Aveng Limited (UG8.F) Earnings Call Transcript

Good morning, and welcome to the Aveng Full Year Results Presentation for FY '25. I'm Scott Cummins, CEO of the Aveng Group. And with me today, I have Adrian Macartney, Group Finance Director and CFO. The opening slide today shows a picture of the Bridgewater Bridge in Tasmania. This is the largest project in McConnell Dowell's portfolio. If you look closely, you'll see that it is open for traffic, providing a very significant link between two major cities in Tasmania of Launceston and Hobart. We'll speak a little bit more about this project later in the presentation. Our agenda today will cover salient features, our financial results, the market outlook, a strategic review update and some of the key messages. I'd like to remind all of you online today that the line is open for questions, and Adrian and I will be more than willing to address those at the end of the presentation. Firstly, to the salient features. Overall, it's been a disappointing year with significant losses on the two major projects we've spoken about before that are awarded to us prior to the COVID period. I would also like to add, however, that post the introduction of various measures we have taken with our risk assessment approach to business, the remainder of the portfolio is performing well, showing an improvement in margin and delivery. As expected, the overall revenue for the group during FY '25 was slightly lower than that of last year at $2.6 billion. The operating loss before capital items was $60.4 million, which was largely driven by those two projects I've already mentioned, Kidston and J108. All this resulted in a headline loss of $84.6 million. But we have increased and retained a strong cash balance with net cash at $211.4 million. Work in hand is slightly up as compared to a year ago and has significantly increased following the close of the financial year with new awards across the business. Now to each of the Pacific segments. In Infrastructure, the Australian and Southeast Asia underperformance associated with the two projects of J108 and Kidston suffered that massive loss that I've been talking about. New Zealand continued to do extremely well with consistent operational excellence across its business exceeding performance expectations. As I've said, the portfolio, excluding the two projects, J108 and Kidston, did deliver an improved year-on-year profitability and operating earnings. I'll provide a little bit more detail on that in the following slide. Significant work has been won post the 30 June close period. In fact, it was in excess of $800 million since 30 June. Our Building segment has shown improved operating earnings and margins across its business directly as a result of reliable and predictable project execution. We have also seen material growth in our Building segment with work in hand more than double that of the previous year. And this has been through a very focused and deliberate strategy in the specialist areas of health care and life sciences, recreation and the education sectors. Over to the Mining segment. The new contract at Gamsberg is doing very well. We're ramping up volumes. We're continuing to invest in the capital equipment, and we're delivering increased revenue, profits and cash flow. However, on the Tshipi contract, our financial performance has been adversely affected by various factors. That has included restrictive mining conditions and a noncollaborative challenging work environment that is being confronted by the team at that site. All of this has resulted in lower production volumes, inefficiencies, higher costs and significant contractual claims being tabled with the client. With regards to strategy, our separation strategy is making steady progress in line with expectations and remains our key focus. I would now like to provide a more detailed update on two specific projects. The Kidston pumped hydro storage project in Queensland, Australia, and the picture on the right depicts the powerhouse where the two 125-megawatt generators will be placed. Made some reasonable progress during the period, but it's been hampered by persistent low-pressure system, which resulted in the need for us to fully demobilize everybody by site. It was 10 weeks later before we were able to get that project back up to its full strength with people back at site working. The disruption caused by the demobilization and the slow but progressive remobilization to the site as permitted by the site conditions had a significant impact on productivity during the period. We also had a need to resequence the work as a consequence of a variation order submitted to us by the client. As a consequence of all of those issues, the program to completion has been extended and the estimated cost to complete the project has increased. We expect the project to be complete by December 2026 and cash flow associated with the recognized losses will be realized over this period funded by existing cash balances. Many of the issues faced by the project and leading to the additional costs and time delays are beyond the control of the project team, and they are the subject of commercial claims and negotiations with the client. Now over to the second project, the Jurong Regional Line in J108 in Singapore. And the lower picture on the right depicts one of the three elevated stations that forms part of that project. I'd also like to advise that the viaduct that connects those stations is now fully complete. That project is proceeding in accordance with its revised plan, both cost and schedule, and the basic structural completion dates, which are very significant milestones in that project are being met as expected. All major works on that project are scheduled for completion this calendar year. Discussions with the client with regards to successfully completing the project and resolving the claims are nearing completion. As I've previously pointed out, the improved