Thank you for standing by, and welcome to The Environmental Group Limited half-year 2024 financial results presentation. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question via webcast, please enter it into the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Jason Dixon, CEO. Please go ahead.
Good morning, everyone. Thanks for joining us on the call. This morning I'm actually joined by Paul Gaskett. It was going to be Andrew Bush, our CFO, but unfortunately Andrew's got COVID at the moment, so he's home in bed and not with us today. Paul will help me out wherever possible. I'm very pleased to be giving you the half-year results today. I'll just jump to the key highlights page here. Revenue grew by 14.6% on the prior period to nearly AUD 47 million, whereas EBITDA grew up to 48% to AUD 4.5 million. And you'll see the key driver there was the increasing margins from 7.5% up to 9.7%. Accordingly, we've upgraded our guidance for the full year now to be up approximately 45% as we see a stronger second half.
For our investors, 50% of our revenue is now largely recurring and a lot of service and maintenance work. So we really worked hard on changing that business model to ensure that we have a balance between the selling of OEM product that helps to grow our business, but make sure we get that recurring revenue underlying as well to make the cash flows very strong in the business. And Airtight fully integrated into our systems and processes. That was a large focus over the last six months, but we've achieved that outcome and we can settle down to some good trading now there.
I guess what I'd just like to highlight is that if you look back to the annual report, what we spoke about was driving margin expansion through improving our business practices and valuing the IP that the company had created. And clearly we're a leader in treating gas and vapor from lithium rare earth projects, working with the energy sector to support the gas turbine market and the transition to renewables with our unique silencer technologies that we'll talk about more later that work particularly well in peak and low power generation. And then the gold standard of PFAS separation. We've got the most efficient water tube boilers in Australia and leading the market with the Turmec recycling system. So we've tried to build a company that's best of breed in the areas in which we work.
I think we're starting to get there now. Our model internally is a model of good, better, best. Everything starts off as a good setting, and then we try and improve it incrementally. And I believe you'll see through the margins and the margin expansion that we've achieved that. So it was clearly stated this period wasn't about revenue growth. It was about consolidating all of the work we put in over the past couple of years and getting ourselves to a point where the business was starting to do the best it can do. So accordingly, net profit after tax AUD 2.1 million, up 47%, which is great. If you then look at the balance sheet and how we've positioned that today, AUD 5 million under on working cap facility and net cash on hand of AUD 7.2 million.
So we've got plenty of working capital available to be able to grow the business further from here. So just the key highlights that I'll call out. So revenue growth, you would've seen that coming through from both from Baltec in you know, it's a small proportion, but obviously you had larger growth in the EBITDA contribution into revenue from Airtight for the first full half. And that saw, as I said, the EBITDA are up 47.8%. The contributors there, EGL Energy and Baltec, which I'll talk more about later in detail. But again, at the AGM we spoke about return to normal trading for Tomlinson post the COVID issues and the cost of shipping issues, which returned to normal net margin expansion within Baltec. Operating cash flow, there's an important thing to call out there.
So operating cash flow AUD 2.9 million, prior to the AUD 2.8 million working capital that we funded into Airtight Solutions. So for those of you who remember, the purchase agreement for Airtight, there was, it was net of working capital. There was a working capital peg involved with the price. So any working capital we had to put in came off the headline purchase price. The way the business was handed over to us was sort of working capital pulled out of it. So we put that funding in but reduced the purchase price by that equivalent amount. So net, net no difference. So operating cash flow AUD 2.9 million, quite happy with. Of course, like always, there was a couple of large payments that fell just into the new year. So you'll see improved working cash flow again in the second half.
So just for the operating units, Baltec IES first. So revenue up 4.4%. You can see EBIT up 153%, which is a stunning outcome. Importantly, margin moving from 6% up to nearly 15%. How we've been able to achieve this, it's the recognition within the business of the value of the IP that our engineering team has generated. So we lead the market in the design of silencers suitable for gas turbines running in peaking load. And more and more turbines around the world as we shift to renewables have gone from being baseload production into peaking load, where our turbines are, as said, world-class and leading. And other unique things like the EP their IP for the filtration systems on solar farms. We're able to achieve good margins on those types of products where we've got unique global IP.
