Thanks for standing by, and welcome to the Perenti Limited FY2022 results presentation. All participants are in a listen-only mode. There'll 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. We will now commence the call.
Welcome, and thank you for joining the Perenti FY2022 results call. My name is Mark Norwell, Perenti Managing Director and CEO, and with me is Peter Bryant, our CFO. I'm looking forward to presenting our FY2022 results today, particularly given our significant second-half step-up in financial performance. However, first, I want to acknowledge and thank our 9,000 people. Over the last three years, even before COVID started, our people have continued to support our business through various challenges, and at the same time, seek out and realize opportunities that have delivered in this half and will continue to deliver in years to come. On behalf of the board and the group executive, thank you for your ongoing support and resilience. In addition, I would also like to thank our patient shareholders for your continued support. Now into the presentation. Starting on slide four, underlying financial results.
We are very pleased with the overall performance of the business, with a second half step-up in performance across all divisions, delivering EBIT and leverage outcomes that were better than expectations. Our revenue was as expected. However, at over AUD 2.4 billion, this is a record year, with almost 20% year-on-year growth while navigating the global pandemic and other macro challenges, hence thanking our people when I opened. We delivered a second consecutive period of record cash flow conversion of 108%. For clarity, this excludes the cash related to our portfolio management activities, demonstrating our continued focus on capital and liquidity management. In line with our updated 2025 strategy, we are focused on maximizing cash flow generation from our divisions, effectively managing capital and driving operational performance with our second-half performance positioning us well as we move into FY2023 and beyond.
In short, in FY2022, every key financial metric was an improvement on FY2021, with the second half of FY2022 a step up on the first. On to slide five, business overview. Despite the positive financial results, we tragically lost three of our international employees in two separate events. We continue to provide support to the family, friends, and colleagues impacted by these tragic events. As a business, we are committed to our goal of no life-changing events, which we have failed to deliver upon, despite significant effort across the business, but it is clear we need to do more. We have completed our investigations of the specific incidents and are working through the findings, plus our teams are also working through business-wide initiatives focused on critical risk management, leadership development and support, training, and assurance.
Improving our safety performance is an absolute focus of the board, the group executive, and our leadership more broadly, and for me personally. Moving beyond the critical topic of safety and onto sustainability more broadly, we are pleased to have released our third annual sustainability report, which will be discussed in further detail on the next slide. As I mentioned earlier, our 9,000 employees showed incredible determination and resilience to deliver such strong results in the face of continued global headwinds. Delivering an 18% earnings uplift in the second half when compared to the first half, enabling us to exceed the top end of our revised guidance range. You may have seen yesterday our release discussing idoba. Since its launch in July last year, we have made strategic investments in this business to expand and refine the product offerings.
We are pleased that the multinational conglomerate of Sumitomo's scale and reputation shares our aspiration, and their acquisition of an equity stake in idoba is recognition of the significant future opportunity that the business represents. During the year, we also updated our 2025 strategy, which we launched in June. Throughout the year, we continued to simplify and maximize the value of our business by divesting non-core businesses and assets. We then allocated cash generated from these divestments to reducing leverage and other strategic initiatives, including the commencement of an on-market buyback of up to 10% of our shares.
We commenced our share buyback on the 23rd of June, in line with our regulatory timeframes, and in six trading days before entering blackout at the financial year-end, we bought back 3.3 million shares, demonstrating our buyback is a genuine and substantive initiative to generate value for our shareholders. Our second half performance, which has continued into FY2023 in support of our guidance, demonstrates we are well-positioned to progress towards our FY2025 targets as outlined at our June strategy launch. On to slide 6, our sustainability report. Our third annual sustainability report was released today, and we are very happy with the progress that we have made in the last 12 months. Importantly, we are also looking forward to what we can deliver in FY2023 and beyond. We are in the process of developing our decarbonization roadmap.
