for standing by, and welcome to the Perenti H1 hundred and twenty one Results Presentation Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Mark Norwell, Managing Director and CEO.
Please go ahead.
Good morning, ladies and gentlemen. Thank you for taking the time to join the Parente Half Year twenty twenty one Results Presentation. My name is Mark Norwell, the MD and CEO of Parente, and joining me is Peter Bryant, our CFO. I'll first provide an overview of our business, our results in the first half of FY 'twenty one and an operational overview. Peter will then step through the detailed financial results and afterwards, I'll provide an update on our 2025 strategy and near term outlook followed by a Q and A session.
On Slide 2, just to recap and for those who aren't familiar with our business, Perenti is a global diversified mining services provider, operating at scale in both underground mining and surface mining. We operate several iconic mining brands, including Bamiko, Ozdul and AMS. We have 8,000 employees over 12 countries, with the USA our most recent entry to support our growth into the North American underground market through our Baliqa business. Underground is a key component of our overall business and it is a key differentiator to our ASX listed peers. We generate significant returns through this business and details of this excellent performance will be covered during the presentation.
On to Slide 3. We delivered very strong underlying results despite the key headwinds experienced during the half. We generated revenue in excess of $1,000,000,000 EBITDA north of $200,000,000 and EBIT of $94,000,000 The EBIT result was negatively impacted by $6,000,000 due to the stronger Australian dollar. When this impact is taken into account, we end up on par with H2 of FY 2020. And in the half, we delivered impact of $45,000,000 which includes refinancing costs and reflects the softer EBIT.
Cash conversion remains excellent at 92%, which is well above the 68% reported 12 months prior. Cash conversion continues to be a key focus of management. Due to the reduced EBIT performance, our ROCE decreased to 14.4%. Our ongoing focus on cash management resulted in our net debt decreasing by 14% on the prior corresponding period. And given the ongoing strong position of the business, the Board declared an interim dividend of $0.035 per share.
On Slide 4. Our underground operations continued to grow during the half and performed very well. However, our results were impacted by the combination of the planned contraction of the Surface Africa business and the underperformance of our investments business on the back of the challenged East Coast rental market. We have taken decisive action to address the underperformance of AMS. And during the half, we finalized the strategic review.
We've made meaningful progress towards implementing these findings, inclusive of the actions that we have previously outlined to the market. Of importance is the significant progress we made towards the resolution of AMS legacy contracts in Mali and Burkina Faso, 2 loss making projects that have impacted AMS over the last 2 years. We expect to liberate approximately $80,000,000 to $90,000,000 of cash, of which $14,000,000 has already been received. This cash will then be redeployed into lower risk jurisdictions to generate positive EBIT and lock in above our hurdle rates. And our results include one off accounting charges this half that Peter will cover in detail.
As announced in October 2020, we successfully refinanced our high yield bonds issuing US450 $1,000,000 of bonds to the U. S. Credit market, receiving very strong support and at a lower rate compared to the previous bond. We have a very solid capital structure to support our business growth. From a pipeline perspective, we continue to win new work in extensions with our order book and pipeline both very healthy.
We are focused on our expansion into North America. During the half, we incorporated a U. S. Company and we will be opening an office in Denver to support our current tendering activities. Turning to our people.
In response to the increasing competition for labor, we have activated a talent attraction and attention strategy. Securing and retaining the right people is paramount to the continued success and growth of our business. During the half, we improved our safety performance. And from a sustainability perspective, we have taken some very important steps and made significant commitments to demonstrate our commitment to a sustainable future. On to Slide 5.
Our safety objective is no life changing injuries. This is because the health and safety of our people is our highest priority. We also know that a business that values safety also delivers business performance. We have shown a pleasing downward trend in our serious potential injury frequency rate and our total recordable injury frequency rate, although our focus is still to do better. In a meaningful step towards this goal, we implemented an infield critical risk management program where our employees are encouraged to locate, identify and verify that critical control measures are in place and work effectively with the intent to prevent life changing injuries or fatalities.
As you can also see, our workforce increased because of works at Hemline and other projects organically growing. We continue to focus on developing and supporting local employees throughout the world. Strategically, this is a very important focus for us in support of our growth ambitions. Slide 6. As previously communicated, we responded swiftly to the initial onset of COVID-nineteen and have provided business continuity despite significant international challenges.
