Thank you very much, and good morning, everyone. Welcome to our FY 2025 annual results presentation and call. In a moment, Wes will take you through the results strategy, hand over to Craig, and then we'll have time for Q&A. If there are further questions, obviously, beyond this call, don't hesitate to reach out to myself, and we'll endeavor to answer your queries as needed. Without further ado, let me hand over to our CEO and Managing Director, Wes Maas.
Thanks, Tim, and good morning, everyone, and welcome to our financial year 2025 results presentation. In terms of the agenda, I'll go through the first two sections, and then I'll hand over to our CFO, Craig Bellamy, who will go through the group-level consolidated financials, after which I'll wrap up and be sure to leave enough time for questions in the end. Moving on to slide three, starting with our FY 2025 highlights, we delivered an underlying EBITDA of $219.4 million, representing growth of 6% on the prior corresponding period. Against the backdrop of renewable energy project delays and project losses impacting the civil construction and hire division, as well as some inclement weather, the standout contributor to the growth was construction materials, which delivered EBITDA of $110.7 million, 38% growth on the prior corresponding period, driven by 9% organic growth and strong contributions from the acquired businesses.
Notably, our disciplined focus on working capital saw cash flow conversion at 97%, a 9% improvement on the prior year. Our business is asset-backed, with tangible assets growing 20% to $1.7 billion, including the residential land bank recognized on our balance sheet at a historical cost of around $15,000 per lot. The successful capital raise in November, along with the execution of our capital recycling initiatives that realized $107 million in proceeds, enabled the transformative acquisitions in the construction materials division while maintaining a leverage ratio well within our targeted limits and far below the banking covenants. After a challenging period of rapid interest rate rises, our residential real estate business continues to gain momentum, and the 201 land lot settlements in the year were ahead of the target and 34% above the prior year.
On the safety front, while we've made substantial progress in recent years, it is still the top priority of the group to focus on actions to reduce this, which are in place. Moving on to slide four, our values-driven culture is the foundation for our successive growth and a true differentiator. While we continue to expand our footprint through strategic long-life assets, critical to the continued success is that the new team members not only understand our values but embrace them. To that end, we've recently held our annual strategy review, where 90 of the key managers and staff across the business attended. Pleasingly, I can report that our culture and values remain a core strength and very much embraced across the broad management team, including those that have recently joined the group.
Moving on to slide five, our overarching aim is to compound capital, delivering attractive returns through the cycle. We've been doing this now for over 20 years. Since FY 2023 this year, we've delivered an EBITDA CAGR of approximately 28%. We invest for the long term, and our success is a function of our disciplined investment framework and underpinned by our fundamentals, namely, an asset base which we can continue to invest in, is directly exposed to renewable energy and infrastructure projects which have long-term tailwinds. A highly aligned and incentivized founder-led team focused on being the lowest cost producer in each end market. Successful established track record of organic growth and accretive acquisitions complemented by prudent capital allocation, and we continue to see highly attractive long-term opportunities in construction materials, and investment capital will continue to be focused in this division.
Moving on to slide six, underpinning our competitive advantage is the strategic locations of our operating hubs across the East Coast. FY 2024 saw expansion into new regions, including the Illawarra region, through the acquisition of Cleary Bros. We've also further strengthened our greater Melbourne hubs through the addition of a hard rock quarry in the Western Growth Corridor and more recently added Ashwat and recycling business, expanding and enhancing our integrated construction materials model. Moving on to slide seven, we are committed to operating in a sustainable way, recognizing the importance we play in reducing environmental and climate-related impacts. There are a number of initiatives underway across our business that target reducing our environmental impact, and in a number of the cases, also generating positive financial outcomes.
As a company, we understand the increasing expectations around sustainability, and we are committed to developing a roadmap to meeting and exceeding sustainability reporting requirements. As part of the implementation of comprehensive environmental data collection, this is the first time we've reported our Scope one and Scope two greenhouse gas emissions data. Moving on to slide eight, ensuring our staff return home each night safely is a top priority. In FY 2025, the lost time frequency rate increased marginally from FY 2024, while the total recordable injury frequency rates are a small improvement. As newly acquired businesses are integrated into the MAAS safety culture and systems, we expect continued improvement over the coming periods. Moving on to slide nine, as a values-driven company, we're committed to the wellbeing of our people and the communities we operate in.
