Well, thanks very much and good morning, everyone. My name's Grant Fenn. I'm the Chief Executive Officer of Downer. With me is Michael Ferguson. He's our Chief Financial Officer. I'll begin with an overview of our FY 2021 half-year results. Michael will go through the financials in a bit more detail. We'll then open up the call for your questions. These results for the six months to 31 December 2020 are very pleasing, particularly under the circumstances in which they've been delivered. I believe they're a great testament to the dedication and agility of our staff and our customers too. Well done. Thank you to all of those people for an amazing effort.
Despite most parts of the group being affected by COVID-19 restrictions and their impact, the essential nature of what we do means demand for almost all of our services has remained strong and resulted in a very resilient performance. Our concentration on critical urban services is proving to be the right strategy. Underlying NPATA was AUD 119 million, up 3.1% when compared with the prior corresponding half.
Underlying EBITA increased by 2.9% to AUD 221 million, and the group's EBITA margin lifted half a percentage point to 3.6%. Work in hand for our core urban services remains at a very healthy AUD 36.2 billion. Our cash flow performance was good. If we adjust for AUD 60 million of cash outflows from individually significant items recognized last year, our cash conversion was 97%, and it was still 84% without that adjustment. With that performance, the group's gearing reduced from 35.5% - 28.2%.
We've made good progress on our key initiatives. We've moved to 100% ownership of Spotless and are on track to deliver over this calendar year the AUD 10 million-AUD 15 million in synergies promised at the time. We completed the refinancing of the group's debt platform with an AUD 1.4 billion syndicated sustainability-linked loan. That's the largest of that type of loan in Australia. We've made significant progress exiting non-core businesses with around AUD 526 million in proceeds. The sales of Open Cut West, Snowden, and RTL have already been completed, and we expect Laundries Blasting and underground to complete by the end of March. We also have strong interest from buyers in Otraco, that's our tire management business, and our Open Cut East mining business, with sale processes currently in train.
Very importantly, we've resumed paying dividends, as we said we would. The strong performance of the business has allowed the Downer board to declare an interim dividend of AUD 0.09 per share, which is a 54% payout ratio on underlying earnings. Slide three provides an overview of the numbers for the six months. I won't go through those in detail. Michael will go through more of the financials in detail later. We'll now take a look at each of the urban services business, starting with transport. The transport services line includes road services, rolling stock services, and projects across Australia and New Zealand. Earnings were up in roads again.
This is a great business. It keeps powering on in both Australia and New Zealand. It's growing its footprint in its traditional markets, also in recycling and waste management. Earnings were lower in rolling stock due to reduced project profit recognition of AUD 16.2 million from lower Waratah bogie overhaul costs in the period, and just under AUD 9 million from reduced patronage on Melbourne trams due to COVID-19. Now, unfortunately, project accounting, which recognizes profit over the project in line with the cost profile, doesn't deal particularly well with lumpy cost programs like bogie overhauls. You recognize more profit when costs are high and lower profit when costs are low, despite the opposite impact on cash. In late December, we delivered into service the first of the High Capacity Metro Trains in Melbourne. As of Monday just gone, we're now at three. They're performing well.
This is a significant milestone, and we've now begun through-life support for the fleet, which will last at least 30 years. This new generation train is the future for the network in Melbourne, and if it performs as we expect, we look forward to more sets being ordered as the state looks to replace the current outdated fleet. The projects business has also performed well during the period, with Parramatta Light Rail coming along nicely, along with the TAP program of station upgrades and our extensive urban project work in Auckland. The business is concentrating on a higher proportion of alliance-style contracts that are currently in the market, reducing risk and improving outcomes.
The transport service line had a work in hand of AUD 16.8 billion at 31 December 2020. We expect demand for our services to stay strong as governments continue to invest in roads, rail, and the broader transport sector. We'll now move on to utilities. That includes our telecommunications, water, power, and gas businesses across Australia and New Zealand. You can see from the slide that EBITA for utilities increased when compared with the second half of the 2020 financial year, from AUD 51.6 million to AUD 54.1 million. The EBITDA margin also improved from 4.1% - 5.3%. The fall in revenue during the period is due to the roll-off of NBN and UFB construction work. Given that drop-off in NBN construction work in particular, we're very pleased with the result.
We're successfully rebuilding our telecommunications contract book with additional construction and maintenance work with NBN and Telstra in Australia and Chorus, Vodafone, and Spark in New Zealand. We're growing our water businesses in both Australia and New Zealand with increased panel participation and term maintenance contracts. In power and gas, we're seeing the benefits of expanded scope with AusNet and Powerco in New Zealand and with others. Utilities had work in hand of AUD 5.2 billion at 31 December 2020, and we expect demand for our utility services again to remain strong. Facilities includes the services we provide to health, education, defense, and other government sectors. It also includes the Hawkins business in New Zealand. The result was up 11% on the prior half with improved margins, which were pleasing.
As expected, revenue in the core facilities business was down against PCP as we've reduced our exposure to construction to focus on industrial FM and technical service opportunities. Despite the drop-off in revenue, the business performed well, and it has turned the corner. We've made great progress in addressing the various contract issues that have plagued the business to the point where we're very confident moving forward. We are winning new business with quality service and innovation, and this should now be a stable and growing business. The facilities business had work in hand of a little under AUD 13 billion at 31 December 2020. To our asset services business. This business has been impacted during the period by three significant factors. Low oil and gas prices, leading to the deferral of non-essential maintenance and capital works in the LNG and coal seam gas sectors.
The deferral of non-essential maintenance and capital works in coal power generation, COVID-19 restricting the movement of skilled resources across state borders to support maintenance and capital works, particularly in the resources sector. Well, you can see that revenue, EBITDA, and margin all improved from the performance in the second half of the 2020 financial year. Revenue increased from AUD 261 million - AUD 267.5 million, EBITDA from AUD 4.7 million - AUD 11.6 million, and EBITDA margin from 1.8% - 4.3%. While the deferrals have lasted longer than we originally expected, this work will need to be done, and we expect significantly increased demand for our services in the 2022 financial year. Asset services has work in hand of AUD 1.5 billion at the end of December. Now, most of you are familiar with this slide, which we introduced into our investor presentations around 18 months ago.
It looks to show how we're managing the business to drive shareholder value, and it's been updated to reflect recent developments. Our proposition is this: If we generate reliable earnings growth into the future while deploying our capital efficiently, and we do these two things in a way that supports our people and our communities, then we'll drive superior shareholder value. Our urban services strategy ensures that we're aligned to critical service markets while serving quality customers. More than 88% of our revenue now comes from government and regulated assets. The markets in which we operate are benefiting from government investment. Our decision to exit our mining and laundries businesses is driven by our strategy to focus on low capital, service-oriented businesses, and we'll continue to examine acquisitions that will enhance our offering. We've returned to a strong operating cash position with a high level of cash conversion.
We expect this to continue into the future as our business is increasingly predictable, and we know our government and blue-chip customers pay us on time. Our strengthened balance sheet and Fitch BBB stable rating mean we're well-placed to consider capital management initiatives. We have a strong zero harm culture at Downer, and we're a sustainability leader in our sector. We invest in our people and our communities, and we are seen as an employer of choice. The combination of these things will drive growth in earnings and dividends per share. Downer has always been a company interested in how its operations impact the world. We are a good employer, and we care about our communities and the environment. The relatively recent investment focus on sustainability has never been a stretch for Downer, and we've got very good things to talk about in this area.
First, a number of months ago, we committed to a 45%-50% reduction in Scope 1 and 2 emissions by 2035 and net zero emissions by 2050. By exiting mining and laundries, we'll reduce our Scope 1 and 2 emissions by 206,000 tonnes or 35%. We've recently completed the finance of the Downer and Spotless debt, as I said, through a AUD 1.4 billion syndicated sustainability-linked loan. If we hit our targets, our interest costs will reduce. As I said previously, the largest sustainability loan completed in Australia thus far. We've been ranked at the 82nd percentile in the Dow Jones Sustainability Index, and that's up from 62 in 2019, and we improved across all three categories and are seen as a real mover in this area. Our employee engagement scores are up four points, and our safety culture and mental health and wellbeing programs are industry-leading.
