SRG Global Limited (SRG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the SRG Global investor briefing. [Operator Instructions] I would now like to hand the conference over to Mr. David Macgeorge, Managing Director. Please go ahead.

Thanks, Harmony, and I'd first like to welcome everyone to the call. I'm conscious it's a very busy time of year for all of us, and there's quite a bit of information to get through. But before I start, I'd really like to acknowledge our people. It's been a terrific 6-month period for SRG Global. They've done an amazing job really living and breathing what we stand for: We live for the challenge, smarter together, never give up and have each other's back. And I'm incredibly proud of all the efforts of our people, and I know that we have many of them on this call today. And I thank you and really acknowledge you for all the hard work that you've done over the period. I'm going to break the presentation down into 2 halves. I'll first go through the half year results, and then we'll move on to the acquisition of ALS Asset Care in the second half of the presentation. I always like to start a little bit about us. So if we move to Slide 2, particularly those that are newer to the story, who are we? We're a diversified industrial services business, went through quite a significant transformation, which I'll touch on. And what we do? We bring an engineering mindset to deliver critical services for major industry across the entire asset life cycle, engineer, construct and sustain. If I break that down, what do I mean by engineering mindset? It's smart, technical, innovative specialists and critical services for our clients. It's not doing the laundry or watering a road. It's something that are critical for our clients, which makes it critical for us. And what we want to be, our vision, is the most sought-after in what we do. Others might say #1 market leader. For us, when our clients have a challenge, a problem, an opportunity, the first people I want them to think of when I pick up the phone is SRG Global and being that most sought-after company in our fields of expertise. As we move to Slide 3, this is our profile. It has changed a lot. We are a different business today to the business we were. And I think I touched on that at the full year results period. And you kind of see the 3 operating segments of Asset Maintenance, Mining Services and Engineering and Construction; the ownership structure, 12% with management and Board, about 45% institutional; more than 2,500 employees across more than 20 industries, across more than 80 sites in 5 countries. And sort of -- it's clearly a very different business to what we were, and that's about to change again. We move to Slide 4, which is the summary of the first half. And look, I think what you're really seeing here is just evidence of us continuing to deliver. It's a record result, EBITDA up 26%; EBITA up 31% in the half. Really positive returns for shareholders: EPS up 31%, increasing our dividend by 33% to $0.02 a share fully franked. I think that throws off a fully franked yield of more than 5%. And I think that's something we do well, being both a growth stock and a dividend-paying stock. Really, really strong cash generation with EBITDA to cash conversion of 139%, and I'll touch on the cash further on in the presentation. Net cash of $38.1 million, that's up 86%, and a really strong outlook for the future. We've increased guidance to $72 million to $75 million. For those with shorter memories, we delivered $57.2 million in FY '22. So it's a significant move for a terrific work in hand of $1.5 billion, a really strong pipeline of opportunities, and we're really showing a strong track record of converting. And we're really bullish about our future in terms of the growth profile over the next 3 to 5 years. I guess in terms of key highlights, I think it's clearly an above-market performance, good conversion. I think most importantly, the business fundamentals are really strong. It's giving us the platform to grow this business in a sustainable way. And I guess the news of the Asset Care business this morning is really off the back of a business -- a base business that is performing and performing strongly. And again, as I said, it's really evidence of us delivering our strategy and doing everything that we said we would do. I think from a financial perspective, probably to me, the key highlights are really just the quality of the earnings that we now have in the group and just the margin profile that you can see. Our margins have continued to improve from a percentage perspective. And I'm really pleased that we've continued to grow but also grow margin percentage at the same time, and it's something I've been asked quite a bit over the last couple of years. Are you growing -- are you buying work? And clearly, you can see from the margin improvement from a percentage perspective, we're growing good quality work with good quality clients and increasing margin percentage at the same time. And I think, ultimately, yes, it's all about us executing strategy, and I only want to link back to strategy in terms of how we're executing against that. So if we move forward a couple of slides to Slide 7. It's all about us building the most sought-after business in what we do. And this has been a very clear strategy for a long time. And really, today is again evidence of us delivering against that and doing everything that we said we would do. And probably, in my mind, a little bit ahead of schedule in where I might have expected to be at this point in time. So for any SRG Global people on the call, please forget I just said that. My expectations are high, but I think we're a little bit ahead of schedule in terms of how we're progressing the strategy, very much in the growth phase of that strategy. And we'll morph into the leadership phase of our strategy as we move into the future, and I'll touch on that a little bit more a few times further on in the presentation. And what that's really delivering is a track record of earnings growth. You can see on Slide 8 the good positive trend around our earnings growth over the last few years. And that's also translating on Slide 9 to a track record of increased cash dividends. And I think you can kind of see the net debt-to-net cash movement over the last few years, and that's despite making a pretty significant investment in our growth over the period. And it's also allowing us to be a good dividend-paying stock. I think we've done a really good job balancing both our growth and dividend. We throw off excellent yield. And as I mentioned earlier on in the presentation, we've increased our dividend again in the first half of this year, which is terrific outcome for our shareholders. But ultimately, as we move to Slide 10, it's off the back of having a really strong foundation as zero harm continues to improve, and I always say a safe business is a good business. I never like to celebrate success in this area. I always call it the glass ball in business that you can never drop. Every