Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Monadelphous Group Ltd (MOPHY, Financial) recorded a revenue of $2.03 billion for the year, an 11% increase from the previous year.
- The Maintenance and Industrial Services division achieved a record annual revenue of $1.32 billion.
- Earnings before interest, tax, depreciation, and amortization (EBITDA) increased by 16.8% to $127.4 million.
- Net profit after tax rose by 16.2% to $62.2 million, delivering earnings per share of $0.641.
- The company ended the year with a healthy cash balance of $225.9 million and a cash flow conversion rate of 169%.
Negative Points
- The termination of the Albemarle contracts resulted in a reduction of $200 million in secured contract figures.
- The company faces ongoing challenges with labor availability, which has only slightly moderated.
- Price volatility in certain commodities, particularly nickel and lithium, has led to reduced production and deferred capital spend.
- The renewable energy sector faces challenges such as network constraints, delayed planning approvals, and supply chain pressures.
- The company does not expect significant margin tailwinds despite recent contract wins.
Q & A Highlights
Q: I note that the recent contract announcements have been around $540 million in total over the past month that you've won. And you've also disclosed $80 million per annum roughly coming out of Kemerton earning. How do we think about, I guess, the wash or the balance for the E&C top line into next year from these recent announcements? Are we right in still thinking that over the past month, your net positive E&C revenue book?
A: I think the contracts that you quoted that we secured over last month and the commentary we've provided around expectations of contract awards over the next couple of months would support the position you put forward in terms of certainly a net positive position in relation to the EC top line. (Zoran Bebic, Managing Director)
Q: Would you expect that to be a margin tailwind as well into next year, given these contracts were signed more recently than what you had Kemerton signed up?
A: No, I wouldn't necessarily assume that. (Zoran Bebic, Managing Director)
Q: Can I just ask on some of the margin trends into next year. Conscious that you've got labor availability headwinds easing. Are there any other tailwinds that we should be thinking about for margin expansion into next year?
A: The commentary we've provided around labor availability, it's moderated slightly, but we haven't seen a material improvement. There's certainly still an issue around the depth and the quality of the labor pool. In terms of margin performance, it will be a function of execution. It's as simple as that. So I'm not seeing any significant tailwinds in response to your question. (Zoran Bebic, Managing Director)
Q: Could I just ask firstly how far through CGP3 completion you guys are?
A: We're still in the early stages. I'd suggest approximately, we wouldn't be more advanced than say 20% complete, somewhere around there. (Zoran Bebic, Managing Director)
Q: On the large Zenviron contract that you won earlier in the month, is there a bit of a slow ramp-up? Or is that expected to deliver strongly to FY25?
A: Yes. I think you're right. We've said work will commence immediately. In fact, has. I'd certainly see the revenue would be weighted to the second half, but it will be a pretty quick ramp-up. (Philip Trueman, Chief Financial Officer, Company Secretary)
Q: On the Pluto modifications work that you won, we didn't really get much detail on when the work is expected to commence and how long that job is expected to go for. Could you just give us an indication of start date and duration?
A: The first phase of work, there'll be a lot of offsite planning activity that's occurring probably to about the Christmas period. So we'd expect to mobilize to site and be executing work in earnest second -- first -- back in the first quarter, second quarter of calendar year '25. (Philip Trueman, Chief Financial Officer, Company Secretary)
Q: Revenue was only up 2% year-on-year and actually went backwards year-on-year in the second half. Was that just because you were lapping oil and gas turnarounds last year? And how should we think about maintenance revenue growing into FY25?
A: We certainly had a larger proportion of our turnarounds in the first half in the maintenance business, particularly Shell's first major, and the number of Woodside turnarounds. So you're right. There was a stronger first half. If I look at FY25, there will be a similar level of turnaround activity. So I guess on that basis, I think you could expect modest growth. (Zoran Bebic, Managing Director)
Q: The second half construction revenue was really strong, sort of up over $400 million. Do you think you can maintain that run rate into next year? Or is there likely to be some moderation?
A: I'd like to think we can maintain that subject to the award of work in the coming months. So, yes, I think we can. (Zoran Bebic, Managing Director)
Q: In relation to the Kemerton cancellations there. How do you expect that to sort of complete as far as the cost position thinking about demobilization costs, et cetera, and cash flow? Do those costs get covered?
A: We're in a process where we're working through that with Albemarle. But that's my expectation. So my expectation is that we can -- yes, it's a loss of revenue. We'll recover our costs. (Zoran Bebic, Managing Director)
Q: Can I get a sense around Melchor second half contribution? I remember in the first half you said the top line in the last two months of first half was around $25 million. Just wondering how that sort of cascaded into second half?
A: We did about $100 million for the year, Will, and we did about $25 million in the first half, so therefore $75 million in the second half. (Philip Trueman, Chief Financial Officer, Company Secretary)
Q: Question on the maintenance contract awards, which you won recently, I think you've flagged $1.9 billion over the last 12 to 14 months. Can you just give me an idea of what level of renewal sits in that versus new awards and scope extensions?
A: In terms of the more recent announcement, they're predominantly renewals. (Zoran Bebic, Managing Director)
Q: Just wondering if you could give us some detail around these potential awards that are coming in the next couple of months, just in terms of sort of size and duration maybe?
A: I'll give you a very short answer, Nick. Not in a position to give you more detail around the awards. (Zoran Bebic, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