We have a team dedicated to managing the logistical challenges in support of our 500 strong ex pat workforce. I want to take a minute to recognize the tremendous effort by all our people for how well they have adapted to a world with COVID. I particularly want to acknowledge our expats who continue to complete long rosters and endure multiple periods of hotel quarantine. Their resilience is truly remarkable and their efforts are very much appreciated. Overall, we have managed well, but there is no denying that there have been additional costs to manage a world with COVID.
However, these costs have largely been recovered. Beyond these direct costs, there are also other costs associated with the restricted ability of our senior people to travel to our locations and provide support to achieve the productivity rates we are aiming for. There is also an impact from ongoing COVID-nineteen fatigue from people working in extended rosters. We see the impacts of COVID-nineteen persisting through 2021, which will continue to affect our business through impacted productivity, injury projects in ramp up phase, travel challenges and intermittent break site shutdowns. But we will remain vigilant and continue to actively manage the controllable aspects of that business to ensure we continue to deliver exceptional service for our clients.
In addition to the regular management of the logistics, we are also reviewing our approach to vaccinations and seeking to improve quarantining facilities. On the Slide 7. Whilst this is a focus area for the industry and for printing, I will only touch on the highlights as detail is included in our inaugural sustainability report released last year. We have commenced proactive engagement with independent ratings agencies to gain better recognition of our ESG credentials and improved performance. We are committed to continuous improvement and some of our recent initiatives are detailed on this slide.
Further details will be included in our 2021 sustainability report. Slide 8. I'll now provide more detail on the underlying performance of the business and industry sector groups or ISGs covering underground, surface and investments. Slide 9, group performance. High level financial measures have been provided earlier in the presentation, but I want to stress again, as we compare this half to second half of twenty twenty, there are specific factors that have impacted our performance, namely COVID, currency movement and the coal price.
And when the ForEx impact is considered, our performance this half is aligned with the second half of FY 2020, which is in line with our qualitative guidance previously provided. As you can see, we have presented an FX adjusted view of our performance, showing the significant impact the strengthening Aussie dollar has had on our financial performance. Underground continues to be the primary contributor to revenue at over 70% and generates excellent returns. Almost 50% of our revenue is generated in Australia, with Ghana the 2nd largest at almost 20%. I would note that we have operated in Ghana for 30 years, So it is a region we are very experienced in conducting business.
Gold, nickel and copper are the dominant commodities and we have a healthy spread of projects with our largest project by revenue at 7%. So we are not reliant on any one project in particular. Slide 10, underground performance. This slide details the excellent and ongoing strong performance of our underground business despite the COVID-nineteen impacts. Due to COVID-nineteen restrictions, the ramp up of Hemlo in Canada and Zone 5 in Botswana are below their planned ramp up rates.
The mines will get to a full run rate, however, later than expected. And whilst it is too early to say when the ramp up will be complete, it won't be complete in this half, meaning some revenue will be deferred, albeit positive for future periods. The majority of new projects and expansions within the group have come from underground. I'll expand on recycling of capital from AMS over the next couple of slides. However, this presents an opportunity to redeploy capital from exited AMS contracts to underground and generate significantly higher returns.
On Slide 11, surface performance. Australian surface performance continues to be strong. However, ANS contraction has weighed on results. Transformation initiatives continue with resolution of Bongu and exit from the loss making project, Yanfuletta. I'll provide further detail on this over the next two slides.
Strict tendering and management disciplines have been successful at Sanddato and will continue into new tenders. Slide 12, AMS strategic review. As I mentioned, the AMS strategic review was finalized in the half. And this slide is a summary of the key findings, importantly, the status of the key initiatives and actions to improve the business. Several of the initiatives had commenced prior to the period.
However, there are some additional details included that we haven't covered before. We've really focused on improving our commercial and financial disciplines, while removing unnecessary duplication. We consolidated the underground and surface businesses under the newly formed mining ISG, led by highly experienced CEO, Paul Muller, who has been the Barmintco CEO for the past 4 years. We have successfully completed the exit of both Fongu and Vizza, and we are progressing with the exit of Yancoallla. We are also progressing with the sale of these assets and the combination is expected to generate $80,000,000 to $90,000,000 in the second half of FY 'twenty one to recycle capital into more attractive regions and generate positive returns with further detail covered on the next slide.
