Symal Group Limited (SYL) Earnings Call Transcript & Summary

Good morning. I'm Joe Bartolo, and I'm pleased you could join us today as we present Symal's very first full year's results. Before we start, this year has been another successful year by increasing EBITDA from FY '24 by 22%, producing another excellent year for Symal. This kind of growth doesn't just happen without an incredible team and strong partnerships. And speaking of teams, I'm joined today by Nabeel Sadaka, our CEO, who will provide some key operational insights; and Geoff Trumbull, our CFO, who will provide key financial information. Let's jump straight into FY '25 results. For FY '25, we delivered EBITDA of $106.1 million. That's 3.7% above our Prospectus forecast and 22% increase on last year's results. Our NPAT came in at $45.7 million, which is 9.8% ahead of forecast and up by 50% on FY '24. And revenue came in at $901.7 million, slightly below forecast, but purely a timing issue with projects rolling into FY '26. We finished the year with another strong net cash position of $46.1 million and cash conversion at 121%, reinforcing our financial strength and ability to invest in growth. With our strong cash position, the Board has declared we are distributing dividends at $0.059 per share, which is 50% of the pro rata NPAT since listing, which is in line with what we stated in the prospectus. It's not just about the numbers. A quick stat worth mentioning this financial year, we've been part of 45 renewable energy projects and 13 data centers, showing our key focus on resilient end markets. We continue to win new projects, building our work in hand and proving the strength of our integrated model. As at the 30th of June, our work in hand was at $1.76 billion, giving us clear visibility of this financial year and well into FY '27 and beyond. For clarity, this year alone, we secured $1.34 billion of new work for the group. This clearly demonstrates that we don't have reliance on any one project, and we're just getting started. Symal is a diversified service provider focused on resilient end markets. We bring together specialist companies to deliver end-to-end contracting services and specialized technical services and capabilities across Australia's most critical industries. Our teams operate across key end markets, infrastructure, data centers, power and renewables, utilities, defense, building and facilities. By uniting all of our full range of expertise, we deliver projects faster, safer and more sustainably while achieving market-leading margin outcomes. As you can see on our map, this clearly shows the reach of our projects with works throughout the South and East Coast of Australia. We operate out of 14 locations across 4 states. Our 1,300 staff are not just employees, they're Symal's competitive advantage by investing more than 20,000 hours in training this financial year alone. We're building the capability that drives safety, innovation and better margin outcomes. We have roughly 4,200 bits of plants, vehicles, equipment and machinery assets ready to deploy across the nation on our own projects and to hire into the external markets. And again, we have a record work-in-hand position sitting at $1.76 billion with an average strike rate of 1 in 4 tenders being converted to live projects, plus 4 ECIs equaling circa $850 million. Exactly as promised, FY '25 was all about strategic disciplined growth and FY '26 will be no different. We're driven by 3 growth pillars that expand our scale, diversify our markets and strengthen our performance, all with a clear focus on long-term investor returns. Our first pillar is organic growth. We're focused on resilient sectors of our industry and sustained demand. We're also scaling, strengthening our existing businesses whilst growing the companies we acquire. And we're creating new opportunities by partnering early through ECIs, securing more projects, a national focus and entering new markets with long-term growth potential. The second pillar is inorganic growth, and it's all about acquisitions, accelerating growth and opening new resilient end markets and increasing our capabilities. Through FY '25, we continually told our investors the types of businesses we wanted to acquire. The 2 we executed Ascot Bin Hire where we wanted more waste to complement our recycling operation and more recently, Locale, further enhancing our capabilities in the utility sector with recurring revenue. We have done exactly what we said we would do. We have carefully reviewed many acquisitions, but we remain disciplined, choosing only those that strengthen our resilience, earnings quality and align with our strict strategy and investment criteria. Ascot Bin Hire has provided high-end quality waste streams, which we can convert into high-value construction materials and alternate fuels. What makes this so important is that it perfectly aligns with Symal's recycling and repurposing strategy. The acquisition adds 600 new skip bins, taking our total bin fleet to roughly 1,000 bins. That means a greater reach, more capacity and more waste to convert to materials. Ascot brings a scalable waste management service backed by a strong operational footprint and a loyal customer base. We've also just executed Locale, an aligned founder-led business with proven performance. Locale comes with an existing 6-year works agreement to deliver civil infrastructure services to 2 major utilities clients. Locale is a deliberate move into utilities, a resilient sector with recurring revenue and growth potential. It brings a minimum of $230 million of locked-in revenue over 6 years, guaranteed base margins and an $8 million EBITDA annualized contribution in FY '26. That's guaranteed revenue with guaranteed base margins over 6 years with growth opportunities. So overall, this is another high-quality acquisition, doing exactly what we say we will do and positioning Symal into the utility sector. Our third pillar is innovative growth. We are leveraging technology, investing in systems to refine processes and increase productivity. And with a future focus, we're scanning new trends, technologies and industries to ensure Symal stays at the forefront. In FY '25, this approach delivered real outcomes. We established Sycle's new resource recovery line and diverted approximately 140,000 tonnes of waste from landfill into usable building products. We purchased our first alternate fuels line, producing an alternate product for coal, and we launched Searo, our new electrical contracting business. Searo is more than an organic startup. It's a strategic innovation designed to complement Symal's work in power and renewables, and it positions us right at the center of the energy transition. And we're advancing AI integration, streamlining processes and delivering instant insights across the business. This is the power of our third pillar, practical investments in recycling, energy and technology that deliver efficiencies today and positions Symal for tomorrow. I will now pass you over to Nabeel to provide some operational insights.

