a part of -- we also have 72 trade apprenticeship positions that support our growth across the group. Shifting now to our priorities for FY '24 and beyond. Safety remains our highest priority and ensuring the initiatives we have in place are active on to reduce our LTIFR. We will continue to execute our capital recycling program with a firm focus on capital optimization. In Construction Materials, we continue the integration of the acquired businesses in particular, focused on our latest quarry acquisitions in the Greater Melbourne area, where we're also expanding our Grantville sand operation in the Yarra Valley hard rock quarry. We are well situated for the first operational Renewable Energy zone, the Central West Orana, and we're working hard to position ourselves for future growth in other Renewable Energy zones and associated projects, which will commence in the coming years. We are very optimistic about the fundamentals for our residential development business and continue to prudently manage costs and CapEx while preparing the business for future growth. At the group level, developing our ESG road map and associated metrics is also our priority, in particular, that's related to meeting future sustainability reporting requirements. In terms of the outlook, we remain very positive about the outlook in the short, medium and long term. Specifically in relation to FY '24, asset recycling is on track to achieve our targeted number of $70 million. Based on current trading conditions being maintained, we reaffirm our guidance for expected underlying EBITDA of $190 million to $210 million, representing 23% growth on FY '23 at the midpoint. Shifting now to give an update on the positive progress of our asset recycling program. The first half saw 3 commercial property assets sold along with a range of plant and equipment, which overall yielded $2.6 million in excess of our book value. We're presently well advanced in negotiations on a number of commercial properties that give us confidence to reiterate our expectation to achieve $70 million asset recycling target for FY '24 with overall proceeds also exceeding their book values. Moving on to the individual business units operating in the Industrial and Real Estate segment. You can see here the respective EBITDA contributions and returns throughout the first half '24 with almost 3/4 of our EBITDA from the core industrial operating business of Construction Materials and Civil Construction & Hire. Turning now to Construction Materials business. Construction Materials delivered a very strong growth after the weather impacted first half 2023. Strong revenue and EBITDA growth was partially driven by strong performance of the business we acquired in FY '23 being Dandy and Austek. Pleasingly, organic growth was strong at 23%, with increased quarry margins achieved through volume and ASP. The increased quarry margins were partially offset by the mix towards lower-margin concrete, asphalt and spray seal revenues, resulting in a small overall EBITDA margin improvement relative to first half '23. Notable was the improvement in cash flow conversion where focused working capital discipline saw cash flow conversion lift by 49 percentage points to 114%. In terms of the outlook, we're excited by our recent quarry acquisitions, which strengthen our Greater Melbourne position and will generate significant opportunities and synergistic growth in the future periods. Turning to our other major industrial operating business, Civil Construction & Hire. While the most mature of our operating units, Civil Construction & Hire continues to deliver solid growth and returns. Renewable energy project work saw strong growth for our Civil Construction & Hire business which also contributed to strong margin performance with EBITDA margins increasing by 4.2% from the prior year. Proactive contract management and a focus on working capital saw a notable improvement in cash conversion to 121%. While spending in the near term has been subdued for the Electrical Service business, budget cycles related to the development of Renewable Energy Zones and associated projects create substantial opportunities in the future, which we're very well positioned to capture. Moving on to our Residential Real Estate business. Revenue declined slightly year-on-year with consistent interest rate rises, weakened consumer confidence impacting external settlements. EBITDA, however, was up by 123%, driven by bulk and global land sales, representing the effective sale of 60 future lots. In the near term, we expect a significant pickup in settlements in the second half, owing to a stronger pipeline of carrying sales as well as interest from our external homebuilders for bulk block purchases. We remain very positive on the medium- to long-term fundamentals of this business. These are unchanged with strong regional migration trends continued as the infrastructure investment in the target markets and demand interest rates stabilize. Moving on to our Commercial Real Estate business. Revenue growth of 23% was driven by our Commercial Construction business, while EBITDA declined 22% with fuel projects reaching fair value adjustment milestones in the half. EBITDA excluding fair value gains grew by 6%. We will continue to focus in the self-storage child care and industrial asset classes. I will now pass over to our CFO, Craig Bellamy, to go through the group's financial performance.

