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

Thank you for standing by, and welcome to the Maas Group Holdings Limited Fiscal year 2026 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Wes Maas, TBC. Please go ahead.

Thank you. Good morning, everyone, and welcome to our financial year 2026 results presentation. Thank you all for joining us. FY '26 has been a defining year for Maas another record result and importantly, a year where we have taken the strategic steps to reposition the group for its next phase of growth. I look forward to taking you through it now. In terms of the agenda, I'll go through the first 2 sections, our business strategy performance and outlook and our business unit reviews. And now I'll hand over to our CFO, Craig Bellamy, who will go through the group level consolidated financials, and I'll follow up with a wrap. Starting with our FY '26 highlights we delivered another record performance with underlying EBITDA of $300.3 million, up 37% on the prior year and in line with our guidance range, driven by a strong continuing operations result in the investment uplift on our Firmus holding. Importantly, our continuing operations underlying EBITDA, excluding the investment uplift was in the -- was $143.3 million up 37% on the prior corresponding period and above our $1.30 to $1.35 continuing operations guidance range, demonstrating the strength of the ongoing business. Underlying EPS of $0.342 was up 51% on the prior year, driven by a record underlying NPAT. On a statutory basis, NPAT attributable to owners of MGH was $136.1 million, up 89% on the prior corresponding period, driven by continuing operations growth and reversal of held-for-sale depreciation. A disciplined focus on working capital delivered strong cash flow again of 93%, in line with our targeted range. We recycled $99.3 million of capital during the year, crystallizing around $26.1 million of historical fair value gains with a further $158.3 million contracted to sell over the next 18 months. We have historical electrical work secured in hand of $1.2 billion to be executed over the next 18 months, providing locked in continuing business earnings growth for FY '27 and beyond. Our leverage ratio of 2.6x sits within our targeted range of 2x to 3x, and we'll sit well below this range upon settlement of the sale of our Construction Materials business. Consistent with our new capital management framework, our focus on maximizing total shareholder return, the Board has not declared a final dividend. Our share buyback program will remain active. And the headline for the year, the sale of our Construction Materials portfolio at Heidelberg for $1.7 billion has now been approved by the ACCC and is on track to settle in October 2026. On the safety front, our LTIFR increased from FY '25 to FY '26 to 5.6%. While we've made substantial progress in recent years, safety performance improvement remains a key priority for the group and a clear focus for management. Moving to Slide 4. Our values-driven culture is the foundation of our success and remains a true differentiator for Maas as we continue to expand and evolve, it is critical that both the existing and new team members not only understand the values but embrace them. our values being trust, commitment, candor, teamwork, leadership and ownership. Pleasingly, our culture and values remain the core strength and are very much embraced across the broad management team, including those who have recently joined the group. Moving to Slide 5. We remain strategically positioned for long-term growth with our investment framework underpinned by a disciplined focus on return on capital employed. What sets Maas apart is a continued focus on supporting key infrastructure markets and aligned founder-led team focused on being a market leader and low-cost provider in each end market, a proven track record of maximizing investment returns through organic growth and accretive mergers and acquisitions, along with a strong, well-capitalized balance sheet to support continued growth. A sharp focus on return on capital has driven more than 20 years of growth, and our integrated operating model provides a genuine competitive advantage in a fragmented subscale markets. Moving to Slide 6, our investment highlights. Our FY '26 underlying EBITDA of $300.3 million was in line with our guidance range, with cash flow conversion at 93% in our targeted range. Underlying NPAT and EPS were up 57% and 51%, respectively, on the prior year. We have a $1.2 billion electrical work order book secured and we remain focused on disciplined capital deployment in the sectors that will continue to deliver strong returns for shareholders over the long term. The Construction Materials sale of Heidelberg has now been approved by the ACCC and is on track to settle in October. This listing that business has delivered around 50% per annum return on capital employed and the Greater Group has delivered 27% per annum return on capital employed, a clear demonstration of our disciplined focus on returns. Finally, we have introduced a new capital management framework, that prioritizes share buybacks to drive total shareholder return while continuing to support core business execution, our operational pipelines and strategic growth opportunities. Moving now on to Slide 7. This slide captures our disciplined evolution from -- through the infrastructure cycles from the civil construction and hire business to a scaled national plant hire platform to a diversified into materials property and underground through to our ASX listing and the scaling of construction materials. 