Acrow Limited (59Y.F) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Acrow FY '22 Results Conference Call. [Operator Instructions] I would now like to hand the call over to Mr. Steven Boland, Chief Executive Officer. Please go ahead, sir. Thank you.

Thank you very much, and thanks folks for joining us this morning as we walk through our FY '22 Investor Presentation. Clearly, this is a great year for the company, a year I'm extremely proud of all the efforts of all of the Acrow team in delivering the results that we're reporting today. I think it really is a watershed year in the history of the business as we've totally transformed this business over the last 5 years since we've become a public company, and I'll give some details in relation to that shortly. In this year, we're reporting record financial results in basically all areas. The growth that we're seeing is all organic growth. It's not the back of any M&A activity in the last, actually only 3 years now. We have a record pipeline of work in front of us. We've also had a fantastic year in securing high revenue contracts, and we'll talk to a bit more detail around that. Very pleasing for me, we're getting great growth basically across all states and all markets. And we are forecasting another very, very strong year in FY '23, and I'll give some color around that towards the end of the presentation. I thought it was appropriate to -- a number of people, I think who are on the call today, will be shareholders of Acrow since we listed in April of 2018. And I'll just, I give a little bit of a step through lesson on where we've come to over that period, because the business that you're shareholders of today is a very, very different business to what it was when we listed in April of '18. And I just wanted to put some information around that, to show how this business has been transformed. So firstly, clearly, from a revenue and a profitability perspective, EBITDA perspective, we basically doubled 2.5x the number of the revenue and the EBITDA, and we're heading towards stripping those numbers in Acrow since listing. Very importantly, we've created -- we are now creating excellent value for our shareholders with the EPS now AUD 0.072 per share this year, heading into the AUD 0.080. And you see that we've got 57% CAGR on EPS over that period. So that's very good for us to see that we're creating that value for our shareholders. The key driving factor over this period has been that we've changed the focus of the business to being an engineering solutions-based business rather than a basically a provider of scaffold services. So you can see over the 5 years or full year out, in the full year '22, we've now got 87.8% of our sales contribution margin coming out of engineering services, effectively formwork and industrial, industrial engineering and Industrial Services, which was only 50% 4 years ago. So the scaffold business now is the pure commercial scaffold business and Acrow now represents just over 12% of our total sales contribution. And I think also pleasingly for yourself and the management team and our Board is that, in a period of such significant growth over 4 years of going 250% increase in your revenue basically, we've increased our margins. So we're not buying revenue for revenue sake. So the margins in the business have gone from 20.2% to 24.5% EBITDA margin. 24.5% EBITDA margin is a very healthy position for the business to be in. And we focus very much on continuing the growth of that number as we go forward. I'll quickly touch on the overview. I'm sure most of you know the story, but the business now is a construction services business that focuses on civil infrastructure, the industrial markets and the commercial markets. We -- steep offering is to provide engineered formwork sales and hire service firstly. We have a specialist screen, edge protection screen system solutions business, and we provide hire equipment, labor and sale of equipment into the industrial market, and we still provide scaffold dry-hire to the commercial sector. We are a national business. We have 10 locations, operate in all states, all capital cities, and we have a very clear growth strategy to broaden the footprint of our civil infrastructure business across the East Coast, especially in New South Wales and Victoria. I'll talk a bit about New South Wales because it's been a lagged for some time and I've been saying that's going to change as it is now significantly changing. And we also have a very strong desire to grow our national footprint in Industrial Services. We operate primarily in Queensland, New South Wales in that sector at the moment. We've got a very strong eye on certainly South Australia and Western Australia. In terms of our competitive advantages, and we're really honing in on these. Number one is the expertise and based on customer focus of our engineering team, which we know is industry-leading, by far, industry-leading. I'll talk a bit about that in more detail shortly. The general quality of our people is something we've worked on a lot over the last 4 years in terms of succession planning and did the general depth of start. Again, I'll talk about that in a bit more detail later. And then I sort of guard jealously the position that we've got to in terms of the range of products that we have and the geographic footprints that we operate in, there's no company in our markets in Australia to operate across the geographies with the range of products that we do. So we've really become a best-of-breed hirer and seller of formwork and industrial scaffold equipment right across Australia. In terms of the financial metrics for this year, so clearly, a very strong year, revenue up 40%, EBITDA up 49%. Importantly, and I don't think we've been in talking about this for some time, we were talking -- we were saying that we're going to start to see the scale impacts coming through our NPAT, not just underlying, also statutory NPAT enhanced dividend now in this year with underlying NPAT up by 104%, statutory NPAT up like 300%. So we had to get to that point of scale, a scale that will be achieved and those numbers will now continue to grow in line with our projected EBITDA and revenue growth. Again, importantly, EPS, 79% growth of AUD 0.072 and continuing to head north forecast to go to the AUD 0.08 in the New Year. We are declaring a AUD 0.015 final dividend for the year, 60% franked, leading to a total dividend of AUD 0.027 per share. So we -- in a business that's growing as we do and still spending a lot of money, investing money into the growth of the business with very high returns, we still believe it's a very important, disciplined factor to be paying dividends, and we're pleased, I mean, this is the biggest dividend that we paid for a full year in