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

Thank you for standing by, and welcome to the Maas Group Holdings Limited Full Year 2024. Results. [Operator Instructions] I would now like to hand the conference over to Mr. Tim Smart. Please go ahead.

Thanks very much. Welcome, everybody. Tim Smart here, Head of Corporate Strategy and Investor Relations for Maas Group. I appreciate you taking the time to dial in for our call today. I know it's a very busy day across the market. In the room here, I've got our Managing Director and CEO, Wes Maas as well as our CFO, Craig Bellamy. I'll hand over to Wes shortly. We should have time at the end after Wes and Craig have presented for questions and answers. And if there's further questions, don't hesitate to come through to myself. So without further ado, I'll hand it over to Wes.

Thanks, Tim. Good morning, and welcome, everyone, to our FY '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 will wrap up and be sure to leave ample time for questions. Our overarching aim is to compound capital, delivering attractive returns through the cycle. We've been doing this now for over 20 years, and indeed, the strong FY '24 results, notwithstanding some headwinds we faced, 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, a highly aligned and incentivized founder-led team focused on being the lowest-cost provider in each end market, a successful established track record of organic growth and accretive acquisitions complemented by prudent capital allocation. I would call out the outcomes of the asset recycling in FY '24, a powerful demonstration of our capacity to purchase, develop, and realize assets at attractive returns. Those of you who have followed us for a while know this slide well, and I'm consistent in stating that our values-driven culture is the foundation of our success and growth and a true differentiator. These values and culture cannot be on the wall or just on a PowerPoint slide. To that end, we recently had an off-site with 90 or so of our key managers across the group, where a major focus of the program was these values and behaviors that demonstrate them day to day. Just as our culture and values create a competitive advantage, this is enhanced by the strategic location of our assets and operations. Our geographic hubs are strategically located within close proximity to many of the largest infrastructure and renewable energy projects on the East Coast, and the further expansion into the Greater Melbourne hub is where the region is arguably the most attractive supply-demand dynamics in the country. While our Construction Materials and civil Construction and 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 drive. FY '24 has seen substantial growth in our Greater Melbourne hub, complementing our Dandy business, which we acquired in December 2022. We've added 3 additional hard rock quarries and earthmoving business primarily working in the quarry industry and a geotechnical laboratory and also most recently, Economix, adding a further 5 concrete plants and strengthening our integrated position. The Greater Melbourne market continues to see the most attractive supply-demand dynamics in the country, and we are confident that our expansion of scarce, high-quality quarry resources strengthened by downstream concrete position will provide substantial growth and value accretion in the years to come. Turning to our FY '24 highlights, which saw record results again with the group year-on-year underlying EBITDA growth of 27%. Underlying EBITDA of $207 million was at the upper end of our guidance in spite of some suboptimal weather, electrical project delays and sustained high interest rates. Adjusting for $5 million contributed to the EBITDA from businesses acquired in FY '24, we were still pleasingly above the midpoint of our guidance range. Our growth was 88% from existing businesses and the core operating industrial divisions of Construction Materials and Civil Construction and Hire, delivering around 70% of the overall group EBITDA. Notably, our disciplined focus on working capital saw cash flow conversion at 88% with operating free cash flow for the year just under $150 million, up from FY '23. Our business is asset-backed with tangible assets growing to $1.4 billion, including the residential land bank of 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 2.4x, below the midpoint of our targeted range, and our capital position has been strengthened through the recently completed successful loan syndication process, which pleasingly was oversubscribed. On the safety front, while we've made substantial progress in recent years, we did see a slight increase in our LTIFR in FY '24, and it is a top priority for the group to focus on these and reduce this over the terms to come. We have been growing our business and capabilities through cycles now for over 20 years. Since listing, we've grown the geographic spread of our businesses as well as deepened the capability within our segments. We now have 5 years of full-year results as a listed entity. At the corporate level, MGH has delivered an EBITDA cumulative annual growth rate of 34%. While the Construction Materials and Civil Construction and Hire divisions, which account for around 70% of the EBITDA today, have grown at 46% and 22%, respectively. It is worth calling out that both the Construction Materials and Civil Construction and Hire division's EBITDA in FY '24 is significantly larger than that of the whole group at time of listing back in December 2020. The safety of our people is the highest priority. Whilst we have made solid progress in recent years, the increase in our LTIFR in FY '24 reminds us of the need to refocus, and to that end, there are a number of measures in place to reinforce the safety culture and reduce workplace injury, with 0 harm the ultimate goal. We are committed to operating in a sustainable way, recognize the importance and role we play in reducing environmental and climate-related impacts. There are a number of initiatives underway across our business that target reducing environmental impacts and in a number of cases also generating positive financial outcomes. As a company, we understand the increasing expectation around sustainability, and we are committed to developing a road map to meet and exceed sustainability reporting requirements. As a values-driven company, we