NRW Holdings Limited (NWH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the NRW Holdings Half Year Results Conference Call. [Operator Instructions] I'd now like to hand the conference over to Mr. Jules Pemberton, CEO. Please go ahead.

Yes. Good morning, everyone. Good morning or good afternoon, depending on where you are. Joining me today is Peter Bryant, our CFO, for our FY '26 half year results. Exceptional set of results for this half year, particularly when compared to last year and some of the challenges we had in pcp. We'll skip through the highlights -- well, I'll skip through the highlights, sustainability, and then I'll hand over to Pete, and then I'll take you through the businesses' operating performances as well. So just a comment on the second page. We've now got a workforce of more than 12,000 people. So we say circa 12,000 people. That's 12,000 people and growing, obviously, given the activity levels we're supporting across the group. And if I skip over the page to the half year financial results, we delivered revenue up 20% or 9.5% to $2 billion, the underlying EBITDA was $132.3 million, up 36.5% on the half and underlying NPAT of $83.1 million, up 42.3% on the half. Record cash holdings for the business of $342.4 million and very strong cash conversion, which again, Pete will talk to more but a very strong focus for the business units. Underlying earnings per share of $0.18. Strong order book grown a bit since the AGM, $7.5 billion, including repeat business. But what's really grown is the outlook and the pipeline, which is for projects to be tendered/awarded within a 12-month period. That's now $25.2 billion, and we have a record of $9.2 billion in active tenders currently submitted and being worked on. Our fully franked final -- or sorry, interim dividend declared at $0.05 a share is up 20% on the pcp. And importantly, and I'll talk more about this during the presentation as we further upgraded our guidance to $275 million to $285 million of EBITDA from $260 million to $265 million, which we disclosed at the AGM. So on the next page, I'll talk about sustainability. We obviously always have a very strong focus on the safety and well-being of our people. and also critical risk management. I'm encouraged to see that the TRIFR has improved, albeit slightly from our position of 6 previously that's down to 5.11. Critical risk management implementation is very close to completion across all of our businesses and obviously having the acquisition of Fredon done recently and will be rolled out across their business as well. Some of the decreases in female participation and indigenous are really due to the inclusion of the Fredon workforce and the increase in blue-collar workforce, which is predominantly male and that's had a, negative effect on some of those stats. But overall, obviously, we're looking to improve those stats. So with that, I'll hand over to Pete to talk through the financials, and I'll cover up again on operations shortly.