the company's history. And again, given the growth and the investment in growth in the company, our return on equity going from 14.5% to 23%, I think is a strong indicator that we're very well manage our growth, and we're a good capital manager; and Andrew Crowther, our CFO, will give more detail later about the sort of the return rates that we received for our capital growth. Certainly, achievements for the year. The first one there, our hire contract. It is -- continues to be, we watch this almost every day, every week about the number of new contracts we're securing, the value of those contracts. It is the most important key lead indicator to the future success of the business, up 28% this year compared to last year. This gives me real transparency for at least 6 months, if not almost a full year around what our hire revenue is going to look like, and we're off to a cracking start in the new year. I'll talk about that a bit later. The organic -- as I mentioned earlier, organic growth. So I'll sort of talk about that in line with the point that's underneath that, WA, SA and Tasmania, because it's really where that we've seen smaller states. It's harder for WA now a smaller state to get the profitability of that business down this year has been quite remarkable. But we've been able to move products into those markets that have previously not been seen due to our product range, open up new channels for revenue and all 3 of those businesses have had fantastic results across the year. Our major growth success story this year has been Industrial Services. So we put a lot of effort and a degree of capital into this market. It does give us our repeatable earnings profile that the rest of our business is more sort of project to project based. But we're very keen to grow further our Industrial Services business that will give us that strong repeatable earnings. So we grow the revenue by 110%, up to AUD 45.6 million and sales contribution up by 53%. Queensland formwork has been our strongest business for some time. And at this time last year, I was stating, we were going to get a significant increase in Queensland formwork in the FY '22 year off the back of activity and to some degree of market share growth, and then it absolutely happened. So really proud of our Queensland formwork business. It continues to be the market leader thereby a long, long way, I'd say, our market share is probably within the 60% to 70% range now in Queensland formwork. And finally, supply chain and logistics. We haven't been immune from the challenges that companies have been facing with -- due to COVID, geopolitical situations, et cetera, in terms of supply chain and logistics issues. We've taken some really strong initiatives to minimize those impacts. One of the major things, again Andrew will talk in more detail about, that is the ability to open up a channel supply for timber and plywood products that a lot of our -- a lot of other companies in Australia have not been able to do. So we've opened up a very, very good supply channel there, and that's enabled us to both grow revenue and significantly grow our margins in the sale of timber and plywood products into formwork operators in Australia. In terms of our safety results, good improvements. With 23% improvement in terms of our TRIFR stats, 49% improvement in LTIFR stats, lost time injury incident, there's not many of them, it fixed down to 4. The total reportable injuries number would be flat. I'm okay with that, because it just means we're reporting more -- we're reporting things better, and we can take corrective action if we need to. Clearly, 0 is the goal. But in the business of our nature, still they have only 4 LTIs across the year is a reasonably good result. Talking about the market and the business, the market we operate in and the general business overview. So, we are very heavily focused on the transport infrastructure pipeline in the country. There has been a 30% growth in spend in transport infrastructure between '20 and '22. You can see on this chart how that's forecast to peak in '23, '24, '25, it won't happen. So there's many times, this will be a longer and flatter peak, which is good for us. The availability of labor, availability of equipment to be able to provide this point peak just won't happen. I think it's well publicized the range of major transport infrastructure projects that are taking longer and costing more. That's not bad news for Acrow. And you can see on the right-hand side of this page, every one of the -- basically the major transport infrastructure projects in the country are now significant contributors to revenue and profit for Acrow. The rail projects in Melbourne, Brisbane and Sydney; the Bruce Highway project in Queensland; the Western Distributor project in Melbourne. And as these projects are coming toward -- and some of them are not yet coming towards the conclusion, as they are getting more toward the conclusion, they are being replaced by other projects. So the pipeline for us here is extremely strong. And it's a factor here that once you get on these projects and Melbourne Metro Rail is a prime example because we had very little market share in Melbourne, this is one of the great -- stimulus is for us to get cracking the mill was this project. Once you get on the project and you provide the right solutions and the right customer service and the right engineering support with the right equipment, it's very, very hard to get you off them. So we are winning 80% of the packages that we're tendering for on Melbourne Metro Rail at the moment on it just continues to roll on. So we've got ourselves in a really good space when it comes to the transport infrastructure projects in the country. And off the back of that, I talked about a 30% growth in spend in civil infrastructure between '20 and '22. Over the same period, we've grown by 56% in that area. And look, the states, it's interesting now to talk through what's happening in each of these states, and I was at WA, and there is quite a story as well. Queensland has gone from AUD 20 million to AUD 30 million in a year, so a 50% increase in revenue formwork in Queensland. We predicted that would happen, and it has happened. And that's not just in terms of activity, but we definitely believe some factors picked up some market share. Victoria, if I went back to '18 and '19, we were lucky to have around AUD 2 million or AUD 3 million of revenue in Victoria to now AUD 15 million. So we're maintaining our position that we -- or growth that we now had in Victoria between the sort of the '18, '19 low points and the real growth we got in '21 was maintained in '22. WA in the bottom right-hand corner, added in for the first time, because again, it's quite a story. WA going from AUD 5.2 million to AUD 