However, I'm pleased to say that our portfolio rationalization in FY22 reduced our Scope 1 and 2 emissions by 23%. In FY2023, we expect to release our Scope 1 and 2 emission reduction target. We've also committed to disclosing Scope 3 emissions from fuel used on our clients' sites. In support of our target of no physical and psychological life-changing events, we published our position statement on eliminating sexual harassment, and we launched the It's Not OK campaign to eliminate sexual assault, harassment, and other harmful behaviors. In conjunction with this, and in support of building a better business through diversity, we have committed to the 40:40 Vision, which is an initiative to have at least 40% of females in executive roles by 2030.
We remain one of the largest employers of apprentices and trainees in Western Australia, with 435 currently in our business and many more trainees in our international operations. To ensure that we leave an enduring positive legacy within our international host communities, local employment participation was 89% and our local procurement delivered back to these host communities. We will continue to focus on our local employment, procurement, and training to ensure a positive and enduring legacy. Moving to the business performance section, starting on slide eight. As we have disclosed previously, and as everyone is acutely aware, FY2022 was underpinned by several unprecedented macroeconomic challenges that have resulted in border restrictions, supply chain issues, rapid cost escalation, labor shortages, and more. Yet Perenti and our people have risen to the challenge to navigate and where possible, mitigate these issues to exceed our expectations.
As we see these headwinds continue to ease and new projects deliver greater earnings, we see opportunities for our business to recover further and deliver additional earnings growth. On to slide nine, underlying group performance. The trend of FY2022 is impressive with year-on-year improvements across all metrics you see on this page. In addition to revenue, EBITDA and EBIT growth, it is also very positive to see from a quality of earnings perspective, ROCE increasing by almost 1% year-on-year. At the same time, we have focused on improving our returns. We have also been focused on delivering our strategy of increasing our earnings from tier-one mining jurisdictions and diversifying our commodity base to future-focused minerals. Our revenue from tier-one mining jurisdictions, namely Australia, Canada, and Botswana, has increased from 44% in FY2020 to 60% in FY2022.
While gold continues to be our predominant commodity that we work in, we have increased our revenue generated from battery minerals, including nickel, copper, manganese, and zinc. In FY2020, 20% of our revenue was generated from mining battery minerals, and this has increased to 25% in FY2022. On to slide 10. To illustrate our improved performance and to clearly demonstrate the significant impact from COVID when it started partway through the second half of FY2020, this slide has the same metrics as the prior slide, but rather than annual results, these are results for each half. In FY2021, as we felt the full impact of COVID, we were able to hold revenue stable, but our profitability decreased to its lowest point in the back half of FY2021 and into early FY2022.
As these graphs show, we believe that the worst of these impacts had passed, and we have seen our business recover and grow, with the positive performance improvements continuing into FY2023. We are obviously still navigating macroeconomic challenges, and who knows what will occur. As we see conditions ease further, we expect this recovery to continue in support of our FY2025 targets. Slide 11, underground mining. In FY2021 and through FY2022, we invested in several underground growth projects which continue to ramp up, delivering increased revenue and earnings, as well as percentage margin improvement.
These projects, including Zone 5 , Cowal, Red Chris, and Savannah, are progressing through their ramp-up phases, and in conjunction with the benefit of rate increases, rise and fall mechanisms reflecting cost increases, border restrictions lifting, and some early, yet positive signs for labor challenges, underground EBIT increased by 15% half-on-half in FY2022 to nearly AUD 100 million at a margin of over 11% in the second half. We expect this trend to continue with further earnings improvements into FY2023. Slide 12, surface mining. As you can see, the performance of surface mining continued to improve on the back of the AMS turnaround. Further upside is expected in FY2023 as the improvement continues, which is underpinned by the commencement of works at the Motheo Copper Project in Botswana, our largest ever surface project, and the continued ramp up of works at Iduapriem in Ghana.
