SRG Global Limited (SRG.AX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the SRG Global Full Year Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. David Macgeorge, Managing Director; and Mr. Roger Lee, CFO. Please go ahead.

Thanks, Darcy, and welcome, everyone, to the call today for FY '25 full year results presentation. But before I start, I really would like to acknowledge our people. There will be many SRG Global people on this call listening in. It's been another outstanding year. You've really stepped up and really lived and breathe what we stand for as a business, live for the challenge, smart together, never give up and have each other's back. So I'm very proud to be working with you and really thank you for all your efforts for this year. So we move to Slide 2. I always like to start with a bit about us, particularly for those that are newer to the story. Who are we? We're a diversified infrastructure services company, and the key here being the diversity of what we do. And what we do is we bring an engineering mindset to deliver critical services for major industries. And the key thing here is critical services. It's not doing the landscaping, the laundry. It's about delivering services that are critical for our clients, which makes us critical for them. And we have the ability to do that across the entire asset life cycle of engineer, construct and sustain and particularly the markets that have moved more towards wanting to deal with less players that can do more for them. The fact that we can offer that complete service for critical services gives us a huge point of difference. And our vision, what we want to be is the most sought after in what we do. Some might say #1, market leader. For us, when our clients have a challenge, a problem, an opportunity, the first thing we want them to think of when they pick up the phone is SRG Global and us making the complex simple for them. So we move to Slide 3. We're a diversified infrastructure services company with 2 key operating segments, Maintenance & Industrial Services and Engineering & Construction, which really aligns the profile that we are today. And you can see from some of our key sectors, we play across a diverse range of sectors, all with very strong growth tailwinds in front of them. And it really gives us a very broad platform on which to apply our skills as we grow into the future. As we move to Slide 4, it gives you the profile and really highlights the transformation that we've made as a business, now more than 4,500 people across more than 20 industries, revenues of circa $1.3 billion and a market cap of roughly $1 billion. We've now become an ASX 300 company, pretty evenly spread geographically between the East and West with the balance in New Zealand. And for me, probably the big takeaway from Slide 4 is just the geographic footprint and presence we have today, gives us an enormous opportunity to really leverage the full service offering that we have. So really now to Slide 5, which I guess is the key slide in the overall deck, which is the summary of the year. Now what you're really seeing here is evidence, further evidence of us delivering and doing everything that we said we would do. It's a record financial result, with EBITDA of $127.1 million, which is up 29% on FY '24. EBIT of $93.8 million, which is up 43% on FY '24 and above consensus. So a really strong financial result, and we'll delve into that in more detail shortly. Terrific returns to shareholders, earnings per share of $0.103 a share, which is up 34% on FY '24. We increased the dividend in the second half to $0.03 fully franked, which is up 20% on the second half last year and takes our full dividend to $0.055 per share, which is up 22% on the corresponding period. I think it's something we've done very well over the journey. It's really balance the growth of the company, but also growing the dividend for shareholders as well. Terrific cash generation, with EBITDA to cash of 102%, and we transitioned to net cash of $16.2 million, which is from pro forma net debt of $38.2 million post the Diona acquisition and really continues our strong track record of cash generation over our journey. It's very much part of our culture, the really strong cash generation of the group. I'm particularly pleased to be back in a net cash position so quickly. We bought Diona during the period, was a transformational acquisition for us in the water security and energy transition space. It's been a highly accretive acquisition for us. It's delivered above business case on every metric. It's been an incredibly successful first 10 months, fully integrated as now SRG Global Utilities. And for me, what I'm most particularly pleased about is this is a cultural integration, really working together as one. The reception from the client base is exceptionally strong and really pleased with how that business is performing and how that's unlocked value in the greater group and vice versa. We now have record work in hand of $3.6 billion, which is up 20% on this time 12 months ago. It just gives us a terrific platform and visibility into the future, which is a good segue into our outlook for FY '26, where we're providing early guidance of EBITDA and EBIT growth of circa 10% on FY '25. That's above consensus numbers on a forward-looking basis and really continues the strong growth profile of SRG Global and how we've grown the business thus far and will continue to grow into the future. So I think it's an overarching summary of the year before I get into the detail. It's been an outstanding year, again, one that really positions the business very, very well for the future and really driving what is very consistent growth, but very high-quality growth for our shareholders. I want to now move over a couple of slides into some of the more detailed financial metrics for FY '25 on Slide 7. You can see there it's really strong on every line. Our revenue up strongly, EBITDA, EBIT and EBIT exceptionally and NPAT exceptionally strong. Probably for me most pleasing is the margin percentage performance continues to really be industry-leading EBITDA margin of 9.6%, EBIT margin of 7.1% and NPAT margin of 4.6%. And you can really see the benefits of us becoming a more and more capital-light business how that top line growth is transcending into the bottom line. Dividends per share up 22%, which I touched on in the summary, and earnings per share up 34%. And to me, it's the fundamentals of the business and the platform it gives us to really sustainably grow into the future has us very, very well positioned. In some ways for me, the numbers really don't do quality -- don't do justice to the quality of the business