9 million of revenue over the course of the year, very, very profitable branch for us now and the prospects for WA going forward are very good for us. New South Wales is the interesting one. So whilst, again, that looks like -- okay, made from AUD 10 million to AUD 12 million, so not enormous amount of growth. But we've just come off in the month of July, the most profitable month the New South Wales branch has had in over 8 years, and that's just going to improve off the back of projects that we have now won. So this time last year, I was saying that you'll see real growth out of Queensland between '21 and '22. This year, I'm saying '22 to '23 for New South Wales formwork is going to look extremely good. Hire equipment wins for the year, up 28.4%, AUD 39 million and AUD 50 million. So important that, that continues to roll. I mentioned, we're up to a cracking start in '23. The month of August were -- we still got a week to go, is the biggest month in terms of contract value won in the history of Acrow. We'll be up towards AUD 8 million just in a month, in the month of August in terms of contracts won. The pipeline is also very strong, up 14% from where it was same time last year. 87% of the value in the pipeline is in formwork. We are winning now pretty much 1 in 2 formwork contracts that we bid on. We mentioned the strong organic growth in the smaller states. And in the commercial scaffold area, we're actually going to see some gains this year, as prices are for the first time in probably 5 years moving upwards. The most important initiative in this business over the last 4.5 years has been the focus on the Engineered Systems and Services and new resource, our engineering department and upskill our engineering department to deliver this kind of result. You can see on the left-hand side, 84% of the revenue in the business comes out of Engineered Systems and Services compared to 43% for 4 years ago. Doubled the number of engineers in the business, 15 to 32. We bet for a couple of extra engineers on, again, it's in specific areas, primarily for our Jump Form business, I'll talk about that shortly. This enables us to make a real differentiation, because we've got -- our engineering tenders are absolutely focused on delivering results to customers. It's about -- it can do, will do, what do we -- how do we make this work in a safe, cost-effective way for customers? So that gives us -- so we've now got a very strong reputation around product quality and safety. And the benefits of this whole structure is that we get significant exposure government-funded civil infrastructure projects and a significant amount of our revenue now comes out of this space. And there's a great tailwind in that area. Pricing is not even close to being the first focus on these projects. And importantly, yes, in an area where there's been a lot of publicity about issues with companies selling close to the wind in the construction sector. The quality of the debtors in this area are government-funded projects, significantly different profile than if you're involved in the residential housing moment. Marquee civil project, I'll talked a little bit about those earlier, but I can talk about in Snowy Hydro. We've got AUD 8.3 million of revenue out of Snowy Hydro, it's only in its infancy. I mean we put a number in there, and we expect there to be AUD 30 million. It could be 2x or 3x that amount for us over the next 5 years to 10 years. Again, there's been a lot of publicity about this particular project in terms of cost blowouts and delays, and they're true. It's absolutely true. This is a troubled project, but it's going ahead, and it has to go ahead. It's absolute the cornerstone to the national power generation -- the national power generation. We know what's going on out in the ground. And so there's no doubt it's going to be costing more ultimately to the federal government than originally planned, but the project is going ahead and it's going to go ahead at same pace. Melbourne Metro Tunnel, we talked about. You can see AUD 12 million going to AUD 16 million. We expect for the duration of the project, we think we've got double the revenue still to go on in Bruce Highway north of [ Benaraby ]. Westgate is getting closer to completion. Cross River for us is still very much in its infancy. And Sydney Metro, and the existing Sydney Metro is getting close to completion. However, Sydney Metro West and then Sydney Metro Interwest and City Metro West will be kicking in, in the next 6 months to 12 months. In terms of operational update. So now a segmental breakdown, 40% increase in revenue, all organic, as mentioned before, pretty much across all divisions in all states. In terms of revenues, you see Industrial Services growing from AUD 22 million to AUD 45.6 million, this is a stand out. In terms of sales contribution margin, though, formwork is stand out growing 36%, whilst the Industrial Services 53%, but AUD 14.7 million in formwork growth for the year, flat in commercial scaffold. Contribution margin, look, this is purely a mix issue. Our hire revenue is 100% pass-through from revenue to sales contribution, in that our labor revenue is round about 19%, and our sale of product revenue is round about 25%. So depending on the mix in any given time, you're going to get a change there. For example, in the month of July, our sales contribution margin was 60%, just for that month because of the mix of work in that particular month. Really importantly for us is that the sales contribution growth of AUD 20 million, AUD 12 million of that hence slide through to the bottom line. So you clearly can't grow a business to this nature as we have, 40% up in revenue without having growth in some of the cost lines. And we're taking a view at the moment. We're setting this business up to not to be a AUD 150 million turnover business. We're seeing this business up to be AUD 200 million to AUD 250 million turnover business in the coming years with a staffing structure that supports the business of that size. And I'll talk a bit about some of the new roles we put into the business shortly, but just as much to do with the future as they are to do with today. But I'm very happy to see basically 60% of the growth of our sales contribution falling through to the star of the business. The next, sales contribution bridge, again shows where we're getting our guides. So formwork hire, industrial scaffold hire, Industrial Services labor hire, those 3 which totaled AUD 15.3 million of our sales contribution growth. A lot of that -- that's where our capital investments go. Our capital investment has been going into formwork products, has been going into Industrial Services products. And that AUD 15.3 million of growth is a lot to do off the back of the capital expenditure