are committed to the well-being of our people and the communities we operate in. We very much have a growing our own ethos, and the Maas leadership development program we have invested in is a very important part of this. We also have around 82 trade apprentice positions across the group. Shifting now to the market overview and specifically the trading conditions and outlook. In terms of the current trading conditions, we're seeing infrastructure and renewable energy-related projects continue to drive solid demand in our Construction Materials division. Renewable energy, including commencement of some transmission projects, underpin the demand for Civil Construction and Hire business. Demand and pricing for childcare, self-storage, and industrial remains robust and is reflected in the prices achieved through the asset recycling program. Elevated interest rate levels impacting consumer confidence suppressing our near-term residential land sales and development. Moving on to the outlook, our expectation for FY '24 is continued solid revenue and profit growth in FY '25. Factors contributing to this outlook include: solid external project pipeline for Civil Construction and Hire and Commercial Construction, strategically located quarries to take advantage of key infrastructure, and renewable energy projects either already commenced or forecast to commence during the FY '25 year. The delayed electrical transmission projects, which have impacted our Electrical service business in FY '24 are expected to materially ramp up over FY '25 and beyond. In addition to the $71 million realized in FY '24 in the commercial property development space, we have contracted property development sales of $65 million. This underpins our strong outlook for FY '25 capital recycling program. Expectations that the external residential land lot settlements will show flat to modest improvement in FY '24, however, the fundamentals of that segment remained strong for the outlook. The full-year contribution from FY '24 acquisitions with our Melbourne East quarries, the Wade Quarry Service business and Economix will also contribute in FY '25 full year. Consistent with recent years, we expect to provide a further update on trading conditions and outlook at our Annual General Meeting. Moving now on to our individual business units in the Industrial and Real Estate segment. You can see here the respective EBITDA contribution and returns through FY '24 with around 70% of our EBITDA from the core industrial operating businesses of Construction Materials and Civil Construction and Hire. Turning to our Construction Materials business. Construction Materials delivered very strong growth with EBITDA up 54% on the previous year, 82% of this growth coming from existing businesses with around $5 million contributed from the Greater Melbourne acquisitions made this year. Existing quarry business achieved higher margins through ASP growth and cost of production reductions. Overall margins slightly decreased on FY '23 driven by higher contribution of lower-margin revenue from concrete, asphalt, and spray seal. Notable was the improvement in cash flow conversion where we focused capital discipline, saw a cash flow conversion at 82% against 69% in the prior year. In terms of the outlook, we continue to see solid demand from the Infrastructure and Renewable Energy Zones. Acquisitions this year have been significantly strengthening our Greater Melbourne network, and we see substantial opportunity to integrate and optimize across the division to further enhance margins and returns in the coming periods. Turning now to our other major industrial operating business, the Civil Construction and Hire segment. In FY '24, we faced some challenges in terms of project timing, which impacted the Electrical business and is reflected in the overall revenue decline. Civil Construction and Hire, nevertheless, we're still able to deliver 9% EBITDA growth with strong margins achieved in the key Civil projects. Proactive contract management and focus on working capital saw a cash conversion of 95%, up from 85% in the previous year. While spending in the near term has been subdued in 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 are very well positioned to capture. A number of these major transmission projects are expected to come online over the course of FY '25 and beyond. Moving on to our Residential Real Estate business. Revenue declined slightly year-on-year, attributed to a 27% reduction in external home builds. EBITDA, however, was up by 124%, driven by both bulk and global sale in the first half, representing an effective sale of 60 lots at a slightly higher external settlements for the full year and stronger land margins with favorable product mix. With the near-term interest rate uncertainty, this continues to impact on consumer sentiment and demand. We have solid carry-forward into FY '25, and our expectation is for flat to modest improvement in overall land loss settlements. We remain very positive on the medium to longer-term fundamentals of our portfolio. These remain unchanged with strong regional migration trends continued, and also off the back of the infrastructure investment. Over FY '25, we will also be developing Rockhampton, Griffith, and Bathurst. These Stage 1 sales will contribute in FY '26. Moving now to our Commercial Real Estate business. Revenues declined by 5% is a function of softer conditions for our commercial construction and building supply operating businesses. Overall EBITDA declined by 10%. This was accounted for by a reduction of year-on-year fair value recognition. As we foreshadowed, fair value adjustments of $22.4 million was well below the actual cash realization of more than $50 million, which included the sale of self-storage assets as part of our agreement with National Storage. The second stage of the self-storage asset sale to National Storage as well as other contracts for sale currently totaled $65 million with proceeds expected in the first half of FY '25 and will be in excess of book value. We continue to focus on self-storage, childcare, and the industrial asset classes where demand and pricing remains robust. Our expectation is that the aggregate funds invested in Commercial Real Estate has peaked and will reduce in future periods. I will now pass over to our CFO, Craig Bellamy, to go through the Group financial performance.

