Thank you for standing by, and welcome to the Perenti Ltd FY 2024 Results Presentation. 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 the company. Please stand by. Please go ahead.
Good morning, and thank you for joining the Perenti Financial Year 2024 Results Call. My name is Mark Norwell, and I'm the Managing Director and CEO of Perenti. Presenting alongside me today is Peter Bryant, our CFO. Before talking to our numbers, I'd first like to provide an overview of the business as it stands today on slide three. Perenti is the parent company for our four operating divisions. Within these divisions, we retain 13 brands, each with industry recognition and value. For instance, within Contract Mining, Barminco and AUMS are renowned leaders in underground hard rock mining, with more than 30 years of experience, and AMS is a leading surface miner in Africa.
Within Drilling Services, the former DDH1 brands of DDH1 Drilling, Ranger, Strike, and Swick have been combined with Ausdrill to create a globally leading drilling company with capability across the full spectrum of mining exploration, development, and production. Mining Services contains a portfolio of businesses that directly support mining operations. BTP is the largest business in this division and is trusted by leading companies for the sale, rebuild, and rental of equipment, components, and parts. idoba is our technical innovation division and is seeking to bring together AI, data analytics, and mining know-how to develop digital products that optimize increasingly complex mining operations. In total, we have more than 10,500 employees working around the world. We provide services to over 100 clients at more than 60 projects. In FY 2024, we earned revenue in 12 different countries across more than 10 commodities.
By revenue, we are predominantly exposed to underground operations. Underground mining is very complex, requiring specialist operators and technical capabilities, which provides a high barrier to entry. More than 2/3 of our revenue is in countries rated investment grade by international ratings agencies. Lastly, when we tender for work for operating mines, we look for opportunities that will survive commodity price cycles, have a client who is financially sound with aligned principles, and the asset has a long mine life. This decision matrix, along with our underground mining expertise, has naturally led us to be weighted towards gold operations, which, given the current gold price, is a fantastic position to be in. On to slide four. This slide demonstrates our ongoing financial improvement year on year, with several records set in FY 2024.
Revenue of AUD 3.3 billion, EBITDA of AUD 645 million, EBITA of AUD 314 million, and NPATA of AUD 166 million all reach new records. This performance was delivered on the back of consistent operations from our core contract mining division, margin growth in mining services, and the DDH1 acquisition. Our organizational structure continues to focus on generating efficiencies at the corporate level and within the operating divisions, delivering improved group EBIT margin to 9.4%, up from 9.2% in FY 2023. We are particularly pleased with our free cash flow result of AUD 184 million. This is defined as operating cash flow after interest, after tax, and after all capital expenditure. For the avoidance of doubt, the CapEx figure includes all stay-in-business and growth capital.
I then compared our result to others in the sector, and the first point I noted was the different formulas in use for free cash flow. If we applied some formulas in use, we would be reporting free cash flow greater than AUD 600 million. However, that is effectively just reporting EBITDA and calling it free cash flow. Coming back to our definition for free cash flow, at AUD 184 million, this is a great result and is larger than originally forecast, due to, in part, the successful redeployment of assets released from discontinued nickel projects, Savannah and Cosmos, and the timing of capital payments. The strong free cash flow facilitated further reduction in our net debt, thereby reducing our leverage to 0.7x , which is another record for the organization, even when comparing years prior to the Barminco transaction.
It has also enabled us to declare a AUD 0.04 per share final dividend. This takes the full-year dividend to AUD 0.06 per share, representing a 5.9% yield on yesterday's closing share price, and is in addition to the circa AUD 30 million of share buybacks we completed during the year. These dividends and share buybacks are a tangible demonstration that Perenti is positioned to reliably and consistently deliver free cash flow in the future. To clearly demonstrate the commitment we have for our shareholders, we are pleased to announce an updated dividend policy, targeting a dividend payout range of 30%-40% of underlying NPATA. We are confident that the business is positioned to deliver reliable performance in the years ahead.
