Macmahon Holdings Limited (MAH) Earnings Call Transcript

Good morning. I would like to welcome everyone to the 2026 Annual General Meeting of Macmahon Holdings Limited. My name is Greg Evans, an Independent Non-Executive Director of Macmahon and Chair of the Board. I acknowledge the Wadjatunonggar people as the traditional custodians of the land on which we meet today. I pay my respects to their elders, past and present and recognize their continuing connection to country, culture and community. I also acknowledge the traditional custodians of the lands on which Macmahon operates throughout Australia and extend my respects to all Aboriginal and Torres Strait Islander peoples. I'm joined at today's meeting by Michael Finnegan, Macmahon's Managing Director and Chief Executive Officer; Dharma Chandran, an Independent Non-Executive Director and Chair of the Remuneration and Culture Committee; Susan Pervan, an Independent Non-Executive Director and Chair of the Audit and Risk Committee; Grahame White, an Independent Non-Executive Director; Tom Quinn, an Independent Non-Executive Director; and Arief Sidarto,-Independent Non-Executive Director and Aman nominee. I'm also joined by Ursula Lummis, our Chief Financial Officer; and Maha Chaar, General Counsel and Company Secretary, who are both members of Macmahon's executive management team. Also present today is Mr. Derek Meet, a partner of KPMG, the company's auditor; and Mr. Rod Somes, the returning officer for today's meeting from Computershare, the company's share register. The Notice of Meeting for this 2026 Annual General Meeting was made available to all shareholders on 21 September 2026 by an ASX announcement, e-mail broadcast or physically by post. If there is no objection, the notice of meeting will be taken as read. As there are no objections, let's move to today's proceedings. After covering administrative matters, I will give a short address to shareholders, followed by the Managing Director and CEO's address, which will be given by Mick. We will then move to the items of business as set out in the Notice of Meeting. Today's meeting is a virtual meeting with shareholders able to attend and participate online through the Computershare meeting platform. Information on how to vote is outlined in the Notice of Meeting and instructions are shown on your screens now. For shareholders who have registered and are eligible to vote at this meeting, once voting opens, please select the Vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as your vote will automatically be recorded. You will receive a vote confirmation notification on your screen. You can change your vote until the time I declare voting closed. Voting for all items of business will be conducted by a poll, which I now declare open. Poll results will be tallied and announced through the ASX as soon as practicable after the results become available. After the poll has closed, shareholders will have an opportunity to ask questions or make comments about the management of the company. Online questions can be submitted via the Computershare meeting platform at any time until we commence question time. Instructions are shown on your screens now. If you would like to ask a question, select the Q&A icon and type your question into the text box. Once you finish typing, press the send button. Please note your questions may be summarized or if we receive several questions on the same topic, amalgamated. Attendees wishing to ask questions verbally, please follow the instructions written below the broadcast. If attendees experience technical difficulties with the platform during the meeting, please refer to the online meeting guide or call Computershare on the number set out in the guide. Before discussing Macmahon's 2026 financial year, I would first like to address the fatal on-site incident involving one of our Macmahon team at the Fosterville Gold Mine in December of 2025. While investigations are still ongoing, we are fully cooperating with the relevant authorities. I would like to give our deepest condolences to Allan's family, friends and colleagues. The safety and well-being of our people is the single most important focus at Macmahon. Despite the improvement in safety metrics, the Board remains deeply conscious that a workplace fatality occurred during the financial year. No metric offsets the human impact of such an event. It is another reminder to remain vigilant and disciplined in our approach to workplace safety and the overall well-being of our people. For my first address as Chair, I'm very pleased to report that Macmahon has delivered another year of strong operational and financial performance, driven by the successful execution of our strategy and the outstanding commitment of our more than 10,000 strong Macmahon team. We