MCHHF (MCHHF) Q4 2026 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Macmahon FY '26 Results Conference Call. [Operator Instructions] And finally, I would like to advise all participants this call is being recorded. I'd now like to welcome Mick Finnegan, Managing Director and Chief Executive Officer, to begin the conference. Mick?

Hi, everyone. Welcome to the Macmahon Results Presentation for Financial Year 2026, and thank you for joining us today during the busy ASX reporting period. We always appreciate your time and interest in Macmahon and the opportunity to run through the results presentation. After the presentation, Ursula and I will be happy to take your questions. Starting with the financial highlights on Slide 2. Macmahon has had another strong year with the business delivering record revenue and underlying earnings growth. We continue to improve the return on average capital employed towards the 25% target only recently set. The increase to 22% was due to our clear focus on improving productivity and discipline across the business and strategic new awards building scale in the target areas, which has increased the delivery of free cash flow. As you know, managing capital intensity in the business has been an ongoing focus for us and the improved returns have allowed us to again increase our dividend payout to shareholders. Global geopolitical instability and its impact on commodity prices, trade and the cost of doing business continue to present challenges, particularly with regards to energy costs. Macmahon has been navigating these well underpinned by our diverse order book and client base. We have been closely monitoring and managing costs and risks, and we'll continue to do so as we execute on our strategy to deliver value for our clients and our shareholders. Some highlights, I'd like to call out include new records for revenue and EBITA and further strengthening of our balance sheet as we again reduce net debt. Revenue and EBITA were $2.6 billion and $190.1 million, respectively, and we saw improvement in our EBITA margin to 7.3% from 7.1% in the prior year. Cash flow generation remains a highlight of the result with underlying operating cash flow of $387 million remaining strong and free cash flow of $103.1 million. Free cash flow is down on the previous year, primarily due to Macmahon paying the final FY '25 tax in FY '26, together with the FY '26 provisional tax payments. Net debt of $111.1 million reduced 32% on FY '25. Importantly, gearing has dropped to 13%, which is in line with our expectations for the year. Both debt and gearing are now below pre-Decmil acquisition levels, which reflects our rigorous and disciplined approach to capital management. Total dividends for the year increased by 47% to $0.022 per share fully franked, representing a payout ratio of 41% in underlying earnings per share. FY '26 ROACE was 22%, which exceeded our previous long-term target of 20% and up from the 21.2% at the half. We believe we can continue to increase ROACE through our strategy and are tracking well towards our current long-term ROCE target of above 25%. The order book is currently $5.9 billion, up from $5.1 billion at the half and strongly supported by a robust tender pipeline of $25 billion, of which $13.8 billion is expected to be awarded within the coming 12 months. The order book includes major contract awards announced post 30 June, including the $355 million 3-year Mt Marion contract with Mineral Resources. The $406 million 5-year Snowy River project in New Zealand with Endura Mining and the $50 million Mamre Road project with Transport for New South Wales in Sydney. Work in hand already locked in for FY '27 is $2.2 billion, but this does not include the $240 million preferred contractor announcement made last week in relation to Medallion Metals Ravensthorpe Gold Project. It also excludes short-term civil and underground churn work and future contract cost escalation recovery as per our usual reporting practice. Slide 3 shows our historical performance relative to our guidance, but also the long-term track record and consistency in delivering growth. I'm very pleased, we have extended our track record of meeting or exceeding our guidance and market guidance to 10 consecutive years. Our CAGR over this period has been 25% in revenue and 21% in EBITA. I can again assure you that we are very motivated to maintain this track record of consistent success into the future. I appreciate many of you are familiar with our business. I will only briefly touch on Slide 4 to recap how our business is structured. We have 3 operating business groups being Surface and Underground Mining businesses and our Civil Infrastructure business. Each of these operating teams brings its own specialized skills and expertise to the group and allows Macmahon to deliver a wide range of services to our clients in Australia, Indonesia and across our regions. Our corporate team is focused on strategic growth leveraging Homeground to secure strategic partnerships and pursuing M&A growth opportunities to establish a whole of mine service offering. FY '26 highlights in our Mining business as shown on Slide 5. Surface and Underground Mining combined generated almost $2 billion in revenue for the group. Underlying EBITA was up 6% on FY '25 to $157 million, and the EBITDA margin increased to our long-held target of 8%, again, an improvement on our FY '25 results. Our Surface Mining team secured over $1.1 billion of new work, including a $792 million extension at Byerwen, $190 million 5-year letter of intent for open pit mining at Wonawinta and $150 million contracts for the restart of open pit mining at Mt Carlton. Our surface tender pipeline of $10 billion, of which $5.6 billion is expected to be awarded in the next 12 months is a very selective pipeline, including key strategic partnerships. Our Underground business had another successful year, winning new work, including an initial $55 million 12-month award at Majestic which was then followed by a 12-month extension, a $36 million contract at Kucing Liar in Indonesia and commencing early works at Mt Carlton, where we received a letter of intent in March. Since June 30, our underground team has won a $355 million contract at Mt Marion and a $406 million contract at the Snowy River project in New Zealand. The Underground business is growing in line with our expectations and now contributes 24% of group revenue. We continue to target revenue growth from our Underground business to achieve the $750 million run rate by the end of FY '28. This expectation is underpinned by an underground pipeline of $6.2 billion, of which $3.1 billion is expected to be awarded in the next 12 months. Included in this pipeline is the Ravensthorpe Gold Project, which Medallion Metals recently announced us as preferred contractor. Some highlights from our Civil business over the year are outlined on Slide 6. The Decmil civil infrastructure business continues to grow and its contribution to the group has increased to 26% of group revenue. Decmil continued to perform well and has cemented its place in the group alongside our mining operating companies, generating