Symal Group Limited (SYL) Earnings Call Transcript & Summary

Good morning, and thank you for joining us today as we present Symal's results for the first half ending 31st of December 2025. I'm Joe Bartolo, Group Managing Director, and I'm pleased to be joined by our CEO, Nabeel Sadaka, who will share some operational insights and our CFO, Geoff Trumbull, who will walk through our financial performance. We're also joined by our Interim CFO, David Gill. The first half has been busy, yet again, exciting start to our second year as a listed company. And as you can see, we haven't been sitting still. We've announced 5 strategic acquisitions and built a robust work-in-hand and ECI pipeline. Our momentum continues to accelerate, and today's results further reflect the strength of our diversified model and disciplined growth strategy. And as always, we continue to deliver on our promises. Let's get straight into the numbers. This half, we've delivered normalized revenue of $504.2 million, an increase of 21% for the same period of FY '25. Normalized EBITDA of $51.4 million, representing 6% growth and normalized NPAT-A of $20.9 million, an increase of 4% for the same period. While revenue growth outpaced EBITDA slightly this half, it reflects project mix and a deliberate investment in capability and overhead support for scaling. Importantly, margins remain within our 10% to 12% target range. We finished the half with net cash of $6.1 million. This reflects disciplined cash management, including dividends and acquisitions, while maintaining balance sheet strength. Our cash conversion remains robust at 108%, well ahead of our long-term average. Given our ongoing solid financial performance, the Board has declared that we'll be distributing an interim dividend of $0.033 per share, representing 40% of NPAT. This represents the midpoint of our 30% to 50% range. Tender conversion rates remain in line with historical performance. And given the large demand across our core end markets, we continue to see healthy opportunities flow through all entities and nationally. As of the 31st of December, our work-in-hand sat at $1.64 billion with the majority of wins in data centers, solar and BESS, water infrastructure, defense and community infrastructure. In addition, our ECIs sit at approximately $1.4 billion with more opportunities to come. And as mentioned previously, we're building the book for FY '27 and beyond. We also reaffirmed guidance of EBITDA at $117 million to $127 million. We will provide a further update upon the completion of Timms, L&D and Davison. This slide summarizes the core foundation of Symal's long-term value creation. We are founder-led and management-aligned with deep sector experience and a structured approach to capital allocation and risk. We have a 25-year track record of sustained growth and remain committed to delivering results. Our revenue base is diversified across contract models, geographies and resilient end markets, including infrastructure, power and renewables, data centers, utilities, building and facilities and defense, all supporting our earnings stability. We have consistent cash generation and maintain a prudent balance sheet, providing capacity to fund both organic growth and targeted acquisitions. Overall, our strategy is centered on disciplined execution, margin protection and scalable growth across our end markets. This slide highlights the operational momentum across the group. We have a clear focus of investment into AI-enabled productivity and innovation. We believe this will drive efficiency and improve project delivery. As always, safety remains paramount with industry-leading performance underpinning operational excellence and risk management. Our national platform continues to gain scale. This is supported by a clear strategic road map and a focus on execution across the regions. We have a substantial pipeline across work-in-hand and ECIs, strengthening forward revenue visibility beyond this financial year while having a clear focus to expand our recurring revenue base. At the same time, we're investing in long-term margin expansion, progressing an M&A pipeline and aligning workforce capacity with our growth. Collectively, these levers position the business to scale in a controlled and sustained manner. We see growth in all our end markets and geographies. However, over the next few slides, I've focused on where we see the greatest opportunities. The first thing is technology and data center demand. These are both important growth areas for Symal. Technology is not slowing down. In fact, it's moving faster than ever. Everyone sees the opportunities in this space and Symal is perfectly positioned for growth in this area. In the first half, we secured 4 new data centers and continue to build trusted relationships with our clients and our global sponsors. This gives us exposure to a multiyear pipeline supported by ongoing hyperscale expansion. Advanced technology is increasing demand for capacity, which in turn provides opportunity to increase our scope on these projects. These facilities require high compliance and surety of delivery, which suits our integrated self-performing model. We bring an integrated solution with our brands, along with our proven track record of delivering complex projects on program, especially in a market where capacity is tight and program is crucial. Overall, data centers and AI facilities represent a long-term technically demanding market aligned with our strengths and growth strategy. Next, we turn to the energy transition. The demand for power that's required to fuel our data centers, are enough reason to be buoyant about this market. We're seeing sustained demand across transmission, wind, solar and battery infrastructure. Today, we have a long history of civil construction in this space, and we've now added new electrical capabilities with Searo. The investment in Searo is delivering results. We've secured our first high-value utility-scale electrical contract and a strong pipeline of further opportunities behind it. This is positioning Symal as a credible full wrap delivery partner in this space. Over the next few months, we have more than 20 renewable projects we're awaiting decision on. This is a $2 billion opportunity. These will include sizable civil and electrical contracts. Now let's move to defense, an increasingly important growth platform for Symal. We have established a defense presence that's building momentum. We currently are delivering 10 civil and infrastructure packages across 4 states with a total value of $220 million. We are seeing consistent repeat engagement across programs, supporting a multiyear revenue visibility. Our national footprint allows us to participate in major defense infrastructure programs aligned with long-term federal investment. This