The scale built during several years of growth is now capable of delivering enduring value and certainty that we have been targeting throughout various cycles within the sector. Slide five, sustainability. These outstanding financial results have also been achieved alongside our commitment to our three sustainability imperatives, which are important to support current and future earnings. Through our actions, we are focused on providing care for our people and communities, valuing the environment, and enabling the energy in transition, and always acting ethically and responsibly. To this end, we restate our target of no adverse life-changing events for our people. We want our staff to feel safe and respected, and we have seen meaningful improvements, as evidenced by employee surveys. We've seen an increase in female participation across the business, and we are proud to have 57% female representation at the board level.
We remain committed to building respectful and rewarding relationships within the local communities in which we operate. Additionally, we have trialed multiple battery electric vehicles during the past year in collaboration with industry leaders, including Sandvik, and in partnership with IGO and ABB, we completed a full mine electrification study that was released as a white paper in May. In addition, through Swick, we are developing an electric underground diamond driller. Slide six, our people. All of our achievements are due to the dedicated and hardworking people that work for us around the world. Our people are the foundation of our business, underpinning our performance and positive reputation. In FY 2024, we continued to invest in employee development. More than 900 people were undertaking apprenticeships or traineeships during the year, and a further 200 completed our whole of company leadership programs.
We firmly believe that development of our people will build both capability and a culture of excellence, that when combined, will ensure ongoing positive performance. The safety of our people is a responsibility that we take very seriously. We want all our employees to be able to fulfill their duties in a safe manner, and ultimately go home safe at the end of each shift to their friends and family. Unfortunately, the tragic passing of our colleague, Siswantoro, during the year shows that we fell short of this critical objective. The loss of Siswantoro has clearly had a profound impact on his family and friends, but also his direct work colleagues and everyone across Perenti. The incident highlights the importance of the Safety Transformation Taskf orce that completed its work during the year, and transitioned into specific actions for each operating division, along with increased assurance of progress.
On the back of the task force recommendations, each division has finalized safety transformation and improvement plans, with implementation continuing in FY 2025. The plans are focused on leadership development, improved training for our people, enhanced approach to critical risk management, knowledge sharing, and assurance. Improved safety framework is critical to ensure that all employees and contractors, regardless of role, go home safe at the end of each shift. Slide seven, group result. As mentioned, the combined efforts of our outstanding team have delivered a new benchmark result for the group. Revenue, EBITDA, and EBITA, were all within guidance and all reached new highs, continuing the growth trajectory of FY 2022 and FY 2023. Pleasingly, our EBIT margin is also continuing to improve.
Year-on-year margin improvement has been driven by focusing on efficiencies in all parts of the business, including overhead savings generated at the corporate level, which is now tracking at less than 1.5% of revenue. The record group performance has been achieved despite lower rig utilization levels in drilling services. The Integrated Drilling Services division is now positioned as one of the leading drilling companies in the world. The strength of our contract mining division and the inevitable uptick in drilling activity offers potential for earnings upside in the future. Slide eight, Contract Mining. The Contract Mining division has delivered a consistent year on slightly higher revenue than FY 2023. During the year, the Savannah Nickel Mine entered voluntary administration. While this was a disappointing outcome, it did allow us to redeploy equipment to other operations.
In an otherwise tight labor market, we found jobs for all staff who wished to continue working with us. The net EBITA impact of the Savannah closure was AUD 11.2 million, which we included in our underlying results. To provide a like-for-like comparison, in FY 2023, a retrospective rate adjustment for the Iduapriem project was received, which increased the result by AUD 11.3 million. Adjusting for both these one-off impacts, the EBITA margin for FY 2023 and FY 2024 demonstrate consistent performance at 11.8%. Over recent months, several important contracts have been renewed, including Zone 5 at the Khoemacau Copper Mine in Botswana, the Mana Gold Mine in Burkina Faso, and two mines in Canada. Slide 9, Drilling Services. On the 6th of October, 2023 , we acquired DDH1 Ltd and its four drilling brands.
The integration of these businesses with our existing drilling business, Ausdrill, has been successful during FY 2024. It will come as no surprise that the market conditions for drilling have been challenged, especially during the second half of FY 2024. This has impacted the performance of the Drilling Services division, but despite these headwinds, the division delivered strong free cash flow. The performance of the division was within our modeled range to support the transaction, and as mentioned earlier, we are well positioned to capitalize on an uplift in demand. Slide 10, Mining Services and idoba. Mining Services has seen improved operational performance in both BTP and Supply Direct. This helped lift the EBIT result with revenue relatively consistent year-on-year. By way of comparison, FY 2023 included AUD 11.4 million of idoba development costs that aren't included in this segment for FY 2024.