met guidance for the 10th consecutive year, delivering record underlying earnings and strong free cash flow. all while reducing debt and increasing returns to shareholders. This was an excellent performance, demonstrating hard work, discipline and the focus of our team, which now spans Australia, Southeast Asia and New Zealand. Pleasingly, there was strong growth from our civil infrastructure and underground mining businesses in FY '26, which has been a strategic focus and a key driver of our improved return on average capital employed target. This will remain a primary focus for Macmahon going forward. In March, Macmahon was included in the ASX 300 Index. This represents a significant milestone for our business and recognizes the many years of consistent growth in earnings we have delivered. With market capitalization now more than $2 billion and being included in the ASX 300, we intend to build on the platform we've created and continue the momentum. This year, we have significantly enhanced Macmahon's reporting on sustainability, which is included within the Sustainability Report section of Macmahon's 2026 annual report. The sustainability report for 2026 continues our journey towards enhanced mandatory climate-related disclosures and addresses climate-related risks. The Board's capital allocation policy remains unchanged, reflecting the importance of paying dividends to our shareholders, maintaining a healthy balance sheet whilst retaining financial flexibility to enable the execution of our growth strategy. We are committed to paying a sustainable dividend in line with this strategy. In FY '26, the Board declared a final dividend of $0.0125 per share, bringing the total dividend for the year to $0.0220 per share, an increase of 47% over FY '25. Since FY '19, dividends per share have increased from $0.05 partially franked to $0.022 fully franked, while net debt has been reduced, demonstrating the balance between growth and shareholder returns being achieved. The FY '26 dividend payout ratio of 41% was at the top end of the previous target range of between 30% to 45% of underlying earnings per share. Supported by the company's performance in FY '26 and the positive outlook, the Board has lifted the target payout ratio range for FY '27 to between 35% and 45% of underlying earnings per share. The target payout ratio will continue to be reviewed in line with the Board's capital allocation policy. Since last year's AGM, there have been some changes to the Board with the appointment of 3 new nonexecutive directors: Ms. Susan Pavan, Mr. Tom Quinn and Mr. Riv Sidato. Mr. David Gibbs, who served as a Nonexecutive Director for several years as an Oman nominee, resigned during September 2026. I personally thank David for his contribution to the Board and welcome our new directors. Our new directors maintain or add to the Board's strong mix of skills and experience, which benefits our shareholders and the overall governance and strategic direction of Macmahon. I do wish to advise shareholders that Mick, our CEO, has indicated an intention to sell a portion of his ordinary shares between now and the end of the calendar year. The Board has approved the proposed sale which must occur within a permitted trading window and would be subject, as always, to Macmahon's share trading policies. The proposed sale is to meet personal tax obligations and other personal financial commitments. As Managing Director and CEO, I believe Mick has earned the right after 12 years of dedicated and high-performing service to be afforded this and note that he remains committed to Macmahon's long-term growth and strategy and will retain a significant shareholding in Macmahon, together with a significant number of performance rights, whose vesting remains tied to achieving performance targets over the coming years. Before I hand over to Mick for his address, I would like to make some important acknowledgments. On behalf of the entire Macmahon team, thank you to our clients for your ongoing partnership and trust in our business. To our shareholders, thank you for your investment, confidence and ongoing support of our business and people. It would not be possible without you. To the executive management team, thank you for your leadership, dedication and hard work throughout the year. And to all Macmahon team members across Australia, New Zealand and Southeast Asia more broadly, thank you for your hard work, dedication, professionalism and significant contribution to our success. I would like to take this opportunity to also welcome the nearly 300 new team members that will be joining at the completion of the acquisition of Aspect Engineering Solutions. I would now like to invite Mick to deliver his Managing Director and CEO's address to our shareholders. Thank you.