risk management processes that we've put in place for the entire group would not allow projects of this type to be tendered in a lump sum environment going forward. I would just like to reflect for a couple of minutes on some of the great projects being executed by our project teams. It is pleasing that our people who contribute to our purpose of providing a better life are receiving some of this recognition. Firstly, we had three projects that were shortlisted as finalized for the premier award in Australia, which is the Australian Construction Achievement Award. Those three projects was the new Bridgewater Bridge in Tasmania, the photo on the top of the photo matrix there. The South Geelong to Waurn Ponds Duplication, which was a complex rail and building job, that's bottom left, was also nominated as a finalist. And Queen Elizabeth Hospital, which reflects the complex building work in the hospital environment was also shortlisted as a finalist. Very, very pleasing to see that the new Bridgewater Bridge actually won the award as the top Australian Construction Achievement project in 2025. That Bridgewater Bridge project, as you can see from the picture, clearly combined the marine expertise of McConnell Dowell with working in the transport sector for the government of Tasmania. There were several other awards achieved across the group. I won't go into them all. They're listed on that page with other aspects and business units within the business. Now to the segment overviews in a little bit more detail. The portfolio, excluding J108 and Kidston did show an improved margin in FY '25 as compared to FY '24. It's actually 2.7% margin versus the 2.4% for the prior year. We expect that to improve as the non-margin contributing projects awarded to us pre-COVID gradually worked out of the portfolio. We do believe that our enhanced risk management processes are now starting to have an impact across the business with that improved margin. And that improved margin is after taking some provisions to address the extreme weather events that we've spoken about earlier across other projects in Queensland and also a technical issue that has occurred on one project as a consequence of a client-specified technical design. The order book in Australia has declined with a reduction in transportation spend and pressure on customers' budgets and a slower-than-expected movement towards other sectors in the Australian market. Post 30-year close, we were awarded some $196 million of new work and another significant project we were notified has been we are the preferred contractor that we hope will -- we should be able to get award in the coming months. Moving to Southeast Asia. The newly awarded marine projects, which is in line with our strategy for that reason, continue to be profitable. So we continue our focus on those self-perform marine projects, which are predominantly in Singapore and Indonesia. We have taken on a provision in H2 to address an identified a recently identified warranty issue on a completed project. So that's had an impact on the financial result for Singapore over the year. And the opportunity pipeline supports our strategic intent of marine specialist focused projects in Southeast Asia. Now over to New Zealand and the Pacific Islands, a very strong, consistent operational performance right across the board, perceiving targets, which has been very pleasing to see. Although the order book was lower at the year-end of 30 June, we've had over $670 million worth of work awarded to that business unit since 30 June with a further $334 million in preferred status that should be awarded in the coming period. Now to the Building segment. Overall, it's performing very well. We're seeing the profitability, both in terms of the absolute margin -- the absolute profitability and the margin increasing in the Building segment. We're seeing the growth being achieved in accordance with the focus on health care, life sciences, recreation and education. And we're seeing significant growth of that business as a consequence of the new work won during the last 12 months. We have seen some slowing of the market in New Zealand, but we're encouraged by the longer-term potential of continuing to grow the business in New Zealand as a consequence of the clearly stated intent of the New Zealand government to invest in health care infrastructure. To the Mining segment. In short, the Gamsberg contract is performing very well, and we have problematic issues to resolve on Tshipi. On Gamsberg, as I've said, we're steadily increasing the volumes, adding additional equipment, mobilizing equipment to site and keeping in line with contract expectations in terms of volume increase and profitability increase. The production is expected to achieve peak as defined under the contract this calendar year. On Tshipi, however, the other side of the coin, where restrictive mining conditions and the noncollaborative working environment is resulting in the lower production volumes, as I've said. This is causing operational efficiency for Moolmans and higher costs. We've had a good look at what's happening across that contract and has now put together a number of very material claims that were in discussions with the client. Unfortunately, those discussions have not resulted in an amicable resolution of those claims. And as a consequence, we'll now be entering a formal dispute process to bring those to resolution. I'd like everyone to understand that we have not recognized any revenue associated with those claims in our 2025 financials. The fleet rationalization taking place across the Moolmans business unit continues to support the Gamsberg requirements and upgrade the fleet overall. But you will note that we have taken an impairment of $11.9 million as we have identified certain equipment that does not have a strategic use for Moolmans in the future. I'll now hand it over to Adrian, who can run through the financial results.

