Mader Group Limited (MAD) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Mader Group Full Year Results Announcement. [Operator Instructions]. I would now like to hand the conference over to Mr. Justin Nuich, Executive Director and Chief Executive Officer. Please go ahead.

Thanks very much, Sherry. Good morning, everyone, and welcome to Mader Group's Full Year Results Presentation for the 2026 financial year. Joining me today as well is our Chief Financial Officer, Paul Hegarty. As Mader moved into its third decade of operations, we are proud to reflect on [ a while so ] year for the group, marked by stronger achievement [ to ] business. This year, we successfully closed out the final year of our first 5-year strategic plan as a listed company, delivering record annual revenues of [ $1.1 billion -- $1.1 million ], a 15% increase on FY '25. This incredible achievement reflects the discipline and precision with which our teams operate across the globe. Through their commitment, they have continued to grow our customer base, strengthen our market position and further establish Mader as a leader in technical services across industries. Our people have played a critical role in achieving the results we're presenting today, and I'm truly grateful to their contribution. Now we've got quite the deck to get through. So with that said, let's dive into it. For those that are unfamiliar with our journey, Mader was founded in 2005 by our Executive Chairman, Luke Mader, identifying an underserviced niche in the industry, we've started providing flexible maintenance solutions to customers with the youth or trucks for our North American [ listeners some tools ] and a vision. Today, that vision has led moved to become a global business, delivering a wide range of technical services across multiple industries in 10 countries. Back [ side ] of more than 4,500 skilled employees around the world. We proudly provide support for the 520 customers in more than 685 locations. As you can see on this slide, we have successfully evolved into a truly global diversified company with our unique business model replicated across multiple industries and service lines. While launching fully organic start-ups in new markets, expanding geographically and broadening our suite of trades, we have delivered around 30% comparing annual growth over the last 10 years. As I mentioned earlier, this achievement would not have been possible without our people, which leads nicely into our next slide, highlighting the specialized workforce that makes it all happen. From the start, a core part of [ Lex ] vision to Mader was to build a workforce where people not only take pride in what they do, but also get the job done while working alongside their [ rates ]. This idea has grown from one mechanic into a global business, comprising a highly skilled team of technicians, each with diverse and specialized skill sets. This includes heavy mobile [ agreement ] technicians, auto and high-voltage electricians, road transport and light vehicle mechanics, fixed plant trades, welding and fabrication and so much more. While we strive to build meaningful careers for people at any stage in [ Mader ] as you can see on the screen, around 60% of our workforce is under the [ agency ]. This is largely driven by our culture and the flexible and adventurous career pathways that our [ world ] offer. Mader's unique offering typically attracts people who are looking for more logistic job and rather a career for [ an endless ] adventure and opportunities. Complexible [ Ross ], site variety and diversity across industries, locations and equipment, we invest heavily in our [ network ] so we can deliver opportunities that are truly unrolled within the industry's work. The 2 core drivers to this are on the spoke culture-led programs, global pathways and [ 3 years ], which I'll speak more on later. However, one thing that has remained unchanged since day 1 is our commitment to the safety of our people. This financial year made a reported -- a total recordable injury frequency rate of 3.65 recordable injuries per [ million ] hours, made a strong safety track record was supported by ongoing education, innovation and investment in our geared to safety program. This continued strengthening -- the strengthening of motors engineered safety controls within its global service vehicles, as well as hosting more safety focus Mader [ date ] across our global operations, while continuing to recognize positive behaviors through field-based safety awards and engaging vehicle campaigns that reinforced our commitment to sending everyone home safely. Now moving on to the executive overview. I'd like to provide a quick summary of our FY '26 highlights. In FY '26, we delivered a record annual revenue of [ $1.101 billion ] an increase of 15% versus the prior corresponding period. NPAT closed out at $65.4 million, up 15% on the PCP. And furthermore, our balance sheet was strengthened delivering a net cash of $35.7 million, up from $8.3 million in net debt versus the PCP. The labor markets in which we operate continue to exhibit extremely competitive divisions. However, through our multidimensional recruitment pathways, strong brand and attractive employment opportunities, we delivered strong net headcount growth of Circus 600 during the financial year. Demand remains strong across all regions with our core mechanical and other industries vertical service offerings, consistently meeting customer needs. The North American segment continued its steady growth profile delivering $186.6 million in revenue, a 12% increase on the PCP or more importantly, a [ 17% ] on a constant currency basis. And we successfully closed out our 5-year strategic plan, exceeding market guidance year-on-year during this phase. So let's have a look into how our geographical segments performed. As you can see on the left, in Australia, revenue was up 16% versus the PCP, delivering $797.7 million. Infrastructure maintenance and ancillary services delivered strong revenue growth of 45% and 37%, respectively, versus the PCP. In North America, revenue increased by 12% or 17% on a constant currency basis, producing $186.6 million for the full year. We also achieved a record headcount of 660 employees within that region. In Canada, headcount growth was supported by our global [ pata ] program, which deployed more than 240 technicians in FY '26. And jumping over to the Rest of the World operations, we provided [ specialist ] services and technical support to customers in 7 countries across Africa, Asia and Oceana. We mobilized close to 50 technicians to fulfill these projects in these regions. I'll now pass over to our CFO, Paul Hegartt, to run through the financials in more detail. Paul, over to you.