Thanks, Wes, and good morning, everyone. I'll start with the underlying profit and loss for the year. The group result for FY '24 saw a record EBITDA of $207.3 million, which represented growth of 27% from the prior year. This growth is primarily driven from existing businesses, which contributed growth of almost $40 million, representing 88% of total growth for the year. Our revenue growth for the year was 11%, largely driven by our Construction Materials division, offset by reduced Electrical services income associated with the timing of projects. Additionally, external revenue from housing contracts decreased as the group transitioned to a more focused spec-building program by delivering built-form products to help drive demand for land sales. Our EBITDA margin for the year increased by 14% to 24%, driven largely by the Civil Construction and Hire and Residential Real Estate segments. Excluding fair value gains, our EBITDA margin increased by 17.6% to 20%, and our EPS for the year also grew by 18% to $0.257 per share. Now on next slide, we've also got a reconciliation of the statutory EBITDA to underlying EBITDA, and as you can see from the table on the bottom right, the reconciling items between the statutory and underlying EBITDA are consistent with the prior years. The largest of these items being contingent consideration for fair value movements of shares, which may be issued in future, depending on earnings hurdles and relate to historical business combinations. Under accounting standards, we were required to book a future liability at the share price at the acquisition date and [ Mark B ] shares to market at each external balance date. The increase this year relates primarily to the increase in the share price since 30th of June 2023. Looking at our expenses, our operating expenses increased by 7% from the prior year with approximately half of the increase attributable to businesses acquired in FY '24. The increase in depreciation of $9.2 million has been driven largely through a full year of Austek and Dandy and the businesses acquired in FY '24. Our amortization was relatively flat for the year at $8.2 million. As you can see from the table at the bottom right of the slide, the amortization of leasehold quarries of $2.5 million is the true amortization cost with the balance of the amortization expense, largely driven by accounting standard requirements in relation to business combinations. Looking at the underlying cash flow for FY '24, the operating cash flow was $154.3 million, which represented an increase of 32% from the prior year. Our cash conversion was again the strength of the business, having achieved a conversion rate of 88% for the year, highlighting our continued disciplined focus on working capital management and a cash flow conversion consistent with that of prior years. Looking at capital recycling and FY '24 has been very successful in executing our capital recycling strategy. As you can see from the slide, our capital recycling realized proceeds of almost $72 million in FY '24. Of note, this was achieved at a premium to book value. FY '25 will see a continuance of capital recycling with $65 million of investment property sales, either settled or contract settled as of today. Given our focus on long-term investment and return on capital, the capital recycling will continue to be part of our normal business cycle going forward. Looking at the underlying cash flow by segment, as you can see, all core segments have achieved a cash flow conversion of at least 80% for the year. Our cash flow conversion for Construction Materials improved by almost 20% to 82% for FY '24, with our Civil Construction and Hire segment also improving from the prior year and achieving a conversion rate of 95%. Looking at these 2 segments, the combined Construction Materials and Civil Construction and Hire segments contributed almost 90% of the total group's operating cash flow at a