Monadelphous Group Limited (8MP.F) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Monadelphous 2023 Half Year Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kristy Glasgow. Thank you. Please go ahead.

Hello, and welcome to the Monadelphous 2023 Half Year Results Investor and Analyst Briefing. Presenting from Perth are Monadelphous' Managing Director, Zoran Bebic; and Chief Financial Officer, Phil Trueman. We are joined in the room by our Chair, Rob Velletri. The structure of today's presentation is similar to previous results briefing. Zoran and Phil will first take you through the company's performance for the half year ended 31 December 2022 as well as the outlook before answering any questions you may have. Some further details are provided as appendices in the slide deck. Copies of today's presentation and associated materials are available on our website at monadelphous.com.au. Throughout this presentation, the speakers will guide you on when to click through to the next slide. I will now hand over to our first presenter today, Mr. Zoran Bebic, who will start on Slide 2. Thanks, Zoran.

Thank you, Kristy, and welcome, everyone. Before we get into our 2023 half year results briefing, I wanted to take some time to acknowledge the passing of our former chair, mentor and great friend, John Rubino. Many of you would have had the pleasure of getting to know John at an investor briefing over the years or hearing from John at one of our annual general meetings. You will no doubt remember his thick sicilian accent and his cracking sense of humor. But I'm sure you will also remember him as an exceptional person with breathtaking business acumen and an ability to form long-term trusting in mutually beneficial relationships, like no other. John was a born leader with enormous charisma. He had an ability to inspire people and was a mentor to many, including myself. We have included on this slide just a snippet of John's story. So we've built 1 business into a powerhouse is a once in a lifetime achievement for many people, but John Rubino was not just anyone. John succeeded in doing it twice with United Construction and Monadelphous. Under John's exceptional leadership, Monadelphous went from a company that was in solvent in the late '80s to an ASX 100 company, where people were proud to come to work and suppliers had confidence in and their customers knew and respected. During John's time at the helm, Monadelphous was trusted with the construction and maintenance of some of the largest and most complex projects and facilities across Australia as well as internationally. Even though he has gone, his memory will always be present in our corridors at Monadelphous and in the stories of our people. We will continue to do you proud, John. Moving now to our half year results. As Kristy mentioned, Phil and I will now take you through our 2023 half year financial and operational performance as well as our outlook before answering any questions. Turning to Slide 4. We recorded revenue for the first half of $953 million, down 10.5% on the previous corresponding period. Our Maintenance and Industrial Services division achieved a record half year revenue of $677 million, up 13.5%. This was driven by strong demand for maintenance services across the resources and energy sectors on the back of favorable commodity prices, high levels of production and aging site infrastructure. As previously forecast, our Engineering Construction division experienced lower levels of activity due to the completion of a number of significant construction projects last financial year and the timing of award and commencement of new projects. In total, the division reported revenue of $278 million, down 42%. More recently, our Engineering Construction division has been engaged for early contractor involvement on a number of projects and continues to experience high levels of tendering activity. We delivered an improved EBITDA margin for the half year of 6.1%, which was particularly pleasing given the current escalating cost environment. With skilled labor shortages continuing, we remain focused on the strategic selection of new work opportunities and improving earnings quality. Net profit after tax was $29.1 million, generating earnings per share of $0.305. The Board of Directors declared an interim dividend of $0.24 per share, fully franked. Since 1 July 2022, we have secured around $950 million in new contracts and contract extensions across our core markets. We continue to build on our more recently developed relationship with Fortescue Metals Group with the award of a number of new contracts, including a construction contract at the Iron Bridge Magnetite Project as well as long-term services contracts for their Pilbara operations. We were also awarded several strategic contracts, including with Petrofac for the decommissioning work on the Northern Endeavor floating production, storage and off-take facility. This is our first offshore decommissioning contract with a growing number of similar opportunities expected to come to market over the coming years. During the half, we undertook a strategic review of SinoStruct, our China-based fabrication business, to ensure its service offering remains aligned to customer expectations and that the business is appropriately structured to grow in its core markets, geographically diversified supply chain and delivering new sectors. Following the review, we rebranded the business as Inteforge. Our heavy lift business continued to expand its capability and customer base and was awarded its first contract in the infrastructure sector on the West Gate Tunnel Project in Melbourne, Victoria. I will now talk about our new work on the contract secured slide. Here you can see the geographical distribution and volume of our new work. This includes a significant amount of work in the Pilbara region of Western Australia with approximately $540 million of work secured in the iron ore sector with long-term customers such as BHP and Rio Tinto as well as with Fortescue Metals. We have also been awarded a number of contracts in the expanding battery metals sector, including lithium and copper markets. We continue to experience strong demand for our services overseas, including in Mongolia at the Oyu Tolgoi underground project and in Chile through our Construction and Maintenance Services business, Buildtek. Moving now to Slide 6, our safety performance. Our 12-month total recordable injury frequency rate was 2.4 incidents per million hours worked, representing a 22% improvement. Our sustained focus on the identification, elimination and mitigation of fatal risk hazards and the application of our fatal risk control standards contributed to a 45% reduction in our serious incident frequency rate from this time last year. We were recognized for our efforts in safety innovation and were named as the winner of 2 industry excellence awards. We also progressed a number of safety technology trials, including the use of pedestrian monitoring and proximity sensors for mobile equipment and vehicle