Invesco DWA Industrials Momentum ETF Price & Performance (PRN)

Good morning, and thank you for joining our results call for the first half of FY 'twenty five. My name is Mark Norwell, and I am the Managing Director and CEO of Printer. Presenting alongside me today is Michael Allis, our CFO. Starting on Slide three, I'd first like to provide a quick overview of our purpose, our businesses and our overall objective. At Prenti, our purpose is to create enduring value and certainty. We are focused on offering rewarding careers for our people and empowering them to make a difference in a safe and respectful workplace. We care and support the communities in which our people live and work, and we look to collaborate with our clients to deliver smarter solutions for a better future. Ultimately, our focus on our people, communities and clients delivers value for our shareholders. With almost forty years of experience in Australia, over three decades of experience in Africa, 15 Years in North America and a decade in Europe, we have a global footprint and critical experience competing in these markets. On the Slide four. Our strategy has been to build a diversified and global portfolio of mining services. We have three operating divisions, each with several client facing brands who deliver a wide range of mining related services.

Contract mining contains Bamiko, AUMS and AMS, each with industry leading expertise in hard rock, underground and surface mining. Bamiko is our most widely recognized brand in contract mining with its global footprint and almost forty years of operating expertise. AUMS and AMS are leaders in African mining with a proud history of operating both at surface and underground. In addition, we have the Orlogy business, which is a technical services and study business that adds value internally and externally. The Drilling Services division was created from the combination of Ozdrill and the acquired DDH brands of DDH1 Drilling, Ranger, Strike and Swick. Each brand has unmatched expertise in particular areas of drilling specialization and the combined scale of the business, now number two globally, is delivering identified cost synergies. Mining Services contains a portfolio of businesses delivering value adding mining and technology services. The previous IDOVA division has been incorporated into this structure with a targeted product development focus and lower cost profile. In total, we have over 10,000 people working in 12 countries. By revenue, we remain predominantly exposed to gold and underground operations. Underground operations are complex, requiring specialist operators and technical capabilities, which takes time to develop but provide a high barrier to entry from competitors.

And given the current and forecast gold price, along with our scale and increasing shift towards underground mining, we are positioned to capitalize on further upside. By our people delivering on our purpose and through effective management of our portfolio of businesses, our objective is to safely generate consistent and strong cash flows through economic cycles to create superior shareholder returns and enable long term growth. Slide five, financial summary. Our financial results are highlighted by record revenue of $1,730,000,000 EBITDA of $323,000,000 EBITDA of $155,000,000 and NPAT A of $82,000,000 These results are in line with our internal forecast in support of our full year guidance. Leverage has increased from thirty June twenty twenty four to 0.9 times, but remains flat when compared to the prior half year result, which again was expected with full year guidance still between 0.6 times and 0.7 times. Our Board has authorized the payment of a $0.03 interim dividend compared to $0.02 in the previous first half. This is consistent with the dividend policy established at the end of FY twenty twenty four, targeting a payout ratio of 30% to 40% of underlying MPAD A and demonstrates the positive outlook by the board and management.

We are also pleased to reaffirm all elements of our guidance with tailwinds expected to benefit each division in the second half. In particular, it is worth highlighting our free cash flow defined as net operating cash inflow after interest tax and net CapEx, including staying business and growth capital. At thirty one December twenty twenty four, free cash flow was negative $11,800,000 compared to negative $8,000,000 in H1 FY 'twenty four. However, in the early days of January 2025, we received several late debtors that were due in December. In total, dollars 42,400,000.0 was received demonstrating our strong free cash flow guidance of greater than $150,000,000 for FY 'twenty five remains on track. This confidence is evident in the declaration of the dividend for the first half. The first and second half SKU is similar to what we saw in FY 'twenty four and aligns with our internal forecasts supporting our confirmation of guidance. On to Slide six, operational highlights. I'd like to note some of the important operational highlights delivered by our hardworking and committed people during the first half. Across the business, we are making positive progress on key safety initiatives, although with safety, we can never get complacent.