We've lifted our corporate governance oversight to improve capital allocation and commercial discipline to focus on generating higher returns. With this in mind, we are currently renegotiating the terms of our Mako project with the intent to improve profitability through cost saving initiatives for the client. We have implemented strategic procurement agreements with a dedicated focus on local procurement where possible, and have reduced system duplication with the implementation of an ERP system common to both Australia and Africa. Given all of our work we have completed, we have reduced our capital base in West Africa, we have liberated cash and we are focused on a smaller number of high quality projects. Slide 13.
This slide demonstrates the approach to recycling capital from loss making projects in Mali and Burkina Faso and into less challenged regions and projects that generate returns at or above our hurdle rates. As we show in the graphs, we have reduced our base of working capital employed and through negotiations, we expect to generate $80,000,000 to $90,000,000 in cash. We then expect we will redeploy this cash elsewhere in the business with a target of driving 20%, which could result in annual positive EBIT of almost $20,000,000 compared to negative $5,000,000 at the 2 projects. This is not the end of it as we believe that as we continue to embed the findings of the strategic review that we will continue to enhance our future earnings. Slide 14.
Investments is the smallest part of our business at 6% of our revenue. Profits decreased as a result of BTP being impacted by a challenging Australian East Coast rental market on the back of worker coal prices. The team are working through opportunities to address this during the coming halves. I'll now hand over to Peter Bryant, our CFO.
Thank you, Mark. And I'd like to welcome everybody to the call and thank you for your interest in Pareteum. As you've heard from Mark, it's been a busy time since we presented our full year 2020 results. As a business, we are pleased with our financial performance and particularly our ability to have strengthened our balance sheet and maintain our margins in spite of the challenging backdrop of the pandemic. Over the half, we have also taken significant steps in addressing some legacy issues and positioning Florenti to deliver our strategy and importantly, deliver it to our shareholders.
Slide 16 provides a high level snapshot of the underlying results of the half against the results from the corresponding half in the 2020 financial year. Mark has touched on the majority of the numbers as we ran through the performance highlights of the group, including the underground, surface and investment businesses. So I'm going to focus on some of the key numbers and performance metrics. Firstly, our underlying EBITDA margin. As you can just to touch under 20% for the half, our EBITDA margin is both one of the strongest in the sector and one of the most stable.
Impressively, we delivered an EBITDA cash conversion of 92%, which I'll discuss in more detail later in the presentation. On a pro form a basis, Corianti has delivered an EBITDA margin of circa 20% for the past 5 years, providing a stable and consistent profile of performance. I've reached 5 years as a reference point given the prepared pro formas for this period to support our refinance. I also want to call out the comments in the second bullet point around our investment in people and systems. The increase this half when compared to the second half of FY 'three relates to the additional costs associated with the alignment of our long term incentive program to industry standards.
This alignment means we now book a noncash expense based on the likely vesting of share rights. Additionally, as reflecting new accounts, we made a small technology acquisition during the half. That acquisition generated revenue that contributed a small loss to the overall result. Mike will talk further about our additional people assistance later in the presentation. Moving down the slide, you will see the reduction in our impact margin, which is largely driven by the reduction in EBITDA, which flows down and if percentage turns is amplified.
The effective tax rate has been pretty stable at 30%. That said, we are expecting this effective rate to increase in the second half as our ability to book tax losses in Australia diminishes, and thus the related tax credits are not available. Finally on this slide, the one off and non underlying items of $89,100,000 reached the statutory NPAT A loss for the half of $34,500,000 dollars Moving on to Slide 17, which reconciles the statutory result to the underlying numbers we've been presenting. Clearly, the largest reconciling item is the one off EBIT and NPAT impacts of the $88,100,000 implementation of the AMS strategic review. I'll run through the individual elements of this on the next slide.
You will also see in the NPAT column an account of $8,100,000 representing the redemption premium payable in relation to the refinancing of the group's U. S. Higher bonds in October. This redemption premium represents the amount payable under the former bonds through a dividend and price maturity, which is a standard element for all U. S.