The BTP result was driven by improved demand and utilization of the rental fleet, with part sales growing in all regions, underpinned by a strong rebuild pipeline. Supply Direct also recorded strong earnings growth, partly due to the successful consolidation of warehousing operations to a single location, allowing us to pursue additional product lines with capacity for further growth. All in all, a very strong set of financial results. I'll now hand over to Peter Bryant, who will present some of the more detailed financial results.
Thanks, Mark. I, too, would like to welcome all those on the call to what will be my last presentation as the CFO of this significant global business. A business that houses some of the most iconic brands in the contract mining, drilling, and broader mining services sectors. As we announced on the 20 th of May, this year, after over eleven years with what is now the Perenti Group, I tendered my resignation and will be moving on to the next phase of my career as the CFO of the Perth Airport in the coming months. It is very gratifying to be leaving Perenti with record free cash flow, three consecutive years of growth post-COVID, a much- improved balance sheet, which has facilitated the reinstatement of dividends and with a positive outlook for FY 2025 and beyond. Slide 11 summarizes the underlying profit and loss for the period.
Mark has been through the performance of Perenti and the divisions to the EBIT level, so my focus will be on the numbers below EBIT, which effectively means the interest and tax expense for the year. Interest expense, being the delta between EBIT and profit before tax, was AUD 69 million, which was up on the AUD 62 million recorded in the prior year. Interest expenses increased year on year because we have seen an increase in interest rates, coupled with a temporary increase in total debt balances as a consequence of the acquisition of the DDH1 group in October 2023. As a brief recap, the DDH1 purchase consideration included the payment of AUD 50 million in cash to DDH1 shareholders, together with the payout of DDH1's AUD 24 million net debt balance. These amounts were in effect funded through Perenti's revolving credit facility.
As we are all acutely aware, global interest rates increased through FY 2024. The all-in rate of our revolving credit facility, which is a variable rate facility, was up circa 1.5 percentage points compared to the prior year. I note, however, the majority of the revolving credit facility was repaid in May of this year as part of our refinancing activities. The blended rate of our core U.S. high yield bonds also increased marginally in FY 2024 following the refinancing activities, which saw the new bonds issued at a rate of 7.5%, compared to the existing bond rate of 6.5%. That said, the new issue was a sensational success, which I'll expand on later.
Moving to tax, and as foreshadowed when we presented the DDH1 acquisition, we saw a notable and pleasing reduction in our effective tax rate, which for the year came in at 32%, well below the previous year's rate of 35%. Given the historic upward pressure on our effective tax rate, it is great to see the rate falling in line with the expectations we communicated to the market. Underlying earnings per share and the very impressive free cash flow per share are also shown in this table at the bottom of the slide. Mark will speak to these in relation to the DDH1 acquisition later in the presentation. Moving to slide 12, which shows the reconciliation between our underlying and statutory numbers.
Looking at the NPAT column, the underlying result for FY 2024 was a profit of AUD 165.8 million, which is up circa 7% when compared to the statutory result before amortization. With the exception of the partial redemption premium paid on the bonds that were redeemed as part of our refinancing activities and the release of capitalized borrowing costs associated with those bonds, the adjustments are consistent with those made at the half and are reasonably straightforward. They include the gain made on the acquisition of DDH1, which is slightly lower than the number at the half following the finalization of the purchase price accounting exercise. Transaction, restructuring, and other one-off costs, which relate primarily to the DDH1 acquisition. Net foreign exchange losses associated with the restatement of our international balance sheets to AUD.
This balance was up on the AUD 5 million recorded at the half, with a large proportion of the increase due to unrealized losses following the implementation of some foreign tax management initiatives related to historic loan account balances. Importantly, these amounts are non-cash and are partially offset by a gain that flowed through our other comprehensive income. idoba product development spend was in line with expectations at AUD 15 million. And finally, we have the net tax effect of these adjustments. Moving to slide 13, the money slide, both metaphorically and literally. As Mark has already commented, the business continued to excel in FY 2024 by delivering free cash flow after growth and staying in business capital and after its investment in idoba of AUD 184.5 million.
