Thank you for standing by and welcome to the Metarock Half -Year FY 2024 Results Conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Jon Romcke, Executive Chairman, and Jeff Whiteman, Chief Executive Officer and Managing Director. Please go ahead.
Thank you, Melanie. It's Jon Romcke here, Executive Chair of Metarock . I'd like to welcome all our shareholders out on the line and any other interested parties who have taken the time out to make the call and listen to what we've got to say this morning. I do refer to the investor presentation that we've published on the ASX platform. That's our main guide for the dot points and the overview that we're going to talk to today. We'll give you a fair bit of detail in this presentation, but then hand it over for a Q&A session after that area. So thanks for joining us. It's great to see that our turnaround plan that was devised late in 2022 and executed throughout 2023 has been delivered, and we're seeing these strong earnings declared for the second half or the first half of the FY 2024 year.
We've got a materially improved balance sheet with reduced gearing. We're moving towards an improved safety environment, but safety and work associated with safety is never-ending, and we'll continue improvements during the next six months as well. The board itself has been refreshed over the last six months, and we've got a strong focus on risk, safety risk, and commercial risk associated with our current contracts and our future contracts. We've restructured the management team, and we've established a fair bit of stability with the permanent employment of Jeff Whiteman as CEO and Managing Director. He's joined the board from February this year, and it's great to see.
We've attracted new work to the business, including the Savage River contract with PYBAR in Tasmania, where they're developing an exploration adit, and we've got new work at Whitehaven's Narrabri Mine in New South Wales, underground Longwall Mine, where we're taking on development activities in the Longwall Gate Road as well. Our existing portfolio is also performing well. Now we've got rid of the legacy projects that we're dragging us behind over the last 12 months. We've got strong relationships with the major mining houses such as Anglo American, Whitehaven, Peabody, and Glencore, as well as many other emerging players with a strong pipeline. There's over AUD 4 billion of opportunities across the group in underground coal and underground hard rock, and our cornerstone investor, M Resources, is very, very keen to use that strategic relationship that they've got in the resource centre to bring new work wherever appropriate.
The outlook for the group is highly positive. We've got a stable foundation. All our projects are cash positive at this stage, and we're looking forward to growing the opportunity in this underground contracting space. I'd like to introduce Jeff, and Jeff's going to go through a bit more of the technical and financial details for the benefit of everyone on the call.
Thanks very much, Jon. I'll start off with the financial results, and I'm certainly very pleased to report a marked improvement from 12 months ago. Revenue for the half of AUD 234 million, a little bit down on the first half in FY 2023 of AUD 259 million, that's due to the exit of various legacy contracts. EBITDA, though, AUD 25.5 million, and that's before a profit on asset sales of AUD 4.2 million. And that's resulted in bottom-line profit before tax of AUD 10.9 million versus a loss this time last year of AUD 73.4 million. Even normalizing the first half of FY 2023, EBITDA was AUD 8.8 million. This year, we're almost threefold higher at AUD 25.5 million. These positive earnings have converted into good underlying operating cash flow of AUD 18 million, and that's assisted in covering the ATO plan repayments and cessation costs associated with Cook.
And also, we had some delayed receipts at the period end, which we expect to reverse. CapEx has been well-managed through the period, and while growth CapEx is to be expected as we move forward and certain new opportunities are won, the CapEx burden of the legacy projects has ceased. In terms of a turnaround plan, it's got us here: we've achieved a number of milestones. We've exited the legacy loss-making contracts, with the last one achieved in the half by a mutual agreement that was at the Cook Mine. We've improved our safety and operational performance at all our sites. We've restructured responsibilities, and I think a much clearer focus on the priorities and really refocusing on our core capabilities in mining services.
We've recapitalized the business, as you would know, in May last year when M Resources came on board with a AUD 25 million placement, and that's been coupled with the sale of surplus idle assets, mostly those that have been tended for the Cook and Crinum projects. That includes the transactions that we announced on the 30th of June last year but actually closed in the first half.
