Industries. Please be advised that today's conference is being recorded. I'd now like to hand the call over to your host today, Ms. Kristy Glasgow. Thank you. Please go ahead.
Hello, and welcome to the Monadelphous 2025 Half-Year Results Investor and Analyst Briefing. I'd like to begin by acknowledging the traditional owners of the lands on which we are joining you from today in Perth, Boorloo, the Whadjuk people of the Noongar Nation and the traditional owners of Country, and pay respect to Elders past, present, and emerging, and extend that respect to all First Nations people. Presenting from Perth are Monadelphous Managing Director, Zoran Bebic, and Chief Financial Officer, Philip Trueman, who are joined in the room by our Chair, Rob Velletri. Throughout this presentation, the speakers will guide you on when to click through to the next slide. The structure of this morning's presentation will be similar to previous results presentations, with some further detail provided as appendices, and copies of today's presentation and associated materials are available on our website at monadelphous.com.au.
I will now hand over to our first presenter today, Zoran Bebic, who will start on Slide 2.
Thanks, Kristy, and welcome everyone to our 2025 Half-Year Results Briefing. Today, Phil and I will present our financial and operational performance for the half-year ended 31 December 2024, as well as the outlook. We will then answer any questions you may have. I'll begin with our group performance and highlights on slide three. Monadelphous recorded revenue of AUD 1.05 billion for the half-year, which is in line with the guidance provided to the market, represents a 4.2% increase on the prior corresponding period. The Maintenance and Industrial Services Division continued to experience strong overall demand for maintenance services and sustaining capital works, delivering revenue for the six months of AUD 645.1 million. This was down around 9% on the prior period, with energy sector turnaround activity returning to more normal levels after the heightened activity experienced this time last year.
The Engineering and Construction Division reported revenue of AUD 405.4 million for the half-year, up 33.7% on the prior corresponding period and similar to the second half of FY 2024. Net profit after tax was AUD 42.5 million, up 41.3% on the same time last year. This result was helped by a AUD 7 million after-tax variance in non-operating items compared to the prior period, with operating margins improving as well. Earnings per share for the period were AUD 43.3, and the board declared an interim dividend of AUD 0.33 per share fully franked. We ended the half-year with a cash balance of AUD 272.5 million, supported by a very strong cash flow conversion rate of 145%. In total, since the beginning of the 2025 financial year, we have secured approximately AUD 1.7 billion of new contracts and extensions across a range of industry sectors, including energy, iron ore, other minerals, and renewable energy. Moving to S lide 4.
In the energy sector, we secured major construction and maintenance contracts with Woodside and Shell, valued at approximately AUD 800 million in aggregate. This includes a multidisciplinary construction contract with Woodside for modifications required to the Pluto LNG Train 1 facility and infrastructure, as well as a seven-year contract to continue providing maintenance and minor construction services associated with Shell Australia's Prelude FLNG facility. In WA's iron ore sector, we were awarded several construction, maintenance, and minor project contracts across Rio Tinto's operations. Our civil business, Melchor, secured a significant structural concrete construction contract with the Saipem Clough Joint Venture at Project Ceres, Perdaman Industries' urea plant near Dampier in WA. Alevro, our heavy-lift services joint venture with Fagioli, will also provide heavy haulage services at the project.
Zenviron, our renewable energy joint venture, continued to strengthen its market position, securing a significant contract for the delivery of CS Energy's Lotus Creek Wind Farm in Central Queensland. Moving to slide five now. Our workforce, including subcontractors, at the end of the year totaled just under 7,300. Pleasingly, we saw overall employee retention rates continue to improve, with staff turnover declining and key talent retention remaining very strong at around 95%. We focus on improving our early careers and talent development pathways, introducing a winter internship program to complement our existing Vac program, and expanding the ongoing development, mentoring, and upskilling journey of our future business leaders. We launched our refreshed onboarding and welcome hub, improving the new employee experience for both new starters and managers, and around 240 people participated in our graduate, undergraduate, apprenticeship, and traineeship programs.