other ball is rubber, this one's glass. I'm pleased with -- that we continue to improve as we grow and grow our number of people. But to be honest, it's something that it's -- every day is a new day, and it has to have a relentless focus for our business. Diversity comes in many forms. We're highlighting gender diversity here, quite an even split at the corporate level. And look, operationally, it's a much more male-dominated workforce, and we are looking for new and innovative ways to bring in more female talent into the business in the engineering blue-collar side of the group. Doing a lot of really good things with our community. We've now created a new position of a Community Liaison Officer, which now we've brought in Vikki Stanley, who's one of our internal people that's been in the business now for a long period of time. It's a great promotion for Vikki, and we really want to step up our efforts in this area. A lot of good things in the local communities, particularly proud of Bugarrba Aboriginal joint venture. It's done well. Vikki's had a key role in that, and it's one that I'm really looking forward to stepping up further in this area. Corporate governance is absolutely key. It's something that we take very, very seriously, and we've got the right processes and policies and systems in place. But ultimately, it's what we stand for is what's driving our results. It's not the best widget. It's not the smartest strategy. It is the culture and people and really living and breathing what we stand for, live for the challenge, smarter together, never give up and have each other's backs. And that's what's driving this performance. And I, again, thank our people for really embracing the culture that we have. It's something we're very proud of and something that we continue to work on. Just going to switch gears a little bit now into some of the more detailed financials in the first half. And what I'll really focus on Slide 12 is just really the margin performance. Overall EBITDA margin percentage of 9%, very much in line with historical performance. If we look at the 3 operating segments, Asset Maintenance, really strong performance, EBITDA margin of 11.6%, very much hovers between 11% and 12%. And that's very much in line with historical, which I think is a really good performance for that business. Mining Services, again, a really strong margin business. EBITDA margin is a tick over 20%, really good execution in the first half, and I'll touch on that a bit more in the presentation. On the Engineering and Construction side of the business, which is more the project-based work, we had quite targeted margins of 7.4%, generally hovers between 7% to 8%. Look, in reality, our projects run higher than that. We are quite targeted and more than comfortable carrying that engineering DNA between jobs within the business. Now we sell pretty much everything that we do, and having that engineering capability and DNA in the group is very, very important to us. Now from a corporate perspective, sort of 2.2% of revenue, and I've always said that we think there's more scope to leverage that, even though it is a very tight percentage. And clearly, today, with the acquisition of ALS, we can leverage that corporate structure even further. And I think that's for us, we are a very scalable business and have an executive management, Board, systems and experience to be a bigger business than we are today. And we're very much structured to be that company. On the sort of cash side of things, and it is quite detailed as you can see, really strong operating cash generation. It's been a huge focus of ours. I think as I've said in the past, it's probably been one of the few benefits of COVID. It really gave us the ability to really drive home the importance of not just profit but cash at the front line. And that might just sound like common sense for people on this call, but probably at the front line, we can be very profit focused. And we've really driven that deep understanding of cash and the importance of cash within the business, and that is now very cultural. And you're really seeing the evidence of that. If anything, I think from a growth and CapEx perspective, about $14.3 million in the first half. We generally hover around $15 million from a maintenance CapEx perspective annually within the group. And clearly, we've been making some growth investments as well. And then probably the other key thing to note is sort of dividend payments there in the first half. So look, really pleased with cash. And probably cash, a little bit similar with safety. If your cash generation is there, it's -- generally, it's a good performing business. We've got -- we're in a really robust financial position. We're in a really -- I guess, we've got plenty of capacity to grow the business into the future and have done a really good job in our business growing our business organically. And funding is within our business. And clearly, today is a different story with the acquisition of ALS Asset Care. But we like to keep a pretty conservative balance sheet and be very disciplined in the way that we manage the business in that regard. I'd like to switch gears again as we move through to Slide 16 and sort of talk more about the 3 operating segments. Firstly, on Slide 16, our Asset Maintenance business kind of are the core services that we do. I think if there's one key takeaway from this slide, it's just the quality and diversity of the client base that we have. 70% of these clients didn't exist 3 to 4 years ago, and it's been a terrific effort and very much part of the strategy on how we grow this arm of the business. And I think you're really seeing clear evidence of that. If we move to Slide 17, which is the half in review for Asset Maintenance, looking at our really strong first half, I think that there's some key takeaways here. It's just the tenure and diversity of the long-term contracts that we're winning. It's giving us a terrific platform on which to grow and cross-sell the business further. It's just that diversity, both from industries, services and also now some of the geographic expansion is really building momentum. And it's been an excellent performance by that operating segment not only in the first half but over the last 2 to 3 years. We move through to Slide 18, which is our Mining Services segment, which is all production-based drill and blast and geotechnical services. Again, look, I think that the key takeaways here, just the quality of the clients, the quality of the commodities, and it's all production-related work. And again, as we move to Slide 19, a really positive first half. That team is -- from an execution perspective, is terrific and really disciplined in how they execute their work. We like to run our equipment with high asset utilizations in excess of 90%. We're not a company that will go on and speculatively buy kit and put it on the fence and go and win work. It's very much, for us, really growing with existing clients. And you can kind of see evidence in the first half in some of the growth we've