Duratec Limited (DUR) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for standing by, and welcome to today's webcast for Duratec Limited Full Year Results Presentation for FY '26. My name is Adrienne Porter, Duratec's Corporate Planning and Investor Relations Manager. I would like to begin today by acknowledging the Noongar people, the Traditional custodians of the land on which we gather and pay our respects to their Elders past, present and emerging. Joining me today are Chris Oates, our Managing Director; and Ashley Muirhead, our CFO. [Operator Instructions] I would now like to hand over the webcast to Chris, who will talk through Duratec's FY '26 highlights.

Thanks, Adrienne. Hi, everyone. Welcome to Duratec's full year results presentation, including a business update and outlook on all sectors and companies. We will start with a quick recap of our business history. Here, we get a snapshot of Duratec's growth since inception. Whilst our long-term CAGR still remains strong, our FY '26 revenue result was lower than anticipated due to the timing of some of the larger projects, which have now landed but well later into the financial year than originally anticipated. The overall result was still positive as our EBITDA, NPAT and EPS are all improved from the prior year despite the anticipated revenue being slightly down. With our order book at new record highs and subsidiary companies performing well, we expect to return to strong growth levels. The key business drivers remain strongly active in all key market sectors and our diversified operating model continues to be a strength with revenue generated across multiple sectors, geographies, project sizes and reoccurring maintenance streams. This balance helps reduce exposure to any single market cycle while supporting more consistent earnings. Looking now at our portfolio, FY '26 saw the group's continued expansion through a combination of organic growth initiatives and strategic acquisitions that broadened our capability, strengthened our East Coast presence and enhanced our service offering across asset life cycle. The award of a $45 million contract with Lihir Gold in Papua New Guinea marked an important milestone in Duratec's expansion into international energy and resources markets, demonstrating the breadth of expertise now available across the group. Acquisitions completed during the year included EIG, which strengthens our position across electrical and fuel infrastructure; RGK Resources, which had specialist inspection and testing capability; Hunter Coatings, which enhances our self-perform protective coating, structural integrity and concrete remediation offering; and Pacific Welding Australia, which expands the group's project-based welding mechanical services and specialist fabrication capability. During the year, we also established DXP Energy Solutions, further strengthening our capability across the energy sector and supporting a broad range of asset life cycle services. These investments continue to expand our participation across the full asset life cycle from technical advisory, inspection and engineering through construction, remediation, maintenance, asset integrity and ultimately decommissioning. This broader capability enables early engagement with clients and supports longer-term relationships across the life of critical infrastructure. Our acquisition strategy remains focused on targeted capability-led opportunities that complement the existing group, strengthen self-perform delivery and add specialized technical expertise. Cultural alignment and long-term strategic fit remain key considerations in every acquisition decision. Whilst the initial acquisition investments have been relatively modest, we expect these new businesses to contribute meaningfully as they scale and leverage Duratec's national footprint, client relationships and collaborative operating model. FY '26 was a year of positioning the business for the next phase of growth and delivery. While revenue was broadly flat, we expanded gross margin from 18.6% to 20.5% and increased normalized EBITDA by 10.3%, highlighting the benefits of our focus on higher quality work and disciplined execution. We strengthened the group through 4 acquisitions and the establishment of DXP Energy Solutions and Atec Facades, broadened our market reach with our ISO 19443 accreditation, opening opportunities within the AUKUS nuclear supply chain and delivered another year of strong safety performance with 0 lost time injury. Most importantly, we converted tenders into the record order book of $650.8 million, up 66.9% from FY '25, providing a solid foundation for the year ahead. Looking to '27, our focus shifts from winning work to delivering it. A substantial portion of the FY '27 revenue is already secured through the order book, supplemented by reoccurring annuity and MSA revenue that sits outside of that order book. We have multiple near-term wins and are also working on converting the number of current ECIs we have been engaged on. We will also benefit from a full year contribution from acquisitions completed during FY '26. Major projects, including Diamantina Wharf, Darwin Ship Lift, Lihir Gold Plug & Abandonment and the Orica Hunter Valley Hydrogen Hub are now moving into delivery, positioning the business for a strong year of execution and operational performance. Taking advantage of operational leverage will also be a strong focus throughout the year. Moving now to our financial highlights. Revenue delivered in FY '26 was $570.3 million, which was broadly in line with the previous year, driven primarily due to project timing and delivery phasing. However, normalized EBITDA, normalized EBITDA margin and NPAT all delivered record results. Normalized EBITDA increased to $58.5 million, up 10.5% on FY '25. Overall, normalized EBITDA margin has lifted to 10.3% and NPAT has increased to $23.8 million, which is up 4.1% from the prior year. Later in the report, you will also see that we have provided sector EBITDA margin performance for each of the reporting sectors. Earnings per share was $0.0925, up 1.6% on FY '25 and the Board has declared a final dividend of $0.025 per share fully franked, which brings the total dividend for FY '26 to $0.0425 per share as we continue our balance between returns to shareholders and retain funds for growth. Our order book is at record levels. Tender activity remains exceptionally strong and our pipeline has reached an all-time high. I will hand over to Ashley Muirhead, who will speak to the FY '26 financial results.