We want all our people to return safely at the end of every shift, so our focus on critical risks, assurance and training of our people is front of mind across the entire leadership team from the group executive to our front line leaders. The Drilling Services division delivered strong results, particularly the operational performance of SWIC and Ausdrill. Across the division, we have consistently seen high utilization in production drilling, but exploration activity remains low. While this appears to be improving, the sector is still below historical averages. We continue to believe exploration activity will increase during the second half of FY twenty twenty five. Despite the lower exploration activity, the DDH1 drilling and strike businesses still managed to remain profitable at the divisional level, demonstrating excellent cost control discipline and the synergies that have been unlocked from the increased scale of the division. In combination, the Prenti Drilling Services division is now the second largest in the world when measured by meters drilled. Consequently, this division is positioned very well to benefit from the forecast increase in activity. Our largest division, Contract Mining, has produced another typically dependable half year result. Contract Mining represents 72% of our group revenue and is an incredibly reliable business.

The scale of the business means that it is not dependent on any single project. As projects naturally roll off due to commodity price fluctuations or end of mine life, people and equipment can be readily transferred to other projects. Some recent contract announcements such as Baminko's first project in The USA demonstrates the growth opportunity ahead. More than $2,000,000,000 worth of contracts are currently in late stage negotiations and expected to be announced during FY 2025. Slide seven, group performance. This slide illustrates the key financial metrics across the group. Overall, group performance delivered record revenue for a half year of 1,730,000,000 EBITDA and EBITDA were in line with our expectations for the first half, and our full year guidance remains unchanged. EBITDA margin decreased slightly compared to the first half of last year, but as guided, the retraction in the first half was anticipated and is not unusual due to the timing of contract repricing. The sustainable growth trajectory of the group illustrates the benefits of our strategy to diversify our portfolio. The combined group has built sufficient scale and diversity in revenue streams to support consistent group performance through commodity prices and market cycles. An acceleration of earnings in the second half is expected to come in each division.

Contract mining will see contractual margin growth. Drilling services is expected to see increased utilization in exploration activities. And mining services will deliver an increase in fleet utilization for BTP. Onto each of the divisions starting with contract mining on Slide eight. As mentioned earlier, contract mining remains our largest division, generating 72% of group revenue and delivering 75% of group underlying EBITDA before corporate costs. While the result shows a slight decrease on the previous corresponding period, the underlying business remains strong. The resilience of contract mining is made clear when this result was achieved despite three underground nickel mines ceasing operations in calendar year '24 and Zone 5 in Botswana, delivering financial performance below expectations. Despite these challenges, the contract mining team continues to deliver strong results. Several contracts are in the final stage of negotiations, including Agnew in West Australia, Abwassee in Ghana and Mana in Burkina Faso, totaling more than $2,000,000,000 delivering us debt change in our work in hand. In addition, we continue to negotiate Zone 5 in Botswana. Beyond these near term opportunities, the pipeline for contract mining remains strong with many additional opportunities in Australia, Africa, Canada and The USA. On Slide nine, we can see that Drilling Services is demonstrating the value of the acquisition made in October 2023.

The delivery of $43,000,000 of EBITDA is a good result, especially considering the exploration market continues to exhibit historically low levels of activity. The production related drilling performed by SWIC, Ausdrill and Ranger has continued to experience strong utilization. These results demonstrate that drilling services has further potential for growth when the exploration market returns to historical levels of utilization. We expect an increase in exploration activity towards the end of FY 2025 and as many market commentators have already noted, there has been a small increase in equity capital market raisings amongst exploration companies already. It is important to note that the quality of the team within drilling services is best in class. The brands have strong reputations for delivering for their clients and I have been incredibly impressed with the quality of the leaders within each business. On to Slide 10, the Mining Services and I Dover division has had a challenged half. The decrease in performance was from the largest business unit in this division, BTP, which was impacted by unexpected idle fleet during the period. The fleet was idle for longer than anticipated in the first half of twenty twenty five, but the team are focused on returning the fleet to a utilization level in line with the historical average.

This target will deliver a stronger result for BGP in the second half. Supply Direct and Logistics Direct continue to perform in line with expectations and a strategic review of Idooba has been completed and revised business plans implemented. This change has focused the Idooba team on product development and lower costs. Mike will expand on Idooba financials and the go forward approach. Slide 11, people. As mentioned earlier in the operational highlights slide, our people are the foundation of our business. Our most important responsibility is to ensure the safety of our people. We are continuing to build a culture of safety and respect and enhance our management of critical risk that supports our objective of new adverse life changing events to our people. Some areas that progressed during the first half in support of keeping our people safe include increased critical control checks by line leaders up 23%, installation of multiple safety systems or trials of new systems including rollout of more fatigue monitoring systems in vehicles, a trial automated rod handler truck within drilling services and real time atmospheric monitoring of gases underground at Sunrise Dam. Dedicated safety coaches are now working in the field in support of our frontline leaders across all regions in contract mining.