As part of our ongoing commitment to ensuring a safe, respectful, and inclusive workplace, we continue to embed our Respect at Monadelphous behavioural framework and launched our Respect in Every Step program. This forms part of our mentally healthy workplace strategy and is aligned to AREEA's workforce mental health framework. Looking now at safety and well-being on slide six, our unwavering focus on the health and safety of our people continues, with our total recordable injury frequency rate remaining relatively stable at 3.34 incidents per million hours worked. We received broad industry recognition for our commitment to safety and innovation, with Melchor receiving awards at the Mates in Construction WA Awards and Alevro collecting awards from the Crane Industry Council of Australia. We're also finalists for a range of other national and state safety and innovation accolades.
We continue to deliver our Fatal Risk Controls campaign, aiming to further improve the identification, reduction, and elimination of fatal risks across our business. Our focus on health and well-being continued, offering a range of employee support services and information sessions on relevant health topics, and we launched another program within the resilience project titled Authentic Connections. Now to slide seven. We continued our efforts in the important areas of diversity and inclusion, community, and environment. Further progress was made on our Stretch Reconciliation Action Plan commitments, again exceeding our RAP targets for First Nations workforce participation and for First Nations business spend. Career opportunity pathways were provided for current and future First Nations employees through traineeships, apprenticeships, and the Indigenous Pathways program in partnership with Rio Tinto. We also extended our long-term partnership with the Polly Farmer Foundation for a further two years.
We aim to enrich the communities in which we operate through our community investment initiatives, and during the period, we delivered the Karratha Community Grants program for the second year running and launched similar programs in Darwin and Bunbury. We progressed a range of initiatives to support our net zero goals, with trials of electric utes, site-based solutions to reduce diesel usage, and electric forklifts to reduce LPG emissions. We also continued the transition of our facilities to renewable power with the installation of a solar system at our Mackay workshop facility in Queensland. Turning to our Engineering and Construction Division, now on slide eight, the division reported revenue of AUD 405.4 million for the half-year, an increase of 33.7% on the previous corresponding period, and secured approximately AUD 740 million of new construction contracts.
Activity levels were high, with construction of the Wet Plant successfully completed at Liontown's Kathleen Valley project and work progressing on the chemical-grade Plant 3 at Talison's Greenbushes site, where Melchor also completed civil and construction works. Work advanced on the BHP's Car Dumper 3 renewal project at Nelson Point in Port Hedland and on the construction contract associated with the dewatering of surplus water at BHP's Orebody 32 in Newman. Work also commenced at BHP's Prominent Hill Expansion project in Mount Eba, South Australia. In the energy sector, we progressed construction at Chevron's Jansz-Io compression project and Alevro delivered specialist haulage and lifting services to Bechtel at Woodside's Pluto Train 2 project in Karratha. Inteforge, our fabrication business, secured contracts for the supply and fabrication of structural steelwork and pipe racks for Iluka's Eneabba Rare Earths refinery project in WA.
In Mongolia, we successfully completed construction of surface infrastructure at the Oyu Tolgoi underground project, achieving a strong safety record over the project's duration. Finally, Zenviron progressed work during the period at Tilt Renewables at the Latrobe Valley Battery Energy Storage System project located south of Morwell in Victoria. Moving now to our Maintenance Division. Our Maintenance and Industrial Services Division recorded revenue for the half-year of AUD 645.1 million. High demand for maintenance services across all sectors continued, and the division secured approximately AUD 950 million in new contracts and extensions since 1 July 2024. In the energy sector, we delivered a significant volume of maintenance and minor construction services associated with Shell's Prelude FLNG facility, as well as for Woodside's onshore and offshore gas production facilities in WA's northwest region.
Turnarounds were completed for Trains one and two at INPEX's Ichthys LNG onshore processing facilities in Darwin, and we also delivered maintenance services for their processing and storage facilities offshore. WA's iron ore sector continued to drive significant activity levels as we provided fixed plant maintenance services and sustaining capital projects to Rio Tinto, fixed plant services to Fortescue under our long-term panel agreements, and general maintenance services to BHP. We continued to provide decommissioning services to Petrofac on the Northern Endeavour FPSO facility, further developing our capability to support future decommissioning activity within Australia's North West Shelf and the Bass Strait regions. Our long-term presence continued in Papua New Guinea with the provision of sustaining capital projects and maintenance support activities at Newmont's gold operations at Lihir Island and Santos's production and support facilities in the Southern Highlands region.
