Good morning, everyone, and welcome to the Monadelphous 20 21 Half Year Results Investor and Analyst Briefing. Presenting this morning from Perth are Monadelphous Managing Director, Rob Balletri and Chief Financial Officer, Phil Truman. Copies of this morning's presentation and associated materials are available on our website at monadelphous.com.au. Throughout this presentation, the speakers will guide you on when to click through to the next slide. I will now hand over to our 1st presenter this morning, Mr.
Rob Bellertri, who will start on Slide 2. Please go ahead, Rob.
Thanks, Christy, and welcome to our 20 21 half year results briefing. So Phil and I will talk you through our financial and operational performance for the period as well as cover off on our outlook going forward. We'll then answer any questions you might have. The structure of this morning's presentation is similar to the previous results presentations with some further detail provided as appendices. So I'm on Slide 3, group performance and highlights.
I'm pleased to report that our sales revenue was up 11% on the prior corresponding period to $947,800,000 The result was an increase of 18.7% on the previous 6 months as the company and the industry more broadly continued to recover from the initial impact of COVID-nineteen experienced in the second half of last financial year. Our engineering Construction division reported revenue of $460,300,000 an increase of 68% with work progressing strongly on a number of major resource construction projects, which had experienced COVID-nineteen related delays in the previous 6 months. The Maintenance and Industrial Services division reported revenue of $491,500,000 which was down 15.9%. The lower than usual maintenance activity was experienced early in the period as the industry steadily regained momentum as well as from reduced demand from within the oil and gas sector. Activity levels in the iron ore sector ramped up significantly through the period due to the large volume of iron ore project developments and execution phase, the resumption of work scopes that were deferred earlier in 2020 and a strong appetite from our customers to maximize production.
The skilled labor market in Western Australia progressively tightened during the period as labor demand increased and border restrictions limited supply. Since the beginning of the period, Monadelphous secured approximately 3 $60,000,000 of new contracts and extensions, most of them in the iron ore sector. Pleasingly, we've seen a substantial improvement in our safety performance with a number of health and safety initiatives implemented over recent times positively impacting our performance in this critical area, and I'll talk a bit more about them later. Net profit after tax for the half was $31,600,000 which resulted in an earnings per share of $0.334 Earnings were lower than normal in the 1st few months of the period as the industry regained momentum post the initial COVID-nineteen impacts. Now included in the NPAT is the reversal of a one off provision of $6,500,000 made in the 2019 financial year relating to our research and development tax incentives, and Phil will give you a bit more detail about that later.
The company continued to adopt its long standing dividend payout policy of 80% to 100% of annual profits, and the Board has declared an interim dividend of $0.24 per share fully franked. We ended the period with a strong cash balance of around $170,000,000 and the half saw increasing levels of working capital as a result of the rapid recovery and ramp up in revenues post COVID-nineteen. As previously announced, Monadelphous was notified during the period that Rio Tinto had filed a writ of summons in the Supreme Court of Western Australia against one of our wholly owned subsidiaries in respect of a fire at Rio Tinto's iron ore facility at Cape Lambert in January 2019. Now we continue to work effectively with Rio Tinto towards reaching a satisfactory outcome in this matter. Moving now to Slide 4, the engineering construction highlights.
As I said, revenues were up 68 percent to $460,000,000 for the period. The division secured about $175,000,000 in new contracts, including 4 new work packages of work with BHP under an existing West Australian iron ore panel agreement for work across a number of sites in the Pilbara. And a contract with BHP was also secured for multidisciplinary construction services at Olympic Dan operations in South Australia. Now good progress was made during the period on a number of major resource construction projects at BHP's South Flank project. Substantial progress was made on our work scopes for the project's inflow and outflow infrastructure as well as construction of the world's largest rail mounted stockyard machines for Thyssenkrupp.
