LYOPFLYOPFOTC
Loading
Sam Wells: Good morning, everyone, and welcome to the Lycopodium First Half FY '26 Results Call. I'm Sam Wells from NWR Communications. And joining me from the company today is Managing Director and CEO, Peter De Leo; as well as CFO, Justine Campbell. Following a brief summary of the results released to the market this morning, investors and research analysts will have an opportunity to ask questions. There will be the choice of 2 options. First, analysts and investors can either raise your hand should you wish to ask a verbal question of the management team and you can also submit a written question via the Q&A function at the bottom of your Zoom screen. We'll endeavor to get to the majority of questions asked, in some cases, combining submitted questions on the same or similar topic. And for those analysts asking verbal questions, we kindly ask that you keep your questions to no more than 2 or 3 live questions on today's call. Thank you. And over to you.
Peter De Leo: Thank you, Sam, and welcome. Thank you for your attendance at our formal investor presentation for the first half of FY '26. As Sam said, I'm joined this morning by Justine, our CFO; and Rod Leonard, our Chair. This morning, I'll be -- mid-day for many of you. I'll be just running through a typical investor presentation, covering off a little bit about the company, providing an update on the financial highlights for the period, touching on operational highlights for the period, then addressing outlook and guidance. And we also provide, as part of the presentation, although I won't be running through in any detail this morning, appendix, which contains a lot of additional and hopefully, informative information. Lycopodium remains a leading global engineering and project delivery group, working across mineral resources, industrial processes and infrastructure industries with an extensive book of quality clientele and 18 offices across the world. I'd speak to our clientele. We have an amazing bunch of clients across all those industries I mentioned, through very, very large clients, mid-tiers and junior explorers and miners, and we're very grateful for that client order book. As a project-focused organization, it is of significant importance and to our benefit to have involvement with projects from the very early stage. Hence, our involvement in scoping and feasibility studies and the evaluation phase of projects through the full engineering and project delivery as a full-service provider in that phase and then also on to optimization and expansion phase works enables Lycopodium to benefit from a project's full life cycle. It's been something we've focused on over the years, both in broadening the services which we provide, but also broadening the time which we are involved in projects. We maintain a high workload with a strong current order book of studies and delivery phase activities on a broad range of quality projects. Committed contracts are valued at $415 million, that's up on last period. And also revenue opportunity pipeline is $1.3 billion, also up on last period, which really indicates -- and I'll talk more about it obviously later, the outlook for the business, but indicates that we are continuing to see busy market, enjoy a busy market and see a busy market. By way of financial highlights, Lycopodium did $174.5 million worth of revenue for the period and $18.3 million NPAT, which provided a 10.5% NPAT margin, which is in line with our expectations for achieving our NPAT target. The Board of Directors declared a $0.22 per share fully-franked dividend for the half year, again, returning to our traditional sort of dividend policy, our dividend expectations and had strong cash at bank at the half year. The company enjoys excellent diversification across a broad range of commodities, clientele and geographies. Those of you that have seen the slide previously may note that we continue to achieve more balance in support of this diversification across these metrics. And we're striving to continue to do this on an ongoing basis. We'd like to see a strong balance in terms of diversification across commodities, across geographies. In particular, it provides surety and strength moving forward. From an operational perspective, we've recently been awarded a number of FEED or front-end engineering and design briefs, which we expect to position us optimally for the next phase of each project. These include the Winu copper project for Rio Tinto, the Assafo-Dibibango gold project for Endeavour Mining, which is our next development project, development gold project for Resolute and a number of others, including most recently, Pilgangoora Plant Expansion lithium project in Western Australia. We've also started initial work on 2 material prospects being Tulu Kapi gold project and the Blackwater Expansion Phase 1A project Artemis Gold. In terms of the LatAm, we hope to be able to transition on to a larger project with our Blackwater Expansion project and awaits news on that thing, which we believe maybe imminent. Of note, however, there has been a shift to the right on these projects, particularly taking in Blackwater from a timing perspective, probably about a 3, 4 months shift from what we previously expected and forecasted, and it has impacted our financials and forecasts. However, we continue to invest in building capacity in anticipation of these and a swathe of other material opportunities and this is really