2026 marks the transition into the next phase. Since listing, we have achieved 29% EBITDA compound annual growth. And an overall 27% average return on capital, a track record we are very proud of. Moving now on to Slide 8. We've been growing our business and capabilities through cycles for over 20 years. Throughout our history, the growth has been very strong, but not linear. We have invariably moved through periods of consolidation and then step changes in growth each chapter of this journey has been built by our people. And it is their work that has taken us from those regional beginnings to diversified national platform we have today. Moving now on to Slide 9. On capital allocation. We are announcing a new capital management framework focused on capital allocation initiatives that maximize long-term shareholder value. The model itself is straightforward capitalist directed to whichever use delivers the best long-term return, buying back stock below -- whereas below intrinsic value, repaying debt to cut gearing and protect headroom, acquiring into industries with macro tailwinds investing organic CapEx above our hurdle rate and recycling assets once they have reached their full value. Consistent with that framework, MGH will seek shareholder approval to expand the on-market buyback program to 20% of the issued capital over a 12-month period. Since February 2026, we've allocated $55.1 million to share buybacks acquired at a discount to the group's intrinsic value and in line with the enhanced framework, no dividend has been declared for FY '26. Moving now to Slide 10 and sustainability. We're committed to operating in a sustainable way, recognizing the important role we play in reducing environmental and climate-related impacts. We continue to invest in lower carbon product lines and alternative fuels to build our environmental data collection and reporting, including our Scope 1 and Scope 2 greenhouse gas emissions. In FY '27, following the Construction Materials sale, we will enhance our sustainable reporting practices and review our mission profile to support future reporting requirements. Moving on to Slide 11. Health and Safety, ensuring our people return home safely each night is our top priority. In FY '26, the group recorded an LTIFR of 5.6% compared with 4.7% in FY '25. And a TRIFR of 16.7% compared to 15.8% in FY '25. Total recordable injuries increased to 94% from 89% in FY '25. These results remain above our benchmark targets and a clear area of focus for management. We remain committed to reducing these frequency rates through visible leadership, strong critical control commitments and targeted risk reduction initiatives. Moving now on to Slide 12. Our people, culture and community. As a values-driven company, we're committed to the well-being of our people and communities in which we operate. We now have around 2,143 teammates and 33% female representation in our senior executive team. We build capability from within through external training mental shift, hands-on experience initiatives, our Maas Edge leadership program. In FY '26, we supported 80 trade apprenticeships and traineeship positions, including 37 trainees and accredited programs. We also continue to support initiatives that reflect who we are as an organization. Some of these include the Children's Hospital, momentum health charities, grassroots, sporting and community organizations and programs that create lasting impacts to the regions where we operate. Moving on to Slide 13, the market overview and trading conditions. The outlook. We see strong digital infrastructure demand is driving growth in our Electrical division coupled with how wind opportunities in our other businesses. Demand and pricing for the self-storage and industrial projects remain robust, supporting our capital recycling initiatives. We have strong pent-up demand, housing demand and low rental vacancy rates, which are positive in the markets we operate, such as Rockhampton, Dubbo, Tamworth and others. We expect strong revenue and profit growth to continue with our operations in FY '27. Key factors include here is the electrical work in hand, becoming a very dominant force a substantial carry-in of more than 200 residential land locks and 158.3 sales in our commercial division. And we have a very strong balance sheet following the construction material site supporting and earnings accretive for redeployment of capital in Q2 FY '27. As usual, we expect to provide further update on trading conditions and outlook at the Annual General Meeting. Moving now into the business units and on Slide 14. On FY '26 underlying EBITDA contribution basis, Construction Materials represents 41% of the segment EBITDA. Civil construction and hire 23%; commercial real estate, 21%; residential real estate, 11% and manufacturing 2%. Together, our industrial operating segments and real estate operating segments provide a diversified platform across the infrastructure supply