Negative Points

• Revenue growth of 33% was partially offset by expense growth of 28.2%, with depreciation increasing due to higher CapEx.

• Net cash flow decreased due to acquisition costs, increased CapEx, and dividend payments.

• Data center pipeline conversion is uncertain, with timing dependent on external factors and project lifecycles.

• The Delta Elcom acquisition is still small, with contracts in New South Wales not yet material to the group.

• Potential risks from data center overbuild concerns in the US, though management sees no immediate danger in Australia.

• Geographic expansion into new regions like Western Australia and Northern Territory faces challenges in resourcing and logistics.

• The company remains opportunistic on acquisitions but has no active targets, limiting growth through M&A.

• Working capital levels are consistent with prior year, but trade payables increased in line with sales, indicating potential cash flow pressure.

Q & A Highlights

Q: What is factored into the $500 million revenue guidance for FY27 in terms of work in hand and the Delta Elcom incremental contribution? A: Matthew Jinks (CEO) explained that the company started FY27 with $312 million in work in hand. Adding the traditional revenue run rate of approximately $140 million effectively puts the starting position at around $450 million. This leaves roughly $50 million of work that needs to be won and delivered during the year to hit the $500 million target. While the company has strong conviction in converting its pipeline, the guidance is based on current contracted work and business-as-usual wins, with potential upside depending on project timings.

Q: Can you provide a feel for the significant step-up in the pipeline from $1 billion in May to $1.5 billion now, and is it still very much Victoria-centric? A: Matthew Jinks (CEO) noted that the expansion is largely driven by existing customers, involving either further growth in existing facilities or, in one case, the next campus for a company. Gary Beaton (CFO) added that the pipeline remains very Victorian-centric. The new work is primarily for traditional clients, with one instance of a new campus development.

Q: How quickly do you think the $1.5 billion pipeline will convert into contracted work on the data center side? A: Matthew Jinks (CEO) stated that conversion timing depends on variables outside the company's control, as projects are at different life-cycle stages. He referenced a recent $28 million early works package for a next campus, which will convert faster than others. He estimated that over the next six to 12 months, there should be clarity on the pipeline, followed by a two-and-a-half to three-year build-out period for larger facilities.

Q: Does the potential change in ownership of Stack Infrastructure affect SKS at all, or is the data center operator removed from the head contractor's decision? A: Matthew Jinks (CEO) said the company saw a similar situation with AirTrunk a couple of years ago, which did not affect them and actually accelerated growth plans. He believes businesses acquired do not halt operations; instead, they may accelerate their strategic direction. He expressed no concern, noting Stack has several years of activity in its pipeline.

Q: With the Delta Elcom integration complete, how should we think about the ambitions for that New South Wales business over the next few years? A: Matthew Jinks (CEO) explained that Delta Elcom, coming off a low base of $25 million revenue, is now tendering for larger opportunities in the $10 million to $15 million range, up from its traditional $5 million projects. While these contracts are material to the former Delta Elcom, they are not yet material to the group. The company is taking a stepped approach to building capability in New South Wales and is not pursuing major facility contracts of the size seen in Victoria at this stage.

Q: Is there a danger of data center overbuild and overcapacity occurring in Australia in the next couple of years, and are you prepared if there is a slowdown? A: Matthew Jinks (CEO) responded that from what the company sees, the answer is no. Data center operators typically build facilities only after signing tenancy contracts. The company's focus is on traditional customers who secure contracts before construction. With the current pipeline, the company can comfortably see three to five years of contracted work, and projects with two-and-a-half to three-year build times are already backed by tenancy agreements, so he does not classify this as overbuild.

Q: Are you seeing any council pushback or community backlash issues on data center projects? A: Matthew Jinks (CEO) said that by the time projects reach SKS, planning approvals, HV connections, and permits are already handled. The company has not experienced a data center operator halting a project due to council approval issues. Community discussions around power and water typically occur well before the company gets involved, and the early works order announced recently was already underway with demolition and site work completed.

Q: Would your acquisition strategy target more traditional work away from data centers, or is it purely opportunistic? A: Matthew Jinks (CEO) clarified that the acquisition approach is opportunistic, with opportunities coming across the desk regularly. The company does not have a list of targets or a specific acquisition strategy. If a particular region or sector aligns with accelerating efforts, they will consider it, but they are not currently working on any acquisitions. Gary Beaton (CFO) added that the company would not look to overpay for any acquisition.

Q: Can you elaborate on the potential for growth in other geographies such as South Australia, Western Australia, or the Northern Territory? A: Matthew Jinks (CEO) noted that South Australia has been the company's second-largest branch, with 80 to 100 resources. The company recently completed a data center in Darwin, facilitated with support from Melbourne. Western Australia has a smaller workforce, but a new general manager has been introduced to focus on the Perth region. While major project activity is currently concentrated in Victoria, the company has ambitions to grow organically in Perth and will assess opportunities as they arise.

Q: What drove the strong FY26 financial performance, and how does the company view its fixed cost base going forward? A: Gary Beaton (CFO) highlighted that revenue grew 33% while expenses grew only 28.2%, with every expense line except depreciation growing at a lower rate than revenue. The company's fixed cost base can support $500 million of revenue, and the profit before tax margin increased to 11.2% for the year. Matthew Jinks (CEO) added that the company maintains a strong focus on cost discipline, which enables scale benefits and margin preservation across projects.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .