SGH Limited (SGH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the SGH Limited FY '26 Results Announcement. [Operator Instructions] I would now like to hand the conference over to Mr. Ryan Stokes, CEO and MD. Please go ahead.

Thank you. Good morning, and welcome to the SGH results presentation for the year ended 30 June 2026. I'm Ryan Stokes, Managing Director and CEO of SGH. Joining me is our CFO, Richard Richards. SGH is a leading Australian diversified operating business focused on industrials and energy. Our strategy is centered on owning and operating market-leading businesses with privileged assets and scale. We are Australian focused with exposure to long-duration demand thematics, including the $1.7 trillion 5-year infrastructure and construction pipeline, the National Housing Accord, a strong mining production outlook and growing demand for domestic gas and LNG. Our approach is guided by the SGH Way operating model, which brings together disciplined capital allocation, execution and accountability enabled by an owner's mindset. We are frontline focused and relentless operators in driving incremental gains, which compound to support our long-term performance. Slide 3. SGH delivered earnings growth in line with guidance in FY '26, along with margin expansion, strong cash generation and further reduction of leverage. Revenue of $10.6 billion was broadly flat, while EBITDA of $2.1 billion increased 2% and EBIT of $1.6 billion was up 1%. The result was driven by our Industrial Services businesses, which grew EBIT by 4% to $1.5 billion. Industrial Services growth was led by 14% EBIT growth of Boral and 1% growth at WesTrac. Coates maintained its margins in a variable construction market, while lower contributions from energy and media reflected a lower share of equity accounted earnings. Operating cash flow of $2.1 billion increased 6%, reflecting the quality of earnings across the business. Slide 4. The SGH Way defines how we operate, measure performance and hold ourselves accountable. Our strategy sets the direction. Our operating cadence drives a disciplined execution, and that execution delivers operational excellence. Performance is measured through the balanced scorecard. Each metric is quantified, tracked and owned by an accountable leader at every level of the business. Delivering on these metrics supports profit, return on capital and TSR and drives a flywheel to support our long-term ambitions. Slide 6. Safety is a key priority for SGH. In FY '26, LTIFR improved 38% to 0.5 and TRIFR improved 29% to 2.2. Every business improved, reflecting targeted programs across critical risk controls and consequence management. Approximately 85% of SGH's 15,000 strong workforce are frontline roles, directly creating customer value. In FY '26, 275,000 hours of training were delivered, largely directed to those frontline roles, building technical, operational and commercial capability. Female representation increased 100 basis points over the year to 20%. Slide 7. Boral lifted alternate fuel usage at the Berrima Cement plant to 48% in FY '26, reducing emissions while delivering commercial benefits. WesTrac also continues to play a key role in the circular economy, remanufacturing more than 10,000 components and rebuilding over 200 machines during the year. Our approach to sustainability focuses on initiatives that deliver outcomes across the three dimensions of social, environmental and commercial aspects. Slide 9. Revenue of $10.6 billion was largely flat, while EBIT of $1.6 billion grew 1% with margin expanding 40 basis points to 14.7%. NPAT of $920 million and earnings per share of $2.26 were both flat, while statutory NPAT of $655 million increased 35%. Operating cash flow of $2.1 billion at 99% EBITDA cash conversion drove net debt lower, with leverage down 12% to 1.8x, below our target range. That strength supported a 3% increase in total dividends to $0.64 per share fully franked. It also funds the on-market buyback of up to $500 million, commencing following these results, while retaining our capacity and focus on value-accretive M&A. Slide 10. WesTrac delivered earnings growth driven by strength in product support activity. Revenue of $5.8 billion contracted 6%, reflecting the previously flagged normalization of capital sales. EBIT of $647 million was up 1%, with services growth and disciplined cost control more than offsetting capital sales movement. EBIT margin expanded to 11.2% in higher services mix and improved productivity. Return on capital employed expanded to 24.6%. Services revenue of $4.1 billion grew 6% on parts volume, service rate gains and increased parts exchange activity. Rebuild activity was at record levels with multiyear run life extension program for Tier 1 miners delivered on schedule. The installed machine base continues to age, underpinning long-term parts, service and rebuild demand. While capital sales normalized to $1.6 billion, the medium-term opportunity pipeline remains strong. Slide 11. Boral delivered earnings growth and margin expansion in FY '26. Revenue of $3.8 billion was up 5% on volume growth and value-led pricing. EBIT of $535 million increased 14% with EBIT margin expanding 113 basis points to 14.1%. Operating cash flow of $779 million was up 13% at an EBITDA cash conversion of 100%. Volumes grew across every product, led by 7% growth in concrete. Growing volume and price together reflects the strengthening customer value proposition highlighted by 3% higher deliveries on time at 88% and 5% higher grade of service at 90%. Work