Thanks, Julian, and I also welcome everyone to the call. As my second results presentation as the CFO of NRW and obviously very happy to present in such a great set of numbers, earnings, margins, cash gearing all reflect very positively for the half. I'm on Slide 5 now. So Jules has already called out all the key numbers, which leads me with, I guess, the opportunity to present the most engaging commentary I can around amortization, interest, tax and non-underlying. If you just run down the numbers there, amortization of acquisition intangibles was up on the prior corresponding period. That increase all relates to the amortization of the Fredon customer-related intangibles that we'll book. And I'll talk about the Fredon acquisition on the next slide. Non-underlying transactions at $10 million. There is a table in the director's report that gives you a full breakdown of that number. The largest single item is $6.7 million relates to Fredon and acquisition costs and the treatment of the deferred consideration for Fredon, which is another item I'll touch on in the next slide. Interest was flat year or half-on-half, which we think we'll use debt to fund the acquisition of Fredon's grade outcome reflects there of the retirement of some equipment financing and the give managed to negotiate a reduction in our interest rates with our banking syndicate. Finally, on that slide, tax, very stable at just under 30% of NPAT. Moving to Slide 6, which deals with the impact of the Fredon acquisition. If there's an opening comment, I'm going to say, sometimes accounting standards can at a level of complexity to how we're required to disclose things I think this is one of those times. This is a brief recap. We announced -- or sorry, the announcement of Fredon -- sorry, when we announced Fredon, we pointed out the total consideration would be a maximum of $200 million on a debt-free, cash-free basis. The $200 million comprised a guaranteed payment of $140 million and an earnout of up to $60 million. Of the maximum consideration, a payment of $18 million was going to be deferred for 2 years. Now the good news is Fredon achieve its earn-out. So we will be paying the maximum consideration of $200 million. So this slide now shows how we have to account for that. If you look at the column on the far right-hand side, I'll just move down the numbers for you. You can see at the top the $200 million acquisition price, we are required under the accounting standards to deduct from that the $18 million deferred payment because that deferred payment is tied to the retention of the minority shareholders. Again, under the accounting standard that deferred payment is treated as an employee expense, not as part of the consideration. We will be providing that payment through our P&L, and that amount will be disclosed as more underlying, and that formed part of that non-underlying balance I referred to on the prior slide. Continuing to move down, you'll see we add back $45 million. The $45 million was a pre-agreed maximum working capital adjustment that has to be made. I did mention the acquisitions on a debt-free, cash-free basis. We then are required to deduct what we're calling seller deductions. These are payments that were made on behalf of the seller by us out of the seller's consideration. As an example of some of the legal fees were paid by us out of the consideration. The math then gives you a number of $208.1 million. That is the total consideration under AASB 3, which we will use for calculating goodwill. You'll then see a 55 -- sorry, $53.7 million cash adjustment. That is actually the cash that was in the business when the transaction concluded. So you recall, I just said the working capital adjustment was $45 million. We actually had a gain because in conclusion, there was $53.7 million of cash in the business. That then gives you the final cash outlay of $154 million. I'll call out the bottom bullet point. on that slide. So on a like-for-like basis, if you think of the announced $200 million purchase price, we effectively paid $191.3 million for the business due to additional cash that came across to us. And you can see the commentary there on what the earnings multiple would be at that level. So as I said, sometimes accounting standards do add some complexity to how we report. Moving on to the balance sheet, which is Slide 7. Perhaps stating the obvious, but off the back of the Fredon acquisition, pretty much every balance in the balance sheet moved. I'm going to call out the 2 or 3 that I think are most important. Net debt, you'll see increased to $200.4 million. And importantly, leverage we're seeing at 22.1% before AASB 16. That balance is actually lower than I think I gave guidance to in previous conversations with most folks on the phone. The gearing was better than expected due to the really strong cash balance that we have on the half. I'm just going to call out, we do still have to pay out the $60 million payment in relation to Fredon. So I do expect gearing will tick up a little bit during the second half of this year, but it should close the full year at or a bit below 30%. Working capital, you see there, we had an increase of $207.6 million to negative -- sorry, to $207.6 million. That is negative working capital. And just to remind everyone, negative working capital is actually a positive. And I think with the time we give Fredon acquisition, we did call out that Fredon runs that business with negative working capital, very focused on getting paid in advance for the work they do. My last call out on the balance sheet is in relation to intangibles and goodwill. You'll see that balance has increased. That increase all relates to the Fredon acquisition. We will be booking customer-related intangibles of $95.3 million and goodwill at $141.7 million. Moving down to the cash flow. And Jules did reference the very, very good cash flow conversion is 114.1%. That cash flow conversion was underpinned by 2 things and by a significant effort of the team to get debtor balances paid, and there are a couple of other balances that we recovered during the period, which was great. We also, through one of our major clients, received some early payments of invoices that were due at the end of the month. So a little bit of a run loss kicker for us. We have called out in the guidance that we expect cash flow conversion to be consistent with long-term averages. So I don't see it at 114% for the full year. We have a $69.2 million tax payment. I'm calling that out just because it is up on the prior period. Again, we have called this out on previous calls. The business had the benefit of some carryforward tax losses and some accelerated capital deductions during the COVID period. Those are now unwind. We're reversing back to what I call a more normal cash tax basis. Final one on this page for me is capital expenditure at $56.2 million for the half. Jules mentioned, our focus on capital and cash discipline that remains. We guided at the -- when we release the full year results to about $140 million of capital for the full year. We haven't changed that number, but I do expect we'll come in below given the focus we have on. Last slide for me is on debt and available liquidity. I won't spend long on this slide, but the data in the table on the left-hand side, I've really referred to already as we've been working through the call. The data on the right-hand table just reflects the headroom we have under our various liquidity facilities. That said, we are going to carry out a bit of a review of liquidity off the back of Fredon and just to see what that structure should look like. My final comment really for those who have had an opportunity to read the accounts as you will see in the subsequent events that we did increase our debt capacity by about $40 million through the establishment of an overdraft facility just help us manage the ebbs and flows of cashing out of the business. I'll hand you, thank you, Jules, now for the exciting stuff.

