salvation
• Increased earnings and cashflow
o Revenue of $652.5m, down 5% pcp
o Underlying EBITDA1 of $121.2m, up 6% pcp, EBITDA margin 18.6%
o Underlying EBIT(A)2 of $46.5m, up 5% pcp, EBIT(A) margin 7.1%
o Statutory Net Profit After Tax of $44.8m, up 56% pcp
o Operating cash flow3 of $96.7m, up 7% pcp
• Strong balance sheet for growth
o Gearing4 at 20.0% and Net Debt/EBITDA of 0.5x
o Available liquidity of $255m (cash on hand of $148.4m)
• Interim dividend increased to 0.30cps (20% franked), up 20% pcp
• Order book of $4.2bn
5
, including preferred contract worth $220m
• Tender pipeline of $7bn
• FY21 guidance6
:
o Revenue $1.3bn – $1.4bn (reduced from $1.4bn - $1.5bn, due to
accounting treatment of certain revenue at Batu Hijau)
o EBIT(A) $90m – $100m (unchanged, as Batu Hijau accounting treatment
does not impact EBIT)
Macmahon Holdings Limited (ASX:MAH) (‘Macmahon’ or ‘the Company’) has delivered
earnings growth for the six months ended 31 December 2020. Statutory Net Profit After Tax
increased to $44.8 million together with growth in underlying EBIT(A), margins and operating
cash flow.
Revenue fell by 5% over the prior corresponding period (‘pcp’) to $652.5 million, due to a
change in accounting treatment on certain client provided consumable items at Batu Hijau.
Operational changes relating to COVID-19 have restricted control of these items, meaning
revenue and costs have not been recorded, consistent with the application of accounting
standard AASB 157
. As there is no margin associated with these consumable items, earnings
have not been impacted. Excluding this change, revenue grew approximately 3% across the
remainder of the business.
Underlying EBITDA1
increased by 6% to $121.2 million (EBITDA margin 18.6%) and
underlying EBIT(A)2 was up 5% to $46.5 million (EBIT margin 7.1%), reflecting an increase in
activity across the Company’s operations.
23 February 2021
/2
This earnings growth has been delivered in a COVID-19 environment where disruptions to
business and travel, and the risks posed to health and wellbeing were actively managed.
Notwithstanding some additional costs and a tight labour market, the Company has been able
to maintain earnings and margin growth.
Macmahon has recognised a $17.9 million Deferred Tax Asset in the results due to a change
in the Australian income tax legislation announced in the October 2020 Federal budget, which
provided an incentive to fully deduct the investment in new Australian capex. This has
contributed to the 56% increase in in Statutory Net Profit After Tax of $44.8 million.
Cash Flow, Balance Sheet and Dividends
Macmahon generated operating cash flow (excluding interest, tax and M&A costs) of $96.7
million, representing a conversion rate from underlying EBITDA of 79.8%. Macmahon expects
further improvement in cash conversion in the second half of FY21 in line with its full year
target of 85%.
Capex for the half was $138.9 million, of which $46.1 million was sustaining capex. For the full
year, total capex is forecast to be $230 million (up from $175 million previously), which
comprises sustaining capex of $95 million (unchanged), $40m for extensions (Mount Monger,
Deflector, Nicolsons, Batu Hijau) and growth capex (Foxleigh, Byerwen, Boston Shaker,
Solomon, Bellevue) of $95 million. The Company remains focused on disciplined capital
management and targets all capex to achieve at least 15% return on capital employed over
the contract life.
Macmahon has continued to maintain a strong balance sheet, with gearing of 20.0%, cash on
hand of $148.4 million, and net debt of $129.0 million at 31 December 2020 (all-inclusive of
AASB 16 Leases).
Macmahon increased and extended its debt facilities during the period to $170 million from
$75 million at a competitive interest rate of sub 3% plus swap. As a result, the Company is
well placed to fund growth opportunities with cash and unutilised facilities of $255 million.
The Board has declared an increase in interim dividend to 0.30 cents per share for the half
year ended 31 December 2020 (1H20: 0.25 cents per share). This represents a 20.7% payout
ratio, which is in line with the Company’s current dividend policy payout range of 10 - 25%.
The interim dividend will be partially franked (20%), with a record date of 17 March 2021, and
will be paid to shareholders on 7 April 2021.
23 February 2021
/3
FY21 Guidance, Order Book and Outlook
Macmahon maintains its EBIT(A) guidance of $90 – $100 million6
, which incorporates an
increase in AUD:USD assumption from 0.72 to 0.75.
As a result of the change in revenue treatment at Batu Hijau, the Company’s FY21 revenue is
now expected to be in the range of $1.3 billion – $1.4 billion, restated from $1.4 – $1.5 billion
previously.
Macmahon’s order book as at 31 December 2020 excluding the Batu Hijau revenue
adjustment was approximately $4.17 billion, which includes $322m of new work (Foxleigh and
other contract wins). Following the award of a new contract extension at Deflector and
finalisation of the Warrawoona contract (for which the Company is currently the preferred
tenderer), the order book will stand at approximately $4.21 billion.
Macmahon is also in the process of finalising the commercial model for another significant cut
back at Batu Hijau with AMNT (‘Phase 8’), which will extend the current mining activities by
another 6 years from 2022 to 2028. As part of this process, Macmahon is in discussions to
remove certain ‘pass-through’ costs on which no margin is earned. If finalised, this change will
improve working capital, tax efficiency and reduce forex exposure.
Macmahon remains positive about the longer-term growth prospects with a current tender
pipeline of approximately $7 billion, of which $3 billion relates to new clients and $1.2 billion in
underground work, with the majority based in Australia. Excluding potential extensions, the
Company has current submitted tenders of circa $2.2 billion and tenders under preparation of
$1.6 billion.
4,208
653 401
4,500
322 4,170
3,768
220
220
2,500
3,000
3,500
4,000
4,500
5,000
June 20 Order
book
1H21 Revenue New Work December 20
Order book
Batu Hijau
(revenue
adjustment)
Adjusted
December 20
Order book
Awarded Preferred 23 Feb 21 Pro
Forma Order
book
Order Book Movement ($m)
No earnings
impact
23 February 2021
/4
Commentary
Commenting on the first half and the outlook for the Company, Macmahon’s Chief Executive
Officer and Managing Director Michael Finnegan said:
“Macmahon has produced a solid first half result and I am pleased the business has continued
to deliver growth in earnings and margins, despite COVID-19 disruptions and currency
headwinds.
The first half was a consolidation period, but an important one for the business with continued
growth of the underground division, and the award and appointment as preferred contractor
for various projects including Foxleigh, Warrawoona, Coburn, Bellevue and Nicolsons. Since
half year end, we have also secured the Deflector extension. This additional work of
approximately $760 million aligns with key elements of our strategy and provides us with a
solid platform for continued earnings growth.
The resource sector outlook is robust driven by high commodity prices and supportive capital
markets. As a result, we have seen many clients advance their projects into the tender stage.
This pending wave of potential awards over the next 12 months is reflected in our significant
tender pipeline and our focus will be on converting more opportunities to drive growth into
FY22 and beyond.
In addition, we will leverage off our competitive advantage of being able to service both
surface and underground mining concurrently, expand our service offering across the mining
value chain and optimising the safe delivery of our order book. This will be supported by our
continued investment in people, mining technology and ongoing digital transformation.”
*** ENDS ***courtesy of Bell Direct
=============================================================================================DYOR
i do not hold this share
there used to be some holders here in earlier days , maybe there still are