Thanks, Chris. Good morning, everyone. Revenue of $570.3 million was broadly in line with FY '25. A highlight of the year was the strong growth achieved across building and facade, energy and emerging sectors, reflecting continued demand for Duratec's specialist capabilities. The strength of our diversified operating model was evident with the growth in these sectors offsetting project timing impacts experienced in the defence and mining and industrial sector. Importantly, we continue to improve the quality of earnings across the group. Gross profit increased to $116.9 million with gross margin expanding from 18.6% to 20.5%. This reflects disciplined project selection, strong project execution and the continued expansion of our self-perform capability, both organically and through targeted acquisitions. The margin improvement flowed through to earnings with normalized EBITDA increasing to $58.5 million and the normalized EBITDA margin increasing to 10.3%. While continuing to invest in acquisitions, business systems and integration to support future growth, we also delivered improved shareholder returns with net profit after tax increasing to $23.8 million, EPS increasing to $0.0925 and the fully franked dividend maintained at $0.0425 per share. Overall, FY '26 demonstrates our ability to improve profitability, strengthen margins and grow earnings while continuing to invest in the future growth of our business. Turning to cash. The group finished the year with a strong cash balance of $78.8 million. We generated $37.3 million of operating cash flow before interest and tax during the year, representing a solid cash conversion of 74%. The result was impacted by the timing of project milestone receipts and operational payments around year-end, which influenced working capital movements. Importantly, cash conversion remains strong. Working capital was well managed and the business continues to generate healthy operating cash flow. A key focus during FY '26 was investing for future growth. We invested $12.1 million in plant equipment to support operational capability and deployed a further $14.4 million into business acquisitions as part of our growth strategy. Those investments strengthen our self-perform capability and expand our market reach. We paid $9.4 million in fully franked dividends to shareholders during FY '26. The strength of our cash generation continues to provide flexibility to invest in growth while maintaining shareholder returns. Turning to the balance sheet. Duratec remains in a strong financial position with net assets increasing to 26% to $93.8 million during FY '26. This reflects both the group's operating performance and our continued investment in strategic growth opportunities. During the year, total assets increased to $302 million, reflecting acquisitions completed during the year, together with ongoing investment in operational capability. Acquisition activity increased intangible assets to $32.7 million and resulted in contingent consideration of $10 million linked to agreed performance milestones. Importantly, we closed the year with $78.8 million in cash and total funding facilities of $343.5 million, supporting borrowings, bank guarantees and bonding requirements. With 64% of facilities remaining undrawn, the group retains significant liquidity and funding flexibility to support future growth initiatives and project delivery requirements. Contract assets increased during the year due to the higher project activity and revenue recognized on milestones not yet invoiced at year-end. Overall, our balance sheet remains well positioned to support organic growth, pursue strategic acquisitions and continuing investing in operational capability. Combined with our strong funding capacity and record order book entering FY '27, the group is well positioned to execute on the opportunities ahead. I will now hand back to Chris to cover the operational highlights.