I'm pleased to say our first modern slavery statement was released yesterday. We've achieved a lot in the first half of 2021 financial year, and we have a clear set of priorities going forward. We'll continue to execute our strategy of divesting non-core businesses, completing those sales already announced, and the two remaining businesses, Open Cut East and Otraco. We'll set our optimal capital structure to between two and two and a half times net debt to EBITDA to ensure we retain our BBB rating, and we'll look to return capital to shareholders following completion of the asset sales. We'll meet our 2021 earnings and cash targets, returning to high cash conversion and dividends with reliability and predictability. We'll continue to refine our portfolio, corporate structure, and property footprint, ensuring that we reduce overheads to match our new earnings profile.
At the same time, we must invest in capability and resilience across the business to manage risk and volatility. This includes increased investment in cloud technology, cybersecurity, and business continuity. The Downer Standard is already playing an important role in driving consistent performance and quality across the business through common processes, single quality certification and IP capture, and will continue its rollout and adoption. We'll focus our attention to growth, mostly organic, but also acquisitive in strategic core markets where we see it appropriate. I'll now hand over to Michael and he'll take you through the numbers in more detail, and I'll come back later. Thanks, Michael.
Thanks, Grant. Good morning, everyone. I'll pick up from slide 17. On a consolidated basis, the group reported total revenue of AUD 6.1 billion for the six months to 31 December 2020, 10.6% lower than the prior corresponding period. Transport revenue was 13% higher, driven by a strong performance from our roads and projects business, while utilities, facilities, and asset services all delivered lower revenue. Depreciation and amortization was 8.9% higher at AUD 233.5 million, primarily due to increased right of use leased asset amortization, reflecting the group's increased use of operating leases during the mining divestment process. Underlying EBITA rose 2.9% to AUD 221 million, and EBITA lifted 0.5 percentage points to 3.6%. The effective tax rate of 29.5% remains slightly below the Australian statutory rate of 30% due to non-taxable distributions from joint ventures at a lower corporate tax rate in New Zealand.
Net interest expenses reduced 3% due to lower average debt levels during the period, combined with some small savings from the refinance completed on the 3rd of December. Downer delivered an underlying NPATA of AUD 119 million, which is 3.1% higher than the prior corresponding period. As Grant mentioned earlier, we are pleased that the earnings and cash performance supports the resumption of ordinary dividends with the Downer board declaring an unfranked interim dividend of AUD 0.09 per share. Slide 18 lists the four items that reconcile Downer's statutory result with the underlying result. The first item relates to the non-cash fair value movement on the Downer contingent share obligation liability arising from the options issued as part of the Spotless minority acquisition.
These options, AUD 7.5 million in total with a four-year vesting period, were granted as part of the acquisition of the remaining 12.2% interest in Spotless, with AUD 2.5 million options each vesting when the Downer share price reaches AUD 6.38, AUD 6.87, and AUD 7.36. Whilst in essence an equity issue, the fair value of these options are required to be recognized as a financial liability at issue date, with the future movements being mark to market through earnings. This is consistent with the accounting treatment outlined in Downer's takeover booklet. The initial liability was recognized as AUD 16.7 million, with an average option price at the time of issue of AUD 2.23. As Downer's share price has risen from AUD 4.30 at the time of issue to AUD 5.33 at 31 December, the fair value has increased by an average of AUD 1.86 per option.
This has resulted in a non-cash mark to market charge of AUD 14 million being recognized in the half. The second item relates to the non-cash write-off of deferred financing costs relating to the termination of Spotless' standalone financing arrangements as a result of the recent refinancing. The third item relates to the transaction costs and stamp duty incurred on the divestment of Laundries. The final item relates to costs and net asset write-downs on the divestment of Open Cut West, offset by the gains on sale for Snowden and RTL. This does not include the expected gain on the sale of DBS of circa AUD 5 million, which will be recognized at the expected completion date of 1 March. I will now move on to operating cash flow on slide 19. I'm very pleased to report an underlying cash conversion of 97.4% and a statutory conversion of 84.1%.
Cash performance was good across the portfolio and reflects the increasing shift to a higher proportion of service-based revenues with stable recurring cash flows. As we flagged during the July capital raising, first half 2021 has seen the cash outflow of some of the items as flagged as uses of the equity proceeds. During the period, we incurred a cash outflows of AUD 60.3 million in relation to portfolio restructure and exit costs, payroll remediation costs, and the settlement of the Spotless shareholder class action. Receivables factoring at 31 December 2020 was AUD 104.7 million, down from AUD 113.7 million at 31 December 2019. Turning to overall cash flow on slide 20. Net capital expenditure for the core urban services business was relatively stable at AUD 66.6 million. This relates predominantly to roads in Australia and New Zealand. Non-core capital expenditure reduced by 60% to AUD 40.8 million.
