SGH Limited (SGHC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Seven Group Holdings Limited FY '25 Results Announcement. [Operator Instructions] I would now like to hand the conference over to Mr. Ryan Stokes, CEO and MD. Please go ahead.

Good morning, and welcome to the SGH results presentation for the year ended 30 June 2025. I'm Ryan Stokes, MD and CEO of SGH; and joining me today is our CFO, Richard Richards. Slide 2. SGH is a leading Australian diversified operating business focused on industrial services and energy. Our model is centered on owning and operating leading businesses, scale and privileged assets, where we can drive results and support the delivery of outperformance. Our performance is guided by the SGH Way, which brings together our disciplined operating model and capital allocation framework. This approach emphasizes focus, execution and accountability with the end objective being TSR outperformance and sustainable value creation. We target sectors with long-duration demand tailwinds with current exposures across mining production, infrastructure and construction, and energy through WesTrac, Boral, Coates and Beach Energy. This strategy, coupled with our disciplined execution, supported our 46% TSR performance in FY '25. Slide 3. SGH delivered a strong FY '25 result with revenue and earnings growth in variable market conditions. Revenue of $10.7 billion was up 1% on higher revenue at WesTrac. EBIT of $1.54 billion was up 8% and in line with our guidance of high single-digit EBIT growth. The result was largely driven by a 6% increase in our Industrial Services segment EBIT. NPAT of $924 million was up 9%, and operating cash flow of $1.95 billion was up 49%, with WesTrac, Boral and Coates all delivering EBITDA cash conversion above 90%. Slide 4. SGH's ongoing focus on operating leverage saw revenue growth, amplified earnings, with EBITDA and EBIT margins expanding to 19.1% and 14.3%, respectively. The margin expansion was predominantly driven by increasing profit at Boral and higher contribution from equity accounted earnings. NPAT was up 9%, while statutory NPAT was up 5%, impacted by impairments of equity accounted interests. Strong cash contribution from the industrial businesses drove a 27% uplift in cash conversion to 95%. This result supported a 10% deleveraging of the business to under 2x and below our leverage objective. The profit results supported payment of a $0.32 per share final dividend, bringing the FY '25 dividend to $0.62 per share fully franked, up 17% year-on-year. SGH also completed the acquisition of the remainder of Boral in early FY '25, further cementing the business as a leading Australian diversified operating company. Slide 5. This slide outlines the SGH Way, which is the articulation of SGH's disciplined and scalable operating model. It guides how we create long-term value and deliver TSR outperformance through consistent execution and accountability. The model is built around 4 concentric layers. At the center is the SGH star, our logo, represents our purpose, objectives and values. The first layer reflects our outcome-based objectives focused on TSA outperformance and sustainable value creation. Second layer outlines how we deliver through disciplined capital allocation and execution across our 4 performance pillars of people, operations, assets and financials. Third layer defines our focused activities with the domestic orientation, privileged assets, long-duration demand exposure and a strong culture of performance and accountability. The outer layer of the SGH Way operating model in action with traits like pace, execution and growth, efficiency, continuous improvement and front line focus. Our approach is supported by the SGH 4C drivers: cadence, which defines the operating oversight and performance accountability with an emphasis on execution and results; capital, with our disciplined capital allocation framework and newly defined opportunity criteria targeting the highest risk-adjusted returns; culture, fostering accountability and an owner's mindset across SGH; and capability, which builds technical depth, leadership strength and privileged asset base to support our competitive advantage. Slide 6. Safety remains a core priority at SGH. We are deeply saddened by the 2 fatalities during the year, and we extend our condolences to their families, friends and colleagues. These incidents have had a profound impact and reinforce our commitment to ensuring every team member and contractor returns home safely each day. Operationally, we delivered safety improvements in FY '25 with LTIFR down 38% and TRIFR down 31%. We will continue to focus on injury prevention and early intervention programs, which reduce incident severity and promote shared accountability for safety outcomes across our businesses. SGH also made progress on our sustainability ambitions over the year. WesTrac commissioned a 1.7 gigawatt solar PV system at its Tomago facility supporting lower emissions and energy costs. Boral increased its use of alternate fuels to 45%, up from 28% following the completion of the Berrima chlorine bypass. Coates also reduced its reliance on grid electricity by 1.1 gigawatts through the continued rollout of rooftop solar across its branch network. On to Slide 8. WesTrac delivered a solid result in FY '25 with revenue up 4% to $6.1 billion. Growth was led by strong capital sales, which increased 12% to $2.2 billion, reflecting significant fleet investment programs by major customers. Services revenue was largely flat at $3.9 billion, with underlying parts price -- parts demand and growing rebuild activity offset by lower average parts pricing. EBIT increased 2% to $639 million, with EBIT margin remaining strong at 10.5%. EBITDA cash conversion of 108% was driven by improved inventory management. And working capital of $1.6 billion was $80 million lower with working capital to sales improving by 3% to 26%. On to Slide 9. The 12% capital sales growth was supported by major fleet replacement and expansion programs across WA and New South Wales. This is expected to normalize in FY '26 as large project deliveries moderate. The stable services revenue was underpinned by continued demand from the growing and aging installed base, with average age of mining machines increasing 7% to 12.4 years. Market fundamentals remain supportive for WestTrac, with Australian commodity export volumes up 3% in FY '25. Iron ore exports are forecast to grow over the medium term, and coal