Duratec Limited (H2E.F) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for standing by, and welcome to this webcast for Duratec Limited's Full Year Results Presentation for FY '25. My name is Oliver McKeon, Executive Manager for Corporate Strategy and Investor Relations. I would like to begin today by acknowledging the traditional custodians of the lands from which everyone is joining and pay our respects to their elders past, present and emerging. Joining me online 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 '25 highlights.

Thanks, Ollie. Hi, everyone. Welcome to Duratec's full yearly results presentation, including the business update and outlook on all sectors and companies. Firstly, at our business history, we get a snapshot of our growth since inception. I'm very proud to report that in FY '25, we achieved revenue of $573 million, up 3.1% compared to FY '24. This was predominantly driven by an outstanding performance across energy and emerging sectors. Our CAGR continues at a strong level of 30.2%. In September '24, we acquired the business of GF Engineering and consolidated all of WPF operations into the 12,000 square meter facility in Naval Base WA. In February 2025, Duratec Limited acquired the business AsClear Pty Ltd, which provides industrial blasting and specialized coatings in Morwell, Victoria. Shortly following year-end, Duratec also acquired 100% of the shares in EIG Australia, which I'll talk to later in the presentation. The key business drivers remain strongly active in all key market sectors, and the group had a solid start to FY '26. This slide shows our updated portfolio, which highlights our current footprint across Australia and the key market sectors and locations in which we operate. Importantly, the company's strong performance in FY '25 positions us well and provides us with the confidence to continue to pursue strategically aligned expansion opportunities over the near- and long-term, ensuring sustainable profitability and shareholder returns. Of particular note is our ambition to expand WPF and EIG into the Eastern states using our established offices and network. Turning now to performance. As mentioned, revenue delivered in FY '25 was $573 million, the highest revenue in the company's history. Normalized EBITDA is a record result at $53 million. And importantly, the overall EBITDA margin improved to 9.2% compared to 8.6% in FY '24. The EBITDA result is up 11.3% on PCP, and ultimately, we have increased NPAT to $22.8 million, which is up 6.5% from last year. Earnings per share rose to [ $0.091, ] up 5% on FY '24, and the Board has declared a fully franked final dividend of $0.025, bringing the total dividend for FY '25 to $0.0425 which represents an increase of 6.25% from FY '24, which the Board [ believes represents ] a good balance between retaining funds for growth and providing returns to shareholders. Our balance sheet remains strong with cash balance of $84 million, able to support key growth objectives. Our order book is healthy, tenders and pipeline remain very strong. I'll go into this in a bit more detail later in the presentation. Before I hand over to Ashley Muirhead, who will speak to the full year financial results, I would like to take this opportunity to thank all of our employees from our 19 locations across Australia for all the hard work and effort that went into achieving this year's results.