we have today. And I really link that back to strategy. We've had a very, very clear strategy for a long period of time. And what you're seeing today is further evidence of us delivering against that strategy and executing and doing everything that we said we would do. If we move to Slide 8, I think probably one of the key takeaways from today it's not just one good year. And this is a continuation of a track record of delivery over a long, long period of time. You can really see the positive trends, be it from an EBITDA perspective, an earnings per share perspective, a dividend perspective, and it really shows the track record of delivery from the company. If we move to Slide 9, that really probably goes into some of the more detailed financial metrics over the journey. You can really see the quality, the track record, and we have delivered on every single metric, whether it's revenue, profit, margin percentage, dividends, earnings per share, you're really seeing the evidence of the transformation of the business and evidence of executing the strategy. EPS of more than 200% growth in the last 4 years. I'm not sure there'd be too many ASX 300 stocks that have done that sort of level over the period, and that's one that we can continue to consistently deliver against. Really pleased how we transitioned to that sort of 80% annuity recurring earnings profile, which really allows that consistent growth and that visibility. We've shown a clear track record of both winning but also executing work. It's probably a question I've been asked over the journey, just buying growth. And what you're really seeing again today is further evidence of us winning high-quality work with high-quality clients, but also executing against that with industry-leading margin percentage. And underpinning that is just a really strong track record of cash generation over the journey where we've really driven not just the financial metrics, but the cash generation of the group to fund our growth and the growing dividend, which is a pretty good segue into Slide 10, which is around -- a little more detail around the cash generation. As I mentioned earlier, EBITDA to cash conversion of 102% and moved from a net debt position back to a net cash position in a very quick time frame, which is really pleasing for the group. High free cash flow with free cash flow of $74 million, which is terrific. And really that continued track record of how we're really growing the business, growing the profit, but also underpinning that with really strong cash generation as well. And that, as we move to Slide 11, really has the company well poised in a very robust financial position with an exceptionally strong balance sheet, which gives us the funding to grow the business both organically and inorganically, it really gives us that strength of our financial position, but also maintaining flexibility as we keep growing the business into the future. That in some ways is, I guess, some of the financial key data. But as we move to Slide 12, really what's driving our performance is the strong foundation of the business and what we stand for as a company. I used to sort of get -- running this business for now more than 10 years and running a public company early on, I used to sort of worry at times that our competitors would see your clients, your margins and your strategy, but it's not the best widget or the smarter strategy that drives performance. It's people and it's culture. And for us, it's living and breathing what we stand for as a business, live for the challenge, smarter together, never give up and have each other's back. These aren't words that sit on a page or sit on a wall in our business. That's what's driving our performance. And I always say to our shareholders, when you're investing in us, that's what you're investing in. You're investing in what we stand for as a business because that is what's driving our performance, and that is our point of difference. As we move to Slide 13, which is a bit on environmental, social and governance, we've tried to provide some examples here. And really for us, it's how we keep things very real and how we make a difference as a business. From an environmental perspective, provide some examples there. The Workiva Carbon capture software platform is now fully implemented in the business and operational and it has us very well prepared for the increase in climate reporting in FY '26. I've given you some examples of some of the sustainability initiatives we have such as alternative composite materials, particularly in concrete, e-waste recycling, solar-powered site facilities. But really for us, the key thing we focus on in the environmental space is really working with our clients, coming out with value engineering, smarter designs, better way of doing things that really improve their environmental footprint given we operate on our client sites. From a social perspective, really pleased with how the Bugarrba Aboriginal Joint Venture is going for scaffolding services. It's the first of its kind in the West. It's progressing very well. Our flagship clients for FMG and BHP, and we see further growth opportunity moving forward. We've now launched our Innovate RAP in FY '25, which is more focused on the what and the hows and moving on from the Reflect RAP. And really for us, it's about how we create pathways moving into the future. From a social perspective, for us, it's all around how we're a good citizen in the local communities in which we operate. I'm particularly pleased with the work we're doing with Clontarf, which is providing opportunities for young aboriginal men and also Shooting Stars were providing opportunities for young aboriginal women and providing pathways for growth and career opportunities. But for us, given we're very well spread geographically, operating in a lot of remote communities, it's how we're a good community citizen in the areas that we play in. From a governance perspective, it's very much continuing to embed the risk management framework that we have. We are very much positioned and operating as a blue-chip company. We have implemented Felix software for supply chain management in the period, particularly pleased with all the work we're doing around psychosocial, which is an industry -- not just in industry, but in society and a lot of work we do there in terms of equipping our leaders with the required skills to keep managing our workforce into the future, which is growing. Really pleased, and I don't celebrate safety. Our TRIFR is 2.2, which is absolutely industry-leading. The safety to me is a glass ball in business. You bounce a lot of balls in business, they're all rubber. Safety is a