volumes are expected to remain resilient. Construction activity also remains elevated with a robust outlook expected to support customer demand into FY '26. On to Slide 11. Boral delivered significant earnings growth in FY '25. Revenue of $3.6 billion was up 1%, with resilient demand from engineering and commercial sectors offsetting volatility in road and residential activity. EBIT rose 26% to $468 million, with EBIT margin expanding from 10.5% to 13%. The margin improvement reflects pricing discipline and continued progress on cost and operational efficiency elements of the Good to Great performance journey. Cash performance was also strong. EBITDA cash conversion was steady at 100%, and operating cash flow increased 11% to $690 million. The uplift was supported by a 1.6% improvement in SG&A to sales to 6.7%. CapEx for the year was $326 million, representing 146% of D&A. This includes $70 million of catch-up investment in heavy mobile equipment to strengthen the network and support reliability and production efficiency. Slide 12. Concrete and cement sales -- volumes increased by 1% and 3% FY '25, supported by resilient demand from the commercial and engineering sectors. Quarry volumes were lower, reflecting softer roading activity, particularly in regional areas, and the impact of customer dispute. Boral's ongoing sales effectiveness focus continued to deliver pricing traction with uplift of 2% to 5% across the product suite, improved customer outcome support of this traction with greater service up 5% to 85% and concrete deliveries on time, improving 13% to 86%. Looking ahead, residential activity is anticipated to recover from calendar year '26, underpinned by government housing policy and interest rate expectations. Major infrastructure projects on the East Coast are also expected to continue to provide a steady baseline of activity. The cost efficiencies delivered in FY '25 position Boral to drive operating leverage as volumes return in line with these market opportunities. Slide 14. Coates delivered a resilient result in FY '25 with revenue of $1 billion, down 9% in variable market conditions. Performance was particularly impacted by lower customer activity in the South, where we experienced a 19% revenue decline and softer conditions in other regions as major projects are completed. Looking ahead, we expect key major projects in residential construction to drive activity. EBIT of $290 million was 9% lower on a normalized basis, with margins remaining strong at 27.8%. EBITDA margin was slightly up at 46%, reflecting continued cost discipline and operating efficiencies, including a reduction in R&M to sales to 17.5%, supported by the ongoing rollout of a hub-and-spoke model. Coates also completed a workforce and network refinement to better align with activity and optimize costs. Slide 15. Time utilization of 59.4% was slightly below our performance target of 60% and was supported by fleet relocation, leveraging Coates' national footprint and strong market share. The year-end fleet value contracted slightly to $1.85 billion on an original cost basis. Long-term fleet planning remains focused on maintaining financial and asset utilization and market alignment. EBITDA cash conversion of 94% was a strong result in the context of working capital build and restructuring costs. Operating cash flow was $458 million. Coates launched its Grow 30 strategy in July, targeting incremental share of the $1.7 trillion infrastructure and construction pipeline. The strategy focus on building capability and presence in growth sectors, including renewables, utilities, defense and residential building. This will be supported by improved sales execution, operating leverage and enhanced use of technology and analytics. Slide 17. Beach delivered strong operational and financial results underpinned by improved execution across the business. Production increased by 9% to 19.7 million BOE, driven by a 64% uplift in the Otway Basin and a 91% uplift in the Bass Basin. Revenue rose by 13% to $2 billion, supported by higher production, stronger commodity pricing and contribution from the Waitsia LNG cargoes. Net profit after tax was $451 million, up 32% on higher sales and an 18% reduction in operating cost per BOE. Beach's result also includes a noncash impairment primarily related to lower oil prices and reserve revisions. Beach declared a final FY '25 dividend of $0.06 per share, up 200% on the prior comparative period. Operational improvement contributed to a lower free cash flow breakeven oil price, which is now below USD 30 per barrel. The Moomba CCS project was also commissioned during the year with over 1 million tonnes of CO2 injected. For FY '26, Beach has provided guidance for production of 19.7 million BOEs to 22 million BOEs at the CapEx of $675 million to $775 million. Slide 18. SGH Energy continues to progress its 2 key projects at Crux and Longtom. At Crux, SGH holds a 15.5% interest in the Shell-operated LNG backdoor project for Prelude. Development is ongoing, and SGH's share of CapEx in FY '25 was $238 million. First gas in the project is expected in CY '27, and SGH intends to begin marketing our share of the LNG cargo in calendar year '26. At Longtom, SGH holds a 100% interest in the field, an existing infrastructure located in the Gippsland basin offshore Victoria. The resource was independently verified at 87 PJs in 2024, and we are working with Amplitude Energy to progress pathways for the gas to enter the East Coast market. Slide 20. Seven West Media has maintained its position as the #1 total television network in Australia now for a fifth consecutive year. Revenue declined 4%, reflecting a soft advertising market, partially offset by an increase in total television advertising share. The business maintained a focus on costs, delivering a 3% reduction in operating expenses. Digital performance remained a highlight, with 7plus revenue up 26%, active users up 27% and streaming minutes up 41%. For FY '26, Seven West is targeting EBITDA to exceed current consensus expectations of $161 million. SGH's historic USD 100 million investment in the CMC funds has delivered USD 122 million in cumulative capital returns and realizations to June 2025. In FY '25, we received profit realizations of $19 million with further realizations expected in FY '26. To date, Fund-1 has achieved a gross IRR of 20.6% and multiple of invested capital of 2.46x. I'll now hand you over to Richard to take you through the FY '25 financials. Richard?