Work continued at Rio Tinto's West Angeles Deposit C and D project with fabrication support provided by Sinostruct. And we successfully progressed our construction package at Albemay's lithium hydroxide plant in Kemerton in the Southwest of WA. Also, Mondium, our EPC joint venture with Laika Podium also progressed the construction phase of the $400,000,000 EPC contract we have with Rio Tinto for this Western Turner Syncline Phase 2 minutee. Sinostruct, our China based fabrication business, secured a number of new contracts and also established its own fabrication facility in Tianjin in China to self perform fabrication work and to provide improved modularization services. Business also continued to deliver work for customers in Australia and Mongolia and PNG.
Now despite the renewable energy sector experiencing a low in activity, Zemviron continued to secure new work a contract to deliver the Marrawarra Stage 2 Wind Farm in Regional Victoria. So moving now to our maintenance division. So we see our maintenance division recorded revenue of $491,000,000 for the 6 months, which was down around 16% on the prior corresponding period. As I said earlier, maintenance activity levels steadily regained momentum during the period after the initial impact of the pandemic. The division retained all its term contracts and secured $185,000,000 in new contracts and extensions, which added to its contracted forward workload.
In the Pilbara, several new contracts were secured with BHP under an existing WA iron ore panel agreement, and the division also secured 3 year master services contracts with Rio Tinto for the delivery of sustaining capital projects across their iron ore mine sites and port operations. High activity levels were experienced in the iron ore sector during the period with the division successfully completing a number of maintenance shutdowns for BHP and Rio Tinto across the Pilbara. And despite the challenges of COVID-nineteen, Buildec, which is our maintenance and construction business in Chile, continued to perform well and was awarded several new contracts. Those contracts included a strategically significant contract at GNL Quintero's operations in Valparaiso, which leverages our core capability in the LNG sector. The division continued to also broaden its service offering, integrating its rail services business acquired last year and investing in specialist equipment to support existing rail contracts and enable further growth.
It also strengthened its marine, civil, CSG pipeline and corrosion management capabilities during the period. I'll move now to Slide 6, which is contract secured. As I mentioned earlier, we won work valued at approximately $360,000,000 since the beginning of the year, financial year. This slide shows the location and values with a large proportion, as you can see, in the WA iron ore sector. In other sectors, we secured a 3 year maintenance contract at Rio Tinto's Gove operations in the Northern Territory, major drag line shutdown for BMA at its Surajah coal mine in Queensland and a 12 month extension to our existing maintenance contract across BHP's WA nickel operations.
Subsequent to the end of the period, we were also awarded a multidisciplinary contract with AGL Macquarie at the Bayswater Power Station in New South Wales. And also in addition to the contract we already mentioned in Chile, Buildec secured 2 contracts with Monero Escondida BHP for the construction of a communications tower at the Escondida copper mine and a conveyor system upgrade at Colosso Port. Looking at Slide 7 now, safety performance. As I said, pleasingly, our 12 month recordable injury frequency rate improved by 16% from 30th June 2020 to 3.12 incidents per 1000000 hours worked. Now the period saw a number of system improvements and a new fatal risk standard to reinforce line of fire fatal risk controls And other health and safety initiatives implemented included a revised frontline safety leadership program and the continued rollout of the Delivering the Safeway behavior framework.
Also in these challenging times, we focused on mental health awareness, rolling out specific training programs and participating in national health and well-being initiatives such as Movember and RU Okay Day. Moving to Slide 8, our people. With activity levels rising across our operations during the period, we saw our employee numbers jump 22% during the period in the last 6 months. Comment there, the retention and development of our key talent is really central to our long term sustainability and success. And during the period, we increased participation in our employee equity scheme, and we made improvements to our performance management practices.
We also focused on a number of initiatives to improve our traction and recruitment in a tight labor market. These included detailed Australian labor market analyses for future workforce planning. We launched our award winning workforce engagement app, Monowork, and we kicked off the Monadelphous Make It Yours employer branding program. We also commenced the implementation of a new upgraded recruitment and talent management system. Slide 9, social value.
