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

Thank you for standing by, and welcome to the Maas Group Holdings Limited First Half '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Tim Smart, Head of Corporate Strategy and Investor Relations. Please go ahead.

Hey, good morning, everyone. It's Tim Smart here. Welcome to our first half '26 results. In a second, I'll hand the call over to Wes. As always, there'll be time at the end for Q&A. And if we don't manage to cover all your questions or further ones come up, of course, don't hesitate to reach out to me over the course of the day or the rest of the week. But without further ado, I'll hand it over to our CEO and Managing Director, Mr. Wes Maas. Wes?

Thanks, Tim. Good morning, and welcome, everyone, to our first half '26 results presentation. In the first half '26, overall underlying group NPAT grew by 26% on the prior corresponding period. The strong first half result and positive outlook supports our upgraded guidance range of $250 million to $280 million in underlying EBITDA for FY '26. As will be discussed further, we are building momentum into FY '27 and most notably in our Electrical business, where there is material pipeline opportunity in front of us. The divestment of our construction materials portfolio to Heidelberg is expected to complete in the second half of this calendar year and crystallize significant value for shareholders while freeing capital to deploy in both existing and next wave infrastructure opportunities. Notably since listing and assuming the sale of CM portfolio completes, the Construction Materials division has delivered an effective annual return on capital employed of 56% per annum, while on MGH level overall, the annual return on capital employed since listing is 28% per annum. Finally, capital recycling continues to be a core part of how we allocate capital, supporting disciplined reinvestment into existing and emerging infrastructure sectors. Moving to Slide 2. This slide captures the evolution of MGH over the past 20 years plus. The business all began with an equipment hire and a single Bobcat and tipper. From there, we scaled into civil construction, leveraging that foundation to expand in construction materials. By vertically integrating quarries and concrete and later into asphalt, we were able to lower costs through scale as well as we generate operational synergies. Adjacent to our civil construction and hire business, opportunities emerged in the residential real estate, which then opened the door to commercial property development in associated childcare, self-storage and industrial assets. Each phase of our growth was driven by adjacency, applying the expertise and infrastructure of our existing businesses to create value in complementary areas. Today, with Construction Materials divestment, we've crystallized a premium value, locking in 28% per annum return on capital employed since listing at the overall MGH level. This positions MGH to deploy capital into both existing infrastructure opportunities as well as the next wave of infrastructure, electrical and digital infrastructure, building on the same disciplined adjacency-led approach that has delivered consistent returns for over 2 decades. Boiling it down, our evolution is a simple story of building businesses, scaling them, recycling capital and reinvesting into areas with structural growth tailwinds. We will continue doing this, and we are excited about the next phase. Moving to Slide 3. Our strategy is focused on sectors with powerful multiyear structural tailwinds. In electrical infrastructure and renewable energy, we are seeing unprecedented investment into transmission generation and related projects, areas where our civil and electrical capabilities are directly relevant. Digital infrastructure and AI present a new frontier with demand for data centers and AI compute and supporting electrical equipment creating significant opportunities for an integrated business like ours. Transport infrastructure continues to be a major focus, driven by population growth and evolving supply chains, providing consistent work for our civil construction and plant hire operations. In the residential sector, population growth, migration flows and limited housing supply continue to create opportunities for MGH property development activities. These structural tailwinds underpin our approach, targeting sectors where we can apply our proven operating model to generate long-term attractive returns on capital. Moving to Slide 4. This diagram captures the way MGH has created value and continues to do so today, build, scale, recycle and reinvest. Across all our businesses, our primary goal is the same: enhance returns on capital employed by targeting sectors where MGH's operating model can create sustainable long-term value. Moving to Slide 5. This slide highlights the breadth of MGH retained operations, assuming the completion of the Construction Materials transaction. This footprint underscores that MGH continues to operate a diversified integrated set of businesses, each positioned to deliver sustainable returns and support the next phase of capital deployment. Moving to Slide 6. Turning to our first half '26 financial highlights. We delivered underlying EBITDA of $115.3 million, representing growth of 21% on the prior corresponding period and supportive of our upgraded FY '26 guidance range. Notably, our disciplined focus on working capital saw cash flow conversion at 100%, a 19 percentage point improvement on the prior corresponding period. Our Civil Construction and Hire division delivered EBITDA of $34.1 million, an increase of 66% on the prior corresponding period, and that is prior to the announcement of the JLE, Firmus contract, which will positively impact the second half of '26 and into FY '27. Our Residential division achieved 80 land lot settlements, a 31% increase on the prior corresponding period and with a strong backlog into second half '26 and also flowing into FY '27. On the safety front, our LTIFR remained flat on FY '25 levels, and our ongoing focus and commitment is to reduce this over time. Moving to Slide 7. Turning now to our updated guidance for FY '26. We are pleased to upgrade our guidance for FY '26 of the underlying EBITDA to a range of $250 million to $280 million. The Construction Materials business included in the announcement of the divestment will continue to be owned by MGH and contribute to the group earnings for the duration of FY '26 with the transaction expected to complete in the second