blended conversion rate of 88%, which provides the group with a strong and stable platform going forward. With respect to our capital investments, as you can see on the slide are details where MGH's has invested during the year, made acquisitions of $75 million in the Construction Materials segment, invested a net $9 million in the Real Estate segment, growth CapEx and PPE of $20 million and net maintenance CapEx of $8.5 million. Also, and as you can see in the graph, our net spend was approximately $30 million for growth and maintenance CapEx. With respect to our capital management, I'll start with the debt side first. Our net debt at 30th of June ex AASB16 was approximately $505 million, comprising of net bank debt of around $480 million, vendor finance of $25 million, noting the larger acquisitions of Melbourne East Quarries and Economix occurred during the second half of FY '24. Our leverage ratio at year-end is 2.4x, which again sits below the midpoint of our target range of 2 to 3x. Our banking facilities as of June '24 are summarized on the right-hand side of the slide, showing liquidity of approximately $100 million. Of note, we have also completed the syndicated refinance of our facilities since year-end, effective from the 30th of July 2024, which provides an additional liquidity of a further approximately $290 million of financial close. We have also established a surety bond facility during FY '24, which we will use in lower bank guarantees where possible. With respect to the equity side, we've declared a final fully franked dividend of $0.035 per share, taking the annual dividend of $0.065 per share fully franked, which represents an increase of approximately 8.3%. Additionally, our share buyback program remains active. A little bit more color on the syndication refinance. As noted, we closed the new facility on the 30th of July 2024. Under the syndicated structure, we've expanded our banking group from 2 banks to 6, which provides a solid foundation for MGH going forward and a significant vote of confidence in the business. Under the new facility, we've increased the facility limit to $730 million with the breakup shown in the table on the slide. In addition, the new facility also incorporates an umbrella structure, which enables us to request an increase in facility limits of up to a further $250 million after the 12-month anniversary of the facility, should we require. In addition to the new facility, the legacy asset finance under the previous facility remains on foot with that facility to be amortized under existing contractual terms over the coming years. The new facility also has the expiry date as noted in January 2028. A summary of the covenants of the new facility noted in the slide, and it should be noted that despite an increase in the net leverage covenant, the company's target gearing range of 2 to 3x remains unchanged. A brief look at our balance sheet as Wes has already touched on, we're a significantly asset-backed business with our total assets now approximately $1.6 billion, with our total tangible assets exceeding $1.4 billion in details of the major balance sheet movements that was set on the slide. Before handing back to Wes, I'll just touch on our capital employed. Our capital employed has increased to $1.27 billion at year-end. Our return on capital has remained stable at 13% for FY '24 as we continue to invest for sustainable long-term returns for shareholders, with our primary focus continuing to be in the Construction Materials seg. Our capital management and investment discipline remain our key focus in achieving target returns in which we have demonstrated during FY '24, through our approach to capital recycling, strategic investment in long-term assets, and minimizing capital allocation into the real estate segments during the current interest rate environment. Thank you, everyone, for your time today, and I'll now hand back to Wes. Thank you.