Thanks, Scott, and good morning, everyone. As you can see, we've made -- our designers have made liberal use of a photograph of our Bridgewater Bridge, we're particularly proud of. And there was a quote a little bit earlier on in the presentation deck as to why we're particularly proud of this project. It has delivered employment opportunities locally, local procurement, and it's a great piece of infrastructure that was built in an environmentally sensitive way. And of course, pleasingly for us, at a profit to McConnell Dowell and ultimately Aveng. Over the page. That's what a winning team looks like. Peter and his team accepting the award in Brisbane about a week ago. And we are particularly proud of that team and everything that they have achieved over the course of the last couple of years in building that project. So well done, Peter and all of your team. Getting into the actual numbers themselves. Revenue was lower as anticipated. We did expect a slowdown in revenues, notably in our Australian business unit, and that was in line with expectation. Going forward, we do expect to see a further slowdown in the Australian business unit going into FY '26. Our operating loss before capital items, of course, minus $60 million, and it has been largely been distorted by some $98.5 million of losses on those two key projects that Scott has spoken about, J108 in Singapore and the Kidston Pumped Hydro project in Northern Queensland. Strong cash on the balance sheet of some $267 million as at the end of June. Again, we are likely to see that cash deteriorate over the course of the next 12 months as we -- those losses come to bear and as we complete those projects. So I would work on a number-wise of approximately $100 million going out over the course of the next 12 months. Our operating free cash flow lower compared to the prior year, but remaining positive and particularly strong. This is supported by great project management by our teams. We expect that this will go negative in the coming year as those projects come through the system. However, our strong cash balance, we believe will continue to be supported with more than sufficient liquidity in our business through the work that Scott has been talking about. And second of all, the improving margin across our jobs that we see post the changes in our risk management processes at the end of 2022. Our net cash position of $211 million improved across the year. We did repay some debt, and we'll talk about that a little bit later on. Look at the more detailed financial performance. As you see there, $2.6 billion in revenues, down some 13.9%. Our gross earnings down significantly and again impacted by those losses on those two projects. Again, pointing out the post introduction of the what we've referred to as the enhanced risk management processes, we do see a split in the portfolio, the pre and post. And when we do that analysis, we certainly do see an improved financial performance across projects in that post period. And we see that the contribution towards revenue declining as we go -- as we work those older projects out of the system, and that should continue to improve our position and our profitability going forward. In terms of the capital expenses, we have written off some impairment losses in the mining business. In the mining business specifically, we had in the period, the completion of 2 projects in South Africa that -- where we completed the works. And we then, of course, had to redeploy new equipment to the Gamsberg project. In doing that, we did an evaluation of equipment. and certain equipment was redeployed directly to the project to work on Gamsberg. Certain equipment is being held and is in part of a rebuild process, and we are rebuilding equipment through the OEMs to improve life and really squeeze that yellow metal for its full value. And then, of course, there was the third category where we did look at disposing of equipment that was subeconomic, and that did result in an impairment provision as we move to dispose of that equipment. We also wrote off certain preliminary strategic costs, primarily associated with banking, legal, financial and tax adviser expenses, which we expensed during the period. We had some gains and losses on recognition and derecognition of IFRS 16 associated leases following the disposal of our investment in Dimopoint, the termination of head leases there and of course, the other side of it entering into new leases in various other parts of our business. Talking about our tax expense then. Our tax expense is primarily related to our profitable operations in New Zealand. It is worth noting that our legal structure in New Zealand encompasses both our McConnell Dowell business unit brand and also our work under our building unit built in. So they're all taxed together in New Zealand. Second point to note is that we have utilized -- fully utilized any previous tax losses that we had in New Zealand. And so we are in a full taxpaying position. The last item is that in Australia, where we do have assessed losses, we did not recognize further deferred tax assets that would have created a credit against