Thank you, Ryan, and good morning. SGH has achieved a record financial result for the year with revenue, margin and earnings growth delivered in mixed market conditions. Revenue of $10.7 billion was up 1% or 2% when adjusting for the sale of Coates Indonesia. This revenue growth was driven by 4% at WestTrac and 1% at Boral, partially offset by a 9% contraction at Coates. Expenses rose 1% for the year, with higher machine COGS to support WesTrac's capital sales growth, offset by cost reductions at Boral, reflecting cost discipline, improved cost recovery, reduced subcontractor cartage and other operational efficiencies. This relatively small uplift in expenses reflect the hyper-focused attention of SGH to drive operating leverage, promoted by the SGH operating model, which supported significant EBIT margin expansion to 14.3%. SGH delivered 6% higher EBITDA of $2.1 billion and 8% higher EBIT of $1.54 billion. The EBIT growth increased to 9% when adjusting for the sale of Coates Indonesia. Net financing costs of $316 million was up 8%, reflecting the higher debt levels following completion of the Boral acquisition, partially offset by lower interest rates on floating rate debt and the benefits of an early refinancing of LSFA. The underlying tax expense of $293 million was up 39%, primarily reflecting higher earnings contributions from our wholly owned businesses in the year as well as lower utilization of unbooked carryforward capital losses at Boral. Underlying NPAT attributable to SGH members rose by 9% to $924 million, while statutory NPAT rose 13% to $523 million, primarily reflecting significant item losses from our equity accounted investments. Slide 23. SGH's statutory result includes $410 million in pretax significant items, including $148 million share of Beach Energy's impairment of production assets and $16 million relating to SGH's share of Seven West significant items. Mark-to-market adjustments on SGH's direct investments resulted in an impairment of $243 million for Beach and $24 million for SWM based on listed observed prices. Other notable pretax items included $12 million restructuring costs at Coates and $10 million relating to Boral property. Combined, these and other lesser items resulted in the $401 million net reduction to after-tax statutory earnings for the year. Slide 24. This slide presents an EBIT bridge with details of the absolute movements year-on-year for each component of SGH's result. It also includes a reconciliation to statutory EBIT. WesTrac EBIT increased $14 million, overcoming pricing-related margin headwinds of more than $60 million, highlighting the robust underlying customer demand for new machines and services. Boral's EBIT grew $97 million, with a reduction in asphalt and quarry volumes more than offset by volumes growth in cement and concrete, supported by cost efficiencies and pricing traction across its product suite. Coates EBIT declined $37 million or $30 million adjusted for the Coates Indonesian sale. The decline largely stems from the South, where softer customer activity led to a 119% contraction in revenue. Energy EBIT contribution increased $33 million, driven by a 32% rise in underlying NPAT at Beach, supported by 9% production growth and an 18% reduction in OpEx per barrel. Media EBIT contribution grew $17 million with lower earnings from SWM, more than offset by increased realized gains from our CMC investment. In aggregate, these movements delivered $118 million increase in underlying EBIT to $1.54 billion or $1.1 billion statutory EBIT after accounting for the $438 million of significant items. Slide 25. Operating cash flow increased by $609 million to $1.4 billion, reflecting a return to high cash conversion across SGH. WesTrac operating cash flow improved significantly as inventory levels normalize following investments in prior year to support customer demand. This drove SGH's cash conversion of 95%, up significantly year-on-year, though in line with historical averages. Dividends from equity accounted investees totaled $50 million, including contribution from Beach and distributions received from WesTrac and Boral. Net financing costs were $317 million, up $62 million on prior year, reflecting higher average debt levels post the Boral acquisition. Income tax paid decreased by $33 million to $203 million, including Australian and U.S. tax refunds received by Boral. Net investing cash outflows increased by $210 million to $678 million, reflecting higher CapEx payments on Crux and investments to extend Boral's quarry portfolio, moderated by reduced fleet reinvestment in Coates, reflecting our disciplined approach to capital allocation. Net financing cash outflows rose to $1.2 billion, largely driven by $677 million in net debt repayments, $182 million to acquire the remaining minority interest in Boral and $244 million in SGH dividend payments. Closing net debt decreased by $150 million to $4.2 billion on net repayment of borrowings. Slide 26. SGH net assets increased by $679 million to $4.8 million, driven by investments in oil and gas assets and PP&E as well as $150 million lower net debt. Inventory decreased by $90 million, primarily from lower new machines and parts stock at WesTrac followed by targeted working capital initiatives. Production and development assets increased by $255 million, reflecting continued investment to bring Crux into production. Property, plant and equipment rose by $125 million, largely reflecting Boral's quarry and planned acquisitions, coupled with our investment in HME catch-up capital. Equity accounted investments decreased by $300 million following SGH's recognition of its share of impairments at Beach and SWM and marking to market our carrying value of each based on their prevailing share prices. Trade and other payables reduced by $262 million, largely reflecting the finalization of the Boral compulsory acquisition. Slide 27. Adjusting for the $99 million of positive mark-to-market on debt-related derivatives, SGH's adjusted net debt to EBITDA or leverage was slightly below 2x at June, down 10% and in line with our deleveraging target. We remain committed to maintaining a strong and flexible balance sheet. Available liquidity was $1.9 billion at year-end, including $440 million of uncommitted facilities. We have continued to take proactive steps to strengthen and extend our funding base. During the year, we refinanced key syndicated facility tranches with tenors of 5 and 7 years. There are now no corporate bank facilities maturing until FY '29. 69% of SGH drawn debt is now fixed, up from 48% in FY '24. The weighted average interest rate of fixed debt is 5.2% with an average remaining tenor of 4.8 years. SGH's effective all-in borrowing cost of 5.4%, and the weighted average facility maturity is 4.3 years. These actions reflect our disciplined approach to balance sheet management and positions SGH well to support growth and capital allocation priorities into FY '26. I will now hand you back to Ryan.