driver fatigue and distraction surveillance. In addition, we continue to focus on the physical and mental health of our people through the launch of our 2023 Health and Well-being Program, enabling our employees to participate in talent initiatives such as mental health awareness training and physical health checks, amongst other things. Now moving to Slide 7, our people. We ended the half with a workforce of around 7,300 people, down slightly on the prior corresponding period. We experienced strong demand for maintenance services which was offset by lower levels of construction activity. The current and predicted future shortfall of available talent remains a significant challenge for our business and the industry. During the period, we undertook a company-wide employee survey to help shape our 2023 retention and attraction strategy and to mitigate the effects of the labor shortfall. We launched our respective Monadelphous program to further embed respectful behaviors in our workplaces, following a substantial program of work undertaken last financial year. To support employee attraction, we ramped up our international sourcing strategy to ensure we are best placed to meet our future resourcing requirements and undertook a comprehensive review of our graduate program to maintain our position as an employer of choice for early career pathway employees. Turning now to Slide 8, sustainability. We remain committed to making a positive contribution to the communities in which we operate, focusing our efforts on the key areas of diversity, community and environment. Following endorsement by reconciliation in Australia, we've launched our latest Stretch Reconciliation Action Plan. This is our fourth RAP and second Stretch RAP. It outlines our pledge to taking action to advance reconciliation through equal accesses for Aboriginal and Torres Strait Islander Peoples to meaningful employment and development opportunities. During the period, we welcomed a new cohort of trainees to our indigenous pathways program in partnership with Rio Tinto, continued our partnership with the Polly Farmer Foundation and launched our Nintirri Room, a new training facility at our Employee Development Center. As a part of our commitment to gender diversity and inclusion, we progressed actions in our Gender Diversity and Inclusion Plan, including the rollout of our respected Monadelphous framework and encouraging greater female participation in our industry through stem events and our partnership with the University of Western Australia's Girls in Engineering program. Aligned to our strategy of targeting net zero emissions by 2050, we progressed our emissions and energy reduction road map, which outlines a series of interim targets towards achieving this goal. A number of working groups were established to support the strategy, energy audits were conducted on all workshop facilities and several trials commenced including the use of hybrid vehicles and solar powered equipment. Looking now at our engineering construction operational highlights. As I mentioned, our Engineering Construction division reported revenue of $278 million for the first half and has secured approximately $280 million of new work since the beginning of the period, including a number of early contractor involvement engagements. We completed several packages of work for Rio Tinto, including construction services at the Gudai-Darri iron ore project, as well as a series of shutdowns at the Western Turner Syncline Phase 2 project. We secured a key contract with BHP for the Car Dumper 3 Replacement Project at Nelson Point from Port Hedland recently. The contract, which includes structural, mechanical and piping works is valued at over $115 million and is expected to be completed in the first half of 2025. During the period, we completed our electrical and instrumentation scope of work at the Kemerton lithium hydroxide plant and secured a contract for the construction of site infrastructure at Talison Lithium Greenbushes Mine. Our heavy lift business continued to experience strong demand. In addition to securing a number of new contracts, we continue to support Fortescue Metals as a part of our long-term services contracts as well as providing specialist heavy lift services to Woodside, BHP and Rio Tinto under existing construction and maintenance services contracts. Alevro, our heavy lift joint venture with Fagioli continuing to deliver heavy haul services at Fortescue's Iron Bridge project. On the back of the strategic review and rebrand Inteforge, our fabrication business secured a number of contracts, including the Liontown Resources' Kathleen Valley Lithium Project, and for the Oyu Tolgoi underground project. It also secured a contract with HydrogenPro for the fabrication of hydrogen gas separator modules for a renewable energy project in the U.S. Zenviron, our renewable energy joint venture, continued to enhance its reputation as a market leader in the delivery of balance of plant works at wind farms, making good progress on the Rye Park project, the largest wind farm to ever be constructed in New South Wales. Moving now to our maintenance division. As I mentioned earlier, our Maintenance and Industrial Services division achieved a record half year revenue of $677 million, up 13.5%. The result reflects sustained buoyant conditions across the resources and energy sectors with the division awarded approximately $665 million of new contracts and extensions since the beginning of the financial year. We performed a significant volume of maintenance, shutdown and project work in the iron ore sector for customers, including BHP, Rio Tinto, Fortescue Metals and Roy Hill. We were reappointed to BHP's iron ore site engineering panel to continue providing multidisciplinary services across its Pilbara Mine and port operations for 3 years, as well as a 12-month extension for general maintenance and shutdown services across BHP's iron ore operations. We also secured a number of new contracts with Rio Tinto in the Pilbara under our sustaining capital projects panel agreement. Importantly, we were awarded 2 strategic long-term contracts with Fortescue Metals, including a 5-year services contract at its Pilbara operations, and a panel appointment for the provision of nonprocess infrastructure services for a 3-year period. In the oil and gas sector, in addition to securing our first offshore decommissioning contract, we've performed a number of major turnarounds for customers, including Woodside, INPEX, Origin, Shell and Santos. We also secured a 12-month extension to our existing contract for the provision of engineering, procurement and construction services in joint venture with Worley, to Santos' oil and gas production facilities in Papua New Guinea. Finally, Buildtek, our Chile-based construction and maintenance services business secured several new contracts with major copper producers, Minera Escondida and [ Collahuasi ] Mining Company. I will now hand over to Phil, who will provide you with some more detail on our financial performance on Slide 11.