We are very much growing our own ethos in the MAAS Leadership Development Programme we're investing in. As part of this, we've put 161 trade apprenticeship positions across the group across the year. Moving on to slide 10, turning to the current trading conditions and outlook, infrastructure and renewable energy-related projects continue to underpin demand for our construction materials business. Whilst there is some softer end demand that persists in the Melbourne market, impacting volume, renewable energy projects, including commencement of the delayed transmission projects, are driving improved outlook and utilization for the civil construction and hire business. Demand and pricing for childcare, self-storage, and industrial projects remain robust, supporting our asset recycling initiatives. Pent up housing demand, low rental vacancy, and the likelihood of ongoing interest rate cuts is underpinning positive momentum for our residential land sales and development business.
The overall outlook for FY 2026 is solid in revenue and profit growth. Factors contributing to the FY 2026 outlook include all-year contributions from the FY 2025 acquisitions. Some softer end demand persists in the Melbourne market, with residential led improvement expected in the second half of 2026. Solid external project pipeline in the civil construction and hire division and also the commercial construction. We have a number of strategically located quarries to take advantage of key infrastructure and renewable energy projects, which have already commenced and are forecast to commit further growth in FY 2026. Proceeds from the property development sales of $41 million since the year-end underpins a strong outlook for FY 2026. Expectation that the residential landlocked developments will see ongoing improvement over FY 2025, with the Ellida Estate in Rockhampton contributing in the second half of 2026.
We plan to provide further update on the trading conditions and the outlook at the annual general meeting later in the year. Moving on to slide 11, moving to our business unit overviews, it's worth noting that construction materials business now accounts for almost half of the group's EBITDA, despite the challenges faced by the CC&H division. Combined with CM, these two industrial businesses account for almost 70% of the overall EBITDA. Moving now to slide 12 and turning to our construction materials business and the FY 2025 results. Construction materials delivered strong growth with EBITDA up 38% on the previous year, driven mainly by 9% organic growth and strong contributions from the acquired businesses. At the product level, there was pleasing organic growth from the quarries and Ashcroft.
Overall, construction materials margins increased slightly on FY 2024, driven by the cost of production improvements in concrete and quarries, partially offset by the disproportionate increase of low margin revenues from Ashville and Spray Seal. FY 2024 was a transformative year for the construction materials division, with acquisitions significantly increasing our footprint and capabilities. I'm very excited about the synergies and growth opportunities that these businesses will present in the future. In terms of the outlook, FY 2026 will benefit from the full-year contribution from the recent acquisitions. We also expect further organic growth from the quarries, which are positively leveraged for the infrastructure and renewable energy project delivery. The Melbourne market continues to experience soft end demand impacting on volume. Independent forecasts see an improvement in the second half of 2026 as residential construction improves from historically low levels.
Moving now to slide 14 and turning to our other industrial operating business of civil construction and hire. Since listing, our civil construction and hire business has grown strongly and consistently. FY 2025 was a challenging year with project delays and a few isolated project losses, resulting in a 35% decline in EBITDA. Major projects, including the CWI RES, did not commence and ramp up over the course of the second half, which saw EBITDA increase by 40% over the first half. EBITDA margins in FY 2025 were impacted by a roll-off of higher margin civil projects in the prior period, low plant utilization and isolated project losses which have been completed. Prudent capital management saw cash flow conversion very strong at 123%. Our outlook for FY 2026 is positive, with increased utilization benefiting plant hire as the renewable energy and transmission projects continue to scale up.
Strong secured pipeline of works, including for electrical, indicates that the improving momentum will continue through FY 2026 and beyond. Moving now to slide 16 and our residential business. EBITDA excluding fair value gains decreased by 9%, driven by an englobo sale in FY 2024, contributing 29% of the FY 2024 EBITDA, which did not repeat in FY 2025. Pleasingly, the business achieved settlement on 201 land lots, up 34% on the 150 we settled in FY 2024. We're generally looking to guide for land gross profit per lot around $100,000, and indeed for the year it was, being closer to up to circa $112,000, driven by estate product mixes and overall pricing remaining stable. Home construction completions were significantly down at the late cycle exposure to land development, although margins improved through disciplined cost control. The outlook for FY 2026 and beyond is strongly positive.
