Thanks, operator. Welcome to the Macmahon 2026 first half results presentation. I'm Mick Finnegan, and with me is our CFO, Ursula Lummis. Thanks for joining us today. We appreciate your interest in Macmahon and the opportunity to present our half-year results during this busy period. We'll run through the presentation lodged on the ASX this morning, and then we'll be happy to take your questions at the conclusion of the presentation. Beginning with the financial highlights on slide two, I'm really pleased to say Macmahon has delivered a strong first half, with healthy growth in revenue and earnings. This continues our demonstrated track record of growth sustained across our mining and civil infrastructure businesses. In fact, civil infrastructure is increasingly a key contributor to revenue and earnings, and today's result further validates our decision in 2024 to acquire Decmil, marking our re-entry into the civil sector.
Achieving this earnings performance is an important milestone, and before I go to the numbers, I wanted to take this opportunity to thank the entire Macmahon team across Indonesia, Malaysia, and Australia for this outstanding achievement. Group revenue was up 11% to AUD 1.3 billion, with underlying EBITDA up 10% to AUD 200 million and EBITDA up a strong 17% to AUD 91 million. This places us well to achieve our full-year guidance, given our expectation of a stronger second half. The business continued to generate strong underlying operating cash flow, which was up 17% to AUD 190.5 million for the half, in line with the EBITDA growth. Free cash flow after tax, interest, and capital expenditure was a robust AUD 39.3 million after paying the final FY 2025 tax together with FY 2026 provisional tax.
The strong cash generation allowed further reduction in debt levels and brought the gearing down to a modest 17%, providing increased plenty financial flexibility. We expect strong cash flow generation to continue in the second half, which has supported our decision to increase the interim dividend to a fully franked AUD 0.0095 per share. The increase is a result of sustained improvement in earnings we have been able to deliver, our confidence in that continuing, and the appropriate allocation of capital through the business. Validation of that appropriate capital allocation is a continued improvement in ROACE. At 21.2%, it was a further improvement on the 30 June 2025 result and up significantly on the 17.5% in the previous corresponding first half.
Once again, this reflects our strategy to diversify the business and have a balance between leveraging our balance sheet to differentiate our proposals and continually improving our ROACE to above the 25% target in time. Rounding out this slide, we have entered the second half with a strong order book of AUD 5.1 billion, with a strong tender pipeline at AUD 25.6 billion, which around 50% is expected to be awarded within the coming 12 months. Slide three summarizes the key operational and financial highlights for our mining business. Mining operations remain our biggest business by both revenue and employee numbers and has delivered revenue and underlying earnings growth at an improved margin.
In surface, we concluded a three-year extension of Byerwen, at AUD 792 million, with a two-year extension option that could see this increase to AUD 1.32 billion. There was also a seven-year extension at Langkawi in Malaysia, highlighting the strength and long-term nature of our customer relationships. The surface mining pipeline remains robust, with AUD 9.6 billion of opportunities being pursued, of which AUD 5.6 billion is currently expected to be awarded in the next 12 months. This is obviously an enviable position, which allows us to be more selective. Underground also recorded new awards in both Australia and Indonesia, supported by a strong pipeline of AUD 8.1 billion, with AUD 3.5 billion currently expected to be awarded in the next 12 months.
This pipeline underpins the strategic objective of achieving AUD 750 million of revenue in underground operations by the end of FY 2028. Over to slide four on our civil infrastructure business, which has performed well with strong half-on-half revenue growth, which represented 23% of the group's first half revenue, putting us well on track for our stated revenue diversity goal. The business delivered revenue, earnings, and margin growth, with revenue of AUD 307 million and underlying EBITDA of AUD 19 million. These numbers were up 61% and 67% respectively, which was an outstanding achievement and represented a contribution to total group EBITDA of around 21%. Underlying EBITDA margin was 6.2%, an improvement on the 6% achieved in the previous corresponding half.