Beyond these initiatives, we continue to progress our assurance activities, training and development of our people and working closely with our clients. Continuously improving our safety systems to deliver improvements is not a task that we can ever say we've completed. This is an ongoing effort of continual learning and improvement across the group. I'll now hand over to Mike, who will take you through the financial results.

Thank you, Mark, and thank you to those dialed in on the call today. Great to be here on my first results call as the CFO of Perenti, a company I've been very proud to work for over the last eleven years. Moving to Slide 12, which details the underlying profit and loss for the half. Mark has already touched on the key drivers to reach the record revenue together with the EBITDA and EBITDA results in the previous divisional slides. So I'll provide some more context on the interest and tax movements in the half. Net interest costs were $35,800,000 up $2,400,000 on the prior comparative period. This increase was primarily driven by the new U. S. Notes being issued in FY 2024 at a very competitive 7.5% interest rate, however slightly higher than the 2025 U. S. Notes. It's important to note the spread on the new notes tightened considerably, reflecting the improved credit and scale of Perenti. With our focus on gross debt reduction as evidenced this half, all things equal, you can expect our interest expense to reduce into future reporting periods. Moving on to income tax expense, underlying income tax expense for the half was $37,600,000 up $1,100,000 on the PCP.

The key driver of this was our profit before income tax increasing by 3.7% to $119,000,000 in the half. Our underlying effective tax rate reduced to 31.5%, which is pleasingly slightly down on the prior period. It is worth noting with the hard work of our tax team that the current effective tax rate is more than 3% lower than prior to the DDH1 acquisition. As called out at the time of the acquisition, significant tax synergies were available with the inclusion of the profitable DDH1 businesses and have been realized. The increased Australian earnings has enabled faster realization of the historical tax losses, therefore putting downward pressure on the effective tax rate. For those new to the Perenti story, we have just over $500,000,000 of Australian gross tax losses available as at thirty one December twenty twenty four. This will provide cash tax shelter for our Australian businesses for some years to come. Moving on to Slide 13, we outlined the reconciliation of our statutory results to the underlying results. Although pretty straightforward during the half, I'll provide some further context on the items. Firstly, we had $2,300,000 of restructuring and other one off costs. Primarily these related to redundancy costs as a result of our continued focus on overhead optimization.

Next item is the adjustment of net foreign exchange gains of $5,300,000 predominantly due to unrealized gains on intercompany loans and tax receivables. Adover product development costs were down 8% on the prior comparative period with expenditure of $6,700,000 in the half. Strategic review of Adover has been completed with revised business plans agreed, resulting in a narrow focus to delivering priority products, thus reducing spend profiles into the future. The team is making very solid progress on the underground simulation product that will be released into the market this calendar year. We are expecting $5,000,000 of product development expenditure in the second half of FY 'twenty five, reflecting a circa 33% reduction to the FY 'twenty four run rate. Consistent with prior periods, we have non cash amortization of the customer related intangibles of 22,600,000 for the half. As the majority of this amortization relates to the Bam Incot transaction that occurred in 2018, from FY 2026 onwards, you can expect the amortization to continue to reduce. This will benefit our statutory NPAT. The last point to this slide, we have net tax effects of all the adjustments of $8,900,000 to reconcile to the $63,500,000 of statutory NPAT for the half, which is slightly down on the prior corresponding period, which had a statutory impact of $69,800,000 To help you better understand the reduction, the statutory results for the first half of FY twenty twenty four included a one off non cash accounting gain on the DDH1 acquisition of $29,000,000 which accordingly had a material impact on the previous corresponding period.