opportunities to promote our unique combination of services. Decmil secured inclusion into the highly strategic Rio Tinto Pilbara Bulk Earthworks panel, which we anticipate will be a source of future work for the team in Western Australia. Order book growth remained a key focus for Decmil. Business again won over $500 million of new work during the year. The work won includes civil works across roads, accommodation villages, infrastructure and wind farms and a significant number of resource projects, which create strategically important opportunities to partner and build operational synergies with our mining businesses. Since 30 June, we announced a $50 million Early Works contract win, with Transport for New South Wales on Stage 2 of the Mamre Road project in Western Sydney. We are targeting robust growth from Decmil with an $8.8 billion tender pipeline, of which $5.1 billion is currently expected to be awarded in the next 12 months. This short-term pipeline includes a key number of larger projects in both the East and West. Slide 7 shows our key Surface Mining projects. Like in Underground, we have sought to diversify our portfolio, across clients and commodities typically with long mine life. We also monitor their position on the cost curve and factor this into our risk assessments. Another point to highlight is the increasing prevalence of clients where we do both the surface and underground mining such as AngloGold Ashanti, Wolfram and Poboya in Indonesia. This highlights the competitive advantage of having an integrated service offerings. Slide 8 shows our Underground Mining projects, including projects and extensions awarded since 30 June 2026. Our underground team had been awarded several major new contracts that advance our aspiration to become a Tier 1 regional underground mining operator. Slide 9 shows our growing list of key civil projects. I don't intend to go through each project separately, but some of the key points to call out include the inclusion of Decmil as 1 of the 3 civil infrastructure contractors on the Rio Tinto Pilbara Bulk Earthworks panel, which creates a strong pipeline of future work. Our growing list of civil infrastructure projects that are moving from the $20 million to $50 million range to the $100 million to $200 million range. And the diversity of infrastructure projects across government, resources and renewables. Diversification has been a key part of our strategy, both in terms of risk management, but also part of our efforts to reduce capital intensity in the business. Slide 10 summarizes our revenue diversification across service offering, commodity region and clients. At a group level, this slide clearly shows the changing contributions of our operating companies and the diversity of our revenue sources. Our Surface Mining business now contributes half of our group revenue, whereas last year, it was nearly 60%. This rebalance has been achieved through the growth in our underground and civil infrastructure businesses and their increasing contributions to the overall growth of the company. You may have noticed that gold is the predominant commodity of our key mining projects. This has been a longer-term feature of our order book and the markets we operate in, and we continue to have a relatively large exposure to gold at 52% of revenue, and we anticipate a growing contribution from lithium over the coming years, driven by increased global demand. Our Indonesian business includes Surface and Underground Mining and Civil Infrastructure services. Our expectation is that this will continue to grow its contribution to group revenue with a long-term target of between 15% to 20% of group revenue. We have been diversifying our business mix to achieve optimal capital intensity to increase ROACE but also retain some of the barriers to entry we see in some areas. This is visible in the very deliberate growth in the underground and civil infrastructure in recent years. These businesses now account for 50% of group revenue. They have strong pipeline opportunities, and we expect these businesses to continue growing strongly and increase overall share of revenue. Moving on to Slide 11 on people and safety. This is a fundamental business priority and we continue to invest in this area, both in the development of our people and in continued safety improvements. Our safety performance improved in FY '26 with total recordable injury frequency rate decreasing to 1.98 from 2.99 in FY '25. This was a pleasing result when you consider we have a workforce of more than 10,000 people across our business. However, we remain focused on driving that number as low as possible. Through FY '26, 18 graduates, 6 interns, 79 apprentices, 176 trainees and 201 emerging leaders participated in structured learning and training programs in Macmahon. Training and development continue to be a priority for our business. 105 identified emerging leaders completed the Macmahon Winning Way leadership program in FY '26, which is intended to accelerate development of new leaders within our business. This is in addition to the rollout of the new training programs, including the critical risk management and psychosocial safety leadership training. We remain committed to maintaining a safe, respectful and inclusive workplace and monitor our employee representation. In FY '26, female representation in the Australian-based workforce was 20.6% across all occupations and First Nations people represent 4.5% of the Australian workforce. Slide 12 outlines some of the initiatives in the business designed to develop and promote Macmahon's culture and value, ensuring they remain at the core of our people development programs. Positive workplace culture is a key element of working at Macmahon and making us an employer of choice. Culture and fit are important elements in our recruitment process. They are defined during onboarding and enforced and embedded throughout the employment lifecycle. Some of these programs I previously mentioned and you are familiar with, including Respect@Macmahon, the Macmahon Winning Way, emerging leaders programs. Our Together.Works employee value proposition was launched and rolled out across our businesses this year. Our EVP brings together our values and our people to ensure the experience of being a Macmahon employee is rewarding for both the employee and the company and is reinforced through our training programs and our communications across the Macmahon Group. Slide 13 outlines some of our sustainability-related activities and metrics for FY '26. We continue to take important steps during the year to enhance our environmental and sustainability reporting. This included complying with new mandatory reporting obligations and maintaining strong governance. Macmahon's 2026 sustainability report is contained within our annual report and will be available on our website. It is compliant with our AASB S2 disclosure obligation and represents a substantial advancement in our governance and reporting on sustainability matters. But I'm conscious of time, so I won't go through the rest of the details on this slide now. I'll now hand over to Ursula to talk through the financials.

