Penguin Solutions, Inc.

I would now like to hand the conference over to Mr. Ryan Stokes, CEO and Managing Director. Please go ahead.

Mr. Thank you. Good morning and welcome to the SGH half-year results presentation for the six-month ended 31 December 2024. I am Ryan Stokes, MD and CEO of SGH. Joining me today is our CFO, Richard Richards. SGH is a leading ASX 100 diversified operating business. We own and operate market-leading industrial services businesses with additional exposure to energy and media. We deploy incremental capital domestically towards industrial and energy opportunities. Our approach to capital allocation is complemented by a disciplined operating model that prioritizes customer execution and accountability. Our owner's mindset approach guides decision-making and promotes a performance culture. It also drives a strong belief in the power of continuous improvement and long-term value creation. These core values and strategies have supported our ability to deliver long-term outperformance, including a 19% EBIT CAGR over the past decade and consistently top decile total shareholder returns. Slide 3. The half-year result delivered revenue and earnings growth. Revenue of $5.5 billion was up 2%, led by capital sales and services growth at Westrack. EBIT of $800 was up 10% driven by earnings expansion across Westrac, Borough and Beech. NPAT of $508 million was up 7% with EBIT growth partially offset by higher interest and tax payments. Operating cash flow of $821 million was up 15% and reflects stronger earnings along with a 6% improvement in EBITDA cash conversion to 75%, largely driven by Westrac. Slide four. The strong half-year result and long-term outperformance are underpinned by our purpose, objective and values, and the disciplined application of our operating model. Our purpose is to recognise and serve exceptional businesses while delivering sustainable value creation and maximising returns for our stakeholders. This purpose is guided by our four core values, respect, owner's mindset, courage and agility. Of these values, our owner's mindset is particularly important in an SJH context. and is deeply embedded into our operating model through four core characteristics. First, we integrate an owner's mindset into our operating cadence, which drives a focus on execution and growth over unnecessary process. Second, each business operates under a dedicated board structure, ensuring clear accountability for performance and results. Third, decision-making is pushed to the front line wherever possible, creating a lean and empowered workforce. And fourth, Our lean operating structure and focus on accountability make SGH inherently scalable. Slide five. This slide demonstrates our capital allocation in action. Our diversified operating structure allows us to preferentially allocate capital toward our portfolio of businesses or into new opportunities depending on where we identify the strongest opportunity for risk-adjusted returns. Our incremental capital allocation is focused on Australia and guided by the thematic exposures of industrials and energy, where we target high-quality businesses that benefit from long-term structural demand tailwinds. Our highly cash-generative industrial businesses allow us to take on and rapidly reduce leverage through operating cash flow. We can achieve that at investment-grade pricing given our consistently strong earnings profile. Importantly, the cost of that leverage is well below our long-run EPS growth rate. so it can be used to effectively amplify return on equity. We combine that financial leverage with operating leverage and disciplined execution to drive long-term TSR outperformance. Slide six. SGH is focused on deploying incremental capital in Australia toward the industrial and energy sectors, where we have identified long-duration growth opportunities This disciplined approach to capital allocation combined with our operating model has supported SGH to deliver consistently strong financial results. In infrastructure and construction, the outlook remains strong with 1.8 trillion investment expected over the next seven years. In mining production, iron ore volumes continue to grow and coal volumes have remained consistent year on year. Both commodities are expected to remain strong through this decade and beyond. In energy, strong demand and tightening supply are expected in the domestic gas market from FY26 onwards. In LNG, demand growth remains strong with supply risk skewed to the downside. Slide seven. The earnings growth in industrial services led by Boral and in energy through Beech were the core drivers of growth in the half year 25 result. Revenue was up 2% with operating leverage supported an EBIT margin increase to 15.3%. EBIT of $843 million was up 10%, and NPAT of $508 million was up 7%. Key strategic outcomes for the half included the completion of the borrower acquisition in July, after which leverage peaked at 2.3 times before being