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Operator: Thank you for standing by, and welcome to the Emeco Holdings Limited Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Ian Testrow, CEO and Managing Director. Please go ahead.
Ian Testrow: Good morning, everyone, and welcome to Emeco's Financial Year 2026 Half Year Results Presentation. Thank you all for joining us today. I'm delighted to have our Chief Financial Officer, Theresa Mlikota, here with me as well as Adam Buckler, our new Deputy CFO. Welcome, Adam. Today's session will follow our usual format. We'll take you through the presentation lodged on the ASX this morning, after which we'll be happy to take any questions. Before we begin, I'd like to direct your attention to disclaimer on Slide 2, which covers important information regarding forward-looking statements. I want to start with Slide 5 and some of the key takeaway messages before we get into the more detailed presentation. Emeco continues to deliver strong operational and financial performance. We've worked hard to strengthen the business and now delivered 6 consecutive halves of period-on-period growth in earnings and cash flow. Our balance sheet is in the best shape it's been in 10 years since I've been CEO, and we've recently completed a refinancing of our debt facilities on better terms and conditions, which provides us with great flexibility to consider growth options going forward. I just want to call out Theresa and her team and the finance and legal teams for absolutely cracking finance, a fantastic work. Well done, team. Our strategy has evolved to focus on disciplined organic and inorganic growth while continuing to target 20% returns for shareholders. We're focused on growing our portfolio of fully maintained rental projects, winning stand-alone maintenance projects and also for the pursuit of adjacent maintenance services businesses. We're also actively monitoring our rental competitors for consolidation opportunities. Additional to this, we will further develop our existing artificial intelligence and operational technology capabilities to expand our competitive advantage. We believe our capabilities in the areas of asset management, condition monitoring and reliability engineering are unique and set us apart from our competition. Moving to Slide 6 and the first half financial highlights. Emeco has an excellent start to FY '26 with a strong operational and financial performance in the first half. Our simplified business model and focus on disciplined capital and cost management has continued to deliver positive results. We have again seen good growth in all metrics, including revenue, operating earnings, free cash flow and return on capital. Group revenue was up 9% to $421 million, operating EBITDA increasing 7% to $155 million. Operating EBIT was up 13% to $77 million on the prior comparative period. Margins were driven by revenue mix with high levels of maintenance work in first half '26 compared to first half '25. While maintenance work is lower margin, it's also low capital and has been a key driver of the continued improvement in return on capital. The positive financial performance flowed through to the bottom line with operating net profit after tax increasing by 21% to $46 million. Operating free cash flow was up 37% to $67 million, with excellent cash conversion of 110% through improved working capital in the period. Return on capital was up 100 basis points on FY '25 and 230 basis points on the first half of '25 and has now reached 18%, which is good progress on our journey to our target of 20%. We've made strong gains in improving our balance sheet and improving returns. Preserving these gains and our capital will be important as we grow the business going forward. Our focus continues to be achieving a return on capital target of 20%. These gains are illustrated in Slide 7, which summarizes Emeco's half-on-half performance history. The slide shows steady and consistent half-on-half improvement over the past 2 to 3 years. The result has been a strong profit uplift in operating earnings from the prior comparative period and a solid repeat delivery of really strong performance we generated in the second half of FY '25. This is in line with the expectations we set out at our AGM. The real highlight here is the uplift in free cash flow generation, which has increased by nearly 70% during the 2-year period. In dollar terms, the business has generated around $230 million in free cash flow since first half '24. Much of this growth is being delivered organically without investment in growth capital, in particular, the growth in earnings from maintenance services, which will remain a key focus going forward. I'll cover this in more detail later. The strong cash generation has driven a significant improvement in Emeco's balance sheet. Net leverage has improved from 1.1x in first half '24 to 0.5x in first half '26. This is an outstanding result and puts the company in a strong position for future growth opportunities, which I'll cover more in the strategy and outlook discussion. Finally, the slide also clearly shows the strong progress we've made towards our return on capital target of 20%. The business generated a return on capital of 15% in the first half of '24, and we've grown this to 18% in the first half of '26. This has been a 230 basis points improvement, and I'm confident the Emeco team can continue to drive this towards our 20% target. Slide 9 shows the group's safety performance over the last 5 years. The safety of our people is paramount, and safety remains a key priority for Emeco and all of our employees. We remain committed to providing a healthy and safe workplace. The total recordable injury frequency rate reduced from 3.4 at 30th of June 2025 to 2.5 at 31st