Thanks, Justin. Good morning, everyone, and thanks for joining us on the call this morning. As Justin mentioned, we delivered record annual revenue of [ $1,101 million ] up 15% on the PCP. This result marks the end of the group's first 5-year plan as a listed company and is a significant achievement. When this plan was enacted in FY '21, our annual revenue was circa $300 million, delivering an NPAT of $19.3 million. To be standing here today, having delivered the strategic plan outcomes and being part of a much larger, more diversified business is a momentous occasion and something we have Mader are all extremely proud of. Importantly, this revenue growth has been delivered to plan, and not at the cost of lower margins. Over the last 5 reported financial years, the group's NPAT margin has not deviated by more than 0.6% between the highest and lowest reported year. From a shareholder perspective, EPS increased to a record of $0.322 per share, an increase of 14% versus the PCP. The Board has elected not to declare a dividend in respect of this financial year given a number of organic and inorganic growth opportunities that are being considered at present. Let's move on to the financial position. As you can see, our asset base primarily comprises cash on hand, trade receivables and property plant and equipment. Our trade receivables position is largely with Tier 1 principles and large mining contractors. And generally, touchwood, we don't have any abnormal credit risk profiles in the debtor book. Our DSO improved by 2 days during FY '26, closing the year at 67 days. Our disciplined use of capital and asset base is reflected in our return on invested capital, which was 25% in FY '26. Importantly, this isn't a one-off. These returns have been consistently delivered at this rate over many years. Likewise, when it comes to our return on assets that closed FY '26 at 18%, a slight improvement on the PCP. We are well supported by our Australian lenders, in particular, now than Westpac, the flexibility that has been established within our finance facilities allows us to respond quickly to opportunities when necessary. Finally, we announced about 18 months ago, a plan to transition the business towards net cash in the medium term. I am pleased to update you that this has now been achieved with a net cash position at 30 June of $35.7 million, up from a net debt position of $8.3 million at the PCP. This will allow greater flexibility and freedom to make strategic decisions around future growth. Now on to the cash flow slide. Our net cash flows from operations was $85 million for the year. Our intense focus on EBITDA conversion was maintained, operating cash flows before interest and tax as compared to EBITDA were 99%. This reflects the quality of our client base and trade receivables ledger, as I mentioned earlier. Free cash flow generation continued to improve year-on-year. In FY '26, the group generated $57.5 million of free cash flow. This is reflective of the shift in capital requirements as the group expands its revenue base into new opportunities that are extremely capital light. This is expected to continue into FY '27 with our capital expenditure expected to be between $30 million and $35 million for the year which is about the same level as it was in FY '26. Given this strong free cash flow generation is expected to continue into the new financial year. As I mentioned earlier, the group is now in that cash position, much to the disappointment of our lenders. This place is Mader in an enviable position to tackle the next phase of growth. This funding flexibility will be critical to achieving the next 5-year strategic plan, which Justin will talk about in a few slides time. That's all for me. Back to you, Justin.