Thanks, Greg, and good morning, everyone, and thank you for joining us for our FY '26 Annual General Meeting. Before I provide an overview of Macmahon's performance for FY '26, I too would like to reiterate Greg's comments regarding the Fosterville fatality and again, pass on our deepest condolences to Allan's family, friends and colleagues. FY '26 was a strong year for Macmahon. We delivered record revenue and underlying earnings, increased dividends, reduced debt, improved return on capital and continued to diversify the business. Importantly, we achieved or exceeded market guidance for the 10th consecutive year. This consistent performance reflects the quality of our people, our client relationships and the disciplined execution of our strategy. Continued growth in our underground and civil business supported further growth in key metrics, including return on average capital employed, which was 22% for FY '26 and tracking well towards our longer-term target of 25%. Free cash flow of $103.1 million remained strong for FY '26, although lower than the FY '25 level. This was due mainly to the company paying both the FY '25 income tax and FY '26 provisional tax installments during FY '26. Our expectation now is that this situation will normalize from FY '27 onwards. The reduction of net debt to $111.1 million brings our debt below pre-deck mill levels in line with our commitment at the beginning of the year. The leverage was 0.28x and gearing was 13.1% at 30 June 2026. Driving operational efficiencies across Macmahon's expanded business was an important focus during the year, and I'm pleased to say we delivered an uplift in our EBITA margin to 7.3% in FY '26, and this was largely supported by our mining business at now 8.1%. We anticipate both our civil infrastructure and underground mining businesses will continue growing at scale in line with our strategy, and we remain focused on achieving our long-term group margin target of 8% -- our recent acquisition of Aspect Engineering Solutions, which I'll talk about shortly, is an important step towards achieving this goal. Mining continued to perform strongly in FY '26 with more than $1.4 billion of significant contract extensions and new wins announced in both the surface and underground businesses. In Surface, we secured a $792 million 3-year extension at Bywan, $150 million contract at Wolfram Resources Mt Carlton project, a $32 million contract extension at Lancowu in Malaysia and a letter of intent valued at $190 million for open pit mining at Manuka Resources Wanawinter project. Growth is continuing to accelerate in underground with several new work awards with both existing and new clients. Our team secured a 3-year contract at Koching La with PT Freeport Indonesia, with the first year valued at $36 million. We also secured an initial $55 million contract for the Majestic mine owned by Black Cat Syndicate, followed by an additional 12-month extension, a $33 million contract at Copper Project in Indonesia and a letter of intent valued at approximately $100 million for underground mining at Mt Carlton. Importantly, this momentum has continued into FY '27. Since June 30, we have announced more than $1.5 billion of new work. This includes a $485 million 3.5-year extension at Telfer with Greatland Gold, where Macmahon has been operating since 2015. Our underground team has won a $355 million 3-year contract at Mt Marion with Mineral Resources, a $406 million 5-year contract at Snowy River in New Zealand with Endura Mining, marking our reentry back into the New Zealand market and then announced as -- and then we were announced as the preferred mining contract at Medallion Metals Ravens -- still project valued at about $240 million over 3 years. The team also recently secured a 2-year $98 million extension at Bulk Minerals Daisy Milano project and has been appointed to develop the exploration decline at the Groundrush project in the Northern Territory, which is managed by the Central Tanami project joint venture, which is 50-50 owned by MGX Resources and Tanami Gold. Our Civil infrastructure business won $500 million in new work during FY '26, increasing its revenue contribution to 25.8% of total group revenue and building momentum in the key 3 areas being resources, renewables and government infrastructure. We are on track to achieve a targeted $1 billion per annum in revenue by the end of FY '28. The recent award by Transport for New South Wales of a $50 million early works contract for the Elizabeth Drive and Mamre Road upgrades in Western Sydney is strategically important as it gives us a platform to expand and grow our offering in New South Wales and win more work in that market. Our team is now focused on securing larger work packages across all 3 of the above sectors, moving from $50 million to $100 million size projects to the $100 million to $300 million range. For major state and federal government infrastructure projects, this will necessitate building stronger partnerships with Tier 1 international infrastructure contractors, where we can collaborate on major projects to deliver some or all of the local content requirements. I'm also excited about the potential to win more work in the resources space through our appointment on the Rio Tinto Bulk Earthworks panel. My confidence in the performance of our civil infrastructure team is underpinned by a strong pipeline of $8.8 billion, of which $5.1 billion is expected to be awarded in the next 12 months. Our acquisition of Decmil in 2024 brought a strategically important civil infrastructure capability to our service offering. Deckmill has been integrated successfully and has contributed positively to growth and returns. We're actively working to build on this demonstrated success with further growth opportunities. Last month, we announced the strategic acquisition of Aspect Engineering Solutions, an engineering business, which provides a scalable engineering and minerals processing growth platform. On the 20th of October 2026, the ACCC provided its notification of waiver determination in which the ACCC confirmed that the acquisition of Aspect by Macmahon is not required to be notified. The acquisition of Aspect is strategically important because it expands Macmahon's participation across the mining project life cycle. Aspect adds engineering and minerals processing capability, broadens our addressable market and introduces another capital-light earnings stream. Importantly, the transaction is expected to be earnings accretive from commencement while remaining consistent with our financial discipline and capital allocation framework. We already have projects such as Paboyo, Nifty and Mt Carlton, where we are delivering a more comprehensive range of services to our clients. And with the addition of As, we expect to further expand this offering. This will enable Macmahon to execute its growth strategy to be a more diversified service provider, and we anticipate making more targeted and strategic acquisitions of this nature as they become apparent. I warmly welcome the team from Aspect to the larger Macmahon family. I look forward to seeing them grow and in the