Thanks, Kaylee. Thanks everyone for joining us today. Welcome to the Macmahon 2021 results presentation. As Kaylee just said, I'm Mick Finnegan, the CEO and MD of Macmahon. I'm joined here today by our CFO, Peter Pollard, our Deputy CFO, Ursula Loomes, our Corporate Development and Investor Relations Manager, Chris Chong. I know it's a busy time of year. As always, we appreciate your time and the opportunity to run you through today's presentation. At the end of the session, there will be an opportunity for questions. If we start with slide two, showing the financial highlights, you'll see that Macmahon has again delivered a strong set of results. I'm pleased to report that the business has delivered on market guidance with what was another record for the company in terms of underlying earnings and cash flow.
I'm very pleased to have achieved this result, notwithstanding the labor shortages, cost pressures, and other impacts that emerged as a consequence of COVID-19. To have delivered these results and have enhanced our business really does demonstrate the resilience of our overall group, our team, and our strategy. Statutory revenue of AUD 1.35 billion was down 2% on the FY 2020 number due to the accounting changes related to our Batu Hijau project, which we discussed in our first half result, and which Peter will recap on in his discussion later. Excluding these adjustments, revenue grew 6%. As you can see, underlying EBITDA and EBITA were up around 5% at AUD 250 million and AUD 95 million respectively, with margins continuing to increase towards our stated targets of 8% EBITA and 20% EBITDA. These have remained unchanged for some time.
Importantly, operating cash flow was particularly strong at AUD 260 million, with a cash conversion of 108%. Our net debt of AUD 130 million reflects the investment in new contract starts in the second half of the year and equates to about 0.5x EBITDA.
This second half investment is included in our return on average capital employed calculation, which still remains relatively solid at 13.5%. The order book remains strong at AUD 5 billion, with AUD 1.3 billion already secured for FY 2022. This gives us confidence in providing the FY 2022 revenue and earnings guidance of AUD 1.4 -AUD 1.5 billion of revenue and AUD 95 -AUD 105 million of EBITA. slide three provides a little more color around our numbers and activity across our divisions. An important note to add on our financials is our available liquidity of AUD 288 million, which includes cash and undrawn financing facilities.
In addition, we executed yesterday a new AUD 145 million syndicated asset finance facility, which adds a further AUD 85 million of funding capacity. Pleasingly, we secured AUD 2 billion of new projects during the year, which underpins our positive outlook and will support continued margin improvement as these projects commence and ramp up over the coming year. Now by division, looking at our surface business, Anglo American's Dawson project and QMetco's Foxleigh project have both commenced in the second half of the last financial year. The AUD 650 million combined surface and underground contract for Red 5's King of the Hills project is expected to commence in early calendar year 2022. Finally, we are the preferred contractor for the Warrawoona project for Calidus. We are preparing to be in a position to start there in early 2022 also.
However, on that job, we are already completing the civil works on site as we speak. Our underground division has continued to grow strongly, and during the year we were awarded a four-year extension at Silver Lake's Deflector Mine, and additional work at Pantoro's Wagtail and Nicolsons mines. We also started early works at the Bellevue project and are hopeful of extending that relationship. Importantly, we were also awarded our largest underground contract worth AUD 500 million with St Barbara's Gwalia Mine, which commenced in May this year. All of this has culminated in an order book of AUD 5 billion as at 30 June, and this does not include any short-term churn work, Warrawoona, or the Telfer and Tropicana extensions we announced yesterday. Tender pipeline also remains robust, and we are currently looking at around 25 opportunities totaling over AUD 7.1 billion.
Importantly, about 64% of this is now in the mining support services and underground sector, which is a reflection of progress against our strategy. Turning to slide four on people and safety, it goes without saying that safety remains a core priority for the management team and for the business, as it always will. Sadly, we reported the tragic passing of two Macmahon employees at site this year. Abdul Hakim at Batu Hijau and Mr. Paul Martin at Daisy Milano. It's always a very tough time when these events occur, and we remain very focused on making improvements where we can, as well as supporting both families and our colleagues as needed. You can also see on the chart that we have a very low LTI frequency rate. There has been an increase in our TRIFR.