chain. Moving now on to civil construction and hire in Slides 15 and 16. We had an outstanding year revenue increased significantly on FY '25 driven by growth across all streams with the segment benefiting from contract wins in the second half '25 and the first half '26 on data center renewable and mission projects. The segment EBITDA increased by 64% to $65.1 million on segment revenue of $424.9 million, up 47%, driven by a strong contribution from Electrical and increased plant utilization with EBIT up 113% to $47.6 million. Cash flow conversion of 86%, is consistent with the long-term averages of this segment. Looking forward, the significant contract win on the pharma electrical manufacturing order of $855 million is expected to provide significant benefit to FY '27 and beyond. Our electrical infrastructure project for Firmus was over our initial electrical infrastructure project. Our previously announced was over 40% complete in FY '26 and is expected to be delivered in the first half of FY '27. We are seeing improving momentum with increased utilization benefiting from Plan high as renewable and transmission projects scale up, a solid work in hand of $1.2 billion on the electrical projects drive continued growth and additional opportunities for significant electrical infrastructure projects outside of Firmus. Moving now on to residential real estate. Revenue increased in FY '25 driven by additional land settlements with 253 lots versus 151 in FY '25. This is excluding the build-to-rent, coupled with increased housing revenue. EBITDA, excluding fair value gains increased by 64% to $28.8 million, driven by additional land settlements. The business has settled 264 lots in FY '26, including the disposal of 11 build-to-rent properties versus 201 in FY '25. Land gross profit per lot was around 105,000 against 112,000 in FY '25 driven by real estate product mixes and overall -- I must say, overall pricing remains stable. The outlook is strongly positive. We have a strong FY '27 carrying of 200 lots already secured. Stage 1 of our elite estate in Rockhampton has settled more than 60 lots in the second half of '26 with strong underlying demand already driving price increases, and we continue our focus on the master plan community strategy while developing opportunities to realize capital from some in global sales. Moving now on to commercial real estate. Segment revenue decreased on FY '25, which included a large land inventory sale representing around 13% of that year's revenue. The external commercial construction revenue also a little subdued, where we've delivered a higher proportion of internal developments in the period. EBITDA increased 20% and to $59.4 million, driven by fair value gains with EBITDA, excluding fair value gains, lower given the FY '25 land sale and the internal works mix. The fair value gain on investment properties was $57.4 million, up on FY '25 was $38.3 million, with around 62% of the FY '26 related to properties under contract expected to settle over FY '27 and the first half of FY '28. The segment recognized proceeds on the sale of developments of $93.6 million in FY '26 above book value as part of our capital recycling program, also crystallizing $24.9 million of previously recognized fair value gains. Looking ahead, in addition to the $93.6 million of proceeds received in FY '26 segment has also contracted a further $142.6 million of sales expected to settle in FY '27 and the first half of '28 and the aerotropolis is expected to contribute materially in FY '27 as key project milestones are achieved. Moving now on to Construction Materials. Segment revenue increased 24% on FY '25 to $629.6 million, driven by the full year contribution from businesses acquired in the prior year. EBITDA was largely in line with FY '25 at $115.4 million, with a softer contribution from the quarries and concrete business relative to FY '25. Margins were compressed by fuel cost inflation from February and softer demand across quarries and concrete, though management regards these pressures in the short term. Importantly, the return on capital achieved for construction materials, incorporating the gain on from the Heidelberg transaction is around 50% per annum since listing, a standout outcome and validation of our disciplined quarry led strategy. On the outlook, the ACCC has approved the transaction and is expected Heidelberg Materials Australia will settle in early October 2026. On Slide 23, a little more on the sale of Heidelberg gross proceeds of $1.7 billion including a contingent consideration of $120 million, which is primarily around some approved -- 3 quarries yet to be approved. The transaction accounts for around 1,140 employees that move across in the transaction and net proceeds after tax and minority interest and debt transfer is expected to be around $1.3 billion. We're extremely proud of the Construction Materials business we've built over many years, the scale, the quality and the performance of the business is a testament to the hard work and commitment of our people and is reflected in the premium value recognized through this transaction, which crystallizes value and positions for the group for the next phase. I will now pass over to our CFO, Craig Bellamy, to take you through the financial performance.