brought down to below 2.2 times by December. We have also lifted our interim dividend for the first half by 30%, to 30 cents per share fully franked, representing our 30th consecutive period of stable or growing dividends. Slide eight. Our focus on people and safety continues to deliver tangible results across our businesses. In safety, we've seen significant progress in our lost time injury frequency rate, improving by nine percent, and in our total recordable injury frequency rate, improving by 12 percent. In sustainability, the Boral Barama Chlorine bypass is now complete, improving the facility's alternative fuel use capability to 45 percent. At beach, The Moomba carbon capture and storage facility was commissioned over the half and is now operating at full capacity. Slide 10. Westrac delivered revenue and earnings growth over the half against a low single-digit parts price reduction effective 1 July. Total revenue of $3.2 billion was up 8%, driven by a 13% growth in capital sales of $1.2 billion and a 5% increase in services revenue to $2 billion. The EBIT margin contracted slightly to 11.1%, with component growth partially offsetting the impact of the past price reduction. EBIT of $352 million was up 5%, reflecting strong underlying customer demand and operating discipline. Westrack delivered an improved cash result, with operating cash flow of $258 million up 146% and EBITDA cash conversion lifting to 67%. The cash result was supported by stronger earnings and a lower relative build in working capital. Slide 11. Underlying demand for Westrac's parts and services was strong, with revenue growth of 5% and a CAGR of 11% over the decade. The headline growth delivered reflects the strength of the underlying demand of Westrac, supported by major rebuild activity and the growing installed mining machine base. The outlook for both capital sales and services remains positive, supported by production expectations for key commodity exposures. Strong fleet investment also continues, with the ageing installed base supporting demand for both R&M to extend asset life and capital sales to blend fleet age down. Slide 13. Borrower delivered a strong earnings and margin result. Total revenue of $1.8 billion was down 2%, supported by pricing traction, and resilient infrastructure activity offset by softer residential construction. EBIT margin of 14.3% was significantly up, supported by operating discipline, performance improvement initiatives, cost variableization, and pricing traction. The margin expansion drove a 29% uplift in EBIT to $259 million, as well as significant growth in borrower's return on capital employed to 15.3%. The performance improvement initiatives delivered over the half focused on operating efficiency and enhancing customer service, including a significant improvement in concrete DIFOD, delivery in full on time, to 83%. SG&A expenses were 8% lower for the half and cost of sales are expected to improve further as volumes grow. Investment in heavy mobile equipment renewal has commenced and is expected to drive production and cost efficiencies. Progress was also made in increasing the performance of the network, supported by initiatives to reduce costs and increase P&L accountability across the business. Slide 14. Volumes were supported by robust demand for concrete, offset by variable demand for other products, including lower asphalt and quarry volumes. Pricing discipline held across all product lines, with concrete pricing increasing by 3%, and quarries by 4%, and recycling by 7%, helping to mitigate the revenue impact of softer volumes. The outlook for Boral remains positive, supported by a robust infrastructure investment outlook that has improved compared to the previous forecast, as well as an expected rise in residential activity needed to meet the National Housing Accord targets. The result shows continued progress on Boral's good-to-great performance journey. The focus remains on driving customer service outcomes, operational efficiency, cost-variabilization and control, price leadership, and enhancing the network performance. Slide 16. COATS revenue of $546 million was down 4%, normalized the sale of COATS Indonesia in the prior period. The modest revenue decline reflects resilient customer activity in the east, west, and north, and lower activity in Victoria. COATS' focus on cost and pricing discipline drove growth in EBITDA and EBIT margins to 46.4% and 28% The result also was supported by operating leverage in R&M, logistics efficiencies and non-operational cost out, including a 7% reduction in personnel costs. The margin improvement helped to offset revenue decline, leading to a 2% drop in EBIT when adjusted for the sale of coats in Indonesia. Slide 17. Time utilization at 59.2% was down 1% and slightly below the high performance target of 60%. The utilization was impacted by softer demand in the south region, which was partially offset by fleet repositioning leveraging our national