The management team is taking this very seriously and targeting improvement in FY 2022, with emphasis placed on improving behaviors and situational awareness to ensure a safe workplace. We are already seeing good progress in this area this financial year. Our physical and mental health program, Strong Minds, Strong Mines, remains an important initiative that Macmahon is a leader on. In times like this, the mental health of our people is even more important. We are proud that this is now being offered to the wider mining industry. Our training and development initiatives remain an area that sets our business apart, and it is all the more important given the current tight industry conditions for skilled labor. Our Grow Our Own strategy has been very successful in training over 426 people across the business during the year, and this includes graduates, apprentices, and trainees.
We also continue to invest in our leadership program and leaders. Turning to slide five. We know skilled labor is a challenge for our sector in Australia, having started five new projects over the past year. This required an additional 670 people. We are fortunate the new projects were spread geographically and through different activities, which did assist as we were not drawing from the same talent pool. We feel we have refined our processes, increased our investment in training, developing, and retaining people, importantly, work with our clients to create deliverable ramp-up schedules. In the current environment, that is vital. As a result, we have high confidence the two remaining projects will be mobilized in an effective way with project kickoff teams already in place. At Warrawoona, early preparation works will commence in November, with mining activities to ramp up from March.
We do have over 60 people on site completing establishment works as we speak, as you can appreciate, ramping up is much easier when you already have a presence on site. At King of the Hills, we expect a steady four to five months ramp up commencing from December. Regarding managing the cost pressures evident in the current market, we're in a relatively fortunate position given the nature of the contracts we have. We have a number of alliance-style contracts, with the remaining schedule of rates contracts, there are rise and fall provisions. Also, all new contracts are priced in today's dollars. Now turning to slide six. This shows a quick overview of our key projects. I won't go through each project in detail, note our major contracts are long-term alliance and/or life of mine contracts, which does underpin the long-term sustainability of our business.
It is also pleasing to see the introduction of a number of new clients over the last year, which serves to diversify our client base and extend the visibility of our order book. While all of our projects are important, I'd like to provide you with an update on three recent developments. Firstly, at Gwalia, we're very pleased to have secured a five-year contract here. This contract is an important milestone in our strategy to expand our underground business, and it is a clear demonstration of the benefits we're now realizing from the GBF acquisition. We're in the final stages of the ramp-up at Gwalia, and to date, we have achieved good progress in many areas. There is work being done to finalize this ramp-up, but once complete, we are optimistic about the joint opportunities that exist for the project and for the relationship between St Barbara and Macmahon.
Secondly, at Tropicana, we are very pleased to have secured the four-year extension of the surface work, which is expected to generate additional revenue of approximately AUD 470 million and extend the company's open pit mining work from 2023 to 2027. This is on top of the Boston Shaker Underground Project, which has been performing well for the last two years and has been building momentum in recent months. Thirdly, I'd like to talk about Batu Hijau on slide seven. We're very fortunate to be mining at the Batu Hijau copper-gold mine in Indonesia, where we have a life of mine alliance contract that provides us with exposure to high-quality, long-term sustainable earnings. To recap, it's the second-largest copper-gold mine in Indonesia behind Grasberg.
It is a world-class asset and in the first quartile of the global copper cost curve with a reserve of over 7 billion pounds of copper and 9 million ounces of gold. Interestingly, if you add the Elang deposit, the resource is over 5x the numbers I just mentioned. We commenced mining here in 2017, we are successfully executing the phase VII cutback now. As flagged previously, we're happy to report that our alliance partner, AMNT, will be undertaking another significant cutback at the Batu Hijau pit called phase VIII. The phase VIII scope is expected to extend our in-pit mining activities at the current run rate for another six years to 2028. slide eight highlights our position on ESG. This year, we published a standalone sustainability report reflecting the increasing importance of ESG considerations for our business and the mining industry in general.
Our ESG priorities have been guided by a materiality assessment we completed with our investors and stakeholders late last year, which have translated to 16 material priorities for the business to focus and report on. As you can see, safety, health and wellbeing, climate change, and corporate governance rated highly on both the impact on Macmahon and the influence on our stakeholders. Please refer to our sustainability report, which we've released today for further detail. It sets out some of the key initiatives we have and will undertake in our sustainability journey. I'd now like to hand over to Peter, who will run through the financials in more detail.