Part of this reduction is offset by the increase in the payment of principal lease liabilities for the mining business, as we reduced mining capital deployed and opted for more flexible leasing during the divestment process. Other items of note in the investing and financing cash flows include the funding of the cash component of the Spotless minority acquisition of AUD 134.5 million, continued investment in IT systems and security of AUD 17.4 million.
Net proceeds after loan repayments from the Snowden and RTL divestments of AUD 17 million, and Downer's equity injection to Keolis Downer to support the mobilization of the operating Adelaide passenger rail network contract of AUD 9.8 million. Downer also paid the deferred 2020 interim dividend during the period, totaling AUD 83.3 million. Cash held at 31 December was AUD 550.4 million, which when combined with undrawn facilities of AUD 1.3 billion, provides us with significant liquidity of just under AUD 1.9 billion.
Turning to slide 21. The Downer Group balance sheet has strengthened. The equity raising and strong cash performance has enabled significant improvement in both the gearing metric, which reduced by 7.3% - 28.2%, and net debt to EBITDA on a post-AASB 16 basis, which reduced from 2.6 x - 2.1 x. Again, it was very pleasing that the business was able to de-lever from strong cash performance and reduce capital spend in addition to the equity raising. Inclusive of the payment of the AUD 83.3 million deferred dividend during the period. The balance sheet will further strengthen following the receipt of the proceeds from the divestments announced during the period, and I will cover this in a later slide. Downer continues to be rated BBB stable by Fitch Ratings. Our new debt profile is set out on slide 22.
In December 2020, as Grant said, we successfully completed the refinancing of the group's debt platform with the establishment of a new AUD 1.4 billion syndicated sustainability linked loan. The new facility comprises three, four, five, and six-year tranches and was structured to enhance the debt maturity profile, extend overall debt duration, and reduce interest costs following the full acquisition of Spotless. Facility is underpinned by KPI metrics relating to Downer's greenhouse gas emissions reductions and social sustainability, which involves cultural awareness and mental health and wellbeing training for Downer employees. As these KPIs are met, our borrowing costs will be further reduced. Following the refinancing, Downer's weighted average debt maturity has extended from 3.4 years at 30 June 2020 to 4.1 years, with no current maturities within the next 12 months.
With the diversity of our debt platform architecture, we retain flexibility to repay revolving debt as the divestment program progresses and proceeds are received. On slide 23, we provide a pro forma overview of the impact of the divestments to date on our key metrics. As I mentioned earlier, gearing at 31 December 2020 was 28.2%. Adjusting for proceeds from announced divestments to be received in the second half of the year, totaling AUD 510 million, the pro forma gearing falls to 18.3%. As Grant indicated, Downer considers its optimal net debt to EBITDA ratio on a post-AASB 16 basis to be between 2x and 2.5 x following the recent reshaping of the portfolio. At 31 December, we are comfortably within this range at 2.1 x, and after considering the pro forma impact of the current divestments, net debt to EBITDA further reduces to 1.8 x.
The assumptions of these calculations are provided in the supplementary information section of this presentation. As these transactions reach financial close and proceeds are received, Downer will consider the most appropriate use of these proceeds. This could include further capital returns and growth in our core markets, with these considerations always predicated on the maintenance of our investment-grade credit rating. Finally from me, slide 24 provides an update on the individual divestments, including their FY 2020 revenue contribution, proceeds, and the estimated timing of completion. Total proceeds attached to the transactions announced in the reporting period amount to AUD 526 million, with the majority of this, AUD 510 million, to be collected in the second half of FY 2021 when the transaction's complete.
As you saw in the cash flow, the sale of Snowden and our share of the RTL joint venture completed in the reporting period with Open Cut West recently completing on 1 February. We have completed all the necessary conditions precedent for the sale of Downer Blasting Services. This is scheduled to complete on 1 March. We are progressing well with the necessary consents and novations for Laundries. We expect this to complete by the end of March 2021. We remain in discussions with a number of interested parties in relation to the sale of the other two businesses within the mining portfolio, Open Cut East, which is now only four operating contracts, and the Otraco Tyre Management business. Thanks very much. I'll now hand back to Grant.