Thank you, Richard. On to Slide 29. In FY '26, SGH will focus on delivering operating execution through 4 key focus areas. First is Cadence. Through the SGH Way, we'll continue to push a structured operating rhythm that drives accountability, consistency and performance deep into our businesses. Second is sales effectiveness. Driving stronger sales performance results supported by data-driven market insights, stronger customer alignment and sales discipline. Third is operating leverage, continuing the focus on costs and margins applying our continuous improvement approach, supported by clearly defined performance metrics. And fourth is innovation, focus on how we can utilize technology to deliver operational enhancements and improve customer outcomes. These priorities build on the strong foundation already in place and reflect the next phase of disciplined execution across SGH. That discipline has underpinned our performance over the past decade, delivering a 10-year EBIT CAGR of 20% and top decile TSR of over 1,000 compared to the ASX 100 at 135%. Slide 30. Looking to FY '26. WesTrac is expected to continue delivering services growth supported by strong customer activity and an aging fleet profile. We expect this will be partially offset by a normalization of capital sales as major fleet deliveries moderate from recent highs. Our Boral operating momentum has continued into FY '26. Growth is expected to be underpinned by an improved go-to-market strategy and ongoing cost and operational efficiencies. Near-term market conditions remain mixed for Coates. However, the medium-term outlook is positive, supported by macro settings and execution of the Grow 30 strategy. At SGH, we remain committed to disciplined capital management and support our stable value creation and TSR performance objectives. Finally, margin expansion delivered in FY '25 and outlook for our core sector exposure supports SGH's earnings guidance of low to mid-single-digit EBIT growth expected in FY '26. Thank you for your interest and continued support. We're now open to questions.