in those areas. The other one I want to point on that page, and again, Andrew will talk more about this later, is our timber sales. So we had AUD 2.7 million of sales contribution growth out of our sale of timber and plywood this year. The numbers we're doing now are never we've imagined were possible, even 12 months or 18 months to 2 years ago. A lot of factors off the back of that, again I'll let still Andrew Crowther, he will go through that. It does come at a cost of working capital, but it's really high return on the investment of the working capital employed to generate the margin growth that we're getting out of timber. Divisional reports, at formwork, 30% growth in revenue, 37% growth in formwork hire. As I mentioned earlier, great contributions, primarily in Queensland and Western Australia, up 50% and 69%, respectively, and the growth of the timber and plywood, which has driven the 26% growth in revenue, 32% growth in contribution in sales, a lot of that's come out of timber and ply. This is consistent growth in this business for us over the last 4 years. It's not going to be stopping anytime soon. I won't go into infinite detail about all of the case studies here. What I will point out is the first 3 case study, which is a Melbourne Metro Tunnel project, and Brisbane Cross River Rail project and the Sydney Rozelle Interchange project, it's all the same equipment. So basically, all of our MK equipment, all of the same equipment are being used in different applications. So it goes to the versatility of the products, the engineering smarts of the products. But I think it's -- that's the main thing I want to point out here, one thing to have the equipment, but it's another thing to know how to use the equipment, they can give best solution for your customer. And that's what our guys are able to do. And all 3 of those projects, and if you look at those, they all look very different applications and they are, but it all using basically the same equipment in different location. The last case study, which is a Screens project, White Residences on the Gold Coast. Sort of one of the highlights again, because it goes again to the versatility of the project. This was not an easy job for a Screens business to undertake. But all that equipment is hydraulic and lifted. We had to build some absolute specific stair systems and stretcher stair systems for this project. And I guess 3 years, 4 years ago, we just said no to this, that kind of a project. Today, we find a way to make it work and make it work incredibly profitably for us and provide the right solution for the customer. Moving on to Industrial Services. It is the real success story here in terms of revenue growth. Revenue up 110%. You can see very high growth in labor hire, which is off the back of the major contracts we've been winning with Visy, Snowy Hydro, and the Mount Piper Power Station, to further contracts on Origin-Surat Basin and Incitec Pivot. The really important thing about this business is, it gives us an annuity earnings profile. So Visy is a 5-year contract. Origin-Surat Basin is a 5-year contract with some further extensions done to it. The Snowy Hydro project, we basically run from 6 to 6 months, you get order for 6 months, you get another order for another 6 months, you get another order for another 6 months, we'll be there for a long period of time. That contract will be generating significant revenue in the industrial space for us for at least the next 2 years to 3 years, and then it converts to a formwork project. We're going to really get into the heavy tunneling part of the project. It's not at that point, anywhere near that point yet. We have invested AUD 4 million in specialized Industrial Services equipment over the period. The next page is an example of that. And really, it's been our preparing us to invest in this absolute specialist kit, the tunneling engineered team, we can't actually provide -- we are not allowed to take a photo inside the furnace of Mount Piper, but this is a schematic of what it looks like. So if you can imagine, again, the work that needs to be done to clean and maintain a furnace inside of power station, it's very specific nature of work. And we've got equipment that is designed in such a way to enable that one to be carried out. It was an R&D project for us to start with. It then turns into a capital investment, and we made very, very strong returns. And it's been one of the major differences that enable us to crack into this market in New South Wales as we have. And then finally, commercial scaffold, I won't talk a lot about this. You can see the margin, the contribution margin is basically flat for the year. What I will say is we continue to exit from scaffold with hire contracts. The margins are getting ridiculously low on those in terms of the labor. We don't want to play in that space. We still have -- by December of this year, I think we'll have 3 contracts nationally down from probably 10 or 12 still at the moment. But the other thing that's really happening at the moment is, improvement in price on the dry hire. So we've certainly seen price lift as we speak right now. And I expect to see actually some revenue, our equipment hire revenue number will go up between 22% and 23% off the back of price increase. People of Acrow are so important to what we do. Clearly, in any very, very good business, you've got to have high quality people, and we do. We focus a lot on succession planning and spoken about this, this is my favorite in the past. It's absolutely front of mind for us now. We've been very fortunate to attract some very high-quality people into the business. To give you some examples there, a new New South Wales GM, Peter Fehrenbach, he has been with the business now 7 months or 8 months in the month of July or actually now he is going towards 12 months, I guess, through that, and the month July is the most profitable month in the history of the business in New South Wales. Evan in a new -- Evan Field, a new National Engineering Manager, he is actually in the photo there, wearing the orange vest. He wound up his own business as an engineering consultant to come and work for us. Rob Parovel, very, very experienced HR guy in the business. And just importantly, on the internal promotions of Matt Caporella, Jurie Roetger, and Jason Merjane, are very important part of the business. Matt, who was our National Engineering Manager is now the Chief Operating Officer in the business, and does an absolutely tremendous job. Importantly, though, while I'm focused on the senior team there, we've done a lot of work on the middle management over the last 6 months to 12 months. So, in the last few months, I mean, we've hired a new National Credit Manager, which is off the back of the retirement of our