Hi, everyone. Welcome to the Macmahon results presentation for financial year 2026, and thank you for joining us today during the busy ASX reporting period. We always appreciate your time and interest in Macmahon and the opportunity to run through the results presentation. After the presentation, Ursula and I will be happy to take your questions. Starting with the financial highlights on slide 2, Macmahon has had another strong year with the business delivering record revenue and underlying earnings growth. We continued to improve the return on average capital employed towards the 25% target only recently set. The increase to 22% was due to our clear focus on improving productivity and discipline across the business and strategic new awards building scale in the target areas, which has increased the delivery of free cash flow.
As you know, managing capital intensity in the business has been an ongoing focus for us, and the improved returns have allowed us to again increase our dividend payout to shareholders. Global geopolitical instability and its impact on commodity prices, trade, and the cost of doing business continue to present challenges, particularly with regards to energy costs. Macmahon has been navigating these well, underpinned by our diverse order book and client base. We have been closely monitoring and managing costs and risks, and will continue to do so as we execute on our strategy to deliver value for our clients and our shareholders. Some highlights I'd like to call out include new records for revenue and EBITDA and further strengthening of our balance sheet as we again reduce net debt.
Revenue and EBITDA were AUD 2.6 billion and AUD 190.1 million respectively, and we saw improvement in our EBITDA margin to 7.3% from 7.1% in the prior year. Cash flow generation remains a highlight of the result, with underlying operating cash flow of AUD 387 million remaining strong and free cash flow of AUD 103.1 million. Free cash flow is down on the previous year, primarily due to Macmahon paying the final FY 2025 tax in FY 2026 together with the FY 2026 provisional tax payment.
Net debt of AUD 111.1 million reduced 32% on FY 2025. Importantly, gearing has dropped to 13%, which is in line with our expectations for the year. Both debt and gearing are now below pre-Decmil acquisition levels, which reflects our rigorous and disciplined approach to capital management. Total dividends for the year increased by 47% to AUD 0.022 per share fully franked, representing a payout ratio of 41% on underlying earnings per share.
FY 2026 ROACE was 22%, which exceeded our previous long-term target of 20%, and up from the 21.2% at the half. We believe we can continue to increase ROACE through our strategy and are tracking well towards our current long-term ROACE target of above 25%. The order book is currently AUD 5.9 billion, up from AUD 5.1 billion at the half, and strongly supported by a robust tender pipeline of AUD 25 billion, of which AUD 13.8 billion is expected to be awarded within the coming 12 months. The order book includes major contract awards announced post-June 30, including the AUD 355 million three-year Mount Marion contract with Mineral Resources, the AUD 406 million five-year Snowy River project in New Zealand with Endura Mining, and the AUD 50 million Mamre Road project with Transport for New South Wales in Sydney.
Work in hand already locked in for FY 2027 is AUD 2.2 billion. This does not include the AUD 240 million preferred contractor announcement made last week in relation to Medallion Metals' Ravensthorpe gold project. It also excludes short-term civil and underground churn work and future contract cost escalation recoveries as per our usual reporting practice. Slide three shows our historical performance relative to our guidance, but also the long-term track record and consistency in delivering growth. I am very pleased we have extended our track record of meeting or exceeding our guidance, our market guidance, to 10 consecutive years. Our CAGR over this period has been 25% in revenue and 21% in EBITDA. I can again assure you that we are very motivated to maintain this track record of consistent success into the future.
I appreciate many of you are familiar with our business, so I will only briefly touch on slide four to recap how our business is structured. We have three operating business groups, being surface and underground mining businesses and our civil infrastructure business. Each of these operating teams brings its own specialized skills and expertise to the group and allows Macmahon to deliver a wide range of services to our clients in Australia, Indonesia, and across our region.
Our corporate team is focused on strategic growth, leveraging home ground to secure strategic partnerships, and pursuing M&A growth opportunities to establish a whole-of-mine service offering. FY 2026 highlights in our mining business are shown on slide five. Surface and underground mining combined generated almost AUD 2 billion in revenue for the group. Underlying EBITDA was up 6% on FY 2025 to AUD 157 million. The EBITDA margin increased to our long-held target of 8%.