Thanks, Wes, and good morning, everyone. Starting with the underlying profit and loss performance. MGH has delivered strong growth across the board and all key metrics for the underlying performance from the prior corresponding period. Revenue grew by 32% to $469 million. EBITDA grew by 47% to $97.1 million. Our EBITDA margin was 21%, up from 19% in the prior year, and we also achieved strong growth in EBIT, NPAT and EPS. Of the growth in revenue, approximately 25% is attributable to the existing businesses, and the growth of $30 million in EBITDA of that is evenly weighted approximately 50-50 between the existing and acquired businesses. The result for the half has been largely driven by the Construction Materials and Civil Construction & Hire segments, in particular, with these segments contributing to approximately 90% of the EBITDA growth and they now represent approximately 75% of the group's first half EBITDA result. The fair value contributions for the period totaled approximately $9 million for the half compared to $15.5 million in the prior period. Excluding fair value gains, the growth in EBITDA from the prior period was 74.5%, with an EBITDA margin of 19% compared to 14% in the prior year. Looking at our operating expenses. The operating expenses increased by 24% for the period with 91% of the increase attributable to acquired businesses. Our depreciation increased by $4.6 million for the year with $1.3 million of these being directly related to AASB16 with the balance of the increase largely driven by the acquisition of Dandy and Austek. Our amortization increased by $700,000 to $4.4 million, with $2.9 million of this relating to acquisition accounting through the amortization of customer intangibles, associated with the business combinations accounting standard. Looking at the underlying cash flow, the group achieved a strong operating cash flow for the period. The underlying cash flow from operating activities pre-land inventory spend was approximately $97 million for the half, which resulted in a cash conversion rate of 110%, up from 89% from the previous period and was delivered as a result of strong working capital management. Looking at the dissection of the cash flow by segment. The Construction Materials and Civil Construction & Hire combined cash flow represented approximately 90% of the group's operating cash flow with both segments achieving cash conversion greater than 100%. The Construction Materials, in particular, was significantly improved. The delivery business of the Commercial Real Estate segment achieved very strong operating cash flow due to ongoing prudent management of working capital. Looking at our capital investments. The capital investments for the period included the acquisition of 2 businesses in the Construction Materials segment for $10.5 million. We acquired a future Industrial site at Newcastle for $24 million, and we invested growth CapEx of $14 million and had net maintenance CapEx of $8 million. Our net CapEx for the period of $22 million was approximately 37% lower than the prior corresponding period. And with further sales of surplus assets expected to occur during the second half, we expect that the second half net CapEx spend to again be less. Looking at our capital management. The Group maintained strong discipline with respect to its capital management with net debt, excluding AASB16 growing less than $10 million for the half to $450 million, driven largely through operating cash flow and asset recycling with group liquidity as of the end of the half of approximately $130 million. Our weighted average cost of debt for the period was 5.6% with approximately 25% of the debt under fixed rate contracts. Our leverage ratio of 2.3x sits towards the lower end of our target range of 2 to 3x. Our current banking facilities were extended to FY '26 during the period, with planning having already commenced in relation to future syndication strategy, which will provide MGH further capacity and flexibility for future growth. Also as noted, the buyback program has been extended and an interim dividend of $0.03 fully franked per share for the half has been declared. Looking at our balance sheet. As already touched on the main areas of investment for the period with the 2 businesses in the Construction Materials space and the acquisition of a future Industrial site in Newcastle. Our total assets are now almost $1.5 billion with total tangible assets of $1.3 billion, providing MGH with a very strong and real asset-backed balance sheet. Looking at our capital employed. Our return on capital employed for the half is 12% on EBIT, which compared to 10% in the prior year. Our target remains 20% with our Civil Construction & Hire investment target delivery expected from year 1, whilst our Construction Materials and Real Estate segments are expected to achieve the hurdle within a 2- to 5-year period depending on the nature of the investment. We achieved improved returns from the Civil Construction & Hire, Construction Materials and Residential as compared to the prior periods. And with Commercial Real Estate will benefit in future periods through our asset recycling program. I'll now hand back to Wes for closing comments.

Thanks, Craig. So to summarize our key messages, we've reported a very strong first half result, underpinned by solid organic growth and driven by our Construction Materials and Civil Construction & Hire operating businesses. We achieved cash flow conversion of 110%, reflecting working capital discipline. We reaffirm our guidance for our EBITDA range, which implies 23% growth over FY '23 at the midpoint. We reaffirm the capital recycling program is on track to achieve the target of $70 million proceeds. We've recently made further quarry acquisitions to strengthen our position in the very attractive Greater Melbourne construction materials market. And we are well -- we are very positive on the outlook with the building blocks in place to capitalize on the strong pipeline and opportunities into FY '24 and beyond. I appreciate your interest in our company, and that concludes our formal presentation. I'll now open up for questions.