glass ball that you can't afford to drop. We don't like to celebrate it because every day is a new day. We're really pleased on the leadership and the proactive engagement that we have in the business, very much driven by frontline leaders, but every day is a new day, and it's one that we really, we focus on heavily. So I think you can see from an overall company performance, exceptional from a financial perspective, but really underpinning that is really strong culture and a really strong safety culture as well. And I always say, give me a business that's driving its safety performance well and generally, the financials will be looking after themselves. I'm going to switch gears a little bit now as we move more into the operating segment update as we move to Slide 15. And you can see our 2 key operating segments, Maintenance & Industrial Services and Engineering & Construction, really strong performance across both segments. And I think the key takeaway here is excellent operational execution with consistent margins. Margins is very much in line with historicals, both in Maintenance & Industrial Services with EBITDA margins of 14% and EBIT just above 11%. Engineering & Construction is around 8% EBITDA and above 6% EBIT, very much in line with historical. The corporate perspective, low 2s, very much -- we very much focused corporately on what matters -- and really that allows us to have a very sort of quite a reasonably lean structure and spend, but one that's very well equipped to keep scaling the business into the future. You can really see the evidence of that through the financial performance. So I move to Slide 16, and we'll sort of go into Maintenance & Industrial Services in a bit more detail. I think there's a couple of key takeaways from Slide 16. It's the diversity of services on which we operate, which we deliver, which very much aligns with a marketplace which is wanting to do with less players that do more. And the other key thing is just the quality of the client base, an absolute blue-chip client base across a diverse range of industries that really has -- that value the value engineering that we deliver and are willing to pay for that, which is clearly evidenced by the margin that we're delivering. So we move to Slide 17, you can really see the update for the year. I think the key thing is excellent performance, step change growth, a number of really good long-term contracts secured, Hunter Water, Genesis Energy in New Zealand, the Department of Climate Change & Energy, SA Water, Fonterra, Transport Victoria, BHP, South32, Hanroy, Origin, Rio Tinto and Genesis Minerals. You can really see the diversity of sectors, the diversity of clients, but the blue-chip nature of those clients. And we're now very geographically spread across both Australia and New Zealand. And really, the opportunity for us is to continue to leverage that footprint to provide other services with clients that we have today, which really opens up further opportunity for us. And a lot of it is more around how do we win work within contracts we have today, sort of ad hoc work by just being there, but also adding other skills and services to those clients. As I touched on earlier today, it's been -- Diona has been a very successful acquisition integration and is now operating as SRG Global Utilities. It's delivered absolutely above business case on every single metric. A number of really good wins already both in that water space and energy transition space and a really good pipeline of further opportunities. And it's done everything that we would expect. It was going to do very much primarily with government under sort of cost-plus framework agreements. And there's been some great early examples of sort of cross-selling initiatives both ways with -- particularly in areas such as SA Water and others, and there's good opportunities both for that business and the broader business working together into the future, which is a good segue to the rest of the business. We see a lot of growth coming up in the future in water, in the broader business, transport, industrial and resources, ports and marine and the energy space. And I think that's one of the key messages out of today is we're not sort of reliant on any one sector, one geography. We have a very broad platform on which to apply our skills, and we can grow in multiple ways. And then we're not reliant on any one single thing. And I think that sort of diversity is one of our real strengths. If we move into Energy -- Engineering & Construction on Slide 18. Again, you can really see the sort of core services on which we provide very much early contractor engagement, self-perform capability. If there's a couple of key takeaways from Slide 18, it's very much the quality of the clients that we have today. But most importantly, they're all repeat clients. Really, all the work we've announced this year, we've announced a lot of new work across the company. It's really all with repeat clients that we have today. They value what we do. The commercial frameworks are well established. It's very much an early contractor engagement model where we basically value engineer better outcomes, which drives better margin performance that gives us the right commercial framework and risk profile to really deliver against. We move to Slide 19. It's been an excellent year again in Engineering & Construction, really strong performance underpinned by excellent execution. Our first major R5/B4 project with Transport for New South Wales is progressing very well, the sort of Jervis Bay integrated road and bridge project. And for those on the call from New South Wales, I'm sure many of you will probably see it. I would have seen it over Christmas, and we'll see it again this year and hopefully, make your drive down the South Coast a little bit easier. From a facade perspective, the absolute market leadership position in facades goes from strength to strength across both Australia and New Zealand, particularly growing strongly in the health and education space, been a lot of spend in sort of schools, universities and hospitals over the period, but that is really continuing over the next sort of 3 to 5 years, and we're really well positioned in that space. Our Engineered Products business, which is an adjunct offering to our sort of infrastructure services business in that space is progressing well. And we like products, you make it, you sell it, you get paid. It's the same client. It's a very low risk profile. It's really an additional engineered product service that we can provide to sort of infrastructure projects, and we continue to expand that in a very disciplined way. It's probably a long-term sort of 