There has been a steady stream of new work secured across a diversified portfolio of project types. The AUD 500 million of new awards demonstrates excellent momentum and the division's capability across resources, government, and renewable infrastructure sectors. Pleasingly, subsequent to December 2025, Decmil has started moving to the larger packages, as can be seen with the award of the West Angelas bulk earthworks…. The tender pipeline reflects robust growth prospects with just under AUD 8 billion in opportunities, of which over AUD 5 billion is expected to be awarded in the next 12 months. Again, this is a carefully screened pipeline to include credible opportunities for the business, with a disciplined tendering approach aligned with Macmahon's tendering guidelines. Slides five, six, and seven recap our key projects across surface mining, underground mining, and civil infrastructure, including some of the new work won during the half.
The tables outline key projects, their tenure, cost curve profile, and related commodity exposure. I really don't intend to go through this list now, but I'm happy to answer any questions in the Q&A or if we see you in person in the coming days. Slide eight illustrates the diversity in our revenue across several market segments. While our work is concentrated in Australia, the company has a strategic objective to increase Indonesian operations across our core sectors, targeting 15%-20% of group revenue from this region. Importantly, we've been diversifying our service offering and moving further into the higher-royalty businesses in the underground mining and civil areas. Revenue diversification by commodity demonstrates meaningful exposure across multiple commodities, and we expect this to improve in focused areas given the intentional broad mix of our pipeline.
The business is well diversified by client, including Tier 1 Global and Australian mines. Moving on to slide nine on people and safety. Macmahon now employs over 10,000 people across operations in Australia and overseas. While the group's TRIR has continued to reduce since FY 2021 as the workforce has grown, sadly, one of our valued Macmahon employees passed away at the Fosterville Gold Mine in December 2025. This event is subject to an ongoing investigation. The safety and well-being of our people remains our highest priority across all levels in the organization, with a focus on promoting a culture of awareness and continuous improvement. Mental health and the well-being is also vitally important. I'm pleased to say we believe Macmahon is a leader in our industry with our Strong Minds, Strong Mines program.
Mental health is embedded as a core workforce priority, and we recognize that psychological well-being directly contributes to operational safety and team effectiveness. We continue to invest significant resources in developing our workforce capabilities through the Macmahon Winning Way Leadership Program and our Emerging Leaders program, providing expertise and leadership capability through all levels of the organization. And finally, on people, our commitment to promoting diversity in our workforce is progressing. We've achieved 4.3% representation of First Nations employees across our Australian operations, and just under 20% of our Australian-based employees are female. Importantly, we have achieved an 11% reduction in Australian-based female employee turnover between December 2023 and December 2025, which we hope is a result of our inclusive culture, creating an environment where women choose to build their careers with Macmahon. Business sustainability is an ongoing objective for Macmahon.
Slide 10 outlines some of our sustainability-related activities and metrics. We have prepared a voluntary standalone sustainability report, along with our annual report, for many years now. I won't go through the detail on the slide now in the interest of time. However, some items to call out during the half include progressing our AASB S2 implementation, which strengthened governance systems and disclosure preparation, and establishing a preliminary Scope 3 baseline in preparation for future disclosures. The company has also established the Macmahon Advisory Committee on Sustainability to strengthen our activities in this area. I'll now hand over to Ursula to discuss the financials.
Thank you, Mick. Good morning, everyone, and thank you again for joining us today. I'll begin with a quick overview of our half-yearly financial performance on slide 12. Mick highlighted the first half results as another strong performance for the business. While this is an outstanding achievement, this slide illustrates that this first half result is not an outlier but demonstrates a sustained track record of achievements in all key financial metrics. Revenue has grown from AUD 810 million in the first half of 2022 to AUD 1.3 billion in the first half of FY 2026, representing sustained revenue growth and diversification across the business. Underlying EBITDA has similarly progressed from AUD 139 million in the first half of 2022 to AUD 200 million in the first half of 2026, while maintaining healthy margins.