to variabilize costs across labor and transport continues to support margin expansion. Slide 12. The Coates earnings result was below our expectations. The actions taken to hold margins demonstrates the discipline and resilience of the business. Revenue of $1 billion was 3% lower. EBIT of $270 million at a margin of 26.7% was maintained through disciplined cost and efficiency actions. Time utilization rose 160 basis points to 61%, driven by sales execution, the hub-and-spoke branch model and fleet management. The fleet grew 2% to $1.89 billion on an original cost basis, demonstrating our confidence in the business. The infrastructure pipeline is expected to mobilize into FY '27, including works ahead of the Brisbane Olympics. Coates is well positioned to drive operating leverage as market activity grows. Slide 13. Beach's production of 19.4 million BOEs was 2% lower, with revenue of $1.8 billion, EBIT of $559 million and NPAT of $355 million, providing SGH with $107 million of equity accounted EBIT. Beach commenced production operations at the Waitsia gas plant during the year, which reached nameplate capacity of 250 terajoules per day in April. The business also optimized its portfolio with the divestment of Artisan, enabling the redirection of growth capital. Beach was also awarded new onshore acreage during the year, including the Taroom Trough, giving Beach access to a new basin. On policy, the proposed domestic gas reservation framework as drafted is a fundamental threat to the domestic gas industry. It puts thousands of jobs, billions of dollars of tax and Australia's long-term energy security at risk. We are engaging directly with government to advocate for practical changes to ensure the domestic gas sector can deliver reliable and affordable gas for Australian manufacturers. Slide 15. SGH's privileged assets are actively managed to maximize return on capital. Our focus on returns and long-term performance anchors every asset decision. The capital allocation framework prioritizes disciplined investment to drive returns and preserve balance sheet capacity for the next leg of growth. At Boral, network investment across concrete, quarries and bitumen extends the integrated asset advantage. The Marulan quarry upgrade is about to commence, and we continue to actively progress network opportunities. At Coates, capital is being deployed across the fleet with investment directed to categories that are supported by the strongest demand, customer pipeline and utilization. Slide 16. Crux is a large LNG resource on a lower-risk backfill development pathway, approaching first gas in the second half of calendar '27. The gross resource is approximately 1.6 Tcfe, with an expected production life of 12 years. SGH's 15.5% interest is expected to deliver a net plateau of 400,000 tonnes of LNG per year or circa five to six cargoes. Construction advanced in FY '26 with a platform topside installed, hook-up and commissioning underway. SGH's investment in FY '26 was $194 million. Offtake marketing commenced during the year with strong interest reflecting the growing demand environment. We expect to contract offtake as production approaches. Slide 17. SGH holds a substantial surplus property portfolio of approximately 3,700 hectares where we are pursuing the highest and best use. Ravenhall is a current development focus with close to 630 hectares of land, 20 kilometers from the Melbourne CBD in a key logistic corridor. Once developed, the precinct is planned to provide approximately 2.5 million square meters of net lettable area. Boral has a 50/50 joint venture with Dexus to develop Ravenhall. Boral contributes to land and Dexus brings capital and execution capability. Work is progressing on the rezoning and development will then proceed through staged superlot to unlock value progressively. Beyond Ravenhall, we are progressing property opportunities at Bombo, Waurn Ponds and Penrith Lakes. Bombo is a former quarry near Kiama in New South Wales, with master planning underway for a future mixed-use precinct. Waurn Ponds is a former cement site near Geelong, covering 1,000 hectares. Planning is underway to support future industrial and commercial use, including data centers. Penrith Lakes is a rehabilitated quarry precinct in Western Sydney. Boral owns 40%, and 330 hectares have been identified for potential development through a state-led rezoning process. Slide 19. SGH has a strong medium-term growth pipeline expected to deliver additional earnings and cash flow. Crux is on track to deliver first gas in FY '28, adding a new long-life earnings profile. In property, Ravenhall is being monetized through the Dexus joint venture. At Boral, network reinvestment across concrete quarries, bitumen and recycling drives competitive advantage, supporting continued growth. At WesTrac, investment in technology and facilities is lifting capacity to support long-term demand growth. At Coates, the opportunity is to invest in network and fleet to meet demand and drive returns. And the outlook for energy also remains supportive. Inorganic activity is a key pillar of our growth ambition. In FY '26, we pursued BlueScope. We identified the opportunity, brought in a partner to put the acquisition finance in place and to deliver it. That is what SGH is capable of executing at scale. We continue to maintain our discipline on price and value. We will also continue to actively pursue adjacencies and inorganic growth, utilizing SGH's strong balance sheet. I'll now hand you to Richard to run through the financials.