Thanks, Mick. Good morning, everyone, and thank you for joining us today. I want to start on Slide 15 to recap our consistent improved financial performance over the past decade. Mick touched on this when he discussed our guidance track record, but I want to expand on this just a little. The slide shows steady and predictable annual improvements in revenue, underlying EBITA underlying EBITDA and the return on average capital employed, all of which are now at record levels since FY '17. Margins have shown growth across time, but also relatively low variability. EBITA margins have progressively increased in recent years from 5.9% in FY '22 to 7.3% in FY '26. I am pleased to say that our efforts around cost management, efficiency and delivery of integrated lower capital services have been important drivers of margin growth. You can also see the tangible results of our strategic focus on reducing the capital intensity and driving improved returns with strong and sustained improvements in the return on average capital employed over the last 5 years. Slide 16 shows a summary of our profit and loss statements. I won't go through all the numbers on the slides. But I will provide some additional context to a few of the high-level numbers. The 8% growth in revenue and 11% growth in underlying EBITA were mainly attributed to the contract execution plus new work during the year from Underground and Civil. Earnings were driven by continued new margin improvement disciplined capital management and cost optimization across the group. Growth in underlying EBITDA of 2% was lower than the 11% achieved in EBITA, primarily due to securing the new work in civil and underground businesses, which have a lower capital intensity. Our operating costs increased in line with revenue, albeit we started a number of new projects in this last quarter including civil projects, which have a higher return on capital, however, slightly lower margin than we see from our mining services. Our EBITA margin was 7.3% for the year, driven by lower depreciation with the completion of 2 historical surface projects, the commencements of lower capital work in underground and civil together with the operational improvements across the business in the second half. Effective borrowing cost of 6.72% at June 2026 compares to 6% for June 2025, reflecting the impact of the RBA interest rate increases that we've experienced in FY '26. Our effective tax rate for the year was 30.6%, and the group retains approximately $104 million in franking credits as of 30 June 2026. Finally, as Mick mentioned earlier, the total full year dividend has increased by 47% to $0.022 per share fully franked with a payout ratio of 41% in line with our FY '26 policy range of 30% to 45% earnings per share. Slide 17 steps out the major cash flow movements between the closing net debt last year and this year. The chart shows year-on-year net debt decreasing through strong cash flow generation. Net debt of $111.1 million brings our debt level lower than the levels pre the acquisition of Decmil. This is a significant achievement and in line with the targeted net debt levels previously set, while substantially increasing returns to shareholders at the same time. Strong underlying operating cash flow before interest and tax of $387.4 million was the main driver to enable us to reduce the debt while increasing the shareholder returns. With strong working capital management, the cash conversion for the year was 98.4%, generating free cash flow of $103.1 million. Tax-related cash payments were higher than the statutory rate for the group which transitioned at the end of FY '25 to a monthly tax payer and paid the final FY '25 tax installment in December '25, together with the provisional tax payments for FY '26. CapEx of $200.5 million included growth CapEx of approximately $20 million. This was lower than expected with the new work wins moving towards the last quarter of FY '26, resulting in new work CapEx being moved into FY '27. Our CapEx target for FY '27 is sustaining capital of circa $200 million and growth capital of approximately $66 million. I'll finish with a snapshot of our year-end balance sheet on Slide 18. I've already mentioned the reduction in our net debt. But you can see on the slide, a breakdown of our borrowings as of 30 June 2026. And I won't go through this in detail other than to reiterate that the business is in a very strong position with regard to available liquidity. Cash and available committed banking facilities is $566 million at the end of June 2026. And finally, Mick highlighted earlier that our FY '26 return on average capital employed of 22% exceeds our previous long-term 20% target and we are tracking well towards the new target of above 25%. Thank you for your attention, and I will now hand back over to Mick before we open for questions.

