I would now like to hand the conference over to Mr. Jim Bindon, CEO. Please go ahead.
Hi. Good morning, everyone. Thanks for joining. I know it's a busy time. I think I say this every year, but seems to be quite a busy day for small cap market announcements. Thanks for taking the time to join our call. Jim Bindon is my name. I'm the soon to be forgotten CEO. As hopefully you've seen in some of the market announcements, I finish up in early March, and John Lorente, you'll hear from him today. He's been with the business for quite a long time, and he's gonna be taking over as CEO. John and also John O'Connor as our CFO will go through most of the results.
You hear just a few introductory slides from me and maybe just briefly talk about the transition of the CEO role across to John, and then you'll hear from the guys on the results. Guys, I'm just gonna move to page three of the presentation. It's headed up 'Zero One Growth Momentum Continues,' just to give a bit of background. I think it's quite clearly or hopefully from our perspective, it was a really pleasing result. Hopefully, these graphs try and give you a little bit of a picture of what we've been trying to build over the last four to five years. When we set our new strategy in place about 18 months ago, one of the key goals was to drive improvement in the financial results.
I think we've built a really good broad base to the business, particularly during the downturn in the construction cycle through 2018 and 2019. We did some hard yard, you know, restructuring our manufacturing and supply chain, but our view was we had to improve the financial performance of the business. Whilst we've grown the base of the business, you know, which is pleasing, and continued the rollout of the expansion, we've certainly improved the financial results. Maybe just grabbing the top left slide there, you can see the revenue growth, coming in about AUD 233 million for the half. Good strong growth there of 20%, but around, you know, around 11% on a like-for-like basis.
Once again, the good thing there is strong contribution from both organic growth and also acquisitions that are certainly joining the group and have been executed successfully. From an EBITDA point of view, pretty much the same story, hopefully if you've seen the headline figures up just over 31%. Again, good strong contribution from the like-for-like business is up some 19%. Then obviously the additional contribution from the new businesses that weren't there in the corresponding period. Once again, good contribution from those two sort of pillars to drive that strong growth in underlying EBITDA. Of course, at NPAT level, same story. Obviously, there's minimal or negligible significant items, statutory NPAT up about 46%.
From a sort of headline point of view, the fact that EBITDA and NPAT are growing well in advance of the revenue growth, that's obviously pleasing. We're still getting that operating leverage as you'd expect as we go, you know, as we continue to sort of grow as a small company and dilute our fixed cost base. Just down the bottom left corner, guys, cash conversion, again, very consistent. Cash conversion is weaker in our first half and always has been. This year, you know, and that's without... Sorry, that's with the pressure that many companies have seen on inventory levels. I think we've been able to control that well and get 74% cash conversion, which is particularly pleasing. From a gearing level, you know, once again, nothing to see there. I think pretty stable.
Gearing at about 20% or leverage, you know, on the basis of EBITDA to net debt, or net debt to EBITDA at about 0.75 or 0.8. I think, you know, obviously we've got a conservative, you know, conservatively run balance sheet, but that certainly leaves good room for growth, I think. Finally, just in that, in the bottom right there, Return on Funds Employed. Obviously, our target was to get over 20%. Clearly, we weren't at that level, and that was one of the main drivers for improvement that we're looking for. The last 12 months, obviously this is on a last 12 months basis Return on Funds Employed. We're tracking at well over 25% now.
I think we, you know, I think we're kind of a worthy place to put investment money where we're sort of generating those type of returns. That's been pleasing. Just on the next page, folks, business overview. Some of you will have seen this before, so I won't spend lots of time on it. It's just tweaked a little bit from the last report. Maybe I'll just cover a couple of points on that. Just on the supply chain diversity up the top left there, so these numbers have changed a little bit. Manufacturing about 20%... Sorry, 21% of our business are products we manufacture ourselves. About 20% is where we have a direct relationship over, you know, with overseas factories where we're doing the importing.
59% of our revenue is being sourced from local supply partners. That's a little bit higher, the third of those numbers. The main reason for that is the last three acquisitions we've done predominantly have a local supply chain. All of their purchases are done locally, so that's diluted our direct manufacturing and our import function. The other thing is that the supply chains have largely corrected themselves, for want of a better term, and some of that direct importing that we were having to do simply to find product, the Australian capacities are adequate now. We've just tweaked down our direct importations a touch in the last six months. That's what's reduced that from 25% in previous presentations down to 20%. Just on the asset mix over the right there, 26 sites now.
