Release Date: February 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Macmahon Holdings Ltd (MCHHF, Financial) reported a 22% increase in group revenue, reaching $1.2 billion.
- The company achieved a 15% increase in earnings guidance metric to $78.1 million.
- Strong underlying cash flow was generated, amounting to $163.4 million, with free cash flow of $49 million.
- The acquisition of Decmil has been fully integrated, contributing to new work worth $333 million.
- The company has a robust order book and tender pipeline valued at $24.8 billion, the highest it has been.
Negative Points
- The company is experiencing labor shortages in key areas, particularly in Queensland.
- Statutory profit was down to $30 million due to adjusting items related to the Decmil acquisition.
- The effective borrowing rate increased to 6.7%, reflecting higher interest rates on new borrowing.
- Net debt increased to $237 million, with a gearing of 26.2%, following the acquisition of Decmil.
- The company faces execution risks, including potential impacts from weather events and other unforeseen disruptions.
Q & A Highlights
Q: Can you explain the margin run rate for the second half of FY25, considering the impact of Decmil?
A: Michael Finnegan, CEO, explained that the second half will be heavier due to new work and contract extensions. The company expects a 45-55 split in earnings for the year, with the second half benefiting from civil works and potential scope expansions. Execution is key, and while weather could impact results, the focus is on delivering the secured work.
Q: How is the integration of Decmil affecting gross profit margins, and is it now stabilized?
A: Michael Finnegan, CEO, stated that the integration is largely complete, with some synergies still to be realized. The margin impact from Decmil is reflected in the slight decrease from 6.9% to 6.6%, but future improvements are expected as the integration benefits are fully realized.
Q: What should we expect regarding share-based payments and other costs moving forward?
A: Ursula Lummis, CFO, explained that the share-based payment expense is tied to securing Decmil's management team for two years and will impact this year and next. Other costs include M&A expenses and system upgrades, which are not expected to recur at the same level.
Q: Can you provide more details on the tax rate and its future expectations?
A: Ursula Lummis, CFO, clarified that the effective tax rate remains around 30-31% due to full recognition of deferred tax assets. The Decmil acquisition tax losses are recognized against goodwill, and future tax payments will reflect the utilization of these losses over time.
Q: How is the home ground accommodation village performing, and what are the plans for it?
A: Michael Finnegan, CEO, stated that the village is profitable at current occupancy levels of 30%, with break-even between 8% and 12%. The company is exploring opportunities to monetize the asset, as it is not considered core to their operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
