Matrix Composites & Engineering Ltd (MCE.AX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's now 10:30 a.m. so I'll begin the meeting. My name is Peter Hood, and I'm the Chairman of Matrix. It's my pleasure to welcome you to the 2025 Annual General Meeting of the Shareholders of Matrix Composites and Engineering. In addition to the shareholders or maybe just one shareholder, I'm not sure, who have attended this AGM in person, I would also like to extend a very warm welcome to those shareholders who are attending via the webcast. I'm advised that a quorum is present in accordance with Rule 16.7 of the company's constitution. And as such, I declare the meeting open. Sitting with me today are my fellow directors: Chris Sutherland, Alison Terry, Stephan Kirsch, Aaron Begley, Managing Director and CEO; and Brendan Cocks, Executive Director, CFO and Joint Company Secretary. Present today representing KPMG, the company's auditors are Graham Hogg and [ Laura Cardy ]. And also present today is Ms. Catherine Noon from MUFG, the company's share registry. I'm advised that proxies have been received from 53 shareholders, representing approximately 35% of the company's issued share capital. All shareholders have been sent a notice of the meeting in accordance with Rule 16.3 of the constitution. If there is no objection, I propose that the notice of meeting be taken as read. There appears to be no objections. Signed minutes of the 2024 Annual General Meeting held on 21st of November 2024 are hereby tabled and are available for inspection. I confirm that the register of shareholders is tabled and is available for inspection either during or after the meeting. If shareholders attending via the webcast have questions, you can type them into the questions window on your screen now. If your question relates to a specific resolution, please ensure you stipulate which resolution it relates to. I intend to pause -- briefly pause at each resolution to check for online questions. We will read out your full name when asking your question. Shareholders have questions of a general nature, these will be directed to be asked during the general question session at the end of the meeting. Before moving into the formal business of today's meeting, I'd like to make some brief key observations of the company's performance in the 2025 financial year. Matrix demonstrated strong operational and financial resilience in FY '25 with significant progress in our core subsea market, offsetting weaker conditions in broad drilling markets. We remain focused on disciplined execution of our strategy and we're successful in securing a number of contract wins throughout the year, the timing of which can be variable and almost always later than expected. Reported revenue for the year was $74.8 million compared to $85 million in the previous year. And whilst that is down year-on-year, we have stepped up significantly from earlier years, reporting our second highest revenue since 2016. FY '25 was impacted by moderating drill rig activity. But in contest, Matrix's SURF business had a record year, achieving over 11% revenue growth and further enhancing our position and market share. While Subsea is currently the driver of near-term performance, Advanced Materials and Corrosion Technologies continue to contribute towards diversifying our recurring revenue streams. The mining and infrastructure sectors provide ongoing opportunities which we are pursuing. Our strategic position in the Henderson defense precinct together with our advanced materials capability provides an exciting platform for longer-term growth in the defense sector. The company delivered a positive $5 million operating EBITDA for FY '25. And the lower overall level of drilling activity that I referred to earlier on, contributed to a net loss after tax of $2.2 million. But importantly, we finished the financial year with $18.3 million cash in hand. We're well positioned to support growth this year. So there was positive free cash flow, a small amount of free cash flow that contributed to that cash position at the end of the year. Our Chief Executive Officer, Aaron Begley, will provide more detail about Matrix' performance in FY '25 and our operations and outlook at the conclusion of the formal business of today's meeting. Before turning to the first item of business, I wanted to acknowledge some changes to the Matrix Board that occurred during the year. Mr. Steven Cole retired after almost 11 years of dedicated service to the company. Steven was a significant contributor to the company's development and transformation throughout East tenure, and we express our gratitude for his contribution to Matrix. And with us today is Mr. Stephan Kirsch, who joined the Board as a Non-Executive Director in February. Stephan has extensive experience in the resources industry across mining, mining services and minerals processing, all key areas for further diversification for us. And finally, on behalf of the Matrix Board, I want to thank everyone at Matrix for their contribution and efforts during FY '25. This includes our management team employees and also our contractors. The Board remains confident in Matrix' ability to deliver sustainable shareholder value through its core subsea business while pursuing further opportunities in emerging markets that I mentioned earlier on. And we are seeing positive signs into the 2026 financial year so far. And as always, I would like to thank our shareholders for their ongoing trust and support in our mission to create long-term value. We have a positive outlook, a strong financial position and a capable and motivated team. And I look forward to our team continuing to deliver safely and