Thanks, Chris. Good morning, everyone. Duratec had another strong full year result with revenue of $573 million, which not only represents a record revenue result for the group, but also underscores the effectiveness of our diversification strategy between sectors. The Energy sector achieved the highest revenue to date of $82.5 million, which is an increase of 77% compared to the prior year and was primarily due to the continued expansion of WPF through the business acquisition of GF Engineering, which increased capability through larger facilities and direct access to key energy sector clients. The emerging sector, which is also disclosed as other segment in the segment note, also achieved record revenues of $60.6 million in FY '25, an increase of 175.5% from the prior year and was predominantly due to infrastructure and mining projects undertaken in the year. Defence and Mining & Industrial sectors both had lower levels of revenue compared to the prior year. The Defence sector reported revenues of $181.4 million, which was 17.6% lower than the prior year and was due to delays affecting the timing of awards, particularly within the state works program. However, these developments position the sector well for FY '26. Mining & Industrial sector also experienced delays with the sector achieving revenues of $136.6 million in FY '25, which was 12.2% lower than the prior year. However, with strategic focus on Master Service Agreements and annuity contracts, the sector outlook in FY '26 remains positive. Gross margins achieved for FY '25 were strong at [ 18.6%, ] resulting in a gross profit of $106.3 million for the year. This improved gross margin from 17.3% in FY '24 demonstrates our ability to convert revenue into stronger bottom line results with the improvement due to an increase in self-performed projects and projects secured through our ECI model. Normalized EBITDA was $53 million for the year, a record result for the group, representing an 11.3% increase compared to FY '24. This was attributable to the higher project profitability and the increased contribution from the DDR Australia Group. DDR Australia had an outstanding result in the year, driven by the Defence Phoenix portfolio and the continued success of DDR's wholly owned subsidiary, RC Construction. The contribution from DDR via share of net profit after tax and dividends amounted to $3.8 million, a 76% increase compared to the previous year. Overheads rose in FY '25 due to strategic investments aimed at supporting future growth, including the relocation to larger facilities by WPF following the acquisition of GF Engineering business acquisition costs and tendering expenses. Additional investment was allocated to the improvement in business systems to enhance future operational efficiency. As a result, the net profit after tax margin achieved in FY '25 of 4% was slightly higher than the prior year. Earnings per share climbed to $0.091 from $0.0866 in the prior year, and the final dividend declared of $0.025 takes the total dividend for the year to $0.0425. And with a payout ratio of 47%, it ensures the group continues to provide the balance between return to shareholders and retaining funds for growth. FY '25 ended with a solid cash on hand balance of $84 million due to strong operational cash efficiency with cash conversion of 98% being achieved during FY '25. This provides an appropriate cash balance to commence FY '26 as it will allow for strategic growth investments, shareholder returns and maintaining necessary working capital facilities. Investing activities in FY '25 included $14 million of investment in capital expenditure and $3.4 million in business acquisitions for GF Engineering and AsClear. Duratec also paid $9.4 million of dividend to shareholders during FY '25. Duratec's balance sheet continues to strengthen with net assets increasing by 25.7% in the year to $74.3 million. Trade debtors continues to be low risk based on customer profiles and well managed with the decrease compared to the prior year, signaling efficient collection of receivables. Property, plant and equipment increased due to additional equipment and vehicles to support future projects as well as the equipment from both business acquisitions. Right-of-use assets and the related property lease liabilities increased in FY '25 as a result of our continued expansion and growth. Borrowings also increased in FY '25, mainly due to asset financing for plant equipment and vehicles and a short-term cash advance facility that was used to support upfront procurement purchases. During FY '25, Duratec had successful negotiations with the Commonwealth Bank of Australia and bond providers to increase facilities by 69% to $294 million from $174 million at the end of FY '24. With 64.8% of available headroom at the 30th of June 2025, Duratec is well positioned for the continued growth of the company. I will now hand you back to Chris to cover the operational highlights.