Thanks, Joe. Good morning, everyone. Clearly, we haven't been sitting still. 2025 has been a big year, and I'm pleased to now take you through some of the operational insights and achievements of the business, starting with safety and workforce. During 2025, we grew our direct workforce by 25% to around 1,300 people. This included 170 of our team, which came from indigenous or disadvantaged backgrounds. Our direct workforce and supply chain partners completed over 5 million hours of work. We brought in 33 graduates, of which 26% are female, a stat we're very proud of considering women represent just 12% of engineering graduates. Despite this rapid expansion in our workforce, you can see at the top of your screen that our lost time injury frequency rate and total recordable injury frequency rate continue to remain well below targets. This is a strong indicator of the strength of our culture on projects and the quality of our internal training with over 20,000 hours of training completed in the business, showing our learning and development programs continue to stay ahead of our growth. To work-in-hand now. On the left of our screen, you'll note that we started the year with $1.3 billion of contracted works. Over the 12 months, we not only replenished that work, but grew underlying work in hand by a further 17%. The Locale acquisition delivers an additional $230 million of secured reoccurring utilities work to be delivered over the next 6 years, meaning our overall work in hand has grown by 35%. The central diagram shows the breakup of our work in sectors, which reflects the shift we foreshadowed at IPO and again at the half, with power and renewables becoming a bigger slice of the pie. It's important to note that infrastructure includes transport, community infrastructure, aviation projects and facilities such as the Moonee Valley Race Course redevelopment, which we converted from an ECI to a [ won ] project during this period. This graph is much more reflective of the diversified services provider we have become. The right-hand graph shows the spread of work into future years, which provides us with a great deal of visibility and confidence around our future growth. Symal boasts a highly experienced pre-contracts and design management team that drives value for our clients, identifies project risks and success factors and creates the solutions which derisk projects, making delivery a higher likelihood of success. To this end, in addition to the $1.76 billion of work-in-hand, Symal has been named preferred or is currently completing ECIs for a further $850 million worth of battery, wind and road projects along the East Coast of Australia. This provides us with a high degree of confidence over $2.6 billion of our pipeline, plus many other tenders that we are pricing and waiting decisions on. It is also valuable to note that $1.1 billion of the $2.6 billion is in New South Wales, Queensland and South Australia, a strong reward for the execution of our national expansion strategy presented at IPO. This is a record for Symal, representing our largest work in hand and future opportunities in our history. This further strengthens our confidence in '26 and well into the future. Symal thinks of its business in 3 operating segments: Contracting Services, Plant and Equipment and our Other segment. In Contracting Services, We deliver engineering and construction projects, both as a head and subcontractor under a variety of contract models. In Plant and Equipment, we deliver internal and external plant hire and conduct quarry operations. And our Other segment is where we house our fledgling businesses and strategic companies such as Sycle as well as group eliminations and corporate services. Contracting Services delivered 79% of the group's revenue for the year and 55% of the EBITDA, while P&E accounted for 20% of the revenue and 41% of the EBITDA. Our Other segment was 1% of revenue and 4% of EBITDA. But it's important to recognize that the group's integration sometimes leads to each segment working on the same project or for one another. It is often our Contracting Services businesses, which bring through other segments such as Plant and Equipment, Sycle and Ascot. And while these businesses predominantly deliver out to market, it's our integration, which often delivers greater value outcomes. In Contracting Services, we delivered $713.6 million (sic) [ $713.7 million ] of revenue and $58 million of normalized EBITDA. 8.1% EBITDA margin represents very strong performance for a contracting business. And pleasingly, you can see from FY '24 to '25 that we maintain this level of performance while growing revenue by 12.3% and improving our conversion at EBITDA and EBIT. In Plant and Equipment, we saw growth in revenue and EBITDA underpinned by strong investment in our plant and equipment fleet with strong demand available in South Australia, Victoria, New South Wales, ACT and Queensland. This led to 40% (sic) [ 40.9% ] growth in revenue and 34% (sic) [ 33.7% ] growth in EBITDA. 