Again, an improvement on our FY 2025 results. Our surface mining team secured over AUD 1.1 billion of new work, including a AUD 792 million extension at Byerwen, AUD 190 million five-year letter of intent for open pit mining at Wonawinta , and AUD 150 million contract for the restart of open pit mining at Mount Carlton. Our surface tender pipeline of AUD 10 billion, of which AUD 6.6 billion is expected to be awarded in the next 12 months, is a very selective pipeline, including key strategic partnerships. Our underground business had another successful year, winning new work, including an initial AUD 55 million, 12-month award at Majestic, which was then followed by a 12-month extension, a AUD 36 million contract at Kucing Liar in Indonesia, and commencing early works at Mount Carlton, where we received a letter of intent in March.
Since June 30, our underground team has won a AUD 355 million contract at Mount Marion and a AUD 406 million contract at the Snowy River project in New Zealand. The underground business is growing in line with our expectations and now contributes 24% of group revenue. We continue to target revenue growth from our underground business to achieve the AUD 750 million run rate by the end of FY 2028. This expectation is underpinned by an underground pipeline of AUD 6.2 billion, of which AUD 3.1 billion is expected to be awarded in the next 12 months. Included in this pipeline is a Ravensthorpe gold project, which Medallion Metals recently announced us as preferred contractor on.
Some highlights from our civil business over the year are outlined on slide 6. The Decmil Civil Infrastructure business continues to grow, and its contribution to the group has increased to 26% of group revenue. Decmil continues to perform well and has cemented its place in the group alongside our mining operating companies, generating opportunities to promote our unique combination of services. Decmil secured inclusion into the highly strategic Rio Tinto Pilbara Bulk Earthworks panel, which we anticipate will be a source of future work for the team in Western Australia.
Order book growth remained a key focus for Decmil. The business again won over AUD 500 million in new work during the year. The work won includes civil works across roads, accommodation villages, infrastructure, and wind farms, and a significant number of resource projects, which creates strategically important opportunities to partner and build operational synergies with our mining businesses. Since 30 June, we announced a AUD 50 million early works contract win with Transport for New South Wales on stage two of the Mamre Road project in Western Sydney.
We are targeting robust growth from Decmil with an AUD 8.8 billion tender pipeline, of which AUD 5.1 billion is currently expected to be awarded in the next 12 months. This short-term pipeline includes a key number of larger projects in both the east and west. Slide seven shows our key surface mining projects. Like in underground, we have sought to diverse by our portfolio across clients and commodity, typically with long mine life. We also monitor their position on the cost curve and factor this into our risk assessments. Another point to highlight is the increasing prevalence of clients where we do both the surface and underground mining, such as AngloGold Ashanti, Wolfram, and Poboya in Indonesia. This highlights a competitive advantage of having an integrated service offering. Slide eight shows our underground mining projects, including projects and extensions awarded since 30 June 2026.
Our underground team have been awarded several major new contracts that advance our aspiration to become a Tier 1 regional underground mining operator. Slide nine shows our growing list of key civil projects. I don't intend to go through each project separately, but some of the key points to call out include the inclusion of Decmil as one of the three civil infrastructure contractors on the Rio Tinto Pilbara Bulk Earthworks panel, which creates a strong pipeline for future work. A growing list of civil infrastructure projects that are moving from the AUD 20 million-AUD 50 million range to the AUD 100 million-AUD 200 million range, and the diversity of infrastructure projects across government, resources, and renewables. Diversification has been a key part of our strategy, both in terms of risk management, but also a part of our efforts to reduce capital intensity in the business.