Just in Baltec for the first half, commentary, very good, margin expansion of 9% from 6% to 15%, as I mentioned. The focus on the process improvement and procurement have lifted returns. We've worked very hard on procurement and purchasing to make sure we're getting the best price every time. Record sales achieved, which is great to see. Current year to date of AUD 21.9 million. I think last year the business turned over about AUD 20 million. We expect to see a stronger second half in revenue and, of course, stronger earnings along with that. The expectation with the expanded team is we can probably push revenue growth up something in the order of 20%-30% with the team that we've got on hand. If we continue to win more work, we will of course continue to expand that team.
Noise attenuation is a growing industry issue. Again, our technology's proven to be very effective in reducing noise emissions. That's also driving our growth. So the demand right now for our offering is at very, very high levels. It's probably the highest we've seen. We've now seen a pipeline for sales growth out until 2030, which we haven't seen our time here before. So we're planning well ahead and we know what we have to achieve. So our focus will continue to be on margin improvement, product development, and certainly making sure that we get all the value out of our unique IP. And I think you'll expect to see margins continuing to grow within that business as well as revenue growth.
So I couldn't be more pleased with how Baltec's going at this point in time, you know, as a result of our great engineering team and the IP that we've put into that business. You can have a look at this one at your leisure, but I had our engineers just do a very simple 2D diagram for us that you could see all the different components that Baltec's capable of designing for the gas turbine marketplace. EGL Energy, again, a very, very good half and very pleased to see what happened. So revenue roughly even, half on half. But what we've seen, of course, is EBITDA up to AUD 2.7 million from AUD 1.8 million. And again, you'll see margins going from 9.6% up to 14.6%.
Everything we spoke to you about at the last full year and the AGM that this was what we were trying to achieve through this period, consolidate the company and start to drive the return for our shareholders. Our design's the most energy-efficient water tube boiler available in Australia, which right now with very high energy prices and gas prices, you know, that's a great competitive advantage to us. Service and maintenance of the gas-fired equipment now makes up about 75% of earnings with EGL Energy, which has been a drive and a focus for the business. The sale and installation of cost-effective boilers, with maximum reliability, fuel efficiency, and easier access for inspection is a key point. We have Australia's only national network of service technicians.
So if you're a very large dairy company, food producer, abattoir, you know, boilers are an essential service for the purpose of sterilization. That national service presence 24/7 is a great competitive advantage for us. So just in terms of the first half, we saw margins improve strongly as cost stabilizing, post-COVID after the shipping and steel prices returned to normal levels, which we flagged previously. Service work remained very high with our increase in stored capacity, obviously growing further revenue. New boiler sales in the recent period have been very strong, which will lead to a good outlook for the next 18 months. At the start of the financial year, new boiler sales were modest. They were reasonably slow, but it picked up later in the half. And we certainly won more than our fair share of those boilers.
In fact, we secured a major contract to supply multiple boilers into Western Australia for a large refinery project, which would be one of the biggest wins that Tomlinson's would've had. At Ignite, of course, they just continue their strong contribution and significant earnings growth in financial year 2023. The culture at Ignite and the way they go about it is really class-leading. We respect how they do it. And their earnings are just going from strength to strength. So that was a wonderful acquisition from two years ago. So in terms of EGL Clean Air, which is TAPC and Airtight, so TAPC revenue down 8%, EBIT down 11%, margins fairly steady. You have to remember this is within the context of the last full year and the prior half earnings being up something in the order of 180%.
So to maintain those levels was quite a challenge, but going well. So in terms of the half, we completed one of our two major lithium rare earth projects on time and on budget, which I think's a great result given the inflation environment. It just goes to show how strong our risk management is in terms of, you know, managing those projects, making sure we go back to back on risk with our suppliers and delivering everything on time. So the project management team did a wonderful job delivering that first one. We got another major project that we're working on right now that's going very well as well. So the capital spend, as you would've noted, on lithium plants globally has softened with the fall in the lithium price. We're certainly seeing that come through the market.