5- to 7-year horizon about how we keep growing that business, but one that is doing particularly well. And I touched on it earlier, particularly in Engineering & Construction, it's really the robust commercial framework that we have. It's -- all our work is really early contractor engagement. So you've got good visibility, you value engineering with the client. A lot of this is sole-source paid style work. It's really with a blue-chip client base that we have very, very long relationships with in transport, defense, water, industrial resources and in data centers and health and education. And it really drives that consistent performance, allows us to be very targeted and specific on what we will and won't do and has that business very well positioned as we grow into the future, which is a good segue into the way forward. So if we move a couple of slides on to Slide 21, which is really the SRG Global strategy. We've had a very, very clear strategy for a long period of time. And again, today, you're seeing further evidence of us delivering against that strategy. The growth phase of that strategy is very much morphing into the leadership phase as well, long-term growth in maintenance and industrial services, you're seeing evidence of that again today. Very targeted growth in engineering and construction with key repeat clients. You're seeing evidence of that today. Step change growth in Engineered Products, you're seeing evidence of that today. Leveraging our capability and footprint in water security and energy transition, you're seeing evidence of that today. And that's now very much morphing into leadership where we want to be a zero harm industry leader. We want to be an ESG leader, a place that people want to work and choose to come to us. It's been interesting as we sort of track how we attract people into the business. We're now more than 4,500 people. And the lion's share of people we attract come through word of mouth, which I think is a really good indication of people within the business, bringing good people and recommending coming to work at SRG Global. We'll keep enhancing our innovation and technology to drive our growth and competitive advantage. I see it very much as an enabler, a lot of sort of innovation and technology in the company, both from a software perspective, but also sort of specialist kit and skill sets. But we very much see that as enabled to execute work. We're never going to come out and say we're a tech company, even though we are charging for our software and the like, but we very much see that as the enabler to grow the business and execute work and get the sort of margins that we get. We'll continue to assess strategic acquisitions that either complement our capability and our footprint. We've got a very long track record of growing the business, both organically, but overlaying that with really good inorganic, highly accretive acquisitions, and you're seeing further evidence of that for the year we've just had. And we want to keep delivering above market returns to shareholders, and you're really seeing that through our earnings per share growth, circa 200% in the last 4 years and a really strong total shareholder return as well. I'm actually boring putting up this slide. It's been the same slide for a long, long period of time, but I think that's something we've done very well over the journey. We've had a very clear strategy, a very simple strategy, and we're absolutely delivering against that and staying very, very disciplined and focused on what we want to be, but also most importantly, what we don't want to be as we keep growing and positioning the business for the future, which is a good segue to Slide 22. We are very well positioned here and the strategic transformation we've undertaken really has us poised to keep delivering sustainable growth into the future. We have terrific work in hand, the $3.6 billion, a great pipeline of opportunities with clients and sectors that we know and know well with skill sets that we have today. We've increased our guidance for FY '26 by growing it by circa 10%, which really is a good segue into Slide 23, which has a very, very positive outlook and positive momentum for the business. Very early and clear guidance for the market, which is above consensus, terrific work in hand and a good pipeline, exposed to a lot of positive sectors in water, energy, industrial resources, transport, defense, health, education, data center and ports and marine, a high level of annual recurring earnings of circa 80% and the transformation of diversified infrastructure services is going to keep delivering consistent growth and high-quality returns to shareholders. And I think that's the key here. It's not just the transformation. It's not just the growth, but it's the quality of the growth and the quality of the business that we have today has us very, very well positioned for the future. And I think that's a good segue to Slide 24, which is the investment proposition of SRG Global. We have complete end-to-end asset life cycle capability with self-performed skills, which gives us a point of difference. We play across diverse market sectors and geographies that gives us a natural hedge. We're not relying on any one sector, one client, one geography, one project, but have a very, very broad platform on which to grow into the future. We have a highly scalable business model. And today, you've seen further evidence of that. We've got the experience, the systems and the structure to keep being a bigger and better business than we are today. A high level of annuity earnings profile, which makes us very predictable and consistent on the way that we grow, a very capital-light business with CapEx circa 2% of revenue and a good high-growth dividend stock where we bounce both the growth but increasing dividends to shareholders. The company is in an incredibly strong position. It's probably the strongest position it's been in certainly in my time in the business. And for us, it's about getting back to work, staying disciplined, staying focused and keep executing and keep doing everything we said we would do. I really want to thank our shareholders. It's been another very strong 12 months. I hope you can sort of see from the performance that we continue to deliver for you. But most importantly, we want to thank our people again. You keep stepping up, you keep living for the challenge. You keep being smarter together, you never give up and you have each other's back. So I can't thank you enough for the year we've had, and I'm very, very excited for the year ahead and the future we have in front of us as we keep building the company that I know we can be. Thank you.