half of the calendar year 2026. Contribution from the non-construction materials-related businesses is expected to be in the range of $120 million to $140 million EBITDA. Within the residential real estate, we expect settlements in the range of 240 to 260 lots, including the build-to-rent unit sales. The Firmus contract with our electrical subsidiary, JLE has now commenced and is expected to contribute meaningfully in the second half of FY '26 and into FY '27. Finally, on the capital recycling, excluding the CM sale, we expect to achieve our $200 million plus range over the remainder of the calendar year '26 with $171 million already secured or settled. Moving now to Slide 8 into our business unit overviews. On Slide 9, starting with our Construction Materials business and its first half '26 results. Revenue increased strongly in the first half '26 on the prior corresponding period, driven by organic growth across our quarry operations, together with contributions from the recently acquired businesses. EBITDA grew 38% on the first half '25, reflecting continued volume growth across our quarries, concrete and asphalt. Margins were slightly lower than the prior period, largely due to the higher proportion of contribution from the lower-margin asphalt revenue. Cash flow conversion remained strong at 99%, up from 96% in the first half '25, reflecting continued working capital discipline. Moving to Slide 11, recapping on our previously announced sale of our CM portfolio to Heidelberg for north of $1.7 billion. The transaction represents significant milestones for the evolution of MGH and is consistent with our disciplined approach to capital recycling. Importantly, Construction Materials business will continue to be owned and contribute to the group earnings through FY '26, with completion of the transaction expected in the second half of the calendar year, subject to customary regulatory approvals. Proceeds from the transaction will materially strengthen the group balance sheet and provide flexibility to redeploy capital into higher return opportunities. The table here shows the financials for the portfolio sold to Heidelberg, including that return on capital in first half '26 was 10%. As highlighted previously, incorporating the gross proceeds from the sale of Heidelberg expected in the second half of calendar year '26 brings the annual realized average return on capital employed for Construction Materials since listing to 56% per annum. Turning now to Civil Construction and Hire on Slide 13. In first half '26, revenue increased significantly on the prior corresponding period with growth across all streams. The segment benefited from contract wins secured in the second half '25, particularly across renewable energy and transmission-related projects. EBITDA increased by 66%, driven by strong contribution from our Electrical division and improved utilization across the plant hire fleet. Cash flow conversion was also very strong at 106%, up from 81% in the first half '25, reflecting prudent working capital management and improved operational execution. Looking ahead, the electrical infrastructure project for Firmus is now underway and is expected to provide a significant contribution in the second half '26 and into '27. The pipeline of electrical work remains very solid and is expected to support further improvement with opportunities for additional large-scale electrical infrastructure projects anticipated to be received in the second half of FY '26. Moving to Slide 14. As we announced in December, we were awarded a $200 million contract by Firmus Technologies for the manufacture and integration of containerized PTUs or PowerCubes together with the backup diesel generator modules. The contract commenced in January and supports an initial 100-megawatt deployment with delivery scheduled for the end of the third quarter of calendar year '26. We're able to fulfill this contract from our existing manufacturing and assembly facilities in Orange, Newcastle, Dubbo and Vietnam. Through JLE's role as a manufacturer and systems integrator of modular electrical infrastructure, this contract positions MGH within the AI infrastructure manufacturing supply chain rather than as a traditional electrical contractor, aligning the group with structural growth in electrical and next-generation digital infrastructure. Moving on to our Residential Real Estate business in Slide 16. In our Residential Real Estate division, revenue increased on the prior corresponding period, driven by higher land settlements with 80 settlements in the first half of '26 in comparison to 61 in the first half '25, excluding build-to-rent properties, together with increased housing revenue. EBITDA, excluding fair value gains increased by 51%, reflecting the higher volume of land settlements during the period. Land gross profit per lot improved to approximately $116,000, up from $102,000 in the first half '25, supported by a favorable estate and product mix, while overall pricing remained stable. Home construction margins also improved, reflecting disciplined cost control. Looking ahead, the business is targeting 240 to 260 lot settlements for FY '26 with approximately 100% of those already secured. We have a strong FY '27 carry-in with 90 lots under contract supporting the forward growth. Initial settlements at the Ellida Estate in Rockhampton have commenced in the second half with strong underlying demand already contributing to a price uplift. Moving on to our Commercial Real Estate business on Slide 18. In Commercial Real Estate, revenue decreased on the first half '25, primarily reflecting a land inventory sale in the prior corresponding period, which contributed approximately 20% of the first half '25 segment revenue. Fair value gains on investment properties of $19.1 million was slightly down on the first half '25 with approximately 90% of the first half '26 gain relating to a property currently under contract and expected to settle in calendar year '26. The segment recognized proceeds of approximately $52.5 million from the development sales in the first half, all above book value, as part of the group's capital recycling program, crystallizing $10.6 million of fair value gains that were recognized in prior periods. Overall, capital employed is expected to reduce across FY '26 as capital recycling initiatives exceed development spend, with the group also investigating opportunities to establish a funds management platform. Now I'll hand over to our CFO, Craig Bellamy, to go through the group financials. Thank you.

