Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Acrow Ltd (ASX:ACF, Financial) reported a 28% improvement in revenue and a 40% improvement in EBITDA year-on-year.
- The company achieved a 39% increase in profit before tax, despite now paying a full tax rate of 30% compared to 8% in the prior period.
- The Industrial Services business now represents 33% of group revenue, driven by successful acquisitions and organic growth.
- New products such as Jumpforms and Acrowdeck are providing significant cross-selling opportunities and fresh revenue streams.
- The company has a record pipeline of contracts, now exceeding $200 million, indicating strong future growth potential.
Negative Points
- Despite the positive financial performance, the EPS remained flat due to the issuance of more shares over the year.
- The Commercial Scaffold segment experienced a decline, reflecting the cyclical nature of the market.
- The company faced a significant increase in tax expenses, now accounting for an additional $10 million due to the exhaustion of tax losses.
- Net interest expenses increased by 63%, driven by higher average debt and increased interest rates.
- The company incurred significant one-off costs, including acquisition-related expenses, branch relocations, and rebranding costs.
Q & A Highlights
Highlights of Acrow Ltd (ASX:ACF) FY24 Earnings Call
Q: Just on the guidance of the 20% revenue growth and double-digit EBITDA growth, can you give us more color on whether some operating leverage comes through or cost?
A: We could have given a range, but there are many moving parts. We prefer to provide more color as we move through the year, especially by the time of our AGM. We like to upgrade as we can through the year and always aim to overachieve. The revenue is driven a lot by industrial, which has significant impacts on EBITDA. The commencement date of the project profile gives us some degree of uncertainty.
Q: Has the cash from the large revenue work that came through in June been received post period end to reverse the working capital drag?
A: Yes, it is starting to come through. Some of these were negotiated sales, so it takes time, but it just happened to occur in June.
Q: Based on your record pipeline and recent acquisitions, is the revenue guidance conservative?
A: We are happy with the starting point. The macro environment in the construction sector is not wonderful, but our results are remarkable given the circumstances. The start dates of projects are questionable, which is the only concern. Major projects are not being canceled, and we are gaining market share across the country.
Q: Can you remind me about the margin contributions of Industrial Services versus Formwork?
A: Formwork contributes 74% contribution margin, and Industrial Services about 38%. As Industrial Services grows, the overall EBITDA margin will reduce but remain highly profitable. The formwork business is project-based with high returns, while Industrial Services offers more predictable earnings with strong margins.
Q: Are you done with the relocation of yards, or will there be significant items in FY25?
A: There are not many relocations left. We have a big project over the next two years to consolidate three yards into one in Southeast Queensland, but that is a couple of years away.
Q: Can you explain the organic growth in Industrial Services?
A: It is a combination of leveraging existing relationships and targeted contracts. For example, the Snowy contract will double by January, and the Ampol contract at Lytton will grow significantly. We are also targeting contracts in Western Australia and looking to grow through M&A.
Q: Can you provide more details on the new loading platform system?
A: It is a platform for high-rise buildings to load materials. Our design is adjustable, unlike fixed-width platforms in the market. It is not a massive game changer but will generate a couple of million dollars in revenue and complement our existing products.
Q: Are your competitors in Industrial Services targeting the same bluechip clients?
A: Some competitors offer a range of services like painting, blasting, and insulation, which we do not focus on. We specialize in access provision for industrial facilities, targeting contracts with higher margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