At Monadelphous, we're committed to making a positive contribution to the communities in which we operate. Our efforts are focused around key areas of diversity, community support and education. And during the period, we worked on the development of our 4th Reconciliation Action Plan, consulting with key stakeholders, including our indigenous workforce. This will be our 2nd stretch wrap, which and it's planned to be released in the in this half during National Reconciliation Week. We continue to make progress on achieving our objectives in the important area of gender diversity and inclusion, and our major highlight during the period was the appointment of our 1st female operational General Manager, Lorna Rakiki, to head up our heavy lift business.
And Lorna has been with the business for a number of years now. We participated in several other social value initiatives, including a partnership with the Graham Polypharma's Foundation's Follow the Dream and Living the Dream programs, which provide education and career pathways for indigenous students. We also supported various initiatives in the education sector and employee volunteering opportunities at community events. And finally, in October last year, our Newman after school program, Monadelphous Mechanical Mob, was announced as a finalist for the Indigenous Engagement Award for the Australian Mining 2020 Prospect Awards. So I'll hand over to Phil now, who will give you a bit more detail on our financial performance.
Thanks, Rob, and good morning, everyone. I'm on Slide 10 now, which shows our financial performance compared to that of the previous corresponding period. And as Rob already mentioned, our revenue for the period increased to $947,800,000 and our earnings before interest tax depreciation and amortization was $57,000,000 a 3.5% reduction on the prior corresponding period. Earnings in the 1st few months of the period were lower than normal as the industry regained momentum following the initial impact of COVID-nineteen. And during the period, we reversed a one off provision of $6,500,000 which made in the 2019 financial year.
And this provision related to notices of amended assessments, which were received from the ATO for R and D tax incentives claimed by the company, which was determined to be ineligible. Now at that time, we requested a review of the decision. And in December 2020, we were notified that the original findings had been set aside and the company was, in fact, eligible for the incentives. And we've commenced the process to obtain a refund for these amounts from the ATO. Our net profit after tax for the period was $31,600,000 which represents an earnings per share of $0.334 and the Board declared an interim dividend of $0.24 per share fully franked and the Monadelphous dividend reinvestment plan will apply for the interim dividend.
The cash flow conversion rate for the 2020 calendar year was a healthy 91%. However, we experienced unusually different cash flow conversion rates in the first and second half of calendar twenty twenty as a result of the initial impact of COVID-nineteen and the subsequent recovery. The materially lower operating activity levels experienced in the months leading up to 30 June at the height of the pandemic significantly reduced the working capital requirements of the business at that time and delivered an unusually high cash flow conversion rate in excess of 300% for the first half of the twenty twenty calendar year. The progressive ramp up in activity post 30 June drove a corresponding increase in working capital as our requirements returned back to normal levels, resulting in a negative cash flow for the period. Despite the large fluctuations we've seen in working capital during the period or during the year, our healthy cash position and the strength of our balance sheet provides us with capacity to invest in suitable opportunities as they arise.
I'll now hand you back to Rob, who will provide you with an overview of the outlook for the business.
Okay. Thanks, Phil. Slide 11 shows the relevant current and forecast Australian market conditions for our business. And you can see sectors in which we operate are expected to provide a solid inventory of prospects and opportunities for growth. If we go to Slide 12, a summary of our of the outlook.
While the global economic outlook in the wake of COVID-nineteen remains uncertain, the resources sector is expected to provide a steady flow of opportunities for Monadelphous over the coming years. With continued solid demand from China driving favorable iron ore prices, the outlook for Australian iron ore investment remains solid, and ongoing capital and operating expenditure required to sustain the high levels of production in this sector will drive strong and steady demand for engineering, construction and maintenance services. Developments in other resource sectors, particularly in lithium, gold, copper and nickel, are also expected to provide ongoing prospects for us in Australia as well as our international operations in South America, Mongolia and Papua New Guinea. The decline in global demand in the oil and gas sector has resulted in delays, deferment in the development of new LNG projects with customers reducing operating costs and deferring nonessential work in the short term. The outlook for the long term outlook for the renewable energy sector is positive, with the pipeline of new wind farm projects expected to come to market in the next few years, particularly as electrical grid access improves in New South Wales and Victoria.