[Operator Instructions] Your first question comes from Niraj Shah from Goldman Sachs.

Just one on WesTrac and parts pricing in particular. I think over the last 12 months, not being against currency has been tricky given the timing leads and lags. But is there any color you could provide on sort of the 1 July pricing dynamics?

Yes, we can. I mean, we see a -- I mean for 1 July that there's an increased kind of mid-single digit, but we do expect that to reverse in the second half as we look at currency mix. It is very difficult to pick it on a currency peg, but our view is it will be a slight increase in first half and probably moderate -- a slight reduction in the second half but net through FY '26 should be a low single-digit positive. But that, again, is our forecast expectation.

Great. And then second one on Coates. I saw time utilization in the second half looks like it sequentially at least improved. Could you just give us some color on how that progressed through the half and the exit rates there if possible?

The exit rate probably tracking closer or like continuation of improvement, so it's been a gradual chase. We had honestly hoped to hit 60% for an end result, but [ factors in ] South probably were a bit more challenging. The movement of gear in -- around the country has been a key factor in that. I mean where we sit in a July context is certainly at that 60%. So we've seen that start to step up as we're focusing on utilization. So the trend looks positive, but it's slowly moving in that right direction. That's probably how we'd characterize it.

Your next question comes from Peter Steyn from Macquarie.

Just to extend the questioning on WesTrac for a second. Services revenue certainly looked like it was fairly soft in the second half. Now appreciating that the price deflation that you saw would have impacted that, but it feels like volumes probably were pretty flat. Could you perhaps just comment on your services experience? And then what do you think or how will '26 unfold in the context of both price but also more importantly volume expectations?

Yes, I appreciate it. I'd say in a macro context, the demand through what we're seeing, customer activity remains strong. What we saw in second half is probably this position which we spoke about in February around customer focus on costs and where that can play through is a rescheduling of work, deferment of work. And that's certainly a factor that played into that demand profile. So it's probably a factor of that price play-through in the result but also just a bit of work deferment in -- as it played in half 2. It's probably playing a bit into FY '26. But there's only so long you can kind of defer the work before it has to be done. So that process, we expect to see -- play through. But overall net, we expect services growth into FY '26 supported by that overall customer activity.