had with Northern Star, both within existing contracts with them and new contracts that we've added to the portfolio. Our key commodity exposure is gold and iron ore. Doing a lot of smart stuff around the innovation front, particularly that Orbix data intelligence software. It's really predictive intelligence, software that allows for good decision-making. We'll continue to develop that software in-house within the group. And again, I think it's all around disciplined capital investment as we keep growing this side of the business. If we move to Engineering and Construction, which is the third operating segment of the group, sort of civil and engineering, specialist building and our growing engineered products business. Again, I think the key takeaways here, it's very much government clients in that transport, water and defense space, really long-term partners in the building space, Multiplex land lease and Built. And I think for me, this is a really world-class capability in the specialist disciplines that we play in. We are a very targeted specialist and niche in this space. Again, as we look at the first half in review on Slide 21, firstly, our civil and engineering business, really strong operational delivery perspective within the group, a good pipeline of infrastructure opportunities. The acquisition of WHO (sic) [ WBHO ], which is now our infrastructure business, it's had a really strong performance. Been delighted with the latest 12-month mark of that business and really delivering to expectation. Our remedial engineering business is really starting to increase and grow, particularly in the water and transport space. We did a small acquisition of an engineered products business called Bartek in December, and I'll sort of touch on our ambitions with products into the future a little bit further on. On the building side of our business, our facades business, an absolute market leader, landmark projects all across Australia. We've now entered the New Zealand market as well. And it's one that -- it is performing exceptionally well with really strong work in hand and a terrific pipeline of opportunities. We're almost agnostic as to the sector or the type of structure. It's really just more following key clients that we have. On the Structures West side of the business, again, a really positive first half, good pipeline of opportunities with key repeat clients. It has been the vehicle that we've used to enter into the defense space, and that business is performing strongly. We are in the process of concluding our exit of Building Post-Tensioning both in Australia and the Middle East. That's very much progressing to plan and will conclude by the end of this financial year. So I think overarching for the 3 operating segments are really positive performance within each area of the business. I'll sort of look back again to strategy and where we're going as a business. And if we move to Slide 23, we've had a very clear strategy for a long time. We are very much going to morph from the growth phase into the leadership phase of our strategy. I will touch on the ALS acquisition in a moment. Probably a couple of key things I'd like to highlight is clearly in the leadership horizon, products is an area that we want to continue to grow. I really like this space. We've got a growing business in the engineered structural products space. These are all specified products. The sales force are Engineers. And it's one that I'm quite bullish on in the sense of products, you make it, you sell it, you get paid. I really like the risk profile of it and the fact that we can do it with our engineering DNA with sectors, clients and geographies that we know. And it's really just another avenue in to spaces that we know. And look, I think, ultimately, over time, I would like this to become the fourth operating segment of the group in time, and that's probably a 5- to 7-year lens. And we will sort of continue to grow that in a very measured and disciplined way as we move into the future. Probably another point to note, and I'll touch on strategy in the second presentation, but selective acquisitions to complement either our capability or footprint. I've talked about that before, and I'll touch about it more in a moment. But clearly, what we've done today is really evidence of us on delivering on what we said we were going to do. We've got a really strong platform, as you can see on Slide 24, terrific work in hand. And really, the focus is on -- in the next couple of years is really leveraging the existing contracts and the platform to really cross-sell different parts of our business. We very much have a cross-sell culture within the group. And we've got a terrific platform in which to really grow the business into the future, both with our work in hand and the opportunity pipeline that we have in front of us, which leads to a very positive outlook. And you can kind of see from our operating segment, with respect to Asset Maintenance, really that step-change growth in diverse sectors with blue-chip clients; and Mining Services operating high-demand, high-quality growth, commodities; and Engineering and Construction, positively linked to significant infrastructure. Investment in engineered products is really starting to gain some momentum both domestically and now internationally as well, and that's driving positive momentum in the group. Now clearly, we've increased guidance today, which is a terrific signs of where the business is going. We are generally sort of 45%, 55% split first half, second half. Really important to note that guidance is guidance on the base business. So it is independent of any contribution from the ALS Asset Care business. Strength and diversity is really giving us protection against any labor or cost challenges happening in the broader macro environment. We've got a good balance sheet to fund our growth. The earnings profile of 2/3 annuity is continuing, and it will step up even further, and I'll touch on that in a moment. And I think, ultimately, the strategic transformation to a diversified industrial services company is really delivering results and will continue to deliver results. And I think as you move to Slide 26, and that is the investment proposition of SRG Global. And I think that's why everyone who's on call, when you look at us, we do have a very deep end-to-end asset life cycle capability, we find diverse market sectors and geographies, and I always say that gives us both a natural hedge as different industries cycle, but also a very broad platform on which to play; a high level of annuity earnings profile, which brings predictability, and we've added to that today; a highly scalable business model, and I think you're seeing further evidence of that today; a capital-light investment profile; and a high dividend yield stock. And I think that balancing that growth and dividend is something that we've done well to date, and we will continue to do. And look, from my perspective, the business is in a very strong position. There's real momentum, and we're well on the way to