Good morning, everyone, and welcome to the Wagners first half FY 2024 results webinar. My name is Sam Wells from NWR, and joining me from the company today is Managing Director Cameron Coleman, Chief Financial Officer Fergus Hume, as well as Karen Brown. Following a brief summary of the updated release to the ASX yesterday afternoon, we will have some time for Q&A with the management team. There will be a choice of two options: first, research analysts will be able to raise your hand via Zoom should you wish to ask a verbal question of the management team, or we will be taking written submitted questions throughout the duration of the presentation today. We will endeavor to get to all questions, in some cases combining questions on a similar or same topic. Thank you, and over to you, Cameron and Fergus.
Well, thanks very much, Sam, and good morning, ladies and gentlemen. Welcome to our half year results presentation. I'm pleased to be able to deliver much improved results for the first half of FY 2024 compared to last year. Market conditions overall have improved, and the demand for Construction Materials and Services has remained strong, which for us, has meant increased volumes, improved margins, and therefore, more positive results. The group's revenue for the first half, at AUD 264 million, is a 20% increase on the prior corresponding period. At a high level, this increase has been predominantly driven by the improved market positions in construction, materials, and services, with a strong customer demand, improved asset utilization, along with a pleasing contribution from project work, and increased composite crossarms and pole revenues throughout Australia and New Zealand.
The group operating EBIT result of AUD 21 million was a significant improvement on the prior corresponding period. After adjusting for the losses in our EFC business, the impairment of the EFC assets, and a derivative mark-to-market adjustment, we achieved a statutory EBIT of AUD 12.5 million, and net profit after tax of AUD 2.8 million. So looking at each of the segments' performance now for the first half, I'll start with the construction materials and services segment, which includes our cement, concrete, precast, steel, quarry, and bulk haulage businesses. Overall, the CMS sub-segment delivered revenue of AUD 234 million, which is a 22% increase compared to the prior corresponding period, as a result of strong underlying trading conditions.
This result has significantly improved EBIT result in the CMS business of AUD 27.7 million, a 95% increase on the prior corresponding period. In cement, volumes continued to improve, as did pricing, delivering a 14% increase in revenue and improved margins. The concrete business has continued to be challenging, however, market conditions have remained more positive than those experienced in the first half of FY 2023, with the business continuing in its disciplined pricing and cost control initiatives. Volumes were significantly affected late in the period with wet weather we experienced in December, and that's continued into January and February. The precast business made a strong contribution to the CMS result with a full six months of production of tunnel segments for the Sydney Metro project. At the end of the first half, 61,000 of the required 70,000 segments had been produced.
This has been a great project for the business, although it will be completed this half. Our bulk haulage business delivered a 30% increase in revenue, with two projects secured late in FY 2023, providing a full six months contribution. Asset utilization continued to improve over the period. While sales were down on prior corresponding period in our quarries business, due to the completion of a large crushing project during FY 2023, the business did experience improved performance from the fixed quarry operations, following the capital investment made into our crushing equipment, leading to an improved EBIT result. The steel business continued to perform in line with our expectations during the period, with the result consistent with the prior corresponding period. Looking now at CFT.
Revenue for the first half was a 9% improvement on the prior period, mostly driven by strong crossarm and power pole demand in Australia and New Zealand. The EBIT result of AUD 1.3 million was also an improvement on the prior period, positively impacted by the strong volumes I've mentioned in crossarms and poles, improved selling prices, particularly in the Custom build business, which delivers pedestrian infrastructure, marine and road bridge projects, and also improved margins from process improvements and production efficiencies on site. The result was, however, negatively impacted by the weaker-than-expected performance of the CFT US business, which delivered a larger-than-expected loss for the first half. This business experienced challenges establishing itself in the market and achieving consistent product sales, given the long lead time between securing and delivering projects.
As mentioned at the AGM last year, a decision was made by the board to significantly scale back our EFC operations in light of the lack of commercial support for the product. This resulted in the impairment of the EFC assets and inventory to the value of $ 5.7 million, which is reflected in this half year result. Moving forward, we will continue to preserve our intellectual property. We remain open to pursuing opportunities for the use of EFC in the right applications, with partners and in jurisdictions where there is support for the product. We expect a small annual loss going forward, associated with the preservation of the IP. However, EFC will no longer be disclosed as a separate business segment after this year's full year result.
I'll now pass you over to Fergus, to take you through the balance sheet and our cash flow.