of December 2025. The lost time injury frequency rate remained at 0. We'll continue to focus on reducing TRIFR with ongoing investment in training, which is a key focus. Slide 10 outlines the key highlights for our Rental business in the first half of '26. Emeco is Australia's largest provider of surface and underground rental equipment with a fleet size of 840 primary machines and a workforce of 480 people and net assets approaching $900 million. Emeco's Rental business delivered a strong operational and financial performance in the first half of '26, with Rental revenue increasing 14% to $342 million, driven primarily by the delivery of increased maintenance services across key contracts. Operating EBITDA increased 6% in the first half of '26 to $168 million, while operating EBIT grew to $94 million from $86 million, up 9% for the half. Operational highlights include the successful ramp-up of a new large fully maintained operation in Queensland, where Emeco provides mining fleet and full maintenance services to both Emeco and the customers' fleets. We also continue to roll out infill digital tools to enhance our service offering, improving quality and productivity. Surface fleet utilization remained healthy at 85%, while underground utilization increased to 69% and is currently running at 75%. We have good operating leverage within the existing capacity of our current fleet, which limits the needs of growth CapEx to grow our earnings. The outlook for the Rental business remains positive. Our competitive positioning via our fully maintained rental model positions the business well to capitalize on new opportunities. While wet weather remains challenging in Queensland impacting utilization in early second half '26, the medium-term production outlook remains robust as customers recover operations. Slide 11 outlines the key highlights for Force in the first half of '26. Force is strategically important to the group with our workshops, field maintenance, asset management and condition monitoring service capabilities, the key driver of Emeco's competitive advantage. These deliver cost-effective maintenance and rebuild capabilities to both our customers and to our own Rental business. Force operates across 7 workshops as well as fully mobile Australia-wide field maintenance capability with approximately 350 employees. Force workshops completed 84 machine rebuilds in the first half of '26 and also provided support services to XCMG for their battery-powered fleet in preparation for delivery to Fortescue. Force delivered total gross revenue of $141 million in the half. External revenue was down year-on-year as workshop capacity was redeployed to support our internal rental fleet. Trade labor utilization remained high. The business maintained relatively stable gross operating EBITDA of $18.3 million and a gross operating EBIT of $15 million. Cost efficiencies realized during the half supported stable margins. The focus for Force will be on business development and increasing external work in both the Eastern and Western regions. The integration of underground capability has opened new maintenance services opportunities, while field-based services remain in strong demand. I'd like now to hand over to Theresa to run through the financials.
Theresa Mlikota: Thanks, Ian, and good morning, everyone. As with our prior presentations, we refer to operating results in our presentation today, which are non-IFRS. You'll find a reconciliation to our statutory results in the appendices. Slide 13 summarizes the group profit and loss. Without rehashing too much of what Ian has covered already, the high-level message from the accounts is that the business continued to deliver period-on-period top line and bottom line growth with strong returns on capital. The business maintained a momentum created in FY '25, mirroring the strong performance generated in the second half of '25 into the first half of '26. Importantly, revenue growth was driven by growth in low capital maintenance services, which continues to drive stronger returns for our business. Whilst margins from services are lower, the return on capital is much higher. We expect to continue to grow this low capital side of our earnings to reach our 20% ROC target. Another point to make about our earnings for the half, our hours of rental fleet utilization were very similar to our last half, but our fleet mix was made up of smaller fleet. This reflected an average price per hour as well as depreciation cost per hour, which were both lower this half. Statutory profit after tax of $38.7 million increased 15% compared to the prior corresponding period, while our operating profit after tax of $46.5 million increased 21%. Lower finance costs contributed to this with lower drawn debt and lower base rates in the half. Whilst our intention is to grow the business, we will continue to maintain discipline around the investments we make, and we will continue to have a laser-like focus on our ROC target, which, as Ian already mentioned, has increased by a further 100 basis points to 18% in the last 6 months. Slide 14 shows the major cash movements half-on-half. The key number here is operating free cash flow, which was up a strong 37% on the prior corresponding period. This was driven by a strong EBITDA-to-cash conversion of 110%. Strong debtor collections in combination with timing benefits on creditor payments drove the stronger cash conversion, releasing $11.3 million in working capital. We expect the timing benefits on working capital to reverse by year-end. Finance payments of $13 million were largely consistent with the prior comparative period. Stay in business CapEx totaled $90.7 million in the half, representing a 17% increase from $77.6 million in the prior corresponding period. Proceeds