Thank you, [ Paul ]. Good set of numbers, well done. So 5 years ago, the Board led the foundation for our future. By setting out some key areas of focus in our strategic plan as a publicly listed business. Since then, this has been a blueprint to guide our growth. The strategic plan set growth targets and operational goals in 4 key areas while keeping culture at our core. Number one was geographical diversification. The second was service line diversification. Third, expansion of industry verticals. And fourth, and definitely not least, of course, to scale the existing business. Further, ambition stretch targets for NPAT was set and successfully exceeded. And now with our first 5-year strategic land complete, we look forward to the next 5 years and continued long-term growth beyond. This 5 years we are embarking on is the next stepping stone on the way to a generational plan to build Mader group into a large global industrial [ com grower ]. So let's take a deeper look at what the future looks like. Over the next 5 years, Mader will activate accelerated growth initiatives in new service verticals as part of our global expansion strategy. Our focus will be on front-end loading of high-growth areas, mergers and acquisitions, increased development pathways, capital investment into growth and new market benches. All building blocks that will lead Mader towards the goal of becoming a globally diversified industrial encore. As always, Mader strong culture continues to be the foundation of its business model. So let's have a look at what's expected over the coming years. Over the next 5 years, the business expects to deliver the following things: circa 15% EPS growth per annum, existing strong margins are to be maintained, capital investment of $30 million to $50 million per annum and expansion into new markets. These initiatives will be pursued while maintaining a measured leverage position and delivering market-leading returns on capital. So now that we've covered our growth trajectory. Let's have a look at the core building blocks on delivering this next phase. So just deliver the next phase, Mader is focused on the following 5 core building blocks, continuing to increase our footprint into the opportunity-rich North American market, continuing expansion across the industries in Australia and in new verticals beyond our existing service lines through organic and inorganic means, investing in workforce development power plays and maintaining our culture led approach. Together, these building blocks position our business to sustainable growth while staying true to the values that define our success. Now let's jump across to our workforce. A key differentiator for Mader is its unique global workforce opportunities and culture-led approach. Our success is built on attracting and retaining a highly skilled team that delivers a premium service to our customers worldwide. We support our people through structured career development, including the global pathway initiative, which creates opportunities to work and grow across international markets which I'll touch more on [ sure ]. We also invest heavily in our leadership capability, strengthening our entire leadership team to drive strong accountable operational performance. Complementing this [ is 3 years ], our employee engagement and retention program, which helps build culture from the ground up. Together, these initiatives create a motivated, capable workforce that underpins Mader onto its long-term growth. So let's jump across investing in our people. This is a key pillar for Mader's long-term success. Through mentoring, training and structured development programs, we create clear career pathways that support progression from field-based roles into leadership and management positions and beyond. This approach has helped build a strong homegrown leadership pipeline from within the business with 89% of Mader management and 82% of general managers and executives beginning their career as technicians. In addition, our general managers and executives have an average tenure of 11 years, reflecting the strength of our culture and employee retention. By investing in our people, we strengthened culturally aligned leadership capability, preserve operational expertise and support sustainable growth across the entire organization. So let's look at how we're looking our opportunities globally. Our global pathway initiative connects our people with career opportunities across the world. With employees already participating in overseas placements and 2-way transfers between Australia and North America are underway, the program supports talent mobility, workforce development and access to global telecos. FY '26 alone saw more than 240 specialists deployed to North America and almost 50 across other countries in Asia, Africa and Oceana. Global Pathways has been a key enabler of both employee growth and major international expansion. And I think needless to say, with the [ assistance of Elbow and Jim's ] latest budget, it has never been easy to convince people to [ embark on ] an offshore opportunity. Now let's look at our offshore demand over the coming years. The demand for skilled trades people continues to outpace supply, creating a significant workforce challenge across Australia's mining and resources sector. As you can see on this slide, more