Thanks, Zoran, and good morning, everybody. So this slide 11 shows our financial performance compared to that of the previous corresponding period. And as Zoran mentioned, we recorded revenue of $953 million for the half year under that strong demand for maintenance services. Our earnings before interest, tax, depreciation and amortization was $58.2 million, giving an improved EBITDA margin percentage of 6.1% for the period, which is up from 5.7% this time last year. And it is particularly pleasing given the escalating cost environment we're currently experiencing. Our net profit after tax was $29.1 million, slightly down on the prior corresponding period, with earnings per share of $0.305, and the Board declared an interim dividend of $0.24 per share fully franked. We generated a strong cash flow during the 6 months with a cash flow conversion rate of 110%, and we ended the period with a bank balance of $190 million. And our strong balance sheet, ensures we have sufficient financial capacity in the current economic environment and enables us to take advantage of investment opportunities as they arise. So I'll now hand you back to Zoran who is going to provide you with an overview of the outlook for the business.

Thanks, Phil. Slide 12 shows relevant current and forecast Australian market conditions for our business. And as you can see, the sectors in which we operate are all forecasting a strong outlook for both capital and operating expenditure over the next few years. Moving now to our outlook slide. Although global economic growth is forecast to remain steady, commodity prices are strong and the outlook for our core markets continues to be positive. The resources sector in Australia and in our overseas locations continues to provide a significant number of prospects for our services across a broad range of commodity markets. The buoyant Australian iron ore industry is expected to persist with capital and operating expenditures required to sustain and maximize production levels, driving demand for our services. High global demand for battery metals is driving significant investment in lithium, copper, nickel and rare earth and these markets, along with the gold sector, will present ongoing opportunities, not only in Australia but also in South America, Mongolia and Papua New Guinea. In the oil and gas sector, there are a number of new LNG construction projects currently in the pipeline with heightened demand for maintenance services expected to remain. Australia's transition towards clean energy is strengthening and an increasing pipeline of new wind farms will provide opportunities for Zenviron, both in the electricity market as well as in the private sector as industrial operators move to meet their decarbonization objectives. The development of the hydrogen sector will also provide prospects in coming years. More broadly, favorable conditions and aging assets across all resources and energy sectors are driving strong demand for maintenance services. The shortage of skilled labor continues to be the most significant challenge for our operations. Heightening supply chain risks and escalating cost environment are also posing challenges. With capacity constraints, we are taking a strategic and targeted approach to new work, engaging and collaborating early with customers, maintaining an appropriate approach to the allocation of risk and increasing our focus on earnings quality. We remain focused on employee attraction, training and development and making Monadelphous great place to work. With travel restrictions lifted, our international labor sourcing strategy continues to gain traction. Following a ramp down of construction activity last financial year, a new wave of construction projects is in the pipeline. Due to delays in the timing of awards and commencement of new projects, Engineering Construction revenue is expected to decrease this year compared to the prior year before ramping up in 2023, '24. As a result, full year group revenue for 2022, '23 is expected to be approximately 5% to 10% lower than the previous year. Supported by a strong balance sheet, we will continue to assess acquisition opportunities to achieve ongoing service and customer market diversification and support long-term sustainable growth. In closing, I would like to thank our team for their efforts. We have a very loyal and talented team driving our strong performance. I also extend my appreciation to our shareholders, customers and other stakeholders for their ongoing support. Thank you. I'll now hand over to the operator for any questions.