process, deliver for our customers and our shareholders. Another highlight for our corporate team was a strategic partnership agreement with AllCap Securities for the partial sale of the Homeground accommodation village in Gladstone, Queensland. Under this agreement, Macmahon will sell an initial 20% of our interest in Homeground with the option to sell another 30% to AllCap by December 29. Homeground is a noncore asset, and this deal enables us to monetize up to 50% of our interest in Homeground at book value. The Homeground transaction demonstrates our disciplined approach to capital allocation. We have realized value from a noncore asset while retaining meaningful exposure to future upside. The transaction also establishes a strategic relationship that may create opportunities for Macmahon to participate in future infrastructure activity in the Gladstone region. Our people remain at the center of our strategy. Macmahon's workforce has grown to just over 10,000 employees across Australia, Indonesia and Malaysia at the end of FY '26. This will increase further with the integration of almost 300 new people from Aspect, the New Zealand team and continued growth in the existing business. I'd like to add to Greg's important comments on safety with some of the important initiatives we have been driving. As Greg mentioned, the safety and well-being of our people is our top priority, and we remain committed to ongoing improvement in the workplace and psychosocial health and safety across the business. There is a continued focus on refining the group critical risk framework to better reflect operating company and sector-specific risk profiles to improve the relevance of our critical controls and assurance activities. Our Strong Mines program remains an integral part of our well-being strategy. It's designed to reduce mental health stigma and provide meaningful resources for employees and their families. The program has seen strong growth in engagement, and we remain committed to its ongoing delivery and improvement. Our Respect at Macmahon program also continues to make a positive impact across the business, focused on building a culture of respect and inclusivity. It provides training tools and a clear framework to help prevent bullying, harassment and discrimination in the workplace and address the growing need to provide psychosocial safety for all our employees. The work in this space is critical to maintaining an engaged workforce, and we will continue to drive this with the winning at Macmahon program to enhance the development of our future leaders. During FY '26, we also launched our employee value proposition or EVP, operating under the tagline Together Works. The EVP was a result of focus groups held at 15 sites across Australia and Indonesia, seeking input from our people on their experiences as Macmahon employees. The EVP brings together the experiences of our employees and aligns them to our values and our culture. We continue to invest in the development of our people. In FY '26, our training programs delivered 18 graduates, 6 interns, 79 apprentices, 176 trainees and 201 leaders through structured leadership training. The disciplined execution of a consistent strategy has been critical to Macmahon's track record of sustained revenue and earnings growth delivery over the past decade. Macmahon's strategy maintains a focus on diversifying the earnings mix and optimizing the capital intensity of the business to deliver stronger underlying margins, cash flow generation and ROACE and ultimately increase return to shareholders. At the start of FY '26, we laid the foundations for our next 5-year strategy. And at its core is the development and expansion of a comprehensive service offering that spans the entire mining value chain. This addresses every stage of the mining life cycle from early-stage concept development, feasibility studies, detailed design and engineering, mine planning, minerals processing and optimization through the plant maintenance and operation shutdown and remediation work. Our belief is that our clients will see value in engaging us to provide some or all of these services. And in doing so, we'll see Macmahon as a true long-term business partner. We already provide surface and underground mining and civil infrastructure services. And with the addition of a comprehensive engineering capability, thanks to our acquisition of Aspect, we will increase the size and scale of our addressable market. We can now more deeply understand and support our clients to achieve their priorities whilst generating operational synergies and cost savings. The increase in addressable markets and expanded service offering enables a more diversified business model, improved resilience and further risk mitigation and importantly, this blended business provides the opportunity to deliver a more balanced set of financial metrics in the longer term. Before I conclude with the outlook, I'd like to recap Macmahon's capital allocation policy. Our policy continues to reflect the importance of balancing dividend payments to our shareholders and retaining financial flexibility to enable the continued execution of our growth strategy within our self-imposed gearing limits. The charts on the slide show Macmahon's track record, and you can see that we have managed to reduce our debt to below pre-decmal levels while simultaneously growing earnings per share and dividend returns to shareholders. We are well positioned to continue this policy, and this is evidenced by the Board's decision to increase the targeted dividend payout ratio to between 35% and 45% of underlying earnings per share in FY '27. This has been a result of our focus on strategic growth, but also achieving strong business performance and disciplined cost management and delivery for our clients. The company has entered FY '27 with a healthy balance sheet and positive earnings momentum underpinned by a robust order book of $5.9 billion, including $2.2 billion already secured for FY '27. The $25 billion tender pipeline coming into the year provides a clear longer-term pathway to deliver continued growth in earnings and cash flow. I'm happy to reconfirm our guidance for FY '27 is revenue of between $2.85 billion and $3.05 billion and underlying EBITA of between $205 million and $225 million. And as is the case in previous years, this year, we expect it to be second half weighted. As always, we will remain focused on delivering value to our clients and shareholders while also prioritizing the safety and well-being of our people and the environment. The company is well positioned for future success with a strong focus on executing and delivering its strategic growth objectives. I'd like to close by thanking all of our stakeholders, shareholders and clients for their ongoing trust and support. I'd like to join Greg in acknowledging the crucial contribution and support of the entire Macmahon team in delivering a year of record earnings growth and strong operational performance. And on behalf of myself and the executive management team, I'd like to acknowledge and thank the Board for their ongoing support. I'll now hand back to Greg.