Thanks, Wes, and good morning, everyone. Starting on Slide 25 and the group underlying profit and loss. And as Wes has already highlighted, MGH delivered a record underlying EBITDA for FY '26 at $300.3 million. This represented growth of 37% on the prior year and finished in line with our updated guidance range of $300 million to $310 million. Importantly, our continuing operations underlying EBITDA, excluding the fair value uplift on our financial assets, was $143.3 million, an increase of 37% on the prior period of $104.3 million and also exceeding our guidance range of $130 million to $135 million for the continuing business, once again demonstrating its strength. Revenue for the year for the group increased by 27% to just shy of $1.3 billion with the key drivers being growth in the civil construction, electrical plant hire and residential from the continuing businesses. EBITDA growth was underpinned by strong contributions from civil construction and higher and residential real estate segments, together with the fair value uplift of the group's investment properties and investments. Our other income was $108 million with the 2 largest contributors being the $41.7 million uplift on our financial assets and also the property fair values of $60.4 million. Of note, the property fair value as Wes has already mentioned, 60% of the fair value achieved in FY '26 is already contracted with approximately another $20 million of historical fair value gains also under $0.42, an increase of 51%, once again driven by the continuing operations. Turning to Slide 26 and the expenses. Our expenses increased by 30% for the year with $76 million of the increase attributable to the businesses that we acquired during FY '25 and '26 and a further $169 million increase attributable to the organic business, broadly in line with the revenue growth. You'll see on the slide, there's adjustments there of $51 million in relation to the expense line with the majority of that being $42 million relating to our minority interest in the asphalt entities. Of the depreciation, it increased by $6.5 million to almost $64 million driven through acquisitions, and our amortization was up slightly to $6.5 million. Of note in our underlying results, we have added an additional charge of depreciation and amortization of approximately $20 million from the statutory numbers to reflect the depreciation charge that would have been made in the accounts should the construction business materials business have been retained. Turning to Slide 27 and looking at the underlying cash flow. The operating cash flow before inventory, interest and tax was $183.5 million, representing a cash conversion of EBITDA ratio of 93%, which sits within our target range and reflects disciplined working capital management across the group. This was another strong result across the continuing business with all key operating segments continuing to convert earnings to cash effectively. The group invested $82 million into land inventory development during the period, up from $44.5 million in the prior period, supporting the strong demand and pipeline across the residential portfolio. Our net maintenance CapEx was $22 million for the year as compared to $9 million in the prior year, and this is really driven through an historically low net maintenance CapEx in FY '25 as well as the increase in the Construction Materials business that occurred during FY '26. Turning to Page 28 and looking closer at the segment cash flows. Pleasingly, the continuing business segments again delivered strong conversion with civil construction and hire at 86%, which is consistent with our long-term average for this segment and our residential real estate and manufacturing achieving greater than 100% conversion. The overall working capital outflow for the year was $13.2 million, driven by movements in the businesses as they scale. The net outflow was in part impacted by the customer prepayments in FY '25 that unwind during FY '26. The commercial real estate conversion of negative 50% reflect more so the timing of the development spend and the fact that the significant portion of the segment earnings were fair value gains on properties that are contracted but not yet settled and which will convert to cash on settlement. And as we said, the fair value gains largely relate to the gains in the real estate segment and the unlisted investments, which are recognized in our corporate segment. Turning to Slide 29 and the capital investments. Total capital investment for the year was $140 million, reflecting a deliberate shift towards strategic investment whilst maintaining disciplined capital allocation across the continuing business. The