Thank you for standing by, and welcome to the Mader Group FY 2022 half year results webcast. If you wish to ask a question, please click on the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Justin Nuich. Please go ahead.
Thanks very much, Melanie. And good morning, everybody. I'd like to welcome you to Mader Group's results presentation for the first half of FY 2022. Joining us also today from Fort Worth, Texas, is Mader's Chief Financial Officer, Paul Hegarty, who will be presenting the details of our financial results. We'll both be available to respond to any questions during the Q&A, which will take place straight after this presentation. The last six months have seen the group deliver a record half-year performance, reaping the benefits created by our shift to focus on strategic diversification in recent years. During the half, we operated in eight countries around the globe, servicing a wide and ever-growing network of customers and sites backed by a skilled workforce of more than 1,750 employees.
At our core, we're a business built on mechanically-minded experts who provide specialist services for heavy equipment maintenance and repairs. The last six months have seen our traditional service offerings continue to expand in the mobile plant equipment maintenance space, attributed to strong customer demand. We're excited by the early success of our new growth platforms that have been introduced, including our recently repurposed infrastructure maintenance division, which delivered revenue growth of 70% versus the previous corresponding period. This division has expanded its geographical focus and now provides services in four states across Australia, including Western Australia, Queensland, South Australia, and the Northern Territory. Regional diversification is crucially important to our goal of building a global, diverse profile. For this reason, we're pleased to have also expanded our operations in North America, including the launch of new organic start-up, Mader Energy.
Targeting the energy sector, we now have a team of specialized technicians conducting equipment maintenance at energy compressor stations in Oklahoma and New Mexico, and have executed several master service agreements with new customers, including a major multinational oil and gas company. Although our financials from presentation to presentations sometimes change, our focus on safety is always constant. As always, it remains our highest priority and our key focus of the business. Our committed and vigilant workforce and leadership team are constantly ensuring safety is their number one focus, and they are looking after themselves and their mates on every job. In the past six months, we are pleased to roll out our bespoke mobile application to our workforce across North America. The app will ensure that our network of remote employees are connected to vital safety tools, important alerts, and customer news.
In addition to investing heavily in safety-focused technology, we continue to invest in our people and culture. Amongst a slew of awards won over the half year, we topped it off with recognition at the 2021 RISE Business Awards sponsored by Business News, where we were named Employer of the Year, a feat we are incredibly proud of. Our financial performance for the six months ending 31st of December 2021 reflects the sustained strong demand we are experiencing globally. For the group, revenue grew to AUD 185.2 million, up 31% on the previous corresponding period. EBITDA grew to AUD 21.2 million, up 30%. The business delivered underlying earnings of AUD 12.1 million net profit after tax, up 39% on the previous corresponding period.
Today, the business also declared an increased interim dividend of AUD 0.02 per share, fully franked, for activities during the half, totaling AUD 4 million. The dividend is scheduled for payment to shareholders on the 23rd of March, 2022. A high-level overview of our operations illustrates our balanced exposure across regional and commodity-based markets. Both our North America and Rest of the World segments have seen sizable growth versus the prior half year, with 66% and 167% increases respectively. With a large addressable market in North America now being targeted through Mader Energy and the geographical expansion of our core service offerings in the USA and Canada, we anticipate continued and compounding growth. A closer look at our reporting segments illustrates steady and growing operations across the group in line with our strategic focus on diversification.
In Australia, we saw increased activity levels across our new and existing service offerings with overall revenue of AUD 160.2 million generated, up 26% versus the previous corresponding period, and EBITDA of AUD 18.2 million, up 35%. Key highlights included growth in our core traditional service lines with revenue up 28% and expansion in our infrastructure maintenance service line, which saw increased revenue of 70%. We also continued to develop our trade upgrade apprenticeship program, which has gone from strength to strength, inducting its ninth and tenth intakes during the period for placement into the Western Australian and Queensland mining sectors. During the half, Mader also ran a national campaign aimed at driving female participation in the program. Our North American market has seen sizable revenue growth up 66% versus the previous corresponding period.