successfully this financial year and beyond. I'll now continue with the formal items on the agenda for the meeting annual report. First item of formal business is the presentation of the annual report of the company, which includes the financial report, directors' report and the auditor's report. Pursuant to the Corporations Act, the company is obliged to present to this meeting the last audited financial statements and reports for the year ended 30th of June 2025. These were circulated to all shareholders with the notice of meeting. And whilst there is no requirement for shareholders to approve the annual report and no resolution is required, I now invite shareholders to comment or ask questions in relation to the financial statements. Mr. Hogg from KPMG is also available to answer any questions in relation to the audit of the financial statements. Are there any questions in the room relating to the financial statements? Are there any questions online? No questions. Resolutions. Before I commence with the reading of the individual resolutions, I advise all resolutions will be voted on by a poll, and the results of the poll will be lodged on the ASX later today. Both shareholders and their representatives were provided with voting cards as the engine. On this voting card, there are a series of boxes. Please indicate on your card how you wish to vote by ticking or marking either the for or against box for each resolution for your vote to count. If you are a proxy holder, a summary of the votes to which you are entitled has been provided with the yellow voting card. If you only have directed votes, you need to do nothing other than submit the voting card. Votes at your discretion or open votes as shown in the column titled votes open on your proxy summary and can be cast at your discretion by marking either the for or against box. Once you have finished the parking or card, please place it in the ballot box, which will circulate the room after all resolutions are read. If there are any aspects regarding the voting on which you are uncertain, please do not hesitate to ask the share registry present representatives who will be circulating the ballot box. We will now proceed through the resolutions and conduct the poll following the reading of all resolutions. Resolution 1. Turning to the next slide on business. Resolution 1 in the notice of meeting, pursuant to the Corporations Act, the company is required to include as part of the director's report a remuneration report, which includes the specified information. The directors have prepared a remuneration report to 30th of June 2025. And which is included in the annual report on Pages 14 to 26, and that has been made available to shareholders. The Corporation Act requires companies with shareholders to put to shareholders a nonbinding vote to enable shareholders to voice their opinion on matters included in the report. In accordance with the betting exclusion statement set out the Notice of Meeting, I further advise that the company will disregard any votes cast on Resolution 1 by or on behalf of any of the following persons: a member of the key management personnel, details of whose remuneration are included in the remuneration report, or a closely related party of such a member. Are there any questions in the room relating to this resolution? Are there any questions online?

No questions.

I now move that for the purpose of Section 250R2 of the Corporations Act, shareholders adopt the remuneration report for the financial year ended 30th of June 2025. With respect to Resolution 1, I advise the proxies have been received by the company as follows and they're shown on the screen in front of you. It is worth acknowledging at this point that vote doesn't stand, doesn't exceed the 25% threshold on the remuneration report. So resolution one, on that basis will not be upheld. I'd like to note that the remuneration freight work is consistent with last year so there is no significant change there, and that was strongly supported at last year's AGM. Also the remuneration report in the annual report makes it clear that we want to reward executives, playing fairly and responsibly. That is the wording used. And I know as the Committee Chairman that the benchmarking that goes on behind that, which show that is a fair position somewhat on the low side. So the vote is hard to understand, but given the outcome here, we will engage with those shareholders to better understand their concerns over the next months so that we're in a position to deal with this matter in 2026. I should ask again, I think, if there are any questions in relation to what I've just said. And if not, okay, I'll move on to Resolution 2. Resolution 2 relates to the reelection of Mr. Stephan Kirsch as a Director set out in the notice of meeting. Mr. Kirsch was appointed as a director following last year's AGM and is offering himself for reelection. Are there any questions in the room relating to this resolution? No questions online or in the room I now move on Mr. Stephan Kirsch, who was appointed to the Board since the company's last AGM and who ceases to hold office in accordance with Rule 19.2% of the constitution and Listing Rule 14.4 and being eligible for election be reelected as a director. With respect to Resolution 2, is proxies have been received by the company as shown on the strong behind me would indicate, Stephan, that you have been reelected. Resolution 3 is an ordinary resolution that relates to the grant of options and performance rights to our Managing Director and Chief Executive Officer, Mr. Aaron Begley, under the company's employee awards plan in relation to FY 2024. This resolution is identical is in identical terms