[Operator Instructions] First question comes from the line of James Wilson from Jarden Group.

Just 2 questions today from me, please. So firstly, on the E&C contract outlook, you've guided to a ramp-up in FY '24, is that something we should expect now to see come more over the second half of '24, given the delays to new contract signings that you've been talking about?

Yes. I don't think -- that's a reasonable expectation. We're certainly continuing to see the amazing award of projects. So I think that's a reasonable expectation.

Okay. Great. And just 1 more from me. You've spoken to being more selective with work going forward given the labor shortages at the moment. I just wanted to get a sense of whether you think you'll reach a point where you'll have to pivot away from pursuing further maintenance growth when new construction work comes online so that you can allocate resources to going after construction contracts instead, if that makes sense?

Yes. I wouldn't have thought so. The reality is our maintenance labor pool is a different labor pool to the construction labor pool and not just there [indiscernible] more broadly in terms of the market. So whilst there are people who transition from maintenance opportunities to construction opportunities more broadly than different labor pools.

Next up, we have the line from Ross Chapman from JPMorgan.

And firstly, my thoughts go ahead to you on the team after John's passing. My first question is just in regards to your comments regarding an increased focus on quality earnings and risk management for new work. Are you seeing any paradigm shifts in terms of contract structuring particularly in regards to cost pass through risk sharing with customers?

Well, I think that's certainly where our focus is. And I think in a constrained labor market, I think clients certainly have a better understanding of the broader environment than they did 12 to 18 months ago. So we are seeing some shift and conversations around contract models and commercial models.

Yes. Great. And just 1 more on your comments regarding profitable acquisitions. Are you focusing on a particular segment or 1 of the divisions for these acquisitions, particularly now in regard to any further diversification into infrastructure or focusing on a specific end market?

I wouldn't say that we have a specific focus. The reality is each part of the business, both the maintenance business and construction business has detailed growth plans, and we're regularly looking at smaller acquisition opportunities. And I guess the way we've always thought about acquisition opportunities rather than large acquisition bolt-on businesses that bring a service capability that we don't necessarily have, but are close and aligned to the core and the rationale was to bring then one of the office name and brand and balance sheet for that opportunity to leverage it. Nothing specifically, but we've always got a portfolio of smaller potential acquisition opportunities that we're rolling through.

Great. I'll just sneak 1 more in, if I could. Just in regards to probably a follow-on question on the labor pressures. You've managed to expand margins in the first half. Given that wages consisted a fairly major part of your cost base, do you see any risks in terms of wage inflation, particularly as you strive to attract a bigger workforce?

Yes, absolutely. And I guess that's the art of in terms of pricing work to investing sufficient enough effort into understanding what you think that will actually look like. And what we've seen over the last 12 months has proved challenging. But we spent a lot of time in terms of our bid submissions and put a lot of data and to take a view around and make assumptions around what wages will look like over the next 12 to 18 months. But probably, that we spent a lot of time pricing that into our tenders, certainly in the construction business. In the maintenance business, a little different. We've got some longer-term contracts that have commitments and have mechanisms in the contracts to deal with rise and fall.

Next question, we have the line from Nicholas Rawlinson from Jefferies.

Can you talk through whether that $675 million revenue for the half in maintenance is a base to continue to grow from in the second half and into FY '24? Or whether you expect some of it to unwind?

I think -- I'll talk about it in macro. In terms of the macro level, there are -- the market, we've said the market is buoying there are opportunities out there. I think in the maintenance business, so the opportunity for growth continues. I think the challenge is becomes the timing of some of this work. So whilst it's a maintenance business and you argue it's a recurring revenue stream, there are a lot of larger turnarounds or shutdown contracts that impact the revenue flow from half year to half year. So it will be subject to that, which is normal. So I guess I'll give you a little bit more color. We had more turnaround activity in the maintenance business in the first half than I would expect to see in the second half.