Thanks, Ursula. If we move to Slide 20, the positive numbers we have delivered today demonstrate the success of our strategy to diversify our business and manage capital intensity. We will continue to focus on this going forward together with expanding our end-to-end service across the value chain. The charts on the slide show the progress we've made in increasing the revenue contribution from our Underground and Civil Infrastructure businesses. We anticipate achieving our goal of underground and Civil Infrastructure business at a run rate of $750 million and $1 billion, respectively, by the end of FY '28. I should also mention that these figures consolidate both our Australian and Indonesian operations. We anticipate our Indonesian operations in Surface, Underground and Civil infrastructure will eventually increase from 10% of our current group revenues to contributing up to 15% to 20% of group revenues. . We see meaningful upside in growth opportunities in the Indonesian market in the years ahead, and we are driving hard to consolidate our position as a leader in that; fast-growing market. The resulting business mix we have today has been a key driver of improving our ROACE to the 22% we see. You can see on the slide the opportunity to further grow Underground and Civil businesses which make up more than half of our $25 billion tender pipeline steadily increasing the Indonesian contribution will only further increase the ROACE key metrics. I would like to briefly comment on the order book outlined on Slide 21. I mentioned in my opening remarks that it was good to see our order book stand at $5.9 billion compared to the $5.4 billion at the end of FY '25. For FY '26, we saw a good level of contract awards across the business, with over $1.1 billion won in the Surface, close to $350 million in Underground and more than $500 million in Civil Infrastructure. Since the end of FY '26, we've already announced significant new wins with a combined $811 million, which includes Mt Marion, Snowy River and Mamre Road, generating significant momentum into FY '27. The order book includes $2.2 billion of work in hand for FY '27. It does not include the $240 million preferred contractor announcement made last week in relation to Medallion Metals Ravensthorpe Gold Project and also excludes short-term civil and underground churn work and future contract cost escalation recoveries as per our usual reporting practice. The tender pipeline remains robust at $25 billion. It is a bit higher than this time last year with opportunities for growth across all strategic areas of our business. There are $13.8 billion of outstanding tenders submitted and that we expect to be awarded in the next 12 months. Macmahon's capital allocation policy is summarized on Slide 22. It is important to recap this and outline our structured approach as the business continued to deliver strong returns. Our policy continues to reflect the importance of balancing dividend payments for our shareholders staying within our debt guardrails and retaining financial flexibility to enable the continued execution of our growth strategy. The charts on the slide show our track record, and you can see that we have managed our debt within our guardrails while growing earnings per share and dividend returns to shareholders. We are well positioned to continue this policy and continue delivering these results. We feel we have met the market's expectations by achieving a 41% dividend payout ratio for FY '26. Well within the target range of 30% to 45% of underlying EPS. As a result, we've now changed the payout ratio target to 35% to 45%. This has been a result of our focus on strategic growth and achieving strong business performance, disciplined cost and capital management and delivering on our clients' expectations. I'll conclude with some comments on the outlook on Slide 23. Consistency was a key theme in my introduction, and this will also be the case in my conclusion. Our priorities for FY '27 are consistent with those in FY '26 and the decade before. Operate safely, continued operational improvements, drive growth in underground and civil infrastructure and work towards our increased ROACE target while generating strong free cash flow and increase return to shareholders. We will also continue to invest in our people and in technology to build our capabilities and deliver for our customers. The outlook for FY '27 remains positive. While no doubt, FY '27 will present its own challenges, mining activity remains robust in Australia and Indonesia, and we've increased diversity in our commodity and customer exposure and our service offering. We are expanding the size and scale of our service offering and our addressable markets by seeking to capture more upside within the mining value chain. This will help build more embedded relationships with our clients. increase revenue-generating opportunities while further diversifying the business. Our expanded service offering will differentiate Macmahon from our competitors as Australasia's only true life of mine end-to-end service provider. While we have a strong order book of $5.9 billion with $2.2 billion of work in hand already secured for FY '27 and a robust tender pipeline that provides us with numerous growth opportunities we are well placed to continue growing revenue and earnings supported by a healthy balance sheet. Releasing our guidance today for FY '27, we forecast continued growth in both revenue and earnings. Revenue is in the range of $2.85 billion to $3.05 billion and underlying EBITA between $205 million and $225 million. I'm confident we are focused on executing our strategy, and we remain well positioned to continue our trajectory of consistent growth. And with that, I'd like to now hand back to the operator to open for questions.