I guess the pleasing thing there is, three new sites for the half year. One of those was a Panels site in Sydney, which was a big gap in our business. We didn't have a Panels position in the largest city, so that's been, you know, a good addition. Then the Epping acquisition, which hopefully you might have seen some correspondence on in December, which gives us a good prefab, a prefab frame and truss position in Ballarat or out near Ballarat, as well as a trade center in Melbourne. Melbourne was actually a market where we didn't have any Building Trade Centres.
We've got a couple of strong panels businesses, and we've got a strong formwork and commercial business, and we've got a good frame and truss plant in Geelong, which gives us access to those project home builders in Geelong. We're certainly weak in Melbourne Metro with respect to the builder market. Obviously the addition of the Trade Centre at Epping is a pleasing rounding out of the strategy. Seven sites manufacturing out of our 26. Four frame and truss sites nationally now. That continues to be an area that we want to continue to expand, so pleasing that we've added another one to our portfolio during the six-month period. Just back over on the left side to the split by construction types, largely unchanged.
The split by revenue, you can see, I think it's pretty nice mix, to be honest, to have, 27%, 24%, 23% of the big East Coast branches, but a really a meaningful contribution from South Australia and West Australia. They've been two of our strongest growth markets from both a sales and a profit perspective. We're really pleased we've got those four sites across those smaller states, you might call them, as well as New Zealand there. I think a mix across our geographies and across our market segments continues to be one of the strengths of the business. Guys, that's it from me. Just as a way of intro, maybe just 30 seconds on the changeover to John as the new CEO. Clearly, John's worked for me for six years.
He's run pretty much all parts of our business under a couple of different structures we've had. He knows the customer suppliers, the staff, and of course, the strategy, which he's been critically involved with during the last five years. I think it's been a very smooth and easy transition from my perspective. Hopefully, you'll see, of course, his style and his touch on the business, but fundamentally, you know, the strategy's intact and I look forward to seeing him continue to roll it out. John, over to you now to run through some of the results, and then obviously, we'll pass across to John O'Connor for the financial components.
Great. Thank you, Jim. Good morning, all, and thanks for jumping on the call. Firstly, just and capping off the transition, just wanna thank Jim for his leadership over the years, has delivered, as we've seen, some great results. We've built a high-performing team and a great culture. I have the privilege to head up the business from the 1st of March, after a few years, after several years in the business and be able to present some good results. If we go to slide five, which is headed 303 performance headlines for 1st half 2023. Maybe putting a little bit more flavor to what Jim mentioned earlier.
Look, continued strong revenue up 19.9% to AUD 232.4 million. growth, organic growth of 10.8% across both our divisions, so both Panels and Construction grew. strong contribution also from the four largest acquisitions too, and two that we executed in the 2.5. We executed in the previous in the previous period. The underlying EBITDA was very strong and grew above revenue. As Jim mentioned, our operating leverage up 31.2% to AUD 28.2 million or up 19.4% like for like. a record EBITDA margin of 12.1% of sales is well above our through construction cycle average target of 10%, which is a great result.
We managed working capital well with net working capital revenue ratio up at 17.7%, with good management of our inventory and our receivables. Jim mentioned our Return on Funds Employed, 28.2%, up 71% on the prior period, which was at 16.5%. Again, a great result. This allowed us to deliver another record interim dividend to our shareholders of AUD 0.086 per share, up 56.4% on first half 2022. If we go to slide six, which is headed Zero Four Performance Headlines.
It's pleasing to be able to deliver continued strong organic growth from the business despite the challenges that have been in the market, particularly weather site delays and some labor shortages. As I mentioned before, that organic growth up 10.8% are well above the analysis of our addressable market growth, which is circa 4% growth. Our strategy for growth, diversity, geography, segments and supply chain is in our view, delivering these results. Our geographical diversity delivered strong results from Queensland, WA, and South Australia. And those markets are looking very strong moving forward.
The Construction Division, divisions, our Building Trade Centres were the best performers, up 31.7% or up 18.5%, like for like, with most builders still reporting strong order books and a positive view on forward pipelines. Our margin management continues to be a good news story, up 116 basis points versus the first half last year. This is due to strong operating efficiencies, particularly from our frame and truss businesses and the product mix. On the right-hand side there, supply chain pressures have mostly eased in Q2, and particularly from Asia. Our slow data will cover from Eastern Europe, but we expect some further improvements in the next 6-12 months.