This increase was driven by both new customers and additional requests for support from existing customers in the United States. Mader's investment in organic startup, Mader Canada, delivered first revenue during the first half, with secured work scopes in Fort McMurray, Alberta. Our second organic startup, Mader Energy, was also launched to target maintenance opportunities in the energy sector throughout North America. With active operations in 20 states, we're excited about the large addressable market in North America and what that presents to, for our business. Our Rest of the World operations generated AUD 5.7 million, up 167% versus the prior half year. Activity levels were steady with equipment maintenance delivered across key customers in five countries across Africa, Asia, and Oceania. I would now like to introduce Mader's CFO, Paul Hegarty, who will present to you our financial results.
Over to you, Paul.
Thanks, Justin, and good morning to everyone from a very cold Fort Worth here in Texas. Let's start with the financial performance of the group on slide nine. We saw group revenue grow by 31% on the PCP, and this included impressive revenue growth of 66% in North America as Mader continued to unlock the value of its diversification strategy in that region. North America continues to be one of our prospective high-growth regions for the future. It's pleasing to see that our Rest of World segment has continued to grow, with an increase in activity levels this half year, up 167% versus the PCP. Obviously, that PCP was heavily COVID affected. Margins have remained steady across the group, delivering 11.4% at the EBITDA line and 6.5% at the NPAT line.
Lastly, we completed the half year with improved EPS, up 36% versus the PCP, and we've also increased our interim dividend up to AUD 0.02 per share fully franked from AUD 0.015 per share fully franked in the PCP. Next, we'll move on to slide 10 and the financial position of the group. We have a relatively simple balance sheet with assets consisting primarily of 800+ service vehicles which are located throughout the globe. We closed the half year with net debt of AUD 22.3 million, which is down slightly from June 2021. The moderate decrease in net debt reflects strong operating cash flow that was delivered despite the capital invested into our service vehicle fleets during the half. To support our rapidly growing operations, Mader also completed a refinance of its debt facilities.
The restructured Australian facilities have extended the tenor and reduced borrowing costs. The new facilities also increase offshore borrowing capacity, which is key for our North American offensive. Now on to the cash flow. We had solid operational cash flow of AUD 22.4 million, and we continued to invest in growth with AUD 17.7 million expenditure, largely attributed to securing a service vehicle fleet to support our new organic startups, Mader Canada and Mader Energy. Overall, a solid financial performance that paves the way for continued growth on a global scale. That's probably enough on the financials from me. I'll hand back to Justin.
Great. Thanks, Paul. Okay, moving on to our geographic footprint. As you can see, our geographical footprint is impressive. Having been built on the back of almost 17 years of operations in Australia, we have a large presence in all major mining regions, accounting for AUD 160.2 million and 87% of group revenue. We're stretching our legs across North America, now actively operating across 20 states. We're confident this segment will continue to expand, particularly with the repositioning of our management team in the previous half year, assisting with business development and positive workflow. In Australia, we continue to leverage market opportunities through our existing and new service lines.
Out of around 520 operating sites, Mader is servicing over 340 of these to varying degrees for a customer base of more than 220 customers. The United States represents a large addressable market, slightly larger than that of Australia. For reference, the ROM which represents the mine production in metric tons is 1 billion metric tons greater than what we see here in Australia. Canada produces almost 6 billion metric tons per annum, presenting a significant range of addressable opportunities for the group, including its large oil sands market. Having secured first work scopes in Fort McMurray, Alberta, we have established a small initial base of operations and will expand from there. Across Africa and Asia, our operations remain scaled down due to ongoing workforce mobility challenges.