During the year, we secured improved rates at Mako, which was the last of the three AMS projects that commenced in 2017 that have dragged significantly on the performance of AMS. Similarly to underground, the second half of FY2022 represents a period of stronger revenue, earnings and operating margin, underpinning the continued improvement to our surface business in FY2023 and beyond. Slide 13, investments. Our investments business continues to evolve and improve. During the year, we divested MinAnalytical and Well Control Solutions, both non-core businesses, and recycled the cash we liberated from those businesses to other strategic initiatives and projects. BTP's performance improved, driven by increased demand for its fleet, given the strong commodity pricing environment and building the capability of the leadership team to drive further improvements.
While the divestments resulted in slightly lower revenue, the quality of our earnings and margins improved, supported by an improving BTP as well as the continued strong performance of Supply Direct and Logistics Direct. As previously reported, this segment currently includes idoba, and during the year, idoba continued to grow, with revenue increasing due to the increased demand for services and from the acquisition of Atomorphis and Orelogy early this year. On to slide 14, our EBIT margin expansion to FY2025. We presented this slide when we delivered our strategy update in June. We are pleased to show that in a relatively short period of time, we are presenting an updated slide that demonstrates progress on improving our margins.
As outlined on the previous slides, we are emerging from a challenging few years with margin compression bottoming out in the first half of FY2022, an improvement in the second half and further improvement forecast in FY2023 and beyond. Based on the midpoint of earnings and revenue guidance, which I'll address later in the presentation, we expect to deliver an EBIT margin of approximately 8%. 8% is still down on our FY2025 target of 10%. However, as COVID-19 continues to ease, the tightness in the domestic labor market improves, and as we deliver overall business and overhead improvements, we see a path towards an EBIT margin of 10% in FY2025. We look forward to continuing to present this slide as we deliver on our earnings expansion journey. Thank you. I'll now hand over to Peter Bryant.
Good morning, everyone. Like Mark, I too would like to welcome you to the call. It's great to be presenting what I genuinely see as a very solid result for FY2022, a result that reflects the efforts of the Perenti team. It's also great to be presenting at what feels like an exciting and positive time in the evolution of Perenti. No doubt there will be a few challenges as we move forward. There always is when you're a global business, particularly as a contractor. We are well-versed in dealing with challenges. Importantly, the momentum is positive. The organization has a positive feel and the refreshed strategy, which is underpinned by a focus on delivering leading total shareholder returns, is on track. Moving to the first slide in my section, slide 16, the underlying profit and loss.
Mark has provided a pretty thorough commentary around the performance of Perenti and has called out the majority of the key numbers, which are all positive and trending in the right direction. From my perspective, it's been a good year, topped off by a very good second half. We've achieved a lot from the divestment of non-core assets, both property and businesses, to the refinancing of the RCF. Most significantly, the underlying financial performance of the business has, without question, improved. Given the commentary Mark has provided, there is not a lot I can add in relation to the underlying performance of the group. In essence, the only new numbers on this slide are profit before tax and NPAT, which by definition leads to interest and tax expense for the period. Year-on-year interest was stable at a tad under AUD 55 million.
Our debt levels increased slightly, driven by currency movements and our investment in growth capital. For the team to have held interest stable is a good outcome, an outcome that has been driven by an increased focus on minimizing our RCF drawings. This was achieved through a combination of actions, including a strong focus on bringing all foreign cash back to Australia, so it's available to pay down the RCF, coupled with a continued focus on the management of our monthly cash flow cycle to minimize the need for the RCF to provide a working capital buffer. Tax expense in the P&L has been held stable with an effective underlying tax rate for the year of 31%. We have called out in the ASX announcement that accompanied this deck that we are expecting to see this effective tax rate increase slightly in FY2023.
Remembering that this is the effective tax rate and does not reflect the cash tax paid. This expected increase is a consequence of a reduction in the level of unrecognized tax losses available to the group, with the balance coming down as tax losses were utilized in relation to the profits generated on some of the divestments during FY2022. I'm happy to do a few one-on-one calls to talk through the joys of tax effect accounting for anyone that's interested. Moving to slide 17, the reconciliation of underlying to statutory. This is a slide I'm pretty happy to be presenting. Over the last couple of years, I've had a number of conversations, both internally and externally, about our desire for clean results. Year-on-year, the number and quantum of the reconciling items has reduced.