Great. Thanks, David, for that presentation. Awesome. So on to Q&A now, and I'll moderate. Roger Lee here. So first one on the system is Diona EBITDA margin circa 9.5% for FY '25 at the time of acquisition. They're running at closer to 9%. What margins do we think Diona could reach over time?

I think our margins are going to be around the level. I mean the EBITDA margins are slightly below the maintenance, but the EBIT margins are high, very capital-light business. Look, I think it will be pretty consistent. I mean I think the key thing to understand the Diona business, when you're talking about long-term 8-year cost-plus government framework agreements, that's a very, very healthy margin. It's very much industry-leading. And look, I think we always look for ways we can improve every part of our business, but I expect the margin performance to be pretty consistent from year-to-year.

Yes. No, that's fair enough. Announced a whole bunch of wins in June '25. When do we expect them to ramp up in the second half of '26? Do we -- what sort of skew do we think first half versus second half in '26?

Look, I think for us, the key thing here is we guide by years. Guidance is circa 10% for FY '26, and that's the guidance we provide. I mean, historically, we've sort of been somewhere around that 45-55 split, but it will vary from year-to-year, very much picking with more and more government work. Sometimes there's more spend in the first half, sometimes there's more spend in the second. So I think for me, 45-55 has been around the level, but if it's 47-53 or 49-51. The reality is we're guiding for a year. And I think making an investment decision based on a full year guidance of 10% and sort of what falls in the first or second half is, to be honest, pretty relevant for me in terms of the way that I run the business. And sometimes government brings stuff forward, sometimes they push it out, but it will be sort of reasonably in line with historical.

Yes. Another outstanding result this year. EBITDA margins at 9.6% is a great achievement. Does work in the net zero space provide similar margins? Or is the competition more fierce?