Thanks, Cam. The first half of FY 2024 has seen a significant reduction in our net debt by $ 37.2 million. This has come about due to three reasons: firstly, our working capital has significantly improved due to the timely receipt of our trade receivables, which included the $ 13 million called out at our full year results, which was received on the third of July. Secondly, our improved earnings, as described by Cameron, has led to improved cash conversion. And lastly, rigorous control on the capital expenditure during this period. To look at the cash, there's been a significant improvement on the cash flow from operations as a result of the improved operating profits and the improved collection of trade receivables, improving the working capital position.
Capital expenditure has been tightly managed during this period, with the spend focusing on growth in quarry processing plants and the replacement of bulk haulage assets. The improved cash conversion has been used to repay debt, mostly working capital facilities, reducing our net debt position. I'll pass it back now to Cameron, to take you through the strategy update and outlook.
So the outlook for the remainder of FY 2024 remains positive, with the strong operating environment experienced during the first half expected to continue. In the construction materials and services side of the business, we expect cement sales to remain consistent with the first half, with some margin expansion, given better pricing and reduced input costs. While wet weather has had an impact on concrete volumes for the start of the second half, market conditions are otherwise anticipated to remain stable. We're continuing to expand our concrete plant network. We have one concrete plant currently under construction, and while it won't make any contribution to the FY 2024 result, it will deliver volume in FY 2025.
We have secured a DA on an additional greenfield site, on which construction is likely to commence in FY 2025, and we will continue to explore additional plant sites in line with our concrete plant expansion strategy, which provides a critical channel to market for all of our vertically integrated supply chain. In our bulk haulage business, improved margins are expected as new fleet is introduced into various projects, improving productivity. Our quarries business is expected to see improved margins from the fixed plants, with the significant capital upgrades at both Wellcamp and Castlemaine, and the production capacity and efficiencies as a result of that CapEx will be realized. The precast business will not see any growth in the second half, with no follow-on work secured to replace the Sydney Metro project. The business will deliver a lower result in the second half compared to the first half.
So while the market conditions are anticipated to be consistent with the first half in the CMS business, the second half result will be lower than the first half, given the completion of the Sydney Metro tunnel project. Moving on to CFT. In Australia and New Zealand, we expect there to be continuing demand for composite products, particularly crossarms and power poles. Margin improvement experienced in the first half is expected to be maintained as a result of those price increases and production efficiencies already realized. We therefore expect a result relatively consistent with the first half. The overall CFT result for the full year will be negatively impacted by a larger than anticipated loss in the U.S., with no large projects currently secured, that will deliver significant revenue in the second half.
However, with the ongoing business development and sales activities, combined with the acceptance of our products demonstrated through the successful completion of recent projects, we do expect the CFT US business to deliver improved results into FY 2025. On a longer term basis, we remain confident in our strategy for the US business. It is currently a projects-based business, which has experienced challenges in securing consistent projects, as we experienced in Australia when we first started in CFT. The strategy is to continue with the bespoke projects while developing a commodity that delivers consistent sales to support the uncertainty of the project side of the business. We remain confident that once we can secure appropriate approvals for the products that are likely to provide for this, being utility poles and marine components, this will deliver sustainable growth into the future.
As we had indicated last month in our trading update, as a group, we're expecting the second half EBIT result to be consistent with the EBIT result delivered in the second half of FY 2023. Given this, we also reiterate the guidance that we provided at that time, that the FY 2024 group operating EBIT is expected to be within the range of AUD 31 million-AUD 34 million. So in summary, we are pleased to be able to deliver the result, the first half result we have today, following an extremely challenging period during FY 2023. The outlook is also positive, with the business being well positioned to capitalize on various opportunities across the construction materials and services sector, and the high demand for our crossarm, utility poles, and composite structures.
So that concludes the presentation, and Fergus and I are both here and happy to take any questions you may have. Thanks.
Thanks very much, guys. As a reminder to the audience, research analysts can ask questions via raising your hand on the Zoom function, in the Q&A box, while others can submit written questions through the Q&A function at the bottom of your screen. First question on the line is coming from Liam Schofield at Morgans. Liam, please unmute your line and ask your question.
Morning, guys. Can you hear me there?
Yeah, Liam, we've got you.
Perfect. Good work on a great set of results. Just two quick questions. You comment on volume growth. What does that sort of look like? Can you sort of put any numbers around there, and perhaps an update on the bulk haulage strategy, which you called out at, I think it was the last result?