Thanks, Mick. Good morning, everybody. Thank you again for taking the time to join us today. Let's start with a quick overview of the company's financial performance on slide 10. You can see that while reported revenue for FY 2021 was essentially flat on last year, we delivered growth in earnings. I'll talk a bit more to the revenue when I discuss the P&L. The key point I'd like to highlight here is the sustained improvement in margins over the last five years across both EBITDA and EBITA, supported by a threefold increase in revenue. Turning to slide 11, highlights our track record of performance against our market guidance. This is now the fourth consecutive year we have met or exceeded our guidance, and this is particularly pleasing given the uncertain market conditions in FY 2020 and FY 2021 due to the impact of COVID.
We have provided guidance for FY 2022, and as you can see, we believe the business is well-positioned for sustainable growth. Another area I'd like to highlight is our capital management focus, which is outlined on slide 12. The business generates high levels of operating cash with a consistently high cash conversion rate of EBITDA. Looking to returns on average capital employed, you can see that the business has consistently generated returns of around 13%-14%. ROACE in FY 2021 was impacted by some large new contract wins and the associated CapEx in the second half of the year. However, over coming years, we anticipate ROACE to reach our stated target of 15% or better. Turning to our profit and loss statement on slide 13, I'd like to talk to some of the key factors behind our performance.
Firstly, statutory revenue was down 2% due to the exclusion of certain client-provided consumable items at Batu Hijau that we were deemed to not have control of due to COVID-19. Excluding this change, revenue grew by approximately 6%. As you can see, earnings growth across the business was consistent with revenue growth at around 5%, which translated to improved EBITDA and EBITA margins of 18.5% and 7% respectively. The tax benefit you can see in the figures was attributable to the recognition of a deferred tax asset of AUD 17.3 million due to a change in Australian tax legislation, which allows us a tax deduction for new Australian CapEx through to FY 2022. Over this period, the effective tax rate is expected to be 30%, but effective cash tax rate is expected to be around 15%. Reported NPAT and earnings per share increased by around 19%.
This, along with the strong cash generation, allowed the board to increase the full-year dividend by 8% to AUD 0.0065 per share. This represents a payout ratio of 18%, which is in line with our dividend policy payout ratio of 10%-25% of our underlying earnings per share. You may have seen slide 14 in previous presentations. I think it is important to highlight the continued improvement in our business mix. Over the past few years, we have significantly increased the diversity of our clients and our underground business. You can also see nearly 80% of our work is related to gold and copper. Three-quarters of our revenue was generated here in Australia.
The net debt cash flow waterfall on slide 15 provides an overview of the major cash movements during the year that have contributed to the closing net debt position at the 30th of June 2021. Strong EBITDA was the main driver of cash inflows, followed by an AUD 19 million improvement in our working capital position, driven by strong cash collections and the receipt of a large VAT receivable during the period. Overall, underlying operating cash flow was AUD 269 million, reflecting a cash conversion rate of around 108%. CapEx of AUD 296 million was due to a number of sizable new contract wins we announced in the second half, which I will explain further on slide 16. We thought it would help to break down the CapEx numbers in more detail.
Of the AUD 296 million total CapEx, around AUD 143 million related to sustaining CapEx, which includes extensions such as Deflector, Mount Monger, Telfer, and Tropicana. Overall, this is in line with our half-year guidance. The balance of AUD 153 million relates to growth CapEx on the back of our significant contract awards during FY 2021, including Foxleigh, Gwalia, and Dawson.
Looking forward to FY 2022, we expect broadly similar levels of CapEx to fund these new long-term contract wins and project extensions. We expect this investment will support us in achieving our stated objective of a return on average capital employed of 15% or better within the next two years. Our balance sheet is summarized on slide 17. I'd like to call out our strong liquidity balance sheet capacity to fund our growth. Gearing is 19.3%, net debt to EBITDA is 0.5x , and cash and available banking facilities total AUD 288 million.
In addition to this, we have finalized and announced a new AUD 145 million syndicated asset finance facility that further increases our available funding capacity by AUD 85 million. I would now like to hand back over to Mick to discuss our strategy and outlook before opening to questions.