Thanks, Pete. On the next slide, Slide 10, we -- a slide you've seen many times before, which is our divisional split between civil, mining, MET and EMIT. Mining comment on this really is that we're not really a true mining services business anymore. We are a services company, obviously, with activities across mining services, but also public infrastructure building, data, defense, et cetera. So we are a very, very diversified business these days. On the second slide, we just have a quick overview of the various segments. Obviously, all of them up on the right-hand side, very positively in an earnings sense. Mining was down slightly due to the completion of some projects, which I'll talk about on the slide. On to Civil, revenue increased 6.3%, strong urban growth and also the WA side of the business. A lot of work for Rio Tinto in terms of their sustaining capital business. So 3 projects there Brockman Syncline, Rio Tinto's coastal water supply and also West Angela's, which is we've worked at for quite a period of time, but we've also awarded deposit age, which is a new project for us there. The revenue in the core Civil business in Queensland was flat compared to the pcp, was also impacted by an underperforming contract. Productivity and rain was causing some issues on that job. We have fully priced that into this half, the expected outcome, and it's due to complete very soon. Had that not occurred, we would see margins at least where they were at the last half, second half of the FY '25 financial year or better. So as we've said previously, we see those margins continuing to trend up post all of the COVID and hyper escalation for a period to being stronger. So we'd expect that looking forward. Looking forward, a huge amount of opportunity continuing, obviously, in the Heartland that we've worked in for a long time in the Pilbara. sustaining replacement, minor works, major works, a lot of very large pipeline of opportunities across all of the majors at the moment. In addition to that, we're seeing quite a bit in the infrastructure space, not as much, obviously, in Queensland yet, but certainly in WA, freeway widening, token grade sets, a whole number of projects that are still coming to market. And this really excludes all of the tailwinds coming in defense, both in WA and South Australia, where I think there's a combined $30 million tag for Henderson and another $35 billion, sorry, another $35 billion in South Australia. So I think activity is going to remain very strong. When you think about the South Australian market, we've worked there previously, at OZ Minerals, Olympic Dam, a lot of that workforce and equipment the capability doesn't exist in South Australian would come from WA or from our East Coast business. So very good opportunities. And as you can see from our order book, active tenders and pipeline is probably as strong as we've ever seen it, with significant tenders pending award. On to mining, growth result back to that sort of 9% margin, we've always sort of talked about a 9% to 11% EBIT margin for this business. We're back at 9% after having a pretty difficult time last year due to the excessive rainfall that we had across those operations. So that's a real positive. Revenue a bit lower on pcp purely because of the cessation of Mt Cattlin Job, Mount Webber and also Isaac Downs were in that period. So run rate was high, but we do expect a much stronger second half with acceleration of Castle Hill and also the weighting of the South Walker Creek project coming in under the new contract model, which sort of started in January this year. So increase in volumes and better performance expected in the second half. So the only other thing I'd call out is probably the award of the Meandu contract. Excellent contract for us to win. It's 100% client's equipment. So when you think about the mobilization, transition phase is happening this half, but it doesn't really impact us financially until FY '27. So again, we're growing the business, growing the Mining division with 0 capital. So when you kind of compare us to some of the comps, we are a very capital-light mining business compared to what you think a mining business looks like or mining contracting business looks like. Again, in terms of order book, as I said, outlook very positive. Order book is strong at $4.5 billion. There's a couple of projects Obviously, you can see from the chart there that will be coming up due for extensions. Those conversations are happening now between those 2 large projects that we have in both Curragh and Karara. And then other than that, there's a pretty big pipeline of opportunities of which we do have capital available to support. So there wouldn't be a huge amount of additional capital required in the short term. On Cement, exceptional performance from those guys on a pcp basis. Revenue, very strong 30% increase on the pcp and also the margin trended up very strongly as well. The combination of good performances from DIAB and RCR and obviously, a very strong performance at -- in the revenue from Primero at Fimiston. That project is completing sort of towards the end of this half. So again, if you think about pipeline outlook for this business, very strong performances during the half and during the sort of the calendar year. A lot of active tenders in play at the moment, again, pending the award plus a pipeline that's building currently $3.8 billion, but activity levels are very high. So we've got no concerns in terms of replacing the Fimiston revenues as we look forward to '27, which may be a concern from some of the investors' comments in the past. So we're very comfortable where this business is at the moment in terms of the MET Group run rate. And bear in mind, DIAB has maintenance and shutdown services that it does, so is RCR in terms of its product supply plus maintenance services. So there's a very large annuity business, good margin annuity business that is embedded in our MET Group division. So it's not all about projects. Having said that, obviously, Fimiston has been a standout for us in terms of capability and size and scale and very strong progress on Coastal Waters and Hope Downs 1 NPI as well for Rio Tinto. And the only other thing probably to call out on that slide is that we're commencing discussions with sort of global investment banks around next steps on generating value commercializing our lithium processing technology, which we've been working on for a number of years now. We've just completed our third pilot plant, had various global majors through understanding our process and its value to the lithium processing industry in general. So that's something that we've kicked off. We haven't talked about it a huge amount in the past, but it's certainly something that can potentially give us a great outcome in the future. So on to EMIT, very happy with, obviously, the acquisition of the business, the people, some fantastic people in the management team and all the culture of the people fits in hand in glove with the NRW businesses. The integration of the 2,500 employees, the systems and management reports and all of the things that we look at financials has gone very smoothly. And we really got some great outlook for that business as we look forward. What it delivered during the period, $208 million of revenue at an EBITDA of 4.6%. That was generally expected and communicated to the market through our due diligence phase. We've won a bunch of data center contracts. But importantly, if you look at the sort of last -- the second last bullet point, Fredon has successfully completed delivery of Westmead Children's Hospital, Auckland Convention Center, Sydney Metro. This is a business that is not just about data centers. So if the technology stocks go fluctuating wildly, it's not all about data centers, yes, we're doing a lot of data centers at the moment. But this business has been around for a long time, and its strengths are across infrastructure, hospitals, public venues, sporting stadiums, defense and all of those areas are going to have some huge tailwinds as we look forward at the moment. So we expect a very strong growth outlook complete, coupled with a focus on achieving our internal target of 6% EBIT margin, which, if you compare it our comps should be absolutely manageable, and we'd look to improve that going forward. Order book, again, strong. Active tenders and pipeline continues to build. So really, some very good opportunities that you'll get to hear about in the near future. So that leads me to our outlook and guidance. So continued strong growth will be delivered in FY '27 and beyond, which is underpinned by our pipeline currently sitting at $25.2 billion and those active tenders of $9.2 billion. $7.5 billion of work in hand, obviously, if you heard previously. So just to reiterate, our '26 guidance. Our full year guidance at the stage is full year revenue increased by $4.1 billion to $4.2 billion from previously $4.1 billion, and our underlying EBITDA has increased to between $275 million to $285 million from $260 million to $265 million. Cash conversion consistent with long-term averages. Now we don't do 114% all the time, but the high 80s, high 90s is kind of where we're targeting. So with that, I will open it up to questions. Thanks very much.

