SGH LIMITED — Earnings Release 2024

Aug 14, 2024

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14 August 2024

Company Announcements Office Australian Securities Exchange Limited 20 Bridge Street SYDNEY NSW 2000

2024 FULL YEAR RESULTS - PRESENTERS’ NOTES AND Q & A

Seven Group Holdings Limited (ASX: SVW) attaches the presenters’ notes and Q & A transcript for the FY24 Full Year Results Investor Presentation.

This release has been authorised to be given to ASX by the MD & CEO of Seven Group Holdings Limited.

For investor information, please contact: Daniel Levy - Head of IR and Communications +61 2 8777 7106 |

For media enquiries, please contact: Lauren Thompson | +61 438 954 729 Hayley Ashburner | +61 497 554 588

investorrelations@sevengroup.com.au

Seven Group Holdings Limited is an Australian diversified operating group, with market leading businesses across industrial services, energy and media. In industrial services, SGH owns WesTrac, Boral and Coates. WesTrac is the sole authorised Caterpillar dealer in Western Australia, New South Wales and the Australian Capital Territory. Boral is Australia's largest and leading integrated construction materials business. Coates is Australia's largest industrial and general equipment hire business. In Energy, SGH has a 30.0% shareholding in Beach Energy, as well as interests in other energy assets in Australia and the United States. In Media, SGH has a 40.2% shareholding in Seven West Media, one of Australia's largest multiple platform media companies, including the Seven Network, 7plus and The West Australian.

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Seven Group Holdings Limited | ABN 46 142 003 469

Level 30, 175 Liverpool Street, Sydney NSW 2000 | Postal Address: PO Box 745, Darlinghurst NSW 1300 Telephone +61 2 8777 7574

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SGH FY24 Results Presentation Speaker Notes and Q&A Transcript 14 August 2024

Slide 1 – Ryan Stokes Opening Title Slide

Good morning and welcome to the Seven Group Holdings full-year results presentation for the year ended 30 June 2024.

I’m Ryan Stokes, Managing Director and CEO, and joining me today is Richard Richards, Group CFO.

Slide 2 – Ryan Stokes Group Overview – Who We Are

SGH is one of Australia’s leading diversified operating groups, with a market capitalisation of over $15 billion, and inclusion in both the ASX100 and MSCI Global indices.

We own and operate some of the leading Industrial Services businesses in Australia and have exposure to transitional energy through the supply of natural gas and LNG.

We focus the deployment of capital and investment in the Australian market, and within three strategic growth thematics: mining production, infrastructure and construction, and transitional energy.

Within these thematics, our businesses have scale, leadership positions, and privileged assets to provide a competitive advantage and economic moat.

Our approach to capital allocation is complemented by a disciplined operating model, emphasising execution with accountability.

Our “Owners Mindset’ approach guides our business decisions and performance of our leaders and people. It brings a strong belief in the power of continuous improvement and long-term value creation.

Above all, we are committed to serving our customers. We deliver best-in-class products and services, with our customers at the heart of everything we do.

The execution of this strategy has underpinned the delivery of strong and stable cashflows, top decile total shareholder returns, and an 18 per cent EBIT compound growth rate for over a decade.

Slide 3 – Ryan Stokes

Group Overview – FY24 Key Results

Strong customer activity in FY24 supported SGH to deliver revenue growth of 10 per cent to $10.6 billion.

The revenue growth was supported through increasing operating leverage, resulting in EBITDA of $1.9 billion and EBIT of $1.4 billion, up 14 per cent and 20 per cent, respectively.

Group NPAT of $850 million was up 30 per cent.

Operating cash flow of $808 million was down 32 per cent, as a result of more than $500 million working capital investment at WesTrac. The investment was predominantly in parts and machines, required to meet the strong customer demand and support growth into FY25.

Slide 4 – Ryan Stokes Group Overview – Earnings Growth and Key Outcomes

Significant earnings growth at WesTrac and Boral were the core drivers of the FY24 result, delivering 25 per cent and 61 per cent EBIT growth respectively. Coates also delivered robust EBIT growth of 9 per cent. In aggregate, these businesses delivered EBIT of $1.3 billion, up 28 per cent, and represented over 90 per cent of SGH earnings.

The equity-accounted contributions to EBIT of our Energy and Media businesses fell by 13 per cent and 58 per cent, respectively.

Key outcomes over the past year include:

• The completion of our compulsory acquisition of Boral on July 4, with post-acquisition leverage peaking 2.26x,

• A focus on operating leverage, supported an expansion in the Group EBIT margin to 13.4 per cent, up 106-basis points,

• A Return on equity of 20.8 per cent, up 406 basis points; and

• Delivering total shareholder returns of 56 per cent.

Slide 5 – Ryan Stokes

Group Overview – Key Financials

Key financial results for the year include 10 per cent growth in revenue to $10.6 billion, 14 per cent growth in EBITDA to $1.9 billion, 20 per cent growth in EBIT to $1.4 billion, and 30 per cent growth in NPAT to $850 million.

Statutory NPAT of $464 million was down 23 per cent, primarily due to SGH’s share of development and exploration asset impairments at Beach Energy and a mark-to-market impairment of Seven West Media.

Net debt to EBITDA finished the year at 2.2x, and under 2.3x at the completion of the Boral transaction in July.

The final ordinary dividend of 30 cents per share declared in July brings total dividends for the year to 53 cents per share fully franked.

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Slide 6 – Ryan Stokes

Group Overview – POV & Accountable Operating Model

The strong FY24 results and our long-term outperformance is supported by our Purpose, Objectives, and Values, and the disciplined application of our operating model.

Our purpose is to recognise and serve exceptional businesses while meeting our objective of maximising returns to stakeholders through long-term sustainable value creation.