[Operator Instructions] And your first question comes from the line of Sami Hossain of Barrenjoey.

I had 2 on my end. So first of all, how should we be thinking about net interest and tax rates going forward?

Sam, I'll let Ursula take that one, if you like.

Sure. So you'll see when you look at our net debt to the debt -- our interest going forward will stay flat on what it is for '26 will go forward into '27 and then our tax last year, we made our final tax payment into FY '25. So as a wholly tax payer in Australia now, you'd see our tax staying on that 30% both for the P&L as well as for the cash flow.

And the second question I had was, can you talk about the levers we should be thinking about for FY '27 margin around mix and work profile? .

Yes. Look, Sam, we expect to continue growing in Civil and Underground. So we're assuming that the 2 net each other off, obviously, Underground is a high-margin business out of the 3 sectors that we've got and Civil is the lower margin business, but a lot less CapEx, higher ROACE. So given that, and if you look at the midpoints of the guidance that we've given, we expect all in, it will probably be something similar to what we've seen this year. We're clearly always aspiring to continue improving, and we'd love to throughout the year, be able to move that up. But at this point, we're holding the 7.3% if you look at the 2 midpoints, which is similar to what we achieved in '26.

Your next question comes from the line of Gavin Allen of Euroz Hartleys.

Just a couple for me. So just exploring that range that you put out there for '27. Maybe we can just unpack a little bit, some of the factors that might impact whether you're a lower end or in the middle or higher end? Is it just simply the timing of work that you might hope to win?

Yes, for sure. So that $2.2 billion that we said is secured for this year. Just to clarify, Gavin, I'm pretty sure you know that, it doesn't include the $100 million to $150 million a year of churn that we get in Underground and Civil. So that is in addition to what that $2.2 billion is. And we tried to call out that, that recent Medallion Metals announcement where we've been notified as being preferred. That's not included in that secured work for '27 nor the order book. Added to that, we've got a pipeline that we see some near-term opportunities coming in. So -- and if that occurs, we feel there's an opportunity to build on that guidance range. If you look at the midpoint, I think it suggests a growth in EBITA of 13.8%. We're desperately hoping for it to be higher. And of course, I think it's pretty well known that in our strategy, we're talking about expanding our service offering. If an opportunity presented to do that similar to Decmil but in an area that would enhance our service offering, we'd look at that, which would have an impact as well. But if I was just to go back to the pipeline very quickly, a number of the near-term opportunities we're 1 of 2 or it's an extension of existing work, some of which isn't in the pipeline or it's where we think there's a relationship or value that we can bring by having more services. So I guess as an overarching comment of the $13.8 billion we expect to be awarded this year, there's probably -- without getting ahead of ourselves a slightly higher level of confidence with a number of those projects. So yes, that hopefully answers your question, Gavin.