than 24,500 additional BET qualified [ roses ] are needed by 2035 to meet Australia's mining and resources [ metal ]. With that said, access to skilled labor will be a key differentiator and Mader investment in recruitment, training, development and retention positions our business to meet this demand and support ongoing growth. This challenge really puts Mader in the backseat to utilize its many angles. It has to fulfill the gaps on top of our existing 4,500 people, creating a significant market to get started. On the topic of talent, let's have a look at one more of major key training and upskilling progress. As we've seen in the previous slide, demands of skilled technicians continues to grow. Mader is proactively investing in its future workforce and one of the ways we do this is by the trade-up program. This program helps bridge the skills gap by developing and upscaling tradespeople across key markets while creating long-term career opportunities for employees. Since inception in 2019, over 520 apprentices and graduated from the program across Western Australia, Queensland, New South Wales and Canada. So let's take a look at our multidimensional recruitment model. As represented in this slide, Mader's workforce pipeline is supported by a multichannel recruitment strategy that has been designed to deliver still talent at scale. While combining employee referrals, international mobility programs, new talent pools, team-led hiring and rapid mobilization capabilities, we can efficiently attract and deploy employees when they need it the most. This recruitment model and approach supports growth while maintaining the flexibility to respond to changing customer demand -- so let's jump across and take a look at the resilience of the Mader business model. This is probably one of my favorite slides. So this will highlight the resilience of our business model and its ability to deliver consistent growth across varying market conditions. Over the past decade, the business has achieved a revenue CAGR of approximately 30%, growing from $43 million in FY '14 to $1 billion in FY '26. Importantly, this growth has been achieved despite significant fluctuations in commodity prices across iron ore, coal, copper and gold being our highest exposure commodities. Mader's reactive service model allows the business to capture opportunities through commodity cycles, while our employment model provides flexibility for employees and helps protect margins. In addition, the continued diversification of service offerings reduces the reliance on any single commodity or sector. So let's take a look at the opportunity ahead of us in Australia. In addition to our core business, Mader also see strong growth opportunities across infrastructure, transport and logistics, and defense with the defense sector allocated a budget of $897 billion over the next decade. All of these sectors and opportunities share a common need for reliable maintenance, services, skilled technicians and mobile workforce solutions in an already depleted trade-based labor market. With a strong pipeline of infrastructure investment, a large national freight network and substantial long-term [ defense ] team, these sectors represent incredibly attractive opportunities to diversify revenue streams and expand Mader's addressable market within Australia. Moving on. The next slide illustrates the mining process. From extraction of the pit through processing, rail and road transport and ultimately to port operations for export. Today, approximately 93% of Mader's revenue is generated in the excavation and extraction phase of that value chain. This highlights a significant growth opportunity within the resources industry itself. As maintenance expenditure continues across every stage of the process, Mader is well positioned to leverage its existing with expertise, workforce and customer relationships to expand further downstream. While increasing our presence across processing infrastructure, transport networks and port operations, we can capture a greater share of mining maintenance spend and unlock additional revenue opportunities throughout the entire pit to [ for ] -- so let's cross over to North America, the land of opportunity. So North America remains a strong growth segment for Mader with a CAGR of approximately 54% -- in the region. It demonstrates market acceptance and execution capability. Although our entry has been strong, we are still relatively early in our journey in the region with great prospects for expansion and growth. The opportunity for Mader is to continue replicating our proven Australian model across the North American market, which is several times larger in scale, which will have a [ little at now ]. Australia remains Mader's most mature market, generating approximately $800 million in FY '26 revenue compared to approximately $190 million in North America. That said, despite North America's smaller current revenue contribution, the region presents a significantly larger addressable market and a substantial growth in [ late ] -- to start as North America has a population of more than 620 million people compared to around 27 million in Australia, providing a much larger labor and customer base. The mining and resources sector is materially larger with about 3,500 active mines and projects versus approximately 900 