We support this objective with our four values: Respect, Owner’s Mindset, Courage, and Agility. The Owner’s Mindset is seminal for SGH. It emphasises accountability and execution.

The operating model has four core characteristics:

First, each of our businesses has a dedicated Board structure, ensuring accountability for delivering results.

Second, decision-making is pushed towards the front line wherever possible, fostering a lean, empowered workforce with accountability at all levels.

Third, we focus on execution and growth, integrating the Owner's Mindset into our operating cadence.

Fourth, our lean operating structures and focus on accountability make SGH inherently scalable.

Slide 7 – Ryan Stokes

Group Overview – Investment Thematics

The 20 per cent EBIT growth in FY24 and 18 per cent EBIT CAGR over a decade highlight SGH’s long-term superior outperformance.

This performance has been supported by our operating model, and underpinned by disciplined investment into the strategic growth sectors of mining production, infrastructure and construction, and transitional energy.

In mining production, Australian commodity export volumes were up 4 per cent for the year, with strong expectations for iron ore and thermal coal exports through this decade.

In infrastructure and construction, the project pipeline is robust and replenishing, with $1.7 trillion in investment expected over the next seven years. The sector is also supported by macro and policy thematics, such as the 240,000 new dwellings required annually to meet government policy ambitions.

In transitional energy, gas will play an increasingly critical role in supporting the grid. The greater the reliance on variable renewable energy, the greater the requirement for firming energy, and gas is best positioned to provide this firming solution. Strong demand and tightening supply are expected in the domestic gas market from FY26 onwards. The global LNG market is also finely balanced, with supply risk skewed to the downside.

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Slide 8 – Ryan Stokes Group Overview – Safety & Sustainability

In addition to a strong financial result, we made significant progress across safety and sustainability in FY24. With ~14,000 employees across SGH’s companies and interests, the safety of our people is one of our most important priorities.

We are focused on delivering a differentiated customer experience, and safety is an important component of the value we provide.

Our LTIFR of 1.4 and TRIFR of 4.5 both improved by 26 per cent over the year, driven by visible leadership, a culture of collective accountability, and rigorous WHS compliance and risk management.

In relation to sustainably, we recognise the meaningful impact and long ‑ term value our business can contribute, with core components of our industrial services portfolio inherently circular. This includes machine rebuilds at WesTrac, recycling at Boral, and equipment hire at Coates.

We are excited to bring the first Cat battery electric mining truck into our territories this year, where it will participate in in-field trials with BHP and Rio in the Pilbara.

We also continue to increase alternative fuel usage at Boral, with the completion of the Berrima Chlorine Bypass project, which facilitated an increase in the facility’s alternative fuel usage to 28 per cent.

Our solar rollout programme and associated EV pilots are ongoing at Coates, with 26 branches now equipped with solar.

Slide 9 – WesTrac

Slide 10 – Ryan Stokes Industrial Services – WesTrac Highlights

WesTrac delivered strong sales growth in FY24, with capital sales up 12 per cent, driven by customer demand from expansion activities and fleet replacements.

Services sales grew by 23 per cent, supported by a 5 per cent increase in parts line-item volumes, an 11 per cent increase in parts exchange components, and an overall favourable shift in product mix. Combined, this led to 19 per cent higher sales revenue for the year, significantly ahead of the 10-year revenue CAGR of 12 per cent.

The strength in both capital sales and services is expected to continue into FY25. A positive capital sales outlook is underpinned by the committed resource project pipeline and strong demand from fleet rebuilds and replacement, which we see as mid-cycle.

Growth expectations for services are supported by the mining production outlook, an increasing installed base of machines, and aging fleets. Customers are increasingly making use of more sophisticated maintenance regimes to extend fleet lives.

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Slide 11 – Ryan Stokes

Industrial Services – WesTrac Financials

WesTrac’s revenue of $5.8 billion was up 19 per cent for the year. Combined with EBIT margin expansion to 10.7 per cent, the business delivered 25 per cent higher EBIT of $623 million.

Strong customer activity and demand led to more than $500 million investment in working capital in FY24. This impacted operating cash flows of $164 million, down $515 million for the year.

This investment was in parts and machines and highlights the growing customer demand for services and equipment. This reflects one of the strongest capital sales pipelines for the business in over a decade.

WesTrac is investing in its people, productivity, and capacity to support customers and growth. The workforce expanded by 4 per cent in FY24, supported by training investment and recruitment initiatives.

WesTrac is also leveraging advanced analytics solutions to drive productivity, while investing in facility expansions and upgrades to support increased customer activity.

These investments in working capital, people, technology, and capacity provide WesTrac with a strong foundation to serve growing customer demand and deliver growth in FY25 and beyond.

Slide 12 – Boral

Slide 13 – Ryan Stokes Industrial Services – Boral Highlights

Boral’s sales volumes were resilient in FY24, with strong customer activity in the infrastructure and construction sector. Project delays coupled with a temporary moderation in residential activity saw total sales volumes contract slightly year on year but remain strong.

An improved go-to-market strategy enabled pricing traction across all products, offsetting volume pressures and inflationary impacts on costs.

Boral made significant progress on its "Good to Great" performance journey in FY24, delivering improvements in procurement, drag site reduction, recycling, and cost base rationalisation.

In FY25, the business will focus on disciplined execution, cost control, price leadership, operational efficiency, and go-to-market agility to maintain positive momentum on the performance journey.

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Slide 14 – Ryan Stokes Industrial Services - Boral Financials

Boral delivered strong FY24 financial results, with revenue increasing by 3 per cent to $3.6 billion, and EBITDA growth of 32 per cent to $599 million.