[Operator Instructions] Your first question today comes from William Park from Citi.

I want to just ask about how things have sort of trended in the first 1.5 months of second half, and I appreciate your comments around optics to the outlook, but just in terms of how things have tracked across each segment. And it's clearly mining with their [indiscernible] impact from rain in the first month or so of the second half, please?

Thanks, Will. Look, there has been a little bit of rain in January, but nothing out of the ordinary. I mean you'd know that last year was an exceptional rain event and constant sort of rain that we experienced throughout the year and more than 9 months of the year. It's normal for us to have rain in January. And on that normal period where you'd expected between December and sort of February, but it hasn't been anything excessive that we're concerned about. And it drives [indiscernible] out there at the moment.

And then just for other segments [indiscernible].

No. I mean, look, again, urban always gets a little whack with the rain when it's in Southeast Queensland, but that business continues to perform generally rain or shine because they recover the ops very quickly and generally going to have a lot of disruption. So nothing here. WA, very little impact to the cycle on came across the post when across Karara. I think we lost half a day or something. So certainly nothing that I'm concerned about. And touchwood last year was the anomaly and we're in a more normal pattern at this stage. But doesn't mean that it can't happen between now and sort of Easter time.

Well, the January consolidated result was where we wanted it to be. We're halfway through February. So I don't have numbers, just I'm not hearing anything that you all said, so everything is tracking as expected.

And then can I just clarify your comments around mining. typically, as I understand it, this is first half skew, but are you suggesting that this year because of the timing of project completions and so forth, you're expecting second half revenue for mining to be higher half-on-half?

It shouldn't ever be a first half skew. It kind of depends on what you're commencing. And when you're commencing it, we had South Walker Creek step-up because we're running the clients gear plus our own gear so that was always going to step up under the new contract in terms of size of contract and then also then the commercial model flips back to a production-based model rather than the hourly higher base model, which it was before. So when it rain, we actually did the best on that job at South Walker Creek because compared to the other projects because of the nonproductivity aspect of it. Now it's converted to our normal production style contract. It's performing very well because we're not having the rain impact. So that's new versus the first half. And obviously, the first half, as I just said before, we've Mt Cattlin dropped out versus pcp, first half 2016 versus first half '25. Mt Webber was completed. It's just run the end of its course. And then also we had a little bit of Isaac Plains in there previously from Queensland. So second half now, as we say, FY '26 into '27 has growth from Mt Cattlin increasing its second big fleet but also South Walker Creek. And obviously, nothing else coming out. So you've got stuff coming in, things not coming out. And then when you hit '27, you got to add on the Meandu as well, which is 0 capital plus whatever it is $150 million a year of revenue, what are the numbers. That makes sense?

Yes. That's very clear. And then just one last one from me, correct me if I'm wrong, but this is first time that you've ever sort of provided color around, I guess, the next fiscal year. Just want to -- so in comparison to prior years, could you give us some sense around revenue coverage for the next fiscal year at this point? Looking at sort of your pipeline work in hand and [indiscernible] to me looks to be quite poor. But just wondering whether something is effectively change in comparison to project. Clearly, your visibility does look good. But just curious to know [indiscernible] expectations for [indiscernible].

Look, Will, I mean, you got to think about the volatility that's been in the sector over the last few years. COVID and post-COVID and those kind of which weren't really normal. Up until 2018 from even the last kind of real downturn from 2017 to 2019, we probably would have been giving forward-looking statements like that. But the business today is so different. There's so much walking the door, annuity, other things that we don't even announce because of the individual values. If we get a variation on a contract with a large client who might not want to say anything, it could be $30 million to $800 million that comes in the door. So you can't -- order book is one measure. I think submitted tenders is very important. We haven't got preferred tenders in that split out of that -- it's not in the order book, but we don't have that sort of split out of the submitted tenders or active tenders. So there's a whole bunch of numbers in there that some of which you see when we deliver the financial periods, but a lot of it, you don't necessarily. So the confidence that we have going forward is really based on that growing pipeline, which is $25.2 billion of projects, which is here right now and coming up within a 12-month period that we'll be bidding or commencing it. So the activity levels are very strong. And obviously, you've got to remember that we've got different businesses now, including Fredon and EMIT. You've got parts, maintenance businesses that are kind of churning along and then the project profile that we see across the iron ore majors plus infrastructure is also building. So this -- it's a very different business to worrying about a binary about 1 big project turning up.