important. We are in a competitive labor market across the world for our people, and we've retained our people and continue to grow our people count and also our capacity in terms of office space and just general corporate capacity, what we see is being a large number of prospects. Our study pipeline is very strong. And those that have been on our calls previously, you would have seen this slide in particular, which tries to demonstrate our early phase work, our work which is midstream in middle of its delivery and then that stuff that's being -- projects that's being completed in recent times. And you can see there is quite a number of new opportunities, new projects, which have ticked into early phase work. I spoke around the Blackwater Expansion Phase 1A, Tulu Kapi, Winu, et cetera. And there is other projects such as Diamba Sud, Iguidi and Doropo where we're doing the FEED work and we hope that those projects will go into full execution and we will be able to participate in the full delivery of those projects. We also got a really strong portfolio of projects, which are called heavy delivery, including Kon in C te d'Ivoire, Yanqul Copper in Oman and a number of other projects, which are listed there and of course, some projects which we already completed. So, we're very, very happy with the number of studies that we've got and that's traditionally the key metric for businesses. We're working on a good number of -- and quality of studies, which tends to be a good indicator for what we'll be doing next. Our focus on people continues as we seek to maintain and enhance our status as an employer of choice and a place where people can develop excellent careers, advance themselves personally and professionally and enjoy growing with the company. Our approach to keeping our people and those on our managed sites safe is demonstrated in our exceptional safety track record. So on to outlook. Demand for our services remains very high based on our excellent track record and performance on all of our most recent projects as well as market conditions, which generally sees commodity prices strong, if not historic high levels, obviously, gold being very, very strong. At the moment, we're seeing enormous number of opportunities emanating out of our traditional markets, including Africa, Australia, but also across the Americas. Silver being another commodity, which we're seeing. A number of projects we've started work on the PFS for Unico Silver in Argentina, supported obviously with our investment in SAXUM. We're also seeing, on the basis of our expansion across the Americas, lots of many new opportunities and the like being presented to us or prospects that we have identified and are pursuing. But we also continue to invest in building capacity and capabilities globally. We've, in the last 12 months, have planned for the next 12 months to increase the capacity in Perth, Toronto and Cape Town, in Lima and in Manila. And that's in preparation for the work and the prospects, which we continue to see, and we see that this will bear fruit in subsequent financial years, certainly, but we also expect to support a strong second half of this financial year. We revised guidance, primarily due to the shift rise of a number of those major prospects. I spoke about the 2 main ones, which are expected to contribute materially to our forecast. We now provide guidance of group revenue between $370 million and $410 million, and NPAT between $37 million and $41 million, in line with our target NPAT expectation of around 10%. We'll obviously continue to keep the market and shareholders updated on any material changes or any material awards. But we consider the second half will be strong to achieve those -- that guidance which we provided. We remain a secure, stable and sustainable business, doing great work globally. This is based on the deep engineering expertise and growing teams, and keeping teams of exceptional high-caliber personnel and we provide lots of, what I call, value in the services which we provide globally. We have a long track record of highly disciplined risk management. We're also focused on ensuring that we have a good portfolio of contracts and style of work, which talks to both risks and also talks to return. And again, leveraging experience over the years. We have a very strong history of execution of projects and execution of business generally, with strong alignment with management and our shareholders. We still have around 30% of the company's ownership held by Board and management. We have a very capital-light approach. We're not an organization that requires to spend a huge amount of capital to generate our returns, and we continue to pursue business in that fashion. I've touched on in the appendices, which you can go through your leisure. You can review the very strong field of blue-chip clients that we have. It's a very diverse list. Lots of clients have been with us a long time. We continue to deliver repeat business as predominant. The quantum of work that we do is in the form of repeat business for clients, new projects for existing clients and the like. Strong commodity diversification, I spoke around that earlier. I think we continue to strike a good balance there. Even in the light of a very strong gold price, we're still busy in lithium. We're still busy in uranium, copper and a bunch of other commodities. Lycopodium, certainly against our peers, appears to have an undemanding valuation. And the