that tax charge. So we did not recognize any more on the balance sheet. We've held that steady the deferred tax asset, although noting that we continue to have further unrecognized tax losses available to us in Australia. Our basic earnings per share was calculated using a slightly higher number of shares this year, some 131 million shares. That's up slightly from the 127 million previously. And again, our headline loss excludes some of those capital items that I have mentioned previously. Turning to the segmentals. In the first instance, our Infrastructure business, we provided a little bit more color in our commentary, if you'd care to read that. And again, infrastructure across three areas of the Australian business unit, New Zealand and Southeast Asia, a drop-off in revenues in Australia, holding steady in New Zealand and small revenues in Southeast Asia as we modestly rebuild that business. The gross earnings in Infrastructure, again, negatively impacted by those two projects that we've mentioned. And the gross margin of 2.2%, of course, lower. But when we look at the two splits the pre and post implementation around -- after 2022, we do see certainly an improving portfolio there. The standout, the building business, just shy of $500 million of revenue, an exceptional performance in new work won with some work in hand of $864 million in the period and really a big shout out to that team in Built Environs who landed a fair amount of work really in the last quarter of the year. They've also delivered on all the work that they did have. So great gross margin there of 6.1%. And as I normally point out, the building business is a strong generator of cash. And so whilst they have an EBIT of some $17 million, a strong contribution of $1.7 million, giving them a total earnings of $18.7 million for the year. Comparing that, of course, our net finance expense is still positive in infrastructure, that is a combination of interest earnings and expense. Interest earnings, we will expect to see some level of decline over the coming year. I think globally, we've seen interest rates fall off. And in Australia, we just had a cut -- further cut down to our base rate of 3.5%. So we are seeing a slowing of interest earnings, and we'll be managing a smaller cash balance as well going through the year. So that line will be impacted going forward. The other point I'd like to make on this page, mining. Again, as Scott has said, we did not recognize anything associated with the substantial and material claims that we have against Tshipi, and that is likely to come through as those matters process through the legal process in the coming year. That resulted in really a breakeven earnings for that business as opposed to we had planned on a profit -- a more substantial profit in that business, but we expect that to be resolved in future. The $10.8 million there of capital expenses is really associated with the impairments. The one thing I'd like to note about in Moolmans, the CapEx expenditure and the replacement there, again, we provided a little bit more color in our commentary, but the $10.2 million new equipment being purchased, but also a notable reduction in the component spend. As you will recall, we capitalized major component spend on equipment. That number has reduced year-on-year and effectively been replaced by the acquisition of new equipment, quite important there. Aveng legacy matters, the costs there were largely associated with legal expenses in completing some legal cases in South Africa over the course of the last year. Our corporate overheads did reduce slightly year-on-year, and we continue to keep those under control and do our very best to reduce those. We anticipate with lower revenues next year that as a percentage of total, we expect overhead to rise slightly above what our longer-term expectations are. We do try to manage total overhead across the business to a lower number than what we've had. Moving on to our balance sheet. Total assets of some -- around about $1 billion with current assets reducing in line with lower revenues, et cetera. So the contract assets reducing. We've also seen in terms of obviously a hit in our retained earnings as we recognize the losses. And our current liabilities are also reducing to some $700 million. So $1 billion of overall equity and debt. A little bit more detail on the financial position. We always like to give you a view of our property, plant and equipment and of course, the right-of-use assets associated with that. So some $294 million, our opening balance, $272 million closing, key movements there, some additions of some $53.4 million, and we spent money in the areas of the infrastructure business, some new equipment, specialist equipment in projects. So the typical equipment being piling hammers and marine-related equipment. We have been disposing of some of our barges that were purchased for purposes of the Bridgewater Bridge, and we've probably disposed of about half of those by now. We will retain a couple of barges and redeploy those to other projects, and we have a few more to dispose of there, but that project is going well in terms