This sensational outcome was well above the initial guidance we provided when we released the half year results and is testament to the relentless focus the business has on generating cash. It was the efforts of our people and the relationships we have with our clients that resulted in this great outcome. Cash flow conversion, being the conversion of EBITDA to cash flow from operations, which we were a tad concerned about given 30 June fell on a Sunday, finished the year at 98%. Although not a record, to achieve this outcome in a period of growth is exceptional. Running down the table, I talked earlier about the drivers to the increase in profit and loss interest, and those same factors saw a slight increase in cash interest for the period.
The cash interest increase is less due to the timing of interest payments and the inclusion of some non-cash items in the P&L relating to the amortization of borrowing costs. Cash tax for the year is up slightly on the prior period, due to the combined impact of the level of foreign profits derived, the remittance of funds to Australia, which often attract withholding tax, and the timing of tax payments. You'll also see we've included acquisition and transaction costs in the free cash flow calculation. These costs relate to the purchase of DDH1 and could arguably have been excluded when calculating the free cash flow number. However, we wanted to ensure the numbers you see in this table agree to the numbers in the cash flow that forms part of the statutory accounts.
Our total capital expenditure, being sustained business capital plus growth capital, less proceeds from the sale of plant and equipment for the year, was AUD 303.3 million, which is below guidance and thus contributed to the strong free cash flow. As per our ASX announcement on the 22nd of July, this reduction in capital expenditure can be attributed in part to the successful redeployment of assets released from the discontinued nickel projects, Savannah and Cosmos, and to the timing of capital payments. The timing element is not that material, and the FY 2025 capital guidance, which is in this deck, and which Mark will talk to you shortly, includes the impact on FY 2025 of the deferred element we spoke to in the announcement. So what did we do with the AUD 184.5 million of cash the business generated?
We paid AUD 50 million for cash consideration to DDH1. We paid AUD 24 million to pay out DDH1's debt facilities at the date we purchased them. We reduced our net debt by AUD 30 million, and most importantly and significantly, we returned AUD 48.8 million to our shareholders via share buybacks and the payments of an interim dividend. All in all, a very rewarding year from a cash flow perspective. For those on the call and in the room, with me here today, who like to see the cash flow in a graph, we have included one in the appendix to the deck. On to my last slide, slide 14, which reflects the liquidity of the group. On the 29th of April, 2024, Perenti announced a very successful issuance of $350 million of new high-yield bonds.
As a brief recap, the issue is 6.6x oversubscribed and priced at a spread of 2.82 percentage points above the U.S. five-year Treasury rate. That compares to a spread of 6.27 percentage points when we last issued the bonds back in 2020. Additionally, the debt investors who supported the new issue were some of the most respected names in the market. The success of this placement is testament to the fundamental strength of the Perenti business in the eyes of this very sophisticated credit market. The proceeds of the new issue were prioritized to firstly repay all of the variable components of the revolving credit facility, which is more expensive debt than the high-yield bonds that were issued in October 2020.
The funds left from the new issue, after repaying the revolving credit facility, were then used to fund the redemption of a proportion of the bonds issued in October of 2020. Those who are familiar with the U.S. high-yield bonds will be aware that a redemption premium is payable if the bonds are repaid prior to them becoming current liabilities. As a consequence, it is better for Perenti to limit the redemption of its existing bonds until they become current in October of this year. At that point, the business will need to assess the relevant market interest rates and make a treasury call on the most efficient use of funds. So what does that all mean?
It means that at 30 June, both the cash holding and the gross debt balances were elevated, as financially, the math does not make sense to repay the existing bonds whilst the redemption premium is still payable. My last comment on this slide, and in the presentation, relates to leverage. Historically, Ausdrill's leverage has been as high as 3x , and when Ausdrill acquired Barminco, the transaction set leverage at 1.4x . Since then, it has been a priority, and thus a focus of the business, to bring leverage sustainably below 1x , which I am very happy to say we have successfully achieved, with FY 2024 being the third consecutive half where we have recorded a level of leverage below that target. Ladies and gentlemen, thank you, and I'll now hand you back to Mark.