Demand for maintenance services is expected to grow steadily on the back of aging assets and customers deferring nonessential work in prior periods. In the more immediate term, the resource activity sector activity in Western Australia is expected to remain strong in the second half of this financial year with increasing demand for schooled labor. Capacity constraints from the further tightening of an already stretched labor market coupled with unpredictable interstate border restrictions will be a key challenge for the business. Now following a solid first half result and subject to the timing of progress of projects, sales revenue for the full year is expected to see an increase of around 10% on the previous year. And while the outlook remains positive, the potential impacts of COVID-nineteen continue to create some level of uncertainty.
Monadelphous' reputation as a leader in its markets and our long standing commitment to the delivery of safe, reliable and competitive service solutions puts us in a strong position to capitalize on the opportunities and to deal with the challenges ahead. So I'll close now. And I'd in closing, I would like to thank our all our stakeholders for their ongoing support, including our shareholders and customers. And I commend our team on their commitment and efforts in under the circumstances in achieving a solid result. Thanks.
I'll now hand over to the operator for any questions.
Thank you. We have multiple questions in queue. Our first question comes from the line of Alex Karpos from Goldman Sachs. Please ask your question, Alex.
Hi, team.
Can you hear me?
Yes.
Perfect. First one I want to ask on is the maintenance side. Appreciate the color of demand growing steadily from here. Can you parse that out a little bit more by end market? How do you think about the different recovery profiles across iron ore and oil and gas for the second half and into FY 'twenty two?
Yes. I guess it's I suppose the forecast is a sort of macro forecast across the whole of the resource and oil and gas sector. I guess the expectation as we've said in our in the outlook is that, one, there's probably been still significant deferment of maintenance and a sort of catch up element, and we do and there is ongoing aging assets. I guess, in the oil and gas sector, we've got a number of large major term contracts that are ongoing. Although, I guess volumes may be slightly down in this in had been slightly down this period due to the oil price tightness in the oil price.
Otherwise, I think pretty well right across the resource sector, there is an ongoing expectation of good volumes available for our maintenance business.
That's helpful. And maybe just staying on oil and gas. If we pivot to the E and C side, how have discussions with customers there, let's say, changed over the past 6 months? Is it still kind of a year delays? Or how are you thinking about the broader landscape into 'twenty two?
Look, I think it's still uncertain. I mean, I don't think any of these projects have been canceled. It's really a question of it's a question of with the question for the majors to understand what the timing I think that these projects or some of these projects will come. It's just a question of when. We're certainly not factoring anything into the next 1 or 2 years in terms of engineering construction opportunities.
It. And one more if I could. You mentioned tight labor markets out in WA and you're certainly not alone in calling that out. How should we think about the potential for margin impacts from a kind of tighter labor market and also potential to raise prices on year end as
a result?
Yes. I mean, it's not a question that there are risks that arise because of the tightness in the market, the ability to get the required numbers of people, the squeeze on rates of pay, etcetera. That's certainly the biggest challenge that we're seeing in front of us in the more immediate term. It is a considerable, I guess, challenge for us going forward.
Thanks. That's it for me.
Our next telephone question is from Michael Aspinall from Jefferies. Please ask your question, Michael.
Okay. Rob and Phil, thanks for taking my questions. I might just ask a follow-up on the labor. Understandably a heavy focus on attracting and keeping talent. Have you seen any cost in post in the first half that you've been successful in being reimbursed by customers?
Or you haven't seen that across any of your projects yet?