23.9% EBITDA margin is pleasing, coming off such a strong FY '24. This includes a period of lower utilization in FY '25 in Queensland during Cyclone Alfred and a very wet year for Queenslanders and people in New South Wales more broadly. You'll note a very strong conversion to EBIT at 12.6%. This is the benefit of Symal aligning our depreciation assumptions more with our listed peers. As foreshadowed at the IPO and again at the half year, infrastructure has returned to roughly 50% of our work-in-hand, which is a much more traditional level for us. With the $310 billion addressable market, our pipeline remains strong and with federal government spending continuing to provide excellent opportunities along the East Coast with a variety of road, rail, community infrastructure and port projects available. Symal's history in facilities such as Hawthorn Football Club, the Home of the Matildas and the Rugby Victoria Centre of Excellence means we are well placed to participate in the upcoming infrastructure works associated with the Brisbane Olympics. We are also hopeful to soon convert the Ballan Road ECI into a signed contract, and we are continuing to deliver the Pakenham Roads Upgrade Work Pack 3 following the successful completion of the Pakenham Roads Upgrade Work Pack 1 which finished 8 weeks early and ahead of the target outturn cost. Power and renewables, together with the Locale acquisition, make up 35% of our order book with the earlier mentioned ECIs expected to boost this further in the future. As Joe mentioned, during FY '25, we participated in 45 power and renewables projects, and we did this across 6 states. Symal has consistently delivered in this market for almost a decade and is considered a market leader. This position in the market has supported our growth in Queensland, New South Wales, South Australia and even resulted in us following an important client across the WA. Symal's addressable market in this space continues to grow as renewables and transmission projects are rolled out in service of the country meeting its energy targets and moving towards net zero. With $110 billion forecast construction expenditure over the next 5 years, Symal's dedicated energy teams continue to focus on wind, battery, solar, substations and transmission opportunities. Another important sector is data centers, where we provide services to Tier 1 builders completing works for the likes of Amazon, CDC, NextDC and Microsoft with other new entrants coming to Australia soon. Investment in data centers is expected to grow to $26 billion with the majority of this investment centered around Melbourne and Sydney, where cooler climates mean lower running costs. Data center expansion is also placing considerable demand on the electricity grid and is driving accelerated need for renewable energy. The defense sector is committed to a $50.3 billion spend over the next decade. As presented at IPO, Symal invested in upgrading our security and IT systems in '23 and '24 to become accredited to work in this sector. Symal and Wamarra is becoming a highly sought-after combination in this sector, which resulted in the group participating in 8 projects over the period, including our recently announced win. Defense represents just 2% of Symal's work-in-hand today. However, we believe this is a sector to watch in the coming years. FY '25 has been another successful year for Symal, delivering strong results. Almost more pleasing, though, is that we've secured a high-quality order book with longer visibility than we've had in our history. Our strategy of national expansion, growth in power and renewables and kicking off in the defense sector are all trending very well, and the addition of Locale opens up more access to long-term reoccurring revenue. I'd now like to pass you over to Geoff Trumbull, who will present the financial section.

Thanks, Nabeel, and good morning, everyone. The next slide talks to our normalized financial performance for FY '25. Consistent with our first half results, we have chosen to highlight normalized results to exclude the nonrecurring impacts of the pre-IPO restructure, the cost of the IPO process and the impact of a material commercial settlement of an FY '23 project, which impacted both FY '25 and FY '24. A breakdown of these items is included in the appendix of the slide pack. Symal delivered strong year-on-year revenue and earnings growth with normalized revenue increasing by 15% to $901.7 million and normalized EBITDA growing by 22.4% to $106.1 million. As Joe mentioned, this EBITDA result was ahead of our Prospectus forecast of $102.3 million and slightly above our most recent guidance in June of $105 million. We ended with a roughly [ 45-55 ] split between first half and second half EBITDA, which is consistent with historical trends. Our EBITDA margin improved to 11.8%, consistent with our first half results with continued strong project margins in our Contracting Services segment and a larger contribution from the higher-margin in Plant and Equipment segment. As flagged in the IPO prospectus, our depreciation expense has fallen year-on-year as we reset our useful life assumptions to better align with industry norms. So FY '25 EBIT margins are more representative of the go-forward position. Normalized NPAT for the financial year was $45.7 million, up approximately 50% year-on-year and exceeding the prospectus forecast of $41.6 million. The next slide presents our statutory results for the financial year and provides a reconciliation between statutory and normalized net profit after tax. A key point to flag here is that the statutory results for FY '24 included $13.5 million of EBITDA benefits from the timing of the FY '23 project settlement, whilst the current year included approximately $15 million of unfavorable EBITDA impacts from nonrecurring IPO costs and the project settlement, which is why we have focused on the