One day, I'm hopeful this slide won't be required as the underlying and statutory numbers will be aligned. Although, to be 100% transparent, given the global nature of the group, I expect as we continue to implement the strategy, we may see a small number of reconciling items in the future. But I'm confident the quantum will be reduced and they certainly won't be a surprise. At a helicopter level, the delta between the underlying and statutory NPAT numbers for FY2022 is AUD 10 million, a significant improvement on the AUD 90 million delta last year. Looking at the line items on the reconciliation, with the exception of the provision in relation to the exit of Mali, everything was reflected in the reconciliation presented in our half year results.
The provision in relation to the exit of Mali is in line with our strategy to exit this country. When we last updated the market, our operations in Mali were limited to exploration or to an exploration drilling contract. Very pleasingly, the team have successfully negotiated and in early FY2023, executed an agreement to sell the Mali-based exploration fleet to another contractor. The sale will generate circa AUD 10 million of cash inflow to Perenti and will deliver a very small P&L gain which will be booked in FY2023. The provision balance of AUD 11.6 million has a number of components relating to some client and local tax receivable balances, all of which are due and payable to Perenti. Don't misinterpret the provision. We will continue to pursue their collection.
We're not good at leaving cash on the table, as was reflected when we settled an 18-year-old fire damage claim for circa AUD 10 million, as per our ASX announcement in mid-July. This claim, which, as I said, dated back 18 years, could have easily been forgotten, but that's not how we run the business. We leave no stone unturned, and we will be relentless in working to recover all the funds owed to us in relation to our exit from Mali. As I mentioned, all of the other items on the reconciliation were there at the half. That said, a couple of the numbers have moved slightly. Moving to slide 18, cash flow and cash conversion. There are a lot of numbers on this slide. I don't plan to run through them all, but I will call out a couple that I think require some explanation.
In terms of the cash flow generation and the consumption of that cash, the next slide is a graph which I think shows more clearly how the year played out. The numbers I wanna call out on slide 18 are cash flow conversion at 108%. I know Mark already highlighted it, but it is a record number. Cash tax paid, which is notably up on the prior period. Cash tax has two elements, normal company tax on the profits we generate and withholding tax paid largely on the repatriation of cash to Australia, predominantly through the payment of dividends. The majority of the increase in cash tax paid relates to withholding tax, and the increase includes circa AUD 10 million of prepaid FY2023 withholding tax.
Moving forward, one of the core elements of the capital management policy is to work to minimize cash tax leakage from our foreign operations. This focus, coupled with the benefits of the prepaid withholding tax, should see a notable reduction of circa AUD 10 million-AUD 15 million in our cash tax paid in FY2023. The steady-state business and growth capital numbers for the year are both shown in the table and explained in the bullet points. Collectively, net capital spend for the year was AUD 441 million, which is after deducting AUD 26.7 million of proceeds from the routine sale of plant and equipment. The growth capital component of this number is AUD 268.8 million.
We know this is a significant investment in capital, and we know we need to demonstrate returns on this investment, and we are confident that we will deliver those returns. The final two numbers on this slide that I'd like to talk to are the proceeds from divestments and dividends. As we have already announced, we generated net cash proceeds of AUD 132.1 million through divestments. The components of this amount are shown on the slide. It would be remiss of us not to acknowledge the Perenti folk, including, perhaps most significantly, those who left the group with the businesses we sold, for their efforts and commitment in executing these transactions so successfully. Lastly, dividends. The amount in the cash flow reflects the final dividend declared for FY2021.
In line with our capital management policy, dividends are unlikely to be paid until we have reached our leverage target of 1x. Although dividends are not likely in the near term, and as we outlined at the strategy launch in June, when the economics make sense, we will consider returning capital to shareholders by other means. As Mark mentioned earlier, we commenced the share buyback in late June, and we're actively buying before we went into blackout, and the program was put on hold. Today, we are out of blackout, thus we are able to recommence the buyback, which we may do so if the economics are beneficial. Moving on to slide 19, which presents the cash flow in a graph, and I think makes the key elements a tad more obvious.