of getting rid of that excess equipment. We will purchase new equipment, of course, going out into the Pacific. There's some new work won there and some of the islands in the Pacific, and that will require the investment of some CapEx associated with those projects. We did some disposals. We had some impairments, as I've mentioned, the impairments identified was subeconomic equipment that we decided to dispose of primarily through auction in South Africa and some FX there, giving us our $272 million. Looking at our borrowings, again, including our IFRS 16 leases, some new leases identified. We did lease some new equipment, again, on the Gamsberg project. We brought in some -- we brought two new Liebherr 9400 shovels into the project. Those have been deployed during the period, and we can see that the impact of that equipment in the rapid rise in production levels at the Gamsberg mine part of the Vedanta Group. We had some lease repayments, of course, in the period, and we had some things that were derecognized I've mentioned through the Dimopoint disposals and the like. Our mining business continued to pay the asset-backed financing debts down on some equipment that we purchased at the Tshipi mine some years ago, and we continue to reduce that debt. We raised some new ABF. We paid some other debt back down again. And what we do is with the debt, particularly in Australia, we use it for things like the insurance process. We have a large insurance bill. We take out some insurance financing, and we effectively smooth the cash flow impact of that across the year. So that's what we do with that. And then moving on to our financial position, our working capital. Again, important there, minimal movement in inventories, trade and other receivables, some small movement down there. Our contract assets, you can see the reduction there largely associated with the reduction in activity levels. Contract liabilities coming down as well and our trade and other payables, again, all associated with levels of activity in the business as our working capital unwinds there. A pleasing picture of the Queen Salote Wharf in Tonga. This is a really fantastic project for the New Zealand -- led by the New Zealand business unit in New Zealand Pacific. Again, creating local employment. We had a number of expats working on the job, but really focused on local employment, upskilling of people and local procurement. Pleasingly, given the work that we have done for the Kingdom of Tonga, we have recently been awarded the new Fanga'uta bridge in Tonga, and that will be further work and further opportunity for us to deliver works in the -- on the island of Tonga. Moving over to our liquidity. Starting the year at some $227 million of cash balance, ending up at $267 million. Those key movements, working capital movements of some $98.5 million. We had some net finance charges. We paid taxes of some $9.5 million. We had some proceeds on disposal of PPE. We did have the Dimopoint gain that happened in the first half of the year. We reported that. We had some CapEx and the repayment, of course, as I mentioned, of external debt. Payments associated with leases and new external borrowings largely the insurance debt that I referred to that we bring in, in the year and pay that down. You'll see the second bullet point there on the page, bringing in some debt funding, repaying it largely in the course of the year. We also brought in the asset-backed finance facility, reported that in the first half. We did that transaction in August of last year. First year of that deal was interest service only, and we will be servicing capital going forward from now. So it will be interest and capital servicing going forward in Australia. And the ABF winding down in the Moolmans business in South Africa. So overall, looking at it, our net cash position improving from $173 million to $211 million across the period. I'd like to hand back now to Scott to look at the outlook.

Thank you very much, Adrian. If I just have a quick chat about the picture on the screen there now, that's actually the Punt Road overall development. And that's an example of the buoyant recreation sector in which our Built Environs building unit participates. That's a newly announced award project that's been awarded to us recently. Work has just begun, and it's a demolition of aging facilities, and you can see an artist impression of what's being built there, very typical of the need to upgrade aging facilities in the recreation center across the regions in which we work. Now over to the market. I'd like to say at the onset that the segment strategies that we've put in place for Infrastructure, Building and Mining are very much aligned with the market trends that we're seeing across those business units. Australia, we've talked about the ongoing reprioritization of the public spend in transport infrastructure and a pivot towards some of those other areas that we're focused on water and waste water, defense and social building to support population growth, all of which is fully aligned with our stated Horizon 2030 strategy for that business unit. New Zealand, we're seeing