Thanks, Michael. Now to the key messages. I think this result is a good one. We've made good progress consistent with the promises we made when we raised equity last July. As we stated then, this business has a bright future. Our urban services businesses have proven their resilience with solid earnings and work in hand. Transport, utilities, and facilities end markets are enjoying tailwinds from increased government expenditure. The scale, leading capabilities, and fit for purpose capital light business model means Downer is well-placed to secure a growing share of this pipeline. Our brand and relationships are strong. Our confidence for the future is reinforced by stable underlying financial performance and greater than 80% cash conversion. We see opportunities to drive margin improvement through technology, simplified structures, operational synergies from complementary businesses, and improved contract performance.
We're committed to consistent and reliable delivery into the future with no surprises. We plan to grow. Evaluating opportunities to invest in our existing businesses, including acquisitions with a disciplined focus on urban services. Now I'll hand back to the coordinator for questions. Thanks.
Your first question comes from Alex Karpos from Goldman Sachs. Please go ahead, Alex.
Good morning, team. Can you hear me?
Yeah, we can.
Perfect. Just a couple on my end. First one, really want to focus in on capital return. You talked about the proceeds from the sales. You talked about potentially regearing the balance sheet post these capital-intensive businesses leaving. Can you just confirm, one, how you think about the dividend payout ratio and other alternative means of return and timing here as well?
Yeah, sure. We've been on record over the last number of months talking about as we move the business to the urban services lower capital model, that we would like to also increase the payout ratio. As we get that in place, we would like to see that payout ratio move to somewhere between 60% and 70%. You'll see the payout ratio of this particular dividend is at 54%, over time, we're looking to move to that level. Dividend's important to us. At the same time, we took money off shareholders back in July and that was really as a result of our sales of our businesses taking longer than we'd expected, overlapped with COVID-19. We're now starting to get those sales underway, it's very clear what we said that what we would do should those sales be done.
As we look at the timing, a number of those will complete, as Michael was stating, March. We've still got a couple of larger ones to do, being Open Cut East, and Otraco. It's unlikely that we would see proceeds of that coming this financial year. Certainly, we'd be looking to for the next financial year. We'll be thinking about this as we're rolling through to the full year.
Got it. One more on my end, just on margins. How should we think about the run rate here going forward? In two business in particular, for facilities management, we showed a nice gain year-over-year, and transport where there are some headwinds year-over-year. How should we think about the true run rate for both of those businesses into the second half in FY 2022?
Yeah. Transport, I tried to just highlight a couple of very specific things there, which certainly one of them won't repeat there. We had a particular issue, well, not issue, but a profit recognition where the bogey overhaul was completed and we don't have as much cost going through that. We would see in transport that those margins, our historic margins would return. In Facilities, yeah, it's good to see that margins are up and I think, again, we'd like to see margins slowly progress and improve from where they are.
Thanks. That's it for me.
Thank you. Your next question comes from Rohan Sundram from MST Financial. Please go ahead.
Morning, Grant and Michael. Thanks for your time. I'll start with Grant. You mentioned your confidence in hitting full-year internal targets. Can I ask, are you able to share what portion of budgeted revenue is currently locked in at this point?
No, that's not something that we'll talk about here. We're looking at this and we're saying, well, the first half performance is as we expected. In terms of positioning with first half, second, it's not that out of the ordinary from what we're looking at. The real trick here is exactly when are the sales going to complete. What contribution is that going to be in for the full year? It's a bit tricky, which is one of the reasons why we're not coming out with guidance particularly. I would advise you to go back and think about this if the businesses hadn't been sold, and you're looking at full contributions for the period, then I'll be saying there's not too much different in first half, second half splits than what we would normally expect.
It's a question about when these businesses that we're selling are actually complete.
Thanks. That's helpful. To follow up on the construction book and EPC, this time last year, there was a disclosure of around an AUD 5 billion work in hand, of which AUD 2.1 billion was EPC schedule of rates, design, and construct. In the absence of any disclosure, are you able to just provide a ballpark of just how much that has actually come off now that you've completed a number of these projects?