Higher bonds. The remaining reconciling items, excluding redundancies, will be to move you to as they are consistently a part of our plan. Amortization, which relates to the customer related intangibles that were acquired as part of the Bamako acquisition and are expensed in accordance with the accounting standards. Foreign exchange movement, which represents the crystallized movement on intercompany loan accounts. One off transaction costs and redundancies with the majority of this $2,000,000 number relating to redundancies.
Slide 18 sets out the components of the one off costs related to implementation of the LMS strategic review. Most importantly, I want to reiterate that as a result of exiting these loss making contracts, we expect to generate ITP 90,000,000 of cash inflows to the group, of which we have received, of which so far we have received 13,000,000 dollars We plan to redeploy this cash elsewhere in the group to maximize value, targeting returns of plus 20%. We're effectively 4 categories of costs that we find on the slide. Most material of the categories are the cost of exiting the Yanfenga project in Mojave. We are close to concluding negotiations in early innings of this loss making contract.
At a high level, the teams that we execute will see the workforce and equipment transferred to a new contractor. To achieve this, we have worked closely with both the non owner and incoming contractor to ensure a transition that works for the 3rd party involved. There are a number of elements to this early entry and there are still some keys to be crossed and some eyes to be dealt with. But we have progressed to a stage where we believe it is appropriate that the expected outcome of the transaction should be reflected in our accounts. Most significantly, we have impaired the value of the assets that will be sold to the incoming contractor for the value in the draft sale agreement.
We are working to have the transaction completed and all required government agreements in place during the half. The next category relates to the finalization of the sale of assets of the Bongu site in Burkina Faso. We have previously impaired these assets to the value of the sale of loan entity with a contractor who had respectively delivered the Bongu contract. That did not materialize and we need to find a new buyer and negotiate a new sale agreement, which is now clear. The last of the material adjustments relate to the impairment of assets held in Ghana, Senegal and Burkina Faso to be recovering value based on the external valuation of executions during the half.
The final element of the final adjustment relates to redundancies and other costs associated with the implementation of the strategy. These redundancy costs reflect our focus on ensuring we have the correct cost base to support our business in Africa. Cash conversion for the half, the underlying EBITDA to operating cash flow was a very pleasing 92%. As you've heard, both Mark and I stay on multiple occasions, cash conversion, working capital management and more broadly, capital management are one of our key focus areas. Cash outflows reduced debt by $36,100,000 during the half.
Redemption premium and borrowing cost of $22,000,000 including the $8,100,000 on the $32,000,000 Capital spend is $119,400,000 for the half, with the 2nd last bullet point providing some detail. We can see $73,000,000 in spend related to growth CapEx, primarily at $0.05. Foreign dividends for the half were up due to the effective payment of 2 dividends during the period. With the FY 'twenty interim dividend, which was deferred as we focused on building liquidity in COVID-nineteen sales to take hold 12 months ago, ultimately paid during the half together with the final FY 'twenty dividend. All that net cash flow for the half is negative for the reasons I just ran through.
On to my last slide, Slide 20. Although it now seems like a distant memory, we continue the successful debt refinance of our U. S. Higher bonds in October of last year. The placement was circa 3 times oversubscribed with significant interest across the globe.
Given the level of interest, we elected to review our capital structure and increase the value of replacement from our targeted US360 million dollars to US450 million dollars We also reduced the capacity of our revolving credit facility by US130 million dollars The final allocation of the debt, which reflected the key support for the business, saw bonds issued to high quality investment names or investor names across Asia with 39%, Europe with 36%, the U. S. With 31% and Australia with 5% of the final placement. We secured a reduction in our 3.8%, which now sits at 6.5%. Importantly, we have in place a long term 5 year core debt facility that is effectively covenant free.
We also have leverage constant at 1.3 times, a number we are comfortable with, but a number we are targeting to bring down to circle 1 times in the near term. Thank you again for your interest. I'll now hand you back to Mark to close out.
Thank you, Peter. Slide 21. I'll now provide an update on our 2025 strategy, provide details on our order book, pipeline and outlook. Moving on Slide 22. We've shown this slide consistently now for the last 2 years, so I won't go through all the detail.
It's just to remind people of the strategy and the fact that Perenti has thought in detail about the strategic pathway ahead and is continually executing against this plan. On Slide 23. As I mentioned, the 2025 strategy has now been in place for 2 years. So it's an appropriate time to check back in on some of the key achievements since its development. I won't go through all achievements.