Look, I think varied is probably the answer depending on contracts, customers, conditions in contracts. And I guess the ability to recover COVID related impacts is varied across our contracts. I couldn't give you a sort of more definitive answer than that.
Okay. It sounds like there may have been some additional costs due to labor though that sounds like
you're in the middle of it. There's no question there has been increase there has been increases in costs, some which are recoverable, some which are not.
Okay. And your EBITDA margins in the first half of 6%, which compares to 5.9% in the second half of twenty twenty ex the provision you took for the New Zealand Water business. And your commentary into that second half was that margins were heavily impacted by COVID. It sounds like then that the first half margins are also impacted by lower levels in lower activity levels in the first half. Would that be kind of correct in characterizing your margin performance?
Yes. Well, I mean, margins, there's a whole pile of different drivers there. But certainly, COVID in the early part was a driver and the ability to, I guess, recover sort of labor COVID labor, extra costs or whatever is also a factor. And I guess it will continue to be a factor as we go forward.
Can you talk about maybe some of the drivers that you mentioned there are a whole pile of different drivers that kind of weren't COVID related?
Well, if you put all of the labor restrictions on to COVID, then it's all COVID. But I wouldn't I mean, you've got a restriction from COVID in terms of access to people, but you've also got a very large demand profile at the moment. So it's a significant overlap of demand. We've got a lot of projects all happening at the same time.
Okay. And revenue guidance or the kind of outlook for revenue to be around plus 10% implies down in the second half on kind of the first half you've just reported. Is that being driven by some E and C work that's coming off that's coming to completion?
Well, yes, look, it depends on how we go with the progress of construction work. But yes, some of those jobs will be tailing off in this half, so that will be a factor. Okay.
Great. And last one for me, I'll turn it over. It looks like the results included a $5,000,000 profit on sale of assets. Is that right? And what did you sell?
Yes, that is correct. And it was really just taking the opportunity to make sure we rationalize the fleet to the size that we need for our future requirements. There was an element
of That's true. Yes. Yes. Like a whole range of different equipment, nothing no one off item.
Okay. Great. Thanks guys.
Our next telephone question comes from Ben Brownet from CLSA. Please ask your question Ben.
Rob, Phil, just wondering when you look at the chart on construction and infrastructure and the decline, how much of that is driven by the exit of the water business and how much is underlying? And then going forward, expect when you talk about renewables, is that the part of the business that you see growing there? And will I is there anything major that you're being on? Is it still to store wind farms?
Yes. Well, so the answer to that is yes. There we are doing less water work and expected to do less of that. So the majority is in wind farm market, the majority of the work going forward.
Okay, cool. And then can you just sort of give us a bit of a color around how you're going on those major projects in construction? Are they going to plan? I mean, you've commented on labor being tighter. Is there anything on the horizon that would lead you to suspect that your execution wouldn't be where you would normally have your execution?
Well, no, they're going fine. Yes, the real issue is that we still need we're actually still ramping up on some. So the labor demand issue or squeeze on labor is the risk that we'll have to see how that plays out over the next 6 months or so.
Okay. And then is there have you been given that
has there
been a reluctance over the last 6 months to bid? Or are you kind of happy with what you've won?
We're in the sort of more immediate term, we are capacity constrained. There's no question we can't there's another big job right there to start now with. We'd be limited. It's really just around timing that's the issue.
Okay. And then just going on to Yes.
Sorry, I don't know if that answers your question.
Yes. No, that's fine. And then so you've noted the bounce back. I think you noted this before that you expected to see a bounce back in maintenance in iron ore. And you did mention the potential for oil and gas to continue to be weak.
I mean, in terms of that oil and gas maintenance kicking back up, do you have any kind of further visibility today than you did 6 months ago? Or are you just waiting to be called on-site to do things?
No. No, we don't. I mean, yes, we've got a lot of it's not just one contract. There's a number of contracts. It's just volumes through them are down.