geographic diversification, I think, for us is key. We continue to expand geographically. The Americas has been a fantastic geographic expansion for us. The acquisition of SAXUM, the opening of the Lima office and Vancouver office, et cetera. We're seeing tremendous number of opportunities coming through. Again, it's fairly early days. So, we have got expressions of interest in and proposals in a number of new opportunities across Latin America in particular, but also our North American operations continue to see a level of inquiry, which is unprecedented. So, I think certainly the word is out about Lycopodium across the Americas and we expect to see continued sort of growth and opportunities for business activities across the next couple of years coming out of the Americas, let alone our traditional Africa and APAC regions. As I said, we also provide some additional, hopefully, informative content as an appendix to presentation to further explain and illustrate the strength and quality of our business. So, I'm not going to go through that this morning. I welcome you to talk through as ever after this presentation. If you have any questions, please feel free to reach out to us with those questions and hopefully, you can ask on the appendices. But thank you for attending our webinar and I welcome any questions that you may have now for us and we'll do our best to answer them. Thank you.
Sam Wells: Thanks very much, Peter. [Operator Instructions] First question comes from Oliver Porter at Euroz.
Oliver Porter: Just a quick one. You mentioned adding capacity and headcount kind of across the board globally. Can you just talk to how you're finding the labor market and perhaps if by geography, are you having any particular challenges or how that sort of is going to look over the next 6 to 12 months?
Peter De Leo: Thanks, Oli. Yes, the availability of good talent is always challenging, and that sort of is a constant. We're seeing that in Australia. We're seeing that in Canada. We're seeing that in South Africa, in particular into large operational hubs. But we continue to recruit good people and bring good people in. And again, talking about -- I touched on our focus on people and the focus on careers and the focus on providing people new exciting and diverse work is something which we sell. And we don't -- we never have people come to light and think that they are joining anything other than an exceptional business, which is great. And so it makes it a little easier, but they are tough markets to find. There's a dearth of high-quality experienced personnel globally. So, we value it very much. To that point being, across the last part of the first half, we maintain capacity where if you weren't expecting to continue to see growth in demand, we may have trimmed capacity at times just to maintain utilization up, which is a key metric for our business. But we maintained it particularly in Cape Town, knowing full well it's not easy to get people. You can't just let people go and expect them to rejoin you in 2 months' time, knowing with the full knowledge that we had the amount of work and are seeing our work potentially ahead of us. We sort of were very careful to maintain our teams and to continue keeping on that capacity and growing that capacity.
Oliver Porter: Great. And just with SAXUM, it's slightly slower start than you initially expected. But can you speak to how the opportunity pipeline as it stands today compares to your expectations when you made the acquisition?
Peter De Leo: Yes. You're right. Their own performance in their own right as a business unit has been slower than we would have liked. Again, those you've heard us speak about the SAXUM acquisition before, for us, the acquisition of SAXUM wasn't so much about what they would contribute to the group in their own right. It was about the opportunities that they will bring to group and the [ features ] that they would provide within Latin America and the Americas, more particularly Latin America and enable us to access clientele and opportunities that we hadn't been previously. If we wind the clock back 18 months, Lycopodium wasn't bidding anything in Latin America. It was aware of lots of opportunities. And we're now sort of much more across and attuned to and enabling and aim to pitch flow opportunities. As I said, Unico Silver is one example. It's PFS, obviously, at this point in time, so relatively early days. They are Australian listed company with silver project in Argentina. SAXUM, in fact, secured the PFS, on the back of good relationship and it's part of our group. And it's supported -- in that case, supported by our Americas' officers and process teams. We're currently bidding a -- or express of interest with a view debating a large copper concentrator opportunity within Argentina, again, supported by APAC, driven by APAC hub, where a lot of [ horsepower ], a long track record of large copper concentrators only enabled by the fact that we have the SAXUM business. So in that respect, it's going exactly to plan. Integration of the business has occurred and has occurred really well. And there is no issues there and no concerns there. The traditional cement market is slower than they would like to have seen and they would like to see, of course. And have we landed a big fish or even medium-sized fish at this point in time, we are really in good stead on a number of great opportunities that we wouldn't have had before with SAXUM bought.