In WA's southwest, we secured a three-year contract for shutdown and maintenance services, in addition to a new three-year contract for the provision of minor project works at South32's Worsley Alumina operations, where we had been providing services for 20 years. I will now hand over to Phil, who will provide you with some more detail of our financial performance on Slide 10.
Thanks, Zoran. Good morning, everyone. Slide 10 shows our financial performance for the half-year compared to that of this time last year. Revenue from contracts with customers was AUD 1.05 billion, up 4.2% on the first half of FY 2024. Our profit after tax was AUD 42.5 million, which is an increase of 41.3%, helped by an approximately AUD 7 million after-tax variance in non-operating items. Pleasingly, operating margins also improved. EBITDA was AUD 79.8 million, an increase of 30% on the prior corresponding period.
Our EBITDA margin increased from 6.08% this time last year to 7.59% for the six months ended 31 December 2024. About half of the variance is attributable to a small number of material non-operating items, including proceeds from insurance and favorable foreign exchange movements, with a balance of the increase relating to an improvement in the operating EBITDA margin. Earnings per share was AUD 43.30, and the board declared an interim dividend of AUD 0.33 per share fully franked, up from AUD 0.25 last year. We ended the half-year with a cash balance of AUD 272.5 million, which was bolstered by a number of advances received from customers and construction contracts. Cash flow from operations was AUD 93.1 million, giving us a very pleasing cash flow conversion rate of 145%.
Our strong balance sheet puts us in a good position to take advantage of appropriate strategic investment opportunities that support long-term sustainable growth and that will create value for shareholders. And I'll now hand you back to Zoran to provide you with an overview of the outlook for the business.
Thanks, Phil. Slide 11 shows relevant current and forecast Australian market conditions for our business per Oxford Economics. Pleasingly, as you can see, the sectors in which we operate continue to provide a positive outlook for capital investment and operating expenditure over the next few years. Moving now to our outlook on Slide 12. Resources and energy demand is expected to remain strong over the long term, underpinned by sustained economic growth and increasing investment in decarbonization activities.
Despite some global uncertainty, worldwide economic forecasts expect growth to remain resilient, with the resources and energy sectors expected to provide a significant pipeline of prospects across a broad range of commodities. Demand for sustaining capital works and maintenance services continues to be driven by ongoing high levels of production across most commodities. In Australia's iron ore sector, investment is projected to continue to sustain current production levels, with a focus on operational discipline and efficiency to maintain a position of global competitiveness. After a period of significant price volatility within the energy transition metal sector, there has been a slow and modest recovery in commodity prices over the past year. Long-term fundamental indicators remain robust, and mining and mineral processing development in the energy transition metal sector is projected to increase over the long term.
This extends to copper and critical minerals, which will require significant capital investment to meet forecast demand. The energy sector continues to provide opportunities, including several gas construction projects and ongoing strong demand for maintenance services. We remain well- positioned to support the decommissioning activities expected over the coming decade for oil and gas assets. Additional opportunities are arising from customers' decarbonization investments, which includes electrification of operations and energy storage. Australia's net zero emissions objective is driving a pipeline of renewable energy prospects within the coming years, as high investment activity is forecast across generation, storage, and transmission. Monadelphous remains well positioned to capitalize on the growth projected within the wind farm and battery energy storage sectors. Significant long-term investment is also forecast for the essential electricity transmission infrastructure needed to support energy transition and grid stability.
The power sector is addressing challenges such as network constraints, supply chain pressures, and delays in planning approvals, which will further expand these opportunities. While labor demand has moderated and general labor availability has improved slightly, the challenge of a skilled labor shortage remains within Australia's resources and energy sectors. We continue to address this by enhancing the capability and capacity of our workforce through focused employee attraction, retention, and development initiatives. We will continue to focus on sustainable growth and quality of earnings through a selective approach to new work, collaborative customer engagement, high standards of delivery, and the appropriate allocation of risk. With construction activity levels increasing and with the strong flow of new work to date in FY 2025, we are anticipating to see high single-digit revenue growth, together with improved operating margins for the full financial year.