Cash flow from business operations, the left-hand third of the graph, reflects operating cash flow after interest and tax, working capital movements, and net sustaining business capital spend for the year, and was just shy of AUD 170 million. The middle section of the graph is significant. It reflects the impact of business simplification or divestments and our investment in growth activities, including growth capital and the two idoba acquisitions made during the year. Pleasingly, the group generated a positive cash flow before financing activities of AUD 28.9 million. On to the final third of the graph. During the year, we drew down on the RCF to ensure adequate liquidity, remembering that some of our cash is held offshore.
I think the remaining elements of the graph are pretty self-explanatory, other than perhaps NCI, which stands for non-controlling interests and relates to joint venture cash being held on our accounts but that we don't technically own. Finally from me, slide 20. Key takeouts are leverage, which Mark has addressed, and the successful refinancing and slight up-sizing of our revolving credit facility at a competitive margin. It was an interesting refinance as it was concluded against the backdrop of events in the Ukraine and in a global debt market that can at best be described as volatile. The RCF syndicate comprises a number of lenders. I want to thank the existing funders for their continued support and also welcome the new members to the syndicate and thank them all for their commitment to Perenti.
I will also call out the credit rating from Fitch, which increased at the start of the refinancing process, which was received very well. Finally, net debt at AUD 553 million was up AUD 50 million year-on-year, with the increase related to the increase in the higher bond debt, which, as the slide notes, was due 100% to the softening of the Australian dollar relative to the US dollar. The impact of this increase was offset by our earnings growth, which saw leverage stable at 1.3x , which is well below earlier guidance of circa 1.5x . Ladies and gentlemen, I'll now hand you back to Mark.
Thank you, Peter. I'll now briefly step through our updated strategy as released in June, provide some further detail on our idoba and Sumitomo announcement from yesterday, and detail our FY2023 guidance. Slide 22, repositioning our business model. As we announced at our 2025 strategy update, we have repositioned our business model consisting of three operating divisions and one corporate center. As we grow and expand these divisions and deliver on our strategic objectives, we will create a blended portfolio of complementary services and offerings to deliver competitive total shareholder returns. The divisions will be focused on safely meeting their client requirements and generating returns from the capital allocated to each division. Resources needed to support operational delivery will be embedded in the division, along with the appropriate authority to achieve the required outcomes.
The corporate center will be focused on strategy, leadership development, capital allocation, enterprise architecture, our shareholders, and governance. Our contract mining division, which includes our surface and underground mining businesses, generates significant baseload earnings through our iconic brands across long-term quality projects with a focus on further margin improvement with moderate revenue growth. Our mining services division, which includes BTP and our supply and logistics businesses, is focused on medium-term growth opportunities in new and emerging areas in support of the mining industry through organic and inorganic opportunities. We will take our time and be disciplined with any inorganic growth opportunities to deliver value as we build this division. Our idoba division represents our long-term growth opportunity, representing a potentially significant value upside as the idoba strategy is executed. Given our announcement yesterday, I will now spend some time providing further details of Sumitomo's strategic investment in idoba.
Slide 23. Yesterday, we announced that we have entered into an agreement where Sumitomo will acquire 10% of idoba for AUD 5.4 million of cash, equating to an enterprise value of AUD 80 million. The talent that has been assembled in idoba is world-class, and in time, the idoba talent, coupled with a significant capability and deep operational mining expertise in contract mining, will develop products and services that will add enduring value to the industry and in turn, Perenti. You may ask, why have we sold 10% of idoba to Sumitomo? We've done this because we have a shared belief with Sumitomo that together we will unlock opportunities and therefore realize value sooner than going alone. With Sumitomo's extensive expertise and global network, along with the vast data to test idoba's product development, there will be significant upside through this agreement.