Yeah, look, it's come off, but there's also a lot of focus now on alliance style contracts, and we're seeing a lot more of those in the market. I don't have the number exact with me. Perhaps we can talk to Michael later about that.
Yeah, that's okay. Happy to take that offline.
Sorry, just the point that's interesting here is that we're seeing a lot more collaborative efforts from customers in Australia than what we have in the past. State governments are being much more collaborative in the way that they're contracting, which is helping us because we've been very clear that the risk management of this is key to us. It's allowing us to participate where perhaps we wouldn't.
Okay. Is it fair to say then if alliance style and collaborative was, say, 60% of the book 12 months ago, is it a lot higher now?
It would be higher, yes, absolutely. Possibly to go higher again if we're successful in those alliance contracts that are available out there.
Okay, thank you. One last one for Michael. I take on board your commentary around, or just the general commentary around cash conversion and cash flow. Do you expect second half cash conversion to be similar? Is second half, is that typically a seasonally better conversion half, or does that no longer apply?
No, we think it'll continue to be strong. We're strong across the portfolio for the first half. We saw a little bit of continued unwind in utilities of NBN that we talked about previously, Rohan. Historically, it's not always been stronger in the second half, but we've got a pretty good visibility of it now based off the portfolio and where we are, and we've got certainly less lockup with construction. Yeah, we see it continuing through to the second half.
All right. Thanks, guys. That's helpful.
Thank you. Your next question comes from Scott Ryall from Rimor Equity Research. Please go ahead, Scott.
Thank you. I was wondering, the slide 24 was very helpful in terms of giving us a few splits on some of the assets you've sold already. If my calculations are correct, out of the mining related businesses, that represents around about 53% of revenue from fiscal 2020. Would that be ballpark? I mean, nearest 10%, is that in the order of magnitude of the EBITA contribution as well?
Yes.
I guess what I'm really getting at is, do we expect something, given your full half mining EBITA, then that's something ballpark the total proceeds there would be what you'd expect for the second half of it?
Yeah, it's about ballpark. It dropped off a little bit in 2021. You just saw the earnings drop off 2020 to 2021. Yeah, ballpark, as you said, that's about right.
Okay. Thank you. In terms of your emissions strategy, Grant, you mentioned the targets that you'd set, which is good. I think more companies are going to set near-term targets. You mentioned as you sell Laundries and mining, you're going to be down 35%.
Can you just explain to me your strategy in terms of your organic or your core businesses, what your strategy is to reduce greenhouse gas emissions over that time? Do you only need 10% and you hit your target? Is that a big tick in the box?
Yeah, well, look, in an absolute sense, we've just given you the numbers there. No, we continue to work on this, and we have done for a number of years. We've got strategies here. When you put a net zero emissions target out there by 2050, of course, in all cases, in every situation, for every company and government in the world, you're also relying on technology to improve, which you don't quite have a full feel of yet. That's got to be understood. We have had strategies in here around our use of energy for a number of years, and they've increased in the last few. We have our bonus scheme focused in on this area for our senior management. Our fleets historically, we've looked to use different fuels, what we do with our energy in the particular facilities we run, et cetera.
We've put, for argument's sake or for example, we've put tracking devices and data gathering into our fleet of vehicles to see what we can do to reduce the use of fuels. We're looking at electric cars. There's a full suite of things which, I guess if you want to, you can look through the sustainability report that we have. It's pretty extensive. At the end of it, all of that still as yet doesn't add up to net zero and we will require technology to come in, whether that be further use of renewables ourselves or hydrogen on vehicles, we will see.
Okay, great. My last question was around some of the comments you made, particularly relevant to your transport business and use of recycled materials.
We've seen a bit of action from the federal government in terms of their procurement strategies. Most of your revenue, as you said, historically, comes from state and municipal government. Have you noticed any major changes in procurement strategies from those counterparties that go towards your suite of products that you guys produce and probably a competitive advantage, I suspect?