I think our margins are pretty consistent across all the sectors that we play in. The work we do is very much we value engineer, come up with better ideas, better solutions, and that really positions us well from a pretty consistent margin perspective across all sectors that we play in. And it's sort of interesting in the net zero space because we've got very high-value engineering skills, particularly can come up with better and smarter ways of doing things, you can really sometimes extract a point of difference, not so much through margin, but through coming up with better ideas. And I think wind farms are a good example. We've got certain anchoring technology that can reduce the concrete footings that are required given certainty of geotechnical conditions. It's an example where if you're going into sort of a renewable space coming up with a different solution that's smarter and reduces the environmental footprint, it could be highly attractive for people that are trying to really play in this space. But I wouldn't say the margins are any different to sort of any other sector in which we play in.

And just to overlay that, David, I guess the key thing for us is the commercial framework and the terms in which we operate and contract with are the key driver for us, and that's consistent, whether it be in the Maintenance & Industrial Services space, E&C space or the Net Zero space consistently. The key thing is ensuring that we've got the right commercial framework that we can enter into that relationship with our clients.

We've always said that, Roger, over a long period of time. The reality is commercial framework trumps everything.

Yes.

You can have an industry thematic that's poor, but when you have the right commercial framework you can do very well. Vice versa, you have an industry thematic with all the spend, but the wrong commercial framework, you're not going to do well. And I think for us -- and that's why for us, it's around clients we know today very well-established commercial frameworks and things that we're good at. And I think that's the key and that discipline will continue into the future.

Yes. Beyond FY '26, how is the business thinking about EBITDA growth outlook?

Look, I think to be fair, we've provided very early guidance for FY '26. I mean I've sort of been on record over the journey of saying sort of 8% to 10% is kind of range about how we feel from an earnings growth perspective over a 3- to 5-year time horizon. The reality is we've kept exceeding that. Our guidance is very strong for '26 again, and it's early, as you can see. But if you want a 3- to 5-year time horizon, assume 8% to 10% a year, earnings growth will be around the level. One thing we do is we provide very early guidance in a financial year. And you can see we're very well positioned and use that guidance as your investment criteria. I'm not going to provide 5-year guidance, but kind of how we think about the business, it's around the 8% to 10% mark is sort of the range over the next 3 to 5 years, but it will very much depend on the opportunity. We see some really good opportunities in '27, '28 and '29, what visibility we have. And certainly, in the sectors we play in, there's a lot of spend coming up and clients and sectors that value our skills and the company is well positioned. But again, it's about being disciplined and ensure it's the right commercial framework, things that we're good at and clients that we know and know well. And it's not just growth for growth's sake, it's growing and growing the quality of the business into the future.

Question here about organic EBITDA growth ex Diona first half '25, second half '25 and the difference between the 2. And I think for mine, David, you kind of touched on this before already that at the end of the day, we're guiding the market to the full year results in the first half, second half results, things will flex from one half to another. And over actually, in the full year, we have grown ex Diona organically, 10% EBITDA and 16% EBIT.

Yes. But I think that assumption there is still -- actually hasn't slowed in the second half. It's pretty consistent. Diona is a high-margin business in the first half. So I think that sort of statement is actually false.

Yes. First half, second half seasonality. I think we covered that. 8% to 10% still -- yes, EBITDA consistently for Diona growth, similar to the rest of the business. I think we talked about before, David, the profile of that circa 8% to 10% going forward, and I think that's kind of it. View and openness to M&A, is this still a priority considering the net cash balance and our strong financial position?

Well, I think for us, we've been very -- had a very clear strong strategy for a long period of time, and the reality is we'll grow strongly organically. And if there are the right inorganic opportunities that unlock shareholder value, then the reality is we're positioned. And I think to me, it's a matter of being ready when the right thing presents that makes sense. And I always find speed and certainty generally trump value in a deal. And you've seen a really strong long track record of -- when we do acquire inorganically, they're highly accretive and they do well. But it's just about being ready when the right thing presents and unlocks value, not just in the business, in the particular business you're acquiring, but also opens up further opportunity in the greater -- in the greater group. And I'm sure over the next 3 to 5 years that we'll grow strongly organically, and then there'll be certain inorganic opportunities that unlock value for shareholders as well.

Diona had a very strong second half. Is that usual seasonality for the business that we should expect? Or is there underlying demand conditions?