footprint. Repairs and maintenance efficiency improved with R&M costs as a percentage of sales reducing to 17.3%, supported by the continued rollout of the hub and spoke model. Market conditions remain mixed for Coates, with softer trading conditions in Victoria ongoing due to major project deferrals, park share offset by resilient activity in the east. Coates has maintained pricing discipline across all regions against this increasingly competitive backdrop. The outlook for Coates remains positive, supported by utilities and transport infrastructure spending, which is expected to grow by 11% and 4% respectively in calendar year 25. The cost out and efficiency gains delivered over the half at Position Coast Well to capitalise on this expected market recovery. Slide 19. Beech delivered 15% growth in production to 10.2 million buoys, reflecting the connection of new offshore wells and production optimisation initiatives. The production growth coupled with favourable pricing saw Beech deliver 5% higher sales revenue for the half. Beach also grew NPAT by 37% supported by the higher revenue, as well as ongoing cost out from the organizational restructure. This included the delivery of a 30% reduction in headcount and a 20% reduction in field OPEX to $12.50 per BOE. At SGH Energy, our share of the crux development investment was $128 million for the first half. The project is progressing to schedule and First Gas remains targeted for CY27. SJH Energy continues to collaborate with Amplitude Energy to assess bringing the long-term gas resource in the Gippsland Basin to market. This supports our strategy of advancing domestic energy supply. Slide 21. 7 West Media's half-year revenue of $727 million was down 6%, leading to a 41% contraction in NPAT to $37 million. Half year 25 costs were down 2%, with full year costs expected to be 20 to 30 million lower than FY24. These efficiency gains coupled with moderating market conditions are expected to support modest year-on-year earnings growth in the second half. In other media, SGH realized eight million from CMC in half year 25, bringing the last reported money on invested capital of fund one to 2.5 times. I now hand you over to Richard for a more detailed run-through of the financial results. Richard.

Thank you, Ryan, and good morning. SGH delivered another compelling financial result for the half, achieving revenue, margin and earnings growth in varying market conditions. Revenue of $5.5 billion was up 2% or 3% when adjusting for the sale of Cotes Indonesia completed in April 24. The revenue growth was driven by 8% expansion at Westrac, partially offset by a slight contraction at Boral and Coates. Expenses for the six months rose 2%, mainly due to Westrac, where cost of goods sold grew in line with revenue. This was partially offset by cost efficiencies delivered at Boral and Coates. The lower relative increase in expenses compared to revenue reflects SGH's characteristics disciplined cost management and realising operating leverage, which when combined with higher equity accounted earnings, drove significant margin expansion. This increasing operating leverage amplified revenue growth, driving EBITDA up 8% to 1.1 billion and EBIT up 10% to 843 million. When adjusting for the sale of COATS Indonesia, EBIT growth was 11% period on period. Net finance expense of $162 million was up 14%, largely referable to the increased net debt associated with the completion of the boral acquisition. The underlying tax expense of $173 million was up 17%, driven by higher taxable earnings for the period. Underlying NPAT rose 7% to $508 million, while statutory NPAT rose 134% to $526 million. The larger statutory delta reflects substantially lower significant items losses from our equity-accounted investments relative to the prior comparative period. Moving to slide 24. SGH's statutory result includes 45 million of pre-tax significant item losses, primarily driven by a 32 million mark-to-mark impairment of our seven West Media investments. Other notable pre-tax significant items include SGH's $8 million share of Seven West Media's significant item losses, our $4 million share of significant item losses from Beach, and a $5 million net income from discontinued operations, reflecting the receipt of deferred consideration, partially offset by additional liabilities recognised for previous divested Boral US businesses. SGH also preliminary recognized 60 million in positive post-tax significant items attributable to the tax benefit on ACA tax value reset on Boral's entry into SGH's tax consolidated group. Combined, these significant items resulted in an 18 million net benefit to after-tax statutory earnings for the six months. Moving to slide 25. This slide presents an EBIT bridge detailing the underlying EBIT movement for each business, as well as the reconciliation to statutory EBIT. Westrac's EBIT increased by 18 million, overcoming the EBIT headwinds from a parts price decrease, highlighting