Thank you, Ryan, and good morning. SGH's capital allocation model is designed to maximize long-term sustainable value creation, compounding disciplined investment into earnings growth and TSR outperformance. We manage our capital structure to balance agility and resilience while using leverage where appropriate, to enhance return on equity. Capital is allocated against clear criteria that cover industry, scope, scale, market position and risk-adjusted return hurdles. Our businesses should deliver CPI plus growth over the medium term, with operating leverage driving earnings expansion above that level. At SGH, disciplined capital allocation and our inorganic M&A focus provides further upside towards our growth ambitions. We have a strong preference for highly cash-generative businesses that produce consistent free cash flow to service debt, enhance return on equity, fund stable and growing dividends and invest to support future growth. FY '26 reflects the capital allocation model working as intended, delivering strong cash conversion, reducing net debt by $515 million, deleveraging to 1.76x, increasing the fully franked dividend and enabling an on-market buyback of up to $500 million, commencing with these results. Slide 22. SGH delivered a resilient result for the year, achieving earnings growth in line with guidance, margin expansion and 99% EBITDA cash conversion. Revenue of $10.6 billion was 2% lower, with 5% growth at Boral and 6% growth in support sales at WesTrac, offset by the normalization of capital sales at WesTrac and 3% lower revenue at Coates. We delivered a 3% reduction in expenses, reflecting SGH's characteristic disciplined cost management. Coupled with an improved sales mix, EBIT and EBITDA margins expanded, delivering 2% higher EBITDA of $2.1 billion and 1% higher EBIT of $1.6 billion. SGH share of results from equity accounted investees declined $39 million on lower contributions from Beach and Southern Cross. Depreciation and amortization rose 4%, predominantly due to the network investment program that began in FY '25. Despite an increasing rate environment, net finance expense of $299 million was down 6%, reflecting a reduction in average net debt for the year, supported by a higher percentage of fixed rate debt. The underlying tax expense of $332 million was up 13%, driven by higher taxable earnings from controlled entities. Underlying NPAT of $920 million was broadly flat on the prior year, while statutory NPAT rose 32% to $689 million, reflecting substantially lower significant items. On a continuing operations basis, statutory NPAT of $655 million was up 35%. Slide 23. SGH's statutory result includes $315 million of pretax significant items, primarily driven by $273 million mark-to-market impairment of our investment in Beach and Southern Cross Media based on the closing share price at 30 June. Other notable pretax significant items include SGH's $29 million share of significant items recognized by Beach and Southern Cross, $16 million of transformation and restructuring costs, partially offset by $5 million of fair value adjustments, largely arising from the acquisition of Boral. The tax benefit attributable to significant items was $84 million. This includes $34 million benefit on discontinued operations, reflecting the release of a tax provision following the resolution of historical tax positions in Boral's divested North American businesses. Combined, these significant items reduced after-tax statutory earnings by $231 million compared to $401 million reduction in the prior year. Slide 24. Underlying operating cash flow for the year increased by $121 million to $2.1 billion, with 99% EBITDA cash conversion, up from 95% in the prior year and in line with our historical average. WesTrac's underlying operating cash flow of $831 million converted 116% of EBITDA, driven by the realization of the working capital investments. New machine inventory was lower as major customer deliveries were fulfilled, with parts inventory reduced through optimization and improved turn times. Boral delivered operating cash flow of $779 million, largely driven by earnings growth, which converted fully to cash on broadly stable working cap. Coates generated $427 million of operating cash, maintaining a strong 91% conversion on the lower earnings base. Net interest and other finance costs paid decreased by $36 million to $281 million, reflecting the reduction in net debt achieved during the year. Net income tax paid rose by $89 million to $292 million, primarily reflecting the higher taxable earnings from controlled entities, with the prior year also benefiting from the foreign tax refunds received by Boral. Net investing cash outflows of $706 million were up $28 million, reflecting ongoing development CapEx for Crux, quarry acquisitions by Boral and an increasing fleet investment at Coates. Net financing cash outflows of $725 million included $436 million in net repayment of borrowings and lease principal, $261 million in ordinary dividends paid, reflecting the higher total dividends of $0.64 per share. Closing net debt reduced by $515 million to $3.7 billion. Slide 25. SGH's net assets increased by $426 million to $5.2 billion at 30 June, largely referable to the increase in oil and gas assets and property, plant and equipment, partially offset by decreases in inventories and equity accounted investments. Oil and gas assets increased by $228 million, reflecting the ongoing development of Crux with the platform substructure and topside installed during the year. Property, plant and equipment increased by $156 million, driven by quarry, batch plant and land acquisitions at Boral and continued investment in heavy mobile equipment to support improved operating efficiency. The $326 million decrease in inventory was predominantly driven by WesTrac, where new machine inventory reduced as large customer deliveries were fulfilled and parts inventory was optimized with inventory turns improving in both dealerships. The $272 million decrease in investment largely reflects the mark-to-market impairment of Beach and Southern Cross Media, recognizes significant items, together with distributions and returns of capital received from China Media Fund. Deferred income reduced by $125 million, reflecting the level of new machine deliveries completed by WesTrac during the year. The combined impact of these items, along with other lesser balance sheet movements, resulted in net debt of $3.7 billion, excluding leases, representing a 12% decrease on June '25 levels. Slide 26. Adjusting for the mark-to-market on debt-related derivatives, SGH's adjusted net debt to EBITDA or leverage was 1.76x at 30 June. Adjusted net debt of $3.7 billion was down 10%. During the year, SGH repaid the maturing USPP tranches in Boral and WestTrac and extended SFA facility tranches, leaving no material corporate facility maturities until FY '30. These initiatives diversified our funding base and extended duration with the level of support from new and existing lenders, reflecting our strong balance sheet, earnings profile and investment-grade credit metrics. At 30 June, 68% of SGH's drawn debt was fixed at an average rate of 5%. SGH's effective borrowing cost was 5.6% with a weighted average facility maturity of 4.1 years. Available liquidity of approximately $2 billion included $575 million of uncommitted. In addition, we hold approximately $7.8 billion in letters of support across five lenders, providing financial capacity for growth. This balance sheet strength and disciplined capital allocation supports the on-market buyback of up to $500 million announced in June, commencing with this result. I will now hand you back to Ryan.