Underlying EBITA has demonstrated particularly strong momentum, growing from AUD 47 million in the first half of 2022 to AUD 91 million in the first half of 2026, almost double. Return on average capital employed has been a standout, progressing from just below 13% in the first half of 2022 to over 21% in the first half of 2026. This improvement reflects ongoing strong growth, supported by a focused and disciplined approach to capital management, and demonstrates our progress towards our return on average capital employed target of greater than 25%.... Looking at the profit and loss on slide 13, to recap, revenue increased 11% to AUD 1.3 billion, driven by the new awards in our civil infrastructure and underground mining operations in both Australia and in Indonesia.
This strong top-line performance reflects the successful execution of Macmahon's diversification strategy, which has significantly grown the company's addressable market and expanded our service offerings. Underlying EBITDA grew 10% to AUD 200 million off the back of the strong revenue growth, together with operational improvements across the business. Underlying EBITA growth of 17% to AUD 91 million is reflective of the strong growth performance in projects with reduced capital employed, resulting in lower depreciation expense but a higher return on average capital employed. The EBITA margin of 7% was driven by the award of this new work, together with the operational improvements across the business. Net finance costs decreased to AUD 15 million from AUD 17 million in the previous corresponding period, reflecting the improved debt management.
Following the debt restructure in June 2025, the effects of borrowing costs reduced to 6% as of the 31st of December 2025, compared to 6.7% for the comparative period last year. This improved borrowing costs, combined with a lower net debt level, reflects our focus on capital and cost discipline in the business. Underlying net profit after tax, excluding amortization, grew 17% to AUD 55 million. This excludes adjusting items of AUD 6.7 million, comprising a share-based payment expense of AUD 2.5 million, customer contract amortization of AUD 2.9 million, and the software as a solution payment of AUD 1.2 million. Reported net profit after tax was AUD 48 million, compared to AUD 30 million in the first half of 2025.
With all tax losses across the group fully recognized, the effective tax rate was 30.8%, which we expect to continue going forward. The half-year dividend was increased by 73% to AUD 0.0095 per share, fully franked, equating to a payout ratio of 37%, in line with our recently increased dividend payout ratio range of 30%-45% of underlying earnings per share. The net debt waterfall chart on slide 14 sets out our major net debt movements in the last six months, drawing out the free cash flow generation and the reduction in net debt. Net debt reduced from AUD 162.5 million at June 2025 to AUD 144.1 million in December, driven primarily by strong EBITDA performance and continued discipline in capital expenditure.
Underlying operating cash flow was AUD 190.5 million, with a strong cash conversion for the first half of 95.2%. We expect these strong operating cash flows to continue into the second half. Free cash flow was AUD 39.3 million, after interest and tax of AUD 54.6 million and net capital expenditure of AUD 96.6 million. Important to note, though, is that the taxation included the estimated final tax payment for FY 2025 of circa AUD 20 million. Our capital expenditure forecast for the full-year remains unchanged at AUD 245 million, with a greater weighting to the second half period. Over to the balance sheet summary on slide 15.
The main outcome of the strong cash generation can be seen on Macmahon's balance sheet, with gearing reducing to 17% and the net debt to EBITDA dropping to 0.36 x. It goes without saying that our balance sheet finished the first half in a very strong position, with solid liquidity and low, stable gearing. Cash and available banking facilities totaled AUD 539 million, providing substantial operational flexibility and headroom for growth and capital deployment opportunities in line with our capital management approach. Our diverse borrowing facility also provides flexibility and access to capital across multiple funding sources, as you can see. Again, we are pleased with the return on average capital employed reaching 21.2%, progressing well toward the upgraded strategic target of greater than 25%, as I've mentioned earlier. I'd now like to hand you back to Mick before we open to questions.