most significant investment was $121 million in unlisted companies, primarily driven by $110 million investment into Firmus. We had acquisitions in the Construction Materials division relating to the joint venture of the Coltec Asphalt and the acquisition of the Coles Tomago asphalt and paving business, which are both in through our Asphalt joint venture. And we undertook growth CapEx during the year also focused on the expansion in our Electrical business and also our asphalt delivery. We also invested $45 million in our development pipeline in our commercial real estate business. Turning to Slide 30 and the capital recycling. The group realized proceeds of almost $100 million during FY '26, which has crystallized $26 million of historical fair value gains, reinforcing the validity of the valuations we carry on our balance sheet. In addition to the proceeds realized in the year, a further $158 million of property sales were under contract at year-end, comprising $66 million expected to settle during FY '27 and $92 million in the first half of '28, supporting a strong capital recycling outlook. On a realized and secured basis, the program represents $257 million of proceeds which will monetize a cumulative $83 million of total gains once all properties settle, demonstrating our continued focus on recycling capital at attractive returns. This capital recycling program remains central to how we maximize return on capital employed within the continuing commercial real estate business. Turning to Slide 31 and our net debt liquidity. Our leverage ratio at 30th of June was 2.6x, sitting well within our target range of 2x to 3x and well under our banking covenant driven by a strong FY '26 financial performance. The group's total underlying net debt at 30th of June was $826 million, of which $745 million relates to the continuing operations. And liquidity at year-end of approximately $479 million with $400 million of undrawn facilities. The net proceeds from the Heidelberg transaction of approximately $1.3 billion, which was already expected to settle in October will provide significant additional balance strength following completion supporting earnings accretive redeployment of capital in line with our strategy. During the year, we also advanced the Aerotropolis line to build capital on a capital-efficient back-to-back line with metrics and completed an accordion refinance in May '26, and we will be embarking on a refinance of our syndicated debt facilities during the first half of '27 to match the facilities in line with our business going forward post the sale of the Construction Materials business. Turning to Slide 32 and the capital employed. The group return on the capital employed improved to 14%, up from 11% in the prior year. More importantly, the continuing operations has delivered a return on capital of 19%, a significant improvement on the 10% of the prior year reflecting the improved earnings profile of the ongoing business, particularly the strong recovery in civil construction and higher, which improved to 21%. The best illustration of our disciplined focus on return on capital listing. The divestment of construction materials will provide a significant reduction in capital employed post settlement, freeing up capital for redeployment while our strategic investment into Firmus will also -- has provided a significant upside during FY '26. We have continued to maintain our capital discipline through prudent investment into residential land inventory in response to market demand and our ongoing capital recycling to maximize capital returns. And turning to Page 33 and before I hand back to Wes, a brief word on how we will report from FY '27, reflecting the transformation of the group following the divestment of the construction materials. From FY '27, MGH will report across 4 operating segments led by electrical. Our existing civil construction and high segment will be renamed electrical, reflecting that is now a business led by our electrical manufacturing. Our residential real estate is unchanged and continues to comprise our residential real estate development activities. Our commercial real estate is also unchanged and continues to comprise our commercial real estate development, including the Aerotropolis asset. Finally, we are introducing a new segment, MGH Investments, which houses our investments that are aligned with our strategy. This realignment will give investors a clearer visibility of the earnings drivers of the continuing business and reflects the strategic positioning of the group as we move into the next phase of growth. That concludes my presentation, and I'll now hand back to Wes for closing comments. Thank you.