existing guy who was a stalwart in the business, but we've got a really good National Credit Manager coming into the business, but we've created some new roles in a business that needs to manage its cash as tightly as we do because of our investment profile, we've now got a Company Treasurer. [indiscernible], having somebody in that role who reports in to Andrew, our CFO, but very talented young guy who has taken basically control of the cash management of the business and an important part of the -- of the way we run and operate our business. Importantly, too, working for Rob Parovel, we've just hired a training and development manager to focus on succession planning and training. So we haven't had that role in the business, but we've now got an experienced gentleman coming into the business who will manage the training and development of all staff, from senior staff, from basically Chief Operating Officer and senior state general managers right through to the guys that are working in a yard operations. So we I think it's a really very good initiative for the business. In terms of the culture, all these things are obviously important that safety, customer focus, solutions focused, being an employer of choice. We believe we're exceeding the industry standards and then setting new standards, having a very open communication. But one thing that's not mentioned there and I will mention it, because I don't ever shy away of it, but we have an absolute culture of online focus. So we don't do it to the detriment of safety. We don't do it to the detriment of customer, but this business is very, very focused on its profitability almost on a daily basis. The guys in the business say, we want 12 grand finals every year. So the end of each market is a grand final, how do we go to the [indiscernible] Blues, in end of June to Super bowl. That's the way we talk about internally. So we really are very focused on our profitability, but not to the detriment of safety or customers or employees. I'll now hand over to Andrew, who will walk you through more of the financials, and I'll come back at the end and give you sort of the outlook of FY '23 year.

Great. Thanks, Steve, and thanks again for joining us today. I'll move over to the P&L slide. As Steve mentioned before, the last 3 years has been a massive growth for us. We've spent AUD 32.5 million of growth capital in the last 3 years. We've acquired Uni-span and Natform and also we've moved strategically to engineered systems. And what you can see now, that allowed us to achieve the scale of growth that we've talked about in the past, that now sees us having 79% of our EBITDA growth flowing directly through to pretax profit. So as Steve already mentioned, our EBITDA has increased 49% to AUD 36.3 million. Now below that, we've got depreciation has increased almost AUD 2 million, which is obviously part of the CapEx growth that we've had. Net interest has increased basically because our volume of debt has gone up, which we'll move on to in a second, up by about 41% on an average yearly growth. Pretax profit, AUD 10 million, up to almost AUD 20 million. Now our tax expense has gone from AUD 1.5 million last year to almost AUD 2 million this year, but that's also come with the decrease of the effective tax rate from 15% down to 10%. Now as you would remember, we have quite a lot of tax losses that we carry forward. We have AUD 11.2 million still of tax-affected losses going forward, which translates to about AUD 37 million of profit that can go against those tax losses. Now we've been very profitable this year. And the reality is that we've probably got another 3 years to 4 years of those tax losses to be able to use. That's a pretty good benefit to carry forward. From a below -- so that gets us down to NPAT underlying, an increase of 104% from AUD 8.7 million to AUD 17.8 million. And then after significant items of share-based payments, which were much lower this year than last year, we get to an increase of almost 300% of NPAT report of statutory NPAT up to AUD 15.7 million. Now from an EPS underlying, that gets us from AUD 0.04 last year to AUD 0.0717. Now, it's also important to remember that we made a AUD 10.5 million capital raise in July. So that AUD 0.0717 or 79% increase in EPS comes with a 14% increase in our actual share -- weighted shares in issue. So that's a pretty good outcome. And as Steve mentioned before, we've made a -- as part of this announcement, we made a final dividend announcement of AUD 0.015, which is 60% franked. Ongoing, that will move towards 100% as we get into a tax payable position. So AUD 0.015, when you add on the AUD 0.012 of 20% franked at the interim, that gives us AUD 0.027 for the year, which was 42% franked. That's up from AUD 0.019 in the previous year. Now when you take into account what's happened to our share price from end of last year to this year, plus that good dividend yield, that's about almost a 42% total shareholder return for the year. Moving on to the balance sheet. You can see that this balance sheet is at a very different balance sheet than what you would have seen last year. This is a very strong balance sheet. We are having AUD 11 million improvement in our net asset -- net current asset situation. Last year, you remember, we had an AUD 8 million deficit in net current assets. This year, we have a AUD 3 million surplus -- a AUD 3 million surplus. Obviously, we've talked about the growth of the company in the last year and the very profitable position we're in, that obviously comes with a cost, a lot of the debt, equity and generated cash. So our net debt during the year went up by AUD 10.4 million. Now that supported the AUD 21 million -- which we'll get into in a moment, the AUD 21.1 million of CapEx, the expanded sales in Industrial Services labor business. And also, we paid the deferred, the last deferred payment for the Uni-span acquisition. We -- our net gearing went up to 28.3%, which was up by 1.5%. Now that's a pretty small increase given the fact of how much we've grown and our debt grow. Our debt-to-EBITDA actually reduced from 1.2x down to 1.1x, which is just our growth of EBITDA and the use and the effective use of the capital of what we've paid for. Our intention is that this balance sheet and the gearing will remain pretty conservative, and we see that there will be an increase during the year, but by the end of the year, that will be lower. And as we go on and the profits and the cash keep on turning out and our CapEx becomes more conservative, that will reduce relatively rapidly. Now, one of the big things we've had, and Steve went on before, our -- we have a rebate in a couple of our businesses during here. Our sales business, and in particular, our timber business grew rapidly. So our sales overall was