Thanks, Peter. The strategy outlined on slide 19 will be familiar if you have followed our progress over the last few years. It remains unchanged from last year with the same strategic priorities, despite some uncertain market conditions in recent times. This strategy is building on the foundation we've created over the last five years and is designed to deliver improved financial performance through modernizing and diversifying our business. We remain focused on margin enhancement and optimization of our current projects. We expect our margins to continue to improve given many things. Calling out the commencement of our new contract awards at target returns, the Stage 5 Telfer extension at correct rates, as flagged yesterday, and scale benefits of the larger underground business.
We continue to look to diversify and expand our service offering across the mining value chain, with a specific focus on lower capital services such as civil construction, engineering, and underground mining. An end-to-end suite of services strengthens the solutions we can offer our clients, increases returns and scalability of our business, and creates new business opportunities for us. The King of the Hills project is a good example of this, as it is an AUD 650 million combined surface and underground contract. We think being able to offer both services and the synergies it provided gave us a competitive advantage and value for the client. We're also focused on modernizing our offering and constantly finding new areas of differentiation, including smart investments in technology. This will play an increasing part in our future as the mining industry moves towards greater automation, alternate energy sources, and digitization.
slide 20 shows how we've diversified and expanded our business since FY 2018, when nearly 90% of our revenue came from surface mining. As Peter touched on earlier, our FY 2021 underground business has grown to near a quarter of our revenue. This has assisted in improving margins and returns on capital. EBITDA and EBITA margins have increased from 16.8% and 5.8% to 18.5% and 7%, respectively, over this period. Our longer-term target is to continue to diversify the business mix with underground surface and mining support businesses representing a more even mix. This will create a more scalable business and support us in potentially exceeding our stated financial targets of EBITDA of 20%, EBITA of 8%, and return on average capital employed of 15%.
Before I talk about the outlook for FY 2022, I want to talk you through our order book and tender pipeline, as it's these that give us confidence when we talk about our positive outlook and guidance. slide 21 shows our order book by year. The total secured order book at June 30 is around AUD 5 billion. This excludes short-term churn work.
In addition to this, Warrawoona and the recently announced Telfer and Tropicana extensions will add a further AUD 820 million to the order book, which is a very strong position for us to be in. Importantly, you can see from the chart that AUD 1.3 billion of this is secured for FY 2022, providing a very solid foundation for our FY 2022 guidance, especially when you consider we have historically achieved between AUD 100 to AUD 150 million per annum from civil and underground services work, which is not in the order book shown.
If you look beyond that in FY 2023 and 2024, at this early stage, both years are also in a healthy position from a secured earnings standpoint. Even after our recent project awards and extensions, there remains a very solid pipeline of credible opportunities totaling over AUD 7.1 billion. The majority of these opportunities are in Australia and predominantly gold and copper projects. Importantly, in line with our strategy, our pipeline is evolving to create a more diversified, scalable business with more opportunities in underground and mining support services. Underground opportunities now represent 45% of the pipeline or AUD 3.2 billion of this work. Whilst mining support services represents 19% of the pipeline or AUD 1.4 billion of the potential work. When you combine our significant order book and tender pipeline, we're in a good position to deliver continued growth in the right areas over the coming years.
That brings me to our priorities and outlook for FY 2022 on slide 22. At the macro level, the outlook remains optimistic. Demand for commodities remains strong, and there's a very healthy pipeline of opportunities and projects. For those who can navigate through this period of heightened risk and execute well, there will be significant opportunity. As a business, we have secured a high level of earnings over the next few years, started a large proportion of those projects, and we have a solid balance sheet to fund our continued growth. I talked about our long-term priorities for the group in the body of the presentation, but specifically outlined here are the focus areas for the remainder of this financial year.
These include a laser-like focus on the safety and well-being of our workforce, finalizing the Batu Hijau Phase VIII extension, continuing to progress our operational technology solutions, which are gaining traction quickly, and further evolving our strategy to expand and diversify our earnings. I did outline our guidance for FY 2022 at the beginning of the presentation. I'd like to recap it again here if I could. We expect revenue in the range of AUD 1.4 to AUD 1.5 billion and EBITA in the range of AUD 95 to AUD 105 million. This is based on an AUD-USD exchange rate of AUD 0.75. Our guidance is supported by a strong order book of AUD 5 billion and in particular, AUD 1.3 billion of work already secured in FY 2022. I'm excited by the business outlook that our amazing team of over 7,000 people have worked incredibly hard to create.