Thanks, Craig. So to summarize the key messages. FY '26 has seen a record result in line with guidance, including 93% cash flow conversion. We have $1.2 billion of secured electrical work in hand, which will drive FY '27 and beyond. We've got a proven operating model aligned to powerful structural tailwinds and the sale of Construction Materials portfolio to Heidelberg, crystallizes premium value to shareholders and demonstrates our disciplined return on capital employee focus. We've also announced our new capital management framework that prioritizes share buybacks to drive total shareholder return. To wrap up FY '27 has been a transformational year for Maas. We delivered a record result. We crystallized significant value through the Construction Materials transaction, and we've positioned the group for its next strategic horizon. None of this happens without our people. I want to thank everyone of our team across the group, including those expected to transition with the Construction Materials business for their commitment, care. I remain very committed to the group and business and genuinely excited by the growth and the opportunities ahead. I appreciate your continued interest in our company, and that concludes our formal presentation. I will now open up for questions.

[Operator Instructions] Your first question comes from Mitch Sonogan with Macquarie. Sorry about that. Your first question comes from Liam Schofield with Morgan.

Just on the $855 million contracts Wes, can you just sort of touch on your capacity to deliver. Where are you assembling the power cubes? What sort of production rate can you deliver? And then just sort of dovetail that into the additional opportunities that you touched on in the announcement?

Sure. I think we've said that the $855 million would be delivered within an 18-month period. We've got large-scale manufacturing facilities in Australia and through our locations at Newcastle Orange, Gabba and also some components being built in Vietnam. On the -- what was the second part of the question, sorry, Liam?

Just the additional opportunities that you flagged.

Yes. I mean the electrical business is quite diverse. So we cover distribution, transmission, manufacturing and then our power service unit. We're seeing strong demand in the transmission space. Obviously, there's significant tailwinds in the digital infrastructure space and many of those projects where we're looking at working in the transmission space just in that manufacturing space across the other parts of the offering.

And just on the aerotropolis, will you sort of start booking fair value gains, our thinking in '27 as you kind of go and revalue those lots?

That's -- we -- but possibly, I would say, it just depends on vision during FY '27. But once again, it will be sort of like effectively milestone driven, which will effectively drive those valuations. But under the accounting standards, most likely there will be some contribution.

So just think about it as interest income going through that commercial real estate line?

Yes. At present, you can see in the in the accounts, it's in the stats, there's a fair value component, which has been adjusted to the interest -- the net interest expense in the underlying result. So yes, just the interest play at this particular stage.

[Operator Instructions] Our next question comes from James Ferrier with Canaccord Genuity.

Just following on from Liam's question there around aerotropolis opportunity. I've not chance to check the accounts yet. But so just what you're saying, Craig, there is there is some influence on the income statement with the net impact of interest expense and interest income.

Yes. So the way it's presented in the stats compared to the underlying, and you'll see there's an adjustment in the statutory accounts as a fair value adjustment for the coupon, which has been adjusted to net interest expense for the underlying, you'll see there's a slight difference there of around $6 million to $7 million in terms of that. So it's been adjusted out of EBITDA from the underlying result. The net effect is there's obviously an interest expense line, the net effect at the NPAT level is effectively 0 for this financial period.

Yes. And what's the balance sheet impact? Are you recognizing that drawdown with metrics on balance sheet as debt and the...

Yes, we are. So there's effectively a financial asset there for the amount that's been advanced out by us and there's a financial liability for the drawdown from metrics.

Yes. Okay. Great. And so just so I can get the numbers right, I think it was $775 million was the net debt number ex leases. And I think 20 of that was advanced to aerotropolis right, so I can back the...

So from a net debt, because it's a back-to-back sort of scenario, the growth. If you're looking at growth excluding the receivables, then obviously, it would be a higher number, but effectively from that basis, it's been set off. So there's really a very negligible effect on the debt basis from the aerotropolis, which given the fact that was announced is prior to 30th of June, is what you'd expect.

Yes. Okay. Understood. With the first firm contracts, so the reference there to having over 40% completion, has that translated to an equivalent revenue recognition? And what's the margin achievement that you've booked in these numbers?