up about 42% and our industrial labor business increased by about 156% during the year. Now that comes with a very large capital -- working capital impost. So working capital being debt repayments in Industrial Services went up by AUD 20 million. Now that's a pretty big one-off hit for the year. But as we'll see in a moment, that -- as you could see from the EBITDA growth, that actually was a worthwhile growth. We also had, as Steve mentioned before, it was an unprecedented year from supply chain issues. So a lot of our creditors bought in payment terms and so forth, and in particular, the timber pay patterns, which I'll get into a moment, required a lot of additional working capital. As I always said, you'll see the -- one of the payments we've made this year was the Uni-span deferred payment of AUD 3.5 million. That was our last deferred payment for that acquisition. And going forward, that's all gone now. Moving over to the next page, funding and liquidity. Now as I've said before, one of the 3 ways to grow is obviously debt. And at the moment, even with the increases in interest rates, even though we want to keep a very conservative look on gearing, debt for us is still relatively cheap. So we're very lucky that we've got very, very good banking partners, being Westpac that have supported us during the last few years, and in particular this year, they support us very closely. Our gross debt capacity has gone from AUD 31.1 million to AUD 46.1 million. And with that, our actual headroom has increased by AUD 8.6 million to AUD 13.2 million. So we've got a lot of headroom to support further growth. And as I said before, our actual net gearing has gone from 26.1% to 28.3%. So relatively conservative. And our debt-to-EBITDA has reduced, as well as our interest cover has actually increased. So it's a pretty good position to be at. And we actually, as I said before, we expect our debt ratios to improve during the '23 year. Now over to Slide 35. This is the -- during the year, we had a very large timber business re-base. Timber for us in the past years was more of a service to our customers where we provided timber to the customers who basically expected us. But going back a few years out, the margins we'd achieve on these thing -- on timber was about 10% to 11%, pretty low, and it was actually a bit more of a pain than anything to us, for actually to do as a service. What we found this year, you would have seen that anyone that knows landscape guidance approval, there's no -- there's an absolute lack of supply of timber over here. There's a growing Australian demand for this. And also along with the same time, there's been a lot of Australian suppliers of timber that has pulled out of the market. So basically it was just kind of excess supply. Acrow during this period has managed to secure a very reliable supply from overseas of LVL and plywood. And not just that, we've actually been able to secure this at much higher margin. So you'll see this year we made a contribution margin of AUD 4 million on our timber business at a 28% margin. Last year, there was AUD 1.3 million of contributions at an 18% margin. And as I said previously, that was more 10% to 11%. But with timber comes a very high impost and working capital. So we have to pay a deposit when we order, and we have to pay the full amount of this timer as it hits Australian docks. And if you take into account our debtors, there's basically a 4-month to 5-month lag on payment. So there's an impost of around AUD 5 million of working capital requirements. But if you think about sales contribution of AUD 4 million and the AUD 5 million working capital impost, that's a pretty good return on investment that we're very happy to continue going. Moving over to the next page, cash flow. Our cash operating profit during the year increased from AUD 11.7 million last year up to AUD 23 million this year, that's 76% increase. Very minimal tax paid this year, although those tax payments will start increasing in the following year. If we move down to the net cash bridge. What we're trying to show here is that this year was a big growth year for a number of reasons, both for CapEx and both for working capital and the re-bases of our Industrial Services labor business and our sales business. So we had EBITDA of AUD 36.3 million. We had working capital impost of about AUD 20 million. That AUD 20 million is a one-off piece. We will continue -- we're currently -- with working capital, we've got about -- this year, we're at about a 22% working capital to sales. The previous year was about 12.5%. Now that was too low. We see this moving back to about 18% to 20% of sales. So what you find next year is working capital will likely increase as our business increases, but it will be a much lower impost on cash usage. Now moving over to the right, you'll see it was a big investment year as well. We had AUD 21.1 million of CapEx, plus the AUD 3.5 million of Uni-span deferred payment. And as you can see, if you actually move left to right, our net debt went from AUD 22.45 million to AUD 32.84 million. However, a large reason for that is the working capital of AUD 20 million and the CapEx of AUD 21.1 million. As I said, that working capital won't repeat itself and at any stage we can sort of move that CapEx spend down. And as you can see, this business will start really shutting cash off very quickly once we hit peak CapEx. Now, from a cash conversion point of view, likewise, the cash conversion this year was just about 52%. The reason for that was the working capital impost of those 2 businesses. Last year, it was 96%. We can see that moving to 90% in the following years. Moving over to capital expenditure. As I said, this year was a relatively high amount of CapEx AUD 21.1 million, of which AUD 14.2 million was growth and 6.2% stay in business. Now, as Steve mentioned before, this CapEx is actually going into the investment where our growth is. So mainly in formwork and into the Industrial Services business. Interestingly, that AUD 21.1 million is up from AUD 16.2 million last year, but it's a lower percentage of both our EBITDA and sales from last year. So even though it's a large amount, it's a smaller amount as a percentage. Now we did a review of what our return on investment is. And as you know, we've been talking about our IRR return requirement is 40% for all of our growth CapEx. We did a review of the '21 and '22 year because these 2 years were very clean from the fact that there's no M&A from the previous year is involved in this. 2021 cumulative return on a growth CapEx was 43.5%, 2022 was 49.8%. So the actual hurdle rate is being exceeded by our growth CapEx. And we expect to see this improve as utilization, et cetera, increase. With that, I will hand back over to Steve.