Thank you, Richard. Slide 28. FY '26 was a year of consistent delivery with earnings growth in line with guidance. Our strong operating cash flow reduced leverage to 1.8x, enabling investment for growth. In FY '27, our priorities are centered on relentless operating, building on the disciplines that have delivered this result. In sales execution, we are focused on higher participation and conversion across every business while maintaining pricing discipline. We are driving operational execution with a focus on operating leverage and scaling AI for value. And we will continue to allocate capital with discipline to support our businesses and drive the next leg of growth. For FY '27, we expect to deliver flat to low single-digit EBIT growth. Thank you for joining us this morning. We'll now take questions.

[Operator Instructions] Your first question comes from Ramoun Lazar with Jefferies.

Just a couple from me. Maybe if we start with WesTrac, you pointed to a further moderation in capital sales in '27. Maybe can you provide us with a range like you did this time last year? And then maybe also, how do you see the phasing of those capital sales beyond '27?

Yes. So I think we've spoken for a period of time around that notion of what's the kind of through-the-cycle capital sales kind of volume, and it's probably where that -- I think we said 1.6-ish,1.6,1.8 and where we are now is pretty consistent with that. We think that's broadly consistent for '27. The longer-term outlook, I think from our perspective, if we're looking at, we do get a bit of visibility to customer investment over that medium-term process. It's a reasonably robust pipeline, certainly stronger than we've seen in the last few years. So we are more confident in that opportunity set going into '28, '29 and beyond. So I think that's where we're seeing expansion projects, reinvestment and fleet renewal starting to play through in that context. So I think that's where we expect a bit of a stronger dynamic from capital sales, certainly in the opportunity set.