Thanks, Ashley. In FY '25, our total headcount grew to 1,265 employees across Australia. To further support the Eastern States teams and strengthen on-site engagement across the region, we established a local people and culture presence in our Sydney CBD office. We also conducted a company-wide employee survey, the findings from which are guiding our initiatives into FY '26 to further enhance our employees' workplace experience. Safety culture remains our highest priority and is key to creating an environment where we can deliver successful projects. Our key lagging indicators in FY '25 increased and in response, targeted programs, including leadership training and scaffold awareness were implemented to reinforce the safety culture and support our commitment to a safer, healthier workplace for all. We also prioritized musculoskeletal risk awareness and have partnered with Soter Analytics to leverage AI to build a database of at-risk activities and role-specific physical demands. Duratec remains focused on a sustainable future, and we'll continue to identify opportunities and innovations that enable us to act sustainably while supporting the needs of our employees and clients. On to our Defence performance and outlook. The Defence sector delivered revenue of $181.4 million and a gross margin of 13%, up 2% on last year, reflecting disciplined cost management and operational efficiency. The sector's ability to sustain profitability amid a shifting project landscape underscores its strategic focus and operational adaptability. During the year, we successfully completed the majority of the 5-stage Coonawarra redevelopment project with the remaining works to be completed by the end of Q2 FY '26. The Duratec had a joint venture, it was awarded 2 early contractor involvement, ECI Head Contracts for Planning Phases in Q2 FY '25 for critical infrastructure projects at HMAS Stirling. These 2 ECI contracts remain on track for construction award in Q2 FY '26. As previously announced, the works involved the planning for the provision of the fit-for-purpose nuclear compliant facilities to support the expansion and enhancement requirements of Defence' infrastructure upgrades at HMAS Stirling to support the U.S. and U.K. rotational force being based out of HMAS Stirling, which is scheduled to commence at the end of calendar 2027. Other long-term opportunities remain a key focus, particularly in fuel and marine infrastructure. These potential projects valued at more than $15 billion program for delivery between 2028 and 2032. These works align with Duratec's demonstrated strategic growth, which is underpinned by its national resourcing model, financial strength and a proven ability to deliver large-scale Defence infrastructure programs. Other opportunities with Defence also remain very strong around Australia. On to Mining & Industrial, where you can see we achieved revenue of $136.6 million and a gross profit of $27.8 million. The successful completion of the Berth C&D project earlier in the year, together with delays in the timing of awards on a number of high probability projects impacted sector performance. Highlights through the year include the award of the $44 million structural integrity project for Rio Tinto and the award of 2 major 3-year term contracts with Newmont Boddington Gold. Also of note is multiple contract awards with Fortescue whilst we work towards a fixed plant Master Services Agreement. M&I also expanded its footprint with Roy Hill in the Pilbara, where current site activity is valued at $3 million annually. Plans are underway to scale this into a broader MSA covering both port and inland operations. Opportunities across South Australia, Queensland and New South Wales and Northern Territory significantly enhanced the company's presence with the sector and will continue to drive growth into the future. Through our strategic focus on Master Services Agreement and annuity style contracts with key clients such as Rio Tinto, BHP, Newmont and FMG and leveraging off our in-house experience and client relationships, the sector outlook into FY '26 remains positive. Moving to Building & Facades, where we achieved revenue of $111 million and a gross profit of $20.6 million. The financial performance reflects our strategic focus on broadening our service offering and leveraging our expertise in both remediation and new construction projects. We continue to strengthen our market position through the use of in-house digital engineering capabilities. The B&F team focused on early contract involvement and designing principle approaches, which enable more efficient planning, fabrication and installation across key projects. Leveraging Building Information Modeling, BIM, to support early design development and off-site fabrication in our Perth workshop, our Darwin team streamlined its delivery on the NT Art Gallery project, reducing on-site risks and improving project program certainty. We also delivered 2 high-profile heritage facade rectifications in South Australia and ACT, namely the Adelaide Town Hall and the National Carillon in Canberra, both of which were award-winning projects. B&F enters FY '26 with strong momentum and a healthy pipeline. Continued strategic focus on ECI is providing a growing number of live opportunities, including 2 major facade rectification projects in Brisbane and Adelaide. Our national footprint, our integrated delivery model and our in-house technical expertise continued to resonate with our clients, managing multi-region portfolios, enabling us to offer consistent, high-quality outcomes across both remediation and construction. The demand for our strengths positions us extremely well into the future. Now looking at our Energy sector, which delivered revenue of $82.5 million, an impressive 77% increase on last year's performance with a gross profit of $23.9 million, 56.2% up on FY '24. We successfully continued to target and deliver Energy sector projects nationwide, including on-site works at Inpex facility in Darwin. Critical project work for Santos, which I will mention under the WPF update and the delivery of critical fuel infrastructure projects with the award of the Western Sydney Airport cargo fuel line. During the year, we also saw the award of Duratec's first direct contract with Woodside Energy Limited, the $21.8 million King Bay Supply Base wharf refurbishment project located at the Port of Dampier, WA, demonstrated a significant step towards building a solid relationship with Woodside. Further momentum came from Duratec's inclusion in APA Group's 4-year National Fabrication Services panel, including a 1-year extension option, expanding the company's footprint in Darwin and reinforcing its fabrication capabilities. The acquisition of AsClear completed on the 24th of February 2025, adds industrial blasting, specialized coatings and hazardous materials remediation capabilities to Duratec's portfolio in Victoria and aligns with the company's broader strategy to expand its footprint and support energy sectors projects in the Bass Strait. With a focus on geographical expansion, Duratec will continue to leverage cross-subsidiary synergies with its combined energy client base. We anticipate this sector will continue to grow in FY '26 and we'll maintain our selective approach to acquisitions. Now moving to the emerging sectors to close out our sector-based performance and outlook. Our emerging sectors, which include Marine, Transport and Water Infrastructure delivered revenue of $60.6 million, up 175% on FY '24 and a gross profit of $10.5 million, up 288% on last year, with a gross margin of 17.3%, which was also up. The significant uplift in financial performance was underpinned by strong revenue growth in the Marine and Water Infrastructure, particularly on the East Coast. Our strategic decision to leverage Western Australian marine capabilities nationally through a unified sector structure enabled us to respond effectively to the rising demand. The 2032 Brisbane Olympics, together with our achieving B2 road certification in Tasmania and Victoria enables us to pursue bridge remediation and integrity programs, while further investment related to the Brisbane Olympics will drive demand for asset rejuvenation and remediation in the Olympic corridor. With a strong pipeline, proven capabilities and a strategic national