Given the potential risks, we've had a very strong focus on debt management, with a restructured team delivering improvements in debtor days, which has been a good result. The acquisition strategy will continue. An area that I believe our business has done really well over the years and is a competitive advantage. FA Mitchell came on board, Epping Timber was completed in the first half, are both performing very well. Our costs have been managed very well, broadly in line with sales, cost broadly in line with sales and have been predominantly variable in nature. If we go to the next slide, titled Five Divisional Performance.
The Construction Division struck strong performance from the Construction Division up 20.9% in revenue, or 12.8% like for like. As I mentioned before, this was led by the Building Trade Centres, up 31.7% with a strong order book well into FY24. The formwork and commercial was also up, but impacted by some delays with a very strong pipeline of commercial and multi-res work, which we expect to grow strongly in the next 12 months. Margins are up, as I mentioned before, on operating efficiencies, particularly from the frame and truss sites and the product mix. The Panels revenue was up 17.6% or up 5.9% organic growth.
A strong performance from most sites and from our acquisitions. This was offset marginally by the Grafton result as the consolidation project was delayed and the softening of the New Zealand market. Just one thing to point out maybe, you know, on bottom in terms of EBITDA margin across both of those divisions continued strong EBITDA margins, and our diversity delivering, you know, strong EBITDA margins across the entire business. I'll pass it on to John Lorente.
Thanks John. Good morning, everybody. Just starting off on the profit and loss, page six. As mentioned previously, our revenue grew just under 20% year-over-year, driven by that strong organic growth and the additional acquisitions that positively impacted the period. Our gross profit result was AUD 64.3 million, which was a 25% improvement on the prior period. This result was driven by, one, improved manufacturing efficiencies achieved at our frame and truss facilities in South Australia and Victoria. This, coupled with the benefits from pricing and some higher margin imported products, helped us deliver that 116 basis point improvements in our gross margin numbers. With a continued focus on strong cost controls, we saw our operating expenses, that's our cost of doing business, increase by 21%, which is broadly in line with our sales growth.
Overall and very pleasingly, we achieved our highest ever half-year EBITDA result of AUD 28.2 million, a 31% increase on the prior comparative period. Our overall finance costs were in line with the additional borrowing we took on to fund the acquisitions and of course reflecting the higher interest rate environment that's currently in play. The resulting NPAT number was AUD 12.8 million, an increase of 46% on the prior comparative period. I'll just point out in the presentation that includes in the appendices our half-year results over the last four years, should you wish to look at those. Looking next at the profit waterfall. This waterfall chart just gives a further breakdown of where that increase in EBITDA has come from.
You'll see that organic revenue growth from our existing branches was 10.8%, and that contributed AUD 5.5 million of the additional EBITDA. A margin expansion that I talked about earlier around manufacturing and product mix and pricing benefits contributed AUD 2.5 million additional EBITDA. The acquisitions, Epping, FA Mitchell and then Revolution United from the previous period contributed AUD 2.5 million to the first half results. Increased operating expenses amounted to AUD 3.8 million, which gave an overall operating EBITDA result of AUD 28.2 million, which is up 31%. Looking next at the balance sheet. Again, very pleasing to report that we've maintained a very strong balance sheet, which really underpins the growth and acquisition strategy that we have in place.
Our inventory levels grew in the period of AUD 7.7 million. We believe these were sensibly contained in light of the increased revenue. As John mentioned earlier, we've seen a big improvement in our supply chain and believe most of the sort of major supply routes are operating near to normal now. We also continue to maintain a strong disciplined focus on our debtor management. We see no material change in distressed customers, but we continue to manage that risk effectively through a combination of trade insurance policies we have in place and then increased provisioning we have in place on our debtors as well. The additional debt drawn down of AUD 5 million was for the Epping Timber acquisition, which closed in December.
Finally on this slide, just demonstrating the strong return we have got from our recent acquisitions. It is very satisfying to report that the contingent considerations paid in the period were at the cap amount in all instances. Looking next at capital management. Our net debt increased from AUD 21.2 million - AUD 29.1 million, primarily reflecting the cash paid for those new acquisitions and the cap consideration payments I just mentioned. In terms of our key metrics, which Jim alluded to on the first slide, the gearing ratio at 19.7% is within our historic ranges and lower than the prior comparative period.
The total working capital as a percentage of revenue remains a focus as always, again, pleasing to see this average 17.7 to the half despite that additional inventory and the first-year working capital requirements for our two new acquisitions. Also satisfying to note, we have agreed AUD 16 million of additional facilities with our main bankers, NAB, that leaves us well positioned to fund new acquisitions in the future. Finally on this page, confirming our interim dividend of AUD 0.086 fully frank has been determined in respect of the first half 2023, that is payable on the 29th of March. This is a 56.4% increase on a year ago, which delivers a balanced payout ratio of 55%. Moving to the cash flow.