A strong balance sheet enables us to continue to assess strategic acquisition opportunities, which support expansion of services and capabilities and market diversification, driving long-term sustainable growth. In conclusion, I would like to take this opportunity to thank the talented team at Monadelphous, whose loyalty and dedication supports our continued growth. I also extend my appreciation to our shareholders, customers, and our many other stakeholders for their ongoing support. Thank you. I'll now hand over to the operator for questions.
Thank you. We will now begin the question and answer session. To ask a question, please press star one one and wait for our name to be announced. If you would like to cancel your request, please press star one one again. One moment for the first question. Our first question comes from the line of William Park from Citi. Please go ahead.
Hi. Thanks, Zoran and Phil for taking my question.
Just in terms of your outlook, I appreciate that you have provided largely unchanged outlook slide apart from reference to energy transitions and electrification. But could you perhaps provide some color around some of the meaningful opportunities that are up for grabs in the near term? Thank you.
Sorry, Will, I missed the first part of the question. Outside of energy transition or in our core markets?
Sorry, Zoran. Just in general, meaningful opportunities that's up for grabs in the near term that you see? Yeah.
So we spoke at the full year. There is, I'll say, in the category of a program of larger sustaining capital opportunities, and I use the word sustainment in terms of supporting sustaining production levels across our key customers in resources, but in particular in iron ore.
So between BHP, Rio Tinto, and FMG, we continue to see a program of work that will be awarded in the next 12 to 18 months. There's a fair bit of work in that space. We continue to see some opportunities in the oil and gas sector, which includes Shell Crux, the back end of Santos Barossa, Arrow work in the Surat Basin, brownfields upgrades, potentially for Chevron on Barrow Island, as well as the Ichthys project. And probably the other one I'd put in that category is stage two of the Waitsia project for Mitsui and Beach.
Thank you.
And just in terms of your comment around expectation of improved operating margins, can you just clarify whether you're expecting a sequential improvement in second half versus first half, or how should we be sort of thinking about EBITDA margin heading into second half in the context of what you guys have delivered in the first half? Thank you.
The way it was written, Will, it was intended to be the comparison against the prior full year, so full year. So FY 2024 v FY 2025, not sequential half on half.
Yep. That makes sense. And then just two quick ones. Other income item, looks like there's a size volatility that is not related to gain on sale of PPE. Could you please outline what drove that up? And also CapEx, looks like it stepped down a fair bit in first half.
Could you just step through how you're thinking about CapEx level in second half and perhaps going forward? Thank you.
So the other item in other income is proceeds of insurance. And in terms of CapEx, Will, for the full year, I mean, for a long time, the long-term average of CapEx runs at about 2% of revenue, and we're expecting that long-term average to continue. Yes, we didn't spend much CapEx in the first half of the year, but just remembering that we invested heavily in CapEx last year. But I do think that we'll sort of end up somewhere heading towards that 2% of revenue number for the full year.
Thanks very much.
Thank you for the questions. Our next question comes from the line of Nicholas Rawlinson from Morgans. Please go ahead.
Hi, Zoran and Phil. Thanks for taking my questions.
Just further to Will's question on margin, obviously operating margins expanded quite materially year on year. What were the key drivers besides the obvious mix effect and subject to execution? Is there any reason why we shouldn't extrapolate that first half margin into the second half and into FY 2026 and beyond?
Right. I'll provide color around a couple of points. I mean, you would have seen, firstly, the business mix was a little different. So it was weighted a little more EC revenue than in prior periods. So that was a contributing factor. I think the other comment I'd make is if you look at the status or the position of major projects or our larger EC projects, this half versus last half. Last half, we secured a lot of work. Sorry, last half.