The combination of asset sales and positive operating cash flow has enabled the total combination of debt deferred consideration for PYBAR and the ATA payment plan. That's almost halved from AUD 120 million, roughly in December 2022, to AUD 62.8 million at the end of this half, with the ATA being fully repaid in December on time. We've continued to manage our working capital facilities very collaboratively with Westpac, such as the current facilities that are now extended out till September this year.
And given the positive recovery in our earnings, there's strong appetite from prospective lenders to be involved in a refinance, and we've all progressed in discussions with a number of parties in that regard. Turning to safety performance, we've talked a bit previously around elevating our safety performance. That remains the core theme for us, and we're working on a range of direct measures in that regard. But from my perspective, probably the most reassuring aspect is that we've recently run an all-employee survey across our Mastermyne side of the business. And together with engagement with both PYBAR and project leadership, both of those have really confirmed to us that working safely is a core value for all of our people across the group, and it is central to our culture. It's not just something that we're saying at a corporate level.
It actually is held in high esteem across all of our people. Just turning quickly to the divisions and the performance across the business: Mastermyne, we're continuing very strong relationships across Anglo American with their three Queensland mines. We've been building our presence at Whitehaven's Narrabri Mine off the back of strong operational performance, and we've recently run some new work at Peabody's Centurion Mine as well. All of that's within our core contract mining services capability. Our specialist strata support business, Wilson Mining, has had a very good first half underpinned by healthy demand for our products and services. In PYBAR and the hard rock space, we've ramped up three new projects in the half. So Rosebery, which started in April, has really hit its straps. The Maxwell project started in July and is well progressed. And we've just recently started the Savage River stage one project in Tasmania.
That started in December. On top of that, we've also started a small raise bore project at Aurelia's new Federation project as well. PYBAR has maintained its strong performance at various projects in Mount Isa, Cloncurry region for Glencore, and AIC, and also doing the raise bore operations at Carrapateena, which is now owned by BHP down in South Australia. Now, the outlook for PYBAR is very positive. Despite two longer-term projects approaching the end of mine life, so that's darks and black rock, the opportunity pipeline for PYBAR has built markedly in recent months. In terms of the outlook going forward, firstly, I'm very proud of the whole team across Metarock. Mastermyne, PYBAR, Wilson Mining, and MyneSight, they've really come together over the past 15 months to deliver the results that you're now seeing. I can't be prouder of the team for doing that.
The legacy issues have been dealt with, and stability has been regained. We're now in a position to really look forward with confidence and focus on the future strategy and operational excellence. Now, the outlook for the balance of FY 2024 and beyond is positive. It's underpinned. We've got a AUD 466 million order book, and possibly even more importantly, we've got a AUD 4 billion opportunity pipeline. That's the end of the presentation, and I'd like to hand over to Melanie to open the floor up for Q&A. Thank you, Jeff. It was a good presentation, and yeah, keen to hear any questions that we've got from the floor.
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're on a speakerphone, please pick up the handset to ask your question. Your first question comes from John Burgess with RAAS Group. Please go ahead.
Good morning. Congratulations on the turnaround, and in particular, the level of disclosure across the business makes it easier to, well, to have a look at the numbers. A few questions. One is, I guess, looking at the EBITDA number for the first half, AUD 25 million adjusted, should we consider that to be sort of a low, mid, or a high point in terms of your earnings potential?
Thanks, John. I would say it's a good indicator of where the underlying EBITDA is. With our Wilson Mining business, the demand for that product is driven by ground conditions at various mines. And so that demand can vary month-to-month. And certainly, in the first half, we've had probably three pretty good months out of that business. And over the longer term, we expect that to continue and grow. But I suppose that's just probably the one area where the demand can vary month-to-month and therefore impact on the EBITDA for a six-month period.
In terms of, I guess, people utilization, equipment utilization across the business, are you pretty full? Is there room to win contracts?
Yes, there's certainly capacity to win new contracts. And yeah, as I say, we've focused on the opportunity pipeline across the business and actively growing, involved in live tenders now for Mastermyne, Wilson, and PYBAR, all around growth contracts. I'll tell you the takeaway on that is we're taking a very measured approach to growth this time. It's in an area of core capability. We're very focused on the commercial risk we're taking on and the safety risk. But yes, we're certainly out there growing the business.
