This article first appeared on GuruFocus .
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Revenue:Group revenue declined by 4.7% to $2.9 billion, impacted by reduced Defence revenue.
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EBITDA:Increased 8.2% to $273 million, with EBITDA margin expanding by 1.1 percentage points to a record 9.4%.
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NPATA:Increased 7.4% to $128 million.
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Cash Conversion:Improved to 93.8%.
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Earnings Per Share:Grew 14.4% year-on-year.
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Dividend:Interim dividend increased by 9.8% to $0.1176 per share, representing a 75% payout ratio of NPATA.
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Work in Hand:Increased to $21.1 billion.
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Customer Renewal Rate:Achieved a 98% customer renewal rate across the period.
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Defence and Social Infrastructure Revenue:Declined by 20% to $999 million, with EBITDA down 10.3% but margin improving by 1 percentage point.
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Infrastructure Services Revenue:Increased 6.3% to $733 million, with EBITDA up 24.6% to $75 million and sector margin up 1.5 percentage points.
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Telecommunications Revenue:Increased 5.9%, with EBITDA up slightly to $97.9 million and EBITDA margin at 12%.
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Transport Revenue:Increased 5.3%, with EBITDA up 29.3%.
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Capital Expenditure:Increased to $53.6 million, or 1.9% of revenue.
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Net Debt-to-EBITDA:Increased to 1.4 times.
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Share Buyback:Upsized by $50 million to a total program size of $300 million, with over $185 million purchased since commencement.
Release Date: August 24, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record EBITDA margin of 9.4%, up 1.1 percentage points, driven by a shift to higher-value work and operational efficiencies.
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Strong cash conversion of 93.8%, demonstrating high-quality earnings and disciplined capital management.
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Work in hand increased to $21.1 billion, with a 98% customer renewal rate, underpinning future revenue stability.
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Successful mobilization of major Defence contracts (worth $3.6 billion) and seven new contract wins, including a 9-year Yarra Valley Water renewal.
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Increased shareholder returns with a 9.8% interim dividend uplift, 14.4% EPS growth, and an upsized share buyback to $300 million.
Negative Points
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Group revenue declined 4.7% to $2.9 billion, primarily due to the Defence Base Services contract transition.
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Defence and Social Infrastructure revenue fell 20%, with EBITDA down 10.3% due to contract resets and scope reductions.
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Telecommunications volumes were softer than anticipated in the first half, with revenue below the second half of 2025.
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Net interest expense increased by $7.6 million due to higher lease liabilities and net debt from buyback and capex.
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Capex is expected to rise to 2.5% of revenue this year due to the SAP upgrade, temporarily above the normalized 1-2% range.
Q & A Highlights
Q: How much of the 1.1 percentage point improvement in group EBITDA margin to a record 9.4% is structural versus timing and mix benefits, and is 9% plus now a reasonable through-the-cycle margin level? A: Dean Banks (Group CEO) stated the margin improvement is largely structural. He attributed it to a deliberate shift towards higher-margin work in sectors like Defence, digital infrastructure, energy, and water, as well as the successful remediation of legacy underperforming contracts from the Broadspectrum acquisition. He noted that the business has been "cleaned up" and that continuous improvement initiatives, particularly in Transport, are driving efficiencies. The company is confident that the improved margin is sustainable and will continue to strive for further improvement.
Q: Can you provide an update on the current thinking on capital deployment opportunities, particularly regarding M&A strategy to support strategic growth initiatives, and capital allocation decisions going forward? A: Mark Fleming (CFO) explained that the company's capital allocation framework is about balance: maintaining financial strength, investing for growth, and returning capital to shareholders. He noted the company is not capital-constrained, with net debt-to-EBITDA at 1.4 times, and is open to good investment opportunities, whether in CapEx like rigs and wells or M&A. The M&A strategy remains disciplined, focusing on adjacent areas to build capability, customer relationships, or geography. Dean Banks added that the company has increased its dividend franking to 100% and upsized its share buyback by $50 million to $300 million.
Q: What is the expected seasonality for the business, and is the historical pattern of roughly 46% first half and 54% second half NPATA split likely to continue? A: Dean Banks (Group CEO) noted that seasonality is limited, driven mainly by holiday periods in January and December. Mark Fleming (CFO) confirmed that the company anticipates a similar seasonality pattern to last year, with approximately 46% of NPATA in the first half and 54% in the second half, though it can vary by 1-2 percentage points.
Q: What is the quantum of mobilization and demobilization costs taken above the line for the new Defence contracts, and will they not repeat in FY27? A: Dean Banks (Group CEO) stated that the company does not provide specific numbers for these costs, as it aims to keep the business "as clean as possible" by absorbing such costs within normal trading. Mark Fleming (CFO) added that this approach includes other one-off items like the SAP upgrade cost. Both executives emphasized that the Defence Base Services and Defence Clothing contracts were successfully mobilized and are building momentum.
Q: Can you provide an update on the mobilization of recent transport wins, such as the Grampians and Eastern Metropolitan road maintenance contracts, and how they are performing in the second half? A: Dean Banks (Group CEO) reported that the mobilization of these contracts has gone "really well," with the company inheriting a high-quality workforce. He noted that while it will take time to ramp up, feedback from new employees has been positive. He also highlighted a strong outlook for the Transport business, with upcoming contracts including the Western Harbour Tunnel, North East Link, and Torrens to Darlington.
Q: How are telco volumes expected to hold in the second half, and is there upside if volumes move higher? A: Dean Banks (Group CEO) said the simple answer is yes, but noted volumes were "a little bit softer in the first half than we anticipated." He expressed confidence in the long-term contracts and collaboration with NBN to advance work, which should drive revenue. He expects the business to grow, though volumes can be variable.
Q: Is NPATA growth expected to accelerate in the second half, and what are the key drivers? A: Mark Fleming (CFO) confirmed a positive outlook for the second half, driven by the mobilization of Defence contracts, continued growth in Infrastructure Services, and new Transport contract wins. He noted the first half represents the bottom for revenue, with growth expected from that base. Dean Banks added that 2026 is a transition year, but the company has good visibility on secured revenue for the second half.
Q: What drove the reduction in warranty and contract claims provisions during the period? A: Mark Fleming (CFO) explained that the reduction was due to the resolution of several legacy commercial claims, including the Gateway claim, which was over $60 million at IPO. He noted that the company has "really derisked the business" by resolving most commercial claims, positioning it well for the future. Dean Banks clarified that the Gateway claim was never expected to be at its full value, and the release of provisions was in line with expectations.
Q: Are there any additional major contracts ramping down or finishing in the second half of 2026 and 2027? A: Dean Banks (Group CEO) stated that the business is "fully derisked" with major contracts renewed over the last 12-18 months, increasing average contract tenure to 6.2 years. He mentioned the Auckland Council contract as one in the public domain that is in the procurement cycle, expected to be completed in 2026 or 2027. He noted that 2027 renewals will likely be of lower value, in the $100 million range, rather than the $1 billion contracts won in 2025.
Q: Can you quantify the gain or loss on the sale of PP&E, which was a significant line in the cash flow? A: Mark Fleming (CFO) stated there was nothing particularly unusual, with the main driver being investment in new rigs assets and retirement of older ones. He noted this is a normal part of recycling capital. Dean Banks added that investment in rigs is positive as it indicates growth, and the company has a sensible approach to depreciating these assets over contract life.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