Thanks, Wes, and good morning, everyone. Starting at Slide 20, looking at the profit and loss. As Wes has already mentioned, MGH has delivered a record EBITDA of $115.3 million for the 6 months ended 31 December, 2025. The result was driven through an increase in revenue of 33% from the prior corresponding period with significant growth in both the Construction Materials and Civil Construction and Hire segments. EBITDA growth for the period was 21% with significant growth attributable to the Construction Materials and Civil Construction and Hire divisions with that division improving by 66% from the prior period. Our EBITDA margin was consistent with the prior corresponding period. We saw EBITDA ex fair value increased by nearly 30% during that time. Fair value gains were broadly in line with the prior period at $19.2 million with almost 90% of that fair value contracted for sale with settlement expected in the first half of FY '27. EPS increased by 15% for the period with MGH's EPS growth since listing achieving a compound annual growth rate of approximately 16%. Turning to Slide 21 and looking at the group's underlying cash flow for the period. The group achieved an operating cash flow conversion rate of 100%, representing an increase of approximately 25% on the prior corresponding period. Once again, this result has been achieved through prudent financial management, driven by strong working capital control across the group. During the period, we have reinvested cash into our residential land inventory to support the strong demand, which is anticipated to grow as we open up more geographical regions in the future. Our net maintenance CapEx for the period was approximately $15 million, which is consistent with the long-term average for the group over the period since listing. Turning to Slide 22 and looking at the segment cash flows. The underlying cash flow for the segments was strong with Construction Materials and CCH (sic) [ CC&H ] at or above 100% conversion. As noted, the result has been driven through strong and prudent working capital management. All segment cash flows improved during the period with the exception of Commercial Real Estate, with the result largely driven through timing differences associated with the sale of surplus land inventory parcel in the prior year and a small working capital investment to support its delivery businesses during the period. Slide 23 and looking at the capital investment for the period, MGH has invested approximately a net spend of $12 million in growth and maintenance CapEx, property development, net of capital recycling proceeds. Our growth CapEx was primarily in the Construction Materials segment. And as can be seen from the bar graph on the slide, our net PPE and intangible CapEx of $25 million is consistent with prior periods. On Slide 24, we've laid out our capital recycling for the period. We settled $56 million of investment properties during the period, which monetized $13.5 million of current and prior year fair value gains. In addition to the settled properties, we have sold a further $114.7 million of property, which is due to settle across the balance of calendar year 2026, which takes our total sales to-date this year to approximately $171 million. Upon settlement of the $171 million, we will have monetized approximately $65 million worth of gains. Turning to Slide 25 and the capital management. At the end of the period, the net debt, excluding AASB16 was $640 million, slightly lower than 30th of June. Our gearing ratio of 2.6x sits near the midpoint of the target gearing range of 2x to 3x. The net proceeds from the Heidelberg transaction will provide significant balance sheet strength for the company going forward. We've also commenced discussion with the banking syndicate in relation to the $250 million accordion facility to provide further balance sheet capacity in the interim. Our dividend for the period was $0.035 fully franked and our share buyback program remains active. Turning to Slide 26 and the return on capital employed. The return on capital for the period was 10%. But of note, CCH returned to 20% in accordance with the target level. The best illustrative example of our focus on return on capital to create long-term value for shareholders is the forecast return for Construction Materials, which is expected to deliver a 56% return since listing. We continue to maintain our capital discipline of prudent investment and taking advantage of recycling opportunities to maximize capital returns. That concludes my presentation. I'll now hand back to Wes for closing comments. Thank you.