Do you have, again, a historical conversion rate of pipeline to contract or an expectation, I guess?
Look, I know people do use rules of thumb on win rates. I think either business has obviously been through some turmoil in the last two or three years. So I think with a new board and a restructured management team, I think how we approach tenders now probably is so different that I'm not sure historical rates apply. But probably more importantly, I think our approach to business development and new work is quite different. And we're very focused on targeting clients we want to work with, on projects we want to be involved in, and working with those clients to develop the scope and contract and less of sort of just waiting for requests for tender to drop on the doormat and sort of applying to as many on the hope that we win one in 10 or one in 8 or whatever.
Probably just a different approach to BD.
Okay. In terms of your debt, two things. One, can you quantify that timing difference in the invoice facility at the year-end? And then two, do you have a target sort of debt to EBITDA or EBIT or whatever metric that you'd be comfortable with?
So firstly, just on the timing issue, I thought referring to page six in the investor presentation, there's a chart there that's got a AUD 5 million normalization to cash flow for that timing difference in the December there. In terms of leverage, again, I probably don't have a firm leverage multiple in mind at this stage. But it's very much been more around removing what I would say is debt that's been more of a milestone around the business. And that seems like the ATA payment plan and so on, which was very helpful to get us through that type position. But it's not debt that we would like in the business going forward. And I suspect the ATA are happy it's repaid as well.
In terms of if there's a bit of asset finance required to finance new assets sort of going into new projects, I'm far more relaxed about that type of debt.
I think that's a good point, Jeff, that we haven't gotten into our capital management system at the moment. Do we have a specific target? It's more related to those growth opportunities and where those opportunities include equipment acquisition, and we're quite comfortable in taking on debt associated with that. So we're not afraid of future debt, but we need debt that is clearly linked to EBIT earning projects and new projects in the future that include the repayments associated with it.
Yeah. I would say I think that's been one of the biggest changes over the last 15 months. Clearly, the business was heavily overgeared in December 2022, and where we've got it to now, our leverage ratio is a fundamentally better position and would be sustainable at the level we're at. But yeah, it's not a firm target.
Yep. Okay. Just one on, I guess, sustaining CapEx versus depreciation. So property, plant and equipment depreciation's around AUD 20 million over the year. And sustaining CapEx usually is a relationship to that. But obviously, your CapEx is very low first half and probably excluding new projects sort of pretty low over the year. So I'm just interested in what is your sustaining level of CapEx in your view.
Again, I think the depreciation here was some historical challenges in there as well, which we haven't sought to go back and normalize. So I think worth bearing that in mind when you look at it. We're running Mastermyne currently is run fairly light in terms of plant. And in PYBAR, probably the depreciation is a heavier charge. But the fleet is in excellent condition there. And so it's not something that we really need to be spending a large amount on. We are doing extension of life work on the fleet. But yeah, generally, we maintain the fleet in excellent condition as we go. And really, with the CapEx on, probably more focus on is around growth CapEx as we're winning new projects. And that's probably more what we're looking at.
Yep. So you're saying that because the depreciation policy then looks aggressive relative to your equipment balance. So you're saying it is aggressive, the depreciation?
Well, the depreciation also is depreciation in there that would relate to a number of the assets that have been disposed of during the period as well. So yeah, I think our depreciation charge will look a bit high compared to what it might be going forward. And yeah, I'm also just reviewing some of the depreciation policies as well. But so I think it's more to do with the level of plant that we actually have.
It's fair to say, Jeff, that the CapEx in this six months is probably not representative of the future. If you looked over five years, yes, there will be equipment replacement that'll need to be factored in. But those sorts of decisions will also be made in conjunction with contract renewals for that sort of work going forward.
Yep. And one final one, sorry, but I guess what conditions, financials, are you looking for to think about a resumption in dividend payments?
Oh, I'm going to pass that one to Jon. That was dividend?
Yeah. Look, when we've got the business generating positive cash flow and when we've reformulated our approach to our capital management going forward, we'll make that known to the market and be able to declare dividends in the future. But right now, as you're well aware, we're not in a cash position to do it in this half. Hopefully, at the end of the year, the board will get together, and we'll address that issue naturally.