Our cash flow, cash flow conversion, which came in at 74%, which was slightly ahead of the prior period. This is particularly pleasing given the growth in inventory and the first year working capital requirements for the new acquisitions. Our working capital net of those acquisitions grew by 8.1%, which compares favorably to the organic revenue growth of 10.8%. We received proceeds of $2.7 million for the Wagga facility. They were received in the first half, which offset against CapEx of $1.6 million on this chart. I've mentioned the additional $5 million drawn for Epping. Closing out, confirming the $8.1 million dividend paid in the first half also just the higher tax payments as we settled our FY22 tax liabilities. I'll now pass back to John, who will take us through the outlook.
Great. Thank you, John. We'll go to our slide 13 that's labeled, page 11, outlook. We still have a very strong residential builder order book, and project pipeline, and they're expected to continue into FY24. The civil market is very strong and the pipeline there's continuing as well. The alterations and addition market is starting to see some softness, but this is being offset by very strong commercial and multi-residential pipeline. This is across all states. Project delays, due to labor constraints, and weather. We've seen that across the market. Commercial jobs in particular have been delayed, across the East Coast, due to the weather events, and they're expected to be delivered later this year.
The residential pipeline, builders managing jobs, several jobs on the go and trying to reduce how many they're managing at each time. One of the lines I'd heard was that a builder used to take 200 days to build a house and now it's 300 days. That's extending delivery of projects. Multi-res projects, as I mentioned, will be extended well into FY24. Our view is that this will be buoyed by migration returning back to pre-pandemic levels. We fundamentally don't have enough housing in Australia, at some point, this needs to continue to grow, or the construction needs to continue to grow. Our costs have stabilized.
Decreases from overseas have been offset by some of the local increases, but far fewer than we had previously. We don't see any significant change in our cost base moving forward. If we go to page 12, outlook strategy and financial. I'll just start on the strategy as the new CEO and had this question from a few. We're maintaining the current strategy. I've been part, as Jim mentioned, I've been part of developing it over the years and delivering it. It's the right direction for our business. We'll continue with the key strategy with the two divisions focused on our customer and market segments. Acquisition strategy and organic growth and our diversity geographically, supply chain, and supply chain is our competitive advantage.
That will continue. On the acquisitions, we have a very strong pipeline across both Panels and Construction, and we are in a position to deliver further acquisition within the next six months. The graph and consolidation project that we've been talking about the last couple of years is almost complete. It has been delayed, and that, as we mentioned earlier, has impacted our results in the Panels Division. We should see synergy starting to be delivered later this year. We lost a week in December due to we lost a week or the week was delayed with builders basically going on leave early and in January, they started back late. January, pleasingly, was still above last year despite this.
Then we saw the run rate improve late in January and then into February, we expect that's gonna continue. The outlook is pretty strong. We expect to be in line with the second half 2023 consensus forecast of the new acquisitions contribution. That's the end of the presentation. Pass it back to you, Sari, for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Rushil Paiva from Ord Minnett. Please go ahead.
Good morning, gentlemen. Thanks for taking my questions. Jim, congratulations on your tenure with Big River. You've certainly done a great job. If you don't mind, I'll just start with just talking about the outlook. John, you just commented there that late January and February had a strong run rate. The result itself, you know, at least for me, did surpass my expectations. When you comment that the second half you expect to be in line with consensus forecast, do you expect a slowdown relative to the first half?
Yeah. more than likely, a slight slowdown for the second half. Yes. yeah, but in line with those consensus forecasts, yes.
Okay, great. Thank you for that. You mentioned in the first half that organic growth was 10.8%. I'm just wondering if you can provide a little breakdown between price and volume growth across the businesses, if possible.
The margin growth, Rushil, was primarily came from those manufacturing efficiencies in the frame and truss.
That was about, what, 50%-60% of that? Then we estimated the price and mix was sort of mixed about 20 each.
Okay. Great. Thank you for that. No, that's great. Just two more if you don't mind. The construction products division was quite strong, I'm just wondering if you can provide a little breakdown between Building Trade Centres and formwork in terms of the EBITDA performance in particular.
As we mentioned, on the revenue side it was 31.7, for Building Trade Centres and around 6%, for the formwork. We'll have to just grab the numbers for you on that. On top of that, Rashil, we'll come back to you afterwards with that breakdown. Yeah. Certainly the frame and truss points, Jim here at Shield, they've got the four sites there. The fourth one only came in December, but certainly there was really strong profit growth, as John mentioned, in terms of those improved efficiencies from the frame and truss site. That was certainly a significant part of the profit growth out of the Construction Division, which as you saw was very healthy.