Thanks, Ashley. Ensuring our people's safety and well-being is vital to Duratec's success. Throughout FY '26, we continue to invest in our people, safety and sustainable foundation. Our workforce, which is growing more recently to a total of 1,580 through a combination of organic growth and acquisition activity was supported by the implementation of a new workforce management system, refreshed leadership and technical development programs and the introduction of a structured career pathway to support capability development across the group. We also renewed our vision, mission and values, published our inaugural sustainability report, launched our Reflect Reconciliation Action Plan endorsed by Reconciliation Australia and established a 2035 Scope 1 and 2 emissions intensity reduction target. These initiatives reflect our commitment to building a strong, sustainable business that supports our people, clients, communities and long-term growth objectives. Moving now to Defence performance and outlook. Defence delivered in FY '26 revenue of $158 million, reflecting completion of major FY '25 state programs, partially offset by the commencement of the $300 million Diamantina Wharf upgrade, which underpins defence revenue through FY '27 to '29. This sector delivered an improved gross margin of 17.4% and an increased EBITDA margin of 8.4% through disciplined project selection, effective cost management and a favorable mix of work. A key milestone during the year was the commencement of the $300 million HMAS Stirling Diamantina Wharf upgrade through the Duratec Ertech joint venture, which further strengthens our position to support future AUKUS-related infrastructure investments. We also expanded our fuel and marine infrastructure capability through the successful delivery of complex defence projects, including HMAS Coonawarra. Importantly, we achieved ISO 19443 accreditation, the nuclear-specific quality standards for participation in the nuclear supply chain, reinforcing our capability to operate in highly regulated and strategically important environment. Looking ahead, the outlook for the sector remains positive, underpinned by sustained Australian investment in defence infrastructure and strategic capability programs. With a strong pipeline across state upgrade, fuel and marine infrastructure and sustainment work, we believe Duratec is well positioned to benefit from AUKUS-related investment and increasing demand for larger and more complex project delivery. On to Mining and Industrial. As you can see from a performance perspective, the revenue was at $114.3 million. While this was lower than the prior year, the sector increased its gross margin 23% through a greater proportion of higher valued structural integrity and maintenance work. During the year, we strengthened relationships with Tier 1 clients like BHP and Hancock Iron Ore, supporting a diversified pipeline of opportunities. Key projects progressed well, including the Rio Tinto's High-Grade Screen House project where additional scope was secured alongside the delivery of the Yuri Renewable Hydrogen and Ammonia project and the BHP Under Harbour Tunnel remediation works. We also expanded our capability and geographical footprint through the acquisition of Hunter Coating in Hunter Valley and the establishment of a new facility in Port Hedland, further enhancing our ability to support clients across key mining and industrial regions. Looking ahead, the outlook still remains positive, underpinned by ongoing demand for remediation, maintenance and asset integrity services across aging infrastructure. With a strong project pipeline across mining, industrial, rail, port and energy markets, together with the growing opportunities across the East Coast and South Australia, Queensland and Northern Territory, we remain focused on converting strategic client relationships into long-term contracts while maintaining a balanced mix of major projects and recurring maintenance work. Moving to Building and Facades, which delivered an outstanding result in FY '26 with record revenue of $138.8 million, which is up 24.1% on last year to deliver a gross margin of 19.9%, supported by strong demand across facade remediation, heritage restoration and building remediation projects. A key feature of the year was our ability to convert ECIs into main works contracts, including the Ayers House restoration project in South Australia and a major high-rise facade refurbishment in Brisbane CBD. Across the country, we secured and progressed several significant projects, including Canberra's largest residential recladding project at Glebe Park Residences, a large-scale live apartment facade rectification work in South Australia, the Heritage Market City paved market remediation project in New South Wales and the landmark Sydney CBD remediation project. We also continue to broaden our technical capability and national delivery models, culminating in the launch of Atec Facades, which expands our offering beyond remediation into the delivery of new build facade systems, significantly broadening our addressable market. Looking ahead, we see strong demand across remediation, heritage restoration, roofing, glazing and building upgrade projects with increasing ECI activity supporting participation in larger and more complex opportunities. The sector is well positioned to build on the momentum achieved in FY '26. FY '26 was a defining year for our energy sector as we continue to strengthen our position as a diversified provider of maintenance, asset integrity, fuel infrastructure and decommissioning services. Despite the slower start to the financial year, revenue for the sector increased by 11% to $91.6 million, supported by strong demand across maintenance, engineering and fuel infrastructure services. During the year, we significantly expanded our capabilities through the acquisitions of EIG Australia, RGK Resources and Pacific Welding Australia as well as the establishment of DXP Energy Solutions, creating a more integrated platform capable of supporting clients throughout the full asset life cycle. We successfully delivered several strategically important projects, including the Santos Varanus Island B tank refurbishment project and the Harriet Alpha decommissioning project, the King Bay Supply Base Wharf refurbishment for Woodside and ongoing