Look, strong first half and second half from an earnings perspective. I mean it's all very much government work. So there will be certain times where governments will bring forward spend or push it out. I mean there's a lot of investment, particularly in that water space. I mean if you're going to use a proxy, sort of 45-55 is around, might be around the level, but it's just going to vary from the year. I think perspective this year, it was pretty consistent first half, second half, maybe almost slightly higher in the first half in terms of government spend work. And I think the key thing for us is it's about the year itself. I didn't sort of get hung up on what's in November, December and what's in January, February. We guide for the year, and it's -- we are getting down to sort of very minute levels when you're trying to predict certain spends happening in a 30-day period. So I think start with 45-55, but it could be more evenly split this year. We'll see how it goes.

Yes. SRG has traditionally been reluctant to have too much debt or paid it down very quickly post acquisitions. How do we think about that as the group gets bigger, more diversified, have greater visibility?

Look, I think for us, we like a very strong balance sheet, no matter what the conditions. We're one of the few companies in our space that raised no money through COVID. And it's about having a very disciplined, strong balance sheet, and it just gives us flexibility. If there's inorganic opportunities that we just treat everyone on its merit in terms of whether use equity or debt or cash. And I think the reality is we have a very strong balance sheet that gives us flexibility. And we'll just keep assessing it as we go. I'm sort of -- we're not a -- some could call it a slightly conservative balance sheet. For us, it's a really strong balance sheet, no matter what the environment we face. It also gives us the flexibility to move quickly if the right opportunity presents. And that has been, I think, a key part of our success over the last sort of 4 or 5 years.

All right. Terrific. Maintenance growth in the ex Diona business, SRG business was strong in the second half, particularly given we had a bit of a volume hit from Alcoa, Albemarle curtailments in the first half. What were the key growth drivers?

Look, pretty strong growth across the board. I mean one thing that we've done well is we've got such a significant footprint across Australia and New Zealand. When you've got this sort of level of volume of contracts, the ability to win ad hoc work being on site is one that we're starting to see the benefits of that. And you've sort of seen with certainly our EBIT margin has got stronger and stronger. And certainly having that sort of ad hoc work is one of the key drivers. But also, as I called out, a number of the contracts that we've secured over the period. We keep winning work. And what we've seen from a number of years now is clients want to deal with less players that could do more for them and the diversity of what we offer and the value engineering of that continues to open up opportunities, not just within Maintenance & Industrial Services, but Maintenance & Industrial Services opens up opportunities for Engineering Construction and vice versa. And I think you'll see more and more evidence of that in FY '26 and FY '27.

Okay. That one has been covered off. One for me, redundancy costs. That's a smaller number than FY '25 -- sorry, a smaller number in FY '25 than it was in FY '24. Roger, can you please elaborate what they were for Diona or other parts of the business? Well, we talked about the curtailment in Albemarle and Alcoa. So clearly, some of those contracts had a redundancy element that we -- obviously, that was $1 million. And I think what's good about the diversity of the business that we were able to reallocate people across the different parts of the business as well to reduce the hit.

Where possible.

Where possible. Is SRG well positioned to win a bigger share of the country's defense budget, which government is forecasted to increase?

Look, we play in the defense space today. I think FY '26 pretty similar performance to FY '25, so around that sort of $50 million revenue mark. There's a lot of spend coming up. I certainly don't think it's a '26 story. It's more '27, '28 and beyond. And look, we've got a very good position, particularly here in the West. We also are assessing things nationally as well, and we're well positioned to gain our share. And I guess it's one of a number of sectors on which there's some good spend profiles coming up, not just in the next sort of 3 to 5 years, but the next sort of 5, 10, 15 years, and we're in a strong position to grab our share.

Is SRG tendering for the Paradise Dam upgrade?

Yes. Look, I don't like talking about individual contracts too much, but it's one that there's a managing contractor for that already in place. So there may well be certain elements, particularly with our -- that may open up for us. But I don't really for commercial reason, make too much comment on individual contracts, but probably more broadly, there's enormous spends coming up in the water space. Sunwater is a very long client of ours. So I think the key message here is we're well positioned not just on individual projects, but across broader spends that these water authorities have.

I think you might have covered the next one already about us looking at more acquisition opportunities and our view on M&A into the future.

I think it's part of the job just keep assessing organically and inorganically. Look, the reality is the key focus is growing the business organically. And then if there's something that makes sense that unlocks value, we're well positioned to move.

Structures West facilities in Henderson and the developments in HMAS Stirling. Can you provide some flavor on the Garden Island opportunities and defense more broadly?