Thanks, Craig. So just to summarize our key messages, we reported a record full year result at the upper end of our guidance, underpinned by solid organic growth against the backdrop with some challenging headwinds. We achieved cash flow conversion of 88%, reflecting continued working capital discipline, which translated to substantial free cash flow generation. We've delivered on our capital recycling program and demonstrated our ability to achieve attractive cash returns with proceeds above book value, and with further detailed $65 million of properties contracted for sale with proceeds expected to be received in the first half. Acquisitions have been focused on construction materials, and we've successfully enhanced our integrated position in the strategic greater Melbourne market. We are positive on the outlook with the building blocks in place to capitalize on the strong pipeline and opportunities in FY '25 and beyond. I appreciate your interest in our company, and that concludes our formal presentation. I will now open up for questions. Thank you.

[Operator Instructions] The first question comes from James Ferrier from Wilsons Advisory.

Can I ask you first of all about the Civil business, I think, where you talked about some strong margins in FY '24 for the Civil projects in particular. Do you mean that in the sense that they were probably elevated above normal levels or strong in the sense that they're sustainable at that level?

I think when we talk about, we've been consistent over the last 5 years that we don't concentrate on revenue, but the revenue mix that comes in will distort the margins. So I mean, if we have a lot of Civil projects where we're utilizing our plant and equipment, that's where we get a higher margin, and that's what's happened in that period. So I would probably guide you back more to the average, if you look at the average of our last 5 years. Not to say that we can't achieve those higher margins that we did in this period in the future, but to be conservative, I would guide you more back to the average.

And then can we talk a little bit about some of the [indiscernible] gains that have been booked in '24? And also what your expectations are into first half '25 for the contracted transactions? And then probably the one that sticks out the most for me is the land lease community fair value gain in '24. Can you just add some color to what's driving that and your expectations on that line going forward and then perhaps turn your attention to the contracted transactions into '25, please?

To give you some guidance for FY '25, I would guide you at the same or similar level to this year. And then if I guide you on expected capital recycling, we already have $65 million contracted and expectation is that, that all settles in the first half. So I would conservatively guide you at more than $70 million in FY '25. In regards to the fair value uplift in the land lease community, it was -- it's milestone-based. So we -- and as we flagged with the market before, we anticipate that we may look to offload some portions of that portfolio in a more [ global ] type or large site disposal. So I think that wraps up with most of those questions.

The next question is from Liam Schofield from Morgans.

Just firstly, on quarry run rate, can you just comment on what that sort of run rate has been for quarries, I suppose, coming out of the end of the financial year and what that looks like going forward? Should we just be thinking that the growth in that division is primarily volume driven? And then the second question is just on the profit on sale of assets of $8 million, what division does that relate to? And what does that look like relative to that flagged $70 million of asset sales for '25?

I'll answer the quarry question and Craig can answer the property question. The quarry question. Look, the FY '24 results, as we said, we had $5 million of acquisition contribution in that period. And you'll note that most or all of those acquisitions were in the second half and quite late in the second half, the run rate is higher than the FY '24 result. We are -- which we've guided the market in the past that we've got different levels of maturity in our business as in the different areas. So Central Queensland, New England, and New South Wales, Western of New South Wales, and in the Melbourne hub, they're all -- they will all improve. So we expect to see increased volume as good ASP, but we expect to continue to improve and pull out synergies, which will therefore lower our costs, and that's on the quarry space.