Our carry-in of 66 lots compares with 32 in the prior year. With the Ellida Estate in Rockhampton expecting to deliver settlements in the second half of 2026 and potential for further rate cuts, we expect strong improvement on the FY 2025 settlements. Moving now to slide 18 and onto our commercial real estate business. While revenues decreased marginally, EBITDA increased by 35%, driven by the increase in fair value gains on our investment properties. Significantly, $8.3 million of fair value gains related to properties contracted for sale in the subsequent year-end, with associated proceeds of $41 million realized. EBITDA decreased by 19%, driven by the reduced activity for the commercial construction and building supply business.
The segment achieved proceeds on sale of developments of $81.3 million in FY 2025 as part of the group's capital recycling program, which are in excess of book value, providing validation for our fair value gains recognized previously. In terms of the outlook, we continue to focus on self-storage, childcare, and industrial assets. We currently have $70 million sold or contracted for sale and have identified further assets for sale, which should see a reduction in overall capital employed. I will now pass over to our CFO, Craig Bellamy, to go through the group's financial performance. Thank you.
Thanks, Wes, and good morning, everyone. Starting at slide 21, as Wes has already highlighted, MAAS Group Holdings Ltd delivered a record EBITDA for FY 2025 of $209.4 million, representing growth of 6% for the year.
This growth has been largely driven by construction materials and the commercial real estate segments, which has offset the softer performance from our civil construction and hire business. With respect to the EBITDA growth, our construction materials division achieved approximately 10% organic growth, with significant organic growth also achieved in the commercial real estate and manufacturing segments. This was, however, offset by the performance of civil construction and hire. Revenue for the year increased by $115 million, which represented a 13% increase. This was underpinned by the significant growth in our construction materials business of 37%. Our EBITDA margin of 22% reduced slightly from FY 2024 due to the drag impact from the performance of CC&H. Our other income of $48.8 million for the year was driven by a combination of fair value increase and profits achieved on asset recycling.
The timing of asset sales with the number of commercial property developments has impacted the change in fair value, as Wes has already highlighted, with approximately $70 million of sales either contracted but not settled in June or contracted subsequent to year-end. This attributed a further $8.3 million of fair value for FY 2025. Of note, we've received $41 million of proceeds since year-end settling some of these contracts, which has already crystallized over $6 million of the fair value gain booked at FY 2025. Turning to slide 22 and looking at the operating expenses for the year, they increased by $112 million, or 16% from the prior year.
Removing the impact of the FY 2025 acquisitions and also the acquisitions made in the second half of FY 2024 to get an understanding of the year-on-year expense burdens, there was a $7.7 million increase in expenses attributable to the organic business, which is largely driven by the CC&H margin compression, but was offset by an improved cost of production in our quarries business. With respect to the underlying adjustments of $47.7 million, you can see from the table the majority of this relates to the 25% minority interest in our asphalt business. As a reminder, we recognize 75% of revenues and expenses from our asphalt business, whereas the statutory accounts recognize 100% and then deduct the net amount at the non-controlling interest line. Depreciation for FY 2025 was $57.3 million, with the $12 million increase attributable to the acquisitions during FY 2025 and the second half of FY 2024.
Amortization for the year decreased by $2.6 million - $5.6 million due to a number of the previously acquired customer contract intangibles now being fully amortized. Turning to slide 23, looking at the cash flow, the group's underlying cash flow for the year, you can see our operating cash flow has increased to almost $171 million in FY 2025, with a cash conversion rate of 97%, our highest conversion rate in the last five years. This was a great result for the group, with all key segments achieving strong cash flow positions, driven through strong working capital management. Our group target cash conversion rate of a minimum of 80% remains unchanged. The group also invested $45 million into land inventory development during the period, with net maintenance CapEx remaining stable at $9 million for the year.