Thank you, Mick. As mentioned earlier, voting on the resolutions will be conducted by way of a poll. I would like to advise everyone that I am holding undirected proxies in my capacity as Chair, and it is my intention to vote all such proxies in favor of all resolutions. We will now begin the ordinary business of the meeting. The first item of ordinary business deals with the financial and other reports of the company. The Corporations Act and Macmahon's constitution require Macmahon to provide its financial reports, sustainability report, the directors' report and the auditor's report for FY '26 before the meeting. Hard copies of these have been sent to the shareholders who have requested them and are also available on the company's website. I now invite shareholders to ask questions or comment on the company's financial and other reports. Questions may also be asked of the auditor in relation to the conduct of their audit or in relation to the preparation of the financial statements. Maha, as Company Secretary, can you please read out any online questions regarding this item?

Chair, we have one question on this item and it's as follows. In Note 17, there's a mention of factoring $34 million worth of debtors. The comparative figure for 2025 was 0. Can you please explain why debtors were factored this year? Also, was this tied to the reversal of the provision for doubtful debts of $4.5 million?

Thank you, Maha. I will pass that question to our Chief Financial Officer, Ursula Lummis.

Thank you, Greg. Thank you for the question. Just to highlight, it was not related to the reversal of that doubtful debt. The trade receivables program was put in place to facilitate for contracts where we have a 45-day debtor time line. So it was a new option that was provided to Macmahon as part of our SMA facility, and therefore, we have commenced using it for any receivables extended beyond 30 days, which are normal payment terms.

And just bring them back to 30 days.

You bring them on to 30 days only, correct?

Yes. Thank you, Ursula. I trust that answers that shareholders' question, and thank you for your question. Okay. As there are no further questions and no resolution is required, we will now move to the items of ordinary business that require voting. The next item of business asks shareholders to adopt the company's remuneration report for FY '26. I draw your attention to the motion shown on the screen. Under the Corporations Act, listed companies are required to include as part of their directors' report, a remuneration report, which includes specified information. The Corporations Act also requires that companies put to shareholders a resolution that the report be adopted. The directors have prepared a remuneration report for FY '26, and it is included on Pages 126 to 145 of the 2026 annual report. Maha, can you please read out any online questions regarding this item, if any?

There are no questions regarding this resolution.

All right. Thank you, Maha. As it appears there are no further questions unless -- or additional questions, unless there is an objection, I will take the motion as being read and refer you to the screen for details of the proxies received. As an ordinary resolution, this resolution is required to be passed by at least 50% of votes cast. Whilst this is a nonbinding advisory vote of shareholders, the views and comments of shareholders will certainly be considered by directors when further considering remuneration matters. The Board recommends that shareholders vote in favor of this resolution. I note that a voting exclusion applies to this resolution as set out in the Notice of Meeting, and the company will disregard votes in accordance with this voting exclusion. I now put the resolution to the meeting. If you haven't already done so, please now cast your vote on this item. I will now move to the next item of business. The next item of business that requires voting is the reelection of Ms. Susan Pavan as a director and refer you to the screen for details of Susan's qualifications and experience. These are also set out in the Notice of Meeting and the company's 2026 annual report. I draw your attention to the motion shown on the screen. Maha, can you please read out any online questions regarding this item?

There are no questions regarding this item.