[Operator Instructions] First question comes from the line of Liam Schofield from Morgans.

Can you hear me there?

Yes.

Yes.

Perfect. Probably just 2 questions, one for Wes, just on the performance of the quarries, Boral sort of made a lot of talking in their announcement about the performance of their quarries. Can you just talk about how those Central West New South Wales quarries versus your Victorian quarries are performing, call it on sort of a like-for-like basis? And maybe just talk about price and volume. And then just a quick question for Craig. Just on that contingent consideration amount, correct me if I'm wrong, the way I perceive it is that you've got an earn-out that someone's to shut an acquisition to shut the lights out and you need to provision to pay them more to reflect the outperformance of that acquisition. Is that how I should interpret that contingent consideration amount?

It's not and this is -- these relate to historical acquisitions. So these have been treated the same way in our financials for a number of years. So you have to assess the business combination consideration at the time of acquisition, and this relates purely to share-based -- future share-based settlements. And because they're classified as a liability, potential liability under the accounting standards because they may be paid, they may not be paid, but the accounting standard requires you to book them. We have to mark to market the share price at the reflected balance state. So it's really just reflection of the share price movements during the period of time.

Yes. So you agreed to pay x shares and that the price of per share...

Yes, correct. It's just the mark-to-market. So in prior periods, we've actually had a benefit on our statutory EBITDA, and we've removed that from our underlying performance actually pulled that back because it's really just a market movement. It's a paper movement's got nothing to do with the actual...

So like noncash essentially, and that's...

Totally noncash, yes. From the -- on the quarries, we've had a 10% increase in volume across the board, around a 6% increase in price. And then your question in regard to the Central West quarries against the Victorian quarries. I would say our Central West quarries are obviously more mature and more stable while still growing, and there's the biggest opportunity there is pushing continued infrastructure and baseload markets, but pushing into the renewable space, there's a lot of infrastructure to go in the Golden Highway and that whole Central West Energy Zone, New England Energy Zones, whereas when you look at our Victorian quarries they're infant, we're bringing them into the stable. So there's large opportunity to expand the volume but also integrate and get the synergies very early days.

And how does sort of price tension work if you compare a metro quarry in Victoria to something more regional like Central West, are different markets, I suppose, capable of -- are you capable of pushing price more in some markets?

You can push price more in some markets. I mean, they're all different. But I would say there's probably more opportunity in the Victorian quarry at the minute than what there is in the in the Central West quarries.

Your next question comes from the line of James Ferrier from Wilsons Advisory.

Can I ask about the Civil Construction & Hire business first. Obviously really positive outlook in terms of that pipeline of tender activity and contract opportunities, taking a slightly longer-term view I'm interested in what your view is of that pipeline, say, over the next 12 to 18 months in terms of the timing of contract tender opportunities and whether we can expect good growth in that segment in that time period, just cognizant of the sort of the 4% growth in revenue in the period just past. If you could just sort of unpack that a little bit, that would be helpful.

The way I'd describe our Civil Construction & Hire business it's a mature business, mature systems people. So it just grounds up. It's steady as she goes. If you look at the slide, which shows our growth in Civil Construction & Hire against the growth in Construction Materials, Civil Construction & Hire has grown every single year. So I would say that we've got a broad business with lots of tentacles we target those small to medium projects, and we have a strong pipeline in the next 6 to 18 months and beyond. If you said what this period, this period, the revenue in electrical was lower. But I would say, in the next 18 months, it will be significantly more. So the electrical part probably underperformed a little bit, but the other parts, I mean, that's the benefit of having a -- we actually have a diversified Civil Construction & Hire business. It's not -- it's not a -- we've got a geographic spread and the spread on our offering. So I would say it's the continuation of the past, not too much different.

Okay. That's helpful. Can I ask about the commercial property book. The -- in the investing cash flow, the development of per commercial property in the period just passed to the $11 million. So we're just thinking about how this ramps up over time in the context of the current book value of the Commercial Property business. And obviously, these are the assets that you're going to retain, not the ones that you're looking to sell versus the ultimate gross development value that you've articulated in the past. I mean there's still quite a bit of activity to take place to develop that book and what the investing cash flow, the development cash outflow looks like over the next couple of years?

So the lion's share of that $11.4 million was investment in ourselves developing out ourself-storage asset. It does ramp up over future periods, but we are looking at opportunities to partner and fund managed to take some of those assets off our balance sheet and it becoming more of a recycling center rather than a big tie on our balance sheet. And is -- sorry, James, you there?