being the company that I know we can be. I guess that's the first half of the presentation. We had a really strong first half. And ultimately, both today, it's getting back and delivering on expectations for the full year. But I think, again, you can see -- clearly see that the base business is in a very, very strong position. And it's about continuing that discipline of execution and growth as we move into the future. I might now move, and I'm going to take 5 seconds, if you don't mind, on a quick sip of water because there's quite a bit to get through, as you would imagine. So we'll now move on to the acquisition of ALS Asset Care and the equity raising. Look, I think before I start, I really just want to give people some background on the transaction, and this is a business that we've tracked for 5 years. It's one that I think for those that are invested in us and know us, we've had a very clear strategy in terms of inorganic acquisitions and what we like. And probably for us, I've always talked about I like that front-end element of asset maintenance where you're expecting, monitoring, certifying, testing the assets. And then the back end is about executing the work. Now clearly, we have very, very deep capability on the back end of asset maintenance execution, and I'll touch on that. But that whole front-end piece, that's the piece I like. The market has very much morphed now to wanting to deal with less players but do more, and that front-end piece takes even further up the curve from a smart technical engineering-style focus. And it really gets you in at the front end and embeds you with the clients. And that profile of business is what we've been looking for. And certainly, ALS is a business that we've tracked 5 years. And I think it's not -- it's any secret that it's been a noncore asset of ALS Ltd for some time. And it's one that there's been some -- a couple of processes that they haven't concluded for various reasons. In reality, we haven't been in a position or a size to participate in those opportunities. And I'm really pleased that we've got ourselves into a position to participate and actually transact on this business because it fits right in the profile of what we're looking for. It's the absolute market leader and really complements what we do today and how we take our growth into the future. So probably if I just start here with -- on Slide 2, which is the acquisition overview, which is really the nuts and bolts of the acquisition. Look, I'm not going to go through this line by line, so we'll touch on it throughout the presentation. But clearly, today, we're acquiring the ALS Asset Care business on for $80 million on a cash free, debt-free basis with a normal level of working capital. It's coming out ALS Ltd, $6 billion global market cap business. It implies an acquisition multiple of just over 5x EBITDA before any revenue or cost synergies, and I'll touch on that further on in the presentation. And we will fund it through a combination of our new equity debt and existing cash reserves. In terms of the overview of ALS Asset Care, I will touch on it probably more in the presentation. An absolute market leader in asset integrity and reliability services with more than 65 years of history throughout Australia. A really comprehensive service offering in that front-end asset, monitoring, inspection, testing and certifying space. A national presence with a geographical split of 70% East Coast-based, 30% West. Long-term, blue-chip client base across sectors that we know, mining, oil and gas, energy, infrastructure and utilities and really stable and predictive earnings, which I'll touch on more. It's all maintenance-based work and sort of, I guess, a profile of circa $135 million in revenue and just over $15 million EBITDA. And most importantly, as I said earlier on in the presentation today, people are the key to any business. And look, a really experienced leadership team, always more than 10 years' tenure at some ALS Asset Care and deep industry experience. From a funding perspective, as I mentioned, it will be a combination of equity, debt and cash. And we'll be doing a fully underwritten -- we've got a fully underwritten institutional placement of $46.4 million and an SPP of up to $5 million. And we have created a new debt facility with the NAB for $30 million, and we'll also be using existing cash. It's EPS accretive. And then really, what it also allows us to do is maintain a conservative balance sheet, which we're very keen to do. This business is continuing to grow, and we want to keep funding that growth into the future. If I move to Slide 3, which is, I guess, the strategic rationale, which is probably some of the more granular detail of the strategic rationale. I mean, they are the absolute market leader in asset integrity and reliability in Australia. The market leader -- we've seen over 65 years of experience, a lot of deep customer relationships that span for long, long periods of time. And I've already sort of touched on some of the key sectors that they play in. But the market leader, we were called the most sought-after, that is ALS Asset Care, in the Australian market. A highly complementary service offering. I think that's really key to understand here is the services that Asset Care provide are completely complementary to what we do. Very much talk and speak our language in terms of very much a technical engineering-based service, but more of that front-end asset maintenance element. Probably the only slight crossover is in that dam monitoring space. It's an area that we do know well today. And what that gives us is just really a great platform in both ways to really leverage the complete platform and cross-sell what we do, and I think that's really the key theme out of this. And the opportunity -- it's the cross-selling opportunity, both ALS Asset Care, even the SRG platform and vice versa is significant. And we have a cross-selling culture within the group, and this will really drive success moving forward. Highly experienced management team and a highly skilled workforce, and I've touched on the management team. It does come with 600 employees, skilled technicians, and that's an absolute asset in the current environment. And what, for me, I'm most looking forward to, it's going to create opportunities. This is very much core to us. It's coming out of, perhaps in some ways, an unloved asset in a major global company. This will very much be core to us. I think it will open up breakthrough opportunities for the Asset Care people, and all key management will transition across with the business. It really accelerates our transition to recurring earnings. 