Okay. Great. And just one other one on WesTrac. Just around the pricing and how you -- I guess, we should be thinking about what that pricing change looks like into the first half for parts?

Yes. That's probably a relevant factor playing in. And clearly, that currency movement in the prior half and certainly through the period that was calculated has played into that result. And I'd say that's kind of a mid-single-digit negative movement into the half, and we are comping against that. And that's probably a factor when you look at the FY '27 guidance. In our view, the underlying demand from customers is there, the demand from parts volume and PEX is there. It's that pricing factor which plays through. And that's essentially a currency translation in first half.

Okay. Great. And just one other one, final one, sorry, Ryan, from me. Just on capital allocation, just your comments, I guess, this morning around the discipline. Any updates on thinking sectors? Investor Day, you pointed to potentially looking at offshore opportunities. I mean, how has that evolved? Are you finding any potential targets? It would be great to get a bit of an update on that.

We are a little more transparent than many others as far as outlining what we look at and why. And I think it's fair to say our criteria is consistent with what we set out in the Investor Day. Yes, we may look overseas, but we are still of the view that, that risk equation hasn't changed from when we had an Australia's sole focus, if you like. It's just we think that, that capital allocation risk here is slightly elevated with policy stance, et cetera. So I think that's a bit of a framing as to why we're broadening a little bit. But our predisposition is investing in Australia. We're very conscious of our operating model playing well here and the ability to take industrial business, if you like, and put that alongside what we have and fit within that SGH operating model. So let's say, when we outlined that at the Investor Day, we said it was industrials and a degree in energy, but predominantly industrials is where we see strong sectoral demand and that value and performance opportunity set. So we need to believe that we can add value. We also need to believe there is value to create. I think that's a real key for us delivering our medium-term ambition, is that combination of the organic performance with M&A. And we think that's a unique attribute of the SGH model, and we have demonstrated that performance with Boral. And we certainly see if we're maintaining that same level of discipline around the opportunity set, and we are focused on driving a return on capital, that 10%, 15% objective, then it would drive return for shareholders. But that's something we are constantly evaluating, and we don't expect us to pivot from that discipline. And so we'll just continue to explore opportunities that are out there. It's just going to be a function of where we see that opportunity to create value and drive performance growth in a situation.

Your next question comes from Nick Daish with RBC.

I think just my first question is just around Coates. I did notice that utilization did tick up to 61% in '26, 59% in the year prior, yet earnings were down about 6.6% growth, which just suggests to me a mix benefit during the period. Could you just flesh that out a little bit further for us, please?

And I mean it's a good pickup. I mean, utilization, there's two measures that drive or two key measures for us that drive ultimate returns. I mean the time one is an important one because it shows just how active the fleet are. That's a good look through. The key one, though, in driving returns is the financial utilization. So if you look at -- for us, the financial utilization step down, which, to be frank, is -- you could argue mix, but in reality, it's probably more a function of a more competitive market and price. And that has been one of the elements we spoke about in, I think, the half year results, and we are very conscious of trying to sustain and drive price, but it's a function of balancing a number of factors in a more competitive market. That's the short answer to that result. But the pleasing factor is that the utilization is there. Our fleet is growing. We see opportunities going forward, and we believe there's more we need to do to drive that sales execution to capture price and ultimately continue to drive margin and performance in the business. So I'd say part of that's market, but I wouldn't -- frankly, that's all market. I think we've got a lot to do in how we execute that performance within Coates. And it is a quality business, and we are market leader. But the factors we need to execute more effectively, and that's a big focus for us in '27.

Got it. And just separately, just on the guidance, obviously, my sense is that there's a little bit of noise in there with foreign exchange influence. Is there a view towards possibly in the future providing guidance on a constant currency basis just so that we can get a better sense for the underlying business? Or is the business' preference to continue to provide guidance on the basis that you've done so historically?

Well, I mean, to be honest, we do on a constant currency basis because it is translated back into Aussie dollars, but it's just difficult to unpick that element. I understand your core of the question. It's just -- we try and provide some visibility to the overall WesTrac parts volume, and it's a frustration for us, in particular the team because what's a unit of parts, if you sort of -- a bulk or a large item, you get a lot of variance play through in this whole unitization of parts volume. So it isn't as easy to get that pure currency translation. And we can provide some context to the currency dollar impact, which I think is probably more relevant to you in that context. And I mean, Richard, can add more on that.