The formwork commercial sites performed well, so they certainly didn't go backwards. Probably the strongest driver of that overall growth in construction came out of the Building Trade Centres, Rushil, and the frame and truss plants were a significant part of that.
Great. No, that message is fine. Sorry, if I could just circle back just to that first question regarding the guidance and the small slowdown in the second half. Where are you seeing that? Would that be Building Trade Centres just given its higher residential exposure or where do you expect the, I guess, the more material impact to be?
Yeah. Rushil, as I mentioned, Our views of Building Trade Centres will continue because we have a very strong pipeline in place and we'll go well into FY24. I think it'll be partly that. I think the other part will be a commercial, so the formwork and commercial is there's several jobs that are ready to come out of the ground. Both those areas and the Panels still performing well. Hopefully we can get some of those to the GC out of the Grafton site.
Sure. That's great. Thank you. That's all from me.
Thank you.
Thank you. Your next question comes from Matthew Chen who's a Private Investor. Please go ahead.
Morning, gents. It's Matthew Chen from Moelis. Just wanted to ask, I think in the past you kind of called out that your outlook was underpinned by extended pipeline. Can you give us an update on, you know, like construction capacity constraints and how that pipeline's looking in that context? Thanks.
Yeah, look, Jim here, I might partly answer that and John can kind of round in a bit on this, but, you know, as John said, certainly on the, on the housing side, which gets the most press, obviously everyone's been reading about...
Mm.
the slowdown or the apparent slowdown in detached housing. As John said, that's not what we're seeing. The Trade Centres-
Mm.
which are, which is the part of our business most exposed to residential housing, that's actually been the strongest growth part of our business in the last six months. The orders are still solid. What we did see from a couple of the. Just to maybe give you some analogy with some individual builders deferred between 60 and 90 jobs with us in and around Christmas. They, if things were all smooth and there was plenty of trades and the slabs were ready, they would've been taking those products from us to put the frames up. They actually pulled.
Mm.
you know, paused on that because Christmas was approaching. They were short of some trades. That's pushing out that pipeline that John spoke about. In that trade center side, even though that's where people are expecting housing to slow, you know, we still feel very confident about that. That's, and that's a bit around market capacity 'cause some of that extending of our pipeline is about those very factors. It's about access to trades, you know, kind of waiting for slabs to be poured before, you know, obviously frames can go up. You know, just the scheduling of all those trades when things are tight, that has certainly held up some builders. Again, John gave the analogy of 200 versus 300 days as at back of the Newco from one particular customer.
Hence why John keeps saying, you know, we believe that pipeline will extend well into 2024, and that's when we see the commercial and high rise markets particularly improving. Whilst there's great tenders and our contractors have got a busy order book, a lot of those projects are either about to start, have been delayed, or are only just coming out of the ground. It's that part of the business as well that we expect to be strong, you know, across the rest of this year, but also in the next financial year.
Thanks. That's great color. Just to follow up then, in terms of, you know, margin growth, do you see any kind of more opportunities to derive manufacturing efficiencies that you'd called out? What are the kind of opportunities for the price increases? How do you think the market's kind of positioned for that? Thanks.
Look, I don't think they'll be material in terms of growth. We've had three years of substantial growth. I do think through the Grafton consolidation project, we will be gaining some efficiencies there, which will help the margins. I think the diversity across our business and one of the areas where we've grown is that whether we go manufacturing with a local supplier or overseas, we've been able to somewhat pick and choose and get the right mix, and that's improved our profitability. I think that will continue as well.
Thanks for your time and comments. Appreciate the opportunity. Well done on the result. Thanks.
Okay. Thanks, Matthew.
Thank you. Once again, if you wish to ask a question, please press star one. We'll pause for just a short moment to allow for questions to register. There are no further questions at this time. I'll now hand back to Mr. Bindon for closing remarks.
All right. Thanks, guys. We certainly appreciate 30 minutes of your time in a busy day, hey. Look, I think the business has performed well. We really appreciate your support as investors. As I move on to something else, I'll be cheering from the sidelines as a significant investor still in Big River and look forward to the two Johns and their team continuing the growth that you've seen in this outlook. Thanks very much guys for joining, and have a nice day. Thanks, everyone.
That does conclude our conference for today. Thank Thank you for participating. You may now disconnect.