Perenti Limited - FY24 Free Cash Flow Exceeds Expectations
PRN (PRN) Share Update July 2024 Sunday 21st
Perenti Limited Reports FY24 Free Cash Flow Significantly Above Guidance
Perenti Limited (ASX: PRN) has reported that its free cash flow for FY24 is expected to be around AUD$180 million, significantly surpassing its earlier guidance of more than AUD$100 million.
Instant Summary:
- FY24 free cash flow expected to be AUD$180 million.
- Initial guidance was for more than AUD$100 million.
- Above forecast debtor collection with cash flow conversion above 95%.
- Reduction in capital expenditure to AUD$305 million from AUD$350 million.
- Final audited results to be released in late August.
FY24 Free Cash Flow Details
Perenti Limited has announced that its free cash flow for FY24 is expected to be around AUD$180 million, based on preliminary unaudited results. This figure is significantly higher than the company's initial guidance of more than AUD$100 million.
The substantial improvement in free cash flow can be attributed to several factors. Firstly, the company achieved above forecast debtor collection, including contract rate adjustments, resulting in a cash flow conversion rate of over 95%, despite the risks of late payments due to 30 June 2024 falling on a Sunday.
Capital Expenditure Reduction
Another key factor contributing to the increased free cash flow was a reduction in capital expenditure for FY24. The company spent approximately AUD$305 million, compared to the earlier guidance of around AUD$350 million. This reduction was partly due to the successful redeployment of assets from discontinued nickel projects Savannah and Cosmos, as well as the timing of capital payments.
Future Outlook
Perenti expects to continue delivering strong free cash flow in FY25. The company will provide full disclosure of its final audited cash flows and FY25 guidance in the release of its FY24 results in late August. The company's revenue, EBIT(A), and leverage guidance provided on 18 June 2024 remain unchanged.
Management Comments
Mark Norwell, Managing Director & Chief Executive Officer of Perenti, stated, 'This result is further evidence that our business can return meaningful value to our shareholders. Our global leading underground and drilling businesses will become increasingly critical to deliver the minerals required to transition to an electrified economy.'
Peter Bryant, Chief Financial Officer of Perenti, added, 'I am proud to see the investment and effort of Perenti during the past years delivering another year of strong free cash flow. The seeds of this success were sown back in 2018 with the merger of the Barminco and Ausdrill businesses, and further enhanced through the successful acquisition of DDH1.'
The significant increase in free cash flow is a positive indicator for Perenti Limited's financial health and operational efficiency. This news is likely to boost investor confidence and could lead to an upward movement in the company's stock price. The reduction in capital expenditure and efficient debtor collection demonstrate strong management practices, which are expected to positively impact the broader market's perception of the company.
Investor Reaction:
Investors and analysts have reacted positively to the announcement. The substantial increase in free cash flow and the company's ability to exceed its guidance have been highlighted as key strengths. Analysts have noted that the company's strategic decisions, such as the redeployment of assets and efficient debtor collection, have contributed significantly to this positive outcome.
Conclusion:
Investors should keep an eye on the final audited results to be released in late August and consider the long-term potential of Perenti Limited. The company's strong performance in FY24 and positive outlook for FY25 indicate a promising future. Staying informed about Perenti's strategic moves and financial health will be crucial for making well-informed investment decisions.