to the resolution that was approved by shareholders at last year's Annual General Meeting. As set out the notice of meeting due to an administrative oversight, the securities approved under that resolution were not issued within the required 3-month period. The company, therefore, seeks approval reapproval from shareholders at this meeting. The options and performance rides are structured with appropriate vesting conditions and performance hurdles that are set out in the notice of meeting. The vesting conditions and performance hurdles are put in place by the Board to ensure that the long-term performance is incentivized and aligned with the company's strategic objectives. ASX listing rule 1014 requires a listed company to obtain shareholder approval by ordinary resolution prior to the issue of securities under an employee incentive scheme to a Director or an associate of a Director. Accordingly, the company is seeking approval for the issue of these options and performance rights. Mr. Begley under ASX Listing Rule 10.14. For the purposes of ASX Listing Rule 10.14 information about this proposed allocation is detailed in the explanatory statement of the company, the notice of meeting. A voting exclusion statement applies in relation to Resolution 3 and is outlined in the Notice of Meeting. However, the directors with our bigly staining unanimously recommend that shareholders vote over Resolution 3. Are there any questions in the room relating to this resolution? No questions online? I'll now move with the issue of 827,123 options and 554,039 performance rights to Mr. Aaron Begley, the Managing Director and CEO of the company is approved and for the purpose of Listing Rule 10.14. With respect to resolution 3, I advise the proxies have been received by the company shown on the screen and that would indicate that Resolution 3 is carried. Just as a comment at this stage, I will make sure specifically at those options and performance rights to issue this time around within 3 months. So I don't have to read that for a third time. Resolution 4 is an order resolution that relates to the grant of options and performance rights to Executive Director, Chief Financial Officer and Joint Company Secretary, Mr. Brendan Cocks under the company's employee awards plan in relation to FY 2024. This is also in identical terms to the resolution was approved by the shareholder shareholders at last year's AGM set at the notice of meeting due to the same ministry oversight of securities under approved under that resolution were not issued within this required 3-month period. The company, therefore, seeks reapproval from shareholders at this meeting for purposes of ASX Listing Rule 10.14, information about this proposed allocation is detailed in the explanatory statement of the company in the notice of meeting. voting exclusion statement applies in relation to Resolution 4 and is outlined in the Notice of Meeting. However, the directors the Brendan Cocks abstaining, unanimously recommend that shareholders vote in favor of Resolution 4. Any questions in the room on this? And no questions online. I now move to the issue of 563,948 options and 377,754 performance rights to Mr. Cocks, Executive Director, Chief Financial Officer and Company Secretary of the company is approved under and for the purpose of Listing Rule 10.14. With respect to resolution 4, I advise that proxies have been received by the company, as shown on the screen behind me, and that would also indicate that resolution 4 is carried I'll make the same comments on this resolution, Brendan. Please issue the options and performance rights. Resolution 5 is an ordinary resolution that relates to the grant of options and performance rights to our Managing Director and CEO, Mr. Aaron Begley, and of the company's employee awards plan in relation to FY 2025. of purpose is Listing Rule 1014 information about this proposed allocation is detailed in the explanatory statement accompanying the notice of meeting. A voting exclusion statement applies in relation to resolution 5 and is outlined in the Notice of Meeting. However, the directors, with Aaron Begley abstaining, unanimously recommend that shareholders vote in favor of resolution 5. Any questions in the room on Resolution 5.. And no questions online. I now move to the issue of $1,683,609 performance rights to Mr. Aaron Begley, Managing Director and CEO of the company, has approved under and for the purpose of Listing Rule 10.14 with respect to Resolution 5, I advise that the proxies have been received by the company as shown on the screen beside me. but also in case resolution has been carried. Resolution 6 is an ordinary resolution that relates to the grant of options and performance rights to Executive Director, Chief Financial Officer and joint Company Secretary, Mr. Brendan Cocks, under the company's employee awards plan in relation to FY 2025. For the purposes of ASX listing rule 10.14 information about this proposed allocation is detailed in the explanatory statement accompanying the Notice of Meeting. A voting exclusion statement applies in relation to resolution and as outlined in the Notice of Meeting. However, the directors, with Brendan Cocks and stain unanimously recommend that shareholders vote in favor of resolution 6. Any questions in the room, living to resolution 6? And no questions online. I now move that the issue of 1,141,926 performance rights to Mr. Cocks, Executive Director, CFO and Company Secretary of the company. is approved under and for the purposes of listing Rule 10.14. With respect to Resolution 6, I advise the properties have been received by the company, as shown on the screen beside me. It also indicates Resolution 