the strong underlying customer demand for both new equipment and services. Boral's EBIT growth of 58 million, with marginally lower sales volume, more than offset by pricing traction and performance initiatives, driving significant margin expansion to 14.3%. Coates EBIT declined by $8 million or $4 million when adjusting for the sale of Coates Indonesia. The decline reflects softer revenue due to project deferrals in Victoria, partially offset by margin growth from cost reductions and R&M benefits from the continued rollout of the hub and spoke model. Energy EBIT contribution increased by $20 million driven by a 37% rise in NPAT at Beach, enabled by a 15% production growth and a 20% reduction in operating costs per barrel. Media EBIT contribution declined by 5 million, reflecting a softer total TV advertising market, partially offset by cost-out initiatives. In aggregate, these movements delivered 79 million increase in underlying EBIT to 843 million, or 797 million statutory EBIT after accounting for the $46 million of above line significant items. Slide 26. Underlying operating cash flows for the period increased by $106 million to $821 million, largely driven by stronger cash flows from Westrac. Westrac's operating cash flow rose by $153 million to $258 million, supported by earnings growth and lower machine inventory. This was partially offset by higher PEX inventory and lower advance payments. The higher cash flows from Westrac were partially offset by lower cash from Boral on unfavorable working cap movements and coats due to modest earnings decline. EBITDA cash conversion at Westrac grew 39% on an absolute basis to 67%, partially offset by lower conversion of Boral and coats. These businesses delivered 75% EBITDA cash conversion for SGH ahead of the 70% conversion in the prior comparative period. Net interest paid increased by $35 million to $163 million, reflecting higher interest rates on floating rate debt and the increased debt used to fund the BORAL acquisition. Net income tax paid rose by $87 million to $152 million, primarily reflecting the higher taxable income and the utilization of Boral's carry-forward tax losses in the prior period. Net investing cash outflows for the year increased by $130 million to $274 million, reflecting higher CapEx for Crux, coupled with lower proceeds from disposals. Net financing cash outflows rose $517 million to $701 million, driven by higher repayment of debt, increased dividend payments, Payments for both shares and transaction costs associated with the Boral acquisition. Closing net debt increased by $248 million to $4.6 billion, primarily due to the completion of Boral's transaction and foreign exchange impacts on our US dollar denominated debt. Slide 27. SGH's net assets increased by $625 million to $4.7 billion as of 31 December. largely referable to the decrease in trade and other payables and an increase in the oil and gas assets partially offset by a decrease in inventory. The $504 million decrease in trade and other payables primarily relates to the closeout of the $335 million for boral shares purchased required to achieve full ownership. The increase in oil and gas assets reflects a $137 million rise in the carrying value of Crux. comprising $128 million in development expenditure and $9 million in remediation provisions. The $155 million decrease in inventories was predominantly driven by working capital issues at Westrac, enabled by the easing of supply chain constraints. The combined impact of these items, along with other lesser balance sheet movements, resulted in net debt of $5.6 billion, or $4.6 billion excluding leases, representing a 6% increase over the June 24 debt levels. Slide 28. Adjusting for the $197 million of positive mark-to-market debt-related derivatives, SGH's adjusted net debt to EBITDA, or leverage, was 2.18 times at 31 December. This represents a 4% decline from the peak of 2.3 following the Boral acquisition in July and is flat relative to 30 June. We expect to continue deleveraging in the second half through strong operating cash flows, supporting financial flexibility and growth. SGH fully repaid the $700 million Borel acquisition facility early in the half, utilizing the proceeds of a six-year, $600 million Asian term loan. SGH also took on $600 million incremental fixed rate hedging at 3.6% swap rate, increasing the fixed portion of our drawn debt from 49% to 65%. We've also extended two SFA tranches early in the second half, totaling $1.3 billion. These initiatives diversify our funding base, and the level of support from our new and existing lenders reflects our strong balance sheet, earnings profile, and stronger credit metrics. At 31 December, 65% of SGH's debt was fixed, with an average drawn tenor of 4.9 years and an average rate of 4.8%. Post the refi, average duration has been pushed out to over five years. We also have no further material corporate bank maturities until FY29. I want to hand you back to Ryan.