We have demonstrated the resilience of our team and business by maintaining our earnings growth in a challenging market. More importantly, it positions us well to continue this performance going forward and sharing some of the rewards of what I think will be a healthy period for those in the mining industry. Macmahon is becoming a more diverse business, which will create a less capital-intensive business with greater scale that can service clients through the life cycle of their mining operations. We are well-positioned to continue this into FY 2022 and beyond, with a strong order book and tender pipeline. With that, I'd like to hand back to Kaylee to open for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from James Wilson with Jarden Australia.
Hey, guys. Congratulations on the results, and thanks for taking my question. Just one from me today. Do you see any potential upside on the guidance range that you've provided us with, given the business update and the new contracts that you came out with last night?
Yeah, thanks for the question, James, and the congratulations. If you look at the second half of last year, double it, I suppose it finishes just below the midpoint of guidance. Obviously, we've taken a position on the risks as a result of COVID-19, and some small projects fell away, particularly the one in Mogalakwena. However, like you said, if we start these projects well, maybe win some more work, get some more churn and perform better than expected, there's an opportunity to hit the top end of guidance. That's how we've picked the guidance and the range.
Great. Thanks, guys.
Your next question comes from Tony Greco, who is a private investor.
G'day, Mick. Congratulations as well from me on a solid, although probably not spectacular result, with a reasonably steady profit and dividend. I guess, six months ago at this presentation, we thought, gee, your CapEx almost surprised on the upside. I guess today you've kind of answered that question that, yes, your CapEx did go up for the second half. The profit hasn't reflected that yet. I guess what you're saying is, that will come through in 2022. Would that be correct?
Tony, that's the way we look at it. If you look at the growth CapEx over 2021, 2022, it's about AUD 300 million. We've made it public the sort of numbers we'd expect in revenue and then subsequent earnings from that CapEx, and we'd expect to see a full- year of that in FY 2023.
Okay, that's good. As I said, I was a little bit surprised last year or six months ago to think, gee, the CapEx is rising pretty much without a corresponding increase in profit. I guess we just have to wait a little bit. Just another question. What have you got in place? Unfortunately, things seem to be going quite well, but mining companies tend to get a bit excited, and sometimes the good times in the mining industry turn around and maybe the iron ore price drops, gold price drops, et cetera. What have you got in place just in case that happens, and we find that maybe some of the jobs are cut short, et cetera?
Yeah, we start the mitigation for that very early, Tony, before we even tender for projects, because we see where they sit on the cost curve and the type of contract style that would allow us to work with our clients through the cycle. We've got a lot of alliances that'll allow us to dial back cost, dial up cost, depending on what the client needs, but it's never at the expense of margin, which is important. Added to that, I think the lives on the projects we're on are quite long-term. We also do have in quite a number of our contracts, if a contract was to be cut short, that there's an obligation on the client side to buy the gear. As an example at Byerwen and at Batu Hijau, that's the case.
There's a number of other protection measures there, but they're the main ones.
Okay, that's good. Yeah. The machinery is not entering the used truck market and being sold in discount. Your new facility that you just talked about yesterday, or that you announced yesterday, the AUD 145 million. Without telling us too much that you can't tell, is that looking at future CapEx perhaps with potential new job wins? Is that what you're looking at?
Oh, that's just. Oh, sorry, Tony.
Yeah, no.
I'll let Peter answer that.
Yeah. Okay. No, thank you.
Peter here. Clearly, as we've outlined, we have a CapEx program this year. Apart from that, if you look at the program, it covers OEM equipment, major equipment, trucks, excavators. It also covers ancillary equipment, and it covers new and old or secondhand equipment. Essentially, putting that facility in place gives us a range of options as to how we fund the program out this year. Really, it's just providing us greater flexibility while maintaining a good level of liquidity as well.