Your next question comes from the line of Cameron Bell of Canaccord Genuity.

Just extending on Gav's question then a little bit. So that's $13.8 billion of tenders you think can be award this year. Can you give us a sense of maybe what portion of that is extensions versus new contracts? .

Maybe, I think I know where you're heading there, Cam, and tell me if this gives you a better idea. We normally say we think there's 1 in 3, 1 in 4 chance of winning the bids in that pipeline. I would suggest this year, it's probably 1 in 2 to 1 in 3, and that includes consideration of those projects where it's an extension or we're already preferred or -- and we haven't been able to announce under NDAs or we're 1 or 2, or there's a relationship there or we think there's a competitive advantage. Just I know I didn't directly answer it, but does that give you a feel, Cam? .

Yes, it does. A similar sort of concept. And then just the other question, just while we've got you on, I guess, your public call. Could you maybe step through how you think about your M&A priorities at the moment? .

Yes, for sure. Look, it's no secret. And we even spoke about it in the presentation that if we can extend our end-to-end services in the jurisdictions we're in, we think it has a significant impact on the addressable market. And there's some clients that would see value in having one contractor execute more work on one site and the synergies that would come with that. We've already seen that occur in places like Cyprium. We're seeing it in Mt Carlton. We're hoping to see with some of the clients that are need to hopefully being awarded or some contracts that are hopefully near being awarded. And we think we'll be able to talk more about that moving forward. So if that's the theme, you would expect us to push hopefully into some engineering areas and then there's some potential others on each end of what we already do, which everyone can probably work out. So that's where we're looking, Cam. We wouldn't be looking to something that costs a lot. It would all want to be debt funded. And if you use the Decmil philosophy, I guess, in terms of scale, what it would bring a platform that we would then grow through our networks and vice versa, we'd hopefully grow off there. That's the areas that we're looking.

[Operator Instructions] And your next question is from the line of Pia Donovan of Argonaut.

Just one for me, pretty similar to Sam's, in terms of margins. Firstly, just around that mining segment. So as you -- that Underground segment of that business becomes a bigger portion. Do you expect margins to improve there? And then also, in terms of as Indonesia becomes a stronger amount of revenue, do you have any impact on margins from that as well?

Yes, absolutely, Pia. I mean, we've made no secret that if you look at the activities underground should be the higher-margin component of all 3. So as that increases in scale. That will absolutely bring with it an enhanced margin in that mining business. And I guess the lower capital required for underground relative to Surface is attractive as well in terms of the capital intensity, but also the ROACE, which, as you know, is a priority for us and is pushing to 22% and ultimately 25%. In terms of Indonesia, that business, the reason we've called out we want to grow from the 10% now, the 8% last year to the 15% to 20% is it typically brings with it higher margins. It typically brings lower risk to Ts and Cs and it almost always brings a lot lower CapEx. So if I could bridge to another point that I've had a few calls on this morning about the CapEx, you'll notice that last year, the CapEx was lower. That was because the number of the jobs won during the year in Indonesia are civil which didn't require the capital. However, the work that's just been awarded this year that we did expect last year, but it always moves. It's slid right. That's why the CapEx has shifted from FY '26 into FY '27 to enable that work to commence and it's those awards that we've put out recently. So if you look at '26 and '27, we've broadly said to the market that you should expect $240 million, $245 million a year. But what we've done is probably -- well, not probably, we expended just over 200 last year. we're expecting the $266 million this year. So net-net, it's still a little bit less than what we guided to, but we just wanted to make it clear that the rigor focus and discipline around our gearing and free cash flow goals that we've made clear for 10 years now, they are unchanged. And the free cash flow generation of the business that a number of us have worked through bridges for in the coming years. They are all absolutely intact and that's where we intend to bring the business. And hopefully, that's a bit visible in where we've brought the net debt. But I know I did shift from the question, Pia and I just wanted to attend to a few calls I've already had this morning. So people don't think that we think the shackles are off by no means do we think that's the case. But we were very lucky at the end of last year and early this year to see underground see some scale increase. And last year, Indonesia see a number of awards in areas where it was higher margin and higher CapEx. But your question is why we want to get underground to $750 million run rate by the end of '28. We think we'll get there a bit sooner given last year was close to $650 million. And Indonesia, the 15% to 20% of the larger business brings with it a much enhanced ROACE. And without going on, we've said in the past, if we can get broadly 1/3, 1/3, 1/3 in Australia, that will achieve the 25% ROACE. Going from 25% to 30% would require the Indonesian business at that 15% to 20%, which is why it's a goal. But obviously, it's not one than the other. They're all happening in parallel.