PCP, we secured a lot of work, and we were either mobilizing or just ramping up projects, so in this six-month period, we had more projects that were well in train, and we completed a number of projects, so we obviously had a little more confidence in terms of outcomes as they came to the back end, so that was a factor, and I think the third factor was, if I look across the business and not just specific to EC, we had really good operational performance right across the business, and that contributed to the margin position as well.
Okay. That's helpful. Thanks, Zoran.
It was some time ago now, but on a conference call when you were helping us with our FY 2025 and FY 2026 forecast for E&C, you mentioned you were basically aiming to get back to FY 2021 levels of E&C revenue, which was just shy of AUD 1 billion. Is that still how you're currently thinking about FY 2026?
Well, I'm not sure we'll get back to that AUD 1 billion number in FY 2026, but we're on a trajectory to get back to AUD 1 billion worth of revenue for EC, I would like to think.
Okay. And just the last one from May. One of your key construction competitors called out that it's seen delays to projects, and that includes iron ore. I appreciate you gave some color to William just before on the larger sustaining capital opportunities. But are you seeing any of those sort of shift to the right?
And can you talk about whether there are any due over the next, say, six months rather than 12 to 18 months?
Yeah, that's a fair question in the sense that probably over the last three, four months, we've seen some delays in awards of projects. I spoke about sustainment work and the quality of customers, so I would expect that work will still be awarded. And when we talk about delays, I think I recall sitting here at the end of FY 2023, 18 months ago, having the same conversation around the delays we were seeing in terms of contract awards. So it's not. Yeah. I wouldn't put that in the unusual category. I'd probably suggest that maybe the difference for us is as well that we're in a reasonably good position in the sense that our current order book is pretty solid.
So yes, I support the view that we are seeing some delay in contract awards. I expect those contracts will be awarded. It's a question of timing. The broader pipeline is still solid, and we're in a position where we've got a pretty solid order book at this point in time.
Yeah. Absolutely. Okay. Thanks very much, Zoran. Appreciate it.
Thank you for the questions. One moment for the next questions. Next question comes from the line of Jakob Cakarnis. He's from Jarden, Australia. Please go ahead.
Morning, Zoran. Morning, Phil. I just wanted to focus on where you guys think you're at in terms of execution. Clearly, that's one of the drivers of the margin improvement in addition to the mix that you're talking to. I mean, what's left to play in terms of the second half?
But then more importantly, as we look into 2026, it sounds the sequencing of contracts maybe are in your favor, but just focused on the execution side that you guys can control that might benefit some of the margin, please.
I mean, if I look at the work we've secured and the ramp-up profile of the work, I would expect that the execution phase that we're going into is not dissimilar to this half. I mean, I made the comment earlier, we're in a different position 12 months ago with new contracts starting and ramping up almost simultaneously, whereas I think we're in a different position. We were in a different position for the first half, and I think we'll be in a similar position for the second half. Coming around FY 2026, I mean, that's still a long way away. We still need to continue to win work.
But as I said, if you look at the work we've secured to this point in FY 2025, AUD 1.7 billion worth of work. Reasonable amount of that sits in engineering construction, around AUD 750 million. So we're in a reasonable position, but we need to continue to win work.
Thanks, Zoran. And just to fill quickly, we keep on coming back to this 2% of revenue number for CapEx. Looks like that ends up being pretty meaningfully different from depreciation. Can you just let us understand what the sequence, I guess, or what the guidance is alluding to there, please, Phil?
So I'm not quite sure the genesis of the question, to be honest, but I reiterate my point is that just over a long period of time, we probably invest about the equivalent of 2% of our revenue in capital expenditure. Some years can be more than that.
Other years can be less than that. It really just depends on sort of the economic conditions that you're in at that point in time, the future outlook for the business, the age of your assets. So this comment that I have answered twice now, it shouldn't be a surprise to anybody, and it shouldn't set off any alarm bells. In terms of more specifically, the depreciation, yeah, I mean, I think we did invest quite a lot of money last year in our plant and equipment fleet, higher than I can ever remember. So therefore, we would expect to see our depreciation go up this year. I hope that answers the question a bit more clearly.
Thanks, Phil.
Thank you for the questions. One moment for the next question. Next question comes from the line of John Patel from Macquarie. Please go ahead.