structure, Duratec is well positioned to deliver sustained value in FY '26 and beyond. During the year, MEnD is relocated to a new office and purpose-built laboratory facility in East Perth, increasing its capability to deliver for existing and new clients. MEnD's strong digital capabilities continue to drive growth in new and existing markets and cement Duratec's reputation as the industry leader in early contractor involvement. In FY '25, MEnD commenced a 3D reality modeling campaign for Flinders Ports. This involved the capture and delivery of multi-format 3-dimensional digital representations of assets to allow for future analysis and maintenance planning. MEnD also won its first project in the Bass Strait, Victoria, conducting testing on a concrete gravity-based offshore oil and gas platform, which underscores our expertise and the way that MEnD provides early contractor involvement opportunities for the group. MEnD continued to excel in the mining sector with the delivery of structural integrity inspections across the Pilbara in Western Australia. Moving into FY '26, we will continue our investment in digital capabilities and innovation and expanding partnerships. To take advantage of new opportunities across all sectors with a clear focus on delivering practical value and maintaining high standards of service, we are confident of MEnD's ability to support clients' evolving needs and deliver excellent opportunities for Duratec across all sectors. On to WPF. As you can see, an excellent financial performance, delivering close to $59 million of revenue and $17 million in gross profit, which is up 77% on last year. The entire WPF Perth operations relocated to a 12,000 square meter facility at Naval Base following the acquisition of the business assets of GF Engineering. The acquisition formed part of WPF's strategic growth trajectory within the Energy sector and included innovation of a fabrication services contract with Chevron Australia. We had 2 significant project wins with Santos, including the offshore Harriet Alpha Decommissioning project, where we leveraged our end-to-end self-perform capabilities, and we also delivered critical infrastructure for Santos' Darwin LNG pipeline duplication project, fabrication and installing the key landside components connecting the Barossa gas export pipeline to the D LNG facility. Looking forward, we will continue to actively explore expansion opportunities within this sector. By strategically aligning with the key energy sector clients such as Chevron, Woodside, Inpex, and APA Group, we are positioned to leverage our capabilities and partnership to extend our footprint and reach new markets, mirroring the success we have seen in the Northern Territory. With a focus on decommissioning, we anticipate this sector to grow strongly. Before I move on to DDR, I'll quickly touch on our recent acquisition of EIG. Based in Canning Vale, WA, EIG is an Australian electrical infrastructure provider, specializing in fuels and fluid transfer services, including in-house consultancy and design capabilities. This acquisition supports our strategic growth by expanding our end-to-end self-perform capabilities, enhancing our service offering nationally and provides an opportunity to scale specialist expertise. This will enable us to deliver outcomes across Defence, Energy and Mining & Industrial sectors. The move aligns with our broader strategy to enter critical national infrastructure markets, diversify revenue streams and strengthen our position in high-barrier, high-value sectors. We're really excited about the capability that EIG brings to our group. We're extremely proud of DDR's performance in FY '25, achieving $113.9 million in revenue, up 68.5% on FY '24 and delivering $22.2 million in gross profit. Delivering the year, DDR Group achieved a significant operational milestone, securing its largest contract to date through the award in the first half of FY '25, of $54.7 million Department of Defence contract, which forms part of the Project Phoenix portfolio work in the Northern Territory. RC Construction, which DDR acquired in January '24, is now fully embedded into DDR's offering and contributed to the group's impressive FY '25 financial performance. DDR has successfully capitalized on its national presence to expand its operations into the Northern Territory and continues to pursue its goal of increasing aboriginal engagement through employment and supply chain opportunities for other aboriginal businesses. DDR has the strongest work on hand position at the beginning of the financial year in the history of the company, and this sets DDR up for an exciting year. As you can see, Master Services Agreement and annuity style contracts made up $176.7 million of revenue for FY '25, higher than PCP at 31% of this year's revenue. This is a large increase in the percentage of revenue generated under MSA annuity style contracts. We will continue to focus and grow our MSA work with existing clients through diversification of services as well as adding new clients, particularly in the energy sector. This revenue sits outside of our order book. Now turning to our pipeline and outlook for the remainder of the year. Duratec order book remains healthy with $390 million of work on hand and a very sizable pipeline of opportunities ahead. The conversion of these opportunities we see in the very near-term, and this will position us for significant growth. What's not in the order book is the MSA work on the previous slide, along with other variations that we often encounter in our industry when working on remediation projects. We currently are working on 8 sizable ECI projects, where should they convert into projects, it would add another $500 million of work on hand. We are confident of converting these opportunities as well as a number of other tenders we are working on, many of which we are shortlisted for these tender opportunities. Outlook. Our outlook in all sectors is still extremely bright. In the short term, our healthy order book demonstrates our ability to win many of the small- to medium-sized projects. Our MSA work continues to grow year-on-year, and we see many more MSA annuity style contracts populating our revenue as we extend our offering into each sector, particularly the Energy and Mining space through Duratec and also our subsidiary companies, including WPF, GF Engineering and now EIG. Works on larger projects include Coonawarra, Woodside, Tom Price and WSA, all continued through the first half of FY '26. Our subsidiary companies, WPF and DDR have strong work on hand with a number of good opportunities that lie ahead. We anticipate converting a number of Defence and Building and Facade contracts into actual project works in the first half of FY '26, with the on-site project works commencing immediately due to the thorough scheduling and planning that is completed throughout the ECI period. The medium- to long-term is very strong with ECI contract modeling dominating our future opportunities. The conversion of the ECI planning phase projects into delivery phase at HMAS Stirling will be a key focus, and we will look to place ourselves in a good position to win further work at Stirling and also Henderson, where there are large marine infrastructure upgrades planned. We still have strong tailwinds in the Mining, Energy and Building and Facade sectors and expect to win further work in these sectors and bolster our order book. Despite any commodity price fluctuations, maintenance still occurs on all aging infrastructure. We keep abreast of opportunities outside of Australia where our existing clients operate, including Santos, Newmont, Australian Defence and the Department of Foreign Affairs. We have demonstrated history of strong organic growth, and we see that continuing well into the future. We are very well funded for future growth. We continually look for potential strategic acquisitions and have an exceptional team within the company helping us deliver on this strategy. With the above outlook, good work on hand, a growing MSA base of work and our subsidiary companies performing well, we have never been so well placed to grow sustainably into the future. That concludes our presentation today. So I'll now hand over to Ollie to moderate our Q&A session. But before I do, I just want to thank everyone for their attendance today.