And Liam, in relation to the $8 million, I think you touched on the profit on sale of assets there for $8 million. That's largely out of the -- as traditionally out of the Civil Construction and Hire and Construction Material space. As you know, we're a regular trader of equipment. We're also quite open that the accumulation of the surplus gear over the last 2 years of acquisitions we're going through or rationalization phase. Obviously, that has occurred during FY '24 and is continuing. So that's really what the large driver is but if you go back on profit on sales, it's something that we've always achieved in terms of just our normal trading arm of our business. With respect to I think a reference to the $70 million for FY '25, just confirming this relates to plan and Wes has spoken about commercial properties, so they're 2 separate [indiscernible] in that $70 million for FY '25.

So just so I'm clear, that $70 million is just commercial land only?

Well, yes, the $65 million that's shown there for FY '25 today is commercial, all in the commercial property.

And there's every expectation you can continue to get a gain on sale as you sell equipment.

We've got a well-established track record if you go through our accounts where we've always declared guide on sales for the size of our equipment. Yes. So we're very confident of achieving future further.

Just maybe one more if I can just jump in. Is there an easy way just to model the ownership share that you don't own? I know that you've got that noncontrolling interest. What does that relate to? And how do we think about that modeling forward?

That's just the interest in the sort -- that's the 20 [indiscernible]. That's the 25% minority interest, we own 75%, and that's the only joint venture that we have or effectively noncontrolled entity we have.

The next question is from Tom Chapman from Jefferies.

Just beginning with the Construction Materials business margins were down 1 percentage point due to full-year Austek contribution. Is this being a normalized margin level? Or is it growth in the other parts of the business like the Construction business greater and net margin might swing back?

Look, it also relates to the relative contribution of revenue, say, across the period, if we acquire and grew more in the quarry division, you will see higher margins, if we grew more or acquired in the concrete or asphalt seal space, you will see lower margins.

It's a revenue composition, yes, ultimately, the actual performance of the business. And if you look at the individual segment performance within the Construction Materials space, has been very consistent and stable and a good outlook. We had all set for 1 month last year, and we've had it for a full year this year, as simple as that, that's certain.

And then just with the expansion to Victoria, how does the market here compare to your other regions? [indiscernible] similar margins, pre-synergies and then kind of longer term, do you expect it to kind of be any higher or lower?

Yes, runs a similar margins to our other areas. I think as that harbor area matures, we will see better margins and higher volumes. So therefore, and we'll be able to reduce our cost. So we -- we've always said that it's our most exciting area or harvest at this minute, and we expect it to continue to improve on all fronts.

And then just in the Civil business, can you just talk to the quantum of the timing impacts of electric revenues and how this might flow into FY '24? Should we expect that a top-line level will return to growth ahead of 23 levels?

Yes, we would expect it to be above '23 levels. What did we miss in '24, it was probably close to 50% down in revenue. So we expect a material swing back over the FY '25 period.

And then just last one. Net PP&E CapEx was down quite a bit in '24 at $29 million. Can you just talk to what's driven that? Is that just a point in time, this may return higher next year and with the strategy and where the growth is?

It's probably easiest to analyze on the growth CapEx because that's where the main variance is. So the net maintenance CapEx has been pretty consistent. If you go back the year ranging between like $8 million to $12 million on a net basis for many years. So we sort of like to sit around that range. In terms of the growth, it's probably more a function of time historically, like in recent years, we've invested significant in the upgraded quarry plants. So we've put those investments in, we purchased new equipment. So it's really just a timing perspective, but the age of the fleet is pretty good. We're pretty good.

I'd say we've materially or significantly invested over those last few years, and we will see the fruits of that over the next few years because we're ahead of the game, we have quite a young fleet. We've heavily invested in our plant and equipment to reduce our cost of production and therefore, we'll see the fruits of that. This was probably the first period where you've seen.

And we've also acquired, as we've said, we've acquired fleet through some of the acquisitions well, which have enabled us to rationalize. We've picked up better flow through some of the acquisition as well, which is have taken the requirement. It's another factor that influenced the growth CapEx, not needed to be significant based on what we've acquired.

[Operator Instructions] Your next question comes from Richard Amland from CLSA.