Yeah. Well, look, the short answer there is yes, we have. You're right, most of the work that we do in that particular space is state and local government. Look, we've certainly seen moves, particularly in local government. The fact that we have a very or capable of having a very high level of recycled product into our various road mixes has meant that local government has been very attracted to that. Yes, that's giving us some competitive advantage, I believe it is. That's across the country, but that's in Queensland, New South Wales, Victoria. We've also seen increased interest from state governments. Of course, you're always battling with change here around technical standards and the like. We're at pains to demonstrate the technical capability of these particular pavements. It does take time for markets to change, engineering to change, but it is happening, right?
We are seeing it, and at the local government and the state governments, they're very interested in these products. This is core business for us. The R&D that we put into this is substantial. It's the main game for us. We're not looking to sell product, input products into what we do on the road space. This is pretty important to us and we're going to continue to invest. We've got Repurpose It in Melbourne. I think that's a clear indication that we are looking at this particular space, and we will invest in it, as I've said in the presentation.
All right. Great. Thank you. That's all I had.
Thank you. Your next question comes from Nathan Reilly from UBS. Please go ahead, Nathan.
Good morning. First question, just around the go-forward CapEx for the core urban services business. Just give us a bit of a guidance on that. We're sort of thinking it's going to be around that sort of AUD 150 million per annum going forward normalized?
Yeah, we think so. Nathan, that's about depreciation and there's a little bit of growth in the first half number for land that we've bought that'll sort of take a while to commission and bring into earnings. Yeah, about AUD 150 is about right.
Perfect. The EC&M business that's being wound down, has that been fully wound down as yet?
It's got residual work that's on, but as you can see, it's sort of washing its face and there's not much there. EC&M wasn't the only part of the business where we were reducing our construction exposure as well. In Spotless, they also had a lot of construction there. We've been reducing the level of construction in that and pushing through to more technically based maintenance.
Okay. Just with respect to the cost base or overhead right-sizing strategy you mentioned, is it too early to share any targets on that or any sort of time frames that you might be targeting there, or when you expect to realize some of the benefits from that cost-based strategy realignment?
At the time that we spoke to the market on the raising, we talked on the Spotless side of AUD 10 million-AUD 15 million and we're well on track to achieve that over the calendar year, right? We've got our plans in place. On the broader side, we said I think somewhere near AUD 15 million-AUD 20 million. Again, we've got our plans in place and some of that's executed, but not all of it. The flip side of this, of course, though, is we are spending more money on security of our IT systems, which I think is a very good investment. We can't get away from that, and I think any sensible management is making sure that stuff's well done.
Got it. Thanks for that. Finally, just with respect to some of the infrastructure stimulus that the state governments have been budgeting and showing allocations of funding towards in the near term, can you give us an update on how any of those prospects might be impacting your tender outlook or your work in hand at this point in time?
I'd just say generally that the opportunity pipeline for our businesses is strong, right? If you're going to have a customer base right now, having a largely government customer base at the state level is a pretty good answer, right? That's what we've got. They're the ones that are spending the money in the community and virtually everything that they announce here will have some level of spin-off to us, either potentially immediately or longer term.
Okay, thanks for that.
Thank you. Your next question comes from John Purtell from Macquarie Group. Please go ahead, John.
Oh, good morning, guys. How are you?
Yeah, good, John. Thanks.
Just had three questions, please. Just in terms of residual COVID impacts in the half, what were the main areas there that still impacted you? Yarra Trams and Laundries comes to mind. How do you see those sort of areas profiling through the second half as we come out of COVID?
Yeah. Well, Yarra Trams is an interesting one. I'm not sure I'm going to predict that. I don't know how quickly will central parts of the city, although in Yarra Trams it's not necessarily just the central part, it's how quickly will people come back into public transport in numbers. I don't have an answer for you. Laundries. Look, that's largely going well, and we're not being disrupted too much. Every now and then, we may have a case of COVID in a laundry. We're getting very good at being able to close it down, quickly clean it, and resume. Our business continuity across the business is quite good, and particularly so in Laundries. Look, we are being impacted on COVID across most of the business in different ways. As you say, Yarra's more extensive, Laundry's less so now, I think. Asset Services. That is impacting us.
Trying to get people across state borders is rather difficult, as you can imagine. Trying to service large industrial customers typically would take all of Australia's skill pool to do it, so it's more difficult. It's affecting the roads business by being more difficult to go across borders. Of course, it's quite volatile. Hospitality, of course, we've not been able to really get back to any sort of earning capacity at our largest venues. It's washing its face, I would say, but we're not making money out of that particular business. We are being impacted and in all cases, productivity is being affected. I'm not sure that calling out every piece of this is going to help us because we've got this for a while now, and we just have to get on with it.