You know, a couple of years ago we would've been deciding what job we could do when and how we're gonna schedule things in. That extreme pressure's come off the business now. So, there is a long-term need, of course, for these products. They're a key component to the renewable energy sector. Growth in rare earth refining continues, and we've got some very significant tenders in the pipeline right now. So hopefully we'll get some further good news this half on that. Servicing at plants and spares organically grew 64% up to AUD 3.6 million. For those of you that have followed our story for the last couple of years, again, this was a focus to grow the recurring revenue within that business and get in front of our clients more.
The more I'm in front of our clients servicing, maintaining, providing spares, the more opportunity we have to sell to them. So that's been a key focus for TAPC and going well. And we also completed during the half the first construction demolition plant for the dust extraction system, which was installed and commissioned. And it was working together with Airtight Solutions in the end post their acquisition. That dust extraction system and that major waste plant has gone very well. So we're pleased with pushing and entering into that market has been a good achievement for us. So you're all aware that we acquired Airtight Solutions back in May of this year. For those of you who are not familiar, TAPC does more gas and vapor. You could call it wet products if you like.
Airtight Solutions are more into dry products, so the dust and particulate matter part of the market. So a great addition to our air pollution control area within the marketplace. Different key clients, if you like. TAPC's more heavy industrial. You attribute Airtight Solutions to be more light industrial. So a very good balance within our business to bring those two business units together. So it was our first reporting full reporting period for Airtight. There's no point in doing PCPs 'cause there's no PCP applicable. The result was in line with our expectations, which is great. We did incur significant costs in transferring Airtight onto our systems and platforms, which we didn't call out as an individual item, but, you know, the costs were incurred by the business. But that's a part of doing acquisitions and the cost of business in my view.
There was one contract that came across that was at lower margins than we'd actually have run through our business, which we'll wind down in the next nine or 10 months. We're certainly working through that now. We've actually got EGL people working on that particular contract. I don't think Airtight, from its light industrial base, it's taken on a couple of larger contracts that are more into that heavy industrial. So it's probably more suited to the EGL project teams to work through those and wind those projects out to completion. They've got a market-leading product, industrial extraction systems, which is fantastic when we're hearing from the clients about the quality of what we're selling, the quality of the product. We have got operational improvements to make through Airtight, joining a public company from a private company.
It's quite a big change in culture, change in systems, a change in processes. I mean, as I mentioned at the start of the presentation, we're through that now, and we're happy that Airtight's now fully integrated into our business. Excuse me. At the time of acquisition, we talked about synergies through our sales into the waste sector, knowing that most of the big waste plants now are built inside, and they need dust extraction systems to be on them. We called that synergy out back in May at the time of acquisition. It's likely to be around AUD 2 million. We certainly expect to well exceed that number. Right now, tenders for dust extraction systems on waste plant is, has exceeded AUD 6 million. So that number's well ahead of our expectations.
And we're having discussions with other companies like Turmec about offering this, on Turmec plants around the world instead of just domestically in Australia. So that business, I believe, will continue to improve in the second half as well. So EGL Waste, I might rest my voice for a couple of minutes, and I can hand over to Paul just to talk about the highlights for the half. But, you know, EGL Waste and I look at the revenue number and I look at the EBITDA number, the business is in its infancy, and it will bounce around from period to period depending on when we're completing projects and what service work we're picking up.
So you can see first half 2023, that was all the ladders and platforms generated that revenue that we did on behalf of Turmec for the Rino Resources project up in Queensland, but at lower margin as you know, we're an agent for Turmec in Australia. What we are building now, of course, is that direct service work into those plants. We've now got all the spares in Australia for Turmec, which is great. But key to this business for me, I guess, it's the macro picture and it's where we are in terms of the cycle. So the National Waste Policy Action Plan requires an 80% reduction in resource recovery from all waste streams, following the waste hierarchy by 2030.
On my math, that means it's a 17% increase or 12.9 million tons of resource recovery needs to be in place in Australia in the next six years to make those targets. And, and with what we're offering now is, is a very, very full service offering between Turmec's recycling plants, the dust extraction systems that we can do with Airtight TAPC, boilers and autoclaves with Tomlinson's, combustion technologies and waste to energy through, through Baltec and through Ignite, and of course, PFAS with now the upsell service. Obviously, I wrote this slide before. We also got the PAAL Agency Agreement in Australia for balers, announced just earlier this week. So we've expanded that offering as well. So I think what we've got now is a world-class offering in, into Australia. So Paul, if you will, I'll just let you talk to the first half commentary and about that recycling tender pipeline, etc., and how we're going.