Thanks, Andrew. So just in terms of our short-to-medium term prospects and forecast of the New Year. We will continue to grow our Industrial Services business. We are looking at M&A opportunities. There's nothing to report and nothing specific there at the moment, but we're seriously looking at opportunities in this space that consists to get in the South Australia, Western Australian markets. We will see an uplift in New South Wales formwork, I mentioned that earlier. There's no doubt that this year we will. I mentioned Snowy 2.0, Sydney Gateway, Sydney Metro West, just on Sydney Gateway alone, in the last 2 months, we've won AUD 1.5 million worth of hire revenue contracts just on that project alone. So we're definitely going to see an uplift. Queensland formwork will have another very, very strong year Cross River Rail, Bruce Highway, Inland Rail, than haven't started yet, going be great project for us. We'll continue to drive organic growth formwork products into the smaller states, WA, SA and Tas. Integrated Engineering Services is a new development for us. So off the back of hiring Evan Field, who is our National Engineering Manager, being an ex-consultant engineer, we're now moving to both becoming a full-service provider to our customers, in not just the products that we provide, but in other engineering services they require. So we're now charging a significant amount of money for service charging, it's good revenue now for us, and we're charging for engineering services. So, I expect we'll see an uplift in Engineering Services charges for the year of somewhere in the vicinity of AUD 1 million this year compared to last year. And finally in Natform, I haven't mentioned Natform much at the moment, but Natform is actually one division that had a reasonably soft year in FY '22. It was the one division especially in New South Wales that was pretty heavily affected by COVID-based delays. But their path from day one is tremendous. So this will be the strongest year of revenue in Natform FY '23 that we've had since we purchased that business, off the back of already won work that's now starting off now that the COVID-based delays are getting resolved. The next one is important. It's, as I said, the transformational investment. I mean, there's various ways you can grow your revenue, number one, you can put your prices up, and in some cases, we're doing that successfully. Secondly, you can get market share gains, such as we're now getting in New South Wales formwork and we previously got in Victoria formwork. I mean you can ride the wave of an uplift in activity as we are in Queensland to a large degree. Or I think most importantly and sustainably, you can open up new channels for revenue and new adjacencies. And that's exactly what our Jump Form business will become. So we now have 10 new licensing agreement to market the system, Jacking Systems product in Australia. We see a couple of photos there of previous users of this system. So this is the Crown Towers, a project in Sydney, probably the biggest or the biggest multilevel construction project in Sydney for some time. Jump Forms are basically the core of the buildings, the lift shafts and shear walls, and core of the building. It's a critical path. Jump Forms are highly engineered part of the project. They're really important to the build the formwork, we've won our first 2 contracts. We announced this recently. Those contracts are on the Cross River Rail, Albert Street Station in Melbourne -- in Brisbane, sorry, and The Monaco, Gold Coast partner development, AUD 4 million of revenue, 90% of that revenue will be hire and all of the revenue and profit generated from these projects we're going to get in FY '23. In return on investment, we believe, of Jump Forms as we go forward, it's going to be circa 70%. It's highly profitable technical work. Now this is not an area that's unfamiliar to us. About 3.5 years ago, we almost bought a very large Jump Form business. We got for basically 2 days from [ settling ] and the owner pulled out of it at the last minute. We're probably pretty happy with what he did to be honest, because his system was not as developed anywhere near this one. I'm confident that we can develop over the next 2.5 years, a AUD 20 million revenue stream, highly profitable out of the Jump Form business nationally. We've just hired a National Business Development Manager for the Jump Form business, starts on the 12th of September. He comes from a competitor, a guy that we've known for some time, highly regarded, technically understand the system, and he'll be driving the growth of the business nationally. I mean, the only limits is, really to us growing this business is, number one, how quickly do we want to do it from a capital investment perspective and also just making sure on these first 2 projects, we absolutely get it right. We know the service delivery is what we -- our promise is what we deliver to the customer. And then really -- I mean this is a big market. This is a multi-hundred million dollar market in the country. And we believe in the next couple of years, we'll be able to carve out a very nice slice of that for ourselves. In terms of our outlook, I'm really pleased to say that we will provide an outlook through our FY '23 year and we're confident to do that, and of some of the factors I'll mention. So we're forecasting, at the moment, revenue growth of circa 15%, somewhere between AUD 165 million to AUD 175 million. EBITDA growth of around 20% into the sort of mid-AUD 43 million to AUD 44 million range. And off the back of both of those, NPAT, 23% and EPS is hitting the AUD 0.08, around 20%. So we're only 7 weeks into the new final year, but we already have a good enough