Thank you, Peter. On to slide 15, progress on DDH1 integration. As previously mentioned, the integration of DDH1 has gone extremely well, despite the challenging operating conditions. The synergies related to the acquisition have been largely realized, which include the ongoing tax benefits associated with the increased Australian earnings, particularly the cash tax benefits. The net result is a slight reduction of 1.4% to underlying earnings per share. However, the free cash flow generated per share increased to over AUD 0.20 per share, as per our strategic rationale for the transaction. The drilling services division now sits among the largest drilling companies globally, and when drilling activity increases, we will see upside in both earnings and free cash flow to the Perenti Group. At the time of the acquisition, Sy Van Dyk agreed to lead the new division.
Having successfully completed integration, Sy will finish with Perenti in December to take up the managing director position with Austin Engineering mid-next year, where he already serves as a non-executive director. On behalf of the board and the group executive, I'd like to thank Sy for his contribution. We wish him well for when he commences his new role in 2025. Slide 16, Group Executive Committee. The upcoming departures of Peter and Sy has allowed us to reshape the executive committee. As Pete mentioned, this will be his last results call with Perenti before he leaves to accept the CFO role at Perth Airport. It's a shame to lose a CFO of Pete's caliber, but I understand his desire to seek a new challenge.
I very much appreciated his counsel and support during our time together, and I wish him all the best in the future as he transitions from the current thrust of contracting to a monopoly. With Pete resigning, one of the benefits in investing in the development of our people is that we are blessed with talent. I'm pleased to announce that Michael Ellis will be appointed as CFO, effective 9th September. Mike was previously the Vice President of Finance for Contract Mining and is now serving as the Deputy CFO. He has been with the business for ten years and worked with Barminco, AMS, AUMS, Ausdrill, and in Corporate. Mike is a great addition to the Group Executive Committee, and he'll be joining us on our upcoming Investor Roadshow. As mentioned, Sy will be leaving the company in December.
Existing Perenti executive Ben Davis will take up the position of President, Drilling Services in late November. Ben has been leading the Mining Services division for the past two years, and at the same time, has been our Chief Sustainability & People Officer. With Ben moving to Drilling Services, Raj Ratneser, another of Perenti's existing executives, has commenced in the role of President, Mining Services. Raj will also continue to lead our electrification studies and strategic initiatives that support our sustainability priority of accelerating decarbonization, which he has sponsored for the last few years. Prior to these changes, Ben and Raj collectively held responsibility for several corporate functions outside of finance. Paul Muller, our former President of Contract Mining, has assumed responsibility for these combined corporate functions, in addition to corporate technology, in his new role as Chief Corporate Services Officer.
With Gabe Iwanow commencing earlier this year as President of Contract Mining, these changes effectively reduce the size of the group executive team by one, consistent with our aim to further optimize our corporate overhead. Slide 17, work in hand. Looking forward, we have AUD 5.1 billion of work in hand. As mentioned previously, more than 3/4 of our revenue is from the Contract Mining division. Contract Mining revenue is generated by typically long-term contracts, ranging from 1-5 years, usually with extensions. For instance, at Sunrise Dam, we will have been on site for over 20 years when our current contract concludes. These long-term contracts give our forward order book great certainty. Beyond our existing contracted work, the pipeline of potential work remains strong.
Our team can point to AUD 15.9 billion worth of prospects after applying a disciplined filter to any potential new opportunities. When filtering prospects, any new project must be of sufficient quality that we believe will survive a commodity price downturn. The client needs to be financially sound, with strong value alignment, and the asset needs to have a lengthy mine life. However, we don't plan to chase growth for the sake of growth. Our target is to deliver reliable free cash flow during the years ahead by efficiently operating the business and generating moderate growth. This will allow us to pay dividends, buy back shares when appropriate, reduce leverage, and fund sustainable growth without compromising reliable cash generation. With this focus in mind, I'll move to Slide 18 and outline our FY 2025 guidance.
We are forecasting moderate growth at the revenue lines of between AUD 3.4 billion and AUD 3.6 billion . We are guiding EBITA to be between AUD 325 million and AUD 345 million on improved margins. Leverage will reduce further to between 0.6x and 0.7x as we continue to strengthen our balance sheet. CapEx is forecast to be approximately AUD 330 million , including payments that shifted to FY 2025, late in FY 2024. The outcome of these results are forecast to deliver free cash flow above AUD 150 million in FY 2025, easily supporting our ability to pay future dividends. It should be noted, like FY 2024, cash flow will be weighted to the second half of the financial year.