Yes, thanks, Jason. So the pipeline for recycling plants tenders, it does remain very, very strong. We've got a number of near-term prospects that we've been recently engaged to do. In particular, we've got an engineering design, which we're currently, we've received a purchase order for, and we are in the process of doing that engineering design. So that's certainly very, very positive, that one, given the fact that a customer is actually paying us for it. So we hold high expectations that we'll secure that particular plant.
The Rino facility in Queensland has been a fantastic outcome for the Environmental Group, but also Turmec to build, you know, one of the largest plants in the world of its type. It's really showcased in the Brisbane market. Not only did, you know, obviously, we provide the dust extraction system for the plant, we provided the structural steel, assisted in the installation of the plant, and we've now recently gone back and done some servicing work on the dust extraction system. So it really encompasses what we're trying to achieve in that waste sector, that one EGL. It allows us multiple touchpoints with our customers, which is, you know, obviously what we're trying to achieve and sort of bridge a gap in the market where we see some of our competitors don't have the service offering that we've got.
And I think in particular that the PAAL Agency Agreement, which we've just signed, and it's certainly from our perspective, PAAL has 52% market share of the European market. They're world-class in terms of channel balers and at the forefront of balers for SRF plants. So the fuel plants or the fuel that comes off the back of construction and demolition plants, their balers are seen as the most effective equipment for baling that product up for transport to places like cement kilns and the like for burning. So it's really good to add to our stable that particular product 'cause obviously we can go to clients now and talk to them about waste processing plants, dust extraction, servicing, as Jason spoke to a little bit earlier. We've got the spare parts based here in Melbourne, and that side of the business is actually starting to pick up as well.
So very strong outlook again for waste. As Paul said, a good tender pipeline. It has been a frustrating 12 months for us, no doubt, as development applications getting through EPA, local council has been a very slow process. But we've seen a distinct pickup in those DAs being approved recently, and it's starting to come and flow through again. So hopefully again, we'll have some good news for you during this half all being well. So EGL Water, just finally, obviously slow and frustrating for us, but that's nothing we can actually do about it. There's clear indications that society and industry are aligning in their need to remove PFAS from the environment.
You're seeing that more and more through media. You've seen what's happened in the U.S. with lawsuits. You've seen what happened in Australia around settlements. So that alignment is clearly taking place. Our technology's now very effective, low capital cost, low operating cost, which has gone particularly well. It requires no pretreatment, and it's very simple to operate. And the technology uses now both the same gas foam fractionation for soil and water. So we've achieved a fair bit in the second half in terms of developing our product line at the same time. So it's been quite frustrating. So we've progressed forward with our first commercial PFAS plant, as you're aware. All documentation is now submitted to the EPA for it to obtain its license at the operating liquid waste facility down in Melbourne.
While this process has taken longer than expected, it's the timing is out of our control. The license amendment is submitted by the facility operator to the EPA and actually has nothing to do with EGL outside of us providing them with technical advice. Our latest information, which is great, is we expect approval for the commercial operation will be granted within the current quarter. I think there was only conversation with myself and Paul yesterday that the EPA are actually moving quite quickly through it. So it was a bit of a question of two steps forward, one step back, I think, is a fair description. It's allow us to continue with our trials for soils and biosolids at the same time. We conducted three initial trials for each waste stream, and we've seen consistent enhancements with each iteration.
I think it's fair to say that at this point in time, we're very, very happy with those results now. We've achieved what we expected to do. So part of our offering going forward now will be talking about soil treatment and also talking about doing treatment on site if that's better for our clients. So the ongoing refinement of those processes has highly yielded really, really good results, and we've been able to do it with exactly the same technology platform. So while it's been, you know, the duck on the water, it's been quite an effective period for us in developing an enhanced product range that will serve our clients very well. So Paul, have you a couple of comments about the market and what you're discussing with our clients?