Slide 24 looks at the cash flow per segment, and as you can see from this slide, there's been a prudent and equity-savings cash flow conversion from the prior year. Our construction materials cash flow conversion of 84% highlighted prudent working capital management in a period where there were significant acquisitions, whilst our civil construction and hire also managed working capital effectively, notwithstanding the challenging operating conditions and achieving a cash flow conversion of 123%. On slide 25, we've got a breakdown of the capital investment. As you can see, MAAS Group Holdings Ltd has again invested in long-term strategic growth assets with a focus on the construction materials segments, with approximately $245 million invested in our quarries, concrete, and asphalt footprints. The civil construction and hire acquisition relates to the civil and plant hire business acquired with the Cleary Bros quarry and concrete acquisition.
The group also invested into real estate platforms during the period, but maintained its focus on capital recycling of the commercial real estate segment, which as previously noted was the main contributor to realizing approximately $107 million of proceeds through the sale of property investments in inventory. The group also invested $30 million into growth CapEx, largely in the construction materials segment, with our net maintenance CapEx remaining stable at $9 million. Looking at our capital management at slide 26, our net debt, excluding AASB 16 at year-end, was $624 million. The leverage ratio at June 2025 was 2.7, sitting well within our target range of two to three times, and noting the banking covenant at four times.
With respect to the leverage ratio, taking into account the $41 million of proceeds that I've mentioned that we've received in relation to commercial properties that we thought may have settled by June 2025, our net leverage ratio would have been 2.5 as of 30th of June. We expect that through forecast operating cash flows for FY 2026 and our continued asset recycling within the commercial property segment, the leverage ratio will be at the lower end of the target, two to three times for FY 2026. The group continues to retain significant balance sheet capacity with undrawn facilities as at year-end of approximately $210 million, which, as noted above, we expect to be further enhanced through our forecast operating cash flows and continued asset recycling. Our final dividends are fully fr anked at $0.35 per share, which takes our yearly dividend to $0.07 per share fully franked.
Turning to slide 27 and before handing back to Wes, looking at the capital employed, you will note a decrease in the return on capital employed for the year from 13% - 11%. This has been largely driven through the underperformance of civil construction and hire for FY 2025 due to the previously mentioned project delays and isolated project losses. With an improved outlook for this segment for FY 2026, we expect a significant improvement in its return on capital metrics for FY 2026. With respect to the construction materials segment, returns are relatively stable given the softness of the Victoria market and the high level of acquisitions over the last 12 months.
As previously noted, our acquisition business case on average operates on a three to four-year window of achieving our targeted return metrics, so we would expect our returns on capital employed to improve on a similar trajectory, also aided by the expected improvement in the Victoria market. This concludes my presentation, and I'll now hand it back to Wes for closing comments. Thank you.
Thanks, Craig. To summarize the key messages, FY 2025 EBITDA of $219 million was in line with guidance, driven by a strong construction materials contribution against the backdrop of some project delays and challenging weather. Construction materials continues to deliver strong growth and contributed almost half of the group EBITDA, and with full-year contributions from the recent acquisitions, will be a dominant contributor in FY 2026. Cash conversion at 97% demonstrates prudent working capital management, and with cash proceeds realized since the year-end of $41 million from contracted property sales, we're in a strong liquidity position. Capital recycling proceeds of $108 million exceeded our target and was above book value, incorporating $14.1 million of fair valuations previously recognized. $70 million sales contracted or sold each year-end and further assets will be identified for sale in the first half of FY 2026.
The outlook for FY 2026 is positive, with expectation that EBITDA growth in FY 2026 will be driven by construction materials, improvement in CC&H, accelerating momentum in the residential land sales, and further recycling initiatives. To wrap up, I remain very committed to the business and excited for the growth opportunities ahead. I appreciate your interest in our company, and that concludes the formal presentation. I'll now open up 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. The first question today comes from James Ferrier with Wilson Advisory. Please go ahead.
Morning, Wes, Craig, Tim, thanks for your time. Really, just a few questions about the FY 2026 outlook here. On the CC&H segment to start, do you think where you sit now and your visibility of the order book contracts there, do you think an EBITDA number similar to FY 2024 is that a realistic achievable outcome?