improved conditions. It certainly has gone through a lull as we're anticipating during the course of the last financial year, but we're now seeing that return to some buoyancy, and that's been reflected in the new awards in that business unit. And the Pacific Islands has a very positive outlook as well with considerable funding being provided by various multilateral funding agencies particularly to support defense throughout the Pacific. So we're well positioned for that market improvement. Southeast Asia, as I've spoken about, we're taking a very modest approach to Southeast Asia to steadily improvement, but that's supported by the marine prospects we see in Southeast Asia. So as of 30 June, we had $1.9 billion of projects in preferred status and $3.3 billion worth of tenders submitted or in progress at that point in time. The Building, a positive market and Building environments is well positioned to take advantage of that. And as I said throughout this session today, it's the focus on health care, the life sciences, the education, the recreation sectors is where our building business focuses all of its attention. We're seeing a slowdown in New Zealand. But as the New Zealand government has announced, they will need over the next 10 or so years, invest significantly in aging health care. $106 million of preferred as of 30 June and $146 million of tenders submitted or in progress there. Over to Mining, that continues to be hampered by or constrained by South African logistics and infrastructure constraints in rail and port capacity. I think everyone is aware of that across South Africa, but we're keeping our eyes on longer-term opportunities that we expect will emerge in the SADC region. Now if we go to a strategic review. But prior to doing that, we get a look at the TQEH Hospital in Adelaide, where Built Environs has a very market -- an extremely strong position in that health care market in South Australia, where it needs that complex knowledge and certainly IP to be able to deliver those projects and they're continuing to do so on budget and on time for the clients where they're working. A strategy update. Well, our intention remains unchanged. We obviously need to improve the operational performance, and we seek to create two separate entities being McConnell Dowell, which contains Built Environs and Moolmans. Over to Moolmans, really pleased with the progress we're making on the Gamsberg project, and we want to see that continue as we up-ramp the volumes but we also need to focus on those problematic issues that I've talked about on the Tshipi contract to get that operational performance up. We need to work on the work environment that's evident on that project site and resolve the outstanding commercial issues. We're making steady progress with the overall transaction of Moolmans, and we have -- and we are in continuing discussions with a preferred bidder as we sit here today. Over to McConnell Dowell, which includes Built Environs. We want to continue the trajectory that we're seeing with those projects that were awarded to us post the risk-enhanced processes we put in place. Maintain the focus on those projects that's aligned with our Horizon 2030 strategy, where we can bring that specialized self-perform capability, and we have to have a particular focus for new work in the infrastructure segment and especially Australia. So that means sticking to our intent, the right projects for the right clients, the right disciplines where we've got that proven expertise and ensuring that we've got the people necessary to deliver our expectations and under the right commercial terms that's appropriate for the project being undertaken. All required work right across the board has been done throughout the period with regards to supporting the strategic initiative to separate McConnell Dowell, and we intend to have implementation offers to deliver shareholder value to the Board in the coming period. Now to conclude over to the key areas. Obviously, in infrastructure, we complete the J108 and Kidston projects in accordance with the current plan and finalize the commercial matters with the respective clients and continue to improve the performance on the remainder of the projects in the portfolio and secure additional work. For Built Environs, our Building segment maintained that positive trajectory of growth and profitability as we've seen over the last period. Mining continually -- continue to increase volumes at Gamsberg and deliver increased profitability in accordance with the contract and improve the financial performance at Tshipi through the resolution of the work environment and the commercial claims and set a foundation for the future so as those things can work in a more collaborative manner going forward. And to our strategy, as I've said, we're committed to all our stakeholders and the long-term sustainability of all of our businesses. And our work in that regard is well progressed, and we'll be able to provide further updates in the coming period. That then concludes the prepared part of our presentation today. So I will now hand over to Adrian and see if we've got any questions.