from disposal of property, plant and equipment were $4 million, resulting in a net CapEx of $86.7 million. Second half CapEx will be lower and will align with the guidance we have provided to the market for the full year. Free cash flow was again applied primarily to debt reduction, including lease liabilities and other financing obligations, which reduced by $13.7 million. No shareholder distributions were made as the company focused on debt reduction ahead of the company's refinancing. The net result was an increase in cash of $45 million bringing total cash to $171 million at period end, up from $126 million since June. As with the prior year, no income tax is paid due to the group's carried forward tax loss position, which was $74 million at period end. Moving to the balance sheet and capital management on Slide 15. Emeco's balance sheet is in great shape and shows the delivery of our deleveraging strategy with net leverage now reduced to 0.5x EBITDA. This provides substantial financial flexibility to manage business growth or to make shareholder distributions in the future. Just highlighting some of the numbers on the balance sheet. The $52 million reduction in net debt since June was driven by strong earnings and cash conversion. The reduction in net working capital was driven by the reduction in debtors with strong cash collections for the half. Prepayments and accruals were both higher, recognizing the renewal of the company's insurance program. Contract assets were higher due to fleet mobilizations to surface and underground projects during the period. $12 million in noncore or end-of-life fixed assets were transferred into held for sale. Trade creditors were higher due largely to timing, and tax liabilities are higher due to the consumption of tax losses. Value created for shareholders and equity totaled $39 million with NTA per share increasing $0.08 per share to $1.44. CapEx outweighed depreciation during the half, mostly due to timing, with, as I just mentioned, $12 million of fixed assets being transferred into held for sale assets as part of the group's fleet optimization program. Turning to capital management. Importantly, the company's debt facilities were refinanced in November 2025 and were used to take out the company's maturing facilities in January '26. A 5-year $355 million syndicated bank debt facility was secured on better pricing and conditions than the preexisting debt facilities and will provide us with better flexibility around the use of excess capital. Emeco's credit ratings were reaffirmed during the half with Moody's maintaining Ba3 and Fitch at BB-. Ian will talk to this a little more in coming slides, but we are actively assessing low capital vertical opportunities to complement core business and will actively monitor competitors for consolidation opportunities. We expect to see opportunities emerge over the next 12 months, which will be assessed using strong capital discipline principles, including our key target of 20% ROC. On that note, the Board have elected to preserve capital at this time and to prioritize flexibility for growth. Consequently, no shareholder distributions have been recommended by the Board in relation to the half. Slide 16 shows the maturity profile and liquidity position in a bit more detail. The main things to highlight here are that we successfully completed the refinancing of our AMTN, which has extended the bulk of our debt maturity profile to be on the 5-year mark. As I mentioned on the previous slide, the new facility was applied towards refinancing the group's existing financial indebtedness, including the replacement of the existing RCF and the redemption of the $250 million AMTN, which occurred on the 19th of January 2026. The group's liquidity position has improved since FY '25, increasing by around $50 million to $271 million, taking account of the note redemption, which took place after period end. Slide 17 outlines our progress towards our ROC target. Our target of 20% has been key to driving improved efficiency and performance across all parts of our business. Over the last 2 years, we have consciously reduced our level of growth CapEx and focused on improving the cost performance of our business as well as organically growing earnings through the value-added services we provide to our rental customers. These low capital earnings have grown through the expansion of field services, on-site maintenance for our fleet as well as customer-owned fleet in combination with condition monitoring and reliability support. We delivered another 100 basis point improvement in ROC for the half, which now stands at 18%. This compares to 17% in FY '25, 16% in the first half of '25 and 15% in FY '24. Our drivers to achieve the 20% target lay in increasing our equipment utilization, optimizing the fleet and increasing our low capital maintenance services earnings. If you recall, in Slide 10 on Force, the segment delivered $15 million of EBIT in the half from $3 million in net assets. So you can see the opportunity from continuing to grow lower capital intensity earnings. Similarly, we have further potential to increase utilization with strong commodity prices in gold and copper. We see opportunities to grow here and our BD teams are focused on achieving this. ROC improvement has been a direct driver of cash generation. Emeco has delivered around $265 million of free cash flow since FY '24. As you can see on the right-hand side, when the company is delivering an 18% return on capital, the business is expected to deliver around $120 million in free cash, which is a good guide for this year. At 20%, this increases to around $140 million. This remains our key target. As always, I'm happy to talk more to the finances in the Q&A section. I'll now hand it back to Ian.