EBIT margins expanded to 10.5 per cent, leading to a 61 per cent increase in EBIT to $372 million. Boral is now achieving our double-digit EBIT margin objective, and we believe there is more that can be delivered.

EBITDA cash conversion of 104 per cent was up 15 per cent.

Boral will continue investing to strengthen its core operations in FY25, with a focus on extending quarry-life and enhancing the heavy mobile equipment fleet to operational efficiency.

We are also pursuing adjacent growth opportunities in recycling and surplus property, including a partnership with Logos to co-develop the Deer Park property in Victoria.

Slide 15 – Coates

Slide 16 – Ryan Stokes Industrial Services – Coates Highlights

Customer activity remained robust at Coates in FY24, particularly in the West and North regions. An industry-wide skilled labour shortage of up to 200k FTE continues to impact project delivery, causing commencement delays. This is expected to defer, not reduce, the opportunity.

Coates’ focus on driving operating leverage and efficiency was critical to delivering earnings growth.

In FY24, operational efficiency gains were largely driven by the continued rollout of the huband-spoke branch model, technology-driven transport, customer service improvements, targeted non-operational headcount reductions, and cost initiatives.

These efficiency and productivity gains position Coates to better serve customers and capitalise on what are expected to be positive market dynamics into FY25.

Slide 17 – Ryan Stokes Industrial Services – Coates Financials

Coates total revenue of $1.1 billion was relatively flat in FY24. Hire revenue was up 1.5 per cent with strong customer activity in WA and Queensland, highlighting the advantage of Coates’ nationwide footprint and diversified end markets.

Operational efficiency gains and a focus on cost control delivered EBITDA margin expansion to 46.2 per cent, and EBIT margin expansion to 28.6 per cent. This represents the eighth consecutive year of margin expansion at Coates and resulted in a 9 per cent increase in EBIT to $327 million.

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Time utilisation remains within the best-practice target range at 60 per cent for the year, down 2 per cent on growth in the hire fleet.

Operating cash flow of $505 million was up 6 per cent, with EBITDA cash conversion of 96 per cent consistent with FY23.

We continued to invest to support customers and our growth ambitions in FY24. This included expanding the hire fleet by $83 million to $1.9 billion on an original cost basis. The fleet growth was supported by M&A, including the $40 million acquisition of GTH in NSW.

Slide 18 – Energy

Slide 19 – Ryan Stokes Energy – Beach and SGH Energy

Beach Energy showed signs of earnings and operating momentum in Q4 FY24, with quarteron-quarter production and revenue increasing by 6 per cent and 10 per cent, respectively.

We welcome Brett Woods as Beach’s new MD & CEO, and will continue to support him through SGH’s chair and Board representation to deliver an ongoing strategic refresh, with key targets including:

• A 30 per cent reduction in headcount, with 26 per cent delivered to date; and

• A 30 per cent improvement in field operating expenses to below $11 per barrel of oil equivalent by FY26.

In FY25, Beach will focus on project delivery, maintaining cost discipline, and executing its refreshed strategy to deliver shareholder value.

At SGH Energy, construction of the Crux LNG backfill project is ongoing, with the first cargo of LNG expected in CY27. SGH’s share of Crux development capital in FY24 was $147 million.

Resource volumes at the Longtom gas field were independently verified in FY24, and a MoU has been signed with Cooper Energy to explore infrastructure access for Longtom production.

Slide 20 – Media

Slide 21 – Ryan Stokes Media – Seven West Media and Other Media

Seven West delivered FY24 revenue of $1.4 billion and EBITDA of $187 million, down 5 per cent and 33 per cent, respectively. The result was impacted by weakness in the Television advertising market and cost growth.

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Seven West completed an organisational restructure towards the end of FY24, including the implementation of a cost out program, and a redefined operating model to drive improved performance across the business.

The restructure comes with a refined purpose to build a better, digital media business that delivers sustainable and growing earnings and cash flow.

SGH’s other media interests recorded an EBIT loss of $6.5 million, largely reflecting a $7.8 million loss on CMC. Our investment in CMC has delivered an IRR over 20 per cent through the life of the investment.

I will now hand over to Richard to take you through the SGH FY24 financials.

Slide 22 – Richard Richards Title Page

Thank you, Ryan and good morning.

Slide 23 – Richard Richards Profit and Loss

SGH delivered on upgraded guidance, with underlying EBIT up 20 per cent. Revenue rose 10 per cent to $10.6 billion, driven by strong customer activity in Industrial Services, particularly WesTrac, with modest growth in Boral and Coates.

Expenses, excluding D&A, increased 8.5 per cent to $8.9 billion, predominantly due to the 20 per cent increase in COGS at WesTrac, required to deliver their 19 per cent sales growth.

Cost management across SGH enabled margin expansion. EBITDA increased 14 per cent to $1.9 billion, while D&A rose just 2 per cent to $511 million, highlighting disciplined capital reinvestment. This delivered amplified EBIT up 20 per cent to $1.4 billion.

Net finance expenses of $294 million was 4 per cent higher, reflecting higher debt associated with the Boral acquisition, partially offset by higher interest on cash deposits.

Underlying NPAT rose 30 per cent to $914 million, while statutory NPAT decreased to $522 million, with the difference largely referrable to significant item losses from our equity-accounted investments.

Slide 24 – Richard Richards Significant Items

SGH’s statutory result includes $360 million in pretax significant items. This comprises $245m, being our share of Beach’s impairment of E&P assets, and $134 million due to the impairment of SWM.

Other pre-tax Significant Items provide a net benefit of $20 million, including gains from the sale of Sykes and Coates Indonesia of $76 million, partially offset by Coates redundancy

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costs of $7 million, Boral direct transaction costs of $14 million, and SGH’s realised property gains of $5 million.