However, I will call out a couple of key points. We have been disciplined about our capital allocation, which is heavily weighted to underground in the external returns. We have called our AMS underperformance and we are actively working to transform this business. We have expanded the business in a quality mining countries, namely Botswana and Canada. In August 2020, we published our 1st sustainability report.
Our disciplined approach to cash has seen cash conversion increase and net debt decrease. We continue to invest in the foundations of the business to support our long term growth with a focus on maximizing value for our shareholders. I'll go into some of the detail of this investment in the next slide. On Slide 24, we have invested in our business to ensure that we have a solid foundation underpinned by streamlined processes and procedures to enable our continued growth. We invested in additional security and emergency management measures to better protect our workforce.
We are continuing to establish the presence in North America and we are actively tendering for contracts. Our presence in North America will grow as we build a base of operations through an office in Denver. We have also recognized the historical underinvestment made in systems and processes. We are removing duplication and inefficiencies that arise from legacy technology infrastructure across model business functions and model jurisdictions. For example, our people data is currently managed across 2 systems and 17 spreadsheets.
For June, we will have 1 system. In addition, we previously had 2 safety reporting systems and we are currently moving to 1. Last year, we were operating 3 ERPs. We now operate 2, and over the next couple of years, we will transition to 1. We know that once these changes have been made, we will have a safer, more productive business with strong foundations to support both organic and inorganic growth.
Slide 25. We have $5,500,000,000
of work in hand,
including $1,300,000,000 of contract extension options. It's not just a very significant following work in hand, but it is also high quality, focused on top tier mine jurisdictions with an underground focus in very attractive commodities of gold, copper and nickel. Our focus on quality returns in underground is evident given 80% of our working hand is underground with over half in Australia. Gold remains our dominant commodity. However, we are also diversified with approximately 25% of our work in copper and nickel.
As part of our refinance, work in hand is a key area of focus for debt providers and the quality of the book was a significant factor in a very positive refinance in October last year. Just to confirm, the working hand is secured and some of the delays experienced at Zone 5 in Hemlo doesn't mean it's fairly lost, rather just valued but will be realized in future periods. Slide 26. This slide details the bridge from our working hand at 30 June 2020 to 31 December 2020. Would note the negative impact due to the strengthening Aussie dollar to the U.
S. Dollar. Beyond that, it is relatively self explanatory. Moving on to Slide 27. We have increased our pipeline from $8,800,000,000 at 30 June to $9,200,000,000 at 31 December.
However, it would have been $9,600,000,000 if the exchange rate hadn't changed. This is a significant pipeline of opportunities in underground, in the right jurisdictions and commodities. At 30 June, we had 63% of our pipeline focused on Australia, Botswana, Canada and USA. And now, we have that at 76%, reflecting our increased appetite to operate in top tier mining jurisdictions and operational friendly jurisdictions. Perenti will not just be nonentity.
We are very conscious of counterparty geography and commodity risks. Therefore, we have strict tendering disciplines in place. The North American option is very real. We have increased the pipeline to $2,100,000,000 across 14 projects compared with $1,800,000,000 at 30th June. And again, this delta will be greater on the same exchange rate.
On to Slide 28. First, let me talk to our priorities. It is very important for us to continue to deliver operational excellence across all of our projects, especially our high margin underground projects, but also the successful ramp up of key projects is a key earnings driver in the near term. We will finalize the conversion of capital in O and S to cash and then redeploy that cash to where we can target higher returns. With our strict financial and commercial disciplines, we expect to incur the work with AMS to enhance the performance of our surface business.
We need to continue navigating COVID-nineteen and deal with the current challenges plus any additional challenges that may arise. We will continue to pursue new project and renewal opportunities with an increasing emphasis on North America. Onto the general outlook. We have a very strong order book with $900,000,000 of committed revenue for the second half of FY 'twenty one. Our pipeline is equally as strong and our focus remains on winning new work in highly prospective top tier mining jurisdictions.
We will continue to strengthen
our presence in North America with an office in Denver expected to open this half to bolster our already active tendering activities. The resources sector is in fantastic shape and forecast to continue to grow. We have done a great job of creating a stable foundation to capitalize on a buoyant industry outlook. We are ensuring we have the right people in the right roles with the right systems and disciplines in place. Our balance sheet is strong and our capital structure is appropriate for our growth aspirations.