Yeah, certainly from our perspective, we see a significant opportunity in the treatment of biosolids from water treatment plant facilities. So there's certainly a number of conversations that we're currently having, and we've done some trials, as Jason just said, with a water authority company, which is fantastic. And also, from a soil perspective, there's opportunity to look at on-site treatment too, which allows us to treat on-site and reduce the risk from the customer so they don't actually have to put product in the back of, you know, trucks and move that to another facility, which has inherent risk, you know, transport costs and, you know, fuel usage and carbon footprint.
So what we're trying to position ourselves is that we do have the ability to treat this particular product, the PFAS, on customer's site and reduce the risk, but also then give them a product back at the once it's the PFAS has been removed from it so they can actually reuse it back on their on their site, or they can recategorize the product and send it offsite to a waste facility at a cheaper rate. So, that's certainly from our point of view, the market is continuing to talk to us about it. The biosolids in the soil is certainly a great opportunity along with the water side as well.
Great. Thanks, Paul. So I'll just move to the outlook and then hopefully give plenty of time for questions if anyone'd like to ask any questions. So as I mentioned at the beginning, EBITDA increased to approximately 45% this year, which I think's a terrific achievement. From memory, 37% growth back in 2022, over 50% in 2023.
So to be looking at that 45% in 2024, I think's an absolute credit to the management team that we've been able to do it. I think there's one point of clarity I'd like there around how the biz different business units operate. So if you look individually and say, "Well, you know, EGL CA was down a little, but Baltec was through the roof last year. TAPC was up substantially, and Baltec was flat," you need to bear in mind that all of those different business units between TAPC, engineering, and Baltec, they are effectively the one team.
So it's the same engineers working on all the one same projects, the same project managers doing the delivery, just simply different sales forces selling the different product lines. So you will see shifts in those business units, but I think they should be considered to be they, they operate as one, under one brand they're just trying to get that balance between if Baltec's growing very quickly, we'll move resources into that business unit. If TAPC's going quickly, we'd do the same. So we have a lot of flexibility to be able to grow EGL as one. And, and Paul and I have been talking to you for a good while now about we call it the one EGL, and we mean it's the one EGL.
We don't put businesses into silos and say, "Well, you can't help out there because that one's growing really quickly, and you don't have the resources." They're all shared resources, and that's why we can, as the one EGL, really move forward very strongly. So the margin and process improvement will remain a focus, but we're probably starting to get the back end of that now and continue to drive margins through our IP. As I mentioned, continuing to develop the one EGL culture, to sell multiple service lines to the one customer, it's going very well on waste, and it's working very well on the balance between the TAPC projects, engineering, and Baltec. 50% of our revenue is now recurring, which is very good to see that. Tomlinson's will continue to improve margins and drive EBITDA growth year-on-year.
Clearly is gonna have very strong performance with the level of sales we've achieved year to date, plus the margin expansion, plus the IP value that we've really got flowing through that business now. TAPC will continue to grow its service and maintenance and continue to improve the quality of revenue coming into that business. As I said, during this period, hopefully, we'll land a rare earths off-gas system, which would be very exciting for us to continue down that path of being the leader in lithium and rare earths refining in Australia, if not the world. As Paul mentioned, EGL Waste and Water continue to grow organically as we're entering new products into those marketplaces. I'll wind it up quickly.
So good EBITDA growth, continuing to build those products and services in recurring revenue, driving margin expansion using our IP, and certainly just improving all that supply chain areas, to make sure we maximize the benefit for our shareholders. So very pleased with the half, and very pleased again with the outlook for the full year. So more than happy to take questions. I can see one's popped up. So just let me read it. EGL have a plan to have a fee-based consulting division or predominantly sales and service. No, we're not looking at consulting. Consulting, I guess, if you like, it's live hand to mouth. We'd rather be involved in providing services and high-quality equipment that are within the marketplace. I guess in some regards, we do provide consulting, I guess, if you like.
As Paul mentioned, we're, we're doing a design for a large, construction demolition recycling plant. So I guess as part of that sales, we're doing that. We've been of, of huge assistance to one of our potential clients around their refining project and our process engineers helping them out with their process design. So, I, I guess, no, we don't sell that service, but that's part of why EGL is so special, is we're the technical experts around the world in these things, and our clients come to us seeking our seeking our help.