Thanks, Chris. [Operator Instructions] We've got a couple lined up already. Probably Chris, starting with yourself from a question from Sam Pittman, Taylor Collison. Could you talk through the drivers of growth in the Energy tenders?

Yes. No worries. Thanks for that. Thanks, Sam. Thanks, Ollie, for the question. The Energy drivers here is super strong. Like there's a couple of parts to Energy, too, to remember we've got our WPF and then we've got just the energy market itself. So the TAM inside there just from the maintenance perspective, about $5 billion. So this creates [ heaps ] of opportunities. We're a very small part of that, obviously. So we think there's a lot to grow in that space. We've got fairly unique capabilities at WPF and GF Engineering combined together with the number of well procedures we have. And we've seen evidence of that with the work we've done at Santos up and the LNG supporting those sort of skills that we do have, and we think we can grow that. Just on the WPF side, again, we've got this large workshop area or facility, 12,000 square meters in Perth, and we've also got a large workshop up in Darwin. So that allows us to do -- it's quite unique to have those capabilities there and then to support the on-site delivery as well of whatever we're building out of those workshops. We've done that, now we've got all this excess capacity. So we're looking forward to growing into that. The key clients here, if we just break it into key clients are some of the drivers. Santos, the work we do with them is amazing. They support us very strongly. We support them. The work that we're generating there, we still see a lot of growth there. We've got our existing customers in the [indiscernible] space we've got Inpex that we're growing with as well up in Darwin. They've viewed our workshop facilities and supporting us being a local provider. And we also get for our workshop down in Perth, there's a lot of, I guess, clients coming through there, understanding what capabilities we do have. In the new space, we've got Woodside, Chevron and APA. So that's -- they're all relatively new to us. So we've got lots of growth drivers there as well to support us. Jumping outside of the WPF offering, Energy itself with the fuel transformation programs around the country are quite strong. And then we'll go into that probably in a touch. I think there's a question coming up about that as well. We have work at the Sydney Airport at Perth Airport, even there's a bit of fuel work coming up. D come on top of that. So the whole decommissioning space in the energy is huge as well, and we're tapping away a lot of spots there. So yes, it is quite an interesting and phenomenal space to be in there. And yes, we've always done very well, and we think we can continue to grow strongly in this space.