That said, the headwinds we encountered in the first half of FY 'twenty one and historically COVID-nineteen are expected to persist through the calendar year with ramp up of growth projects and water pipeline opportunities delayed. This does not mean the value is lost. We will deliver on these contracts, but rather pushed out into FY 'twenty two and beyond. I'm very pleased with how our business and people have responded to and navigated these challenges. As we move forward, Pareteum remains in a very strong position and factoring in the continued impact of COVID to our business, we expect Perenti to deliver second half FY 'twenty one revenue and margins consistent with the results achieved in the first half of FY 'twenty one.
Thank you for your time. And we now move into Q and A.
Thank Your first question comes from Ben Brannett from CLSA. Please go ahead.
Hi, Mark, Pete. Just can I start on Slide 13 with AMS? Can I just understand that a little better? So is that chart there, is that the EBIT result of the whole of AMS? So it looks like about negative $6,000,000 $7,000,000 something like that.
Is that correct?
Dan, it's Peter. Peter. Let's start on the liquidity chart that just shows the rate of capital and how we can get better returns from it. It's really based on the Oil and the bonder in Yanfel Oil, not the full AMS.
Okay. Can you give us an idea of what in U. S. Dollar revenue and EBIT AMS was just so we can put it in context of what's left after those exits?
Then I've got those numbers. I'm not being given them on this call. You can possibly back calculate in Aussie dollars what the contribution has been by looking at the slide deals with the in service business and by stacking out the 3.8 million dollars for the 3.4 million dollars adjustment, if you call that.
Okay. And can you give us an idea then of how many at what dollar value of assets is left in post selling the assets that post the $80,000,000 to $90,000,000 what the asset base left in that business is?
It's about 300,000,000.
Dollars And that's Aussie?
That's Aussie, mate. Everything I say will be Aussie units, I call it out on Aussie.
Okay.
Okay. Understood. And then with respect to the COVID cost, is that should we be looking at that corporate line for the majority of those costs? Or are they as well in the underground business?
The bulk of them actually sit in the projects to which they relate to. Then I would say, though, it's difficult to isolate them. The bigger impact from COVID is, as we said during the presentation, is more around the productivity impact from our workforce being in country for a longer period of time, easily to some of our senior staff to free their travel. So that productivity impact is very hard to point
And also, Ben, it's Mark here. I just covered off the operational cost, which is correct. We also have a dedicated team that are managing it globally for us, and those costs do come through into the overhead.
Right. So okay. Okay. So then I mean, obviously, you're saying that it's hard to quantify, but could you ballpark a number or a range of what you would expect the COVID related impacts to be?
Yes. I guess the 2 parts or probably 3 parts there being. One is the direct costs associated with moving people globally, plus the direct costs from the quarantining to physically within the countries they operate. And those costs are generally covered through the clients. So that's sort of one sort of category.
Another category is around the productivity impact that Peter has spoken about, and they are hard to quantify. And I guess if you think about sort of reduced coverage of expats on-site, leading to the productivity impacts, if you look through sort of the last 12 months, we've had isolated periods of taking a fighting isolation on-site more from a precautionary aspect given sort of contact tracing. They are hard to quantify. And then the 3rd category is what I call the other 4, which is the team dedicated to managing COVID. And that's really, there's been that's probably about 5 people sort of full time dedicated to covering our
Yes. Okay. And then with respect to the underground business itself, it looks like there was some pretty good growth in Australia. So can you talk about that? And then can you talk about, from an overall margin perspective in that underground business, where it looks like a bit of mix shift back into the Australian business at lower margin, kind of where you are happy with that EBITDA margin that was sort of 15.1%, would you expect in a normal environment that to be sort of back where it was, say, call it, first half 'twenty unimpacted?
Or are there some mix changes there?
Yes. I guess, overall, we're certainly very pleased with our underground performance. The growth that you called out, Ben, has been both international and domestic. Domestic sort of in the south predominantly through just a ramp up with some of the projects that we have, then obviously the ramp up internationally on the back of Zane-five and also the Hemline project. So good growth.