After accounting for $9 million in significant items related to net finance expenses and a tax expense of $32 million on these items, the total significant items expense was $392 million after tax.

Slide 25 – Richard Richards Business Unit Earnings

This slide presents an earnings bridge detailing underlying EBIT for each business unit, and a reconciliation to statutory EBIT.

WesTrac's EBIT increased $123 million. Revenue growth was supported by strong customer demand for new machines, parts and components. The half per cent margin expansion reflects disciplined cost control and operational efficiencies.

Boral’s EBIT grew by $140 million. This was achieved through 3 per cent revenue growth driven by an improved go-to-market strategy that enabled pricing traction, and improved cost control, delivering 3.8 per cent margin expansion to 10.5 per cent.

Adjusted for the sale of Coates Indonesia, Coates delivered 1 per cent revenue growth. Accordingly, the $27 million EBIT growth reflects margin expansion, delivering EBIT margin of 28.6 per cent, up 234 basis points on cost management enabled by delivery of its huband-spoke branch model.

Earnings from our Energy segment declined by $15 million, largely reflecting SGH’s share of Beach’s $44 million NPAT decline.

Media’s contribution to SGH EBIT decreased by $36 million.

In aggregate, disciplined execution across our industrial services businesses delivered $233 million increase in underlying EBIT to $1.4 billion, or $1.1 billion statutory EBIT after accounting for $351 million of Significant Items.

Slide 26 – Richard Richards Cash Flow

Underlying Operating cash of $1.3 billion was down $259 million, largely reflecting the $500 million investment in working capital at WesTrac, split evenly into machines, parts & PEX inventory. This investment was necessary to meet growing customer demand and support operations and growth in FY25.

The increase in working capital was partially offset by stronger customer receipts across our other industrial services businesses.

EBITDA cash conversion at Boral and Coates remained strong at 104 per cent and 96 per cent respectively, while at WesTrac contracted to 28 per cent.

Combined, these businesses delivered 68 per cent EBITDA cash conversion for SGH, down 27 per cent from prior year.

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Net interest was flat at $255m, with a $14 million increase in financing costs, offset by an $18 million increase in interest on cash deposits at Boral.

Net income tax rose by $152 million to $236 million, reflecting SGH's improved earnings and Boral’s return to a tax-paying position.

Net investing cash outflows were $468 million, reflecting higher PP&E expenditures, offset by the sale of the Sykes business for $101 million, and Coates Indonesia for $64 million.

Net capex increased by $25 million to $488 million, mainly due to higher fleet investments at Coates, partially offset by reduced expenditure at WesTrac following the completion of facilities expansions.

Payments for production and development assets totalled $147 million, driven by drilling and fabrication activities in the Crux joint venture.

Net financing cash outflows were $563 million for the year. This was primarily due to $607 million paid to acquire non-controlling interests in Boral, $168 million in SGH ordinary dividends paid, and $68 million in dividends paid to Boral minority shareholders, partially offset by $444 million in net proceeds from borrowings to support the Boral takeover.

Closing net debt increased by $316 million to $4.3 billion, driven by the working capital investment at WesTrac and additional debt associated with the Boral transaction, partially offset by strong operating cash flows at Boral and Coates.

Slide 27 – Richard Richards

Balance Sheet

SGH’s net assets decreased by $497 million to $4.1bn in FY24, primarily due to technical liabilities from the Boral transaction and impaired equity accounted investment values, partially offset by higher net working capital.

The increase in trade and other payables largely reflects a $335 million technical liability related to SGH’s obligation to compulsorily acquire the remaining 5.1 per cent of Boral shares outstanding as of 30 June. The $247 million scrip component of this liability was unwound following the completion of the acquisition on 4 July.

The $405 million decline in investments reflects the mark-to-market of SGH's investments in SWM and our share of Beach’s impairment of P&E assets over the year.

The higher net working capital was primarily due to a $490 million increase in inventory predominantly associated with WesTrac, offset by $94 million increase in payables excluding the Boral transaction liability and $135 million lower receivables.

These movements resulted in a net debt of $4.6 billion, or $4.3 billion excluding leases, representing an 8 per cent increase over the prior year.

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Slide 28 – Richard Richards Capital and Liquidity Management

After adjusting for a $71 million positive mark-to-market on debt-related derivatives, SGH’s adjusted net debt to EBITDA, or leverage excluding leases, contracted 3 per cent to 2.2x. SGH’s leverage has subsequently peaked post concluding the Boral transaction at 2.26x in early July, and we expect to reduce this naturally through strong operating cash flows in FY25.

SGH entered into a 12-mth $700 million Bridge facility to support the Boral acquisition, which was drawn in May and fully repaid in July.

SGH finalised a $600 million Asian Term Loan tranche, attracting strong credit support from new lenders for SGH’s credit and core thematic exposures and was 3x oversubscribed. This 6-year tranche priced inside of our existing tranches and funded in July. The ATL proceeds were used to fully repay the Bridge.

The SFA now provides a limit of $2.5 billion, with no significant corporate maturities until FY28.

WesTrac also completed a $410 million USPP in January, which was also over 3x oversubscribed, demonstrating market confidence in our financial position and capital management strategy.

This positions SGH with long-term debt within the operating businesses, matching the longdated nature of their assets, and a revolving corporate syndicated facility to support working capital and other investments.

SGH simplified its capital structure over the year, settling the $366 million equity swap, the $250 million Exchangeable, and the majority of the $46 million Convertible.

The Boral NCI was also eliminated post-acquisition in July.