Yeah, look, volume growth for us is through our aggregates, cement. Well, it's in a number of businesses, the volume growth, Liam. If you look at the aggregates, cement and fly ash business, as we bring those additional plants online, and as the general market in South East Queensland continues to be reasonably buoyant, we're seeing very strong volumes coming through those divisions. And then coupled with that, we're seeing that now that we've got those new pulverization machines commissioned in our composites business, the volume of power poles that are being delivered into the electrical networks continues to be, you know, something that we're really pleased with. The demand for that has been excellent, and people are really starting to take up the replacement of timber poles with our composite poles.
So the volume growth we're seeing is across both the composites business and the South East Queensland Construction Materials business. And the bulk haulage business strategy is still something that we are considering. The business is performing well. It's making a real contribution to the overall group. So, we're not in any rush to do anything there. We're sort of very content with how that business is going, and we'll continue to invest some capital in there to ensure that we stay competitive and improve margins wherever we see possible.
Gotcha. Perfect. Thank you.
Thanks. As a reminder, any other research analysts that would like to ask a question, please feel free to raise your hand. There is another question coming in from Peter Drew at Canaccord Genuity. Peter, please go ahead.
Yeah. Hi, Cam and Fergus. Just a, I guess, a question firstly on the cash flow. You know, I'm just wondering, is there gonna be any unwind of that sort of working capital benefit through this year? And then secondly, just what full year CapEx will look like, please?
Sure, Peter. In terms of working capital, no, we sort of, we don't see any unwind of that working capital benefit that we've achieved. We're probably not expecting to see the improvement that we've seen in it this half, either, just because of, you know, we had that unusual event with the receivables, and, that's what sort of drove most of it. In terms of full year CapEx, we're still targeting that sort of $ 20 million-$ 23 million range for our full year CapEx. That will depend on whether or not we get some mobile gear, that because of the lead times on it, you just can't be sure when it's actually gonna land. So that's why there's that variance in the range.
Yeah, thanks for that. And then just to clarify, just to comment on cement volumes in the second half, are you saying that cement volumes will be in line with the absolute volumes that you did in the first half?
Yeah, that'll be. We expect them to be consistent with the first half.
Right. So that's quite a good result.
It is, given January, January is typically very slow.
Yeah.
Every year, so-
And-
Sort of where we see it.
Just the last one, just in terms of concrete volumes, I mean, sort of expecting a fairly large, you know, kind of percentage uptick on a what was a relatively low base. What sort of percentage, you know, or even in absolute, sort of meters, growth do you expect this year versus FY 2023?
Well, we'll be looking at about 20% growth in volume in the concrete business.
Yeah... Yeah, and then, and prices are holding?
Importantly there, though, Peter, the market, the market has been stable, and that volume is at much healthier selling prices.
Yeah. Yeah, understood. Thanks. Thanks, guys.
Okay, thanks. We've got one more submitted question here, and just as a reminder, if there are any more questions, please feel free to drop them through the Q&A function at the bottom of your screen. This question relates to pricing versus volume. With respect to the revenue growth, are you able to comment how much was driven by volume versus what proportion was driven by pricing?
It is a combination of both. It is a combination of both. The cement business experienced both volume and price growth. So I don't have the split of that at hand.
So the businesses that would've seen price growth would've been cement and concrete. Aggregates, not so much, though we did see volume growth in aggregates, but we saw volume growth in cement and concrete to a lesser extent as well. So to put a percentage on it, I couldn't put an overall percentage on it, because there's also project work in there, additional project work on the bulk haulage that's provided a revenue increase as well, which has got nothing to do with volume, in a sales point of view. So I don't have a definitive answer for it, but hopefully that's given a bit of color around what it is.
Okay, great. Thank you. That's it for the questions coming in today. If you do have any follow-up questions, please feel free to email them through to me, Sam Wells, at NWR Communications. And with that, I'll just pass it back to Cameron for any closing comments.
Thanks, Sam. Yeah, as I said, we're very pleased with the performance, and we're excited about the runway ahead in South East Queensland. And thanks very much for your attendance today, and we'll be on the Sydney and Melbourne roadshow the week after next. And happy to take any meetings one-on-one, or otherwise, happy to do any video conference meetings. So we'll close it down at that. Thanks very much for your attendance. Have a good day.