6 has been carried. Thanks for bearing with me through the last four resolutions. Brings me to Resolution 7. Resolution 7 is a special resolution of the lights to the approval of an additional 10% in the company's placement capacity under the listing rules. That is over and above the normal 15% that is available to listed entities in any 12-month period. without the need to obtain shareholder approval. Are there any questions relating to this resolution. There are no questions online. Unless there are any objections, I now move Resolution 8 as set out the notice -- Resolution 7, I mean, set out in the Notice of Meeting be taken as read. With respect to Resolution 7, the proxies have been received by the company show on the screen beside me. This would indicate that this resolution has not been carried. This resolution is really for the sake of good housekeeping, should we want to make a place we've got no current intention to do that. So the outcome certain why it has been not voted for, but it's probably inconsequential now come forward. And there are other lines to deal with this and as resolution outlined, it's on top that is available to us anyway. Any questions on what I've just said? No? Thank you. Are there any general questions in the room? And no questions online? So I've now read through all the resolutions and answer the questions by shareholders. So we will now conduct the poll. If you haven't already submitted your voting card, please do so now to the share registry representative. [Voting]

Okay. All persons who intend to vote now voted ears of the voting process has been completed, and I, therefore, declare the poll closed. The results of the poll will be lodged on the ASX later today. And that concludes the formal business of the AGM, and I now close the meeting. I thank shareholders for their continued support, and I will now ask Mr. Begley to provide an update on the performance, strategy and outlook for the company. Thank you.

Thank you, Peter, and good morning, everyone. I'm Aaron Begley, the CEO of Matrix. And I'll be taking those in the room and online through the presentation that's been placed up on the platform this morning to provide a general overview to the business's activities and strategy and outlook moving forward. So moving to the third slide. Our business is effectively broken into 3 separate divisions, those being Subsea, Advanced Materials and Coating Technologies. Subsea encompasses all of the product lines and services that go into the subsea space, primarily for oil and gas but also for the emerging markets of offshore floating wind, and deepwater mining and other related industries. So that includes SURF for subsea production, includes our traditional drilling products and in the past couple of years, we've also seen some significant orders coming from deepwater mining, and they're all included within the Subsea range. Advanced Materials is one of the emerging business lines the company has. It does have some established product lines within that suite that I'll go through in a minute, but that includes and encompasses products like well construction consumables, products for the mining sector and advanced materials and specialty materials for a whole range of industries, including deepwater, ROVs, and defense applications. And lastly, coating technologies really encompasses our paint technology distribution business, where we also wrap services and specialist equipment around those product lines, which service the Australian resources sector. Let's move directly to the next slide. There's a quick snapshot of FY '25. We had another solid year of performance. Unfortunately, we didn't see growth year-on-year from '24 to '25, primarily due to project timing and some delays that were evident in the drilling sector. Nevertheless, we have seen significant momentum in our SURF business, and this is a business line that really didn't exist a few years ago to any meaningful extent within the business. This is a group of products that we have developed and tested and qualified here at Matrix, and we now sell to the global market, utilizing the very large plant capacity that we have installed here in Henderson. So we've seen some significant growth in that sector. Advanced Materials is also well positioned for growth. We are particularly excited about some opportunities in both more construction and also mining consumables. And Coating Technologies continue to deliver into the energy and resources space. Our operating profitability was an underlying EBITDA of approximately $5 million. This did result with a small NPAT loss of $2.3 million, again, impacted by the time we've completed project delivery awards within the year. At the end of the year, cash was sitting at around about $18 million. And you can see from the revenue contribution but the vast majority of our revenue was derived from subsea buoyancy of which the vast majority of that revenue was SURF-based. Moving on to our strategic growth objectives. Our key objective is really around building out our SURF product line. So Matrix is known for buoyancy, but we do much more than just points. We make a whole range of engineered products from engineered polymers. So the serve product line build-out strategy is about increasing the range of products and services that we provide into that sector. So not just buoyancy, but all sorts of ancillaries like [ VIV ] and drag reduction technologies, protection for pipelines and for flexibles and a whole range of other complementary products. that are based on our materials technology that we're leveraging into those markets. We will continue to service the global Deep drilling market. We are leaders in this