An advisory board will be established, with Sumitomo having one board member, plus independent members, with myself as chair and Sarah Coleman continuing as the idoba president. Perenti will maintain full control, subject to certain reserve matters, although these won't impact day-to-day management of idoba. We've always been excited about the future of idoba and more so now with the Sumitomo agreement. This investment by Sumitomo is an excellent demonstration that we are on the right path to creating enduring value with idoba as our future-focused technology division. Slide 24, delivering through our strategic focus areas. As we presented our 2025 strategy update, we are looking at delivering through our strategic focus areas across two time horizons. In the short term, we'll continue to optimize our current business and strengthen the foundations and then build out our portfolio, although some elements of the two time horizons will occur concurrently.
We recognize that we are on the journey with our safety performance, and we are committed to making meaningful improvements as we seek no life-changing events. In other key focus areas, and although it is only a couple of months since we presented our updated strategy, we are very pleased with what has been achieved to date, which has us positioned well for FY2023. On to slide 25, our focus strategy to deliver competitive TSR. By focusing on our purpose to deliver enduring value and certainty for all our stakeholders, and as we execute on our strategic focus areas and build out our portfolio of complementary businesses, we will deliver sustainable cash-backed profits, generating competitive returns for our shareholders.
Our FY2025 targets are to keep our people safe, deliver moderate revenue growth as we continue to increase our exposure to tier one jurisdictions, and importantly, continue to improve the quality of our returns with a focus on our EBIT margins, return on capital, and decreasing our leverage. On to our final slide 26, our FY23 guidance. We expect that FY2023 will represent a significant year-on-year step-up in performance as we make meaningful progress towards our FY2025 targets. Our FY2023 guidance and FY2025 targets are supported by tangible business actions. We will target no life-changing events by delivering on our safety improvement plan and continuously improving our safety performance.
When compared to FY22, our FY23 revenue will be similar, but our EBIT will be a solid beat by 5%-16%. CapEx will be significantly less at circa AUD 330 million, and free cash flow will be stronger with leverage well below 1.2. We have almost 95% of our FY2023 revenue secured through committed work in hand, supported by a strong pipeline. Our EBIT growth will come as our growth projects deliver improved earnings and impacts driven from COVID and the war in Ukraine are further managed and mitigated. Now we have released our results, we will reassess our share buyback against the recent positive share price performance and other capital allocation opportunities to ensure it generates the best returns for shareholders and supports our long-term strategy before recommencing.
In closing, through the support and dedication of our people, we have navigated another challenging year. With our strong finish to FY2022 and a positive outlook for FY2023 and beyond, I'm excited about the future of Perenti. Thank you. We 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 a question. Your first question comes from Nicholas Rawlinson with Jefferies. Please go ahead.
Hi, guys. Thanks for taking my questions. Just on your EBITDA guidance, is that at constant FX? If so, is it still right to assume that a 1 cent downward move in FX, that's about AUD 1.5 million in EBITDA for the year?
Yeah, Nicholas, both the answers to both questions is yes, that's correct. Constant FX and that's the correct end all on your end. Correct.
Okay, great. Thanks. Just on labor costs, they were up about 20% for the year, which isn't out of line with peers, obviously. How should we think about labor costs in FY2023?
Yeah, Nicholas, I guess with the tight labor market, we are really seeing labor increases coming through. We do expect that continuing into FY2023. With our rise and fall formulas, we will see those costs recovered, and then reflected in uptick in rates for our clients. We're seeing increases. The rise and fall formula should deal with those.
Great, thanks. How are things progressing at Cowal? Could you give us an indication of the ramp-up profile there?
Yeah, I guess going back a step with the Cowal, we have been on the project, the development work for some time prior to securing the larger contract. We had a soft start, if you like, with the mobilization. That's progressing well. Ramping up well from our perspective with our client. We're looking for that ramp up to continue throughout the financial year, and that ramp up's factored into our guidance number.
Great. Just on Red Chris, are you still expecting big packages of work to be awarded there soon?