I was just going to clarify, sorry Wes, the opportunity you're talking about there is adjacent to and complementary to your asset recycling.

Correct.

Okay. Very good. And then just last question is just around maybe one for Craig, the D&A expectations for the full year?

I'd say the half performance, James, would be twice that to be a good target.

Your next question comes from the line of Mitch Sonogan from Macquarie.

Maybe just a quick one follow-up from James here just on the Civil Construction & Hire. Just in terms of the EBITDA margins, I know that the revenue was up 4%, but EBITDA margins back to 21.4% was a good outcome. Is that a pretty fair range for where you target for that business now given the change mix versus, say, 3 or 4 years ago?

Yes, we expect to maintain there or thereabout those sort of margins. And I suppose it's our model and our integration and ability to complete a large portion of the projects that we do that drives the margin outcome for us. So I think not only the margin outcome, but the risk. We see that as risk mitigation, which we've described...

Mitch, I think when looking at it versus the prior year. I think we touched on it. And obviously, we've discussed it in prior things. We had in the first half last year, we did have a little bit of exposure of the bad debt and the project loss. So if you normalize the effect out, we've been pretty stable in terms of margins of that 20% plus for a little while now in terms of operations. So I think where we are at the moment, it's pretty representative of where we should be.

Yes. Very clear. And Wes, maybe just touching on to the acquisition down there in Victoria. Can you maybe just expand on that a little bit more? You've obviously talked about how attractive the Victorian market is. But yes, keen to understand, was that a competitive process? And maybe you could just give a little bit more color about how your location and how you see that tying into the existing Dandy assets in that area down there?

Yes, it was a competitive process with a couple of the majors. We -- it integrates into our network. So we partially previously buy stone off of one of those quarries to supply into our Dandy business, obviously, internalize that now and also optimize the transport fleet, and the ability to scale those quarries is significant over the largest of the quarries is the North Neerim quarry that pushes right into [indiscernible] Marine as far as distance. So high-quality aggregates supplying into all markets, but the quality is that it can provide into the asphalt market and good customer base, ability to expand, board offer an aged private owner that had owned the assets for a long, long time. And yes, we're quite excited about our ability to expand those quarries.

Yes, fantastic. And just a few quick ones. Just on the cash flow expectations for the second half. Obviously, with the conversion there at 110% is great. Construction Materials, you did 114% there. Is that sort of what you're still targeting another strong result for the second half?

We expect another strong result. I would guide the market at that 80% to 100%. It will cycle in that sort of range. But yes, we do expect another strong result in the next half.

Absolutely.

And just a quick one, Craig, just on the -- on the fair value increases are only $8.8 million, well down with PCP. Can you just give us an outlook on what we should expect there in the second half since full year and pretty similar question just in terms of overall net interest expense second half versus first half as well?

Yes. Sure. So I think in terms of the fair value for the half Mitch on the commercial real estate, yes, it's driven by milestones and completions of delivery and so on. So I think some we're still in progress at December. So everything remains on track with what we said previously in terms of using last year as a bit of a surrogate for what our total expectation would be for FY '24. I think in the second half, as Wes already touched on our commitment to the $70 million asset recycling is well underway. We're confident of that. We believe there'll be some premiums achieved in relation to the realization of that. So I think there'll be a combination of unrealized and realized gains that flow through. So I think if you're looking at a quantum, go back to the previous year from the totality, but there could be a split between realized and unrealized in terms of as we roll through FY '24.

I'm sorry, just on the net interest expense second half.

Yes. So the interest cost term. So in terms of the actual rate that we're doing. So we had a weighted average cost there of around 5.6% for the period on the float, our current rates around 6.2 -- 6.1% to 6.2% on the current rates. We're pretty disciplined in our capital management and we'll keep our debt under control. So obviously, it's like there's been some increase during the period in the interest cost with the increase in the official rate. So there'd probably be a slight premium in the second half.

Your next question comes from the line of Matthew Chen from Moelis.

Just wanted to ask around the Victorian expansion as a follow-up. The margins there in line with some of your other Victorian assets or more broadly in line with the materials group? And how should we think about that going forward in the kind of medium term?