And then if I may, sneak just a second one. In terms of Boral's outlook, it certainly seems like you've colored in '26 of the lot around efficiencies. Just curious what your expectations are for volume, particularly as you see resi start recovering. You're commenting about that in the context of Coates but less so in Boral.

Yes. We're -- I'd say the -- if we look around the drivers of activity in FY '25, it's still -- I mean, really half of the business relates to some form of kind of resi in the context of multi-res or alts and additions within Boral. But we've seen a strong commercial and infrastructure activity. We expect that to continue to flow through in '26 and don't expect a recovery in that overall resi market in calendar year '26, so not in the first half but do expect to start to see that play through more in half 2. But again, without seeing the indicators of that from a construction activity, that's just more a feel perspective than any form of forecast at this point. But overall, we're expecting volumes to be relatively consistent going into -- through FY '26. And if there is a step-up in activity, that should support some volume growth, I'd say, in '26. But without seeing the early indicator to that, it's -- our base assumption is a pretty steady volume outlook for FY '26.

Your next question comes from Ramoun Lazar from Jefferies.

Just a continuation on the Coates discussion, just the second half. You called out the softening conditions in the southern regions. Just wondering, what are you seeing in the sort of first 6 weeks of the year? Has there been any signs in those southern regions to suggest the macro has stabilized or starting to stabilize there?

Probably add context here. It certainly feels like it's stabilized, not gotten -- hasn't deteriorated from where that runway was in southern regions. We're seeing overall pretty mix conditions around timing of projects in other markets but overall, with a similar half 2 dynamic play-through in first half. But we'd anticipate that starts to recover more in half 2 than half 1, I'd say, from a Coates outlook perspective.

Okay. That's clear. And then just Boral, on the mid-teen margin target, it sounds like '26, you're expecting relatively flattish volumes from your previous comments. Do you think with the self-help initiatives still there, that mid-teen target can be achieved on a flat sort of volume outcome next year or in '26?

Look, to be honest, the volume out result from '24 to '25 perspective is relatively flat. So it -- that, itself, shouldn't impact our ability to drive the performance improvement. And the plan is to continue to optimize the business and drive efficiencies, improve customer service that ultimately should -- are aimed to support that margin expansion, and we definitely see that playing through in that current volume outlook. So to the point earlier, if we're looking at a base assumption of a pretty consistent volume outlook for '26, we do think we can drive that margin improvement through those initiatives. Again, price will be a factor but a smaller factor as we look at closer to CPI-type increases. But fundamentally, our focus will be on holding that price that's being realized and then looking at what we can do to drive efficiency through the business. And there's still a lot of initiatives underway that should get us towards that ambition.

Your next question comes from Shaurya Visen from Bank of America.

Just a quick follow-up on Boral. So second half margins of around 11.7%, you compared that to the first half of 14%. Would this -- that be just normal seasonality? Or anything else you would want to call out? And just as an extension, is that normal seasonality? Would we expect first half margins to sort of trend back to the first half '25 margins? And I had another follow-up post that.

I think the answer is, yes, it is consistent sort of with that seasonal adjustment. I think we highlighted at the half year that the number of working days in the second half versus first half was certainly lower. And I think we also called out the fact that you had Easter and Anzac Day effectively merging, meant that there was a couple of weeks of effectively lost production right through the construction industry. So in that context, I think it certainly reflects those externalities. And in terms, we would expect effectively a strong first half this year consistent with first half last year.

A quick one for you on Boral. Can you just give us an update on the CEO transition? Where are you in terms of the process right now?

I mean, to be honest, we've got to announce that the changes occur in the year ago only in 1st of July. So I'd say it's pretty consistent with that prior announcement. We're working through that process. I mean, Vik's firmly in the chair driving the business today. And the appointment of McKenzie as COO certainly provides a bit of support in that process, but not really much more color with that at this point in time.

Your next question comes from Brook Campbell-Crawford from Barrenjoey.