99% of their earnings are maintenance-based. A high proportion of revenue is contracted with typical contracts sort of 2 to 5 years. But they're very sticky contracts. They're very predictable earnings, which is really positive. And I think from a combined group perspective, the business mix is very heavily skewed now to revenue recurring, annuity style earnings with sort of nearly 3/4 of our earnings now are annuity recurring-based. It's accretive on a range of financial metrics. It's EPS accretive. It's margin accretive, that's pre any cost or revenue synergies. Look, in reality, it is -- this opportunity is very much about the revenue synergies and the growth. There will be some cost synergy opportunities, but this is not about head count reduction. All 600 people will transact with the business. They will all come across, and they will have a role moving forward within the group. And it's how we grow it from here. It's very much been operated as a stand-alone business unit set up for sale, and it will really plumb straight into our business as a separate business unit. And the corporate support will be there from above. And I think ultimately, and I'll touch on it more in the presentation, it will add multiple avenues to grow, not only the Asset Care business but the broader group with this transaction. I mean, the cross-selling opportunity and the capability of the platform will really accelerate our growth ambitions and market share. And look, I think there's no doubt, Asset Care under our ownership is a very core business to us. It will really benefit from, I guess, that investment and love and care and attention that we will provide. And look, I'm really delighted that we've been able to make this happen. I know there will be a number of Asset Care people on this call today, and I really want to acknowledge them and the experience and expertise that they bring to the table and really welcome them into the SRG Global family. But I want to pare it back now on Slide 4, just for a moment, just to really pare back to how this fits in the business. I touched on our business early on in the presentation, that diversified industrial services, the engineering mindset, the critical services, the entire asset life cycle of engineer, construct and sustain and being the most sought-after in what we do. And I think when you hear that language, and we move to Slide 5, you see how ALS -- how the Asset Care business now fits within the group. It very much fits in the sustained market. It's very much a business that brings an engineering mindset. These are absolutely critical services to our clients. You're talking about structural integrity monitoring, testing, inspection. Now these critical services for our clients very much fits in the sustained bucket. And it's all about that front-end element of asset maintenance in terms of monitoring, inspection, testing, certification and then the SRG existing capabilities of that back-end maintenance execution style work. It really does allow us to provide a complete end-to-end solution. Now there are a few companies probably like us now with this complete service offering. And then I think it is a very, very neat fit. It's very, very complementary. But it's one that clearly -- the cultural fit, this type of business, the engineering focus, it's very much -- it's a really positive matching of bringing 2 very complementary companies together. And it really aligns with strategy on Slide 6. I won't labor the point, but you can see our strategy. You can see the number of boxes that it ticks that's within our strategy in terms of not only how we grow the ALS Asset Care or the Asset Care business, I'm going to take the acronym out now, but the Asset Care business within our broader group, but also how we can take our broader group and grow it through the Asset Care business as well. I think probably a couple of points to really highlight here is just this is an acquisition that is -- completely complements our capability but also our footprint. I've talked a lot in the past around wanting to increase our East Coast presence. We're building momentum within the core SRG Global business. In that regard, this really fast-tracks that, which is very much in line with what we're trying to do. And clearly, the capabilities I've touched on in the previous slide is highly complementary. And I think ultimately, our ambition of 80% annuity, 20% project-based earnings profile, it takes us much further down that pathway, and I'll touch on that a little bit more in a moment. So probably now into a little bit more detail on the Asset Care business and the transaction overview, if we move to Slide 8. You can sort of see the business at glance, and I've touched on most of these points. It is the #1 player in the Australian market. And probably some of the key competitors, global billion-dollar companies such as Bureau Veritas and Atlas are probably some of the key competitors. But Asset Care is the #1 player in Australia. Long history of operation, 600 highly skilled engineers, technicians and practitioners that come into the group. Really stable and predictable cash flow and earnings. It throws off really good cash, really good cash generation. And basically, 99% of the revenue is generated through maintenance work. Before I touched on the profile in terms of revenue and the EBITDA margin of circa 11%, and you can kind of see the geographic split there of East versus West. And you can see how that really complements the SRG Global national footprint and also our New Zealand footprint as well and the clear geographic opportunity that this transaction presents for us. If we move to Slide 9, and this is perhaps some of the more technical detail, and I won't sort of labor the technical elements, too. But I think you can really see the technical expertise and the breadth of what this business offers from an integrity and reliability engineering perspective, inspection, testing, monitoring and sort of that training and certification. It's very much a complete offering. It really rounds out the capability of SRG Global in the asset maintenance space. And as I mentioned, these are critical services for our clients, which is really -- enables us to be really embedded with them in terms of the services that we're providing. If we move to Slide 10, which -- what it comes with is a really experienced and a highly skilled team of technicians. Management are very, very experienced basically with the Asset Care group but also in the industry as well. And it really takes the profile of personnel within SRG Global with now over 3,200 people who are in the group, which is an asset -- an absolute asset for SRG Global, a lot of really experienced people. And again, it will open up some terrific career opportunities for the Asset Care people that are joining SRG Global today. If we move to Slide 11, which is the pro forma business mix. Probably I think the key things to highlight here, it really does accelerate our shift towards annuity revenue and earnings. You can see from the Asset Care business, 99% of it is in the asset maintenance recurring space. And you can kind of see the profile from both a revenue and earnings perspective in terms of recurring versus project-based, it does take the group to 74% annuity recurring style earnings, which is quite a major step forward for us and very much on the pathway to the sort of profile of business mix that we want. So... [Technical Difficulty]

