Macmahon Holdings Ltd Ord

Good day and welcome to the Nukmaan 1st half 26 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. For operator assistance throughout the call, please press star 0. And finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to hand over to the conference call hosts, McMahon CEO and MD, Mr. Michael Finnegan, and the company's CFO, Ms. Ursula Loomis. Please go ahead.

Thanks, Operator. Welcome to the McMahon 2026 first half results presentation. I'm Mick Finnegan and with me is our CFO Ursula Loomis. Thanks for joining us today. We appreciate your interest in McMahon and the opportunity to present our half year results during this busy period. We'll run through the presentation lodged on the ASX this morning and then we'll be happy to take your questions at the conclusion of the presentation. Beginning with the financial highlights on slide 2, I'm really pleased to say McMahon has delivered a strong first half with healthy growth in revenue and earnings. This continues our demonstrated track record of growth sustained across our mining and civil infrastructure businesses. In fact, civil infrastructure is increasingly a key contributor to revenue and earnings and today's result further validates our decision in 2024 to acquire Deckmilk, marking our re-entry into the civil sector. Achieving this earnings performance is an important milestone and before I go to the numbers, I wanted to take this opportunity to thank the Insire McMahon team across Indonesia, Malaysia and Australia for this outstanding achievement. Group revenue was up 11% to $1.3 billion with underlying EBITDA up 10% to $200 million An EBIT A up a strong 17% to $91 million. This faces a swell to achieve our full year guidance given our expectation of a stronger second half. The business continued to generate strong underlying operating cash flow which was up 17% to $190.5 million for the half in line with the EBIT A growth. Free cash flow after tax, interest, and capital expenditure was a robust $39.3 million after paying the final FY25 tax together with FY26 provisional tax. The strong cash generation allowed further reduction in debt levels and brought the gearing down to a modest 17% providing increased block financial flexibility. We expect strong cash flow generation to continue in the second half. which has supported our decision to increase the interim dividend to a fully franked $0.95 per share. The increase is a result of sustained improvement in earnings we have been able to deliver, our confidence in that continuing and the appropriate allocation of capital through the business. Validation of that appropriate capital allocation is a continued improvement in Roarchie. At 21.2% it was a further improvement on the 30 June 2025 results and up significantly on the 17.5% in the previous corresponding first half. Once again this reflects our strategy to diversify the business and have a balance between leveraging our balance sheet to differentiate our proposals and continually improving our ROACHI to above the 25% target in time. Rounding out this slide we have entered the second half with a strong order book of $5.1 billion with a strong tender pipeline at $25.6 billion which around 50% is expected to be awarded within the coming 12 months. Slide 3 summarises the key operational and financial highlights for our mining business. Mining operations remain our biggest business by both revenue and employee numbers and has delivered revenue and underlying earnings growth at an improved margin. In surface we concluded a 3 year extension of Iowan for $792 million with a 2 year extension option that could see this increase to $1.32 billion. There was also a 7 year extension at Langkawi in Malaysia highlighting the strength and long term nature of our customer relationships. The surface mining pipeline remains robust with $9.6 billion of opportunities being pursued of which $5.6 billion is currently expected to be awarded in the next 12 months. And this is obviously an enviable position which allows us to be more selective. Underground also recorded new awards in both Australia and Indonesia supported by a strong pipeline of $8.1 billion with $3.5 billion currently expected to be awarded in the next 12 months. This pipeline underpins the strategic objective of achieving $750 million of revenue in underground operations By the end of FY28 Over to slide 4 on our civil infrastructure business which has performed well with strong half-on-half revenue growth which represented 23% of the group's first half revenue putting us well on track for our stated revenue diversity goal The business delivered revenue, earnings and margin growth with revenue of $307 million and underlying EBITDA of $19 million These numbers were up 61% and 67% respectively, which was an outstanding achievement and represented a contribution to total Group EBITDA of around 21%. Underlying EBITDA margin was 6.2%, an improvement on the 6% achieved in the previous corresponding half. There has been a steady stream of new work secured across a diversified portfolio of project types. The $500 million of new awards demonstrates excellent momentum and the Division's capability across resources, government and renewable infrastructure sectors. Pleasingly, subsequent to December 25, Deck Mill has started moving to the larger packages, as can be seen with the award of the Western Angeles Bulk Earthworks. The tender pipeline reflects robust growth prospects with just under $8 billion in opportunities of which over $5 billion is expected to be awarded in the next 12 months. Again, this is a carefully screened pipeline to include credible opportunities for the business with a disciplined tendering approach aligned with McMahon's tendering guidelines. Slides 5, 6 and 7 recap our key projects across surface mining. Underground Mining and Civil Infrastructure, including some of the new work won during the half. The tables outline key projects, their tenure, cost curve profile and related commodity exposure. I really don't intend to go through this list now, but I'm happy to answer any questions in the Q&A or if we see you in person in the coming days. Slide 8 illustrates the diversity in our revenue across several market segments. While our work is concentrated in Australia, the company has a strategic objective to increase Indonesian operations across our core sectors, targeting 15% to 20% of group revenue from this region. Importantly, we have been diversifying our service offering and moving further into the high row archery businesses in the underground mining and civil areas. Revenue diversification by commodity demonstrates meaningful exposure across multiple commodities and we expect this to improve in focused areas given the intentional broad mix of our pipeline. The business is well diversified by client including tier 1 global and Australian miners. Moving on to slide 9 on people and safety. McMahon now employs over 10,000 people across operations in Australia and overseas. While the group's TRIFA has continued to reduce since FY21 as the workforce has grown, sadly one of our valued McMahon employees passed away at the Fosterville Goldmine in December 2025. This event is subject to an ongoing investigation. The safety and wellbeing of our people remain their highest priority across all levels in the organisation with a focus on promoting a culture of awareness, and continuous improvement. Mental health and the well-being is also vitally important. I'm pleased to say we believe McMahon is a leader in our industry with our Strong Minds, Strong Minds program. Mental health is embedded as a core workforce priority and we recognise that psychological well-being directly contributes to operational safety and team effectiveness. We continue to invest Significant resources in developing our workforce capabilities through the McMahon Winning Way Leadership Program and our Emerging Leaders Program, providing expertise and leadership capability through all levels of the organisation. And finally on people, our commitment to promoting diversity in our workforce is progressing. We've achieved 4.3% representation of First Nations employees across our Australian operations, and just under 20% of our Australian-based employees are female. Importantly, we have achieved an 11% reduction in Australian-based female employee turnover between December 23 and December 25, which we hope is a result of our inclusive culture, creating an environment where women choose to build their careers with MCMAH. Business sustainability is an ongoing objective for MCMAH. Slide 10 outlines some of our sustainability related activities and metrics. We have prepared a voluntary standalone sustainability report along with our annual report for many years now. I won't go through the detail on the slide now in the interest of time however some items to call out during the half include progressing our AASB S2 implementation which strengthened governance systems and disclosure preparation and establishing a preliminary Scope 3 baseline in preparation for future disclosures. The company has also established the McMahon Advisory Committee on Sustainability to strengthen our activities in this area. I'll now hand over to Ursula to discuss the financials.