We would say that generally in line with the rest of our construction materials business, noting the assets that we purchased were 3 quarries like quarries run at a premium margin against the concrete or asphalt or spray seal businesses that will because we're not a static portfolio period-on-period, it distorts the overall margin, but should increase the margin in the next period with the contribution from that, but albeit a small contribution because we only just completed that acquisition and we do need to get in there and integrate. And it's a long-term opportunity rather than a short term. It's not going to be -- should be hit. It's a long game.

Sure. And what's that kind of annualized contribution that you're expecting in the fullness of time?

Look, over time, we expect that it would contribute in the $8 million to $10 million, but we're talking over a few years with some synergies, et cetera, it potentially more than that over time, I would say, an extremely strong long-term strategic assets.

And just a little bit more color on the progress of the capital recycling program as it has developed through the first half and if you'd just be able to potentially quantify and give a little bit more detail on some of the assets plus the properties?

We probably can't detail too much more at this stage. We've stated there in writing that we're in advanced negotiations on a number of commercial properties. And obviously, as that comes to light, we'll update the market. Singularly, they're not material. So -- but we will update the market as for an update as they come along.

Your next question comes from the line of Richard Amland from CLSA.

Just a couple of quick questions. On the resi, you mentioned during the comments that you were looking at bulk lot sales. And I just wanted to sort of ask a couple of questions around what that means, who the counter parties are, what the trade-off that you're considering is for short-term versus long-term development profits? And is there a risk to MAAS' brand in terms of you are the nameplate housing developer. What are the implications for you letting go some of the lots to third-party...

First and foremost, we protect the integrity of our estate, and it is our brand and our name. So we will stand behind that. Some of those bulk lot sales are in noncore or areas where we don't have the long-term holdings and so places where we have long-term holdings, we'll be looking to secure or hold or et cetera. We have conversations with a number of housing providers. And also working with a few opportunities on some potential parts of our noncore or nonoperational business and then looking at some land lease sites where they're not integrated into the rest of our portfolio where we may look to offload.

Just for -- to help me with my frame of reference, I mean, I've only seen some of the Dubbo stuff. I mean, the other what sales in the Central line of region? Or are they in some of the other -- some of the other pockets that you guys have operations in?

If I describe our long-term core portfolio, that would be more Dubbo, Tamworth, Rockhampton and then we have a scattering across, Lithgow, Bathurst, Orange, Mudgee and Griffith. So in some of those noncore spots we may look or we are having some conversations to partner or offload some property in those areas.

Okay. Okay. That does add a bit of color. Just regarding the commercial property, I confess I'm already a bit fuzzy through reporting season, but it's just not -- I may have missed it, but were there any actual commercial property sales in the half? Or is it all -- is that $70 million capital recycling schedule looking to be at a 2 half?

There were 3 completed in the first half, but the lion's share will be in the second half.

Okay. And can you -- again, I apologize if it's in the [ press result ] just slow going. What -- can you tell what the proceeds were on those 3 that were completed?

Proceeds were under $10 million in the first 3.

Okay. Okay. And just going back to the quarry acquisition, it looks like the total consideration is around $70 million. I know that you're sort of not committing to a guidance figure, I mean, that's come to implicitly. But if I look at the Dandy acquisition, it was about $85 million of purchase. And I think we -- at time of acquisition, we sort of estimated at $10 million EBITDA contribution. Are you happy for us to sort of pro rata this one on that basis? Or should we be thinking of it in different terms?

Slightly different in the early stage. If you look at the acquisition as well we've had $40 million upfront and $30 million deferred consideration. So we've sort of taken that -- when we look at the return metrics that we will drive out of this acquisition.

Okay. That is clear. And just on that, on the additional $30 million deferred, you're saying the presentation over 10 years, is it reasonably straight line? Or is it -- are there upfront payment -- have waiting?

Straight loan.

Okay. Cash or estimate there?

Cash.

Your next question comes from the line of Chad McCall from [indiscernible].

Can you hear me?

Yes.

Okay. Great. So well done on a good result. You mentioned Central West Orana project earlier. You've also have mentioned renewable projects a lot more in the presentation. I'm thinking more about the kind of medium to long term. Can you give us some comments around what you're seeing in terms of updates around some of those projects. I know Central West just had the consortium, shortly store appointed basically. Yes, just some context around that because it's obviously a high-growth industry that we're all keen to learn more on.