Just to stay on Energy, Chris, just to focus on that sector. A question has come in from Marcus Barnard from Bell Potter. Just regards to this Energy sector, can you split the $82 million and 77% growth between organic and acquired as he's interested in the underlying growth. What do you feel underlying growth is, high teens? Or higher? Also regarding margins at 29% at an ongoing level looking forward? And same question for the emerging sector. So I'm just going to stick on the Energy. We'll break that up a little bit. So do you have a split on the $82 million and that 70% growth, whether that's organic or acquired?

Yes. I think -- I mean, there's a couple of ways to slice that question there in the sense that what we bought was $20 million worth of revenue and obviously, with that good margin. So we've really pushed that organically. So from $20 million up to $80 million that -- could you say that's organic? WPF has done, and we see the numbers there, $58 million, I think, of memory there. So in that sense, we've pushed that organically. So then the rest of that outside of that is delivered through other programs of work that are absolutely organic. So if you look at it, it's fairly strong organic. We haven't added much into it. EIG is too new. It's not in there in any sense yet. So we've really -- all of that to me, other than the original purchase of WPF is an organic push. And we get behind it. We've grown it and it's going really well. So we still see strong growth ahead. Just to -- I think the margin space, we've probably answered this once before. We did have 32% margin in the period before. It's at about 28%. This is gross margin wise. And we still see that being the number that it should be in '27, '28 around that zone for this type of work.

And just to round out that as well, just for people who are new to the story, you've got GF Engineering and A&B Welding as acquisitions. They're more of a geographical and strategic move rather than a major revenue move?

Yes. And also, they're asset-type purchases as well. So being -- I think $1.5 billion for A&B Welding, $2.2 billion for GF, buying the assets of. So really, in that sense, they are assets we're probably going to buy anyway. So it's really -- it's still a strong organic push story, not that we're taking on any goodwill or customer relationships really at that stage.

Very good. And then the same question for emerging sector, presume more diverse. So that's again for Marcus, just to finish out his last question. The growth, I suppose just -- has the growth in the emerging sector been organic?

Yes. Yes, that's us -- and there are the things we've always done, right, in that -- we're talking about Marine Infrastructure outside of Defence, obviously, there Water, wastewater. And so there is -- that sector itself is probably one of the biggest or the biggest sector that there actually is. And we've got all the skills to do it. It's maintenance, remediation, it's all the things that we do. So for us to concentrate and grow that, we can grow that quite well because all the -- and our growth is probably more East Coast orientated in the sense that 80% of the population live there with all of those things that need maintenance remediation. So yes, it's organic. It will continue to be organic. There's -- with what we are, EIG and other sort of purchases are probably sitting more in the Energy space or Defence space rather than the emerging sector at this stage.