Moving on to Slide 14, the statutory cash flow for the half year. The business delivered $229,000,000 of operating cash flows before interest and tax. Cash conversion is 71%, resulting in free cash flow after all capital expenditure of negative 11.85. As Mark discussed earlier and as highlighted on this slide, we received $42,000,000 of debtor receipts in early January twenty twenty five, with some of our clients paying a few days late. As shown on the slide, adjusting for the $42,000,000 of late debt receipts, our adjusted free cash flow was $30,600,000 with adjusted cash conversion of 84% in the half. Other call outs on this slide net interest paid is $34,200,000 up $3,800,000 of which $2,200,000 relates to accrued interest paid on The U. S. Notes redeemed in December 2024 that would normally be paid in the second half. Cash tax of $43,500,000 was up on the PCP predominantly due to the timing of international tax payments with cash tax in the second half of FY twenty twenty five expected to be slightly up. Onto capital expenditure, we continue to invest into our fleet with net capital expenditure of $163,000,000 in line with our depreciation. Moving into our financing activities, we had net debt repayments of $134,000,000 which reflects the USD 100,000,000 partial redemption of the 2025 U. S. Notes, reducing our gross debt and lowering interest in future periods.

As called out in our FY twenty twenty four results call, as this redemption occurred after October 2024, there is no premium payable on this redemption. On market share buyback activities for the half totaled $17,200,000 and $37,700,000 was paid in relation to the $0.04 final dividend declared in August 2024. In summary, the $30,600,000 of adjusted free cash flow in H1 is in line with our internal forecasts. The second half waiting for the earnings profile and the expected year end cash conversion has us on track to deliver our guidance of greater than $150,000,000 of free cash flow for FY 2025. This free cash flow guidance represents a very healthy free cash flow yield on current trading price and builds on the $117,000,000 of free cash flow in FY 2023 and our record free cash flow delivery of $184,000,000 in FY 2024. Now on to Slide 15, liquidity and capital management. Our balance sheet remains very strong and well positioned for the future. At thirty one December twenty twenty four, the group had circa $600,000,000 of available liquidity. The strength of the balance sheet combined with the increased scale of the business with the inclusion of the DDH1 acquisition resulted in Perenti receiving rating upgrades from both S and P and Moody's during the half.

Across all three global credit rating agencies, S and P, Moody's and Fitch, Perenti is now only one notch below investment grade, which is a strong testament to the fundamental strength of the business and the scale that has been built. One feature that has been highlighted during the conversations with the rating agencies is the favorable outlook for the underground mining market, our robust contract structures used in contract mining and the high rate of contract rollover success. The long term nature of this contracting model and the combined group revenue greater than $3,000,000,000 provided the rating agencies with confidence to upgrade their ratings. Moving on to the debt structure, the USD 100,000,000 redemption of the twenty twenty five notes in December has reduced our gross debt to USD $863,000,000 at the reporting date. Noting there is more than USD 60,000,000 of FX impact on our debt balance period on period with the revaluation of The U. S. Notes. Remaining 2025 U. S. Note stub amount, which is USD 103 is now current on the balance sheet and payable October 2025. This is consistent with our strategy as this is our cheapest debt with interest at 6.5%. Over the next eight months, these twenty twenty five U. S. Notes will be repaid with a combination of free cash flow and existing USD credit lines within our syndicated debt facility.

The timing of this redemption will ultimately be a treasury call based on what is best for the balance sheet and best for our shareholders. As a result of the debt repayments, our cash balances reduced during the half to be $265,000,000 As previously flagged, the thirty June twenty twenty four cash balance was elevated pending The U. S. Note redemption premium falling away, which occurred in October 24. Our leverage is 0.9 times consistent with the prior corresponding period, however, is up from thirty June twenty twenty four. There are some points to note on this. Firstly, we expected our leverage to increase during the first half in line with our expected cash flow profile. Secondly, if we normalize the net debt for the $42,000,000 of late debt of receipts, our adjusted net leverage is circa 0.8 times. We are confident in our FY twenty twenty five free cash flow delivery and the second half waiting is in line with our free cash flow delivered in the second half of FY twenty twenty four. Consequently, we remain confident in the delivery of our guidance range of 0.6 times to 0.7 times leverage at the end of FY twenty twenty five.

Now on to Slide 16. During FY twenty twenty three, we successfully brought leverage under one times meeting the threshold that we set to recommence dividends. On our FY 'twenty four results call, we announced the updated dividend policy of 30% to 40% of underlying NPAT A. This policy is one part of our capital management framework which seeks to enhance shareholder value by paying down debt, distributing dividends and when appropriate, buying back shares on market. I'm proud to note that during the last twelve months, the collective value of payments allocated in these categories adds up to just under $250,000,000 The management team of Perentia remain focused on strengthening the balance sheet and driving tangible returns to shareholders through this capital management framework. Thanks all. I'll now hand back to Mark.