Slide 10 summarizes our revenue diversification across service offering, commodity, region, and clients. At a group level, this slide clearly shows the changing contributions of our operating companies and the diversity of our revenue sources. Our surface mining business now contributes half of our group revenue, whereas last year it was nearly 60%. This rebalance has been achieved through the growth in our underground and civil infrastructure businesses and their increasing contributions to the overall growth of the company. You may have noticed that gold is the predominant commodity of our key mining projects. This has been a longer-term feature of our order book and the markets we operate in, and we continue to have a relatively large exposure to gold at 52% of revenue. And we anticipate a growing contribution from lithium over the coming years, driven by increased global demand.
Our Indonesian business includes surface and underground mining and civil infrastructure services. Our expectation is that this will continue to grow its contribution to group revenue with a long-term target of between 15%-20% of group revenue. We have been diversifying our business mix to achieve optimal capital intensity to increase ROACE, but also retain some of the barriers to entry we see in some areas. This is visible in the very deliberate growth in the underground and civil infrastructure in recent years. These businesses now account for 50% of group revenue. They have strong pipeline opportunities, and we expect these businesses to continue growing strongly and increase overall share of revenue. Moving on to slide 11 on people and safety. This is a fundamental business priority, and we continue to invest in this area, both in the development of our people and in continued safety improvements.
Our safety performance improved in FY 2026, with total recordable injury frequency rates decreasing to 1.98 from 2.99 in FY 2025. This was a pleasing result when you consider we have a workforce of more than 10,000 people across our business. However, we remain focused on driving that number as low as possible. Through FY 2026, 18 graduates, six interns, 79 apprentices, 176 trainees, and 201 Emerging Leaders participated in structured learning and training programs at Macmahon. Training and development continue to be a priority for our business. 105 identified Emerging Leaders completed the Macmahon Winning Way leadership program in FY 2026, which is intended to accelerate development of new leaders within our business. This is in addition to the rollout of the new training programs, including the Critical Risk Management and Psychosocial Safety Leadership training.
We remain committed to maintaining a safe, respectful and inclusive workplace and monitor our employee representation. In FY 2026, female representation in the Australian-based workforce was 20.6% across all occupations, and First Nations people represent 4.5% of the Australian workforce. Slide 12 outlines some of the initiatives in the business designed to develop and promote Macmahon's culture and values, ensuring they remain at the core of our people development programs. Positive workplace culture is a key element of working at Macmahon and making us an employer of choice. Culture and fit are important elements in our recruitment process. They are defined during onboarding and reinforced and embedded throughout the employment lifecycle. Some of these programs I have previously mentioned and you are familiar with, including Respect at Macmahon, the Macmahon Winning Way, Emerging Leaders programs. Our Together.Works employee value proposition was launched and rolled out across our businesses this year.
Our EVP brings together our values and our people to ensure the experience of being a Macmahon employee is rewarding for both the employee and the company and is reinforced through our training programs and our communications across the Macmahon Group. Slide 13 outlines some of our sustainability-related activities and metrics for FY 2026. We continued to take important steps during the year to enhance our environmental and sustainability reporting.
This included complying with new mandatory reporting obligations and maintaining strong governance. Macmahon's 2026 sustainability report is contained within our annual report and will be available on our website. It is compliant with our AASB S2 disclosure obligation and represents a substantial advancement in our governance and reporting on sustainability matters. I am conscious of time, so I will not go through the rest of the details on this slide now. I will now hand over to Ursula to talk through the financials.
Thanks, Mick. Good morning, everyone, and thank you for joining us today. I want to start on slide 15 to recap our consistent group financial performance over the past decade. Mick touched on this when he discussed our guidance track record, but I want to expand on this just a little. The slide shows steady and predictable annual improvement in revenue, underlying EBITA, underlying EBITDA, and the return on average capital employed, all of which are now at record levels since FY 2017. Margins have shown growth across time, but also relatively low variability. EBITA margins have progressively increased in recent years from 5.9% in FY 2022 to 7.3% in FY 2026. I am pleased to say that our efforts around cost management, efficiency, and delivery of integrated lower capital services have been important drivers of margin growth.