Just shifting towards, I suppose, the MSA styles. We've got a question here from Abraham from Shaw and Partners. Just looking to find out, can we annualize the second half '25 MSA revenue of approximately $100 million for FY '26 expectations. So that would leave you with $200 million approximately for the year FY '26. You've got a number of questions. I'll probably just go through them one by one.

Yes, no worries. With the MSA, it is very -- I probably won't say the numbers, but what we are definitely growing in the sense we're on -- with all of those clients, we say Newmont, the Rio, BHP, Santos, et cetera. So it is growing and it forms -- and what percentage it's going to be of our revenue probably depends on how much of the lump sum or the ECI-type projects we're picking up with B&F and Defence will probably vary a bit, but we do believe it's a growing volume number. So annualizing it's probably up to other people to do. It's probably not a bad way to go considering there's a fairly strong pattern behind us of what we've achieved and done. And we're targeting hard that area, too, right, in the sense of mining. Obviously, that's come off a little bit, but the Energy space has grown a lot. So yes, it's -- the math is probably there to do those types of things, but we are concentrating on it.

Okay. And moving on from MSA into Defence. Another of Abe's questions is any new color around the 2 ECI head contracts at HMAS Stirling in the West WA? And is there a risk of delays into second half of '26? He's also got a question related to that with regards to does the $500 million of ECIs you're working on include the Garden Island project. So maybe we'll focus on the 2 ECIs first, and then we can get to the 2 head ECI contracts at HMAS Stirling.

Yes. So in general, the ECI work stats basically split up between Building and Facades. We're working on a number of them. There's probably 5 ones there, they're quite significant, totaling up to $200 million. And there are various parts like some of them we think are going to be adopted pretty soon or converted soon-ish. And then the others probably take a little bit of time to roll out. They're generally a 6- to 9-month investigation or ECI period. Over to Defence, yes, those numbers are in there. That is -- looking at that, we're at 90% -- the 90% designs come it's been priced. It's due for construction award second quarter of FY '26. So do we see slippage? We don't. People are telling us it's not going to be slippage. So it's quite a strong time line to achieve. So this is based around for those -- or the background of it is it's about the rotational force coming to Perth housed in HMAS Stirling. This is -- the commitment is fully there. It's happening. It's -- everything is due to kick off at the end of calendar '27. So this work that we're circling is all to do with supporting the infrastructure or building the infrastructure around supporting that rotational force. So -- and limiting Perth, you see this, it's on the news every night about just all the apprenticeships that are going out there tails into the $20 billion spend at Henderson , which is just across the road from HMAS Stirling. So there's a lot of action going on around there. It has to happen. It will happen. It's just the timing of it. We don't dictate the timing, obviously, but there's pretty strong demand to get this going.

And kind of sticking with that with regards to the timing of that award. I think previously, we spoke about consensus. There was a consensus out there and consensus of $60 million EBITDA for FY '26. Abe's question is, can you provide comments around FY '26 EBITDA versus earlier consensus? Well, he used the word guidance, but I'd call it consensus because we haven't given guidance of $60 million FY '26 EBITDA at the FY '25 guidance update. So just a question around that. And is there any allocation to the 2 HMAS Stirling ECI contracts in the EBITDA bridge from FY '25 to FY '26. So a long-winded question, but we're talking about probably the consensus that's out there, Chris, and then the ability to the comfort with that and what HMAS Stirling ECI contracts, how they impact that?

Yes. So I think in short, yes, we have a bit of that into the $60 million -- to agree with consensus at $60 million. So -- but not all of it sitting there as that. So we're trying to bridge, I guess, and try to get to the crux of the question, I think, is to go how do you get from $53 million to $60 million? And yes, there's a few pathways to do it, right? There's the ECI can get you there, converting the ECI into a project for those 2 projects we're talking about. That's probably the easiest way to do it. We've also got other bigger programs of work sitting around in the Energy space, in the Building and Facade space, et cetera. So there's a couple of pathways to do it. People are probably analyzing the order book, the MSAs, et cetera. And so if you probably dissected a bit, there's a bit that we need to win. But we've got a lot of, I say, irons in the fire, and they're all probably there as we have described. So yes, so we can see ourselves getting to there via winning some of those jobs. And yes, there's a bit of them in there to get to the $60 million. So I think that has answered it. If not, please ask again.