At 30 June 2024, 48 per cent of SGH debt was fixed at an average rate of 4.8 per cent, and an average duration of 6.3 years. Our all-in funding cost stands at 5.7 per cent, with a weighted average maturity of 4.1 years, which increases to 4.6 years after drawing the ATL and repaying the bridge.

I will now hand you back to Ryan.

Slide 29 – Ryan Stokes Closing Messages and Outlook Title Page

Thank you, Richard.

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Slide 30 – Ryan Stokes Closing Messages and Outlook – Boral Transaction

The delivery of the Boral transaction was a key outcome for the year.

Boral is a close strategic fit for SGH and is strongly aligned with our capital allocation principles and operating model.

Boral faces into the infrastructure and construction pipeline and is now Australian-focused, where SGH has a proven ability to drive performance.

The business has market leadership and improving cost discipline, which was highlighted by the significant FY24 earnings growth.

It also has privileged assets that provide a competitive advantage, such as its quarry and concrete batch plant network.

Boral’s rapid performance improvement and move to a net-cash position during the year drove the timing of the acquisition. Importantly, owning 100 per cent of Boral provides SGH access its strong cash flow generation, which can be deployed into the most accretive opportunities.

Slide 31 – Ryan Stokes

Closing Messages and Outlook – FY25 Priorities

Looking to FY25, SGH will drive performance outcomes across our businesses, through maintaining strict operating and cost discipline, and integrating Boral to support its "Good to Great" performance journey.

SGH will also continue to invest to strengthen our core and support growth and capacity, while driving operational efficiencies and margin.

At WesTrac, that investment will focus on service capacity and working capital as required to support customer activity and growth.

Boral will invest in Heavy Mobile Equipment and the quarry network to improve operational efficiencies, strengthen the upstream network, and extend asset life. It will also continue to develop growth adjacencies in recycling and surplus property.

Coates will explore additional programmatic M&A to increase market share and grow the hire fleet.

The disciplined execution of the operating model combined with these investments provides a strong platform for SGH to continue to deliver earnings growth, stable and growing dividends, and superior TSR for shareholders in FY25 and beyond.

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Slide 32 – Ryan Stokes Closing Messages and Outlook – Guidance

The positive outlook for our core sector exposures, adjacent growth opportunities, and FY24 investment in working capital supports Group earnings guidance of: “High single-digit EBIT growth expected in FY25.”

Strong demand for Services, combined with inventory investment and one of the strongest Capital sales pipelines in over a decade supports a growth outlook for WesTrac.

At Boral and Coates, both businesses are well-placed to leverage productivity gains from FY24, supported by a robust infrastructure and construction pipeline.

Beach Energy’s refreshed strategy and Waitsia-contingent production guidance of 17.5-21.5mmboe underpin a positive outlook.

We look forward to effectively capturing these opportunities to deliver for our customers and shareholders in FY25.

Thank you for your interest and continued support.

Slide 33 – Ryan Stokes

Appendix and Disclaimer

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TRANSCRIPT OF Q&A

• Operator: Thank you. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset before asking your question.

• Your first question comes from Nathan Reilly with UBS. Please go ahead.

• Nathan Reilly: Morning, gents. Two questions for me. The first one just in relation to the growth outlook which you provided for both Boral and Coates, Ryan talking to I guess, the productivity gains which you're looking to balance against the underlying demand and activity, just want to talk us through your assumptions around both those factors, please?

• Ryan Stokes: Sure. Boral and Coates will both continue the work on operating leverage and efficiency gains. We do expect market conditions to provide a really favourable outlook in sectors and I think it's worth stepping into a geographic breakdown of that. There has been strong growth in regions. We call out West and North and I think we're starting to see that activity start to step up in East.

• South remains a broader question from a Coates perspective, but overall we do see the breadth of that network providing a basis for opportunity. But our focus is on how we continue to unlock further efficiency through the Coates network, and where it makes sense, looking at certain programmatic M&A. But I'll just preface, the guidance is not conditional on that, it's on the organic steps.

In relation to Boral, we see the outlook broadly positive from a dynamic when we couple the focus on pricing discipline and overall activity. With both factors we see positive market dynamics playing through with a net continuation of operating leverage and that's probably getting more pronounced with Boral because we definitely see that EBIT margin target stepping up from low teens to higher. So, that's definitely going to be an opportunity in FY25.

• Nathan Reilly: Got it. Thank you. And my second question, maybe one for Richard, you flagged the strong operating cash flow conversion that you're targeting for FY25. Do you have a leverage target that you're expecting to achieve by the end of FY25?

• Richard Richards: We certainly see it’s peaked at 2.26, Nathan, and we would see it coming down to something close to 2.1, and that's assuming no other major transactions. The strong operating cash flow that was delivered from the businesses, despite the $537 million of investment in working capital at WesTrac, we would certainly expect to pull some of that WesTrac

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working capital back this year, and that will support continued deleverage of the Group.

• Nathan Reilly: Thanks. And just a final question that you mentioned, just in relation to that WesTrac working capital investment, can you give us a sense of what the mix of parts versus machinery is in that $0.5 billion investment?

• Ryan Stokes: It's probably about, just a rough rule of thumb, about a third of that's machines, and two-thirds parts and components, as a rough number. If you look at the growth in parts revenue, and assume where we target from a return-rate perspective, we're definitely seeing that overall inventory needs to step up to meet the customer demand, coupled with what we're seeing as further demand growth perspectives into the year. So that's probably a broad mix in that working capital.

• Nathan Reilly: That's great, thanks for taking my questions.

• Ryan Stokes: All right, thanks, Nathan.

• Operator: The next question comes from Joseph House with Bell Potter Securities. Please go ahead.