As far as margins look, we're always looking to improve those margins where we can. We did have an improvement on this half compared to the prior to the half that we pulled out at the 15.6 percent was slightly down. That would be our objective. But I wouldn't be actually sort of placing too much sort of way on that just given the headwinds. So ideally, we're going to get back to that point quickly.
But I think we just need to sort of keep navigating, keep the consistency. Our main focus there, Ben, is to get the job done and generate strong returns and manage it safely. So in time, we have to get back there, but not in the short term.
Okay. And just lastly, so on those 2 AMS contracts where the miners, I guess, have announced and you've announced that a new contract is coming in and buying the equipment. Do you expect that to be paid relatively soon after they take delivery of that equipment? Or will there be some other adjustment to suggest that there might be over a longer period of time? So that 80 to 90 less the 14, is that an expectation for the second half?
Or should we expect that to be spaced out?
Yes. And pertaining to have that through during the half, I guess,
to get the balance there about Bondi is that it's
up and operating now. So the is generating income again on the back of that restart. And the Anfilula contract in mine continues to operate. So we are expecting that they take delivery, particularly Anfilula and we're looking for a handover in March. And that's going to be finalized with some of the things and so over the next several weeks.
We expect the cash coming through in this half. Brendan, can you update on that?
Yes. Ben, I might just add whilst literally, whilst again, being in the call and received another $6,000,000 came through last night when our bond is just a charge of the payment that gets used. So we've never seen
in those.
Your next question comes from Josh Tanachos from UBS. Please go ahead.
Hi, Mark and Pete. Just following on, firstly, on starting off on the good stuff. In terms of the underground, that was obviously extremely strong result despite the sort of COVID impact. Just keen to really understand when we're looking at that, how much of those productivity issues actually hit that underground business versus the surface business? And then also just in terms of with the Hemsworth and Botswana contracts, just how much sort of profit from those contracts?
Or if you can even give us a feel for how far through maybe in terms of percentage terms are you from achieving the revenue and sort of profit from those contracts?
Yes. Good morning, Josh. It's Mike. In terms of, I guess, the COVID impacts, surface versus underground, we see a greater generally a greater impact operationally on underground due to the additional expats. So it's a high percentage of expats we run in our underground business internationally, and that's due to the, I guess, the technical sort of know how required in underground, which is a key differentiator.
So great impact there. Having said that, the contracts in underground generally there from a commercial acumen point of view for recovery in that service, which we have called out in terms of one of the legacy issues within AMS. So this impacted. And the other thing I would say is the review of IMS is it's a very strong brand, well recognized as sort of quality delivery. That's not the issue.
It's more about sort of the commercial management and cost management. So I guess less impact but less stability to recover. In terms of the ramp up of the same 5 and the penlight, in terms of the update I provided just provided a Q and A, did call out that the timing of that business is sort of working through on some impacts of COVID and sort of the international travel and the South African strain and the U. K. Strain that have further restrictions on.
So we're still just assessing that when we'll get to steady run rate. We don't expect that to be in this half. We expect that to be through into FY 'twenty two. So as far as percentage, Josh, I might be able to provide that to you. But the positive is it continues to ramp up and we'll continue to see increasing earnings for those 3 jobs throughout the next 6 to 8 months.
Got it. And then just in terms of SURF, I mean, you've obviously outlined your plans and strategy moving forward then. I mean, what are the sort of major next steps? Like when you sort of look at the projects within there, are there any that are also concerning you? And are there any other sort of further exit options or renewal options or change in terms of repricing options across the book into this sort of second half?
Yes. So I guess one item I'll sort of call out and we've touched on it sort of this prior, but the Zambrano project, which was a competitive tender over the last couple of years, struck on, I guess, I'll call it the new sort of commercial disciplines and hurdles, performs very well. So meeting our expectations, building our client expectations. So I guess that's an example that we do our discipline. The IMS business can still generate positive returns from good contracts.
So it can clearly be done. To your point, Josh, regarding sort of other challenge contracts, the Mikado contract is another contract that is a loss making project for AMS. And you'll probably be across it, Josh. But in terms of the benefit of other people on the call, back in 2017, 3 projects were struck in or 1 in quick succession for AMS, Bongu, Fililla and Mako. And those three jobs have all been loss making projects.