Sorry, it's just a couple of confirmation questions. So just on the Construction Materials, I think you called it out, but just trying to confirm that the contribution to EBITDA in fiscal year '24 from the acquisitions was $5 million. Is that out of the $38 million uplift?

Correct.

And the Civil Construction, I apologize, we're going to chart over some ground that was previously asked, but I already have my question queue. Can we just get some color on the actual projects and where were they the delays? Were they in the Renewable Energy Zones in New South Wales? Or was it further afield than that? What should we be sort of paying attention to watch for the unwind of those delays?

The main projects that were delayed were in New South Wales with Renewable Energy Zones, but I think our business model is quite unique. We have quite a significant number of smaller to medium contracts. So to -- there's a lot of contracts rolling in the unwind. I think the enablers where counsel and the like have enabled these projects with access roads and the like, they're on hand and on foot. So I mean we expect to see them ramp up over the next 1, 2, 3 years. So there's a material runway in front of us, and they're already underway or on foot.

And just to go into the Commercial Real Estate side, the performance of that business was a little flatter than what we expected. But I guess is that because most of the gains have already been taken as you mark-to-market that portfolio in previous periods such that the profit outcome wasn't necessarily as large as what would have been the case if there hadn't been asset inflation through the period. Is that correct?

No. I mean it's milestone based. We can't control what the profit is period-on-period. We expect still a strong contribution going forward. So like I said, I'd guide you at same or similar, might be able to touch more and I don't think it will be less. I think the operating business or the hardware business down a little bit in line, probably more with the residential sales or sales into the residential market and construction down a slight bit, but I wouldn't guide you that it's going backward. It's still strong, just the timing.

The next question is a follow-up from James Ferrier from Wilsons Advisory.

As for the opportunity for a follow-up here. Can I ask you about the cash flow expectations into FY '25. In terms of the net changes in land inventory, we would think that probably likely to be a net cash outflow in '25, given you've got the development activity in Rockhampton, et cetera, and was to your earlier comments on likely land lot sales activity. Is that a fair observation?

Yes, in terms of -- obviously, with the new development, James, investing into those new areas will require cash without a cash return out of those areas. So that's fair expectation as we've already guided in terms of the settlement profile, we're expecting that to be similar to modest. So give you a bit of an idea, but there is -- there will be more development spend on a land basis for FY '25 than FY '24.

Overall, on the whole group, it's immaterial. We obviously take it offline, and we can share some more detail but it's immaterial in totality.

On the commercial property side, you've obviously guided to where you see the contracted transaction value and proceeds in the first half of that $65 million, and you gave some color on what it might be sort of $70 million with a bit more. But what are your expectations at this stage around cash outflow on commercial in relation to acquisitions and development?

It will be a net inflow in FY '25.

Growth CapEx, you touched on to an earlier question. And then really just the underlying operating cash conversion. Is there any reason to think it's not going to be at consistent levels for the last couple of years?

No, it'll be consistent with what we've been doing.

Your next question is from Sophia Mulligan from Macquarie.

Just a few quick ones for me. Just on the acquisition pipeline and the ability to fund it, if you could talk through what you're seeing at the moment?

Look, I think it's the same or similar to the past. The -- are there opportunities out there that are either coming to market or we've targeted. Our ability to fund those, I think we indicated that we have plus $400 million of liquidity, and we're producing cash. And we've got asset recycling. So we are definitely capable.

And on the pipeline of work in Civil, so just what you're seeing at the moment in the tendering process, is pricing competitive or is it rational?

Strong short, medium, long-term outlook, no less, probably more in the renewable space, which we've been consistent in telling the market.

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

Well, thanks very much, everyone, for all your questions. Of course, over the following days. You may have more questions, and we're very happy to help go through those with you. So don't hesitate to reach out, and we can help as needed. Have a good rest of the day, and thanks again for your interest. Bye-bye.

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