• Joseph House: Morning, Ryan and Richard. Thanks for taking my questions. Firstly, your effective tax rate in FY24 was 18.8 per cent. Typically, your effective tax rate has hovered around that 20 to 22 per cent mark in the past. Could you explain what drove this lower tax rate and should we be expecting higher tax rates in the near term?

• Richard Richards: Thanks, Joseph. It's an interesting one. I think what you'll find is the way that we've segregated the effective tax rate, you've got about $249 million as a Group effective tax rate for the year, and if you then think of the differentials of about $32 million on the significant items, it gives you about $211 million referable to underlying.

The difference is the proportion of earnings sitting at a Group level, and on an underlying basis for the equity-accounted investments which we recognise on a post-tax basis, is actually higher. The other element is we received $200 million of fully-franked dividends from Boral during the year. We recognised some tax losses, both revenue and capital, during the year, just given the nature of the transactions we completed, and in fact, Boral as well.

So that being the case, we would expect the growth in the proportion of earnings referable to our Industrial Services businesses to actually increase year-on-year. In that sense, we would expect the prevailing corporate tax rate that most corporates would have of around 30 per cent,

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we think we'll probably be doing somewhere in the order of 26 to 27 per cent next year, all other things being equal.

• Joseph House:

• Ryan Stokes:

• Excellent, that's really clear, thank you. And just at Boral, how should we think about margins heading into FY25? It seems the 10-plus percent EBIT margin might be the new norm. You know, what initiatives will be in focus in FY25 to mitigate cost growth, and is it too early to assume we might see some benefits flowing through from your multi-year capex programme at your quarries and for your heavy mobile equipment fleet?

• That's a good question across those broad initiatives at Boral. If I try and pick a couple of those questions, in relation to the EBIT margin result, it's been a fantastic result and credit to the team. I think Vik and his team have driven a huge amount of change and performance in a short period of time. But our vision, if you go back to our presentation material probably three years ago, we called out that target as an ambition and certainly it's really pleasing to get the business to that.

We do see potential beyond that margin, and what gives us confidence is, the Australian construction materials sector is a really robust sector. Compared to, if we look at our global peers and the EBIT margins they are delivering, it does highlight that heading towards a mid-teen margin is something which is achievable. We're not going to get there quickly, but fundamentally, that starts to become closer to the ambition, if you like.

That is definitely going to be a focus for us. We do see more opportunity there. We are completing that performance journey and I think Vik could be first to admit that there's more we need to do. Certainly that notion of cost control, price leadership, operational efficiency, go-to-market agility, will all be part of that. So that's going to be a key component.

In relation to the question on HME investment and extending quarry life, I'd say that quarry life isn't really going to show an earnings benefit in the short-term, but long-term, yes. In our view, the company has probably under-invested in that area. We're going to be making investments to ensure we keep that quarry life. That's going to be an underpinning of future growth and the way we think through that is we look at that growth over the long-term, so it's definitely going to be an important investment.

Some of that won't necessarily be pure capital investment. It'll just be through how we extend through government leases and approvals, etcetera. But on the HME, we do think that will generate an improvement or reduction in operating costs and R&M, etcetera, over time as well as operating efficiency. Some benefit will play through in that investment in an earnings context.

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The performance journey is a very complex series of work on a number of different fronts where we need to execute effectively and instil that performance uplift we expect. Part of that growth dynamic for FY25 will be further delivery on that performance journey.

• Joseph House: Understood. And just lastly, at WesTrac, are you experiencing any supply shortfalls for large diesel engines just given the growth in data centre construction around the world? And if you are, is that likely to impact any rebuild opportunities in FY25 and beyond?

• Ryan Stokes: That's a fascinating question because if you're asking that in February we would highlight that as a fundamental issue we have to manage. I think we probably did highlight the large engine aspect. For Caterpillar, it's been a very concerted effort over the last 12 months to address the supply aspect given there's been a step-up in demand both on the rebuild aspects as well as new engine demand, and you're exactly right, data centres are a massive demand for new engines.

They've worked to improve that supply chain, so I'd say as we complete the year, we've seen a big step-up in that supply. Part of that working capital build up has been a growth in parts inventory and a lot of that's going to play into that large engine attribute. We've seen that improve. It's still a factor we need to manage, but less of a factor today I'd say, just given the work that Caterpillar has done on supply chain. We're starting to see it ease, if you like, that pressure point ease. So overall we don't envisage that will be a constraint for growth in FY25.

• Joseph House: Excellent, that's all from me. Thanks for taking my questions.

• Ryan Stokes: Thanks.

• Operator: The next question comes from Julian Mulcahy with E&P. Please go ahead.

• Julian Mulcahy: Ryan, I'm just interested in how you sort of see the year playing out because you had revenue for both Boral and Coates fall in the second half and consistent with your comments about an air pocket recently in the press. So should we kind of expect that revenue will be down first half before a rebound in the second half for both of those businesses?

• Ryan Stokes: No, I mean firstly, I think this is probably worth putting some context around that notion where, the outlook in demand is positive. We see an ability to step through that. We don't see a play through in that volume. If there is any air pocket, I don't want to use that term, we've been living through it the last six months. The reality is, we emphasise, what we see in demand, we expect to play through. We probably see further growth in calendar 2025 as that step-up in residential dwelling supply that has to play through from an overall supply perspective.

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We're expecting demand to remain relatively stable through the year. We're not seeing a massive fluctuation, but we are probably more confident that will start to bolster into H2 as we see activity stepping up. But overall, it's not a material factor from a half-on-half dynamic. We do see it being relatively consistent.

Looking through the result and the elements on a half-on-half basis, WesTrac had a stellar first half, we probably see that moderate to some degree as we’ve seen in the second half, but fundamentally, the overall demand we are anticipating to be broadly consistent through the financial year.