I had one on WesTrac parts. Just wanted to check. Ryan, you mentioned that overall for FY '26 could be a low single-digit parts price increase. I guess, in our calcs, that should drive sort of low single-digit group EBIT growth alone, which gets you to the bottom end of the range. So just checking if that's the right way to think about it for this year.

Kind of. It's a bit simplistic in looking at it as a single driver. I mean other factors play into it. But overall, that's the right viewpoint from a parts perspective and the notion of overall services growth. But again, the point on customer focus on costs and other factors that play into that, so if there's a continuation of how they look at scheduling work that, that does play into it but again, more timing related than anything else. But I wouldn't want to just take a simple parts price plug and then assume the SGH curve earnings as a result. I don't know, Richard, you add...

Yes. I think also, as you highlighted, Ryan, first half, we get a parts price increase, but we are actually, just based on currency movements, expecting a decrease second half, which will actually, therefore, ameliorate the impact of parts price increases in an absolute sense. So I think that also needs to be factored into your thought process.

Got it. Understood. And just maybe one on M&A. Do you mind just providing your latest thoughts around M&A there and just your thinking and if it's changed at all over the last, I guess, [ several ] months? There wasn't a huge amount of sort of commentary on that part of the strategy on -- in the result material, so just checking your latest thinking there.

I mean, look, I think, firstly, probably I want to just emphasize, I mean, the strength of the operating cash flow of the group to get our leverage below that 2x objective. We had that as a target. Didn't set that as a specific target for FY '25. We're very pleased to do that within this financial year. It certainly gives us the flexibility to look at opportunities, but we'll be disciplined in that context. I'd point you to the material we provided at the Investor Day because we actually -- I think we ran through that capital allocation framework in detail plus the 7 core criteria where we screen opportunities. I think that's extremely transparent as far as how we look at opportunities, and that's consistent today. I think that's the best way to try and frame that. And it's -- at this point, we're focused on driving our businesses and deliver FY '26, but we certainly got capacity opportunities emerge.

[Operator Instructions] Your next question comes from Lee Power from JPMorgan.

Ryan, just on the quarry volumes, like they were down again. Price is up again, which seems to be consistent with the recent trends. I note that you've called out some -- just some moving parts around Deer Park dispute, and I'm assuming there's some weather in there. Should we -- like is there something that this trend is going to continue? Or is it some sort of active decision that you've made? I'm just trying to break out like quarry location versus the regional roading mix versus you holding back on volumes to try and push price.

No, definitely the latter. I'd say the dispute was a big factor into the volumes and doesn't take a lot if you look at the total impact in a volume context, but the dispute aspect and secondly, the overall asphalt activity is another key factor. So that is quite a big pull-through in the aggregate demand. So they're the 2 key contributors to overall volume from a quarry perspective, but from a strategic perspective, we're continuing to try and optimize the assets. Our focus on how do we get the quarry assets working more efficiently, more effectively, not about constraining volumes at all. It's really about how do we drive that and how do we keep that discipline on price but ultimately get our core assets working more effectively. We've invested quite a bit through the period in quarry in both sand and aggregate quarry, both extending life and new assets. So we continue to invest to build out the portfolio and have done -- our team have done a lot of work on extending quarry life, so address the short life quarry issues that somewhat existed within Boral. So continue to drive quarry opportunity, and we want to see that volume grow -- should grow off the back of that dispute being resolved and also expectations that asphalt will start to see growth.

Okay. Excellent. And then just a follow-up, going on from Brook's. Like obviously, you mentioned leverage down again. How do you think about level of invested capital in things like Boral, like -- and just across the existing operating business? Like you've called out a couple of things around quarries that you've done. Are there any kind of near-term opportunities that you think present themselves in the existing business? Or is it more just wait for something external?

Richard?

I think seminal to the capital allocation framework is that the first use of capital is actually making sure that all of our businesses have access to sufficient capital to grow organically their businesses. So in that context, we did effectively identified sort of 18 months ago sort of an extra $300 million in Boral to effectively improve their quarry position, to deal to short-life quarries as well as HME. I don't think that has changed at all. Are there other opportunities in the network? We will continue to look at markets where there are opportunities. I think there are some. But beyond that, I think we will continue to support Boral to grow in -- organically through things like recycling. So we're making investments there, and we're continuing to effectively progress the development of some of their property portfolio. So we certainly continue to see deployment in capital in Boral in inorganic context as being constructive for the group.