Yep.
Okay. Great. Appreciate the time. Thank you.
Thanks, John.
Thank you. Your next question comes from Paul Walker with Cargill Corporation. Please go ahead.
Good day, gentlemen. Thanks very much for taking my question. Just wanting to ask any feedback from M Resources on the half result, and have they indicated any aspirations or made it clear any objectives that they want to see Metarock achieve in the next six months?
Yeah. I think the initial feedback is that M Resources are happy with the result and the progress of the turnaround plan. They're also clearly focused on growth opportunities and are very keen to continue the support to the business aiming at future growth. And we're very keen to leverage that connections that M Resources has in the resource industry as a whole to take those opportunities as we can. So yeah, it's a positive story, and they're looking for us to certainly grow the business in a sensible way, and in a cash-positive way, and an EBIT improvement way, so.
Has Metarock, is the management, the board at Metarock, have they been particularly concerned about the very low liquidity and, in my mind, a perceived no interest from the market in general on the Metarock story today, in particular over the last six months, just the volume of shares that have traded very low?
I think, Paul, clearly, the businesses, I think most people on the call would be aware, it's been through a very tough period of time. We are very well progressed on the turnaround. And as I say, we've been through two consecutive periods of good underlying earnings now. That was still based on normalized earnings in the second half of FY 2023. We've now delivered a first half without having to normalize earnings. But it's all still quite fresh. So I think that's and I think the other thing is it's been a sort of deliberate strategy on behalf of the management team is to we've really sort of not tried to keep it below the radar, but we haven't been out there blowing our trumpet about progress because we've been trying to achieve the milestones on the way through.
And I think having got to where we are, we will be engaging with the market a bit more. And yeah, I would hope to see somewhat more interest in the share trading over the next sort of 12 months compared to what it would have been over the past 12 months.
Once upon a time, winding the clock back maybe two or three years, Metarock, or at that time, it may have been Mastermyne, they used to put out an earnings guidance, so a particular range that they anticipated they'd achieve for EBITDA in the next or in the forthcoming period. Is that something that management are considering to reinstate in the future?
It's certainly something we're going to discuss at the board level over the next couple of months and see when we're comfortable to do that. I think it's a good idea for public companies to be able to do that where we do have a stable and a positive story going ahead. So we'll certainly consider that, Paul, and come back to you.
Yeah. Just a final question. This AUD 4 billion pipeline of opportunities, what are some of the actions that, let's say, the River Street office has undertaken and main focus of has there been any deliberate engagement of new back-of-house resources to be able to deal with this opportunity pipeline, or is it still too early in the development process to start putting new people on seats?
No, we're starting and have been over the last three months starting to engage with key parties, i.e., companies that have underground projects on their books. And there's plenty of information in the market and information about new approvals, underground mine approvals, etc., that give us the pointers of where to go. And with a network of connections between myself, M Resources people, and Jeff's experience in the industry as well, that gives us in to open those conversations and then make representations on our capabilities. And we've got a broad range of capabilities in the underground hard rock area, underground coal area, in the ground stabilization, and also in the training in setting up new mines with proper and sensible training regimes through our mine site business.
We offer those suites of services to those companies that are going to head underground over the next two or three years. I'm very confident there's going to be three, four and five new mines over the next three to four years developed, and Metarock's going to be there and be part of those businesses wherever we can.
I appreciate your comments. I think over the last six months, you've done a very good job in running the business and steadying the ship. Thank you.
Thanks, Paul. Thanks, Paul. Yeah, I was just going to add, I think, on that point around business development and converting these opportunities, again, probably taking a slightly different approach to what the company might have done previously. But very much, the business development does not fall on one or two people sitting in the C-suite. The business development responsibility is across the organization from project managers at existing sites and certainly across different leaders of business units and so on. So it's very much a very good level of resource. Clearly, I think 12 months ago, people were focused on a lot of firefighting and not very focused externally or looking at BD. And it's the removal of that noise and the clarity that we have now is what's really allowing people to look outside of the company. And that's really what's building that pipeline.