So if you think about roughly $800 million of parts in WesTrac and you're talking about effectively a 5% to 6% parts price decrease, the retranslation of those parts and components delivers roughly a $40-odd million hit effectively day 1, so on 1 July. And then on top of that, if you think about the parts sales during the year, other than the revaluation, effectively, the 5% to 6% decrease in revenue translates through to another approximately $40 million drop, assuming effectively parts demand ceteris paribus. So where we get to is that just the pure currency impact flowing through WesTrac's result effectively in '27 will be approximately $80 million.

Your next question comes from Nathan Reilly with UBS.

So while we're on the topic of that FX headwind, those prices are set every 6 months. So have you assumed flat or consistent FX into the second half?

We've learned a long time ago try not to budget that or forecast that too well because a lot plays through. I mean the difficult part is if you look at where we start, July 1, and you have to calculate then, you wouldn't have had that currency change through. So it's a difficult element to forecast, but our assumption is it's -- that effectively, a 0 outcome in half 2. So for context, that's the way we think about that. It's very -- it's just a difficult dynamic to have to assume or try to forecast what that might be. So short answer, we try and avoid that and just assume it's consistent. So there will be a movement in half 2, where that is -- that will be a function of currency through the period. The other factor, which we, again, don't forecast, is more likely than not -- I shouldn't say more likely, but the usual movements in a price reval or down line movement in price usually occurs on a calendar year. So that's the other factor that may play through in that second half, which we just don't have visibility of as we sit today.

Okay. Can I also just ask about Coates. Can you give bit of an update just in terms of regional performance, just around the states, just in terms of utilization trends. But also if you could just comment on how you're seeing competition in those states and potentially also just around asset classes as well?

New South Wales has been pretty consistent and robust market. I think we've seen some projects roll off delays of others, but that's been broadly consistent through the year. WA is probably slightly up, but not materially. I think there's a bit of activity across that regional side we play into. But from our perspective, we're needing to grow into that Southwest WA market, and that's something we're focused on, but WA has been a decent market for us or the West region. North has been more challenging. I think there's a lot of gear that's left other environments, particularly South and ended up in that Queensland region, and that's, I think, yet to see a big step-up in activity. We do know and expect that to come through pipeline start to look a bit better there. And the interesting thing in South for us is the Victorian market actually has been pretty consistent, but that's come down quite a bit. So that's -- still hasn't stepped up, but it's consistent, but we're seeing a bit more activity in SA and Tasmania. So utilization, I think, for us is strongest in West and East, and there's opportunity for us to grow in Queensland and South. That's -- and it's pretty consistent across the mix of the fleet.

Got it. And just in terms of that more competitive environment that you sort of flagged earlier, just -- is that specific to regions? Or is it -- you're seeing that more in particular asset classes?

It's more pronounced in regions. It's definitely more pronounced in areas. And we're seeing the harder market for us, the more challenging environment has been in North, in Queensland, where it just feels like there's excess gear waiting for projects that have been delayed, and that's playing through. So we're working hard to hold that. And similar, South is -- I said it's consistent, but it's still soft. But overall, that price dynamic is playing through in other markets, but it's just nature of just being more competitive. But we've worked hard to drive utilization up and try to sustain that price and very focused on how we actually push price as a key lever of performance in '27. It's without doubt the biggest opportunity we have, is to drive that price and get that play through in margin, and we're very focused on that. But I think at the same time, the business has demonstrated that resilience and the ability to continue to optimize our cost structure and sustain what we think is a strong EBIT margin, but we're definitely focused on how we can actually improve that operating leverage and returns.

Your next question comes from Keith Chau with MST Marquee.

The first one, actually just a few follow-ups on some of the answers. The first one with respect to the level of WesTrac capital sales or revenues for FY '26. And I think, Ryan, in response to Ramoun's question, you talked about $1.6 billion to $1.8 billion being the range that's sufficient for FY '27. Just noting in FY '26, revenue was $1.65 billion. So I just want to understand.

Sorry, just to be clear, the $1.6 to $1.8 billion is what we've referred to in prior conversations around what's through the cycle. The comment around that $1.65 million is right there and kind of tried to, I think, just to be clear, guide to '27 being more consistent with '26. But no. So that's at that $1.6 million level to be precise.