Thank you, Mike. On Slide 17, our work in hand and pipeline. As of the 02/05/2025, we retained $4,700,000,000 of work in hand. This includes the recent work one with Nevada Gold Mines and extension with Regis Resources at Duton. As mentioned previously, it does not include over $2,000,000,000 of near term contract extensions. These contracts still sit as part of the pipeline and will only convert to work in hand once a fully executed contract is signed. In contract mining, which covers surface mining and underground mining on this chart, we have a pipeline of $16,000,000,000 which is the majority of the pipeline for the group. The $16,000,000,000 pipeline for contract mining is due to the long term nature of contracts as the opportunities link to operating mines or mines in development, thereby providing greater visibility of the pipeline. Typically, drilling services and mining services have shorter term contractual arrangements resulting in less visibility over both work in hand and the pipeline. Overall though, the outlook for the mining industry is very positive, which positions our diversified service offering extremely well to capitalize on future upside. In particular, we believe the recent win of the Gold Rush underground project for Nevada gold mines in The USA offers Baminka an excellent opportunity to prove the capability and efficiency of the team directly to USA clients.

North America is the largest underground hard rock mining jurisdiction in the world and this new market has huge potential for Baminko with limited upside currently factored into the pipeline. Lastly, on Slide 18, I'll repeat what I said at the outset. We confirm our guidance for FY 2025. A diversified portfolio of mining services is a resilient and sustainable business model with clear advantages that come from scale in both contract mining and drilling services. Our strong free cash flow generation is supporting our capital management framework, allowing a reduction in gross debt, providing CapEx funds to drive sustainable growth and supporting our ongoing ability to pay dividends and buyback shares. We expect revenue between $3,400,000,000 and $3,600,000,000 and EBITDA of between $325,000,000 and $345,000,000 with greater pull through in the second half. CapEx is still forecast to be approximately $330,000,000 and we expect to exceed $150,000,000 of free cash flow in FY 'twenty five, which will see cash flow strengthening to reduce leverage to 0.6x to 0.7x by thirty June twenty twenty five. We will deliver these results by maintaining our approach that we outlined at the end of FY24. Our first objective is the safety of our people who deliver our services.

Without them, none of these results would be possible, so safety must remain at the forefront of everything we do. We must continue to win and extend projects that deliver sustainable growth. There is no point taking on projects to earn greater revenue if they do not return an appropriate profit margin. Free cash flow remains a priority. While the adjusted free cash flow demonstrates that the business remains in a strong position, greater cash conversion at the end of the full year reporting period will be a particular focus during the second half as we demonstrated in the second half of FY '20 '20 '4. The disciplined approach to capital allocation will continue in the future as will the approach to seeking efficiencies across all divisions. Onto our last slide. On behalf of the Board and Group Executive, thank you to our clients and everyone at Prenti for their efforts during the first half. We have a fantastic team of dedicated individuals who make our company great. I remain honored to lead this team and look forward to delivering on the second half of the year alongside them all. I'd also like to thank our existing shareholders and potential investors for your time today.

We are pleased that you have supported our journey so far and we look forward to continuing to deliver in the future. I'll now hand back to the operator to facilitate any Q and A. Thank Your first question comes from William Park with Citi.

Thank you. Thanks, Mark and Mike for taking my question. Just on iDoba, can I just clarify your comments, Mike? You said you're expecting the cost development cost to sort of step down in this year. I think previously you called out around $50,000,000 for FY 'twenty five. My apologies if I have missed it, but what should be the number that you guys are expecting to spend this year, please? Thank you.

Thanks, Will, for the question. The expected spend in the second half is $5,000,000 on the product development costs. Therefore, the annual spend for FY 'twenty five will be just under $12,000,000 But importantly, I think the run rate represents a 33% reduction on the FY 'twenty four spend.

Thank you. And just in terms of the late debtors that you called out that's impacted, I guess, cash conversion for the half. Is that something that's kind of one off? Or should we be kind of expecting some, I guess, movements to cash conversion going forward, I. E, were you seeing more and more customers being more flexible with their payments of their invoices? Thank you.