You can also see the tangible results of our strategic focus on reducing the capital intensity and driving improved returns with strong and sustained improvements in the return on average capital employed over the last five years. Slide 16 shows a summary of our profit and loss statement. I won't go through all the numbers on the slide, but I will provide some additional context to a few of the high-level numbers. The 8% growth in revenue and 11% growth in underlying EBITA were mainly attributed to the contract execution plus new work during the year from underground and civil.
Earnings were driven by continuing the margin improvement, disciplined capital management, and cost optimization across the group. Growth in underlying EBITDA of 2% was lower than the 11% achieved in EBITA, primarily due to securing the new works in civil and underground businesses, which have a lower capital intensity. Our operating costs increased in line with revenue, albeit we started a number of new projects in this last quarter, including civil projects, which have a higher return on capital. However, slightly lower margins than we see from our mining services.
Our EBITA margin was 7.3% for the year, driven by lower depreciation with the completion of two historical surface projects. The commencement of lower capital works in underground and civil, together with the operational improvements across the business in the second half. Effective borrowing costs of 6.72% at June 2026, compares to 6% for June 2025, reflecting the impact of the RBA interest rate increases that we've experienced in FY 2026. Our effective tax rate for the year was 30.6%, and the group retains approximately AUD 104 million in franking credits as of 30 June 2026.
Finally, as Mick mentioned earlier, the total full-year dividend was increased by 47% to AUD 0.022 per share, fully franked, with a payout ratio of 41%, in line with our FY 2026 policy range of 30%-45% of earnings per share. Slide 17 steps out the major cash flow movements between the closing net debt last year and this year. The chart shows year-on-year net debt decreasing through strong cash flow generation. Net debt of AUD 111.1 million brings our debt levels lower than the levels pre the acquisition of Decmil. This is a significant achievement and in line with the targeted net debt levels previously set, while substantially increasing returns to shareholders at the same time. Strong underlying operating cash flow before interest and tax of AUD 387.4 million was the main driver to enable us to reduce the debt while increasing the shareholder return.
With strong working capital management, the cash conversion for the year was 98.4%, generating free cash flow of AUD 103.1 million. Tax-related cash payments were higher than the statutory rate for the group, which transitioned at the end of FY 2025 to a monthly taxpayer and paid the final FY 2025 tax installment in December 2025, together with the provisional tax payment for FY 2026. CapEx of AUD 200.5 million included growth CapEx of approximately AUD 20 million. This was lower than expected, with the new work wins moving towards the latter quarter of FY 2026, resulting in new work CapEx being moved into FY 2027. Our CapEx target for FY 2027 is sustaining capital circa AUD 200 million and growth capital of approximately AUD 66 million. I will finish with a snapshot of our year-end balance sheet on slide 18.
I have already mentioned the reduction in our net debt, but you can see on the slide a breakdown of our borrowings as of 30 June 2026. I will not go through this in detail other than to reiterate that the business is in a very strong position with regards to available liquidity. Cash and available committed banking facilities is AUD 566 million at the end of June 2026. Finally, Mick highlighted earlier that our FY 2026 return on average capital employed of 22% exceeds our previous long-term 20% target, and we are tracking well towards the new target of above 25%. Thank you for your attention, and I will now hand back over to Mick before we open for questions.
Thanks, Ursula. If we move to slide 20, the positive numbers we have delivered today demonstrate the success of our strategy to diversify our business and manage capital intensity. We will continue to focus on this going forward, together with expanding our end-to-end service across the value chain. The charts on the slide show the progress we have made in increasing the revenue contribution from our underground and civil infrastructure businesses. We anticipate achieving our goal of underground and civil infrastructure businesses at a run rate of AUD 750 million and AUD 1 billion respectively by the end of FY 2028. I should also mention that these figures consolidate both our Australian and Indonesian operations. We anticipate our Indonesian operations in surface, underground, and civil infrastructure will eventually increase from 10% of our current group revenues to contributing up to 15%-20% of group revenues.