works at the INPEX Ichthys LNG facility. Looking ahead, we enter FY '27 with strong momentum supported by the growing portfolio of maintenance, fabrication, fuel infrastructure and decommissioning opportunities. Key projects include the Lihir Gold Plug & Abandonment campaign in PNG, the construction management contract at Orica's Hunter Valley Hydrogen Hub and a national services agreement covering tank and fixed asset maintenance for a major fuel infrastructure provider across Australia and New Zealand. We're also providing ECI services for the design of Perth Airport's jet fuel expansion project and have secured Stage 2 fuel infrastructure works at Sydney Airport. Together with our expanding maintenance contracts and strong relationships with major operators, we believe the sector is well positioned for growth across Australia and the Asia Pacific region. Finishing off with our sector-based updates with our emerging sectors, which include marine, transport infrastructure and water infrastructure. Revenue achieved by our emerging sectors was $67.8 million, an increase of 11.8% on the prior year with an improved gross margin of 18.2%. As we expanded our presence across marine, transport and water infrastructure markets, the result was driven by a more diversified portfolio of projects and continued investment in capability, market expansion and national delivery. During the year, we secured several significant project awards, including the Darwin Ship Lift glass and paint facility, the Kwinana Bulk Jetty Cathodic Protection Works and electrical infrastructure works for CSIRO. We also continue to strengthen our national marine capability through project delivery across Western Australia, Queensland and Victoria, while expanding our exposure to new clients and end markets, including high security government infrastructure opportunities through our inclusion on the Department of Home Affairs panel. Looking ahead, the outlook remains positive, supported by a strong pipeline across marine, water and transport infrastructure markets, continued government investment in critical infrastructure and increasing demand for marine asset upgrades. With growing client relationships, expanding capability and a broader addressable market, we are well positioned to pursue larger and more complex infrastructure opportunities in FY '27 and well beyond. We will now look at our updates by entity. During the year, MEnD continued to strengthen its role as Duratec's specialist technical advisory inspection and asset integrity business with demand growing across all major sectors. MEnD expanded its national capability through the establishment of a Brisbane laboratory and further enhanced its technical offering through the acquisition and integration of RGK Resources, adding specialist nondestructive testing, inspection and asset insurance capabilities. The business also increased its involvement in defence advisory services and secured its first international engineering project through the Newmont's Lihir Main Wharf and RoRo Remediation Study in Papua New Guinea. Looking ahead, we see continued demand for asset integrity, inspection and technical advisory services, supported by ongoing investment in digital engineering, laboratory testing and inspection technology. Importantly, MEnD supports Duratec's early contract involvement model, enabling earlier client engagement and leveraging the group's national footprint and multidisciplinary capability to convert advisory opportunities into long-term project and maintenance work. WPF continued to strengthen its position as a key provider of fabrication, welding, mechanical and maintenance services to the energy sector. During the year, the business expanded its East Coast footprint through continued growth in Queensland and the acquisition of Pacific Welding Australia, further enhancing its national self-perform capabilities. Looking ahead, with strong relationships with major operators, including Chevron, Woodside, INPEX, Santos, McDermott and APA Group support a growing pipeline of maintenance, fabrication and decommissioning opportunities. Combined with the enhanced capabilities delivered through the PWA acquisition, WPF is well positioned to support larger and more complex energy and industrial projects across Australia. EIG has integrated well into the Duratec Group and during the year, continued to strengthen our capability across fuel, infrastructure, electrical and mechanical services. EIG has enhanced Duratec's integrated energy offering and asset life cycle capability while increasing collaboration across the group on larger fuel infrastructure opportunities, including Perth Airport jet fuel expansion program. Looking ahead, EIG is supported by a strong pipeline of opportunities, including recently awarded Rio Tinto bulk lubrication facility and fuel infrastructure upgrade projects. Continued investment in engineering capability, specialist fuel systems, master metering solutions, mobile bunkering technology and maintenance services, together with the support of Duratec's national platform and complementary energy business positions EIG to pursue larger and more complex infrastructure opportunities and continue the group's long-term objective of becoming a leading asset life cycle partner to the energy sector. During the year, as part of our B&F offering, we launched Atec Facades to expand Duratec's capability beyond the remediation and into the newbuild facade market, significantly broadening our addressable market. The business brings specialist expertise across design, procurement, fabrication and installation, complementing Duratec's established facade remediation capabilities. Atec combines in-house design, digital engineering and national delivery expertise to create an integrated facade delivery model capable of supporting larger and more complex projects. Looking ahead, we see growing demand for specialist and design-led facade solutions and believe Atec provides a scalable platform for long-term growth in the facade sector. By leveraging BIM digital engineering and the broader capabilities of the group, Atec is well positioned to enhance efficiency and strengthen client relationships. During the year, we established DXP Energy Solutions to expand our capability into the higher-value energy services, creating a specialist