Thanks, Ursula. Let's move straight to slide 17, where we talk about increasing revenue diversification and the reduction in capital intensity across the Macmahon business, culminating in improved ROACE, which we are now starting to see. These metrics go hand in hand, and they insulate our business from volatility and exposure to the cycle, while also providing an improved blend of key financial metrics, resulting in growth in returns to shareholders and free cash flow. Our target has been to transform the business to a more equal contribution across our surface mining business, our emerging underground business, and our civil infrastructure business. This has evolved to also include growing our Indonesian operations to contribute 15%-20% of group revenue, up from current levels of around 10%. Our journey demonstrates this strategy is clearly working.
Going back, our revenue mix was dominated by surface mining, with low capital intensity services representing just 11% back in 2018. Today, in the first half of 2026, that mix has fundamentally shifted to 51% surface mining and 49% higher ROACE services.... This business mix evolution, business mix evolution will continue to be driven through our increasingly diversified pipeline, where higher ROACE services now represent 63% of our opportunities pipeline as at the end of the first half of 2026, compared to just 22% in FY 2018. Our ROACE has improved to over 21% in the first half of 2026 as a result of this diversification. Our increased ROACE target to over 25%, up from our previous 20% target, reflects the opportunity we see to continue this diversification.
This brings me to our work in hand and tender pipeline on slide 18. Macmahon's current order book stands at AUD 5.1 billion. This includes recent contracts awarded by Rio Tinto in January 2026. But as with our usual practice, excludes extensions and short-term civil and underground churn work, and this is typically around AUD 100 million-AUD 150 million annually. The order book brings FY 2026 revenue already contracted to AUD 2.5 billion, putting us in a very strong position to deliver on our revenue guidance for the full-year. The order book run off is also robust, with work in hand for FY 2027 already at AUD 1.7 billion and AUD 1.1 billion for FY 2028.
This excludes scope growth on existing projects, potential extensions and variations to current contracts, as well as the churn I mentioned a moment ago. Our tender pipeline has increased to AUD 25.6 billion and is consistent with our strategic target of achieving increased diversity in the business and further driving improvement in our return on average capital employed. Around AUD 14 billion of this is currently expected to be awarded in the next 12 months. This is an enviable position and allows us to be selective, and our team remains very focused and motivated to convert the right opportunities. Slide 19 reiterates our message around capital management at Macmahon. Our priorities remain unchanged and include maintaining a resilient balance sheet and liquidity, retain growth funding flexibility, and increasing returns to shareholders. The charts on the slide show our record against these objectives.
Our performance has been strong across all three objectives since the refocus on capital-light growth in 2022, 2023. Debt has been trending down, strong earnings growth has been reflected in increased earnings per share, and we've increased returns to shareholders through increasing dividends and dividend payout ratio. With this continued improvement, we've increased the interim dividend to AUD 0.0095, fully franked, which at a payout ratio of 37.1%, is approximately in the middle of the newly increased dividend payout range of 30%-45%. I'd like to conclude with slide 20 on our priorities and guidance for FY 2026 before we break for questions. Our priorities for FY 2026 are focused around progressing to our long-term growth and diversification targets.
These include growing underground to over AUD 750 million and the civil infrastructure business to a billion-dollar revenue enterprise by the end of FY 2028. In parallel, we want to increase the contribution from Indonesia across the three core sectors to 15%-20% of group revenue, albeit this might be a slightly longer timeline. Our ROACE target was recently increased to exceed 25%, and we'll work hard to achieve this, as we have with other metrics in the past. The outlook for FY 2026 remains positive, underpinned by a robust order book of AUD 5.1 billion, secured FY 2026 revenue of AUD 2.5 billion, and a strong tender pipeline of over AUD 25 billion, providing confidence for future growth.
We therefore expect continued strong performance in the second half of FY 2026 and have reaffirmed our FY 2026 guidance of revenue of AUD 2.6 billion-AUD 2.8 billion and underlying EBITDA of AUD 180 million-AUD 195 million. Now, with that, I'd like to hand back to the operator to open for questions.