Your next question comes from Darcy White from Jarden. First one, just on net performance. Could you break down how much of that improvement is leveraged to higher production versus what's coming from customers? And just given where commodity prices are, how should we expect any incremental benefits as those customers continue to ramp up in the second half, please?

So are talking about MET specifically?

Yes, MET specifically?

Well, look, I mean, the RCR business or the products business, mostly these days. It doesn't do major projects anymore. It used to do a bit of that, but it's mostly in our products and in the service and maintenance of those products. So that's become more of an annuity business. And that's obviously helping improve the overall margin. DIAB is more specialist small projects plus shutdown and maintenance as well. So I was doing a shutdown in maintenance for FMG and for others as well. So again, that becomes sort of not really an annuity business, but more so in annuity business. And then the projects are generally kind of smaller sub 50 million little-sized projects. And then you've got Primero, which has obviously, a chunk of firm has been in at the moment at a lower margins than most of the projects a bit at. So I don't know if that really explains the question properly. Pete, you want to add?

A bit of color on that. And I think when we talk about net, people automatically going to Primero. But the net business, when you roll in as RCR, [indiscernible] Primero is kind of, call it, ballpark 50% of the EBIT that, that division generates. It's not as heavy as most people think is, and Jules has gone through those 3 businesses. So that's the only additional point I'd add.

That's great deal. Just on margins. Mining performance were pretty strong in the half. Can you just talk to what you're seeing in that second now? How we should think about capacity from here, what you guys are seeing in terms of competitive intensity? And just whether there are any key projects or contracts we should keep in mind for the second half that we should be aware of, please?

Look, two key things I called out on the slide are obviously the extensions that are sort of there at the moment, which is Curragh and Karara, which we've been obviously incumbents for quite a long period of time. Curragh also has Curragh North, which is [indiscernible] and others where it Curragh Main.So there'll be the ongoing conversations at the moment to obviously extend that project. So those 2 are big sort of catalyst is. If you look at the business as usual number, our revenue or annuity number, that's important for us for looking forward. The bid activity is reasonable and building, obviously, through all the gold guys and others and even lithium people that are starting up again in new gear. But winning Meandu was a great opportunity for us. It doesn't use any capital. So we've been very disciplined. And unless we're getting the right returns, we're not interested. We'd rather spend the money on the Fredon, as you can see and diversify the business or grow that business and there is no capital intensity. So we're being very, very disciplined around that. What we'll see is probably drill and blast is in the mix on a few contracts. They haven't had the best year this year. It's been a bit quieter for them. But I think into '27, that will pick up as well. So drill and blast, which is quite a profitable part of that mining segment will help as we look to sort of '27, '28. But with the focus on capital from even the majors as well, there will be opportunities that come to contractors, assuming they have equipment. For us then, if we have the equipment, great. If we need to go and buy the equipment, it's very, very heavily scrutinized before anyone spending money.

[Operator Instructions] Your next question comes from Evan Karatzas from UBS.

I'm getting this asked a lot. I think I know the answer. I was going to ask you. In the MET's results obviously very strong. Was there any proper at least from [indiscernible] or anything else that could be seen as one-off in normal course of business or anything else like that?

No. No. No.

Okay. Yes, very clear. And then when we think about just the MET's earnings number, I mean you're sort of in this 40, mid-40s the last 2 halves, do you want to maybe just speak on how you're thinking about the sustainability of this level of earnings for the rest of '26 then also into '27 as well, please?

Look, I think as Pete said, you've got -- as said as well, the DIAB, the RCR business is sort of and FI are kind of a part of that solution and more projects that we bid with Primero and our usual margins would potentially improve it. So there is a very large revenue chunk related to Fimiston but at a lower average margin across the business. So I think it just depends on the mix of that. But project-wise, there's a lot happening. So Primero is involved in at the moment, that momentum and that project pipeline is building. So there's some really good things that we're involved in. So I have no concern in that business growing looking forward.

Yes. Okay. Good one. And just final one for me. Just coming to Fredon. Can you just remind us of the margin expansion opportunity for Fredon there getting to 6%. Why is it more depressed today? And what drives it to 6% over the short term? Anything you can point to there? And also what's the definition of short term as well?

Short term, well, for us, as the boss to the Fredon guys looking on the call, it's short term is soon. Does that help? Very soon. Look, I think some of the comps do produce different margins. These guys are very conscious of delivery. conservative in terms of their view around their projects, which is a good thing on an aggressive and things like that. They're a conservative delivery model. There are no kind of commercial issues outstanding. They deliver exceptionally well, and they're conservative in the way they do it. So I think that very early days, obviously, for us acquiring this business. And it's really about getting our sort of systems, processes, management reporting, all that sort of stuff that we need to get our hands around. And now we then focus on -- they're very clear in our understanding of the focus on improving those margins. And I have no doubt they'll do so within a short period of time, which could be in a half, it could be next first half '27, but I think we'll start to see things improve pretty quickly.