And if you'd like, I, I can, just repeat that if you, have a question, you can just, type your question into the Ask a Question box for anyone else who joined.
Yep. There's no other questions at this time. We'll leave it open, and just see if any pop up in the next minute or two. But, thank you very much, everyone, for joining us. Thank you for your support over the last couple of years. I certainly hope we're delivering to expectations. And I guess, more importantly, I'm very pleased with the team we've built here. I'm very pleased with the strength of the management team.
And I think, the consistency of us being able to deliver great outcomes is just showing how good that management team is and how hard they work on behalf of our shareholders. So thank you all for your support.
Excuse me. I see that a few, more questions have come in. Please go ahead, sir.
Yeah. So the first question is, what do you see being the main drivers of the upgrade to guidance? Does this include any waste PFAS sales? Obviously, hard for me to comment directly on some of those things, but Baltec clearly is helping out with that upgrade. Tomlinson's is continuing to achieve well. I think we've spoken very clearly about waste and our expectations that if we're in design freezes and that DAs are coming through, that, you know, we're seeing some nice improvement in that market.
The PFAS sales, that hasn't changed our guidance. We always had the forecast for this year of our expectations, and that forecast remains exactly what it was at the start of the year. So that's as expected. Next question is, the license approval for the EPA for the PFAS plant, the key thing to hold them back for the sales, what does the pipeline look like? You know, clearly, that's it, it's a very, very big issue, isn't it?
If you've gotta have a license, well, you don't have to. That's a poor expression. Our clients, when they talk with us, would like to see that the plant gets EPA approval, knowing that if they invest into a plant, their plant's more than likely to get approval as well. So the answer is, you know, it's a very important milestone in the road to achieve that outcome. As I mentioned, that outcome is likely to be very soon, in my view. The pipeline, yeah, the pipeline's good. I think we'd be engaged with, and Paul, please correct me if I'm wrong, seven to eight different potential clients at the moment looking at waste streams all the way from liquid waste through to, as Paul mentioned, biosolids and soil. So I'm not sure if you all still there, Paul, but it'll be.
Yeah, no, no. Absolutely, Jason. It's the pleasing part about it is it's across an array of waste products, not just one particular stream. So that's yeah. It's very pleasing.
Yep. Thank you, Paul. Next question. Sorry, I'm just gonna scroll down. Given the strong result, how is this being integrated into the EGL Investor Relations Program? So clearly, doing this call open to all investors is one part of it, but I'm pleased to say we're covered by a number of brokers now. So we're covered both by Bells and Taylor Collison, which are working with that. We've got another broker that's very interested in picking up coverage with us. We go out and do a roadshow extensively, not only for these next couple of days, but Paul and I are gonna come around again in March for any shareholders that want to see us.
And we're very open to talking with our shareholders. So I think, for a relatively small company, we've done very well in getting a number of institutions on our register and continuing to drive that Investor Relations Program. I think one of our next step forwards and I'm blaming a lot on Paul today, but we've also introduced a HubSpot system into the whole business, which is integrated into our website, which drives inquiries now directly out to our sales based on how long they spend on our website looking at different products. Part of that is we're also gonna use that to be able to direct email all of our investors and all of our shareholders any new information, media updates. And we're certainly getting a bigger and stronger focus on social media now.
We actually employed a marketing person, believe it or not, now to do that type of stuff as the business has grown and developed. So I think you'll continue to see a broader-based EGL Investor Relations Program. I hope that answers. Yeah. I think that's a great point, Jason. So we are in the process of implementing a CRM system, which is internally and externally across the business that's integrated into our webpage as well. And we're doing some upgrades to our webpage as we speak. And certainly, our marketing manager that started in the business has been a fantastic acquisition to the business.
Yeah. No, it's an area that we've come a long way on.
So I'll say that that appears to be the end of the questions for now. I can't see any others popped up. So once again, thank you all very much for your time. I hope you enjoyed the presentation. And if you need anything further, you know, my door's always open. I'll always pick up the phone. So please, please feel free to contact me. Have a nice day and enjoy reporting season.
Thanks very much. The conference has concluded. You may now disconnect.
Great. Thank you very much, Derek. Well.