Ian Testrow: Thanks, Theresa. I'll now move on to strategy. On Slide 19, you'll find the pillars that guide our strategy and its execution. Emeco's core strategic pillars guide consistent execution and long-term sustainable value creation for shareholders. I want to briefly recap these given their importance. We're Australia's lowest cost, highest quality, technology-driven mining equipment rental and maintenance service provider. We use our scale to invest in maintenance services, condition monitoring and asset management, technology and development of our skilled workforce to create a competitive market advantage. Secondly, we'll build on our diversified portfolio of businesses and services, balanced by service line, customer, project, commodity and region. This gives us flexibility to service a broad range of customers across a range of sectors utilizing our core strength while also exploring complementary or logical adjacencies. Finally, Pillar 3, exercise disciplined capital management. This pillar provides some of the guardrails to ensure disciplined capital allocation. Setting a ROC target of 20% in combination with a more conservative leverage target will provide more robust investment decision-making. It is worth noting the reset of our target leverage of 0.5 to 1x. This has been reset to support resilience through mining cycles but also providing the flexibility of dry powder to make opportunistic investments should they arise. Being prudent in the consideration of our capital investments will drive us closer to our 20% return on capital target and will assist to maintain strong free cash flow whilst protecting the balance sheet for all the cycles. These targets provide the flexibility to reinvest in the business, pursue inorganic growth or return capital to shareholders. Moving on to Slide 20 and our scale and competitive advantage. We've worked really hard over the years to create a competitive advantage for our scale. As you can see by the map, we have operations all around Australia. We're truly national. We have a very large rental fleet, 840 pieces of equipment. We have the ability to rebuild those equipment and rebuild mid-life equipment, which gives us a cost and quality advantage. And we're supported by the Force workshop, which has workshops all around Australia and a very talented workforce. On top of that, we have our asset management team, which is based in Brisbane. They provide reliability engineering, asset planning, condition monitoring and a bunch of analysts that really are key to our business. Moving on to strategic priorities on Slide 21. These are presented across 3 broad time horizons. Our near-term focus will be on strengthening and optimizing our core by growing our fully maintained rental projects, expanding low capital earnings and maintenance offering. This includes organically growing our earnings for the provision of maintenance services for customer-owned fleet. We'll actively monitor competitors for consolidation, and we'll scale our artificial intelligence and operational technology capability. These opportunities will likely be within or adjacent to the mining sector. Over the medium term, we will extend our capabilities for adjacent low capital opportunities. This includes assessing adjacent maintenance services and asset management acquisitions, commercializing our artificial intelligence-driven operational technologies into a repeatable operating model and partnerships to accelerate entry into adjacencies. Over the longer term, our strategic focus will be on portfolio resilience by divesting our earnings base by expanding existing capabilities into new industries or sectors, strategically scaling up digital services offerings, positioning the business for the energy transition. I want to emphasize this does not mean that we're going on a buying spree. Each investment decision will continue to be considered utilizing strong guardrails aligned with the disciplined capital management, including key financial hurdles, capability fit or strategic alignment and a driver for growth. Slide 22 shows the growth of our workshop and maintenance services and just how significant a part of this business this is. This generates 50% of gross revenues and about 35% of gross EBITDA of the business from a small capital base. Maintenance services have been an important contributor to Emeco's financial performance. Low capital and maintenance services earnings have doubled over the last 12 months. The scale of this contribution demonstrates a strategic shift towards a low capital, high-return service offerings. This expansion has been underpinned by significant growth across fully maintained projects, including projects where Emeco maintains both our and our customers' fleets. The maintenance service expansion directly strengthens Emeco's competitive positioning through the differentiated service capabilities that extend beyond traditional equipment rental. It has been a key factor in recent rental contract wins and renewals while achieving high returns. By leveraging Force's mid-life rebuild capability and on-site service expertise in combination with its asset management, condition monitoring and reliability technology, the company has created a defensible competitive advantage that supports sustained earnings growth and improved capital efficiency across the business cycle. It's important that we show how management have organically grown this low capital