Yes. Okay. So it's that combination of delivery and best scale, right?

Yes. And I mean just the number of projects that are coming as well. I mean it's if you think about what's out there, it's not just data centers. They do a lot of data centers, but it's the traditional business that they've been working in well with those hospitals, major projects, convention centers or stadiums or airports or whatever else. There is a huge volume of work coming up, and they are a very, very capable organization. One of the interesting stats on it, and they're probably the lowest turnover rate out of any of our businesses, I think culturally, it's actually improved since the acquisition down to like 11% annualized turnover, which is the lowest you'd ever see anywhere for the kind of business. So it's really an exceptional outcome for us. And obviously, we're very pleased to welcome all those employees to our group.

[indiscernible] group procurement contracts and there, I say, they're not for sale, so they're now focused on growing [indiscernible] due diligence questions here.

Your next question comes from John Campbell from Jefferies.

Great result actually. Just two questions for me, and it's sort of already been asked, but just around MET and Fimiston. Is it would it be right to think along the lines of, say, into FY '27, that there'll be a couple of hundred million of revenues that need to be replaced, but presumably, as you say, the pipeline is pretty good, but the margin impact probably is going to be positive. Just a question of whether you can fully replace those lost revenues?

Yes and yes, John. I think we -- the replaced revenues is not that much of a focus because there is quite a lot of work around. The important thing for us is obviously just improving, making sure that we maximize the overall margin. So whatever opportunities we get to do that, and there are a number of live bids that would certainly deal with that. The pipeline is pretty good and building probably that would be the comment.

Yes. And the margin performance, obviously, for the first half was really good. So it would seem that it would seem reasonable to assume margins will be higher in '27, almost certainly.

Yes. Again, it depends on the mix of the DIAB, RCR and those sort of volumes. But I mean, everything we've been doing with those businesses, they had some challenges with RCR, with overheads reduction when we're trying to grow the parts and maintenance business. So I think we've got a good handle on that now, and that's really the focus. That's a very high margin or higher-margin business. But generally, the NPI projects, the other projects, the FEED studies, the engineering work that Primero does is also at a higher level. So it's just making sure that we balance the right projects in that sort of mix. But what we're seeing at the moment in an activity sense is very positive. So.

Yes. Okay. And just on mining, again, pretty solid margin performance. And your target, I think, around the mining can be sort of in the 10s, early low 10 -- sorry, low double-digit potentially. But as you've sort of progressed and you're becoming less capital intensive within that segment, is it reasonable to assume that margins -- like if you can maintain margins as you're increasing the proportion of noncapital-intensive contracts, that would be a very, very good outcome?

Yes. Look, ultimately, if we get the opportunity to do that because obviously, not every project you can and then it comes back to are we willing to invest that level of CapEx in a project, which lately, we have we haven't won a lot of big mining projects with our own equipment. We just haven't -- we've been focusing on other things. But yes, I mean, Baralaba is a good example of that. Meandu is a good example of that, 100% clients equipment. And if we can keep the mining margin at a blended 9%, happy days. Not about outcome. You can see what we're spending in CapEx. I mean, I don't think I've seen that number that low for 10 years, I don't know. I mean it's been a long time since we've looked at a number that low. We do have a focus on it, but we've just shut the gates on cap -- you can't walk in the door and say, I want to buy this and buy that to grow a mining business that is still competitive and isn't spinning out the right margins. So unless something changes there, and you're making stupid margins, why would we go and buy the equipment and deploy that capital to that business.

Your next question comes from Nicholas Rawlinson from Morgans.

Congrats on a really strong result. Just on the met segment. When you roll off the target cost estimate contract at Fimiston, I know it depends on mix a; bit, but same mix of Primero, RCR, DIAB, NFI are all pretty much the same. What's sort of a sustainable margin on that? Can you give us sort of a rough indication?

Look, where it is at the moment to when it was small, it was doing 8 to 10, and now it's we've sort of said it should be better than we reported last half, slightly higher, but that was sort of one-off of a bit extra any. I mean in the kind of realm of where we are now is not unreasonable. A couple of things obviously come out of that. It's just that mix of projects. And we've got some very good project teams. We obviously want to keep them busy. We've really built probably the largest project of its kind in Australia very successfully. And we're bringing the Rios, the BHP, everyone else up there to have a look at our capability, which is a real pat on the back for our capability as a group, which is probably not well enough understood. So as a result of that, we're starting to see a lot more interest and not only in construction but also in FEED studies. And obviously, the commodities, in general, are in a very positive environment.

And then just a general one, at the group level, the EBITDA guidance range has actually widened. Usually, it'd be narrowing at this time of year, I guess. Can you just explain what's driven the $10 million delta?

Look, I mean, we're not out of the complete wet season yet. If you want to think about it like that, but it...