Thanks, Craig. So to summarize the key messages, this result reflects a strong first half '26 performance across the group, including cash flow conversion of 100% and supportive of our upgraded FY '26 guidance. The announced sale of construction materials portfolio to Heidelberg crystallizes premium value and demonstrates the group's continued focus on disciplined capital allocation and return on capital employed. Our proven operating model remains aligned to powerful structural tailwinds. Our retained businesses are well positioned for accelerated growth supported by strong pipeline and increasing activity across key end markets. Finally, we remain focused on disciplined reinvestment of capital to further enhance returns on capital employed over the medium and long term. To wrap up, I remain very committed to the business and excited by the growth ahead and the opportunities that lie. I appreciate your interest in Maas Group, and that concludes the formal presentation. So I'll now hand it back to the operator and open up for questions. Thank you.

[Operator Instructions] Today's first question comes from James Ferrier with Canaccord Genuity.

Could I ask you about the CCH segment, first of all, seeing this first half result, when you look at the electrical revenue component to the segment, it grew pretty strongly on PCP, and it was up as well on the second half of FY '25. Was there any Firmus-related revenue booked in the first half? And if not, what's driving that growth?

No, there was 0 Firmus-related revenue. Growth has been in the transmission and high-voltage space, but also, I suppose, across all the segments of our electrical business. So we are quite busy in the manufacturing space there as well.

And probably just extending that into the outlook and again, excluding Firmus, what's your thoughts, Wes, on the growth path and the visibility of growth within the electrical part of the business?

Look, the growth part is for our electrical business, excluding the Firmus and data center related opportunity is very strong. I think I've been consistent in saying before that we expect to be able to double that business over the next 3 to 5 years, maybe earlier, but it has a very strong growth outlook.

Second question, on the property side of things, a really strong result there in terms of the velocity of recycling and certainly realization of value versus book, given you've accounted for $19 million in fair value gains in the first half and the visibility you have in the guidance you've given sort of for the recycling over the remainder of the financial year, what's your revised expectations for fair value gain for FY '26?

Yes. I'd say, just the fair value will be similar in the second half as the first half would be our expectation.

