Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record financial performance with revenue at $3.3 billion, EBITR of $645 million, EBITA of $314 million, and NPAT A of $166 million.
- Strong free cash flow result of $184 million, exceeding initial forecasts.
- Successful integration of DDH1 Limited, positioning the drilling services division as one of the leading drilling companies globally.
- Reduction in net debt to 0.7 times, achieving a record low leverage for the organization.
- Commitment to sustainability with initiatives like battery electric vehicle trials and a full mine electrification study.
Negative Points
- Increased interest expense due to higher interest rates and temporary increase in debt balances from the DDH1 acquisition.
- Lower rig utilization levels in drilling services, impacting performance.
- Closure of the Savannah Nickel Mine, resulting in a net EBITDA impact of $11.2 million.
- Tragic passing of an employee, highlighting the need for improved safety measures.
- Challenging market conditions for drilling services, especially in the second half of FY24.
Q & A Highlights
Q: Can you provide more details on the financial performance and key drivers behind the record results in FY24?
A: Mark Norwell, CEO: Our financial performance in FY24 was driven by consistent operations from our core contract mining division, margin growth in mining services, and the successful integration of the DDH1 acquisition. We achieved record revenue of $3.3 billion, EBITR of $645 million, EBITA of $314 million, and NPAT A of $166 million. Our free cash flow was $184 million, which was higher than forecast due to the redeployment of assets from discontinued projects and timing of capital payments.
Q: What are the key elements of your updated dividend policy?
A: Mark Norwell, CEO: We have updated our dividend policy to target a payout range of 30% to 40% of underlying NPAT A. This reflects our confidence in the business's ability to deliver reliable performance and generate free cash flow, allowing us to provide consistent returns to our shareholders.
Q: How has the integration of DDH1 Limited progressed, and what are the expected benefits?
A: Mark Norwell, CEO: The integration of DDH1 has gone extremely well despite challenging market conditions. The synergies related to the acquisition have been largely realized, including ongoing tax benefits. The Drilling Services Division is now among the largest globally, and we expect upside in both earnings and free cash flow as drilling activity increases.
Q: Can you elaborate on the sustainability initiatives and their impact on the business?
A: Mark Norwell, CEO: Our sustainability initiatives focus on three imperatives: caring for our people and communities, valuing the environment, and enabling the energy transition. We have seen improvements in employee safety and female participation, trialed battery electric vehicles, and completed a mine electrification study. These efforts support current and future earnings by aligning with our commitment to ethical and responsible operations.
Q: What are the future growth prospects and strategic priorities for Perenti?
A: Mark Norwell, CEO: We have $5.1 billion of work in hand and a pipeline of $15.9 billion worth of prospects. Our strategic priorities include maintaining a disciplined approach to capital allocation, focusing on reliable free cash flow, and achieving moderate growth. We aim to pay dividends, buy back shares, reduce leverage, and fund sustainable growth without compromising cash generation.
Q: How has the company's leverage and liquidity position evolved?
A: Peter Bryant, CFO: We have successfully reduced our leverage to 0.7 times, achieving this target for the third consecutive half-year. Our liquidity position is strong, with a successful issuance of USD350 million in high-yield bonds, which were 6.6 times oversubscribed. This has allowed us to repay more expensive debt and improve our balance sheet.
Q: What are the key financial metrics and guidance for FY25?
A: Mark Norwell, CEO: For FY25, we are forecasting revenue between $3.4 billion and $3.6 billion, EBITA between $325 million and $345 million, and free cash flow above $150 million. We expect leverage to reduce further to between 0.6 times and 0.7 times. CapEx is forecast to be approximately $330 million, including deferred payments from FY24.
Q: Can you discuss the changes in the executive team and their impact on the company?
A: Mark Norwell, CEO: With the departures of Peter Bryant and Sy Van Dyk, we have reshaped the Executive Committee. Michael Ellis will be appointed as CFO, and Ben Davis will take up the position of President of Drilling Services. Raj Ratneser will lead Mining Services and continue to oversee our electrification studies. These changes aim to optimize our corporate overhead and maintain strong leadership.
Q: How has the company's safety performance evolved, and what measures are being implemented?
A: Mark Norwell, CEO: Safety is a top priority, and we have implemented safety transformation and improvement plans across all divisions. These plans focus on leadership development, improved training, critical risk management, and assurance. Despite the tragic passing of a colleague, we are committed to ensuring all employees and contractors go home safe at the end of each shift.
Q: What are the key factors contributing to the strong free cash flow performance?
A: Peter Bryant, CFO: Our strong free cash flow performance of $184.5 million was driven by efficient operations, successful redeployment of assets, and timing of capital payments. We also maintained a relentless focus on generating cash, achieving a cash flow conversion rate of 98%. This allowed us to pay dividends, buy back shares, and reduce net debt.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