So we've obviously got Bongu. We're close to exiting Yantanilla, and we're working through Mako. What our focus with Mako is to actually work with the mine, look at the mine plan, find opportunities to drive the cost base down and share the savings with the client and with ourselves as well. That contract runs until May of 2022. There is an extension option on that for a 2 year period thereafter.
But our focus is to actually decline cost savings, improve the profitability of the Mako project. So that's the main sort of overhang around operations within AMS, Josh.
Yes. Got it. And just maybe one just for Pete, just around the currency paid into the currency is probably a slightly larger impact than I'd expected anyway within this half just with the debt offset. Just interested into the second half just how much sort of impact you're seeing there and how we should maybe look at sensitivity of currency moving forward, please?
Yes. So we've called out that we're taking out our guidance on a range of $0.76 If it holds at $0.76 against the prior year, the impact is around $8,000,000 at the end of line.
Got it. All right. Thanks, guys.
Sure.
Thank you. Your next question comes from Michael Aspinall from Jefferies. Please go ahead.
Good day, Mark and Pete. A couple from me. I'll just start one more on kind of the surface business. You've talked a bit about new contracts in AMS. Can we take that the Australian service contracts should be performing to your expectations?
Yes, Michael. The Australian service business is performing well. We very happy with the performance there in both the exploration and drill blast. Different nature of contracts in terms of, I guess, the seasonally that we're comfortable with and the performance is strong. So yes, comfortable with how we're going with Surface Australia.
Okay. Great. And then one on the pipeline. Pipeline's up to $9,200,000,000 Can you give us any indication of how much of that is recontracting mines you're already on and then the timing of that as well?
Yes. So in terms of the pipeline, it does have some numbers associated with renewals in existing jobs. So for example, we've got Itau Offering, the job in Ghana. We've got and I'll just call that sort of the main ones. We've got with AGA and IKANGA and Gaida in Tanzania.
And we've got Sukari, which is a project we sent them in Egypt. They are the main ones that, I guess, make up the bulk of that. We have already extended a couple of projects that went to that value. It's $1,400,000,000 of the $9,200,000,000 So quite a portion of existing clients.
Okay. So $1,400,000,000 is extensions and the remaining is new
contracts? Yes.
Yes. Okay. And you still have a slide on kind of the phasing of that pipeline. Can you kind of give us any indication of do you expect much of that to fall in the second half and into FY 'twenty
Yes. Don't I'll answer them too fast, Michael. We expect that a number of contracts will be awarded in the second half of 'twenty one, but the actual revenue associated with those awards will come through into FY 'twenty two. And a number of the large jobs that we're currently targeting will be in the second half of FY 'twenty two.
Okay. Great. And then one on North America. You mentioned that you expect the award of a project in the second half. Is that expected to be in the underground business?
Yes, it is. So Michael, in North America, we're only targeting underground services in North America. We see our underground offering, and it's having, I guess, significant differentiation to the North American market. And so therefore, we're only targeting jobs that are underground specific.
Okay. That's very useful. On BTP, have you started to see the East Coast rental market improve and kind of have high coal prices started to flow through operationally or not yet?
Yes. We did see some slight improvement in January in terms of coal. And I guess 2 parts to the BPP business, obviously, the sort of softening call. But people in the joint ventures and change of control, which did sort of flow through into December. And we have seen that sort of pick up a bit into the New Year.
So we're fairly sort of signs of positive there, Michael, that I guess given the sort of volatility we've seen, the interest in seeing how it goes for the half.
Great. And last one for me. Thanks for your comments on the kind of the corporate charge and what's driving that. Can we further the similar number should be expected in second half and into FY 'twenty two as well given the change in accruing for LTIs?
Yes. It should be similar sorry, stable.
Great. Thanks a lot guys.
Thanks, Mark.
Thank you. There are no further questions at this time. I will now hand back to Mr. Norwell for closing remarks.
Well, thank you, everyone, for taking time to join our call this morning. This is the Viking Bird for an early start. So we'll be running through further discussions over the next couple of days. But I guess just rounding out given the headwinds I've called out and particularly the ForEx and if you sort of back out the $6,000,000 impact, we're back up to $100,000,000 EBIT for the half, which is comparable to the previous half of 101, which we have to be consistent with the period. Strong performance, the business is in sort of fantastic shape to continue to grow in the 'twenty two and beyond.
So we're well positioned, and we look forward to further discussions. Thank you.
Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.