At the minute, Civil Construction & Hire, more than 50% of our revenue is coming from Renewable Energy. And we expect -- it's very clear in the media and well publicized that the market there is going to grow period-on-period quite significantly over the next 5 to 7 years. And I think if we're any chance of meeting the targets by 2030 as everyone knows, we're quite a way behind. The Central West Orana is the first of the Renewable Energy zones we're looking at more than $10 billion in that region. We're on the way the contractor on the first Squadron Wind Farm project in the Central West Orana region. We secured a significant portion of the hard rock resource in the Renewable Energy zone. So that puts us in good stead for our ability to supply product and service to these projects. So I would say it's early days, and it's definitely a major focus for our business to make sure that we're there to serve the client and give the very best service and product we can. But in very early days, if we're right at the start of this growth, like it's the newest and be the largest portion of our business over the next 3 to 5 years.

And when I saw your guidance in the context of results today, which is a beat to consensus. It didn't go through kind of each of the points around what makes up your guidance or some of the contrary on the guidance. I've gone back had a quick look. And when you look at Civil Construction & Hire, which looks like it's done quite well. Whether it's a comment I'd love to -- or whether it's something I'd love to get a comment on just understand how that's playing out. And in the context of acquisitions and growth, can I be checking and saying your guidance may look a little conservative. Is there anything inherent within that guidance that we should be monitoring? That had you hold that guidance in the context of a pretty positive result. And obviously, the benefits from acquisitions as well come through in the second half?

No, there's nothing -- is nothing to call out. I suppose we have made a couple of acquisitions there. They're quite small contribution and we want to bed those in and see how they perform. And so I would say that not material in the change to this year's number. We had more think about that for next year. And as far as weather goes, I would say that the weather has been generally normal in a we can always say could we dry our business prospers in dry weather. It hasn't been perfectly dry, but it's been normal.

And just last question, if I may. Obviously, resi sales and settlements are a big delta. It was asked earlier, but I might just ask in a slightly different context. You may have seen some of the work done. And if you look at the stats around Dubbo in particular, price of holding up well, lack of rentals, it just feels like there's a pretty supportive resi market. But just keen get your perspective on when you think resi sales may end up normalizing for maybe a comment on what you're seeing now in terms of forward-looking indicators around resi sales and how you think that may normalize over the short to medium terms?

Obviously, we're implying that we're going to have a better second half than the first half, and we've got a better carry in and better sales advice numbers, et cetera, at this point. So that sort of the next half. But I feel that it will be towards the end of this calendar year where we will see material change. Now the rental demand and product available is almost at tipping point, but I think it will still continue to -- until the interest rates point really hard sideways or down. I just don't think that the market confidence or the real urge, I mean it would possibly be cheaper for people to buy today rather than rent because the rental becoming so absorbent, and there's -- there's absolutely nothing to rent. And I think that general comment would be across most of our markets. I know it would be -- it's more than that in the Rockhampton market say. Our challenge we're just -- it's a time thing, not -- not an if when we deliver in Rockhampton, it's just time. And we think that will be really well received in that market because there's just simply no stock. Tamworth as well. And across the other markets, I would say it's similar, but your real Central West Energy zone, which Dubbo is the major beneficiary and Tamworth been the major beneficiary in the New England and Rockies. That's why we've chosen those larger regional hubs or centers.

[Operator Instructions] You've got a follow-up question from James Ferrier from Wilsons Advisory.

Good timing because it's a follow-up on the previous question. The resi development activity in that first half, pretty modest cash outflow sort of $5 million. In the context, Wes, of your comments there around your best guess on when sales activity picks up, when do you think you need to ramp up your development cash outflow? And I guess, specifically with respect to Rocky, when you need to get moving there to be ready when the demand does come back on?

The last quarter, we're envisaging to start bringing on Rocky, Griffith and Bathurst may not be all in this financial year, but then for sales into FY '25 in the existing areas, sales Dubbo, Tamworth, Orange and Mudgee, there won't be any additional investment in this period, apart from completion of some spec or build-to-rent home products.

And just to be crystal clear, the fourth quarter FY '24?

Correct.

Yes. Okay. On the asset sales program, and I'm looking at Slide 28 here. Just to be clear, the asset sale target of $70 million does include some proceeds from the sale of PPE, but you're not including PPE sale proceeds that you would typically net off with maintenance CapEx? Is that the right way to think about it?

Correct.

Terrific. And then lastly, the -- in global sales in the resi business, given you're selling in bulk and you're selling forward, do you typically expect to achieve a similar EBITDA per lot? Or is it lower?

Probably slightly less, but obviously, we're bringing that revenue forward on a relative basis, it's a similar result for us.

As there are no further questions, I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's conference call. You may now disconnect.