sector as far as a drag reduction in IV mitigation is concerned and we have supplied -- we think more than 50% of the current global drilling fleet of buoyancy globally. So we'll continue to leverage that strong track record that we've developed. In the area of Advanced Materials, we're going to continue to build out our high-value consumables that we selling into key markets, primarily resources markets, specifically well construction products and products for the mining sector. So products that are targeting markets such as screening and screening media, wear products and products -- innovative products for conveyors and materials handling. I'll be showing you some images later on in the slides of some of these products in the field. And we're also going to be leveraging our position here in Henderson. We are in the middle of what will become the largest naval shipyard and defense service precinct in the country. So there are all sorts of opportunities where we can continue to wrap services around the products that we sell into that sector. and also more broadly expand our range of technical services, in particular, for Navy. So moving to the next slide. This slide gives you a snapshot of the products that we're expanding or that we currently provide into the surf subsea sector. So of course, buoyancy is probably the biggest single product line in terms of revenue historically that we sold into this sector. We sold over 13 [indiscernible] so we've actually installed over 1,000 large deepwater modules into this market, primarily into Brazil, but we're also supplying modules all through the Americas, including North and South America, and we're targeting markets in places like Indonesia, with Africa and anywhere else where there's a requirement for to serve spend. So more broadly, though, this gives us an opportunity to add on other products to this to our core product offering. So this includes products like protection for flexibles and rigid and rigid flow lines. IV suppression, which we -- is a market we're really excited about. We have been involved in this market peripherally for a number of years, but we're launching new product suites into this market, primarily for SCRs, still catenary risers, but also for subsea pipelines. The image that you see there is for a product that's being stalled off Western Australia on a pipeline for an operator. But we have lots of opportunities wherever there generally is a rigid pipeline or a rigid steel container riser so there are opportunities for these sorts of products. Installation and decommissioning buoyancy is another one. very large structures is a really interesting market, not just for subsea applications, but also for surface applications. And we're building out our IsoBlox technology that we're selling into sector to broaden our market, not just, as I said, not just in subsidy, but also for large surface or near surface structures. And then finally, we wrap support services around those products. So we have personnel at the moment, offshore South America, helping our customers safely install buoyancy and other products in the field. So this generates another revenue opportunity for the business. Very quickly, a snapshot of where these products go and where they're found. So the image on the screen there towards the right, you can see various applications of distributed buoyancy, for example, for flexibles from umbilicals to still catenary risers, VIV suppression for rigid risers and large subsidy structures for dealing with field architecture issues on FPSOs now the floating production systems. Right. So a snapshot as to our penetration into this market. Over the last 3 years, we've sold over $170 million of surf or some see production loyalty into these markets. So I think this really demonstrates the company's ability to develop or identify opportunities, develop, test products and fully commercialize them international and international markets. And some of these products are quite technically challenging, but we've been leveraging our skills in producing large volumes of composite materials at scale at that facility here in Henderson coupled with our deep understanding of the way Composite Materials and Polymers perform in demanding engineering environments. So these products sometimes have quite a long distance to travel from conception to qualification. Sometimes it's quite quick, but sometimes it can take years. And so this is an example though of how we've shifted from a dependence on the drilling market, which is very, very lumpy and quite unpredictable for us. into a market that has steady state long-term growth for the next 10 years. Look, also just something to point on this slide is that we've also started to receive orders directly from the operators. So most of the work that we've done historically has been with the EPCI contractors. So companies like Saipem Subsea 7, McDermott's, Technip and others, we are now starting to see orders come directly from the operators themselves, and that was evident recent order elated about $6 million from an international customer. To support what I've been saying around the outlook for SURF, it's really stronger for longer, I guess, in this market. We're now getting visibility past 2030 as far as products that are being committed to. So SURF spend should be very strong for the next decade. This is being supported -- this is a view of most of our EPCI clients and also the oil operators. -- deepwater developments are one of the most attractive areas for operators across any sector. So more attractive in some regards, the shelf drilling, especially outside the Middle East and the economics are also very attractive when compared to