feeling for the business to be able to give this outlook with a high degree of confidence. One of the reasons or the reasons we can do that, number one, is the AUD 50.4 million of hire contracts we won last year, it was up 28%. And the first 2 months of '23 and we've not even finished August yet, we've won over AUD 12 million of work, and in fact, that number is now AUD 12.5 million this morning, it will be AUD 13 million by the time we finish August. So the first 2 months of the year we won AUD 13 million of work that's unprecedented in our business, and again, gives me that high degree of confidence around this outlook. A lot of the capital equipment that we ordered last year has only arrived at the very end of the last financial year, that gears now out and in the field, generating revenue and profit. And finally, the revenue and profit from the Jump Form contracts is now factored into this forecast. It clearly -- it wasn't there last year. It's a brand new adjacency and channel for us and a factor that revenue and profit into the forecast, again, it gives us a high degree of confidence about the outlook we've provided. So that's it from us at the moment. Thanks very much, folks, for your attention. I hope you're pleased with the result. We certainly are, and we think just the future growth prospects for the business to be just as strong as it's been over the last 12 months to 24 months. So then I'll pass it back for any questions that we have.

[Operator Instructions] Your first question is from the line of Alex Lu from Morgans.

Steve, Andrew, I hope you guys are well. Can I just start with FY '23 guidance, please? And you've given quite specific guidance there and that you seem quite confident with the range. But I was just wondering, just some of the factors that could influence whether you get to, say, the bottom or the top end of that range and I guess things around project timing, supply chain, equipment availability, et cetera. So just wondering if you could just make some comments around that, please?

We're 7 weeks into the year, Alex, I think it's probably my first comment around that. We've got 45 weeks to go. So, look, yes, last year we did 4 upgrades, our outlook for the first what we gave over there -- at around this time was, we want to operate over the course of the year. So I think that's the first comment around that. We -- it's not a great factor around equipment availability, dictating the forecast at the moment. Most of the forecast -- the forecast that is driving this outlook, I can say up to January, February, March at the moment, in terms of the one work. I mean, look, it could be -- there could still be some project delay. I mean that does happen. It certainly that happened in the Natform business last year off the back of COVID. That's now kicked in, Natform had its best month in July for probably the last 12 months, but that can always be a factor. So that can dictate the top and the bottom end of the range. I think we really haven't factored in into this forecast at the moment, a lot of big product sales, which will only be an upside if they haven't. So I think at the moment, we're quite comfortable with what we forecast. But I think the 2 things to answer your question specifically would be, will there be project delays? You never know. You don't -- you just don't know, all right? So that can happen at any time on any project for reasons that we don't know about. And secondly, again, we're 7 months into the year. So we've got a really good view about -- I mean, I've got high revenue forecasts that go out to November that it will be accurate to probably 95%.

Okay. That's very helpful. And can I just talk about staffing, please? And obviously, our engineering team is very important to what Acrow does. But given labor shortages and things like that, do you think you have enough engineers to service the amount of work that you have coming? And if not, how do you track new engineers? And I guess, how you're finding that process?

Yes, a very good question. So, we are -- we said we've doubled, we've got 32, exactly that was more, like 36 now with some of the trainees we're bringing on. So that is one answer that we've got a really good traineeship program going now. But that's -- again, that's probably for tomorrow rather than for today, but that's a way -- we like to train our people up from staff, what they do in a degree, as part of the -- Matt Caporella, he maybe is a prime example. Matthew started with the business is a 21-year-old doing is degree, and 10 years later, the Chief Operating Officer. So that's the kind of progression that can happen through that program. But we've got some very specialized areas now that we're looking for, Jumpform is an example. We're looking for a couple of experienced jumpform engineers in the business. So one thing I'll say about the jumpform business for example, I'm factoring in that we're going to be winning those 2 -- we won those 2 contracts, we will be starting and kind of put about AUD 0.5 million of overhead straight into that business. I'm setting it up as if we're setting it up, as it was 3x at size to start with, in terms of the staffing and support we're giving, to make sure we get it right. But look, there's no doubt. The high-quality engineers are in high demand. It's also no doubt that we're becoming a very strong employer of choice in the formwork engineering areas, no doubt about that. And then thirdly, our traineeship program will deliver good results over time. It doesn't get you obviously qualified engineers today, but it's a really -- a strong initiative to make sure that our future is well protected.

Your next question is from the line of [ Tina Wilson from DNB Capital ].