Okay. And maybe, Richard, just as a follow-on from that. When you look at deferred income on the balance sheet, at least for us, and please tell me if I'm incorrect here, but if the deferred income for WesTrac is settling at a trough level, should that be a reasonable indicator that WesTrac sales should be finding a bottom in the near term? Sorry, Westrac Capital sales, I beg your pardon.

Yes. The deferred income is predominantly effectively deposits on new mining machines, but it's not solely. We also run effectively some MARC contracts. And those contracts are effectively a power by the hour where you bill per hour, you defer the revenue and then you recognize it when it goes through effectively major service events, which we have done in the last 18 months. So in that context, it is predominantly referable to machine sales, but the MARC contracts also play a part.

Okay. And are you able to give us a very broad split of that deferred revenue balance? Or is that something that varies over time?

Look, it does vary over time. I think if you have a look at the financial statements, you'll see that the effectively the movement in deferred income was about $125 million decrease.

Okay. Okay. And then just going back to Coates price competition. I think in prior forums, the target, at least, was to be able to maintain pricing. Certainly it seems as though real pricing has fallen for Coates. One of the comments made in the presentation was that the exit run rate out of FY '26 was prices improving. Is that on a real or a nominal basis? So i.e., can the price increases observed at the end of FY '26, is that enough to recover costs?

So just -- so as far as the outlook for '27 on price, we would -- we're focused on how we can continue to drive that price north. That is a major focus for us. It's a constant balancing act we have to manage as far as kind of winning activity, balancing duration and projects and opportunity. But the real focus for us is how we get that price realization up and, obviously, have that play through in returns. It is a major driver for us of, that operating leverage in the business. If you look at where we are from a time and duration perspective, there is a room to grow that. But financial utilization is the key lever for us to drive that return level up. And there's a couple of hundred basis point opportunity there we think we need to execute through '27 at least.

So Ryan, would the goal be to get your price increase above cost inflation then, just putting it simply.

Yes. Absolutely, yes. And yes, that is a focus. And that -- I think that -- but that's -- I just want to be cautious because I don't think that's necessarily the right way to think about the business in our ability to manage costs, isn't purely around price. So the price realization will drive the financial return on the fleet. We can still drive cost measures to actually ensure that we've got that sustained margins through this. So I don't -- just conscious of that, that isn't the only kind of lever around those controls to deal to cost inflation. We have other levers, and we'll continue to pursue that. But that price lever will drive that financial return and ultimately should play through in operating leverage.

Yes. I certainly appreciate that one. There's several more moving parts to the business than just pricing a bucket of costs. The last one, and the one that struck me actually outside of the operating businesses, is PLDC. It's a development that we've been following for far too long and longer than we probably care to admit. But it's been a tricky project in the past. In the presentation, you talked about 20% of the areas being granted some fill approvals. So presumably, you're not going to go ahead or the JV partners aren't going to go ahead and fill that area without developing it in the future. So is that fill approval a good lead indicator of councils perhaps getting ready to grant some development approvals for that site?

Yes. Those follow -- Boral probably have been following that journey. It has been a long time. But if you roll back for a lot of that period, that PLDC focus was on a rezoning for residential. Our view is that the employment opportunities, the infrastructure opportunities and others through industrial are the opportunity set that the state government is keen to see, and we'll get behind in that rezoning. Still work to be done around some of that process and go through all the required steps to get the development approvals in place. But if you think about the concerns you've got around flooding, et cetera, our view is the best application there is going to be an element on industrial applications, data centers, et cetera, could be well positioned there. And just for clarity, the area isn't prone to flooding. It's not -- there's no concern there. It's how that increase in activity would play into the broader region. But for us, the field is the opportunity is something we want to pursue. We've got other companies approaching us proactively and the joint venture around the potential for activity on there. And we think it is really well positioned just given proximity to core infrastructure and the fact it's the large kind of lake, and that's pretty good for data centers. So we think there's interesting opportunities there as there are with Waurn Ponds. And I guess what we're trying to signal here is as we think about the property, we want to actively drive value through that. And some of these processes may take a period of time, but looking at what's the highest and best use as an owner in that asset, conscious of where we deploy our capital. So I think they're worthy to think through in that medium-term opportunity set.