platform focused on engineering, well abandonment, decommissioning and operations across the energy asset life cycle. A key milestone during the year was the mobilization and delivery of a major Plug & Abandonment campaign at Newmont's Lihir operations in PNG. Looking ahead, we see growing opportunities across Australia and PNG in decommissioning, well abandonment, operations and maintenance and broader energy infrastructure services. DXP's integrated delivery model, which combines engineering and field execution under a single management structure, together with its strategic partnerships and specialist expertise positions the business to support increasingly complex projects and further expand Duratec's presence across Australia, PNG and the broader Asia Pacific energy market. Looking now at DDR Australia, Duratec's Aboriginal and Torres Strait Islander Associate business. The business further enhanced its self-perform capability through the integration of RC Construction and targeted investments in plant and equipment, improving its ability to deliver civil and concrete works across defence, government and infrastructure markets. A key milestone was DDR's expansion into the Northern Territory and commencement of the Darwin Ship Lift project, which provides a significant runway of work while strengthening DDR's national presence. During the year, DDR continued to deliver strong social procurement outcomes with Aboriginal people representing more than 25% of its workforce and Aboriginal enterprises accounting for more than 30% of supply chain spend. Looking ahead, the business remains focused on disciplined growth across Western Australia, Queensland and the Northern Territories and is supported by a solid order book and strong pipeline of defence and government infrastructure opportunities. Looking now at our Master Services Agreement and annuity style contracts, which made up 32.5% of revenue in FY '26 compared to 31% in FY '25. These agreements reflect the strength of our long-standing client relationships. Many of the major clients have partnered with Duratec for more than a decade, providing repeat work opportunities, increasing revenue visibility and creating meaningful barriers to entry. We anticipate MSA work to grow and continue to strengthen future revenue visibility and create opportunities for repeat work. This revenue sits outside of the order book. Now turning to the pipeline and outlook for the remainder of the year. Duratec's order book has grown to a record level of $650.8 million, representing a 67% increase from last year. During FY '27, we anticipate delivering between 70% to 80% of this along with the standing start MSA work. The tender and pipeline outlook of $1.3 billion and $4.8 billion, respectively, reflecting a substantial pipeline of opportunities across our core markets. Whilst the order book has grown 67%, the tender sections still remain very strong and even after the conversion of a number of larger opportunities. This truly shows our expanding business is very well placed for FY '27 and well beyond. The pipeline has increased slightly and we anticipate this to continue to grow as we expand our service offering and grow capacity and capabilities. Turning to the outlook. We enter FY '27 with record order book of $650 million. It's also important to note that it's only recently that a number of these projects have moved into the execution phase, providing a strong platform for continued growth well into FY '27. These include the HMAS Stirling Diamantina Wharf upgrade, Lihir Plug & Abandonment campaign in PNG, the Darwin Ship Lift Blast & Paint Facility, Kwinana Bulk Jetty Cathodic Protection Works and electrical infrastructure works for CSIRO. Together, these projects provide a solid base of activity across defence, energy and emerging sectors. We also expect an increased contribution from our portfolio businesses and recent investments. EIG is progressing opportunities, including the Rio Tinto bulk lubrication facility and fuel infrastructure upgrades, while WPF, PWA and DXP are expanding our fabrication, maintenance and decommissioning capabilities. The quality of our revenue base also continues to strengthen. MSA and annuity style contracts represent 32.5% of FY '26, up from 31% in FY '25 and sit outside of the order book. This reoccurring work, together with growing maintenance and sustainment activity supports revenue visibility and earnings resilience. Looking further ahead, significant investment across defence, energy, mining and industrial and critical infrastructure continues to support the demand. Our position is further strengthened by the commencement of HMAS Stirling Wharf upgrade, increasing AUKUS-related opportunities and a significant investment plan for the $24 billion Henderson Defence Precinct. These opportunities are complemented by a growing pipeline of major marine infrastructure projects as well as expanding prospects across energy, fuel, water and transport sectors. We are also participating more broadly across the asset life cycle. The addition of engineering, specialist, inspection, fabrication, maintenance, asset integrity and decommissioning capabilities allows us to engage earlier, self-perform more work and remain involved for longer. Recent ECI conversions are evidence of the value of our early engagement strategy, creating significant follow-on delivery opportunities that will support performance in FY '27, '28 and well beyond. With a cash balance of $78.8 million, a growing portfolio of complementary businesses and continued investment in self-perform capability, the group retains flexibility to pursue disciplined organic expansion and strategic acquisition opportunities. Taken together, these factors position Duratec to pursue larger and more complex projects while further diversifying the group's earnings base. That concludes our presentation for today, and I would like to hand over to Adrienne to moderate the Q&A session. Before I do, I would like to sincerely thank our people across the group for their hard work, commitment and contribution throughout FY '26. The strength of Duratec lies in the capability and dedication of the entire team whose continued focus on safety, quality and delivery excellence underpins our success and positions the business for future growth. I thank you all.