However, demand for Mader specialist services are strong due to a widening maintenance deficit caused by the pandemic. Our operational and financial performance during the first half highlights the significant flexibility and adaptability of our unique business model. Over the past six months, we have laid a solid foundation to enable the business to deliver on its long-term objective of compounding annual revenue growth. Our operations in North America, including that of Mader Canada and Mader Energy, are accelerating steadily, and we are excited to see further growth in this pillar of the group's long-term strategy.
Looking ahead, we'll continue to diversify our revenue profile to target addressable markets with new revenue streams expected to deliver growing returns for investors. With current market conditions and increased confidence, we are pleased to forecast FY 2022 revenue of at least AUD 370 million, delivering an NPAT of at least AUD 24 million. Moving over to our investment case, to summarize our business for current and prospective investors, we believe that Mader represents a robust investment opportunity. We are the largest independent supplier of contract labor for maintenance of heavy mobile equipment in Australia, with a rapidly expanding scope of services designed to capitalize on market prospects such as infrastructure maintenance and energy, to name a couple, which leaves Mader well-positioned to continue this rapid growth.
Since listing on the Australian Securities Exchange, we are proud to report that our earnings continue to exceed third-party broker forecasts. Our operating model is high quality, responsive and replicable across multiple markets. Notable attributes of the Mader business include 17 years of organic growth, our disruptive business model and proven track record of successfully replicating our business model in new addressable markets, our low capital operations, large remaining addressable markets in which we are actively targeting through our multidisciplinary scope of services, and our unique people and culture focus, which was recently recognized with an Employer of the Year award at the 2021 RISE Business Awards, sponsored by Business News. In closing, to conclude the presentation, firstly, I'd like to thank everyone for their hard work and commitment.
Our success as a business is a credit to our entire team who, despite facing ongoing mobility challenges, continue to adapt quickly and embrace new opportunities. Thank you most of all to our frontline staff in the field who work tirelessly and professionally to build our reputation as a superior maintenance provider around the globe. I'm positive that we have created a strong platform from which the business will grow upon. With an array of exciting opportunities available to us, we'll remain a people-first business and continue to diversify and invest. I look forward to guiding Mader in its journey as we deliver our potential for clients and shareholders alike. Thanks, everyone, for joining us for the presentation, and I'd like to just hand over to Paul to run through some questions for us.
Thanks, Justin. A few questions filtering through online. We'll start with Matt Joass from Maven. Does Mader have any operations in Russia? Is there any impact, or direct impact of Russian sanctions on Mader?
Yeah, no, look, we don't have any operations in Russia. Yeah, it's pretty well confined to U.S., Canada, and the rest of the world where we talked about Africa and Asia and Oceania. I guess it's too early to tell around what that impact from Russia will be. You know, they're looking at fuel prices. Would imagine that you know that energy costs will continue to rise and will likely flow onto the energy business in the U.S., but very hard to tell at this point in time.
Thanks, Justin. Couple of questions from Jason Palmer at Taylor Collison, so I'll work through them. North American margin contraction, we saw that in the first half, around start-up costs. Justin, do you wanna sort of just give an overview of those and how we see those going forward?
For North America, yeah, look, I guess we've put a couple of parallel organic start-ups in North America being Mader Energy and Mader Canada. You know, as you would imagine, both of those will be quite a cost burden to the business while they start up and you know we invest capital and human capital into getting those up and running. You know, that said, we are investing reasonably heavily in those. We also expect to see those sort of you know break even and start turning a profit into FY 2023.
You know, I suppose the downside from the initial you know start-up of those two businesses will you know certainly be washed out as we see those medium- to long-term prospects you know come into the group.
Thanks. Thanks, Justin. Another question from Jason around corporate overhead, which I'll take. Just looking at the corporate overhead increases half to half in the corporate line, I assume, Jason, that really it's more about reallocating some costs that used to sit in the Australian segment into the corporate segment. You'll see that the Australian segment profit margins have increased in line with, I guess, costs moving into the corporate line. Another question from Jason around significant second half vehicle delivery. Justin, do you want to just briefly touch on the thinking behind. Sorry, the significant first half vehicle delivery and the significant. The rationale behind those.