Your next question comes from Nathan Reilly from UBS.

First one just in relation to Coates. Ryan, keen to get your thinking on the current sort of outlook for the domestic infrastructure cycle. I'm also keen to understand how that sort of aligns with your thinking in terms of your Grow 30 strategy in terms of what you're, I guess, chasing in terms of addressable market and also market share opportunities for Coates. And I guess, finally, just how that all plays through in terms of current decisions around fleeting in terms of the composition of your fleet.

So from an overall opportunity context, I think -- and look, there are a number of different data sets that we look through to get a feel for what's happening across the market and overall the macro models or whoever else you use -- highlights that there's a dip in the acceleration of the infrastructure activity, which is a little bit what it feels like we've kind of seen. A question mark of that is the outlook in Victoria is a little more complex to read because I don't think it's quite -- there's the same recovery expectation. But certainly, New South Wales, Queensland, WA and South Australia all have a pretty positive outlook. And we're starting to see elements of that, although you can point to deferment of project commencements. But overall, the pipeline of activity remains quite strong. So the Grow 30 strategy for us is about how do we look at those different opportunity sets, be it other segments. We're not quite as strong in -- that we need to be leading into, couple that with a much stronger focus on sales execution and we want to grow that share. And I'd say if I follow through, I mean, certainly hasn't been a highlight in the second half of FY '25. We've been pushing but haven't seen that translation of that competitiveness in a sales context as much we would like, hence, the focus now on how we drive that. We still think we can grow share. We still think we've got fleet positioned in the right location, the ability to move to where there's demand and ultimately, the right base of fleet and original cost basis. So all of which goes up to play into that market activity. From a fleet profile perspective, I don't see that there being a radical change. I think the unique nature of Coates is any CapEx of fleet is set to look at what that 10-year demand profile is for that gear. So it's not like we're -- the fleet profile will evolve over time, and we're very comfortable with how that's positioned. We still think we can go after those opportunities in those other segments with the existing fleet profile we have. So that's not a massive change in that context. So it, for us, feels like it's a lot about how we focus our resources from a capability perspective. And ultimately, that performance perspective, it will kind of drive some of those opportunities that the -- that's what we're expecting. And as of a bit of organizational restructure, so the appointment of a Chief Revenue Officer to drive that accountability of sales -- have been small -- some of the steps to help drive the performance of Coates into FY '26.

And switching gears and just talking about Crux. Can you give us an update in terms of your planned sort of marketing those LNG cargoes? And if you can, maybe just an update in terms of your thinking on potential EBIT contribution into '27 and in '28?

I'll talk to the first part and then, Richard. So the -- we call that out. I mean we've got time to market the gas. It's relatively simple. There are 2 key products coming out, let's say -- well, I mean, a number, but LNG and the liquids. The liquids, we're likely to co-market with Shell given volumes, and we'll look to enter into an arrangement around the sale of that -- of our proportion of the LNG cargo. So that's going to be a focus for us in '26. It's not hugely dissimilar to the dynamic that Beach set up with its marketing of LNG cargoes from Waitsia. So our view, we've got some understanding about that process, and we'll pick the right timing to market the gas. Richard, talk to financial.

In terms of -- Nathan, from -- if I talk to EBITDA, so in a cash flow context, in full production, we would expect in an Aussie dollar context, Crux to throw off in the order of between AUD 200 million and AUD 250 million of cash. And so in terms of earnings, it will throw off a little less. In terms of EBIT, probably about $100 million of earnings. So it certainly will be a significant earnings contributor in full production. And it's a unique asset to SGH in the context of you've got a Tier 1 operator, you've got a reasonable reserve life. But there's -- in terms of capital reinvestment, unlike an E&P company, we would literally be able to liquidate off the position via production, which makes it very attractive to SGH.

Thank you. As there are no further questions at this time, that does conclude our conference for today. Thank you for participating. You may now disconnect.