side of the business significantly. We believe this is a strong avenue to deliver future earnings growth. We have a good delivery track record, and we'll seek to expand and grow this part of our business. I want to use Slide 23 to judge just how serious we are about technology as a competitive advantage. Our asset management, reliability and field service teams are applying artificial intelligence and machine learning to drive better equipment reliability, lower cost and longer asset life for our customers. We actively apply AI and machine learning to the data that we source from our oil samples analysis and machine telemetry to provide better predictive maintenance across our fleet and an increasing number of cases, our customers' fleet, with active condition monitoring through our in-house telemetry across more than 200 of our machines. We're developing first-generation in-house agentic reliability solutions using patent analysis and root-cause investigations to drive improved decision-making and response times. We're rolling out the digitization of all paper-based field and workshops activities to improve maintenance decision-making, quality and cost control. We're investigating the application of artificial intelligence and machine learning across asset knowledge, field quality, service delivery and commercial processes. We have performed early proof-of-concept work to assess its commerciality feasibility and business value. Slide 24 outlines a brief update on ESG. We continue striving to be a sustainable business that delivers creative solutions for our customers, a family feel for our people, support of our local communities and value for our investors. Emeco is committed to integrating environmental, social and governance principles into our business strategy and operations. We published a climate change position statement available on Emeco's website and are developing a decarbonization transition plan to work towards lower Scope 1, Scope 2 and Scope 3 emissions. Scenario analysis has been undertaken to identify potential physical impacts of climate change in our people, equipment and operations. Preparations for reporting under AASB S2 climate-related disclosures are well advanced with oversight through the ESG Committee, and Audit and Risk Management Committee. I touched on safety metrics for the first half earlier on Slide 9. We continue to focus on strengthening workplace, health, safety, well-being and training through targeted initiatives and improved consistency of execution. FY '26 HSET focus areas include ongoing uplift in critical risk and control insurance, continued enhancement of workshop safety controls and expansion of role-based leadership and workforce training. Governance assurance is underway with ongoing assessments and compliance monitoring to validate policy effectiveness and drive continuous improvement. Slide 25 lists our priorities and outlook for the second half of FY '26. I'll start with our priorities for the core business. We continued disciplined capital expenditure and cost efficiencies to drive returns and cash flow while increasing utilization by building a portfolio of fully maintained projects for a pipeline of opportunities and expanding the Force service offering. With regards to capital management and the deployment of growth capital, investment in fleet will be limited until our existing fleet is more fully utilized with current capacity to grow earnings without the need to buy more fleet, a key driver to achieving our 20% return on capital. We'll also actively evaluate potential M&A opportunities, including low capital intensity businesses to complement our core business, and we're actively monitoring competitors for sensible consolidation opportunities. We intend to preserve our improved balance sheet and capital position to provide maximum flexibility should the right opportunity present. We'll continue to invest in technology to improve efficiency and to build our competitive advantage. The focus will be on delivering the build phase of our D365 ERP project and continuing the digitization of operational technology. I mentioned ESG earlier. Our focus will continue to be on improving safety and health, continuing the development of our plan to reduce emissions, and preparing for the new FY '26 sustainability reporting requirements. The mining sector outlook remains supportive for the business with the medium-term production outlook remaining robust. This provides a stable foundation for continued demand for our equipment rental and maintenance services across the sector. For FY '26, we expect stay in business capital of approximately $170 million to $175 million. Depreciation is expected to be in the order of $160 million to $165 million, while nonrecurring spend is anticipated to be approximately $15 million. We expect positive financial performance in the second half subject to wet weather events in Queensland, impacting client operations. Just to conclude, we're confident that continued execution of our strategy will enable us to deliver sustainable growth and increase shareholder returns in FY '26 and beyond. I'd like to take this opportunity to acknowledge the efforts of our entire Emeco team for delivering another great result and an excellent start to FY '26. I'd like to thank our customers, suppliers, financiers and the community partners who play a crucial role in our ongoing success. With that, I'll hand over for questions.