Okay. And then last one for me. With respect to the Firmus contract, the way it's been described today, commencing January completion in the third quarter of the calendar year. What do you think that means for revenue recognition? Should we straight line it and therefore, account for essentially 2/3 of it in second half FY '26, 1/3 first half FY '27? Or is there a different way to look at it?

It won't be -- it probably won't be quite that level just in terms of the way the work is staged, there is certain ramp-ups and so on like that. So it may be more linear in terms of contributions between halves. But yes, it won't be at 66%. So it won't be a straight divide by 9; and 2/3, 1/3 sort of scenario.

So you're a little bit more back-end weighted than what I've just described.

Yes, yes.

And our next question comes from Mitchell Sonogan with Macquarie.

Just a quick one following on from James. Just on the Firmus contract, Wes, obviously, you've given some specific numbers on the first contract there. Do you mind just talking to potential timing or any other color you can give us on the potential for the follow-on work for the other 500 megawatts? And just thinking about margins on these contracts, if you do get the follow-on work, bigger contracts, are there some scale benefits you would get to that on delivery?

We expect follow-on work over the next sort of 60 to 90 days. And definitely, we'll have follow-on work confirmed in the second half, which will roll out into the back end of this calendar year and into '27. Scale, yes, we will get some scale synergies and efficiencies there. And I would probably have to defer to Firmus to sort of confirm their rollout to be aligned with that.

Yes. Very clear. And Wes, just on, I guess, the business on a go-forward basis, you've obviously talked to the $120 million to $140 million EBITDA this year in FY '26. Are you able to give us any guidance into '27 just in terms of the mix of real estate? I would have thought resi continues to grow pretty strongly, but just unsure of what we should expect for the Commercial Real Estate book in '27. And then is that a fair base to then grow or assume some sort of level of expansion in the Civil Construction electrical space as well?

Yes. Look, we expect residential to continue to grow. We've got -- I think, we said we've got 91 lots already contracted that roll in into '27. So we will probably be expecting in the 300 to 400 lot range, hopefully, at the upper end of that, because we've got a very good lead in and good visibility in our portfolio. And I think we will start seeing the fruits of that investment that we made some years ago into those locations. They are all quite strong. Most notably, I would say Rockhampton is extremely strong. So we would -- we expect 30% plus growth in our residential business. In the commercial business, I would say we would expect it to be similar levels to the past in that 40 to 50; or 40 to 55. So a similar sort of development profit that we've made in the past and operating businesses remaining the same, maybe some improvement or growth there on the commercial construction side, but not material. And then on our CCH business, we will probably look to rename that because the material part of that will be electrical. So it will be electrical, civil and hire, and we see a really strong next 3 to 5 years in the electrical space around the transmission, the modularized electrical manufacturing space, and rolling that into Firmus and other related parties.

Yes. Great. And just a final one for me, obviously, just following on from that, talking about the big pipeline that you see and strong growth over the next 3 to 5 years. Yes, just in terms of your views in terms of the organic opportunities. And I guess, can you give us any color on just the potential pipeline of opportunities out there for M&A? That's all for me.

Look, I mean, everything that I spoke about this then is all organic. We will, look like we have in the past, to fill in parts of our supply chain and related or downstream parts of each of those businesses. We're not -- we're certainly not running out of opportunities and opportunities are presented every day that we put through our investment committee. And we don't think that we will not run out of opportunities, Mitch.

Our next question today comes from John Campbell with Jefferies.

Just on the guidance, the $120 million to $140 million EBITDA. So that is effectively all the retained segments, but pre-corporate head office costs. Is that right?

No, it includes the corporate side.

So that includes -- so that will be effectively what -- sort of Maas will look like post divestment as group EBITDA?

Yes, there might be a little bit of corporate efficiency [ obtained ] still working through that, but that's a pretty good guide.

That's in FY '26 pre any growth or any reinvestment of the capital, et cetera.

