Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MAAS Group Holdings Ltd (ASX:MGH, Financial) reported a record full-year EBITDA of $207.3 million, representing a 27% growth from the prior year.
- The company achieved an 88% cash flow conversion rate, highlighting disciplined working capital management.
- Significant growth in the Greater Melbourne hub, with the addition of three hard rock quarries and five concrete plants.
- Successful capital recycling strategy, realizing proceeds of almost $72 million in FY24.
- Strong performance in the construction materials division, with EBITDA up 54% year-on-year.
Negative Points
- Slight increase in Lost Time Injury Frequency Rate (LTIFR) in FY24, indicating a need for improved safety measures.
- Revenue decline in the residential real estate business due to a 27% reduction in external home builds.
- Challenges in the civil construction and hire segment due to project timing, impacting the electrical business.
- Elevated interest rates impacting consumer confidence and suppressing near-term residential land sales.
- Commercial real estate business saw a 5% revenue decline and a 10% EBITDA decline, attributed to softer conditions and reduced fair value recognition.
Q & A Highlights
Highlights of MAAS Group Holdings Ltd (ASX:MGH) Earnings Call
Q: Can you elaborate on the strong margins in the Civil business for FY24? Are these margins sustainable?
A: Wes Maas, Chief Executive Director, Managing Director: The strong margins were due to a favorable revenue mix, particularly from projects utilizing our plant and equipment. While these high margins are achievable in the future, it is more conservative to consider the average margins over the last five years.
Q: Can you provide more details on the fair value gains booked in FY24 and expectations for 1H FY25?
A: Wes Maas, Chief Executive Director, Managing Director: For FY25, we expect fair value gains to be at similar levels to FY24. We have $65 million in contracted property development sales expected to settle in the first half of FY25, with a conservative estimate of more than $70 million in capital recycling for the year.
Q: What is the current run rate for quarries, and how should we think about growth in this division?
A: Wes Maas, Chief Executive Director, Managing Director: The run rate is higher than the FY24 result due to acquisitions made in the second half. We expect increased volumes and improved synergies, which will lower costs and enhance margins.
Q: Can you clarify the $8 million profit on the sale of assets and its relation to the $70 million of asset sales flagged for FY25?
A: Craig Bellamy, Chief Financial Officer, Company Secretary: The $8 million profit largely comes from the civil construction and hire and construction materials segments. The $70 million for FY25 relates to commercial property sales, separate from the regular trading of equipment.
Q: How does the market in Victoria compare to other regions, and what are the margin expectations?
A: Wes Maas, Chief Executive Director, Managing Director: The Greater Melbourne market is our most exciting area, and as it matures, we expect better margins and higher volumes, reducing costs and improving overall performance.
Q: What is the impact of electrical revenue timing on the civil business, and what should we expect for FY24?
A: Wes Maas, Chief Executive Director, Managing Director: We expect a material swing back in electrical revenues over FY24, with levels anticipated to be above FY23.
Q: Can you explain the net PP&E CapEx decrease in FY24 and expectations for next year?
A: Craig Bellamy, Chief Financial Officer, Company Secretary: The decrease is due to timing and significant investments in recent years. We have a young fleet and have heavily invested in plant and equipment, so we expect to see the benefits over the next few years.
Q: What caused the flatter performance in the commercial real estate business?
A: Wes Maas, Chief Executive Director, Managing Director: The performance was due to milestone-based profit recognition and a slight decline in the hardware business. However, we expect strong contributions going forward.
Q: What are the cash flow expectations for FY25, particularly regarding land inventory and commercial property?
A: Craig Bellamy, Chief Financial Officer, Company Secretary: We expect a net cash outflow for land inventory due to development activities, but overall, it is immaterial. For commercial property, we anticipate a net inflow in FY25.
Q: What is the current acquisition cost environment, and how does it impact your ability to fund acquisitions?
A: Wes Maas, Chief Executive Director, Managing Director: The acquisition cost environment is similar to the past, with opportunities either coming to market or targeted by us. We have significant liquidity and are producing cash, supported by our asset recycling strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