• Julian Mulcahy: Right. And in terms of like, the movement on costs, I mean, the figures, you did very well on costs in both Boral and Coates in the second half, so offset that revenue decline. So, have you got a lot more room to move on costs if it is a bit slower initially?

• Ryan Stokes: I'd say it's a constant focus and there's a firm belief that we need to continue to look at what we can do to improve our business. What we can do is be more targeted from a region basis. So if we're seeing, and we are reacting on that at the moment, from a Coates perspective, that southern market is slower than we expect, we can reallocate gear and resources to actually move them. It's one of the strengths of the Coates model, that ability to reposition, so if demand’s stronger in Queensland, we can actually reallocate and re-orientate the business towards that. And that's playing through at the moment, so I'd say in short, the answer is yes. There's more we can do and the more we'll need to do, and more that Boral has under its plan to deliver on its potential, and more that Coates will do in response to where there's opportunities, where we need to deploy more gear and where we can pull gear from, and overall labour resources as well. That's a constant focus for us and we do think that there's more that we need to push on for both businesses.

• Julian Mulcahy: Right. And just finally in your guidance, in the past you've had a growth rate for the industrials as opposed to the Group as well, you haven't done it this time, is it fair to say that WesTrac will be the major driver of the growth this year?

• Ryan Stokes: That's a really interesting question. On a dollar basis maybe. Boral is going to be pretty strong on a percentage basis as well, but if you look at the Group today, 90 per cent of the earnings orientate towards Industrial Services. We figured the Group guidance was probably sufficient and deals with what may play through more broadly. And as we sit here today, we are confident in that outlook and our ability to deliver to what we see as a pretty robust demand dynamic. Overall, I think that both WesTrac and Boral have a pretty strong opportunity set in front of them

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and Coates is going to have a growth opportunity but not quite the same percentage.

• Julian Mulcahy: Thanks, Ryan.

• Operator: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Simon Thackray with Jefferies. Please go ahead.

• Simon Thackray: Thanks very much. Good morning, Ryan. Good morning, Richard. Thanks for taking the questions and congrats. I just want to repackage some of Julian's earlier questions on cost. And you gave some very helpful answers there. But flipping it on its head, what about portfolio pricing expectations as we move forward for Boral and Coates? And I ask that question in the face of expectations for end markets, which you've been pretty clear on. But, in particular, given the very high level of inflation in infrastructure costs, it seems to be a recurring discussion topic with central banks and government at the moment. How should we be thinking about price in this inflationary environment for both Boral and for Coates?

• Ryan Stokes: Pricing is certainly an important aspect. We're not in the same environment we were, probably 18 months, two years ago, where there was strong pricing power in that area. Our view is on ensuring that we can cover our own inflation dynamic with pricing and continue to push that in a disciplined way. If I think through the broader issues for the industry, which I think is where you're going with the central bank, frankly, I think there's more in regulatory costs and processes that's driving inflation, more than what concrete or hire gear would be in reality. There's broader issues with that inflation.

• From our perspective, we've had a reset of the effective price of construction materials, and over time got better returns from our hire equipment. We'll just need to continue that same discipline. In our view, the growth and the performance result shouldn't play through as pronounced through price in FY25. It's going to be through what we can do to drive more operational efficiencies in both businesses.

• Simon Thackray: Now, that's a good answer. Fair enough. Thanks for that. And then maybe just touching on your reference earlier to M&A and it was just a reference as a national operator, particularly for construction materials, but arguably relatively underrepresented in WA, your views on expanding your exposure or leverage to WA?

• Ryan Stokes: Okay, look to be honest, just when I talk M&A, I think it was more in reference to Coates and what we believe in relation to the opportunities out there to acquire fleet at reasonable values. It's a logical way to grow a fleet and I think Coates is operating at a level now where integrating

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businesses is quite accretive on the right terms. But we will be very disciplined around that.

In relation to looking at Boral’s footprint in WA, yes, we think that's an opportunity. We think that there's other opportunities to invest and grow. But overall, we'd like to expand that position in WA and that could be through organic investment to be honest, because for us, it's really about that downstream position, and if on the right terms, an inorganic opportunity was to come up, we'd have a look. But we have to remain disciplined in that context. We’ll we take a similar view in other jurisdictions as well.

I think the important part, and I made a reference to it, if we look at SGH today, we've got three really strong cash flow businesses. Richard's point around the strength of balance sheet means that we can deploy capital across where we think there's the best return and opportunity. That's a unique attribute of SGH. So we'll look through that, where it makes sense on anything in relation to either organic or any inorganic step. But I think today we've been very disciplined on inorganic steps and we'll be retaining that discipline as we go forward.

• Simon Thackray: Good to hear, and then Richard, a really boring one, I apologise to you. Just your comments on the leverage in the margin and the low increase in D&A cost of 1.7 per cent year-on-year reflecting disciplined capital allocation, cost recovery, pricing. What's the outlook for D&A? What's the range for D&A in FY25, under the current capital allocation plan? And can you give us a bit of a steer on that just makes life easier?

• Richard Richards: We wouldn't see D&A significantly changing next year. In terms of capital investment, we would see capital investment stepping up a little, and that really just reflects the net incremental investment in the energy assets. I think you could expect the energy assets, in terms of Crux, incrementally we'd be talking about another $100 million of capital in Crux based off current views, which given they’re in-field and drilling, are pretty well formed, and the rest of the businesses.

So we would expect all up, net capex in the year to be a little over a $100 million greater than this year, and then with the catch-up capital that Ryan referred to on HME, we would expect that edging up close to $800 million.

Simon Thackray: Perfect. Thanks so much. I appreciate you taking the time.