Yes. I feel like that's covered comfort with that $60 million and a few ways to get there. I think that probably covers off Abe's performance kind of questions based on operations. Actually, probably one for yourself here. He's noted employee expense other category was up roughly $9 million year-on-year in FY '25. Could you provide some color to that?

Yes, sure. No problem. So overall employee benefit expenses were up $9 million for a variety of reasons. One of the main ones would be tendering expenses. Obviously, a lot of investment going into future growth, business acquisition costs. So a lot of our employees dealt with the business acquisitions and the due diligence. And business system improvements is also handled in-house internally, and we're also positioning for growth going forward. So hopefully, that gives some clarity over the increase in employee expenses.

Thanks for that Ashley. Chris, back to Defence. I might maybe take this question and you can add on to it, but [ Eric Rhodes from Moelis ] has asked or mentioned that we've highlighted the opportunities in the Defence fuel transformation project. Can you discuss the scope and status of that work? So I suppose for anyone listening, Australia as a country, we have limited fuel reserves. So this is what's the lever and the driver in this space is that Defence are obviously part of -- if we got cut off from the world, we'd have 33 days of diesel or jet fuel, kerosene on our -- within our country. So when you look at that from a Defence perspective, they want to protect everything that they have with regards to fuel capability. So what does that mean for us? It means infrastructure upgrades. It's where we work. It's what we do. We've obviously delivered Tindal and the fuel storage tanks at Katherine up in the Northern Territory. One project that we have spoken about is the Learmonth tanks, which is pretty much a carbon copy of Tindal, but done in Learmonth in Western Australia near Exmouth. So that's a tender where the documents have just come out. We're looking at those documents, and we will tender. And obviously, we'll be in a very strong position -- we'll be tendering in a strong position because of our capability of what we've delivered, our in-house experience, but also the fact that we've acquired a business like EIG, who specialize in fuel and liquid transfers. So having them as part of our team internally is a really strong positive piece for us. And not just Learmonth, right across the country, there's going to be many opportunities where you'll have probably those small to medium fuel upgrades and fuel refurbishments for anything from fuel storage, thanks to handling systems and pipelines. And it's probably a really good space for us, Chris.

Yes. I think that's covered it off well from my perspective as well.

Just on -- probably on EIG, I think we've had a question here from [ Michael Mand ]. When acquiring companies, what ratios metrics are you willing to pay, example, P/E ratio or EBITDA ratio. So that's probably on the -- a good segue from EIG. Chris, just any comments on that?

Yes, we do -- like that can -- because there's a multiple pathway to earnout, there's -- it can be anywhere from high 2s to low 3s. So that's probably where we sit on a lot of these acquisitions or like to sit. That's probably pretty buying at a pretty good rate. We've had got -- there's a history there of buying things that like GF Engineering and AsClear as close to bargain purchases where the assets are worth what we're paying. They don't come around that often. So I think the 3s to 4s are good numbers to be at, but it's probably more so around what it can do to us into the future. So that -- so when we look at that, what EIG can do in the fuel space and electrical space is push us into places we haven't been. And we do know EIG well because they've been in our supply chain for some time, delivering work at Auxly. We did a fair bit of work with them there and other defence projects as well as mining, too, they do a bit of work at Rio. So we love what they do. We think with our balance sheet and our footprint, we can grow it very strongly organically from here with not that much investment either, by the way, because it's generally around people, systems, procedures, et cetera, so they can leverage off our footprint and our skills. So that's probably more about what we're trying to do with our acquisitions going forward. Yes, metrics are always there, but we think one of our other ones, we want to pay things off in 2 to 3 years. So depending on how quickly we can grow it, and we've got a proven track record of that as well. So that's how we view it. We might step out and pay a little bit more for something if it really makes strategic sense. But at this stage, we haven't had to do that because we still are a very strong organically growing and pushing business. And you can see that by our tender section being at 1.65 that obviously, when we convert what we want to convert out of that, we've got to make sure we've got our eyes on that as well.