Yes, Scott, thank you. And I'll perhaps give you a prewarning so you can start thinking about these ones. I'm going to throw the ball to you on. I'll deal with a couple of them in the meantime, though. But Matthew Robarts from Blue Quadrant Capital wants to know expect roughly the losses on J108 and Kidston, anything above the $98 million in the coming period? And second thing I'd like you to think about is just John Arron from SBG Securities. I wanted to understand the percentage of current order book related to projects awarded before '23. In other words, the introduction of the risk management processes, what's that sort of split? And I know we have spent some time talking about that. In the meantime, I'm going to deal with two questions, one from Craig Butters. How big was the additional warranty provision taken in Southeast Asia? And John Aaron had a similar question on the same topic, elaborating on the warranty provision raised, which project was it? How much was the provision? Is that already in the contingent liability for McConnell Dowell? So, Craig, unfortunately, we're not going to disclose the size of individual provisions on individual projects nor the names of individual projects. But to clarify, I mean, and unfortunately, that's just really from a commercial negotiation point of view. It's inappropriate for us to provide that sort of information. It was material to the results of the Southeast Asian business. I will say that. We believe that the provision is adequate to address what needs to be addressed. And John, it's not a contingent liability. We have recognized the provision, and it is on the balance sheet. Then there's a question about the downside risks from again, Craig Butters, the downside risk to next year's cash flow, the circa $100 million that I'm referring to versus total losses recognized on the problem contracts. What are the upside and downside risks? So Craig, the issue is that in accounting, as you know, on a loss-making contract, we take the loss in full upfront and then effectively, the cash flow flows out over the course of the remaining part of the project. So we've taken the full hit, the $98.5 million. The cash flow on the two projects. One project, the losses are largely funded already, although there will be some funding still over the period. The other project is -- was actually in a cash positive position. And so the loss will have to be funded almost in full. The majority of that $100 million will flow out across the next 12 months in a fairly even manner on the larger portion of it. So let's talk about sort of an 80-20 split. About 80% of it will flow out in a fairly steady manner month-on-month over the course of 12 months. 20% of it will flow more like more in the next six months and which tapers off beyond that. So that's the sort of the downside of the cash flow risk. We have provided for it. We have provided for it in our liquidity plan and our cash flow plans going forward. And so we're reasonably comfortable about that going forward across the next 18 months in our cash flows. Upsides on loss-making projects, upsides are pretty tough. By their nature, they are loss-making. We are in commercial negotiations in both situations. And in the event that those commercial situations or commercial positions taken, we're able to achieve better than what we believe that would provide some level of relief and upside on those loss-making projects. Scott, do you want to perhaps kick off and just talk about those two points that I mentioned?

Yes. So maybe back to Matthew's question there. As Adrian said, with the two loss-making projects, we've taken what we consider to be an appropriate position on that job, which is reflecting the loss through to completion. The J108 project in specific is largely complete. It will be -- we'll get through all of the basic structural completion milestones by the end of this calendar year. So that's in a highly predictable space in that regard. The Kidston project being about 70% complete, still has a long way to go. You saw the photo of the powerhouse earlier on in the presentation. So obviously, we've got to install all the mechanical equipment on that project and then go into the commissioning phase. So there's some elements of the work that we're closely looking at that it carries risk associated with that, but we believe that we've taken an appropriate position on that risk. Then over to John Aaron's question. If we look across the portfolio, that -- those projects awarded prior to the introduction of the enhanced risk processes totals about 16 projects. In a combined basis, those 16 projects are 94.5% complete as of 30 June. A majority of them are complete, 100%. We've got others in the 90s. And the one project that's the least complete is Kidston. So there -- we're gradually and steadily working them out of the portfolio where Kidston is actually the one that brings that percentage down. So we can certainly see light at the end of the tunnel there with all the rest of those projects in that portfolio shortly. So I hope that covers that question. Anything else there, Adrian?

Yes. Andrew Bishop from Excelsia has come back on a similar question around key risks on Kidston and J108 going forward. What are the key milestones? And then are there any other projects that are potentially problematic? I don't know if you want to -- I think we've really covered J108 and Kidston, but any further color you might want to add?

Well, maybe just on J108, as I think I might have mentioned, the viaduct is fully structural complete now. You can work from one end to the other. The stations are largely there. We'll be providing -- we'll be applying for basic structural completion on the additional stations shortly. So I feel very comfortable where the construction activity is on that job. If we go to Kidston, as I mentioned, we have to put all the mechanical equipment in the powerhouse. And unfortunately, just going to the resequence change is that we were unable to complete the tunneling work because of excess water in one of the pits or the dam, if you like. That was a client issue. They were unable to get rid of that excess water. So we had to stop our tunneling works. We now have to go back and redo that tunneling work. So we're going to have some productivity impacts associated with the work in the powerhouse while we're completing that client instructed variation to now do the completion of the tunneling works. So we need to address that concurrent work activity. The only other -- I did make mention to one other project, which is a project in Queensland, Australia, where the client's design and specified methodology has proven to not be technically possible to complete. So we're in discussion with that client now as to what alternative solutions can be applied to installing a water pipeline beneath an environmentally sensitive park area. So that's the only one that I've got my specific eyes on from a technical operational perspective as to what the solution is going to be and how we're going to work with the client to execute that, that solution.

Still staying in Queensland.

Okay.

Stephen Menke from Finova, would like to understand to what extent were or are the weather-related setbacks covered?