Okay. Great. And just like broadly, should we expect group margins in the second half to be broadly similar to first half in it sounds like E&C work won't pick up until FY '24?

I think, once again, it will be a function of when the work lands and our performance in terms of execution, I think a more broader thematic is that this focus and this narrative around focus on quality of [indiscernible] is being a little bit small -- more selective about opportunities, hopefully, should support a view around maintaining margins and over time, hopefully, improving margins.

Great. And just a last 1 from me. Could we have an update on the timing of E&C awards that are out in the public market at the moment?

I've been -- if you go -- it's -- at the AGM, I'll talk about a pipeline of in excess of $2 billion worth of capital projects just in E&C. So in terms of that pipeline, the number of -- we're tracking -- obviously tracking that pipeline. The number is very similar. The reality is, a lot, almost all of those projects have shifted to the right, and we're seeing delays.

Yes. But you couldn't give us an update on any like specific projects in the next 3 to 6 months that are sort of publicly known to be out tender and just any additional detail on that?

I mean there are different, okay. So maybe if I talk a little bit about the lithium market, there are a couple of projects that have been talked about in the market more broadly, Albemarles, Kemerton project, Talison, Greenbushes expansion, Kathleen Valley. These are projects that we would have expected, probably expected to see or being close to award at this point in time or even a little early, how well we seem to move to the right. Yes, 3 to 6 months. And I think that's pretty consistent with what we're seeing across the broader pipeline. So it's not specific to a particular commodity market we're seeing it across the board. So these capacity constraints that we're talking about in terms of resource challenges, they're more prevalent in terms of the front end of projects. So getting to the point where engineering and procurement and final approvals are given that they are taking -- that is taking more time and causing the pipelines that drift to the right.

Next up, we have the line from Andrew Hodge from Credit Suisse. I'm not getting any response from Andrew. I'll proceed with the next question. Next up, we have the line from John Purtell from Macquarie.

Just -- sorry, just to -- further to your last comment there. So in terms of some of the sectors that you bid in, you mentioned sort of lithium. So just to confirm that you're sort of expecting -- you've seen some shifting to the right there. Are you expecting outcomes on those projects over the next 3 to 6 months. So just to confirm that and maybe some of the other opportunities and timing around that in terms of rare earth and oil and gas and that type of thing.

Yes, in terms of rare earth, probably seeing a similar view. In terms of -- probably the other comment I'd make in terms of -- which sits outside of the large major projects, there is a significant portfolio of sustaining capital work across the major iron ore producers between BHP, FMG, Rio Tinto and Roy Hill. What we're seeing is projects in the value of $50 million to $150 million. There are -- there's a building plethora of projects in that space and that sustaining capital space, which will come through, but not dissimilar to the large projects, we're also seeing a lag in terms of working through the approvals and award of that type of work.

Do you see that sort of delay is more around the approval process as opposed to any fundamental sort of cost or economic issue?

Yes, that's probably -- that's a good question. At this stage, it's not about cost. It is this constraint. We've talked about at the front end in terms of client organizations and engineering companies, they're dealing with the labor constraints and they're seeing more of it because of the status of the phase of the project is at. And that -- there's no doubt that's contributing to this delay that we're seeing.

Just a couple of others, if I could. Just full point of clarification, where you talked to a ramping up in construction revenue in '24. Does that mean you're expecting an increase in revenues in '24 on '23 within construction?

I think subject to this point around timing, I think that's a reasonable assumption or expectation.

And just the sort of lift in margin that we've seen and appreciate the comments here around quality of earnings, but we saw that despite much lower construction revenue. So was the margin improvement this period, presumably that was inclusive of improved margins within maintenance and also better margins within construction despite that lower revenue?

I think that's a fair comment. Understanding that the maintenance business also consists of sustaining capital or smaller project where -- so that's executed well. The margin would be better in that part of the maintenance business as well.

We have the line from Andrew Hodge from Credit Suisse.

Hope you can hear me. Just -- sorry, you mentioned a very difficult operating environment to price things and you spend a lot of time looking at the pricing, given that you historically have been much stronger than many of your peers in getting that right. Do you think there's a risk over the next 6 months as contracts begin to drop that you've priced them appropriately, but competitors have been a little too punchy in their pricing, they win them, but they can't execute them at those prices? And that the effect is that you're right, but you missed out on work as those contracts get awarded?