in Australia. As you can see, resource production is also significant [ in rate ] across [ Ron ] gas and oil production. With a relatively small share of a very large addressable market, North America remains a key long-term growth driver for our business. The focus is on expanding service lines, increasing market penetration and leveraging Mader's workforce model to capture a greater share of this opportunity. So let's have a look at the opportunity ahead. On this slide, we compare Mader's North American business today with where the Australian business is currently positioned, to highlighting the significant growth highlight -- still Australia is a mature and diversified operation with [ HD ] mechanics making up around 46% of the workforce, supported by a broader mix of trades and multiple service verticals. In contrast, [ 17% ] in North America's workforce is currently made up of HD mechanics, reflecting the business' early stage of development in that region. Labor storages across North America, driven by an aging workforce and declining trade participation creates strong demand for skilled technicians and specialized workforce solutions. Programs such as made a global part initiatives are helping the business access international talent and support access international talent and support workforce growth in this region. Now let's sit across and have a look at our growth -- our postgrowth as a business. Mader's growth strategy has historically been built on organic expansion, underpinned by technical capability, on customer relationships and a customer approach. Now in our third decade, this approach has enabled us to successfully enter new markets and expand into new industries while maintaining operational -- our culture remains a common foundation across every growth initiative, providing a scalable platform for entering new sectors and geographies. While organic growth remains the primary focus, we also remain open to small sinusitis we like to accelerate growth, add capability will provide access to attractive markets. The solvency is simple, acquired more than scale hard, made up as a prudent framework for growth. in capability, leverage culture, new markets and scale efficiently over time. As mentioned in the previous slide, while organic growth remains our primary strategy, we are also evaluating targeted acquisitions. We focus is not on large transformational deals, but on the quarry businesses that complement makes existing capabilities and culture. Acquisitions can significantly accelerate revenue generation and market entry. Allowing Mader to establish a presence much faster than building organically from the ground up. Our key benefit is immediate access to establish customer relationships, improve the market credibility and existing revenue streams. These acquisitions will also overcome various tier, such as the high opportunity sectors like defense, where acquiring can provide access to specialized licenses, accreditations and technical capabilities. as well as work panels that would otherwise take many years to develop organically. So let's have a look over at the FY '26 outlook. If you come to mind back to Slide 10, where we touch on our strategic plan, this slide shows our progress against the NPAT target set. As you can see for the entirety of our first 5-year strategic plan, we have not only achieved but exceeded our impact guidance. These results highlight the strength of our scalable operating model and execution capability. To summarize the approach for the next 5 years, our goal towards becoming a globally diversified industrial conglomerate is well underway. During this next phase, the business expects to deliver the following: circa 15% EPS growth per annum, continued strong margins, capital investment of $30 million to $50 million per annum. New market expansions, our measured leverage position and market-leading return on capital. With existing solid foundations, made is strongly positioned to continue building a global business at scale that pushes boundaries and delivers long-term value for our shareholders. customers and employees alike. I'd now like to cover our FY '27 guidance. FY '27 is a year of heavy strategic investment and front-end loading of high-growth opportunities. We expect revenue of at least $1.13 billion of NPAT and at least $72.5 billion -- sorry, $1.13 billion of revenue and NPAT of at least $32.5 million all while expanding to new margins and packing high-growth opportunity. We will continue building an opportunity which is to capitalize on future growth prospects. Our focus is simple. Good scale, strengthen our portfolio and deliver market-leading returns over the long term. Now let's say, look at our investment case. With Slide 26 wrap up or improve confidence as we enter this new financial year. The current and prospective investments made to present a robust investment opportunity with many prospects ahead. That's field adaptable business model, we have grown to have a market cap of around [ $1.2 billion ] today. The resilience and hardware as been shown through in many areas. And within behind us, we'll continue to deliver a superior to invest for our customers and value to our shareholders. So that concludes today's presentation. Thank you for joining us, and we'd be pleased to take your questions at this time.