Sam Wells: Next question comes from Stephen Scott at Veritas.
Stephen Scott: Just on Slide 4, world of green dots. Just noticed that Europe and also maybe Middle East maybe presencess there. Do you have any thinking about that in perhaps the medium term?
Peter De Leo: Thank you, Stephen. Europe is not on our radar per se. It's not a huge amount of minerals activities in Europe. There is obviously some mineral activity, but not a huge amount. Middle East, on the other hand, is on our radar. In fact, of course, we're currently working on the Yanqul project in Oman, where that project is being delivered at our Americas hub. But also the Americas hub is also seeing a number of inquiries from Dubai-based and Middle East based groups, some projects in the Middle East, some projects out of the Middle East and particularly into Africa. And we also -- we have an entity established in Dubai where at this point in time it's on the shelf. But acknowledging that we do need to find the level of prospectivity in that region increases to such a point that we consider to have an operation there. We can activate that. But certainly, I think Middle East from a level of prospectivity, it's certainly something that we have an eye to -- we can service out of APAC and out of Africa or out of our Americas' hub and where clientele are and where relationships exists. There's quite amount of, I guess, money coming out of Dubai in particular, Abu Dhabi, Saudi alike. So, I expect to see some opportunities coming out of there.
Sam Wells: The next question -- we probably have a couple of questions on the shifting time lines. Are there any specific factors that caused the delays to Tulu Kapi and Blackwater? And are there any second order impacts on these delays? And specifically, there's a couple of questions around how much extra cost did you have to carry during the half that are associated with those delays? And is that visible in increased project expenses as a potential forward indicator?
Peter De Leo: It's not indicated. It's not related to additional project expenses, let's say. What it relates to -- let's just deal with the first part of the question. And that is around timing, project delays and the like. Unfortunately, the reality of our world is that we don't control when projects start. We can influence obviously by completing our study work efficiently, effectively and well, making projects more fundable, more easily fundable and dealing with what we do with our partnering, our inputs to projects, making sure they are high quality and we do that regularly on an ongoing basis. But the timing when a project starts, when it gets funded, when it gets permitted, some of those we call nuances around when a projects has a full green light. It's not something we can control. I'll give you an example. We did a project last year, early last calendar year, polymetallic project in far north Canada. We gave a red hot crack. We were shortlisted and have caused [indiscernible] perhaps even the favored party. That project at the time was apparently going to be starting in calendar year '25. That project still got [indiscernible] and some effectively native title issues still in group. These things we can't control. We do our best to forecast and to do a likelihood and probability of a project going and then a likelihood probability of us securing to that project and then what that might mean for our business size, our capacity, our capabilities and all that business planning that we do. But unfortunately, we don't control the timing of projects. And two, that we sort of singled out in our presentation today, we singled out because they are material contracts potentially. They get fully green light and we fully secure them. They're both material contracts and have material demands on the business. And we prepared in advance for what was meant to be a kick-off in, call it, fourth quarter 2025. And you have to do that because you can't be caught flat-footed on all these things. They all have aggressive and challenging schedules. And when things don't kick off necessarily exactly as per our forecast, we have to enact contingency plans and the like. And to the second part of your question, increased project expenses that you're seeing in the financials really relate to FG Gold, Baomahun, which is a relatively soft form of half EPC. I can't give too much detail, but it's a project where you're seeing some direct costs being coming through our books, so as we've seen project improvement -- project costs. And on the equipment side, we've started a business about 18 months ago called [ pudco ] where we sell some form of OEM, products leveraging our technical capabilities and our technologies developed over the year and that's what you are seeing there. And to the last part, are we seeing -- have those project delays caused us to incur costs? Well, in one respect, yes. What happens with project delays where you start seeing a softening in utilization of our personnel because you bring on 40 people and they're not fully occupied to the level you'd like to see them occupied. That can have an adverse impact because you're carrying some of their costs. It's not flowing straight through projects. But again, it's just a reality. We tend to model our commercials, around a certain utilization level. If you're doing better than that utilization, then you make more profit, you are doing less than utilization, you start running into your target profits.