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Okay. My apologies there. I think we dropped out for a moment there, so my apologies. But I think we were just commencing Slide 12 of the presentation. You can see here, it's indeed a step-change, accretive acquisition. If you look at the profile of the business, for the sake of -- for example, the increased guidance from $72 million to $75 million, taking the midpoint of that guidance for the sake of this exercise, you can see the contribution of Asset Care and how the combined group looks. I think from a financial highlight perspective, it is EPS accretive for any cost or revenue synergies. And as I mentioned earlier, it's not a cost synergy play. It's very much -- yes, there will be some opportunities around property consolidation and optimization. But clearly, it's all around revenue synergy. It is margin accretive. It's very much a capital-light business, and our CapEx is sort of 2% to 3% revenue. And that throws up really, really good cash, which is a positive for our business. And then kind of -- if we sort of close with Slide 13, which is really, I think, the key of this acquisition, it's bringing together 2 highly complementary and market-leading businesses that will really accelerate our growth ambitions. And what it really allows us to do is to leverage the platform from -- the combined platform from services, customers, sectors, geographies and really cross-sell the diverse capability that we have. That allow us to leverage our market position, really good technical capability, that one-stop shop model and certainly our view and experiences that customers are morphing more to wanting to do with less players that do more. It allows us to -- brings with it a market leadership, most sought-after position and brings more scale into the group, which will be an advantage against smaller competitors. And the third bucket is have the opportunity to grow and leverage technology in terms of a lot of smart stuff this business does around data, operational efficiencies, in-house software that this group has and specialist equipment. And I think for me, the most pleasing thing here is when you hear me talk about the Asset Care business, you can easily just change Asset Care out and put SRG Global in because it sounds like I'm talking about the same company. And I think for us, this transaction very much stacks up as a steady-state business. But we think we'll be able to grow this business significantly as we move into the future. That's kind of, I guess, the detail of the transaction. I'll probably move now just quickly to Slide 15, which is all around the offer summary. Look, I think probably, the detail is there for everyone to read and participate and play their part. We are looking to raise $46.4 million through a placement, which is fully underwritten and will be a share purchase plan up to $5 million. I think probably the key takeaway also from a ranking perspective, all new shares will be -- that are issued will be eligible for the $0.02 dividend, which we've announced today. I think for more information, I'd encourage you to contact within the joint lead management group. I think -- so I think for me, in closing, prior to any questions, look, a really positive step forward for us. This is not the grand final. It's really another step in our journey of what we're trying to build as a business that I'm delighted today that we've been able to bring a really complementary business into the group that really aligns with our strategy and is a really strong cultural fit as well. And it's really off the back of what I think is a really, really strong performance for the base business in the first half of this financial year. So I really want to thank our shareholders for all their support. And then I'm really looking forward to rolling up the sleeves, getting back to work and really keep continuing to take this forward -- this business forward and keep doing everything that we said we were going to do. So thank you.