Thanks, Chris. [Operator Instructions] And we'll now move to the first question. Actually, before I jump into the first question, I might just remind everybody that a copy of the webcast, along with the presentation will be uploaded to Duratec's website following the meeting. And now looking at the questions we've received. The first question is a multipart question from Lindsay Bettiol at Goldman Sachs. I'll read the question in full, and then I'll break it down. It's a 5-part question. And Chris, you can then address it in stages. So the question in full is first part with regards to the bridge to FY '27. So looking at the order book of $650 million, if we subtract the $150 million for Diamantina over 2 years and then also look at the MSA, so $185 million plus revenue and all the ECI work and medium to large projects that are dropping in the second half of FY '27 and is there anything wrong in this math calculation? Second part of the question relates to medium and larger opportunities in the second half of the year, looking for some more color around the 13 ECIs. And also with regard to the value of those ECIs, confirming if the $280 million is in the order book and also the timing on the potential of converting those ECIs. And then a final part to that question is with regard to margin trajectory in FY '27, if there's any specific segment callouts that you'd like to address. So if you want to maybe take the first part Chris.

No worries. Thanks for that. And yes, we'll go through all of those parts of those questions. So we start off with the bridge to the '27, I guess, in reference to consensus numbers and taking the order book to that part. So the order book sits at $650 million, as we've outlined there, which is probably the absolute strength of the year that we've had, taking it from $400 million to $650 million. Then we break that down and we go, yes, some of that goes through to FY '28, which is really good. Then we're left, I think the way the question was asked at about $500 million revenue to be delivered in FY '27 plus the MSAs, I think the question relates that at about $185 million. This is all about and it's just all the stat that we've got out there. So you get yourself into the 6s. How do we bridge the gap? Yes. It's pretty -- it's probably all the data there. We've got $1.3 billion worth of tenders that we do come through. We always talk about our win rate being 1 in 3. But on that ECI work, it's exceptionally stronger and some of those projects are just one for one on the win rate. So we do expect some more to be dropping from now onwards. And I'll probably just jump into some of those ECIs as well because we've called out 13 of them at $280 million. They -- and the timing of them is happening at all sorts of periods, as you can imagine, like there's one due relatively soon, probably on the smaller scale that wouldn't be announced. And then behind that, we'd expect another one fairly soon after that as well, more in the Building and Facades space because that's where a fair few by number are. Obviously, one of the bigger ones that's inside that will be the Perth Airport project we're working on. So it's a very low number as in $3.5 million or half of our proportion of that, that sits inside the order book right now. The rest of it is in tenders and it is quite a big part of that. And it's a complex job, fuel-related job, everything we do and I think why we won the job, but we'd expect that to come through if timing is anything to go by as what we hear in the second half. That -- and that obviously, we have plenty of work to do in between now and then that added to it will populate some pretty big numbers back into the order book. And so we'd expect to be holding that order book up and about along with delivering some pretty strong revenue. I think -- yes, just to confirm, too, that the $280 million, that was one part of that question, is not in the order book. It is in the tenders. So that's the way we're always going to call it out because it's not a job till it's a job. And that's probably answered all the way through that question there. I think -- sorry, the margin trajectory in FY '27, that's the last part of that question. Yes, we've got -- if we run through that and I think that question pops up again, so I can answer that part of that as well. So in defence, we've got a -- I'll just talk gross margins and the EBITDA margins