Thank you Mick. Good morning everyone and thank you again for joining us today. I'll begin with a quick overview of our half yearly financial performance on slide 12. Nick highlighted the first half result is another strong performance for the business. While this is an outstanding achievement, this slide illustrates that this first half result is not an outlier but demonstrates a sustained track record of achievements in all key financial metrics. Revenue has grown from $810 million in the first half of 22 to $1.3 billion in the first half of FY26. representing sustained revenue growth and diversification across the business. Underlying EBITDA has similarly progressed from $139 million in the first half of 22 to $200 million in the first half of 26, while maintaining healthy margins. Underlying EBIT A has demonstrated particularly strong momentum, growing from $47 million in the first half of 22 to $91 million in the first half of 26, almost doubled. The return on average capital employed has been a standout, progressing from just below 13% in the first half of 22 to over 21% in the first half of 26. This improvement reflects ongoing strong growth supported by a focused and disciplined approach to capital management and demonstrates our progress towards our return on average capital employed target of greater than 25%. Looking at the profit and loss on slide 13 to recap, Revenue increased 11% to $1.3 billion driven by the new awards in our civil infrastructure and underground mining operations in both Australia and in Indonesia. This strong top line performance reflects the successful execution of McMahon's diversification strategy which has significantly grown the company's addressable market and expanded our service offering. Underlying EBITDA grew 10% to $200 million off the back of the strong revenue growth together with operational improvements across the business. Underlying EBITDA growth of 17% to $91 million is reflected in the strong growth performance in projects with reduced capital employed resulting in lower depreciation expense but a higher return on average capital employed. The EBITDA margin of 7% was driven by the award of this new work, together with the operational improvements across the business. Net finance costs decreased to $15 million from $17 million in the previous corresponding period, reflecting the improved debt management. Following the debt restructure in June 2025, the effects of borrowing costs reduced to 6% as of 31 December 2025, compared to 6.7% for the comparative period last year. This improved borrowing costs combined with a lower net debt level reflects our focus on capital and cost discipline in the business Underlying net profit after tax excluding amortization grew 17% to $55 million This excludes adjusting items at $6.7 million comprising the share based payments expense of $2.5 million customer contract amortization of $2.9 million and the Software as a Solution payment of $1.2 million. Reports at net profit after tax was $48 million compared to $30 million in the first half of 25. With all tax losses across the group fully recognised the effective tax rate was 30.8% which we expect to continue going forward. The half year dividend was increased by 73% to 0.95 cents per share fully franked equating to a payout ratio of 37% in line with our recently increased dividend payout ratio range of 30% to 45% of underlying earnings per share. The Net Debt Waterfall Chart on slide 14 steps out our major net debt movements in the last six months, drawing out the free cash flow generation and the reduction in net debt. Net debt reduced from $162.5 million at June 2025 to $144.1 million in December, driven primarily by strong EBITDA performance and continued discipline in capital expenditure. Underlying operating cash flow was $190.5 million, with a strong cash conversion for the first half of 95.2%. We expect these strong operating cash flows continuing to the second half. Pre-cash flow was $39.3 million after interest and tax of $54.6 million and net capital expenditure of $96.6 million. Important to note though is that the taxation included the estimated final tax payment for FY25 of circa $20 million. A capital expenditure forecast for the full year remains unchanged at $245 million with a greater weighting to the second half period. Over to the balance sheet summary on slide 15. The main outcome of the strong cash generation can be seen on McMahon's balance sheet with gearing reducing to 17% and the net debt to EBITDA dropping 0.36 times. It goes without saying that our balance sheet finished the first half in a very strong position with solid liquidity and low stable gearing. Cash and available banking facilities totaled $539 million. Providing substantial operational flexibility and headroom for growth and capital deployment opportunities in line with our capital management approach. Our diverse borrowing facilities also provide flexibility and access to capital across multiple funding sources as you can see. Again, we are pleased with the return on average capital employed reaching 21.2%. progressing well toward the upgraded strategic target of greater than 25% as I've mentioned earlier. I'd now like to hand you back to Nick before we open for questions.