Okay. Thank you, David, for the excellent presentation. So just on to Q&A now, and I'll sort of manage the Q&As as they come through. So there's a few thematics here, which I'll try to group together for the interest of time. So one of them, David, was around the ALS being on the market and being noncore to -- sorry, Asset Care being on the market and being noncore to ALS. What's the performance been since the 5-year period, I guess, since it's been on sale? And has it reached its potential through that period or is there more to come?

Well, to me, I mentioned earlier in the presentation, it's been very stable earnings for the period. I think that the Asset Care team has done a terrific job through that entire process. Do I think there are great opportunities to -- through the combined group and growing the business further? Absolutely. I think to me, that's the opportunity, and I'm really looking forward to the business joining the group and really investing on how we grow this business. And I think it's no secret it was a noncore asset within the ALS global group. And -- but for us, it's very much core, and we want to invest and really grow the business into the future. And I think it's got enormous potential in that regard.

Yes. Thanks. A question around the process, the acquisition process. Was it competitive? How did you fund the opportunity?

It was a competitive process. I think as I mentioned earlier, it's a business we've tracked for 5 years. I think 4 or 5 years ago, the expectation was probably more than our market cap as a business. And look, we've been tracking it. I think what we brought to the table was, I guess, a corporate structure and a real footprint to cross-sell that gave us some advantage. And it's one that I'm really pleased with the transaction and that we've been able to secure the business.