While generation of free cash flow is a priority, our first objective is the safety of our people as we deliver our services. This goal is clear across the entire organization and is a focus through our divisional safety transformation and improvement plans, as detailed earlier. We will continue to win and extend projects, but without jeopardizing free cash flow. Achieving this balance requires us to maintain our disciplined approach to capital allocation. We believe this balance is the key to delivering a sustainable rate of growth and delivering enduring value for our shareholders. Our organizational structure has returned some excellent efficiencies over the past year, but we will continue to seek efficiency across all divisions and functions. This includes further optimization of overheads to improve margins. On to slide 19. We have significantly grown the business in recent years.
We are proud of our growth because it has established a business of scale and a diversified portfolio to deliver consistent returns to shareholders. We have either hit or exceeded our guidance targets for the last three years, and our expectations for FY 2025 are realistic, based on current work in hand. We hope investment markets will take some reassurance from this chart that we achieve the goal that we set for ourselves. At the same time, as we have grown the business, our balance sheet has been strengthened by significantly reducing our leverage. The reliable free cash flow that the business can now generate enables us to fund CapEx to sustainably grow earnings, provide returns to shareholders by paying meaningful dividends and buying back shares, and reducing our gross debt to reduce our interest costs. On to slide 20, our final slide.
On behalf of the Board and Group Executive, I'd like to thank everyone at Perenti for their commitment and contribution throughout the year. I love this slide, as it showcases some of our dedicated team members across the globe. Today's result is the culmination of the hard work of individuals like you see here. It's important to recognize that our company is built on the capability and commitment of our people. I am incredibly proud to be part of such a fantastic team, and I look forward to continuing the journey with them in 2025 . Thank you to our shareholders for supporting our journey, and we look forward to rewarding you with another successful year in FY 2025. We'll now move to Q&A.
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 William Park, from Citi. Please go ahead.
Hi. Thanks for taking my question. Firstly, can I just ask about the EBITDA guidance for FY 2025? And I do apologize if I missed this on the call, but how much of idoba development costs are you expecting in FY 2025? Presumably, it will be a bit of a step down from AUD 15 million in 2024?
Yeah, Will, it's Peter. The quality of that call is a little bit iffy for us here. I think it was around idoba and idoba spend in FY 2025. At this stage, we're envisaging idoba spend to be broadly consistent with the amount that was spent in the FY 2024 financial year, and the accounting treatment of that spend will be exactly the same as it was in 2024, so no change.
Thank you. And my next question is, free cash flow. And, Mark, I appreciate that you said this is the second half weighted, but can we get a sense around, what the second half's, first half, second half split sort of looks like, and what are some of the key moving parts that we should be aware of?
Will, the key moving parts really around timing of CapEx, predominantly sort of into the business, based on our CapEx profile and our assets, utilization and changes, we see that weighted to the first half, as we called out. As far as giving that specific split, we won't provide that specific split as part of our guidance, but we did call out, obviously, the weighting. So it's purely a timing issue regarding CapEx, but the overall free cash flow guidance number north of 150 for the financial year holds.
Thank you. And just on, I guess, uplift in your work in hand and pipeline in 2025, 2024 versus first half 2024. Can you just talk through what has driven this? And presumably, a lot of extensions being secured at a more favorable rates. Is that what's driving this, or is there something else?
Yeah, certainly, extensions that we've secured, particularly over the last couple of months, where we've closed out a number of key extensions, including Sunrise Dam, which is of key scale, and some other ones. They're the predominant drivers for the increase in work in hand. In terms of the actual terms per contract, we don't disclose those, but they're all factored into our guidance for 2025.
Thank you. And just one last one. Just with respect to DDH, has there been any meaningful changes with respect to retention rates at all with Perenti?
If you're talking retention of the team within the four businesses that came across from DDH, plus Ausdrill, that we've integrated, beyond the change to Sy that I outlined, there's been no change for the leadership teams within each of those five brands within Drilling Services. There's a great folk in each of those businesses, very stable, so we've got the right people in place to continue to operate that division.