It did go up a bit.

Yes, it did go up a bit.

I know. I was just like you had $260 million, $265 million. I was just wondering if there was like maybe a bit of contingency built in there for, I don't know, the outcomes of Fimiston margin recognition there, like in terms of whether maybe you take a little bit of a hit or something like that.

Look, I don't think so, but you can work out what you think. The reason is it's usually been in that kind of $10 million range. It was only -- obviously, we went to a slightly tighter range, but things have continued to be dry. Operations are performing well.

Your next question comes from Cameron Bell from Canaccord Genuity.

Just that pipeline of projects in the next 12 months and your active tenders, those 2 numbers are just on the massive numbers. It's probably a difficult question to answer, and I won't hold you to it, but that $25 billion top line, roughly ballpark, how much of that would you expect to actually convert into eventual active tenders?

Good question. I mean, look, depending on who the customer is in that mix is to some of it can be extensions as an example, we're already there, and they're big numbers. As you can kind of work out from our mining slide, but there is other mining bids live. There's a lot of construction. And as I said just before, we haven't split out the stuff that we're preferred on, so there's another number of that preferred. So look, I mean, I'm not going to give you a number, but it could be sizable.

I thought I was pushing my luck I guess the other part of it being a sort of reverse trickle-down period of work. Given how much work is out there and how your the competitive landscape is consolidated, do you think your win rate of tenders is heading higher?

Look, again, probably, I think if you need a particular capability and you need certainty of delivery, we've been around a long time in our core businesses, and we have a very good reputation for delivery across those segments. So urban is kind of a no-brainer, Civil Pilbara WA, kind of no-brainer. And there's some decent stuff there in terms of framework agreements and other things that are happening. infrastructure the other interesting thing probably to comment, which I haven't commented on is made in WA or even made in Australia. If you think about our comps in a civil sense, there are very little left. I think we're the only sizable one left in WA. Georgia was taken out by the Austrian Strabag so -- and that's a very important piece to decision-making in the public infrastructure space as well as our local content. Otherwise, the Spanish, the French, one Queensland mod that's private is doing a bit of work. So that becomes than a smaller tender field or potentially as long as you got the capacity. So the key thing for us is making sure we're hiring key people ahead of those opportunities so we can deliver well. And that's what we're sort of focused on, whether it's from Queensland or Rio have got direct flights from Brisbane as an example. So we then bring people through Perth. So Brisbane is a bit quiet or. Gold is a bit quiet, we can funnel people to the west and vice versa. So -- and then potentially, we've got South Australia to deal with, whether some opportunities that we're working on that are obviously around Olympic Dam, but then Arcus related as well. We're still in Whyalla . So lots of things are going on and ultimately not a huge amount of choice.

Just bit of context too, and I'll give you the names. But the top 5 drives a pipeline to $6 billion in the top 5 jobs. There's some big jobs out there.

Yes. Okay. And then just the last question for me. You gave us that a bit of breadcrumb in the next slide. What is generate value in, I guess, when you're talking about the within process in that?

Well, look, we think we have developed a process and we are patenting it, and we have IP just now called Ali for a much lower capital cost refining process, which doesn't use the same heat or assets or caustic chemicals to produce a lithium carbonate, battery-grade lithium carbonate. So when you think about that versus the Metso, which is a nearly EUR 20 billion company, we may have something that has some value there. However, we need to go through the motions and understand how to best do that, whether it's sell it, operate our own operation, JV, license, all of those things, which ultimately we want to build, but this has a global significance in terms of we think. So hence, it's a breadcrumb in terms of what future value -- well, we don't understand the future value. We know there's a lot going on. And if we can build something at half the price of the current lithium processing plant, which don't really work here, we might be under something. Albemarle say that doing it in Australia is twice the cost of China, well, maybe we can do it at the same cost as China, but -- and it's a different flow sheet and different process. But anyway, that's the one the breadcrumb.

Your next question comes from Matthew Chen from Moelis.

Just wondering, interested in your latest thoughts on capacity or geographies you want to build on. It sounds like Fredon has gone pretty well. So I'm interested if you kind of want to focus in that more localized space, I think.

In terms of our geo geographical...

No, in capacity in that sense on that side?

Look, I mean, we're growing our workforce numbers. I think when we talked about the acquisition long after. We were 11,500. I think we're now 12,200 or 12,300 or something not long after. So the focus as I said and for Fredon, we've talked about this with investors as well that it should be a material growth uplift in the '27. Yes, material growth uplift. So and that's really to support the projects that we see coming across a lot in the Eastern states, but they're also very busy in WA. So it's been sort of Victoria WA, Queensland in this sort of financial year. But as we look forward, there's probably more in South Australia. Victoria is still very busy, but also coming back into New South Wales as well in Queensland. So we're just positioning to make sure that, a, we're either -- they follow their clients, obviously, a lot of data centers still to build, huge amount of capacity interesting, the whole the mass thing and where we haven't built a huge project before, but he's tied up with furnace. I mean we have that capability. We're doing, I don't know, $300 million worth of data centers so we're right in there in terms of an electrical and a cooling perspective through the HVAC business. So we're focusing on how we can deliver the best outcomes for our business through the opportunities that are out there. right.