rounded up to overall EBITDA as well. So we have defence at 17.4%. That's up. So that's a really strong part. It has been there before. Up at that, we're coming off a base of 13%. Obviously, the revenues come down, but we have secured the circa $300 million job by DEJV. So we'd obviously expect us to bounce back strongly from a revenue perspective. We do that at a margin of around 17%. We're going really well. We expect that to happen. When the volume goes up, then the EBITDA margin at the end of that, which is 8.4% should go up accordingly. Obviously, with the overhead proportion that doesn't need to rise on that journey of increasing the revenue. M&I, so that's our mining business, 23%, that's gone up a bit. And basically, the churn of all the small to medium jobs is around that margin, sometimes a little bit more than that, but that's probably about right. If we do grow some strong revenue, that margin can come down. We're not anticipating that at this stage. That translates to an EBITDA margin of 8.1%. That's a bit lower. On that journey of FY '26, we were probably expecting to grow mining more than what we thought. And so we had probably some overheads there. The structure probably wasn't exactly right for what we were doing, but we do expect that to grow now. We have readjusted how we view that going forward. So again, we probably want that EBITDA margin to come up a bit as it should. But generally, the gross margin is about right. Building and Facades has had an absolute good year and we expect that to continue. That's at 19.9%, doing a lot of self-performing there. EBITDA margin is 9.4%. So that's good and that could come up a little bit too on that journey depending on the mix of jobs that we've got. Energy is probably the interesting one there, and I'm going to answer another question that's coming is 25% with an EBITDA margin of 14.7%. But if we have a quick look at that too, with what's happening there is we went from $27 million in the first half to $64 million in the second half to round off at $91 million. So that as a percentage from half-to-half is huge difference. And this is some of those projects coming through, one, particularly our Plug & Abandonment campaign in PNG. So the mix of that has come down slightly. We still expect energy to be in the 20s as we grow, but we are growing significantly there as well. So then really, you look at EBITDA at 14% to 14.7%. Again, we would want to hold that. Maybe we can do something good there, but that's definitely a huge area of growth for us, and we would always want to be in the 20s for energy. Lastly, emerging 18.2% gross margin into a 3.2%. So that's a bit lower. It did have some more overheads in there in and around a little bit of those acquisitions, but probably had some one-offs and some parts to that. So we want to see that EBITDA margin rise a little bit and the gross margin could come up a little bit depending again on the mix of work we've got. I think I might have answered a few of the second questions, but if you could take us through that as well, Adrienne.

Sure. Thanks, Chris. So the second question from Abraham Akra at Evans & Partners is also a multipart question. And as Chris alluded, probably has been in some part addressed in his previous response there, but I'll read the full question. The first part is, can you share underlying PBT and NPAT? The second part is any more capability gaps that you deem attractive via M&A? Part 3 is gross margins in energy fell year-on-year. Can you provide some guidance as to why and what we can expect gross margin for energy in FY '27? And the next part relates to revenue and the 13 ECIs. So what is the revenue for the 13 ECIs contributing in FY '27 and confirming the ECI revenue is outside the order book. And the final part relates to the opportunity for near-term tenders at Henderson. I think you've probably covered a good portion of that, Chris. So I might just then throw it to Ashley for the question around the underlying PBT and NPAT and then maybe come back to you to cover off anything else that you think is appropriate.

Yes. Thanks, Adrienne. If we were reporting normalized net profit after tax, then there would be an adjustment for the one-off costs in relation to the 4 acquisitions and the business system improvements. So that would result in the net profit after tax or the underlying net profit after tax being approximately $27 million.