Yes, yes. Okay. That's good. And you've sort of touched on it already, but I might just ask it anyway. So post the settlement of Construction Materials with Heidelberg in the second half, our understanding is that you have no plans for any significant capital return at this stage. So could you just sort of confirm, a, that there's no further equity investment in Firmus beyond what you've already done? Secondly, that Firmus, if you do get a much expanded relationship in terms of supply relationship, it won't require any material CapEx. And assuming that's the case, can you just give some thoughts about -- because you're going to have a very strong balance sheet with, at this stage, a lot of uncertainty for investors, I think, as to how you plan to deploy that? Any updated thoughts on that would be really good.

Regarding electrical works and contract works with Firmus, there's no required CapEx. So we have the facilities and the capability that we can expand to meet the requirements. On the investment or further investment, there's nothing further intended at this point in time. And in regards to the reinvestment of that capital, I mean, at this point in time, we aren't in a position to confirm any acquisitions or where we are where we are definitively going to invest that capital. But I can just say that we've got a number of opportunities with or around the existing segments that we have today that we can -- and we believe we will invest that capital for a sufficient return. And I would just point you to the past 5 years where we've highlighted, we've made a 28% return on capital per annum across the whole group and where we've actually realized the sale event, we've made a sale event and realized 56% return on capital. So we would just guide you to the past is a picture of the future, and we are unchanged in our overall strategy. And we're just -- we're allocators of capital that we've -- and disciplined in our approach to deploying that capital.

Okay. Just quickly, last question. So it's been reported that Firmus has secured, I think, a $10 billion (sic) [ USD 10 billion ] financing facility. Since that -- since that announcement has there been any further real discussions? Because at this stage, what we've -- what you've released is just that initial 100 megawatt. But has there been any sort of update in your discussions with Firmus for work beyond that 100 megawatt?

There's definitely been discussions in -- we're working on several opportunities and projects, but we don't have a signed contract, and we can't disclose those discussions at this point in time. It will be -- that's Firmus' job to deliver that news over the coming weeks or months. But I can Blackstone didn't give them USD 10 billion without a pipeline and without clients.

And our next question is a follow-up from James Ferrier at Canaccord Genuity.

Within the resi business in the FY '26 guidance, what's the build-to-rent quantum within that 240 to 260 settlements?

Very small.

Very small, James, just bear with me, I'll see if I can find it for you. [Indiscernible] or something in total. It's really just the sale of the residual portfolio, so.

I think, it'd nearly be gone completely or if not, there will be single digits left.

Yes. Okay. That's good to know. And then back on the CCH segment or it seem to be renamed CCH segment. This business historically has had a bigger weighting to civil. Going forward, it's clearly going to have a much bigger weighting to electrical. What, if any, changes does that mean in terms of typical contract structure, whether it's sort of a shift to more fixed price or whether it's a shift to more cost plus? What sort of changes do you think occur in the mix with that contract structure typically?

Look, I think it will be similar to the past, although the largest growth in our in our CCH book is the electrical book. And at this stage, it's very materially weighted in the manufacturing space. So it's quite a positive area where we progress payments and et cetera. So we're not taking contractor risk or site condition risk. It's a lot of manufacturing delivery commissioning.

Yes. But are you sort of taking on a fixed price per unit type contract and therefore, the onus is on you to deliver that as lower cost as possible?

The answer is, yes.

Yes. Okay. That's helpful. And lastly, a similar sort of question, but what, if any, changes do you see around the cash flow and working capital, in particular, requirements for the CCH segment going forward relative to where that working capital impost has been in the past?

Fairly unchanged, like we're able to manage that through progress claims, et cetera.

Yes. Okay.

James, just confirming it's 11 build-to-rent, so it's 5 to go in the second half. We did 6 in the first half. That's it. That will be the total.

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

Okay. Well, thank you, everyone. Again, if you do have further questions, don't hesitate to follow up with myself, and hopefully, we'll see you in the coming days on our roadshow. Thank you, everyone.

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