Operator: [Operator Instructions] Your first question comes from the line of Gavin Allen from Euroz Hartleys.
Gavin Allen: Good numbers. Just a couple for me quickly. Just firstly, thinking about the journey to 20% ROC, which has been a long-term target now and you're obviously making very good progress on that front. Do we think about that directionally now as a sort of a 12-month or an 18-month or 24-month journey? Do you think -- not to hold you to anything, but just in terms of direction.
Ian Testrow: Thanks, mate. Appreciate your support. Yes, that one, we've obviously -- can you hear me?
Gavin Allen: Can, mate, yes.
Ian Testrow: Yes. Cool. Yes. Thanks, Gav. The question you made, we've made great progress on that. We launched this objective at your other conference a couple of years ago, and I'm really proud of the progress that we've made towards our target of 20%, remains our target as we put through the pack. It's all in utilization, really. This -- what we're doing around the maintenance services has really helped improve our return on capital. But if you look at that utilization at about 85%, it's kicking that up to 90%. That really gets us to 20% at some point, which shows that there is operating leverage in the business and capacity for increased earnings on this fleet.
Gavin Allen: Yes. That makes sense. So you can do it. You can do it quickly if you get to 90%. And if it's more steady, it might include some sort of, I don't know, continued growth in the maintenance side. Is that sort of one way to look at?
Ian Testrow: Yes, it is. The maintenance side of things that earnings come through, which is really what I'm really proud of, to be honest, the team has done a fantastic job, really leverages that return on capital because it's not capital-intensive earnings. But ultimately, getting that fleet working harder gives us that uptick in earnings as well, so it's a combination of those 2 things.
Gavin Allen: Yes. Good one. Just one more for me. So medium term, you're talking about adjunct acquisitions in the maintenance side and asset management side. Just wondering if you got any flavor on how you're finding the competitive environment on the M&A front. Do vendors seem sensible to you in terms of price as a general rule? Or where are we thinking about that in an M&A curve or cycle?
Ian Testrow: To be honest, we haven't been overly active in that space this year. We're working hard on our strategy and working with our Board. We've been in the gym for a couple of years getting fit. We're getting that return on capital from 13% to 18%, getting that leverage from 1.1x down to 0.5. So we've been at the right to consider those options. So I wouldn't say that we've done a hell of a lot of work. A fair bit of work in regard to how do we position this thing. There's 2 areas of focus. One is consolidation, looking at competitors where their fleet aligns with us when we can take our maintenance services to improve their business. That's attractive to us. And the other thing is, is to have a look at what are we doing really well in maintenance. What's facilitated that growth? There hasn't been so much in our typical Force workshops. It's been growth in maintenance services in the field. What are we doing there? What are we doing well? Where can we improve on it? And where does that add value to look at M&A to improve that and broaden that value proposition? So they're the sort of 2 things that we're looking at in parallel together.
Operator: [Operator Instructions] There are no further phone questions at this time. I will now hand back to Mr. Testrow for closing remarks.
Ian Testrow: Thanks, everyone. I appreciate all the hard work from the Emeco team. I touched on it in the preso, but great work to Theresa and her team and our legal team, Penny and just the hard work on that refi. I think that's a great thing for the business. So thanks for that, and thanks to everyone. I appreciate it.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.