Yeah. We're currently working with the client for the next package of work. We were hoping that this would be out before the Northern Hemisphere winter. That's probably gonna push out into next year's spring, Northern Hemisphere. The timing of that may be a bit later in the year for that confirmation of award. But the project is going well, and we have factored that into our guidance number again.
Okay, great. Thanks. That's it from me. Thanks, guys.
Thanks.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll just pause momentarily for more questions to join the queue. There are no further questions at this time. I'll now hand back to Mr. Mark Norwell for closing remarks.
Sorry, I think one more has come through.
Just come through. Cameron Bell with Canaccord. Please go ahead.
Thanks very much. Guys, you might have mentioned this during the presentation, but look, I just wanted to dive into what you meant by net CapEx. I see you've got a footnote saying, offset by a couple of divestment of kit, et cetera. Could you give us an insight as to what the makeup is within that CapEx number? Like, how much divestments do you plan on making?
Cameron, it's Peter. You're talking about the forecast for next year.
Yeah.
I think got out at circa AUD 3.30. There is some proceeds from the disposal in the normal course of business in that. I'm not going to quote the number on this call, mate, but there is a small amount in there.
Yep. Okay. Thanks, guys.
Thanks, Cameron.
Thank you. Your next question comes from Rodney Prior with Nordea Investments. Please go ahead.
Hi. Thanks for taking my question. Just one clarification on guidance. Does the AUD 185-AUD 205 EBITDA guidance include the AUD 10 million West African settlement that you announced in earlier in the financial year?
No, that's not included in there.
So for clarity, we put that as a below-the-line item. We wouldn't include that settlement in our underlying results.
Great.
Thank you.
Thank you.
Next question comes from Jon Scholtz with Macquarie. Please go ahead.
Morning, all. Just linking the next year's guidance to that 2025 sort of target levels. I mean, if we look at 8% growing to the 10%, on similar sort of revenues . Are you seeing current contracts actually running at that 10% EBITDA margins or is there other levers you're gonna pull to be able to get to that 2025 sort of levels? Thanks.
Jon, it's a combination. We are seeing a number of contracts already exceeding that 10%. Given the number of contracts, obviously we go with an aggregate weighting for our blended portfolio, if you like. We are seeing examples where that's already achieved. In terms of bridging the gap from where we are currently to the 10%, we see that through a number of areas. We see that through various operational improvement opportunities that the team are working through. While we've called out, the COVID impacts are easing, they haven't sort of fully eased, so we still see some further upside as the issues there sort of abate. Supply chain fits into that as well. We're seeing into the future, hopefully some positive relief there with supply chain.
Labor obviously has been a challenge. We are starting to see some positive flow through in the last couple of months in terms of numbers with borders open, et cetera. We're still down on our numbers, but we've done well recently. Again, we're seeing some further upside as labor flow through. Also broader sort of overhead review and optimization in the future. In short, Jon, we do see contracts north of 10% already, and we do see quite a number of levers that are still to be pulled, plus some further easing of some of the macro challenges, hence our confidence about 10% into FY25.
Excellent. Thank you.
Thanks, Jon.
Thank you. There are no further questions at this time, and I'll hand back to Mr. Mark Norwell for closing remarks.
Thank you, and thank you everyone for joining. In closing, I'd again like to thank our 9,000 employees for their commitment and resilience over the last three years. I'd also like to thank for the support from our clients and our investors as we've navigated COVID and broader macro challenges, as well as historical items within the business. As demonstrated with our half-on-half slides, we have grown our revenue through COVID, and we are now seeing the earnings pull through from investing in new projects, delivering against our strategy and the significant effort of our people. Subject to broader macro challenges, we are very positive about the future. We have a good plan, an excellent team and positive momentum that will support our future earnings growth and cash generation.
With the same effort that has generated returns from eighteen-year-old claims, starting new projects in new countries during COVID and addressing internal challenges, we are looking forward to seeing ongoing improvements to our results, which will finally reflect the effort of our team. Once again, thanks for your time and have a good day.