onshore drilling in the United States, which has obviously become quite a large petroleum producer. So really, we're seeing that EBITDA today's oil prices the majority of deepwater developments are economical. So it really shows how the technology has shifted to developing the really large deepwater fields. Brazil and Guyana are probably the 2 most preeminent markets in terms of deepwater production. We're obviously really well embedded in Brazil now having delivered a lot of equipment and safely install that in that market. Guyana is also quite significant with Exxon's activities there, and Matrix is qualified by Exxon. There's opportunities in the Gulf of Mexico that are opening up again and also the Gulf of America, north of the border, so to speak. And then there are historical opportunities in West Africa, markets like Indonesia, Malaysia and interestingly, in Southern Africa, in particular, some very, very large opportunities that are coming in offshore Namibia, where the geology is very, very similar to the sub-salt geology that you'll see in offshore South America. So this really paints a very solid pipeline for the company and why we're so focused on building out those product lines because selling buoyancy is great and leverage is what we do, but as we add on products like the IV suppression and protection equipment and installation and others, potentially a $30 million buoyancy contract content with $10 million or $15 million of other ancillaries that you can wrap around that. So this is a natural progression for us to build out that product range. Just very quickly on drilling. Obviously, this was our traditional market. It has been very, very lumpy. The drill rig market did come off pretty substantially in 2025. It is projected to pick up next year. We are seeing lots of inquiries again, the products that we sell into this market are really wrapped around 2 things. the drag reduction technology, LGS, that we're now seeing specified by operators where there are areas of high current, so that's really encouraging. So we do expect to see more orders next year for that technology, and that's actually depicted up on the screen here that you can see. In the short, there's that's on the -- in the riser rack on a drilling contractor's rig. So we do expect to see quite a bit more of that next year, and we are actively pricing inquiries for that. And they'll be used in places like Mozambique, places like the Gulf of Mexico, offshore Brazil, where there are high current areas that make it very challenging to drill. So it's quite an enabler. Also, our low-density deepwater technology is something else that we sell into this market. it enables our customers to get more out of their existing asset base. This is very much about improving the performance of the existing installed capacity in the market as opposed to waiting for any new rig builds, which I'm not going to come anytime soon. So this is about servicing the existing installed capacity of drillships and sensors. Right. Moving on to Advanced Materials. The next slide. Look, this is a very, very interesting business line for us. It's a bit of a bucket for non-oil and gas products that we make. And I think in the near future, we'll be reporting these product lines out separately into its constituent target markets as the revenue becomes bigger. So it includes still replacements and advanced composite applications. So this is where we're looking at products that are traditionally made from anything ranging from steel to rubber to other traditional products. and displacing those with an advanced polymer technology. So for example, the image on the left-hand side is a well construction product, a low-friction centralizer. It's a consumable that's used in pretty much every horizontal deviated well drilled anywhere in the world. It's a big market. That's a control, so we like it. It's a standardized product. It's like selling Lego, we love it. It's fantastic. And we just want to sell more of it. The image on the top and the middle is screen media, a very large market in Western Australia. It's a product we've been developing for some time now. There are no local manufacturers of this product, and we believe we can penetrate this market with a product that lasts longer and is lighter than the competition. I've got an image up there of a UV for defense that I'll get to. But interestingly, the image on the bottom right-hand side is another mining product. So this is up at a site, one of Rio Tinto's sites and this is a lightweight composite idle frame that we've developed in conjunction with Rio Tinto. It's half the water for judicial steel frame. And so it's really used -- there is a strong safety case to use this product. There are -- and the conveyor and overlay can buy there are tens of thousands of these or at least thousands of these frames that are used. And so this is another exciting product opportunity for the business where we're looking to expand our revenue from these high-value consumables in the resources sector. Right. A bit more information on [ construction ] products. So we have that about 50 standard sizes with this product line. The image that you see there is of a horizontal well completion to blue centralizes the pic and Matrix centralizer. And it's really designed to reduce friction downhole. And we've talked about this in the past. It has contributed significantly to our bottom line in the past. But what we've done is completely reinvigorated this product line. We've the company has got a really good reputation in this sector. We've got new distributors that have been appointed in Indonesia, Malaysia, one coming in Oman. We have distributors in Saudi were approved