I think there is a risk of that market is still competitive. But to be honest, that's not different to not just this market, any market in terms of pricing assumptions. So I think that is a risk, but I guess the pipeline going back to this point around the pipeline is really strong. So it's a different market. We're not relying on having to win a specific opportunity, unlike a couple of years ago, we're missing an opportunity was far more critical.

And then just on the people, you've mentioned that, that's still a great hurdle for yourselves and for the industry. Are you seeing any improvement with regard to the labor market as time is evolving? Or is it still obviously not fixed, but is it improving in any capacity?

My view would be [ no ], it hasn't improved. And I think if you look at this pipeline that we're talking about, a lot of this work now starts to align pretty well. So I think, arguably, the challenges would be more significant in 12 months' time in terms of resourcing work generally.

We have the line from Richard Johnson from Jefferies.

So, I'm just trying to sort of think through the broader market dynamic you've just been talking about, where you've got a very strong pipeline, but a system that's capacity constrained, but at the same time, you've got very competitive pricing. And I'm just trying to really square that circle. So I don't really understand how that all happens. Normally, it would be the other way around.

Well, I think as a part of the cycle, clearly, a lot of this work hasn't been awarded. So people are positioning themselves to secure the first lot of projects. And it becomes a function of your understanding of the risk and the project itself. And -- so pricing isn't just about assumptions you make about your rates. It's also your understanding of productivity and requirements to deliver that work. And how [ do you touched ] on. We make various assumptions and we might be right. But if someone else takes a far more aggressive position or it doesn't understand what's required to deliver the work, we don't win the work. They win the work. I mean it has consequences for them in terms of execution beyond that, but it doesn't help us. So I think -- yes. I'm not sure if that answers your question.

No, it does. But absolutely, it does. But I was just sort of thinking through are we effectively saying here that the customer is now prepared to take more risk? What I mean by that is that they're prepared to use the supplier they might not normally have.

Well, I think there's that, but the comment I made earlier is customers -- they have an understanding of what's happening in the market. So there are more discussions around different commercial models as well, which means that not all contracts -- not all construction work will be done on a lump-sum basis, rates reimbursable with a risk-reward model attached to it. So there are some of those conversations occurring.

Got it. And then just finally, the comment you made in your outlook about taking a different strategic approach to new work opportunities which you explained. I was wondering if you could provide a little more detail around that. I'm just trying to understand what you're doing differently today that you haven't done in the past, it all sounded pretty familiar.

Yes. Well, yes. So we talked about the allocation of risk. So these conversations with some customers around commercial models that are a little different to what they were 3 or 4 years ago. I mean that's part of the conversation. We're involved in some ECI, so early contractor involvement, where clients are paying us to work through planning for some of these smaller projects that will come through. Yes, even large ones. And I guess, also understanding the volume of activity what the pipeline looks like, we can obviously be a little bit more selective about the opportunities we're pursuing in terms of the customer, the market it's in, the timing of the work, our confidence and ability to get the resources. So that's been more of a feature as well.

Yes. Got it. I mean is it reasonable to assume that as an extension of that, given that the approach you're taking, I mean you may always say this, but you've got a very high degree of confidence on the win rate, given you're being much more selective about what work you're approaching?

I'm not sure I understood your question. Apologies.

So it's really around your level of confidence on whether you'll win the work, given that you're targeting very specific pieces of the business because of the strategic differences or the strategic approach that you're taking now?

Well, yes. And I guess part of that strategic rationale on the factors in the opportunities we're pursuing and the ones that we had confidence that we can secure and that we can deliver.

We have a follow-up question from John Purtell from Macquarie.

Just had a follow-up, guys, around the -- there was a recent in the U.S. in terms of hydrogen fabrication. So the question is, is this a sign of things to come, given the amount of renewables activity over there and how you manage the risk around that type of work in terms of -- more broadly around that fabrication piece?

Yes. So I think that's the important point. It's not execution on the ground in the U.S. It is a fabrication package for a number of schemes. I think it's fair to say it's strategic, but it's small in nature, but it's certainly a market that we're staying close to and would look to participate more significantly in the future.

Thank you for the questions. With that, I would now like to hand the call back to the management for closing remarks.

Thank you very much for your participation today, everybody. That now concludes our briefing.

Thanks, everybody.

Thank you for your participation. You may now disconnect.