normalized figures. The next slide presents our cash flow for the financial year. Statutory operating cash flows for FY '25 were $90.4 million compared to $85.2 million in our prospectus forecast. After normalizations, this provided a cash conversion rate of 121%. This is above the historical average of around 100% between FY '22 and FY '25. As anticipated at the half year result, we saw a partial reversal in the circa $40 million of seasonal working capital benefits in the first half. However, we retained an overall $20 million working capital benefit for the full year. CapEx for the period was $60.9 million, slightly up on the Prospectus forecast of approximately $57 million, the majority of which was associated with growth of our fleet of heavy plant and equipment. CapEx was fully funded through additional asset financing drawdowns. As flagged in the Prospectus, there was $39.2 million of dividends paid prior to the IPO, which are reflected in the FY '25 cash flow. The $13.9 million associated with the final FY '25 dividend will be paid at the start of October 2025. The next slide provides a summary of our balance sheet. Our year-end cash position improved by $22.5 million versus the June 2024 pro forma balance sheet in the Prospectus, after the $39 million (sic) [ $39.2 million ] in dividends and $20 million (sic) [ 20.3 million ] in tax payments paid at the time of the pre-IPO restructure. As mentioned, we saw a strong cash benefit from movements in working capital, which continues to run at a negative balance. This is driven by our cash management cycles and careful planning at tender stage to ensure we optimize our cash position on our projects. During FY '25, we have shifted from fair value to cost accounting for our property, plant and equipment, which we believe is more useful to investors and in line with our peers. As part of this change, we restated our FY '23 and FY '24 PPE balances accordingly. This has resulted in a reduction of $10.6 million in the FY '24 opening PPE balance. We finished FY '25 with a PPE balance of approximately $152 million, of which approximately $40 million sits within our Sycle and Ascot businesses that sit within the Other segment, with the majority of the balance sitting in our Plant and Equipment segment. We have seen an increase in lease assets and liabilities with the addition of several new locations in FY '25. This includes our new head office in South Melbourne, new offices in Brisbane and Adelaide and our new plant yard in Avalon, Victoria. This will result in some higher depreciation of lease assets in FY '26. The next slide provides a summary of our funding position. With a strong cash result in FY '25, our net cash position has improved to $46.1 million, excluding lease liabilities. This is an improvement on the June 2024 pro forma position of $40.3 million even after the CapEx and acquisition investments made during the year. We had approximately $114 million of undrawn capacity on our asset financing limits and nearly $65 million of capacity on our bank guarantee and bonding facilities at 30 June 2025, providing significant headroom for our growth aspirations. We are planning to undertake a refinancing of our existing debt facilities in FY '26 in order to firm up additional committed liquidity, simplify and align terms across key lenders and extend tenor. This will ensure we have capacity and flexibility to pursue further inorganic growth opportunities as they emerge. The Board has declared a dividend of $0.059 per share, consistent with the guidance of 50% of pro rata net profit after tax since listing. As previously disclosed, the group's dividend policy moving forward is 30% to 50% of net profit after tax. The next slide provides an overview of our capital allocation framework. We are focused on achieving 3 key objectives. Firstly, given the strong cash generation profile of the business, we can continue to self-fund organic growth and associated CapEx requirements through the operating cash flow generation of the business. Secondly, that means we can utilize our balance sheet capacity to maintain flexibility through cycles and to capture acquisition opportunities when they emerge if our return criteria is met. Finally, we seek to maximize total shareholder returns through a combination of earnings per share growth and sustainable dividends. To this end, as flagged in our remuneration report, senior executive LTIs are tied to a diluted EPS growth rate of 10% per annum. I'll now pass you back to Joe.

Thank you, Geoff. So for my closing remarks, we are confident in our strategy, proud of what our people have achieved and committed to delivering consistent value for our shareholders. We delivered a strong FY '25 financial result, exceeding our earnings forecast. We increased our work-in-hand position by 35% to $1.76 billion. We expanded on our recycling and electrical offering, and we executed 2 strategic acquisitions. We now look forward to FY '26. We're guiding to a normalized EBITDA of $115 million to $125 million for FY '26 with a dividend of 30% to 50% of net profit after tax. In addition to delivering our strong work-in-hand position, we will continue to pursue acquisitions that enhance our scale and capabilities and continue to grow organically. To our investors, thank you for being part of something truly special. For those who are considering joining us, the opportunity has never been clearer. Symal is just getting started. Thank you.