No. Thanks, Will. Yes, no, it is a one off. And as outlined in the deck, dollars 42,000,000 was received early in January. I think potentially some of our AP offices had a good Christmas break, but we did receive quite a few invoices on the January 2 as well. So it was a very short term timing. And importantly, if you look at our cash conversion for the first half of last year, it was quite similar. And around Christmas time, we do occasionally see a slightly less less EBITDA cash conversion. So no long term issues there. And I would just add, Will, as well that certainly our contracting discipline around sort of payment terms absolutely is front and center with every tender and it's very much ingrained sort of through the team. So, yes, no change in terms of how we approach contracts and how we approach getting paid. And Mike just outlined the one offs and the sort of timing thirty one December.

Yes. Thank you. And then just one last question I had was around sort of first half and second half SKU, particularly with respect to well, with respect to contract mining, mining services and drilling services. You touched on second half SKU and the contract mining. How much of a SKU should we be expecting it to sort of similar kind of SKU that we've seen in FY 'twenty four? And for Mining Services, can you just step through your expectations around BTP fleet utilization improvement sequentially in second half versus first half? And obviously, with drilling services, is majority of that improvement going to come from exploration? And do you see a lot of that being driven by production? Thank you.

Yes. Thanks, Will. Certainly, the skew into the second half is what we've seen. Historically, it's also what we've called out previously. I would note where we landed in terms of the EBIT in the first half is very much in line with our own internal forecast that we then use to build our guidance and therefore having the reinstatement or reconfirmation of guidance for the full year. As far as the second half is concerned in terms of drivers around the step up, certainly from a drilling services perspective, the production side of drilling with SWIC, AUS drill and STRIKE has been strong and we're still seeing some sort of upside coming through there. Exploration as we called in the call and this everyone on the call also knows that exploration has been been soft. We are seeing some early sort of signs of some improvement there in calendar year 'twenty five, and we are hoping for a slight step up towards the end of the financial year. So that gives us the confidence around drilling services. As far as mining services, which is predominantly BTP, as you called out, that will be around fleet utilization. We did see some fleet come off just at the start of the financial year and that was the main sort of drive around the softer first half for mining services on the back of BTP.

We're seeing some of that fleet getting back to work and we've got some more fleet to get back to work throughout the half. So that will really drive the step up. Supply direct bolt, it's a smaller part of the business in mining services. That is a strong business for us that we continue to see some uptick. So that will also contribute into the second half. As per contract mining, a number of items there in terms of improvements, just some of the commercial contracts we have in place regarding Alliance style contracts. We generally have adjustments in the second half as we sort of work through that brings into a stronger second half, which is again one of the drivers to historically having a stronger second half. So, that combination really is what's positioned us for delivering on our guidance for the full year with a stronger second half compared to first.

Your next question comes from Matthew Chen with Moelis.

Just a query about how you guys are thinking about your pipeline and your opportunities in North America given the recent win of Goldrush, either a bit of color around kind of other opportunities that might exist there or further afield? Thank you.

Yes, thanks. In terms of firstly Goldrush, first job for Baminko in The U. S. And we do see hopefully some upside with that job into the future given it's the world's largest gold mining complex. We see that as positive. I would also note that one of our drilling businesses, SWIC, has operated in The U. S. Since 02/2009. So certainly some good knowledge sharing between the two businesses, which is positive. As far as North America more broadly, we still got the two Bamiko jobs in Canada at Himlo and Regris. Regris, the cleaner Newmont job is under study for expansion in the future. So given we're on-site and operating at Regris, we do see potential upside if that expansion gets approved by Newmont in due course. As far as The U. S. Is concerned, we do call out The U. S. In our pipeline, although I would say that at this point of time, we haven't really factored in the full set of opportunities for a pipeline in The U. S, mainly because we're still assessing the priority jobs that we want to go for. And our approach to North America, which sure has always been the case, is we're going to be pretty steady with our growth there.

So we want to make sure that we deliver at Nevada Gold and then expand in due course. So that pipeline will build out in time, Matt, as we go through our filtering process and look to increase the number of targets in North America for Bone and Co.

Thanks. Appreciate your time and comments.

Your next question comes from Marcus Barnard with Bell Potter.

Just one quick question on the guidance. I can sort of see you're expecting a recovery in exploration drilling and in the BTP fleet. Is the guidance dependent on that recovery coming through or do you have enough flex elsewhere in the business to make that up if that recovery doesn't come through?

Thank you.