They're not significantly down, but there's pressure on people are looking at much tighter with their allocation of operating expenditure in that sector. So whether that comes back or not, really, all of it comes back or that gets becomes grows back to where it was, I'm not I really am not too sure.
Okay. And Phil, can I just can you just you mentioned the working capital in the last period, and then there was obviously the difference in this period? So can you just explain to us a little bit about what drove the big working capital swings? Obviously, net working capital was up, but obviously, receivables and payables were up a lot, too. So can you talk us through that and then talk about how that move is going coming into the end of the year?
Sure. So the as we said, the activity levels picked up during the period. And we had costs going out of the business, significantly labor costs, which are paid on a week by week or fortnight by fortnight basis. And we don't collect that money back into the business again for a period of months afterwards. So that's the driver.
In terms of the full year, we do have a few advances on construction jobs that are due to unwind as these big construction jobs come to an end. But really, it's going to come down to the collections around year end. But I'd just like to reiterate that you just have to be cognizant of the fact that we did have 2 very unusually different halves, but the cash flow conversion over the 12 month period was sort of greater than 91%. You have to look at the 2 halves together. Our net working capital position at the end of December is the same, almost the same as it was at the end of December the previous year, so it's returned to more normal levels.
Our next telephone question comes from John Prattell from Macquarie Group.
Just had a few questions, if I can. Look, Rob, just in terms of staff numbers, so conscious of your comments there. But are you expecting your staff numbers to continue to grow through the second half?
We have a yes, quite an intense period where we've got a number of projects all firing at the same time. So I think there's an expectation of numbers increasing through the period, but then they'll decrease again. So if you get what I mean, it really is just a function of the progress of where we are at with the work that we've got on. So I would expect them to increase, be nice to them to stay there, but it really depends on the workflow post year end, I guess.
Thank you. Look, coming back to margins, obviously, you delivered 6% in that first half EBITDA. And do you think there is the potential for second half margins to improve on that, noting that you still had COVID impacts in that September quarter? You've obviously also called out higher labor costs.
Yes. Well, I think really the yes, the margin question is, again, a function of a whole pile of different drivers depending on where projects are at in terms of their progress and the issues around, I guess, the significant issue around labor. Yes, labor costs are going up. Recoverability is going to be a question. So very whilst I can say we'd love for them to go up, there's certainly a lot of pressure on those margins.
So yes, I guess very, very hard for us to predict going forward.
And Rob, maybe just from an industry point of view, I mean the industry
By the way, sorry, just I will expand a little bit more on that. And that's sort of more significantly and we're talking about labor and the pressure of costs, etcetera, or productivity, etcetera. That's generally not as acute in our maintenance business, where we most of those contracts are kind of cost plus or there's rise and fall type arrangements. It is more on our construction business where some of those prices have been fixed.
And just to finish, which is sort of related to that. I mean just from an industry point of view, the industry is pretty full at the moment, Rob. I mean would you expect industry margins to improve from here as logically one would expect more rational bidding?
I hope so. I can only hope. Yes.
Okay. And just the last one. You mentioned some of the jobs might be tailing off towards the end of the period in terms of construction. And in terms of the bidding pipeline, sort of the areas that you're sort of seeing most prospective to sort of replace that or grow off that?
Look, I think iron ore has got a steady investment kind of pipeline of $5,000,000,000 or $6,000,000,000 year on year. So that will just provide us with an ongoing set of opportunities. It's a question of lumps and timing of that work and etcetera. Otherwise, yes, there is lithium projects in the pipeline. It's copper work for us in Mongolia as well as Olympic Dam.
So it really is a to me, it's a case of the timing of some of this work. But in terms of the macro view, there's plenty there.
Our next telephone question is from Wei Weng Chen from JPMorgan. Please ask your question.