Next question comes from Mitchell Sonogan from Macquarie.

Congrats on a great result. Just a couple of quick ones. On the Civil business, you just made that comment, and apologies if you've been through this. Have been jumping between a few today. you've made the comments about opportunities with defense in Western Australia and South Australia. Yes, do you mind just talking to that a little bit more detail at the point where you're looking at tenders over what time frame? Would that potential work start to build?

Yes, good question on the time frame. Not really sure. We're certainly -- the defense business in WA is very closely aligned with the WA government as well. So it's not just purely run by defense. It's being run sort of collectively. We've just extended our lease at the Primero Henderson Yard and everything else to be ready to support all those activities. I think it may go to because of the sensitivities around a couple of major contractors and then we'll look to align our group's capability with one of those 2 major delivery partners, and these are massive construction guys that are well versed and trusted by defense. So that's kind of how that's probably going to work in WA. But then you've got South Australia going at the same time. And we're just looking at those opportunities at the moment in terms of teaming up with some of the majors to look at that. So we don't have a big capability in South Australia at the moment, but we have done quite a bit of work at Olympic Dam and airstrips and infrastructure. We did the road for OZ Minerals, and we're now building their original corporate project out there and things as well. So we do have the experience there other than what we're doing at Whyalla. So that's a consideration subject to kind of how busy we get in WA, I suppose.

Even a bit on defense, we've even had some thoughts around RCR because RCR got a big machine shop here. So in the future, we might be making dry shafts at submarine [indiscernible], and that's trying to vary that field, but there's a lot happening.

Yes. There are only one or 2 businesses in WA. The other one being Hoffman Engineering that can do that type of machining, which actually was news to me until about a year ago. 9 months ago, and they started talking about it. So that's -- yes, future opportunities are very good.

Yes. Just a second sort of one, just on Fredon $1.7 billion of active tenders. Just wondering over what time frame would that work typically be delivered? Is it a 12- to 24-month period? And I guess just yes, whether it's historically or what's the historical win rate that typically achieved or a range there?

No, worries, thanks. Well, look, I think they've got a very high strike rate in terms of their win rate because a lot of it is with long-term customers and a lot of the business, I think, 70% when we announced it -- of their businesses with long-term customers, but that for 20 years or more. So the wind rate is very high. They get involved very early so sometimes, the timing of those awards can take time, depending on when the builder or whoever the head contractor as it starts. But win rate is very high. And again, a lot of that we don't necessarily announce because of the value. So depending on the materiality to the group, we kind of thought about announcing some of those little stuff. But again, it takes time to get the announcement through those their counterparts of their clients and obviously the end client and if it's defense, particularly that's challenging because I don't necessarily want to talk about it. So that's...

The interesting announcements something that's...

We want something. We just don't know. I can't tell you. So I think that's it's a fantastic business. I said, really good addition to the group.

[Operator Instructions] Your next question comes from Peter, a shareholder.

Perhaps an excellent result, a very happy shareholder. Could you just clarify where we are with the Whyalla situation, pleased with the golden recovery of the $10 million? I realize there's a note 3 in the accounts. It's quite complicated. Could you just summarize exactly where we're at in sort of plain English, please?

Peter, that's going to be difficult because it is a complicated scenario. Look, we've tried and been scoffed at every opportunity to try and get money out of this process. We tried to take ownership of the port, which we thought we had until the government changed the legislation to take it away from us. So that was obviously a challenge. We successfully wound up LPMA, which was good as a private company, which owns the shares in Tahmoor. Again, he put that into administration, and he since put Tahmoor into administration, but we're not giving up. We're not spending 5 hours of the day thinking about it, but we are still continuing to work on it. And ultimately, where the situation is now Tahmoor lender being sold, by either the administrator of LPMA, which owns the shares in Tahmoor, and that's it's a pretty valuable asset, 2 million tonnes a year reasonable quality coking coal closer to the coast. That sells we get a very significant chunk of anything over a certain value, but we just got to wait and see on it. So look, we don't give up. We've got all our money back on Gascoyne in which turned into Spartan, should have held a little bit longer. But that's just is what it is. We've had to deal with the pain and we're a very different position to where we were 12 months ago when this -- when the government stepped in. And we're still on the mine. We're still working on the mine.

Yes, the reassurance was that we're not getting distracted and it's not taking a huge amount of time trying to recover this money.

No. But as a shareholder, I absolutely value your thoughts on it and all our shareholders, that's our money. We should have been paid for it. We're not a bank and we will do whatever we can to recover until that moment comes, and hopefully, we do get something back.

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

Yes. Thanks again, everyone, for listening. A lot of good questions as well today and look forward to seeing a lot of you who were on the road next week. So thanks very much.

Thank you.

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