Thank you. And just the last one, can you just talk through some of the updates around the work that you've done with Safety Taskf orce and what some of the initiatives that you have been able to roll out and given what's happened in this fiscal year?
Yeah. So we've certainly been an absolute focus from the board throughout the whole organization regarding safety of our people more broadly. We called out a number of items, but there's a range of areas that we've been focused on across each of the divisions. And as you'd appreciate, each division with the different service offering that they have, they have been different sort of priorities, albeit we do have some consistency, particularly around leadership development across the whole organization, driving critical risk management standards, and that's broader risk management of your higher order activities across the organization. The training and development of our people more broadly has been a focus, also around the assurance of verification of activities.
As you'd appreciate, we do a lot of activities associated with the work that we deliver, assuring that they are in accordance with the standards we expect, but at the same time, looking at ways to share knowledge across the business, take learnings, and continuously improve the broader system. Obviously, safety for the industry is a critical priority as it is for Perenti and sharing that more broadly. We're also looking at how we partner further with our clients regarding particularly critical risk and factors associated with driving improved safety performance across the industry. So it's been a range of areas, we all at the team have been focused on and making solid progress, albeit still plenty to continue to do in safety. You never actually finish the safety sort of journey.
You're always looking for further improvement, so it's been a very, very clear focus right throughout the organization.
Thanks very much, and best of luck with your future endeavor, Peter and Sy. Thank you.
Cheers, Will.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Matthew Chen from Moelis. Please go ahead.
Morning, team. Just wanted to ask about in the Drilling Services, the dynamics in terms of, the margin result, which was up, but just in the context of, lower than forecast, rig utilization, and then perhaps a little bit of an update to, how that performance has gone, fiscal year to date. Thanks.
Yeah, Matthew, in terms of the margins, it's an area that we did call out as part of the investment case associated with the DDH acquisition. Part of our due diligence obviously focused on the maintenance activities within DDH1. We like the practices that they had, that we have been looking to adopt across the Ausdrill business, particularly, plus also with the increased purchasing power associated with being one of the largest drilling service businesses globally. That's also flowed into some our ability to drive some costs down. So they're the key areas that we've looked at within the drilling services division to drive margins up.
We still see sort of further upside, and that's the, I guess, the future benefit associated with having one of the largest drilling service divisions globally, that when the demand uptick inevitably occurs, we're extremely well placed. We've got stable people, we've got the practices, and we've been focused on the cost base as well. As far as into this financial year, into the second month, I'll hand over to Peter to talk about some specific numbers.
Yeah, it's still that running a little bit softer than we would have liked. Rig utilization is just below the 70% mark, and as you know from our previous engagements, we'd like to see it running around the mid-70s. Utilization is still a little bit soft, but as Mark said in the call, well positioned for the inevitable turn in the drilling cycle.
Thanks. That's really helpful. And just in terms of leverage target in the medium term, have you got one that you can talk about?
Yeah. So in terms of leverage, obviously we've called that out over the last number of years and driving that down to the record result at 30 June at 0.7. With our guidance, we're putting that out to between 0.6 and 0.7. Into the future beyond that, now I guess we'd be looking at sort of getting closer to 0.5. Anything beyond that, we don't think we're using our balance sheet wisely. But in terms of what we do with the additional free cash, that will go into returns to shareholders that we've called out, in terms of buyback subject to the value associated with share price at the time.
Dividends, as we've been increasing those when we recommenced in February of this year, and also looking at organic growth opportunities as well to generate further returns. So certainly we see it decreasing, but there is a floor where we wanna get to, and we'll share more information in due course on that.
Thanks. That's really helpful. Appreciate your time and comments, and good luck in the next thing, Peter and Sy.
Thanks, Matt.
Thank you. Your next question comes from Rodney Pryor, from Nordlys Investments . Please go ahead.
Hi. Thanks for taking my questions. Just wanted to ask a little bit in terms of contracts. Obviously there's been quite a few extensions in recent months. Just going through the historical, is it fair to say now that Sanbrado is one of the last remaining contracts that were sort of signed pre-GFC, or are there any others in that that I'm missing, that all other contracts other than Sanbrado are kind of being rolled and renegotiated in the last couple of years? Thanks.