We see meaningful upside and growth opportunities in the Indonesian market in the years ahead, and we are driving hard to consolidate our position as a leader in that fast-growing market. The resulting business mix we have today has been a key driver of improving our ROACE to the 22% we see. You can see on the slide the opportunity to further grow underground and civil businesses, which make up more than half of our AUD 25 billion tender pipeline. Steadily increasing the Indonesian contribution will only further increase the ROACE key metrics. I would like to briefly comment on the order book outlined on slide 21. I mentioned in my opening remarks that it was good to see our order book stand at AUD 5.9 billion compared to the AUD 5.4 billion at the end of FY 2025.
For FY 2026, we saw a good level of contract awards across the business, with over AUD 1.1 billion won in surface, close to AUD 350 million in underground, and more than AUD 500 million in civil infrastructure. Since the end of FY 2026, we have already announced significant new wins with a combined AUD 811 million, which includes Mount Marion, Snowy River, and Mamre Road, generating significant momentum into FY 2027.
The order book includes AUD 2.2 billion of work in hand for FY 2026. It does not include the AUD 240 million preferred contractor announcement made last week in relation to Medallion Metals' Ravensthorpe project, and also excludes short-term civil and underground churn work and future contract cost escalation recovery as per our usual reporting practice. The tender pipeline remains robust at AUD 25 billion. It is a bit higher than this time last year, with opportunities for growth across all strategic areas of our business.
There are AUD 13.8 billion of outstanding tenders submitted that we expect to be awarded in the next 12 months. Macmahon's capital allocation policy is summarized on slide 22. It is important to recap this and outline our structured approach as the business continued to deliver strong returns. Our policy continues to reflect the importance of balancing dividend payments to our shareholders, staying within our debt guide rails, and retaining financial flexibility to enable the continued execution of our growth strategy. The charts on the slide show our track record, and you can see that we have managed our debt within our guide rails while growing earnings per share and dividend returns to shareholders. We are well-positioned to continue this policy and continue delivering these results.
We feel we have met the market's expectations by achieving a 41% dividend payout ratio for FY 2026, well within the target range of 30%-45% of underlying EPS. As a result, we have now changed the payout ratio target to 35%-45%. This has been a result of our focus on strategic growth and achieving strong business performance, disciplined cost and capital management, and delivering on our clients' expectations. I will conclude with some comments on the outlook on slide 23. Consistency was a key theme in my introduction, and this will also be the case in my conclusion. Our priorities for FY 2027 are consistent with those in FY 2026 and the decade before. Operate safely, continue operational improvements, drive growth in underground and civil infrastructure, and work towards our increased ROACE target while generating strong free cash flow and increased return to shareholders.
We will also continue to invest in our people and in technology to build our capabilities and deliver for our customers. The outlook for FY 2027 remains positive. While no doubt FY 2027 will present its own challenges, mining activity remains robust in Australia and Indonesia, and we have increased diversity in our commodity and customer exposure and our service offering. We are expanding the size and scale of our service offering and our addressable markets by seeking to capture more upside within the mining value chain. This will help build more embedded relationships with our clients, increase revenue-generating opportunities while further diversifying the business. Our expanded service offering will differentiate Macmahon from our competitors as Australasia's only true life-of-mine end-to-end service provider.
While we have a strong order book at AUD 5.9 billion with AUD 2.2 billion of work in hand already secured for FY 2027 and a robust tender pipeline that provides us with numerous growth opportunities, we are well-placed to continue growing revenue and earnings supported by a healthy balance sheet. Releasing our guidance today for FY 2027, we forecast continued growth in both revenue and earnings. Revenue is in the range of AUD 2.85 billion-AUD 3.05 billion and underlying EBITDA between AUD 205 million and AUD 225 million. I am confident we are focused on executing our strategy, and we remain well-positioned to continue our trajectory of consistent growth. I would like to now hand back to the operator to open for questions.