Good day, Zoran and Phil.
Hope you both well. Just had a few quick questions if I could. Look, firstly, just on the maintenance side, obviously, last couple of years, we've seen quite a big first half, second half skew more, obviously weighted to first half. Are you expecting a more even profile of revenue this year across the halves, in which case you could see maintenance revenue grow in the second half of this year versus last?
I don't think that's an unreasonable assumption the way we're seeing it. I mean, we called out the reality is the first half of last financial year, there were an abnormal number of large turnarounds, particularly in the energy market, that happened to coincide in that half. From memory, there were Shell shutdowns, INPEX shutdowns, and Woodside shutdowns. So that was a little unique.
But I would expect the revenue for the second half to be more consistent and up slightly on the first half.
Thank you. Second question just around, obviously, the Albemarle project, and that was demobilised in the period. Was there any material benefit to margin from that in this result?
So we did demobilise from Albemarle's Kemerton project. We did finalise the commercial and contractual arrangements, and they were in line with our expectations. So the outcome is reflected in the half-year results, but there wasn't a material impact to the number as a result of that.
Thank you. And the last one in relation to renewable energy prospects, obviously, the sector is going through some challenges from a sort of project economics viewpoint and government support perspective. I mean, how are you seeing the outlook there, taking that into account?
I still think the outlook looks pretty positive, particularly if you focus on, I mean, if you look at two particular parts of that renewable sector being wind and battery energy storage projects, the outlook looks very strong. So we're still confident there, John. As well as the progress and the thinking that some of our customers are making in our traditional core markets, the resource sector, we're starting to see a number of renewable opportunities there as well. So overall, it looks pretty solid.
Got it. Thank you.
Thank you for the questions. Our next question comes from Julian Mulcahy from E&P Financial Group. Please go ahead.
A couple for me. Firstly, can we have some sort of breakup of the AUD 7 million after-tax benefit? I mean, do we assume that that was AUD 10 million pre-tax and looks like AUD 3 million was through insurance? Where was the rest coming from?
So we were impacted. The variance between the two years was impacted by the proceeds of insurance that I spoke about earlier. There was a variance in terms of foreign exchange movements between the two periods. And then we also saw AUD 2 million more interest revenue than we had in the prior period as a result of, obviously, the higher cash balance and the high interest rates that we've got at the moment. But there's ups and downs all over the place. But those are the three that impacted the non-operating variance.
So is your pre-tax number 10?
Yeah, pre-tax number's 10.
Oh, okay. And also, Zoran, with that comment on the energy transition, does that take into account if there's a change of government?
There are a lot of things that need to happen in terms of, okay, one change of government, two change of policy. But I think irrespective of that, I think based on what we know now, and even if there was a change in government, we're still reasonably confident with the broader outlook in terms of the renewable market.
Right. When do you think you'll be pitching for some of the further decommissioning of offshore platform work?
Decommissioning? I mean, there are a number of smaller opportunities that exist here in WA, but I think the more significant decom opportunities are probably three years plus out. The larger proportion of them I would suggest are associated with Bass Strait decom activity.
Thanks, guys.
Thank you for the questions. Our next question comes from Rohan Sundram from MST Financial.
Thanks, Zoran and Phil.
Just the one for me, just in terms of how you're seeing inflation pressures on your business and to the extent that that's easing. And maybe just one around, do you anticipate to see any indirect impacts from tariffs, especially on China, or anything like that? Thank you.
In terms of inflationary pressures, we're still seeing some pocket wage growth pressure, but the reality is it's moderated from the levels we saw, I'll say, two or three years ago, particularly in terms of supply chain inflationary impacts. I mean, they have come off more materially.
Thank you. And any thoughts around, yeah, sorry, the tariffs and any indirect potential impacts?
I don't have any specific thoughts or views around that. I think our customers are probably trying to get their heads around what that means more at this stage or what that could mean.
No problem. Thank you.
Thank you for the questions. Next question comes from Richard Aplin from CLSA. Please go ahead.