Thanks, Rodney. Yeah, in terms of contracts, Sanbrado has actually been a reasonable contract for us over the last few years. It is coming to an end in the near term, so we won't be seeing the extension of that probably beyond this financial year, possibly earlier, but that's factored into our guidance. Most of the other contracts since COVID, we've predominantly rolled. We've got a couple coming up now that would have been rolled during or about COVID time of Agnew, which will be done within the next six months or thereabouts. But as you say, yeah, predominantly, they've all been renewed over recent periods.
I add, Rodney, so the average contract term is between three and five years in the contract mining space. Similar in the underground space, more specifically, and our historic rollover rates are in excess of 95% of contracts successfully roll, just for clarity on that.
Yep. No, that's great. Appreciate that. And, and then the other one, just on sort of, you know, depreciation and, and CapEx, I guess, you know, you've obviously gone through quite a heavy, growth cycle, in recent years. You know, some excellent contracts that you've picked up, that now looks like it's coming in balance more so where, you know, sort of depreciation and, and sort of CapEx are close. I just know some previous announcements you had split sort of sustaining and growth CapEx, but I don't think that was in the full year, pack that I saw. Just wondering, could you give any color, you know, sort of, of that for the full year? What was, you know, sort of the growth versus sustained business CapEx?
Yeah, a very good question. And we've kind of moved a little bit away from sustained business and growth, and are focusing more on total CapEx. In part, Rodney, that's because of, to be honest, the difficulty in defining the difference between growth and sustained business. So I don't have the split here, but I think that the thesis that sustained business should be running broadly consistent with depreciation is the right thesis moving forward.
Okay. That's great. Maybe just interrelated to that and sort of asked maybe slightly a different way, in terms of contract ramp up, is it just Motheo and Botswana that, you know, sort of is still sort of ramping up? Is Cowal now kind of pretty much running at full steam or any other ones that I'm sort of missing that are sort of still in ramp up stage from that sort of, you know, CapEx spend?
Yeah, Rodney, those projects that you mentioned, they are predominantly, they have sort of ramped up in terms of capital outlay to the, to the rate that the customer's looking for. We do see potential upside for further growth of those projects in time, albeit that will be dealt with subject to the mine plan and the right returns as well. And ideally, we wanna see growth in the projects we're in because we take out the ramp-up risk of greenfields. But in terms of your assessment, yes, the CapEx for those projects you've named has been invested into 2024, predominantly for the ramp up.
Okay, great. I'll turn it over to someone else. Thanks very much.
Thanks, Rodney.
Thank you. There are no further questions. Oh, pardon me. We do have a question from Brendon Kelly from Alceon. Please go ahead.
Hi, Mark. Hi, Pete. Thanks for taking my question. Just on the CapEx, hoping you can just help us understand what's assumed for new wins on the pipeline for FY 2025.
Yeah. So in terms of pipeline into 2025, we've got a number of existing contracts for extension, our new Mana project in Burkina Faso, capital requirements been factored into our capital number for the year. And we have included one small additional job for a new win into FY 2025, and that's a moderate amount of capital that supports our moderate growth with a focus on cash generation. So in summary, Brendon, CapEx is included for the extensions and also for one additional job into the year for Contract Mining.
Brendan, not directly related to capital, but perhaps to close that out. And when you do look at the Contract Mining business for next year, circa 80% of the revenue is from the existing portfolio of secured jobs. And if we roll a couple of contracts forward, that gets us pretty close to the numbers for next year, and the capital for those is built in.
Gotcha. Thanks, gents.
Thanks, Brendon.
There are no further questions at this time. I'll now hand back to Mr. Norwell for closing remarks.
Thank you. And in closing, I'd just like to reiterate that we're very pleased with the FY 2024 result. With the outlook positive and the strength of our businesses, we are confident of delivering growth and strong free cash flow into the future, and this is evidenced by declaring a final dividend of AUD 0.04, taking the total dividend to AUD 0.06 for the year. By the board announcing a dividend policy, along with share buybacks as appropriate, we're very optimistic about the ongoing positive future of the Perenti business. Thank you for taking the time to join our call today, and have a great day.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.