Thanks, Mick.

Sorry, Pia. I know I went off on a few tangents there, but I did want to attend to -- some calls we had this morning maybe, we could have explained the spread of the CapEx a little bit better. But it's not that increasing is not a sign of what's to come. It's just if you accumulate the 2 years, it's still in line with what we've tried to put out to the market last year.

Your next question is from retail investor Tony Greco.

And again, a really good result. So congratulations to yourself and all the team there at Macmahon. Diverging into the CapEx, you've answered one question. So thank you for that. So you explained the increase for next year. And you've also earlier explained that you've secured the $2.2 million, but you're forecasting still $2.85 billion to $3 billion. So you've touched on that as well. Two other questions then. Just the Homeground that you announced the other day and the strategic partnership, were you able to just elaborate a bit more on that?

Yes, absolutely, Tony. And I appreciate the recognition of the team. We think we've got an amazing group there. But yes, Homeground, we saw that as an ability to leverage that asset that we got -- that we acquired with Decmil, we think it brings with it an ability to lock in the value on the balance sheet. We think it brings an ability to have someone that's active in the area and could have a constrained around accommodation motivated to fill the camp in the coming years as they expand on that port, which will be some significant works and significant heads. And then for us to be able to get ourselves on the panel and in somewhat of a priority position for some of that works, we think that also will create a leverage synergistic benefit to the business. Obviously, nothing has changed in terms of how we look at that asset. We see that as being noncore but we see this as an opportunity to increase occupancy with a motivated partner, get some extra work. And then at some point in the future, it's still not in the strategy. It's noncore, and we'll divest of it. Hopefully, at that point, it's full and it can attract a higher rate.

Yes, I thought that the important thing there is the occupancy. If that's -- if you can get that up or the value of course, increases. And just the second question, just with the acquisition of Vault by, I think it's Regis. Do you see anything there? Because I guess Regis is also part of the Boston Shaker client -- or was a client. So would you see any changes there? Or are you still -- the contract will still continue, et cetera, et cetera? .

Yes. Look, that Regis offer has now been superseded by a superior offer from Genesis, Tony. So look, we're planning for those contracts to end as announced, if anyone wants us to look at something else, we would. But the reason the order book and the pipeline are where they sit is because we're planning for us not to have them. If anything changes, as always, we'll look at it, and we'll do whatever makes sense. But at the moment, we're planning for those to finish on the dates that have been announced.

Okay. Thanks for the update. Yes. You're right. I mean I wasn't looking at that closely other than the fact that I realize that King of the Hills and Daisy Milano are Vault, so I did wonder. So I was sad to see if that finishes. But anyway, we'll keep our fingers crossed that there will be a lot more work coming up. The other question just with the diesel supply and the price increase in that, how do you see that working out? Obviously, we would like the war to be over as soon as possible, but it doesn't look like that's going to happen.

Yes. Look, so far, the diversity in the portfolio has enabled us to navigate through that. It's not easy. We don't want to win at the expense of our clients, and we want to support them. But so far, we've been able to work with our clients and navigate through that, Tony, the diversity of the portfolio helps. But yes, it's not without its challenges for sure.

And that does conclude our Q&A session for today. I would like to hand back over to Mick for closing remarks.

Yes. Thanks, Paul. Thanks to everyone that joined the call over the next few days, we'll be seeing a number of you. But if there's anyone that would like to meet that's not on the list, please give myself or Ursula a call and we'll make sure we make the time to catch up. As always, we appreciate the support. And yes, we look forward to explaining our intention and the results more clearly over the coming week.

This concludes today's conference call. Thank you all for joining us. You may now disconnect.