[Operator Instructions]. The first question comes from [indiscernible] from Unified Capital Partners.

First question here is a great job on achieving the long-term targets, which is good, going from 300 milligrams to 1 bill organically in a small amount of capital is increasing in an achievement. Can we spend a bit more time on the 15% per annum target, Justin. We're quite here were quite large at the moment, and the law of large numbers means to get higher and harder. We'll just growth be a mix of organic and inorganic or mostly small bolt-ons loading the balance sheet strength.

Yes. Thank you, Joe. If you haven't hit enough of my voice in -- yes. But I mean, 16% year-on-year, they are the targets, especially off the bikes that we're -- and look, I think hence the guidance for this year, and I must really just double down on the investment in some of the new opportunities we're looking at. We've just taken on the other side of our workshops and we've doubled the size of our workshop capability, so putting 8,000 meters under roof. We've started up the defense business. So obviously, the start up of that and associated starting of that. We bought executive and -- people into key infrastructure and project roles. As well as support teams to focus on supercharging those. We've incorporated an indigenous joint venture within the infrastructure of rail division and then also working in the background on a couple of large opportunities. as well. But needless to say, those required some significant investment. I mean we see the markets, we've seen the opportunities. North America remains a massive addressable market for us. But again, we'll troop and gives us nothing but confidence that is been to over the medium and long term will be at

Thanks, Justin. A question here on FX headwinds in the in the financial year. I'll take that, and you can have a rest. There were a little bit there. I guess the FX impact to the revenue line was about $8.2 million to the negative. That would have been closer to $1.010 billion. We have those FX movements and the NPAT impact was close to $800,000. So it would have been sort of north of $66.1 million NPAT without those FX headwind. Perhaps extending new verticals, Justin. Which of these are most likely probably the infrastructure maintenance space to oadly in Australia. Anything further to add in that space?

No. Look, I mean we've done a few bit of DD on the sense, look, we know how big that industry is and the spend that's coming up to there via passenger we've been on. So we've chosen to be a titer. So we're well underway to tendering working in defense. Infrastructure maintenance is just in lowering some executive and see cause powder to really supercharge that effort and that is huge as well as rail and road transport. The North American market as well, I mean needless to say -- you saw on the slide, any that is we've seen tailwinds in both the U.S.A. and Canada. So again, we'll throw the kitchen at making sure that, that has the support needed to scale as quickly as we need so. A question from Joe House from Bell. In North America, what vertical market penetration is the easiest to deliver in the near term is it structural? Yes, we recite Look, I think some of the service lines as well, like our electrical trades, fabrication trades and the like that we sort of support within our core business as well with being up there. infrastructure differently, and they're certainly seeing some big projects come online that we could definitely plan to support rolling at this point in time.

So a little bit -- another question from John on from Unifi. A couple or any further information on rest of world, how we're feeling about that in the second half, and then I'll talk about guidance assumptions?

Yes. Thanks, Jon. Yes. Look, rest of the world, we're always busy doing a bunch of business development. Obviously, that went backwards a little last year and the reason for that was a large contract that we had in -- with us all these has come to an end, which was I was on a finite time anyway. We started some other stuff up in New Zealand where we're doing another job in Africa as well. So it will always be ends and flows of that rest of the world business, but we love to keep doing that to create opportunities for people that have those opportunities and will continue to do so. And just to round out your question there, John, FY '27 assumption from Rest of World is sort of not much coming from a growth perspective there. Do you think that we can hold the line there, but it will be a growth footing, but we're not putting out too much that for FY '27, the growth will come out of Australia and in North America?

Okay. A question from [ Garen Alestra ] -- when thinking about the 15% medium- and long-term growth targets, can we take this to be organic growth with inorganic growth perhaps accelerating this from time to time? How do we feel about that?

I think you probably said it perfectly -- an organic contain most of our sort of gross assets. But obviously, new organic will accelerate in from time to time as we see the opportunity to spring or us beyond what we could do organically.

Excellent. Just a question from Nika Palmer from -- in FY '27, NPAT growth -- is this deliberately conservative given the investment phase is an upside to FY '28 as those investments mature. That's only for the conservative big let's talk to that, but to be next...