I think the business is showing that it can handle it. The ways of doing business, we've worked out. Our business continuity's been excellent. We'll live with this for a while, and we'll build from where we are. I think we're looking forward to, just in Asset Services, an improved position in 2022. We think the deferrals, et cetera, you can't defer these things forever. Some of these businesses and maintenance that's been backlogged, et cetera, will need to happen. The further we get down the track here, the more that that will come back in play.
Thanks, Grant. Just the second question, just picking up on Nathan's question in relation to government stimulus, and obviously there's been a lot of focus on that area. We've seen a delay in the timing of some larger infrastructure awards. Obviously, you're more focused on the small to medium end and obviously have the maintenance side. I suppose, is that sort of that small to medium side, you're still seeing a good level of work today? There's been no real sort of delays in terms of how that's played out from a timing point of view?
Look, there has been bits and pieces of delays, but we're starting to see them come through. Frankly, it's not that larger part of our business that is material, John.
Thank you. The last one for Michael. In terms of cash restructuring costs, what you're expecting there for the full year? I think it was AUD 23 million in the half. Will that step up meaningfully in the second half? I note that you did take some large restructuring provisions last year through the P&L.
Yeah. We've called out, John, the AUD 60 that we spent this half. I think we called out about AUD 131 of the AUD 386 of restructuring costs that we booked at 30 June as being cash related. We'll see the balance of that come out. The one we don't know about is the payroll remediation and the timing of the payments of those. Yeah, we expect the majority of it'll close out in the second half. If we think of the AUD 131 that we called out, we'd spent about AUD 30 already through to 30 June. We spent the AUD 60 now, so we're thinking about somewhere between AUD 30 and AUD 50 to tie up the residual balance of the amounts provided. That'll come through the second half, and we'll call it out the same way we've done here.
Got it. Sorry, just one add-on from a comment before. In terms of the bogey overhaul and that sort of accounting, is that sort of a one-time issue there, Grant? Or does it sort of flow through into the second half?
No, it's really every few years. I think we tried to highlight it. We might not have done such a great job, next time it's coming up, we'll let you know.
That essentially has been taken through the first half, so it therefore sort of is back to normal for the second?
Yeah. Well, it depends what you exactly mean. The impact of PCP to this is in the first half and we won't see that in the second. Right? It will rebound somewhat in the second.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Wei-Weng Chen from JP Morgan. Please go ahead.
Hi, guys. Just a couple of questions from me. Firstly, just wanted to ask about the Yarra Trams. Just the AUD 8.8 million impact, does that come back just when ridership returns, or is the government coming to the party and topping you up? My understanding is bus contracts used to have fare box risk, but now that's changed. Just wondering if you had any comments around whether trams may move to a no-fare box risk model.
I've not heard that, but at the moment, yes, there's a commercial arrangement with the Victorian state government. Absolutely. As people come back, I'm sure that'll go back to where it was, which is fine by us, but it's not there at the moment. This is the effect of it.
Yeah. Just to confirm, the AUD 8.8 million is the net effect, including the government sort of top-ups?
That's the net effect of the government support.
That's really the KD position. Most of that's Yarra's, not all of it.
Yeah. Okay, thanks. Secondly, just wanted to circle back on the topic of guidance. Just wondering what the thinking was behind not providing guidance for the second half. You're transitioning to a business where the core is more predictable. You've exited a large part of your non-core earnings. Just would've thought that you would've probably been in a better position to give more guidance rather than less.
Oh, yeah. The fact that we could give it, sure. We certainly could, but we're not going to. We said we weren't going to, and we're not. I think we've given the market enough to sort of work through it. The big issue here is when do these asset sales complete, right? We'll watch closely as to what the market puts out around our view of the full year.
Okay, great. Thanks. Yeah, that was all from me. Thank you.
Thank you. There are no further questions at this time. I will now hand back to Mr. Fenn for any closing remarks.
Well, thank you very much. Thanks very much for spending the time on this, and I look forward to seeing you over the course of the next number of days. Thank you.