Yes, Marcus, in terms of your point on exploration, look, it's a pretty small sort of uptick that we'd be anticipating into FY 'twenty five. So I'd certainly say that our guidance is not dependent upon the uptick. One of the benefits of our scale and also diversification in our portfolio is that we do have a lot of different sort of levers and a lot of different areas where we can see an uptick. But specifically to exploration, then our expectation is very modest into FY 'twenty five.

Your next question comes from Cameron Bell with Canaccord Genuity.

Just following up on that last question. Just maybe if you could like I know you can't allocate individual dollars to each segment, etcetera, but you've got guidance out there that basically says at the midpoint you're going to get any incremental uptick in EBIT from, I'd say, about $25,000,000 Could you just help us maybe understand where most of that comes from, how much is currency, etcetera?

Yes. Thanks, Cam. So in terms of, I guess, you'd be asking is to sort of allocate that delta into the second half across the three divisions. So I won't be quite as precise as you'd hope. But given the scale of contract mining, certainly we see a sizable step up. In terms of proportion of that uptick in the second half from contract mining, BCP, we see a moderate sort of step up there given the utilization lower in the first half and looking to get fleet back to work in the second half. And then thirdly, in terms of exploration drilling, pretty moderate. So, I guess, Cam, in summary, the allocation of the EBIT step up would predominantly be from contract mining.

Thanks, Mark. In relation to the FX sorry, Cam. Just in relation to the FX query, we've assumed in the second half sort of mid-60s. So it's obviously been a little bit volatile over the last month, but we've taken our approach at the mid-60s.

Okay. Sure. You used to actually give, there was a rule of thumb back in the day around what your FX actually did. It was a $0.01 fall, I think it was $2,000,000 EBIT, $4,000,000 EBITDA. Is that still the same in the current structure?

It's very similar, but for the second half impact, it will obviously be less.

Yes. Okay. Thanks, guys. Appreciate it.

Thanks, Gabe.

Your next question comes from Gavin Allen with Yours Heart, please.

Hi, guys. Just a quick one for me. I'm just asking the same question that's been asked already a couple of different ways. But just in the interest of clarity, when we're thinking about that full year guidance and the SKU that you've got in mind and just bearing in mind that it's been sort of called out for some time now that you are expecting a SKU and the guidance is unchanged, That things like BTW or BTP utilization zone five financial performance, these sorts of things, were as you'd sort of planned them to be when you entered into fiscal 'twenty five or have things sort of are there other swings and roundabouts we should be thinking about?

Yes. Thanks, Kevin. I guess the nature of our business and the scales these days, certainly there's always swings and roundabouts in the scale of the business. And we do have areas of the business that are performing very, very strongly. And they do account as some of the downside. So, certainly the swings around about balance out to hit our internal half year forecast. Zone 5, as caught out in the call and in the presentation deck's down where we want it to be. But the second half isn't based on seeing a massive turnaround there at all. In fact, we're factoring that to be sort of relatively consistent in the second half and anything that comes through will be upside. But we're not seeing a huge sort of expectation in the second half of turnaround of Zone 5, a little bit with BGP with the fleet utilization down as you say. But certainly the SKU is in line with our internal forecast.

Yes. That makes sense. And then by definition, I think you've talked about exploration and you haven't got a lot of factored a lot of exploration factored into your numbers. And that really came on strong into May and June, and who knows where it does or not, but just to be clear, do you got plenty of leverage still there in DH in particular?

Yes, absolutely, Gavin. Certainly, we clearly hope it comes in May, June, but what we do know is that it will come into play at some point. And that will be significant upside to the business when that comes on. The drilling services division is going really well, team performing extremely well. And even DDH, as you mentioned, with that benefit down, the team sort of managing the cost base, they're doing a fantastic job. So it's really well positioned to capitalize when we see the market come back strongly in exploration.

Yes, makes sense. Thanks guys. Have a good day. Cheers guys. Thanks.

Your next question comes from Stefan Jemen with FCJ.

Hi. Thanks for the presentation. Lots of good numbers there. I noticed in your announcement of the market though, you've reported earnings per share. You haven't mentioned earnings per share at all in the presentation. But on the report of the market, it drops 25% from $0.08 to $0.06 I'm assuming that's because of the one time adjustment in the acquisition in the previous year. And the second part of the question is still on a per share. Very nice to see a 50% increase in the dividend per share in the first half, just trying to do the calculations for your full year guidance. If you achieve guidance, are you likely to maintain the second half dividend from last year, increase it or decrease it?