Operator: The next question comes from Joseph Kusia with Goldman Sachs. Please go ahead.

• Joseph Kusia: Thanks Ryan and Richard. So just firstly on the adjacent growth opportunities you've highlighted with Boral. Can you maybe give us a sense for the size of the opportunity in enhancing the C&D waste

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position and what kinds of investments would need to be made there? And perhaps secondly, can you just elaborate a bit on the property strategy particularly the partnership with LOGOS on developing Deer Park?

Ryan Stokes:

Yes. The primary reason we called that out was just to ensure we're emphasising where we see Boral, and our primary focus has been on getting the performance journey in place and locked in. As I said earlier, the team have done that, and it is a great result in that core construction materials business to see the EBIT margin where it is. We do see those adjacent growth areas, and we definitely think recycling, and leveraging the Boral asset position, we have inherently in using some of those recycling products, as an opportunity and it's one that we want to explore.

I'd say at this point, it's probably too early to outline what we see in that context. But what we're just trying to emphasise, there's growth expectations in core construction materials and there are additional growth avenues within Boral. It's a bit similar with property where we like the Deer Park site has been one we've spoken about over time. It's been quite heavily portrayed through the independent expert report, as far as the opportunity. We are really trying to emphasise our pivot in taking control of Boral from a prior strategy to divest of surplus property, to where we can look to hold, redevelop and exploit it over the long term. Both are elements we call out. Recycling’s had good growth in FY24. We expect growth in FY25, but at this point, we wouldn't really have any more kind of detail on any inorganic steps other than to say we do think it's compelling growth and an area we'll focus more attention on into FY25.

• Joseph Kusia: Great, thanks for that colour. Perhaps on Coates, are you seeing any sort of broader industry dynamics that are supportive of hire as opposed to sort of construction companies owning their own equipment? I know you've kind of spoken about that a little bit in the past, but kind of keen to hear if there are any updates on that? And just in general, how you sort of seeing the competition in the hire market evolving at the moment?

Ryan Stokes:

• Yes, and we've spoken about that because we think that's a long duration trend where customers are increasingly looking to rental to solve their equipment requirements. If you think the nature of projects and what's required to win major government projects today, it isn't the requirement to have a large pool of gear.

There is an expectation that as a head contractor, you can subcontract and bring gear in where required and rely on a rental market for that. We’ve seen that in other jurisdictions. I think that's playing through

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in Australia as well. We do see that growth dynamic over time playing through as far as the demand for hire, or the increasing hire as a percentage of work done. We think that's a structural dynamic that is playing through.

In relation to competition, where markets start to go flat to negative, you definitely see an increase in competition. We've been focused on maintaining that price leadership as the market leader and that's been an important discipline for us.

I think that the value that Coates has, is an ability to move gear around, which means that we can bring gear into markets where there's stronger demand and pull out of markets where it's weaker. That's definitely playing out in the East Coast and what might be elements in Victoria. We're seeing growth in Queensland. We're seeing a lot of commencements occurring in New South Wales.

So that's a key strength of that Coates platform, which means it gives us a better position to compete. Overall, we're seeing the market probably still pretty consistent. I'd say that there's probably a growing dynamic where over time, there'll be increasing concentration to fewer, bigger players, which will, in our view, improve returns.

• Joseph Kusia: Great. And how's the Coates solution business performing?

• Ryan Stokes: We've had a much greater transparency into the P&L in that business. I'd say on Engineering Solutions, it's performed very well. We're winning work in that context and making superior margins. On Industrial Solutions, we've got some work to do on our go-to-market strategy and that transparency in the P&L has meant better insight into that. The lumpy nature of some of that work, industrial shuts, etcetera, mean that we are reviewing and adjusting the workforce to be more variable to deal with some of that work, as an example.

But overall, it's a key growth factor for us and does present a meaningful contributor to earnings. We are continuing to push that go-to-market enhancement and improvement. It'll be a big focus for us in FY25 as well.

• Joseph Kusia: Great, thanks. And just last one from me on a WesTrac. Can you maybe talk about the aging of the fleet and kind of what the average lives are of the current fleet, how that's changing and perhaps any additional colour on how that's impacting the parts business?

• Ryan Stokes: I'll give you some broad context but Richard can give the data point on the number. If we look at how customers are operating gear today, the notion of running components to their appropriate life is something

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that is happening more and more, which means you can extend that frame life out and look to continue even through rebuild of that frame to have that frame extend longer and longer. Having gear in territory working and looking to rebuild seems to be a bigger focus for customers.

So we are seeing that strategy play through. We are seeing a pretty active rebuild attribute. It's a logical maintenance strategy when you can have aged gear work at the same productivity as new gear through that component management. And our job in being able to rebuild individual components means that we've become very integrated into that whole maintenance operation. Richard, fleet?

• Richard Richards: Sure Ryan. It's really relevant when we talk to mining fleet. We've got roughly 8,000 mining units currently in operation in territory. If we have a look between the two states, in terms of WA, despite the significant investment in new fleet, the average age of fleet has actually increased by effectively 0.2 of a year. So it's gone up from 11.0 to 11.2. In terms of New South Wales, it's actually gone up, funnily enough, by 0.2 again from 13.0 to 13.2, just reflecting, I suppose, the different investment histories between New South Wales and WA. So New South Wales has a slightly older fleet.

• In terms of where that sits against historical averages, that's probably, in terms of New South Wales, a little higher than historical, and in WA, it probably come down just a tad with the significant investment at Boddington KCGM and some of our other customers over the last two years.

Joseph Kusia:

Perfect. Thank you. That's all for me.

Operator:

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

[END OF TRANSCRIPT]

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