Hi, good afternoon, guys. Just two quick questions from me. One, I just was hoping to confirm the Melchor incremental revenue contribution in this half. I sort of had it based upon the time of acquisition completion at the end of October 2023 that you had about two months of incremental contribution worth about AUD 50 million, and that was into the engineering construction sector. Is that a segment? Is that accurate?
I think in the last year, I think it was about AUD 25 million for the two months. I think we bought the business at the end of October. And for the six months, I would suggest it's sort of similar on a pro-rata basis, maybe a little bit less.
So is that AUD 25 million a month or?
No, no, no, no.
For the two months.
All right. So you've got an extra AUD 25 million. That's fine. Just wanted to double-check that.
Yeah.
That's the unique business.
Yep. And then the other question I had was, in the engineering construction awards of AUD 750 million, a good healthy number, can you give us a bit of indication over what timeframe that that's expected to be delivered? Is that sort of notionally a two-year order book? Is it less than that, more than that? Just a broad framework.
Yeah, I'd need to have a closer look, but it's probably 15 months to 18 months, somewhere around there. Some of that work's already well in frame, and some of the work is about to kick off.
So if I look, well, I won't say because I haven't specifically looked at it, but just trying to dimension it, it's probably somewhere between a year and two years. So 15 months to 18 months intuitively sounds right.
No, that's helpful clarity. That's it for me. Thank you.
Thank you for the questions. Next question comes from Nathan Reilly from UBS. Please go ahead.
Hey, Zoran. Just a question. So I'm looking at your comments around solid sort of project pipeline/bidding activity in the resources and energy markets, but also just marrying that up with your comments around the skilled labour shortage that you're seeing in some pockets. I'm just curious, are you seeing any change in how you're approaching project delivery models in that environment?
I'm not in the last six months. I wouldn't say nothing in terms of changing delivery models.
I think while my comment around skilled labor shortage, I think the reality is there are a few more people out there, but it's a quality issue. It's the depth of quality in the labor pool. There are particular classifications or grade classifications, both blue collar and white collar roles that are still pretty tight.
Can I get an update on just general productivity levels in the industry at the moment? From your perspective, just in terms of timing of awards, project approvals processes, and just general labor productivity across the industry?
I think the timing of awards piece is linked to the comments around we are seeing some delays in terms of getting through the approval processes to awards. I'd expect to see some further delays over the next six months.
But as I said, I've got confidence that that work will be awarded and executed by someone. In terms of the productivity piece, I made the comment that one of the contributors to our margin performance is operational performance. And if you get underneath that, a component of that is our ability to be able to execute the work we've had in hand reasonably productively. So arguably, productivity generally has improved slightly in this period. But I wouldn't necessarily take that as a macro view. I think we have a really strong operational performance. And as I said, not just in the engineering construction business, across the business.
Got it. And final question, are you seeing an increase in early contractor involvement to the tendering processes?
An increase? Probably not, but there is a level of ECI activity that we're engaged with at the moment.
Perfect. Thanks very much.
Thank you for the questions. One moment for the next questions. We have a follow-up question from Nicholas Rawlinson from Morgans. Please go ahead.
Hi, guys. Just a quick follow-up. Could you comment on the shape of the E&C book in terms of how much cost plus you're doing and how much schedule of rates as a proportion?
Right at this point in time, I don't know. I'd probably say there's a mix of, yeah, maybe 60/40 between some version of rates reimbursable versus more fixed price work. But even within that, there are nuances to reimbursable contracts and fixed price contracts in terms of components within the overall pricing. But I'd say 60/40, somewhere around there.
As in 60 schedule of rates?
Probably. Or more akin to schedule of rates. Yeah. Rather than pure rates.
Yeah.
Do you see that, I mean, it was 50/50 probably a year or two ago. Do you see that trend continuing to increase in terms of sort of fixed price/schedule of rates?
Well, in terms of continuing to increase, I'm not sure about that. But at this stage, I probably expect to see a similar split or allocation.
Okay. That's it for me. Thank you
Thank you for the questions. We have no more questions from the line. I'd like to hand the call back to management for closing.
Thank you all for your participation today. That now concludes our briefing.
Thanks, everyone.
Thank you.
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