If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. And your first question comes to the line of James Lennon from Petra Capital. Your line is open.
Well done, Mick and Ursula. Great results. Two questions from me. Firstly, just on the margin, are you able to give a bit more detail around, what's driving that, that margin improvement, I guess, per segment? I mean, obviously, the civil was, was a great outcome, but also surprised to see, you know, such a good uplift in the, the mining side. So if you could talk a bit more about the, the margin uplift, that'd be great.
Yeah, for sure, James. Thanks, thanks for your note. You're right, the margins in mining, I think probably were a little bit, little bit better than what was being expected externally. But internally, with, with, you know, Fox leigh coming off, that wasn't great for us, so that was actually dragging down results. And the reality is, the new OpCo model we've rolled out, I think is starting and gaining traction, and we've seen efficiencies achieved through the result of that going out and the teams being narrow and being able to focus more on their specific activities. So, we've seen a number of projects in mining perform a lot better. If you recall last year, the first half of last year, underground underperformed. We corrected a few contracts, really stepped up performance. That performance has held-...
Now we've seen that translate through into surface mining. Added to that, we had a bit of luck with some of the seasonality, James, and there wasn't any startups, which, you know, can tend to drag margins down. So there was a few things like that as well. But predominantly, it's underlying performance and execution of the team. They've done a fantastic job. We're not at the 8%, though. We expect to see mining at 8%. So there's still some benefits to come there. They'll come with scale in underground, and also continued improvement on execution, but we do feel we're on the right path.
Great, okay. And just in terms of the civil side, as you're increasing the size of the contracts, is that expected to have any sort of benefit for margins or not really?
We've always said, James, as I think you'll probably recall, civil will be between five and seven, probably on balance, around six. Typically, resources, civil is closer to the seven. You know, the government renewables is between that five and 6.5, so the blend should come out from six. As we get scale, I would hope to do better and push the blend towards seven, but we don't wanna-- we just wanna manage expectations at the moment. And if we say six from civil, and then, as we've always said, eight from surface, nine to 10 from mo, underground and one or two points more across all three in Indo, we'll hit the targets that we're after. Predominantly, it's that ROACE target, exceed 25.
But for the time being, back to the question you asked around civil, if we hold six as an expectation, we'll always be striving for better, of course, and not at the expense of the clients. We want it to be through better ways of doing thing, things and good execution.
Great. Okay, thank you. And just, lastly, on the working capital, that's sort of been moving around a bit, I guess, with you know, programs starting up, et cetera. What's the sort of rate going forward, do you think, for net working capital?
I'll hand to Ursula. I mean, one of the things I just wanted to highlight before I do was we're really pleased, and I know I'm forcing this in, so I apologize, but that free cash flow of AUD 40 million that you saw this year, that actually included AUD 20 million of tax from last year. So, we paid provisional for 2026, which will be what we do moving forward, pay provisional for the year in that we're in. Obviously, this year we had to pay that, and we paid retrospective tax. Now we're a full taxpayer in Australia. So, that's thrown it out a bit, but I'll hand to Ursula to give you the detail, James.
Thanks. Hey, James. So if you look at our history, James, you'll see on the first half, our working capital management, our cash conversion always goes down generally. But I think one of the useful things with this OpCo model that is working quite effectively is each MD is focusing on their, one of their targets is to get that working capital up to 100%. So if you look on a half, on average, we do the 85, maximum 90, and then for the full-year, we get to the 100%. So you'll see with this half, it's improved to that 95, and we, we don't, we do expect that then to go back to the 100% for the full-year.
It really is a factor of having all the MDs now focusing on their divisions and bringing their working capital up, optimizing it for us across the whole board.