Okay. Yeah, no, because you're generating some reasonable cash there and you're holding back some cash.
We always maintain a reasonable level. We have an agreed level of liquidity that we want to hold within the organization. That gives us greater flexibility. I think the other point to highlight is that we've been able to put this in at very competitive rates. All in around 3%.
Yeah, that's very good. Excellent. Thanks for that, Peter. Thanks, Mick.
Thanks, Tony.
Your next question comes from Cameron Bell with Canaccord Genuity.
Morning, guys.
Hey, Cameron.
I'll be pretty brief. Just on the COVID side of things, I was wondering if you could give us some clarity around how much COVID actually added to your cost base. Better still, if you have an idea of how much the cost base and the productivity impacted your EBITDA.
Yeah. Look, it's a difficult one. It has increased costs a little bit, Cam, obviously, but a lot of it's been offset with costs that we haven't been spending, in terms of travel, accommodation, various things. Look, I'd say the result would've probably been AUD 2, AUD 3 million more, but that's a stab. I can find that out for you in more detail, Cameron, but that's what my gut says. We might've been closer to the top end of guidance without it, but obviously the guys did an amazing job managing what they had to get through the year, where we're at.
Yeah.
I suppose importantly, we're understanding it better too, and at Batu Hijau, for example, the whole workforce there has had their first shot of the vaccination. The Telfer workforce has all had their second shot of the vaccination. We're understanding it better as well. I expect that coupled with the fact that all the new work's been priced in today's dollars and we've got rise and fall mechanisms, hopefully the biggest impact is behind us.
Yeah. Okay. Just the other one for me, do you expect your cost of debt to come down at all over the next 12 months?
Well, I think with this facility going in place, throughout last year we did retire some old, more expensive facilities. It will come down marginally, but as I said, if you look at, say, the cost of this new facility, it's around 3%. We did put a syndicate facility in place last year, which is similar, around 3%. We are then dealing with financing options through our OEMs, which are slightly higher, but still quite competitive.
Yeah. Okay.
Would look to see some decrease in the overall cost of financing this year. Yes.
Great. Thanks, guys.
Thanks, Cameron.
Your next question comes from Alex Spear with Cbus Super.
Hi, Mick. Congratulations on the result. Looks really good. My question's around Batu Hijau and the phase VIII, and just timing around that extension. Could you give us a bit of clarity on what your expectation is around timing and also impact on EBIT guidance for FY 2022, if at all, and also impact on CapEx guidance? Thanks.
Yeah, definitely. No worries, Alex. Well, good question because we have been talking about this for some time, but it'll be good to be able to give people a bit of comfort about it. Firstly, in terms of timing, if you have a look at the order book, you can see 2022 not really impacted because it's secured work you can see there already. You can see it just start to creep in in FY 2023 when phase VII came off. In terms of urgency to get it over the line to maintain earnings, there isn't much there. The priority for the people at Batu Hijau and AMNT has been about protecting the people and just protecting against COVID, obviously. We wanted to make sure that was the priority for us all to focus on, and once we get that addressed, we can come back to concluding phase VIII.
It's given us an opportunity to run a whole lot more scenarios, which we can work together on and pick the optimal one in for both organizations and taking into account many criteria, including the impact on our balance sheet. For us, the relationship is still very sound. I'm still very confident in progressing to get phase VIII. We've got a life of mine contract there.
The other piece Chris just pointed out to me, that's why I paused there is, it is a related party transaction, so there's a little bit of extra rigor that we'll go through and make sure that all investors can get a little bit more detail on that deal just to keep them comfortable or you comfortable because, we've had a history of good returns from Batu Hijau and what we put forward when we do that, I expect to be the same.
Okay. Yeah, that makes sense. Great result, guys. Thanks.
Thanks, Alex.
There are no further questions at this time. I'll now hand back to Mr. Finnegan for closing remarks.
Look, we thank everyone for taking time out today. I know there's a lot of results being released today, so we appreciate your time, and I know we can only see a few of you face-to-face over the next week and a half, but for those we do see face-to-face, we look forward to it. The others, we look forward to seeing you virtually. We really appreciate your time this morning, and no doubt we'll speak to most of you over the coming week or two. Thanks very much.