Thank you, Mick. As mentioned, we will now begin the Q&A session. For those listening by phone and would like to ask a question, please press star followed by one on your telephone keypad to raise your hand and join the queue. To withdraw your question, simply press star one again. When called upon, please use your handset, ensure your line is unmuted, and be ready to ask your question. Again, that is star one to ask a question. Your first question comes from the line of Sami Hossain of Barrenjoey. Please go ahead.
Good presentation, guys, and thanks for taking questions. I had two in mind. First of all, how should we be thinking about net interest and tax rates going forward?
Hey, Sam. I will let Ursula take that one if you like.
Sure. Hi, Sam. You will see when you look at our net debt to the debt sweep. Our interest going forward will stay flat and what it is for 2026 will go forward into 2027. Then our tax, last year, we made our final tax payment into FY 2025. As PAYG instalments in Australia now, you would see our tax staying on that 30%, both for the P&L as well as for the cash flow.
The second question I had was, can you talk about the levers we should be thinking about for FY 2027 margin around mix and work profile?
Yeah, look, Sam, we expect to continue growing in civil and underground, so we are assuming that the two net each other off. Obviously, underground is a high-margin business out of the three sectors that we have, and civil is the lower margin business, but a lot less CapEx, higher ROACE. Given that, and if you look at the midpoints of the guidance that we have given, we expect all in, it will probably be something similar to what we have seen this year. We are clearly always aspiring to continue improving and we would love to, throughout the year, be able to move that up. But at this point, we are holding the 7.3, if you look at the two midpoints, which is similar to what we achieved in 2026.
Sounds good. That is all from me.
Your next question comes from the line of Gavin Allen of Euroz Hartleys. Please go ahead.
Good morning, team. Thanks for the preso. Just a couple from me. Just exploring that range that you put out there for 2027. Maybe we can just unpack a little bit, some of the factors that might impact, whether you are a lower end or in the middle or higher end. Is it just simply the timing of works that you might hope to win?
Yeah, for sure. So, that AUD 2.2 billion that we said is secured for this year, just to clarify, Gavin, I am pretty sure you know, but it does not include the AUD 100 million- AUD 150 million a year of churn that we get in underground and civil. So that is in addition to what that AUD 2.2 billion is and, we tried to call out that recent Medallion Metals announcement where we have been notified as being preferred, that is not included in that secured work for 2027, nor the order book.
Added to that, we have got a pipeline, that we see some near-term opportunities coming in. So, if that occurs, we feel there is an opportunity to build on that guidance range. If you look at the midpoint, I think it suggests a growth in even at 13.8%. We are desperately hoping for it to be higher. Of course, I think it is pretty well known that in our strategy, we are talking about expanding our service offering. If an opportunity presented to do that similar to Decmil, but in an area that would enhance our service offering, we would look at that, which would have an impact as well.
But if I was just to go back to the pipeline very quickly, a number of the near-term opportunities where we are one of two, or it is an extension of existing work, some of which is not in the pipeline, or it is where we think there is a relationship or value that we can bring by having more services. So I guess as an overarching comment, of the AUD 13.8 billion we expect to be awarded this year, there is probably, without getting ahead of ourselves, a slightly higher level of confidence with a number of those projects. So, yeah, that hopefully answers your question, Gav.
Absolutely, mate. Yeah, appreciate it.
Your next question comes from the line of Cameron Bell of Canaccord Genuity. Your line is open.
Thanks. Morning, guys. Just extending on Gav's question, Ben, a little bit. So that AUD 13.8 billion of tenders you think will be awarded this year. Can you give us a sense of maybe what portion of that is extensions versus new contracts?
Maybe, I think I know where you are heading there, Cam, and tell me if this gives you a better idea. We normally say we think there is one in three, one in four chance of winning the bids in that pipeline. I would suggest this year it is probably one in two to one in three, and that includes consideration of those projects where it is an extension or we are already preferred or, and we have not been able to announce under NDAs or we are one of two, or there is a relationship there, or we think there is a competitive advantage. I know I did not directly answer it, but does that give you a feel, Cam?
Yeah, it does. Because similar sort of concept.
Yeah.