Hi, guys. Just a couple of questions from me. Just the first one was to go back on first half guidance. You guided to sort of 10% half on half growth, which was provided in late November. If you kind of do the math on where you guys ended up, it kind of means that you guys earned an extra $70 odd 1,000,000 of revenue in the last 5 weeks of the year.
Wondering if you could give us some color on that. Was that revenue that you'd expected in the second half? Or what was that?
To me, it's just a combination of I mean, sometimes we just can't we can't necessarily predict demand on a month to month basis. It really is just the case where we've had a ramp up and everything is firing. So you've got all our projects firing. You've got customers wanting to accelerate completions on the basis of demands for production, etcetera. So when that happens, you that's really what we're seeing there in terms of that spurt in the particularly in the latter part of the half, the last three months.
Yes. Okay. And then just a question in general on your contracts. How much revenue is typically generated from a new contract in the 1st year? And the other follow-up question was you coming off a period of 2 halves where for obvious reasons you've had below average contract wins.
Just wondering if creates a headwind at some point to subsequent periods from a revenue perspective?
Yes. Look, the revenue flow is very variable. It's really variable on I mean, our contracts and it's I can't answer the first question. There's no average contract. Our contracts can range from $10,000,000 to $300,000,000 or $400,000,000 So I can't really answer the question specifically.
What I can say is that the sort of macro pipeline is good and it's a case of then timing. Really is timing of work. And when work comes off and when work comes on. So you're going to get quite a bit of variation because of that.
Yes. And not sure
Sorry, that's and to make sure and that's very much and that is very much the case in the construction world. Not so much in maintenance, which has a lot of fixed term contracts with volumes that are just constant and consistent. So we get less variability in that part of the business, which is a half of the business and more variability in the other part of the business in the construction part of the business.
And just a follow-up, I'm not sure if I helped you answer the question, but let's take the construction. I kind of meant in terms of typical contracts like that, would you earn 15% of the contract value in the 1st year or sort of 30%? Or is that not really something to
Our construction projects are normally a year or 18 months, so they're all done in that
period. Our next telephone question is from Stephen from Bell Potter.
Hi, guys. Just a couple of questions from me. So the 6% EBITDA margin was a decent result in light of the current operating conditions. But if we were to just assume for a minute that order impacts and COVID impacts would have normalized moving forward, and I know it's obviously a fluid situation. But if we were to assume that that would have now normalized moving forward, is the return to that PCP margin of 6.9% to 7% realistic not for the current half, but looking at FY 'twenty two?
I think well, it's certainly realistic, yes.
Yes. And then the second one, just the nature of the current competitive environment. So I know there wasn't a lot of major FY 'twenty one contract wins so far. That's in contrast to some of your competitors. Just if you can provide any color on how you're playing or seeing the current competitive environment?
Are you deliberately not wanting to win too much work, imminent work given resourcing constraints? Do you also suspect that some competitors are tendering more aggressively to grow their order books?
Yes, both of those things. Okay. Yes. I mean, we're bidding most things, but clearly, it depends on what our workload is and what we feel comfortable doing for the price that we're bidding. And others may be in a position where they don't have any work, so they'll be pricing more keenly.
So from your point of view, you're maintaining the contract discipline, you're confident in the macro outlook and you're just happy to maintain that discipline and you'll trust that the work will come through in time?
Yes. I mean, correct. And we have we've got good relationships with clients that have pipelines of work. So that gives us a bit of confidence as well.
Yes, beautiful. That's it from me guys.
And the final question today is from Nathan Reilly from UBS. Please ask your question, Nathan.
Hi, guys. I was just going to ask about the order book in terms of the work which you booked this half. So if I'm looking at it, it looks like you booked $360,000,000 of new contracts for the half, but you've burned about $950,000,000 of revenue from your order book in this half. Can you talk is that tender pipeline you mentioned earlier, is that at a level that would make you think you'd be able to sustain annual sales at that 1.8 $1,000,000,000 level which you're going to this year?