Yeah. Thanks, Paul. Look, I guess when we see significant capital spend in this business, it's really as a result of forecast growth. You know, with kicking off the energy business, you know, as well as accelerated growth in the U.S., and vehicles coming through in Australia, you know, we've seen quite a capital spend in the first half. That said, you know, we are entirely comfortable with that because that just demonstrates the accelerated growth of the business. You know, we'll still see a reasonable spend in the second half, not as high as the first half.
You know, again, that just demonstrates the pace of growth that's happening across the business and ensuring we don't constrain our growth by not having vehicles particularly available in areas of Canadian energy and the U.S., where our field service product, you know, most often leads the way into new customers.
Perfect. Thanks. Thanks, Justin. Another question coming through from Jason around 1H NPAT, hitting AUD 12.1 million, including half a million AUD contribution from Western Plant Hire that has now been divested. I guess looking forward into how that lines up with our guidance for the full year. I guess yes, that half a million AUD contribution from Western Plant Hire won't be there in the second half, but I guess the number of moving parts that we see in the business and the growth trajectory that we can see continuing to be delivered gives us that confidence that our NPAT guidance will be delivered on. Another one from Jason, Justin, for you. M&A seems to be a lesser discussion point, which is, I guess, a positive.
Organically moving into energy infrastructure, verticals, et cetera. Is this a lesser need now, M&A? Or how does the business think about that moving forward?
Yeah. Thanks, Jason. Look, M&A is still front of mind. You know, again, we have, you know, I suppose we report on the things that we have done, but, you know, we've certainly run our ruler across, you know, several acquisition targets over that last sort of period or over the last couple of years really. We'll continue to do so. You know, what we saw in energy, you know, again, there were some opportunities to, you know, to implement an M&A or an acquisition. We decided not to really because of, you know, I suppose our business model and the confidence we have in it.
Also, you know, the similarities between the current business and the energy business, you know, were quite alike. Trying to buy something and then change a culture and turn it into something that we want, you know, you could spend just as much time and energy doing that than you could doing an organic startup. We did end up doing an organic startup on that one. That said, we are still closely running the ruler over acquisition targets, and that may be something that will come up in the future.
Thanks. Question here on tax rates and how we should think about average tax rates moving forward. We think that 26% in 1H was a little low, and really we think that'll be sort of around the 28% moving forward as an effective tax rate for the group. As North America increases, particularly in the U.S., that effective tax rate for the group will come down. It's sitting at about 26% at the moment as an effective tax rate in the U.S. One more question here, probably for you, Justin, from Lee Lee online. What are the main differences in terms of competitive landscape and market dynamics between Australia and North America?
Yeah. Thanks, Lee Lee. I guess there are quite a few differences. With the Aussie market, I guess it's quite mature and, you know, we see some smaller competitors, you know, doing similar sorts of things. What we probably see less of in the U.S. is this type of business model. It tends to be more OEM dealers and local businesses that do similar things, but just in regional areas supporting local towns, so to speak. I guess where the Mader business model, you know, comes to its own is that we are fully flexible, we are OEM agnostic, and we can, you know, provide people from sort of anywhere in the country to anywhere in the country to conduct work.
That flexibility and that OEM agnosticism is, you know, what we see as a real advantage for us over there and probably a difference to what we see over here in Australia.
Thanks, Justin. A couple more questions coming through. One from Hamish Murray from Bell Potter. What's the outlook for rest of world? How is demand and what is the timing around growth? And then also, how do we think about the labor component needed to service that potential growth in that region?
Thanks, Hamish. The outlook for the rest of the world, I mean, obviously, given the mobility constraints and obviously being in the middle of a pandemic has been quite restrictive to growing things, particularly in those parts of the world. We're seeing that free up now and putting a bit more effort into BD to deliver more work in those regions that we have done previously. The maintenance deficit on that equipment has increased through a lack of access through that pandemic. The need for services such as Mader is extreme.