Then just the other question, just while I have got you on your, I guess your public call, could you maybe step through how you think about your M&A priorities at the moment?
Yeah, for sure. Look, it is no secret, and we even spoke about it in the presentation, that if we can extend our end-to-end services, in the jurisdictions we are in, we think it has a significant impact on the addressable market, and there are some clients that would see value in having one contractor execute more works on one site, and the synergies that would come with that. We have already seen that occur in places like Cyprium. We are seeing it in Mount Carlton. We are hoping to see it with some other clients that are near to hopefully being awarded or some contracts that are hopefully near being awarded. And we think we will be able to talk more about that moving forward.
If that is the theme, you would expect us to push hopefully into some engineering areas, then there is some potential others on each end of what we already do, which everyone can probably work out. So that is where we are looking, Cam. We would not be looking to something that costs a lot. It would all want to be debt-funded. If you use the Decmil philosophy, I guess, in terms of scale, what it would bring, a platform that we would then grow through our networks and vice versa, we would hopefully grow off there. Those are the areas that we are looking.
Great. Thanks, guys.
Before we move on to the next question, a reminder, if you would like to join the queue, to press star one. Your next question is from the line of Pia Donovan of Argonaut. Please go ahead.
Thanks. Hi, Mick and Ursula. Just one from me, pretty similar to Sam's in terms of margins. Firstly, just around that mining segment. As that underground segment of that business kind of becomes a bigger portion, do you expect margins to improve there? Also in terms of as Indonesia becomes a stronger amount of revenue, do you have any impact on margins from that as well?
Yeah, absolutely, Pia. We have made no secrets that if you look at the activities, underground should be the higher margin component of all three. So as that increases in scale, that will absolutely bring with it an enhanced margin in that mining business. And I guess the lower capital required for underground relative to surface is attractive as well in terms of the capital intensity, but also the ROACE, which as you know, is a priority for us and is pushing to 22% and ultimately 25%. In terms of Indonesia, that business, the reason we have called out we want to grow it from the 10% now, the 8% last year, to the 15% to 20%, is it typically brings with it higher margins. It typically brings lower risk profiles, and it almost always brings a lot lower CapEx.
If I could bridge to another point that I have had a few calls on this morning about the CapEx, you will notice that last year the CapEx was lower. That was because a number of the jobs won during the year in Indonesia were civil, which did not require the capital. However, the work that is just been awarded this year that we did expect last year, but it always moves.
It has slid right. That is why the CapEx has shifted from FY 2026 into FY 2027 to enable that work to commence and it is those awards that we have put out recently. So if you look at 2026 and 2027, we had broadly said to the market that you should expect AUD 240 million, AUD 245 million a year. But what we have done is probably, well, not probably, we expended just over AUD 200 million last year. We are expecting the AUD 266 million this year.
So net-net, it is still a little bit less than what we guided to, but we just wanted to make it clear that the rigor, focus, and discipline around our gearing and free cash flow goals that we have made clear for 10 years now, they are unchanged. And the free cash flow generation of the business that a number of us have worked through bridges for in the coming years, they are all absolutely intact. And that is where we intend to bring the business. And hopefully, that is a bit visible in where we have brought the net debt. But I know I did shift from the question, Claire, and I just wanted to attend to a few calls I have already had this morning so people do not think that we think the shackles are off. By no means do we think that is the case.
But we were very lucky at the end of last year and early this year to underground see some scale increase, and last year Indonesia see a number of awards in areas where it was higher margin and higher CapEx. But your question is why we want to get underground to 750 run rate by the end of 2028. We think we will get there a bit sooner given last year was close to 650 and Indonesia to 15%-20% of the larger business brings with it a much enhanced ROACE.
And without going on, we have said in the past, if we can get broadly a third, a third, a third in Australia, that will achieve the 25% ROACE. Going from 25% to 30% would require the Indonesian business at that 15%- 20%, which is why it is a goal. But obviously, it is not one then the other. They are all happening in parallel.