Yes. So thanks for the question. I'll lead up first. Thanks, Stephen, and cover off dividend and briefly touch on the other point, then Mike will add a bit of color to that. Firstly, in terms of dividend, I think and thanks for calling out the increase in the interim dividend from $0.02 to $0.03 certainly a demonstration from the Board and the company about the confidence of the outlook for the business and also the financial performance of the business. So, we're very confident about the outlook. In terms of dividend for the full year, certainly delivering on our guidance of cash generation north of the $150,000,000 positions us extremely well with leverage targeted between zero point six and zero point seven times, which fits into our policy regarding payment driven. So that will continue to improve the balance sheet and the ability to pay. As to what that will look like, I won't make any sort of speculation. It will be a full Board decision at our August board meeting in terms of what we do to pay. So we'll touch on that when we do the full year results, but the outlook is strong. So I'll leave it at that.

In terms of the dividend, as far as the point regarding the EPS, Mike will talk to that and call out the point you raised about the acquisition accounting from prior periods. Thanks, Stephen.

So in relation to the statutory EPS, you are correct. It has dropped from the prior corresponding period. The main driver of that is in last year, there was a 29,000,000 noncash accounting gain in relation to the good acquisition that we did in relation to DH1. So clearly, that is impacting the statutory EPS numbers as you disclosed.

Okay. What was the $29,000,000 as an earnings per share figure? What would that be of the $0.08 I assume it's?

It'll be $0.29 over circa $900 so it'll be just under $0.03 0 point 0 3 dollars right. So, really the comparison is $0.05 to $0.06 rather than $0.08 to $0.06 Correct. There or thereabouts.

Okay. Thank Your next question comes from Mitchell Sonnegan with Macquarie.

Good morning, Mark and Michael. Just a quick one on Drilling Services. Just looking at the EBITDA margins up 11.1% there. Is that largely what we should expect going forward, not expecting a broader uptick in exploration drilling? Or is there still further synergies to come through from the DBH? Thanks.

Yes. In terms of the margin moving forward, Mitch, as exploration comes back on, we will see an uptick into that margin into the future. I would also add that the team, whilst exploration is still soft, they continue, as I mentioned before, regarding cost management. So we are looking at ways to try and sort of push that a little bit higher, but that will predominantly come through as we see exploration improve hopefully the back end of this financial year into FY 'twenty six. So we are looking to push that up higher in time, Mitch.

Yes. And just on Zone five being called out, specific headwind. Are you able to provide any further color on approximately what's the impact that had on the result? And also any timeframe for your negotiations? Thanks, guys.

Yes. Thanks, Mitch. In terms of specific numbers, I won't talk to exact numbers with the EBITDA of Zone 5, but fair to say that it's not to deliver what we want. And I think an important part about that is it demonstrates the benefit of scale within our business these days, but we're not beholden to any one project. And if one project doesn't quite meet our expectations, we've got a lot of other projects that are performing either in line with expectations or above. So definitely the benefit of the scale that we have in our business now and also the diversification. As for timing, the twelve month extension that we executed last year takes us through to thirty June this year. The team are in negotiations with the client there to look to extend into a further contract at Zone 5 in Botswana. If we do extend that contract, it will be on the financial terms that do make sense for us in terms of generating the right terms. If we don't actually extend the contract, the benefit we have with that contract is that will then allow us to recycle the capital that is at Zone 5 and we have that as part of the contract with the client.

And then we'd be looking to allocate that cash that we get from Zone 5 into more value accretive returns for shareholders. So either way, Mitch, we either extend the contracts on terms that generate better financial results for us or we take the capital that's allocated to Zone 5 and allocate that to better returns. So ideally, we extend and stay there, but if not, we're in a good position to be able to extract the capital we've invested there. We expect to know the outcome certainly by June 30, but ideally over the next three months.

Very clear. Thanks Mark.

There are no further questions at this time. I'll now hand back to the company for closing remarks.

Right. Well, thank you everyone for taking the time to join the call this morning, particularly those in Perth for an early start. As per a couple of the questions and comments regarding the outlook and the SKU, First half in line with forecast supports our full guidance number $0.03 dividend and uptick from the $0.02 in the prior period really does demonstrate the confidence of the outlook into the future. And we look forward to having discussions with investors post the call. Thanks for your time and have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.