by Ramco. We've got distributors in Abu Dhabi, and we're just about to announce a new distributor in North America and in the U.S., which is one of the largest markets in the world for this product. So in terms of the market size, it's about the same size of Boise, and we have the installed capacity to make a lot of this product here at Henderson. But it is more fragmented in the voice market. So there are more players in it. But Matrix is really -- Matrix's, MaxR and Recon product lines are really considered to be the premium product in the sector. So it's well recognized, but it really does meet some reinvigoration of the distribution channels, which is what we said about doing. So I do expect this product line to grow quite significantly next year. And it's a consumable that goes down the well and it doesn't come back. Secondly, Advanced Materials for Mining. We now have a dedicated BD resource building sales in this sector. As I mentioned, we are targeting specifically materials handling and conveying and also greening and wear products. So we have products in the field now, and we do expect to see some material revenue from this product line within the next 12 months. we are really focusing on our own backyard here, something we haven't done before, but there are lots of opportunities in the iron ore, gold and other hard rock sectors and also mineral sands within West Australia is part of our strategy to build a baseload of consumable products within the business that will complement the project-based product lines that we sell. The strategy is very much to build this revenue to the point where month-on-month, year-on-year, it's sustainable, it's reliable and ultimately, we'll make the business profitable just on these product lines. So when project work comes along, that's effectively the [ cream de la cream ]. Right. I will just touch on where we are in terms of Matrix and the strain Marine Complex. We're really right in the middle of what will be the biggest naval complex in service complex in the country. So we have most of the properties to the west of us will be reassigned to service the Navy's submarine and surface ship program. So this -- there will be some build new build activity here, but also -- there's -- the Navy is looking to service not only our equipment but also Arcus's equipment in the near term, but for a long time. So there are opportunities to wrap technical services around our products, but also the more sophisticated platforms that maybe will be using in this area. So we are actively engaged with talking to defense as to what else we could do with our capabilities, our sites and our equipment to broaden our scope of services in the sector. So there are some -- some very interesting conversations we had. Look, Coating Technologies, I'll just touch on is we are expanding our market into the East Coast. There's lots of opportunities for this business line in New Zealand, in particular, and also up into PNG. So we're selling this the [indiscernible] range across quite a wide range of markets now, and it's good month-to-month business and gives us OpEx exposure across a very diverse customer base, but it also gives us the opportunity for our salespeople, our business development people to show their customers what our other capabilities are. So it's really a way of generating revenue, which is sustainable, but also expanding our other business lines. In terms of outlook, for this year excuse me. Sorry about that. I did leave my phone on the desk, but I have an iWatch for my sims. So we've already secured $70 million of revenue for this year. So that's already in place. So all of that will be executed and delivered within this financial year. Most of that is from the subsea sector, but we do also expect Advanced Materials and our Corrosion division to materially contribute. We have a pipeline of other work near-term contracts that we expect to land over the next few months, that will also contribute to this financial year's revenue. So if that happens, we should see year-on-year growth. What we will see, however, is profitability, very much skewed to the second half. So because of project timing, the first quarter of this financial year, revenue was very low. We were unable to press the button on a number of projects. before this quarter. So as a result, that will mean a small first half or first half EBITDA loss, but then we will -- we're projecting a second half positive EBITDA results will more compensate for the first half loss, resulting in a full year positive EBITDA. So very much skewed to the second, third and fourth quarters in terms of revenue and EBITDA performance for the business. Just really a reflection of that lumpy project cycle, which in the future, we hope to moderate with Advanced Materials. So in Advanced Materials, look, as I mentioned, we're reinvigorating -- well, let me go back a bit, where more broadly with our strategy, we're continuing to build out our sort of product lines. That market looks very strong for the next 10 years. or more. So we're looking to get a larger share of that market across existing and new products. We'll continue to participate in the drilling market. and we see lots of opportunities with well construction and mining consumables, in particular, that we'll continue to pursue quite aggressively. And I believe we'll start seeing some significant revenues within the next year. And lastly, we'll continue to push our opportunities within the defense precinct here in Henderson, but also participate more broadly in the defense market within August. I think that brings with the conclusion of my presentation. Thank you for listening. Are there any questions online?