As far as the headcount to feed that work, you know, that really is quite a attractive thing to a lot of our Australian workforce. We generally don't see too much of an issue servicing that work. You know, as you know, I guess given the demographic of a lot of the employees that we employ, that work is very attractive to them and they do like to go and do it. Filling the requirements is not seen as too much of an issue.
Thanks, Justin. Question here on the CapEx profile for North America, and I guess just a general question around the key differences in the service trucks versus the service vehicles that we traditionally acquire in Australia. Do you wanna just talk through that?
Yeah. In Australia, we generally service the industry with Toyota HiLuxes or Land Cruisers. That, you know, really is quite fit for purpose for what we do. I guess the U.S. model is a little different and most of that is off the back of customer demand. Yeah, the requirements for a vehicle are larger. We look at sort of Ford F-550 or F-600s, or Dodge Ram 5500s with 8,000-pound cranes equipped on those. Including, you know, welders and other tooling that customers require. That is really off the back of customer requirements. We couldn't go and service a U.S. mine site with a Toyota HiLux.
It just would not meet requirements for those customers. Hence the you know, the increased capital cost over in the U.S. Yeah, that said, it is all recoverable, so we are comfortable with the way that's rolling out.
Perfect. Question here from Frank Volante around growth on the east coast of Australia, what we're seeing there and how we're addressing those particular segments.
Yeah, good question. Thanks, Frank, and good to see you're still in there. I guess the east coast, we're seeing some really strong growth over there. Our head count, you know, has increased significantly over that first half and continues to do so. The operating segments, you know, coal is running very strong as everybody knows at the moment and we're seeing demand for our products off the back of that. What we are also doing is kicking off a minor hard rock segment or store over in Mount Isa, servicing a lot of that non-coal, the non-coal commodity over in that Mount Isa area and down into New South Wales. We are trying to diversify as hard as we can over there.
You know, we're still seeing strong demand across the board, in that space as well. That has only just kicked off, but we're expecting to see some strong growth in both of those regions as we move forward.
Thanks, Justin. I guess a bit of a follow-up question from Frank on that is probably in a broader context, how are you seeing the mindset of the local customer base in Australia?
Look, I guess, you know, we see it reported quite often around the skills shortage. That doesn't really change across the country. You know, at the moment it's you know everybody is desperate for labor. You know, we're seeing large owner miners expand, bring new projects to fruition. You know, as well as you know significantly more fleet coming into the industry with very little of it being retired. You know, it is outstripping labor supply.
I guess, yeah, I suppose that is the mindset is around making sure that people have got labor secured to ensure that their you know their assets and their businesses can continue to run, which is obviously where we come in and provide that service.
Thanks. One final question if there's no more that come through, is really around Canada first revenue delivered in 1H, which is positive. Any client feedback or how do we think for that market moving forward, into 2H and beyond?
Yeah. Thanks, Paul. Look, I guess. You know, it's very early days in Canada. You know, that said, we see the Canadian market very similar to the Australian market in a lot of ways. You know, we've got some large very large mine sites with ultra-class fleets, like similar to what we would see in a BHP or a Fortescue over here. You know, we're really focusing on putting our key talent forward to kick that business off. And so far the feedback from our customers has been very strong. You know, again, it's a massive mining market in excess of what we're seeing here in Australia.
You know, yeah, we're gonna continue to focus on that business development and growing our service offering across that country. You know, again, it's similar gear, it's similar sort of mine sites, just a whole lot colder in winter. You know, it's, you know, I think our business model is well suited to servicing that industry.
Thanks. Thanks, Justin. That is all the questions that have come through the portal now. If there's nothing else that comes through, we'll probably wrap it up there.
All right. Thanks, Paul. We might hand back to you. Thanks, Melanie.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.