Yes. Look, I think for us, the sort of work we're doing is more in the infrastructure construction space, particularly in that facilities construction work and how some of the assets are to come. And we sort of hope over time that the engineering and construction sort of also morphs into sort of the maintenance elements as well. So at this point in time, it's more in the E&C space.

Roughly, how much of the $3.5 billion is what in handbook for FY '26? I guess the question is, how much visibility do you have in FY '26?

Yes. To the market sort of think sort of 80% of style earnings and the balance of it more in that sort of space and sort of a high degree of either what's locked in or what's visible.

Yes. You mentioned that this SRG is a highly scalable business model. Can you please elaborate on that?

I think to me, the key message there is we are structured and continue to be structured and ready to be a bigger business than we are today. And we're turning over $0.5 billion. We were structured and ready to be a $1 billion turnover business. We're sort of well poised now and structured to be a larger business than the year we've just had in FY '25. And it's not about carrying excess fat in the business, but it's having the right sort of systems structure, leadership and experience in place to be a bigger business than we are. And I think that's the key to execution. It's about being ready, not sort of winning and then working out how you're actually going to execute. We're well positioned ahead of time. And I think a lot of that comes to the clients that we have, long-term clients. We know them well, have exceptional visibility what's coming up in their world, and it allows us to plan and position and to be ready to partner and deliver for them.

Can you please clarify your approach to announcing contract wins after the large group announcement in June?

Look, I think there's an individual approach. I mean I guess as we've grown over time, sort of what's -- we're kind of as a company now less reliant on winning individual things to kind of keep driving the growth and what we announced $850 million work late June start of July, and really the pipeline is strong in front of us, but we tend to probably chunk things up a little bit more in announcement, but there's no kind of set, here's the criteria. It really -- it's kind of just providing the sort of news flow sort of more periodically as opposed to sort of project by project.

Reasonably broad question, but probably covered off anyway, but does a reduction in government subsidies or an increase in spending on renewables or reduction in that impact SRG?

Well, I think the macro here say has a huge impact for us. There's a lot of spend coming up. But again, you touched on it earlier, Roger, the commercial framework, there can be a lot of spend coming up in renewables and government spend, but it's the wrong commercial framework then. It's not where we want to be. So we're quite specific on opportunities within segments and renewables is no different to that where there's certain construction opportunities, but then there's certain maintenance opportunities that lead on from that as well. And so I think what the government will do what the government does. I don't think that will change our approach or all the sort of areas that we want to focus on and grow because it's really the commercial framework element that's most important for us.

I guess in the defense, I think you've covered...

I probably answered that one.

This one here. How is David's motivation after 10 years? Any succession plans? Did you plan this one, David?

I thought you might have done. Passionate about the business. We've got a really detailed rigorous talent management plan that runs very deep within the company, and we keep developing leaders within the business. I've got an excellent experienced executive team that do an amazing job. And I'm very motivated and I don't know. I want to keep driving the business because I think we're still in the early stages of what this company can be and what we're building, unless people want me to tap me on the shoulder and tell me to go, but I'm not planning on going anywhere.

Yes. Fair enough. What does this amazing business growth mean for employees' salary increases?

Is this from someone within SRG? It kind of looks like it. I think for us, we reward people in our business well. We keep paying really strong market to both attract and retain people. And I think overlaying that, we have a very strong culture where people enjoy the environment in which we work in. And that to me is the best way to sort of help people build their careers and retain people and build their careers and build the company at the same time.

I think the feedback we get consistently is that new people joining us, they feel that there's a very different environment here culturally. It's a very supportive environment and people stay, and our turnover rate is extremely low. So I think that's one. SRG contract announcements, do they include contract renewals of existing contracts? Or are they only new ones?

It's a matter of both, but primarily...

Primarily. I think that's kind of it. There's a fair few questions. But yes, thanks, everyone, for the questions, and I'll throw it back to David again.

Look, I think I can say it's a really strong performance. And for us, it's about not getting ahead of yourself, staying disciplined and just keep delivering. And we're firmly focused on delivering another good year in FY '26, but also positioning -- continue to position the company for '27, '28 and '29 as well. And I think you've really seen that over the journey. We're well positioned, another good year coming to '26, but the 3- to 5-year time horizon is also very strong for us as well.

Okay. Thanks, David.

All right. Thanks, everyone, for bringing in.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.