Okay. Perfect. A question around the client base of Asset Care. Is there an opportunity to work with them? And is there anything that kind of overlaps with them?

Well, there's a bit of client overlap, but not extensive. And what I think it really opens up is opportunities to really go to the combined group's clients and really take the complete offering. I think if you refer back to the map in one of the earlier slides, that East Coast presence really help build the footprint from an asset maintenance perspective on how we grow the business and vice versa.

Okay. Terrific. A question here around the recurring nature of our earnings and project-based earnings. I think, obviously, [ in amount ], there are strategic horizons, leadership phase, you talked about an 80-20 based from this 2/3, 1/3. What's that time frame?

Well, look, I think it's -- we'll ultimately get there when we get there. I mean, to me, we're continuing to morph further down the path. And we've done, I think, a terrific job over the last 3 or 4 years really taking this sort of 2/3 annuity recurring earnings profile. We're now at sort of 74%. It's very close. Whether it's 74% or 78%, 80%, 82%, I'm not going to get too hung up on that. I mean, you can sort of see the profile that we're growing towards. And we expect all 3 operating segments, including our project-based business, to continue to grow. And probably on the -- over the next 3 to 5 years, the more inorganic opportunities will be more in that sort of annuity recurring style areas, which will probably naturally get us to that point.

Yes. Good. Just a question on Asset Care's contracts. How much fixed price contracts are there within that area of the business?

It's all schedule of rates, time and materials. So very much a good risk profile, contractual terms with clients.

Got it. Perfect. Sorry, these questions came up earlier on the presso, David, before you talked about contacting the joint lead managers and talking about the allocations. So I think just to reiterate David's point around contacting the JLMs on participating in the placement.

Yes. I know there's obviously a lot of -- it seems that's a very long list of questions, Roger. And just conscious of time and so forth, so maybe stick to themes, if you can.

I think one of the questions here is around M&A. And are you done with M&A for a while?

Well, look, I think our focus in the short term is really bedding this business down and integrating it well. And because it's one that's -- we've got sort of external partners that we've used previously, and that's one that -- we already commenced that planning. The business will come across to us on the 28th of -- the transaction will conclude on the 28th of February. From a completion perspective and the integration, to me, my -- I'm very big on this is that when you acquire a company, the first 3, 6, 12 months is about integrating the business well, getting the people embedded into the culture and feeling valued and really delivering that base case which we've put forward and then look at how we grow it from there and do it in a very measured and stepped way. And then that's really my focus over the next 6 to 12 months.

Okay. Just jumping around a little bit, pushing on the result itself, another solid result for the half. Full year guidance, what's it going to take to get there? And the assumption is that, that $72 million to $75 million does not include Asset Care's contribution.

Correct. It doesn't include Asset Care's contribution. That will be over and above that. And look, I think for us, we've clearly put out upgraded guidance. It's a reasonably tight range. And I think for us, it's all around our execution and probably converting a couple of things that may contribute a little bit. But now I think if we execute and execute well, we think we'll be in a very strong position to deliver against our guidance, and our track record is of doing so.

Okay. Perfect. And just to be conscious of time, there's one more on Asset Care, David. How -- who are some of Asset Care's major competitors? And where are they placed in the...

I think I might have touched on, I mean, Bureau Veritas. So one other, $12 billion market value business globally, Atlas, another -- again, a multi-multibillion dollar company. They're probably -- a couple of their major competitors. They play all around the world. Clearly, the Asset Care business is focused on the Australian market. And that's our mission for now and possibly New Zealand as well.

Okay. And I think there are a couple of questions on dividends going forward. I think we'll do this as a final question here to round it off. So do you see us as continuing to be a dividend-paying stock into the future?

First, I think we have no set policy, but we want to balance the growth and dividend elements of the business, and I think our track record is of doing so. And we want to continue to do so into the future.

I think that's probably most of the themes there. Yes.

Okay. Look, really appreciate everyone coming on the call. There's obviously quite a bit to go through and absorb today, and I think today is a really positive day for us as a company. And we want to roll up our sleeves and get back to work and keep delivering for all of you. So thank you for your time today, and I look forward to catching up with you in the future.