Of course, James, when there's a startup, that builds a bit of working capital in whatever period that's there as you're getting to payment terms. But I think, Ursula is on the money. If you assume 90%-100% on average, you know, a bit lighter in half one at the moment, and then once we get to steady state, it should be flatter, but that's what we're after.
Brilliant. Thanks for your time.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes to the line of Gavin Allen from Euroz Hartleys. Your line is open.
Good morning, Mick and Ursula. Thanks very much for all that. It's truly. Just a quick one from me. So you did talk about sort of AUD 14.4 billion up for grabs in the next 12 months, which is a mountain of prospect. Just, I'm curious about how we think about your win rate expectations in relation to that number in the context of you being selective. So, you know, what does success, success look like on that front, sort of 12 months from now?
Yeah, absolutely, Gav. I mean, it's an interesting one because, if I break it down, in that AUD 14.5 billion that's due in the next 12 months, AUD 5.6 billion of that's in surface. Two of those were already preferred or negotiating, and they got some, you know, some good models around capital. It all fits within our future-looking forecast for CapEx. So that obviously, we should secure those. The others, it's probably, I'd say 1-in-3 on balance there in surface. In underground-
Yep.
That's 3.5 due in the next 12 months. There's two that are imminent, where we're either preferred or sole sourcing and negotiating, so I'd like to think those are secured. Beyond those, it's probably, you'd say 1-in-2 , 1-in-3 , and then in civil, maybe a little bit more competitive, Gav. That 5.3-
Mm.
That's gonna be awarded in this next 12 months. I'd say it's probably between 1- in- 3 and 1- in- 4.
Yeah. And that civil side is starting to show up in bigger-sized packages for you?
Absolutely, yeah, for sure. We can't shy away from the fact that that's where we need to put that business. We put it out there, and we need to do it, and the team are doing a good job, and I think we're starting to build the credibility out in the industry and the sector with the clients and that they're moving us towards bigger panels and bigger projects. Now we've got to start securing them, of course.
Very good. That's plenty for me. Thanks very much, guys.
... As a reminder, if you do wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. And your next question comes to the line of Cameron Bell from Canaccord. Your line is open.
Hi, good day, guys. Just wondering if you could expand on the CapEx indications for the second half? Like, where you're sort of roughly allocating that money towards.
Hi, Cam. Yeah, sure. So for the second half, we've we said we'll stay with the AUD 245 million, so it's about AUD 145 million. If you look when we guided in the beginning of the year, there was about AUD 35 million of new, and we've incurred about AUD 15 million of that. So there's still roughly about AUD 20 million of new capital or growth capital to go into the underground project, primarily, 'cause as you know, civils is light capital, mostly rental. And then the rest is just sustaining, which holds up the depreciation.
Okay, sure. And then I guess kind of an extension of that: so presumably, you've got a bit of spare kit floating around, given some of those contract conclusions. Does that just roll into these, you know, this massive midterm tender pipeline?
Yeah, absolutely, Cam, particularly in the underground. Obviously, I mean, with Genesis coming off, we sensed that it was a long, long process, so we were never at a point where we thought it was 100%. So we kept the pipeline warm and, you know, our people, our IP and the fleet we retained there and the that we've got sitting elsewhere will be redirected to that new work for sure. If we can optimize some of that new CapEx and we don't need it, we will, but equally, we want to be good partners to the new clients, but it certainly won't exceed the budget.
Thanks, guys.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. If there are no further questions, I'll hand back over to Mr. Finnegan for closing remarks.
Yeah, thanks, Kevin. Look, I, I appreciate everyone taking the time. I know it's an incredibly busy period. If anyone does have any questions, please reach out to us, and if we're seeing you on the road show over the next two or three days, we look forward to seeing you. And if, if we're not and you'd like to, please, please reach out to us. We'll make time. We appreciate everyone's support. We know we've still got much to do, and that, but the team's committed to it. So thanks, everyone.
That does conclude our conference for today. Thank you for participating. You may now all disconnect.