No worries. I probably -- there's one part that -- of the question there relating to some of the projects and I guess the topping up of the orders or the tenders, right? So we're at $1.3 billion. That's still relatively strong considering a lot were won and lost in that period before, right? So we won our fair share. We got the order book from $400 million to $650 million. So what's the stuff ahead? And a lot of this isn't in the tenders by the way, because we're only really putting it across from pipeline to tenders when it's -- when we're actually tendering on it, meaning it's getting near term. So this is just a macro probably look at some of the stuff that's out there that we are targeting and we will be looking at. So we obviously have our conversion of the ECI at Perth Airport. So that's a big number that is in tenders. Some of the other things working that are around by the way, the Kwinana Westport, so we have -- if we look down, this is in Western Australia there, there's a massive upgrade. So first of all, there's the Kwinana Bulk Terminal that's coming out and that's in the EOI phase now that we're part of. That's quite a large job, a very large job. Next door to that is Henderson. So that if everyone is probably following the news on that, the $24 billion planned spend. That number has just been revised or other people think it's a lot more. There's a heck of a lot of work that we believe we can do. We work a lot in that Cockburn Sound. We're obviously doing a lot of work over at Garden Island. So we think we should be -- we can tender certainly hard at it. We think we will be preferred to some degree in that space. We've also got that ISO accreditation 19443, which allows us in that nuclear supply chain. So that's a big target for us. We have lots of work for Santos. There's some term maintenance contracts we think we line up well for. There's other work at Garden Island. There's plenty of other things going on. That's obviously targeted with an $8 billion spend. There's a couple of fuel facilities coming up in Sydney, again, right up our street for what we do. Brisbane Airport is doing a big fuel upgrade. There's just other fuel upgrades that we're working on with multiple clients around Australia. The U.S. defense spend, that's another big target. That's barely in the pipeline at all, but we do -- we see that as a place we can certainly play. PNG opportunities, we are working our way through the one job MEnD has won another project. So we're wrapped with that, and we think there's still a lot to play out there. I think that's probably covered off that.

Thanks, Chris. Just moving then to the next question, which is from Pia Donovan at Argonaut. It's a question around margins. So Pia asks, margins are at record levels. Do you expect these to -- sorry, do you expect to keep margins looking forward? And how should we look at margins across the sectors and at the group level?

Yes. That's -- I probably touched on them individually a bit and then just to round it off, is that we had a good year and got the margin from 18% to 20%. We think that is sustainable, particularly as -- with the acquisitions we've made, if you could say, RGK, EIG, PWA, they're on the higher end of the margin profile. So part of that is we internalize some of the jobs and that's our offering to the client is we know what we're doing, we can get these jobs done. Then our margin can go up because it's more self-perform, but that's our target. So we think and believe those gross margins are very sustainable. Obviously, and we've probably said this plenty of times and we haven't had the opportunity to take advantage of operational leverage yet. And -- but when we do look at the order book and we see that, that definitely can play out. And that's us adding a fair chunk of revenue from where we were in '26 to '27 and then completing or performing well at that, that obviously is a good gross margin from a corporate overhead perspective, we collect that. We did -- the business is set up to handle this type of revenue into the 7s. So we feel we can translate that into a pretty good EBITDA when it all comes down to it. So when it's not lost on us, we have targeted this for some time. And the beauty of '26 despite perhaps the numbers or the revenue wasn't where we wanted it to be, the order book goes from $400 million to $650 million. That is what we would look at '26 and say quite a phenomenal setup year. The other point to that probably is we've won a lot of that towards the end of the FY as well. So if we look at that, that -- the run rate now is up where we wanted it to be. And that's, I guess, the beauty of the position that we're in now looking forward.

Great. Thanks, Chris. Next question is from Simon Hinsley at NWR, and you may also address this in part. Simon asks, just to clarify, is it right to say with a $650 million order book, which you may convert 75% plus the MSAs of $200 million gets you close to $750 million already. Is it a fair way to look at the standing start for FY '27 in terms of revenue?

Yes. I think I went through that earlier on. And you can dice the math a few different ways, but it's there, right, because you go the order book is there, the $650 million is there. There is part of that is DDR in there as well, which we don't account for at the top, obviously, with the revenue side of that. So then you convert the $600 million by that 75% yet and we called it out as 70% to 80%. These jobs are underway now, so we're not expecting that slippage to occur. Then you add the MSA work, you automatically get yourself to some pretty solid numbers, which call it a standing start or however we want to look at it. But we are -- we've never been this well placed. That's probably very clear if you go back through the history of the order book and then you try and relate order book because the order book is what we're going to do. And if you go back through those years, we absolutely have not been in this position. So that's the beauty of it. And all of the math that I think these questions are alluding to is there. And so yes, we are -- have the best standing start by a long shot than we ever have in the history of the company.