So I've got a number of questions from [ Matthew Tenum ]. Apologies if I got that wrong. So the first question while hydrogen and floating wind initiatives aligned with the energy transition at the technical challenges, such as cryogenic and micro cracking in composites are significant. What is the Board's realistic time line for these segments to become material revenue contributors for example, in ceding 10% of group revenue. Are we effectively funding R&D over the next 3 years without visibility on commercial scale orders before 2028?

Well, there's a lot of questions within that one question. But look, I'll try and address it reasonably holistically. Firstly, there's a reference hydrogen. Look, we were involved quite heavily with FFIs, ambitions to build an electrolyzer plant in Gladstone. We produced quite a lot of products for them. All of that was fully funded by -- so currently, the business has no R&D expenditure at all in the hydrogen space. But the FFI work unfortunately, has concluded with the shutting of the Gladstone facility as Fortescue's grain ambitions have been shifted. The second part of the question was around offshore floating wind. Now with offshore floating wind, the world's first commercial scale offshore floating wind farm outside of China, et China doesn't really have a commercial scale offshore floating wind farm. They do have some very big demonstration is likely to reach FID next year. In terms of us generating reasonable revenue from offer floating wind is still a few years away. It's a segment of the offshore wind market that is yet to be fully proven commercially in a demonstration plant that's not subscale. So that's the time frame on that. And as far as stress cracking and composites is concerned with cryogenics, I might leave that one.

Next follow-on question. Management has cited moderating activities and delays in the drilling sector. these delays purely administrative where are we seeing project cancellations due to economic viability? Furthermore, at what were the utilization rate? Does the board believe placement cycle for rise of buoyancy will actively restart rather than the market. remaining maintenance-only mode until 2027?

So this year that you did see rig activity drop off for a number of reasons. There was still probably too many -- a bit of an overhang in the market. There were too many rigs around not enough work. The primary drivers behind that were primarily project timing. But also, you saw deactivation scrapping of rigs right through that period. So there's still recovery mode happening, I guess, with some of the large filing contractors. You've also seen a lot of M&A activity, which has meant there's been not a lot of CapEx sitting behind that. So I think, look, rig rates are good. Utilization has come off in 2025, likely to recover in 2026. There's no more M&A activity on the horizon in the floating sector there is in the jackup sector. In terms of replacement, I think replace the replacement market will be will be quite subdued. I think what we'll see is the upgrade market will be where we're focusing. So LGS to enable rigs to drill in high current and an upgrade of riser systems to enable them to drill with 20,000 rate of VODs. So more weight, more boys are acquired. They are the things that will drive demand as opposed to the replacement market, unless the equipment is very, very old, but then a lot of the really old rigs have been scrapped.

Next question scaling up for defense contracts often requires significant investments in security infrastructure and specialized tooling. What is projected -- the CapEx requirement for FY '26 to bring that Henderson facility, but the standard required a full rate maple production? And how will this impact free cash flow?

Right. So at this stage, we have no CapEx projected particular activity for the type of work that we are doing and we're projected to do our current security systems are deemed to be adequate. There is if there was a large project that were to come through the door, depending on its nature, we would also expect the Commonwealth to help fund any security upgrades that are required.

Okay. Matthew's next question. Regarding the Ghost Shark program now being a program of record with and you're establishing its own manufacturing facility in it. Can you clarify Matrix's confirmed role in the full-scale production phase? Does Matrix hold the binding supply agreement for the series of production? Or is there a risk that Angel will in-source further syntactic fiber manufacturing as volumes scale?

I can't comment on defense contracts, except to say that it would be likely for a EV manufacturer to in-source that type of product. Otherwise, I can't comment.

Two questions from Matthew. FY '25 showed a modest operating cash outflow of $0.4 million [indiscernible], a sharp contrast to the $1.9 million inflow in FY '24. With a $577 million subsidy or book to deliver, could you impact the cash conversion cycle dynamics we should expect for we're seeing extended payment terms from major PC contractors in Brazil that would require higher utilization of the new trade finance facilities?