We'll also enable that pipeline to be successfully converted.
Thank you. Your next question comes from Jonathan Peters-Scales with Matra Capital. Please go ahead.
Hi. Thanks for taking my question. This is a question to do with risk. We get to see historically what the margins have been, but we don't get to see what risks have been taken to get those margins. And so in the future, is there a way of actually giving us an assessment of what risk is being taken to increase margins or to give us a handle on what the risks of the business are?
Yeah. Look, I think that's a good question, Jonathan. I think it's a difficult one in terms of disclosure, not only around the confidentiality and commerciality, but also being able to try and describe it in clear terms.
In an easy-for-word way.
But very much. I think when you look through sort of the nature of the contracts and where some of the contracts have been before, the level of risk that was put on the company in terms of achieving production and in some cases, taking on coal price risk and so on, we're not in that game now. So the contracts we're taking on now are sort of traditional mining services-type contracts. And whilst a number of our contracts will have margins that might vary based on achievement of different KPIs around both, say, production and safety, so we're happy taking that sort of risk on, but certainly making sure we're covering our costs and then also getting some upside where we're prepared to as we are, we're prepared to back our capability in terms of achieving good performance and good safety outcomes. So that's really where the company's at.
I think for disclosure would be more if we're taking something on that's outside of those norms. That's probably where we would be expecting to disclose that.
Is that something you will disclose in the future if you take on more risk, then you'll disclose that?
I think the problem is, Jonathan, how do you describe it and how do you measure it? There's no sort of standardized metric to measure risk by it. So much of it is objective in nature and will change from contract to contract, mine to mine. But we'll take on board your comment, and we'll have a discussion at board level on whether that's something we can look at and develop and maybe do some comparators between different margins or different mines or contract arrangements in future. But it's certainly something at board level we discuss, but very hard to get a measure that's going to be meaningful to the market, I think. But we'll take it on board as something to consider.
Okay. The other question is, I noticed in the presentation there hasn't been really much focus on value per share, and I think it's an important metric. As shareholders, we don't care about how big the company is. We just care how much the earnings per share is and what the earnings per share growth is. Can you sort of state whether that is going to be a focus on an earnings per share basis, the growth of this company?
Yes. Yeah, going forward, that certainly is a pretty normal metric for companies to focus on. Obviously, the last 15 months, we've been focused on trying to get our recovery moving, and that by default is going to improve the position per share. You can see in the Appendix 4D, obviously, there's some statutory disclosure there. And with the improvement, the earnings per share has improved. But yeah, that will be a focus going forward. Obviously, there was a diluting effect when M Resources came on last year, but without that placement, the company might be in a very different position. So I suppose it was the needs and must at the time. I think certainly bringing M Resources on has been a game-changing move for the business in not just financially, but as John said earlier, strategically as well.
But yes, having done that, we are not intending just to go and sort of creating diluting events for the cycle.
Okay. And then just on capital management, there may be a conflict between what M Resources wants and what minority shareholders want in the form of dividends or buybacks. Is there any indication as to what the desire there is, or is that just something that's a work in progress?
Yeah, nothing that we can address at this stage in relation to that. We're certainly going to be sensitive to that. But I'm certainly of the mindset that what's good for a large shareholder is also good for minority shareholders normally. And where unusual situations arise, we'll be very transparent to the market.
Okay. Also, the last question is, CFO, is that something that you're looking at at all?
Yeah. So we are going to make some moves on that. At the moment, we've certainly got some excellent help through some consultants that are very experienced CFOs. And so that's on top of a very capable finance team within the business. So that's certainly getting us through. But yes, I'll be looking to resolve that in the not too distant future.
Okay. Thanks very much for taking my questions.
Thanks, Jonathan.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Romcke for closing remarks.
Thanks very much, Melanie. Thank you, shareholders, and others that have participated in the call. We're certainly going to be moving forward and being as transparent as we can to the market as we move forward and also capture opportunities for the future and be looking forward to also engage with the market as those unfold. So yeah, thank you, Jeff, for taking us through the detail, and I'll sign off.
That does conclude our conference for today. Thank you for participating. You may now disconnect.