Perenti Limited (AUSDF) Q2 2026 Earnings Call Transcript

2026-02-22 23:34:58 ET

Perenti Limited (AUSDF) Q2 2026 Earnings Call February 22, 2026 6:00 PM EST

Company Participants

Mark Norwell - Group MD, CEO & Director
Michael Ellis - Chief Financial Officer

Conference Call Participants

Sumeet Ozarde

Presentation

Mark Norwell
Group MD, CEO & Director ...

Good morning, everyone, and thank you for joining the Perenti FY '26 First Half Results Call. My name is Mark Norwell. And presenting alongside me today is Mike Ellis, our CFO. Today, we'll take you through our first half performance and outlook for the remainder of FY '26. Overall, Perenti has delivered as per expectations and remains well-positioned to continue delivering strong earnings and cash flow for the year.

Starting on Slide 3, our diversified portfolio. For those who haven't been following Perenti closely, we are a diversified global mining services group with leading positions in contract mining, drilling services and mining and technology services. For example, our underground mining business, Barminco, is a top 2 global underground hard rock mining contractor. And our drilling division, comprising 5 specialist brands, is a top 3 global drilling business.

We believe that a sustainable business is one that consistently delivers for its people, its clients, the communities in which it operates and ultimately delivers enduring value for shareholders. To achieve this purpose, we have built a diverse company with 13 brands operating across 12 countries. Approximately 2/3 of our revenue is generated from underground mines, and currently, our work in hand is strongly weighted to gold projects. Our diversified portfolio, scale and market share creates a resilient business that can deliver consistent performance through market cycles.

Turning to the first half financial results on Slide 4. The first half of FY '26 reflects consistent delivery as we continue to evolve our portfolio and strengthen our balance sheet. Revenue was similar to the first half of FY '25 and EBITDA slightly lower, following the conclusion of the Botswana underground project at the end of FY '25.

As communicated in our FY '25 results, we successfully sold the fleet in Botswana, delivering a decrease in depreciation, supporting a new half EBITA record of $160 million. EBITA margin improved to 9.3% compared to 9.0% in the first half of '25, demonstrating the improving quality of earnings. Underlying NPATA increased 12.4% compared to the first half of '25 supported by lower net finance costs and improved operating performance. Underlying EPS increased to $0.098 per share, also up 12% from the corresponding period.

Normalized free cash flow of $33 million, adjusted for delayed debtor receipts collected in January, also improved on the first half last year. Net leverage reduced to 0.6x compared to 0.9x 12 months earlier. And our gross debt reduced to the lowest point since the acquisition of Barminco in 2018, following the repayment of the remaining 2025 senior unsecured notes in July 2025. As a result, the Board has declared an interim dividend of $0.0325 per share, an 8% increase on the $0.03 dividend in the first half of 2025.

On to Slide 5. And as always, the safety of our people remains our first priority. The continuous learning approach that we have adopted requires us to constantly seek ways to improve our safety systems, and ultimately, performance.

During the half, we continued to invest in frontline safety leadership and strengthened our company-wide safety leadership framework, which includes clear expectations for what safe work looks like. Divisional critical risk frameworks and verification tools have been updated, and we continue to focus on creating a safe and respectful workplace.

We also implemented practical safety enhancements across the business, including in-vehicle monitoring systems, improved operator visibility, upgraded gas monitoring and smart camera exclusion zones and standardized controls for working at height across the drilling fleet. While we continue to make positive progress as a business and as an industry, we need to maintain an unwavering focus on improvement to keep our people safe.

Moving to Slide 6, group performance. As mentioned earlier, EBITA increased 3% to a new first half record of $160 million, despite the strength in the Australian dollar at the end of the half, which has continued into the start of the second half. Our EBITA margin improved to 9.3%, driven predominantly by the transition away from the underperforming underground contract in Botswana.

As we've outlined previously and as demonstrated in the half-on-half comparisons, earnings and cash flow are weighted to the second half of the year. Contract mining will benefit from several contractual elements flowing through in the second half, and drilling services continues to see demand increasing with margin growth expected in the second half.

Turning to our divisions, starting on Slide 7. Contract mining contributed around 70% of group revenue and 74% of underlying EBITA before corporate costs. The significant transition in revenue mix continues in line with our strategy with new and existing projects substituting for projects that have concluded in Burkina Faso and Senegal. As mentioned, the conclusion of the underground contract in Botswana has helped to improve first half EBITA margin to 11.1%.

Work in hand remains strong in projects such as Great Fingall in Australia, Goldrush in the U.S.A. and Mana in Africa ramping up. The award of the Dalgaranga contract in July 2025 will also have a greater contribution in the second half.

As outlined on Slide 8, Drilling Services delivered revenue of $422 million, up 9% on the first half of '25 with utilization continuing to improve across the division. With drilling demand remaining strong, particularly in gold and copper projects, the division is positioned to benefit from margin expansion as market capacity tightens.

Swick, in particular, has seen strong demand, recently winning and mobilizing 3 new projects in North America. The multiple mobilizations temporarily impacted margins during the half. However, margins are expected to improve in the second half and into FY '27 as the new projects move to steady state and the benefit of improving market conditions are realized.

On to Slide 9. Mining and technology services has delivered improved performance compared to the first half of '25. The BTP rental fleet saw higher utilization with idle fleet returning to work, although still below historical levels. BTP parts continue to deliver below expectations, presenting an opportunity for improvement in the second half. idoba continued to focus on its underground simulation tool with costs reducing as planned with further reductions forecast in the second half of '26. Overall, our first half results met expectations with our balance sheet continuing to strengthen.

I'll now hand to Mike, who will provide more detail on our financial results.

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