Sam Wells: And maybe just as a follow-up to that. Can you comment on first-half '26 utilization, particularly in the second quarter against PCP? And what would your expectations be for the H2 balance?
Peter De Leo: We expect to see utilization increase. Utilization was reasonably high through the first quarter of this financial year. It has softened across second quarter, as I said, certainly in some of our operational centers. APAC and Americas was running both fairly high utilization levels. Africa headcount lower as well as Process Industries business at this time in SAXUM. Again, though as a group, we were still running above target. Utilization levels were softer than we had seen in the first quarter. We expect those utilization levels to increase. Our forecasts are that they will increase through Q3, Q4 of this financial year. But certainly, beyond that, we expect, based on our forecast that we'll see utilization increase into FY '27 as well and not only increase, but we expect probably bigger numbers, bigger headcount in due course, obviously, evidenced by -- we're taking on more office space and the like. So, that's part of the plan.
Sam Wells: And in regards to the number of studies being currently undertaken by Lycopodium, how much would that be up on perhaps a 12-month range?
Peter De Leo: It's a bit of a tough question. It's been in studies. In terms of total quantum, it's probably there or thereabouts, maybe a little higher. But it's obviously also the mix of studies and what those projects look like and we are studying what the size of them are, what stage study it is, et cetera. So it's always a tough question to answer. But if you just look at -- are we got more studies on today than we had on this time last year? Probably I'd say we do. Because we're doing more studies in the Americas. There is similar amount of studies here in APAC and probably a similar number of studies out of Africa as well. So it's probably up.
Sam Wells: And maybe just the last question this morning. Can you give us a sense of the conversion rates you currently see through the life cycle of project development, i.e., for each client that commences a scoping study, do they utilize Lycopodium for delivery and operations?
Peter De Leo: Often, yes. Sometimes no. I'd say most of the project work, which we get involved in, we've been involved in study work. And we expect that you have an advantage if you completed the feasibility study, whether it be PFS. PFS, often when you are doing the scoping, you generally roll into PFS, DFS and so on and so forth. But what I will say is taking a project from scoping study, especially copper project, copper concentrator, for example, the scoping study level through execution might take you 10 years. So, these things take a long time. Gold projects somewhat less in this market. We've got a number of clients who haven't done a scoping study and want to be in execution, want to be pouring gold by Christmas next year, which is unrealistic, of course. But there is no shortage of sort of enthusiasm, call it, that side of fence at the moment.
Sam Wells: I think that's all the time we have for live questions today. If there are any follow-ups, please feel free to e-mail me and/or Justine, and we'll endeavor to get back to you. And maybe just with that, Peter or Justine, I'll pass it back to you guys for any closing comments.
Peter De Leo: Thank you very much. Look, nothing else to add other than we're very happy with the way the business is tracking at the moment. We're really working to plan. Obviously, dealing with the vagaries and the separate project timing and some of that impact that it has to the business over time. But in terms of the strength of the business, the fundamentals of the business, the balance sheet is, of course, remains strong. We're always looking for new opportunities, looking for how we can leverage our capabilities and do more and continue to do it as well as we are doing it, if not better. So, that's it for the presentation. Again, as I said earlier, if you have any questions, please feel free to reach out to myself or Justine and we'll try to help you out with answers. And thank you very much for your attendance.
Sam Wells: Thank you very much for joining today's Lycopodium first half results call. Enjoy the rest of your day. Goodbye.