Yes. No, I think so. Yes. I mean remember, our maintenance business, if we don't if a contract some of those contracts are like 3 to 5 years. So if it's not due for rebid, then you're going to lose a year of revenue as in the book until it comes up again down the track.
So the $360,000,000 of new or renewed contracts is not necessarily just the burn. That isn't all of it. There's already other things in train with particularly in maintenance, where we've got a 4 or 5 year contract. Do you get what I'm saying? Is that clear?
Yes.
Yes. No, like yes. I think it's more in
the so in the maintenance area, I mean, unless we lose contracts, as in when they come up for rebid, we lose them, then that's the only negative. Otherwise, the rest of it is positive. If we we knew ones, it's positive. And then if the volumes go up in existing ones, it's positive. And there's a whole range there's a range of sort of point of sale type work we do, many and varied.
So that volume doesn't really it's not highly variable. The revenue is not highly variable. It's really in the construction space where, yes, you've got all your jobs finishing at all one time and you need to wait another few months before you get a whole pile of others and you're going to have a lull, but that's generally not what happens. There's enough volume to maintain your some sort of ongoing work. It's really but ultimately, it's a question of timing.
Yes, yes. And I guess, as you point out with respect
to the engineering business and the lumpiness there,
it looks like you've won, I think
it's $175,000,000 in new contracts there. But again, the burn rate just shy of 0.5 bill. But in that business, your typical duration on the contracts are 12 to 18 months. So I'm just wondering, that pine ore construction revenue, your run rating, a very, very strong annual sort of revenue growth rate there would be near peak, not quite big, but certainly a very good year. Does that I'm just trying to get a sense of where you're at in terms of peak activity levels for these mine replacement projects that you're working on at the moment.
It's looking like the customers that you're working for are targeting 1st ore later this year. So in terms of that second half revenue outlook, is that something that you think you can maintain based on current run rate?
Well, yes, most I think most of those iron ore jobs are due to be finished this calendar year. In the case of how much gets finished in this half versus next half, most of them will be finished pretty much finished this calendar year.
And I think you mentioned a pipeline in iron ore projects of about sort of $5,000,000,000 to $6,000,000,000 per annum in terms of
the CapEx that needs to
be spent in that space. Would you expect that your revenue generation or revenue pool from that pool of work would take a step down just based on what kind of sits in that pipeline relative to the mine replacement projects which you've been working on? Or can you sustain it around current levels?
I don't know. I think there's plenty there. It's a timing issue, and that's what it is. I mean, I think there are forecasts running around. I have seen forecasts in the iron ore expenditure over the next 8 years, which kind of averages it's pretty well kind of peaky at the moment, and then drops off maybe $1,000,000,000 to $5,000,000,000 for the next 8 years.
So and we're talking to customers about new work opportunities coming up in the next 1 or 2 years.
Okay. And finally, just back on the margin. I think you noted somewhere in the accounts that there was the benefit from JobKeeper, I think about 7 mill in the first half. I'm guessing that was more than offset by additional costs that you encountered in the first half. But just in terms of how that rolls off in the second half, is that creating a bit of a headwind from a margin point of view as that rolls off in terms of the subsidies relative to the costs which might have crept into the business that you now have to deal with?
It's all rolled off. We're not getting any more. Like that's passed now. Do you know what I mean? So I understand you yes, understand you put most all of that's being utilized in paying people for standing them down and a whole range of particularly early, early in the period.
But yes, that's not there anymore.
Okay. I'm done.
But it's not there anymore, but we don't have the reason for it to be there now anyway,
if you
get what I mean. We've got everybody employed. It's the COVID impacts are now much more about restrictions on getting people and therefore productivity risks attached to that.
Understood. Okay. Thanks for taking my questions.
No worries.
There are no further questions at this time. I would like to hand the call back to the speakers for closing remarks. Please continue.
That now concludes our briefing for today. Thank you very much for your participation.
Thank you. Thank you.