Yeah. Thanks, Mick.
Sorry, Pia. I know I went off on a few tangents there, but I did want to attend to some calls we had this morning. Maybe we could have explained the spread of the CapEx a little bit better. But that increasing is not a sign of what is to come. It is just if you accumulate the two years, it is still in line with what we had tried to put out to the market last year.
Yeah. No, that is great. Thanks.
Yeah. Next question is from Retail Investor Tony Greco. Please go ahead.
G'day, Mick and Ursula. Thanks a lot for your presentation. Again, a really good result. So congratulations to yourself and all the team there at Macmahon. Diverging into the CapEx, you asked one question, so thank you for that.
Yeah.
You explained the increase for next year. You also earlier explained that, yeah, you secured the AUD 2.2 million, but you are forecasting still AUD 2.85 million- AUD 3 million. You touched on that as well. Two other questions then. Just the Homeground that you announced the other day and the strategic partnership. Are we able to just elaborate a bit more on that?
Yeah, absolutely, Tony. I appreciate the recognition of the team. We think we have an amazing group there. Yes, Homeground. We saw that as an ability to leverage that asset that we got, that we acquired with Decmil. We think it brings with it an ability to lock in the value on the balance sheet. We think it brings an ability to have someone that is active in the area and could have a constraint around accommodation motivated to build a camp in the coming years as they expand on that port, which will be some significant works and significant heads. Then for us to be able to get ourselves on the panel and in somewhat of a priority position for some of that work, we think that also will create a leveraged synergistic benefit to the business.
Obviously, nothing has changed in terms of how we look at that asset. We see that as being non-core. We see this as an opportunity to increase occupancy with a motivated partner, get some extra work, and then at some point in the future, it is still not in the strategy. It is non-core, and we will divest of it. Hopefully, at that point, it is full and it can attract a higher rate.
Yeah. No, thanks for that. I thought the important thing there is the occupancy. If you can get that arc, well, the value of course increases. Just the second question, just with the acquisition of Vault by, I think it is Regis. Do you see anything there? Because I guess Regis is also part of the Boston Shaker client, well, is a client. Do you see any changes there or the contract will still continue, etc ?
Yeah. Look, that Regis offer has now been superseded by a superior offer from Genesis, Tony.
Oh, yeah.
So look, we're planning for those contracts to end as announced. If anyone wants us to look at something else, we would. But the reason the order book and the pipeline are where they sit is because we're planning for us not to have them. If anything changes, as always, we'll look at it and we'll do whatever makes sense. But at the moment, we're planning for those to finish on the dates that have been announced.
Okay. Yeah. Well, thanks for the update. Yeah, you're right. I wasn't looking at that closely other than the fact I realized that King of the Hills and Daisy Milano are Vault on, so I did wonder. So I was sad to see if that finishes, but anyway, we'll keep our fingers crossed that there'll be a lot more work coming up. Right. Thank you for that.
Yeah.
Oh, and the other question, just with the diesel supply and the price increase and that, how do you see that working out? Obviously, we all would like the war to be over as soon as possible, but it doesn't look like it's going to happen.
Yeah, look, so far the diversity in the portfolio has enabled us to navigate through that. It's not easy. We don't want to win at the expense of our clients and we want to support them. But so far, we've been able to work with our clients and navigate through that, Tony. The diversity of the portfolio helps. But yeah, it's not without its challenges, for sure.
Mm-hmm. Okay. Thank you for that, and congratulations again, and thank you to the whole team there.
Thanks, Tony.
That does conclude our Q&A session for today. I would like to hand back over to Mick for closing remarks.
Yeah, thanks, Paulie. Thanks to everyone that joined the call. Over the next few days, we will be seeing a number of you, but if there is anyone that would like to meet that is not on the list, please give myself, Ursula, or Tony a call and we will make sure we make the time to catch up. As always, we appreciate the support, and yeah, we look forward to explaining our intention and the results more clearly over the coming week.
This concludes today's conference call. Thank you all for joining us. You may now disconnect.