The answer's yes, James. With our current workbook and the roll into FY 2026, it gives us confidence, yes.
Thanks, Wes. Building on that, especially if you think about the electrical part of the CC&H segment, which has been a bit of a laggard, just given the nature of the sequencing of that sort of demand, arguably, if that starts to pick up, you can push ahead of the sort of 2024 run rate, or really, is that captured in your comments there?
At this point in time, we would guide you that it's positive. The blue sky opportunity in outlook is huge, it's documented everywhere. We would rather guide you at FY 2024 levels rather than saying we expect it to ramp up over the coming year, definitely, because the opportunities are significant. At this point in time, we wouldn't, I don't want to guide you too bullish.
Yeah, no, that's understood. To finish on that segment, if you did go down the path of what you were just describing there at the end in terms of sort of upside, looking further ahead, given where the utilization rates are now, that would necessitate allocating more capital for more equipment purchases, etc., to facilitate further growth?
In the civil and plant business, yes, but not as much in the electrical space. The projects are larger and there's, you know, in that space, whilst we talk about utilisation, the assets are quite underutilised relative to the project and size opportunities. There's a bit of headroom with what we have in the electrical space, I would say.
Okay, that's helpful. On the construction materials side of things, when you talk about soft demand in Melbourne, are you specifically, is that isolated to concrete or are you seeing that extend back up into quarry materials as well?
Look, it's isolated to our concrete business, but obviously the pull-through from quarries has an effect. We've actually maintained or taken more market share in the quarries, say, from external, but our concrete business, the same or similar to everyone's concrete business in Melbourne, volumes are down. Our volumes are not down in the quarries, actually.
Okay, that's helpful, Cala. To finish on the construction materials business, simplistically, if we sort of took second half 2025 EBITDA, doubled that, add on the smaller acquisitions that were completed later in the period, plus there's some organic quarry volume growth there across the business, and then if the big concrete market around RESE comes back in the second half, that's accretive to that scenario as well. Do you think that's a reasonable way to look at it?
Yes, lots of variables in that realm in that way, but yeah, we expect to grow. I mean, you simply annualize the acquisitions plus some growth. It's pretty easy to work out that we will grow, you know, in the first half and the second half of 2026.
No, that's clear. Last one from me, just thinking about some of your comments there around the timing of asset sales within the commercial business and some of the fair value gains that have been booked in this result for assets that will be settled in FY 2026. As you sit here today, what are your rough expectations for fair value gains in FY 2026?
We would expect the same or similar to the past, maybe less than this year, but I'd probably guide you back towards the last year, you know, roughly 30, that sort of number.
Yeah, that's helpful. Thank you, Wes.
Yeah, it's in a very steady state, so it'll just keep rolling along.
Yeah, understood. Thank you. Thanks for the call.
Thanks, James. [Crosstalk]
Thanks, James.
Thank you, James.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. The next question comes from Sophia Mulligan with Macquarie. Please go ahead.
Hi, team. Congratulations on the result. Just two for me, please. Firstly, on the RESE outlook, great result with the needed eight settlements. Could you provide any color maybe on how many settlements you're expecting for the year?
Oh, look, I think last year we guided like 150 - 180. We haven't given specific guidance, but we would expect, you know, in the 250 odd range, so in the at least 20% odd growth. Again, as we get a little bit further down the track, we will update further at the AGM, but quite positive momentum. Have we had a really good roll in? We've had a positive July. You know, we can say positive signs, but at this point, we would probably guide you towards 20% growth.
Right. In terms of capital allocation, I know you haven't given a specific target around 2026, what you're expecting, but you've had a good start to the year with the formula you've done so far. Any indication of where you think it could land this year?
Capital allocation to capital recycling.
Sorry, capital recycling. [Crosstalk]
Yeah. [Crosstalk]
Yeah.
I think we've got $71 million of contracted sales already. I'd expect north of $100 million. Again, it's early days.
Great. Thanks very much, James.
Thanks, everyone. Thanks.
Once again, if you would like to ask a question, please press star then one. This concludes our question and answer and also concludes our conference break.