gives us scalable capability across multiple states rather than a single-project exposure. Importantly, in addition to organic opportunities, we're evaluating acquisitions that will deepen our capability and enhance our margins while strengthening credentials and client access in defense. Overall, defense represents a structurally supported multiyear opportunity where we can scale through capability, relationships and disciplined capital allocation. Now let's talk about the Olympics. Brisbane 2032 represents a significant multiyear infrastructure opportunity for Symal. There is $22.9 billion of committed government-backed infrastructure investment through to 2032, covering Olympics-related infrastructure. This provides a long-term procurement pipeline rather than a short-term activity. In addition to the Olympics, the major project pipeline across Queensland is estimated at over $100 billion over the next 5 years. We are well positioned to capture this growth. Our recent acquisitions of McFadyen's, Timms and L&D, coupled with our existing Symal businesses provides us an established platform in Queensland, supported by well-established local relationships and a proven delivery track record. Overall, Brisbane 2032 strengthens our forward visibility and supports disciplined expansion in key growth markets. These are just some of the end markets we service. Overall, the industry remains buoyant with opportunities for all parts of the group. Now to our aspirational slide. This slide outlines how we are building towards a $200 million earnings platform. Since listing, we've added meaningful EBITDA through organic growth and disciplined acquisitions, increasing our annualized EBITDA from approximately $102 million at IPO to over $130 million on a pro forma basis. Each acquisition has been targeted to strengthen capability, expand geography and enhance scale while remaining earnings accretive and aligned with our internal return criteria. Our 2030, $200 million target is aspirational and reflects our ambition to continue scaling the business in a controlled and value-focused way. Overall, this demonstrates a clear pathway of building earnings through both organic execution and targeted inorganic growth. Now I'll provide an M&A update. Since listing, we've announced five separate acquisitions, Ascot Bins, Locale, McFadyen's, Timms Group and L&D and Davison. Each has added scale and strengthened capability, all with a clear focus across our priority end markets. Together, they've expanded our footprint, enhanced vertical integration and supported earnings growth. I'll provide more detail on the latest acquisitions in the following slides. Looking ahead, our M&A strategy remains disciplined and targeted. We are focused on increasing capacity, deepening vertical integration and strengthening our national footprint across power and renewables, data centers, utilities and defense. The emphasis is on acquiring capability-enhancing, margin-accretive businesses that expand scope, improve incumbency and position us to capture greater market share in these long-term growth sectors. Now let's dive a little deeper into the two acquisitions we announced in December. Timms Group and L&D provide us with a strategic foothold in the Brisbane market, giving us immediate access to the Southeast Queensland civil and infrastructure pipeline ahead of the 2032 Olympic Games. The $28 million upfront purchase price is supported by plant and equipment, making it a tangible asset-backed transaction, and the businesses together contribute approximately $8 million in annualized EBITDA with earnings accretion expected from year 1. They bring civil contracting, plant hire, haulage and recycling capabilities that fit naturally within our integrated model. Their teams are experienced, commercially prudent and trusted by clients across the state. Most importantly, these businesses, together with the scale of Symal, give us a scalable platform that allows us to expand with speed and confidence in one of Australia's highest growth infrastructure markets. On to Davison Earthmovers. They provide us with an established platform in South Australia, giving immediate access to the region's growing infrastructure, renewables and defense pipeline. The transaction is supported by a significant fleet of plant and equipment, strengthening our asset base and delivery capability in the state. The business contributes approximately $7 million in annualized EBITDA with earnings accretion expected in the first year. Davison is a well-regarded local brand with deep client relationships and a multigenerational operating history of nearly 40 years. It's a founder-led business with a strong cultural alignment to Symal. Importantly, this acquisition allows us to scale our delivery model in South Australia, creating a platform for long-term growth and expanding our national footprint. As you can see, we are delivering exactly like we said we would. We've expanded our scale, capability and footprint through disciplined execution and targeted acquisitions. We have strengthened the platform and not just growing revenue. Our ambition for growth is clear, but it's balanced with a strong focus on margin expansion, capital management and consistent cash generation. We are building a larger, more integrated business with control and long-term value for our shareholders. Enough from me. I will now pass you over to Nabeel to provide some operational insights and Geoff, who will dig down into the financials.

Thanks, Joe, and good morning, everyone. Our people are the foundation of our success, and our culture is what takes us to the next level. During the period, we completed over 9,200 hours of facilitated training, supported by our in-house learning and development team with 55 graduates currently being developed in our system. We supported local communities with social investments into grassroots sports and community programs. And for the 10th year in a row, we trumped our previous record, raising $280,000 for the Fight Cancer Foundation. We also grew our meaningful indigenous employment with Wamarra being recognized with 2 industry awards. And following the recent bushfires last month, we supported Operation Veterans Assist by providing tools and equipment to armed services veterans who are assisting Victorians to get back on their feet. We also had the opportunity to pilot a variety of hybrid equipment, which was powered by Searo. Sending our people home safely every day remains our #1 priority. Our self-performing workforce is the core of who we are, and our safety culture continues to be something we're deeply proud of. With the 12 months to December 31, our Total Recordable Injury Frequency Rate and Loss Time Injury Frequency Rate were at historical lows. Our TRIFR of 1.76 compares very favorably to the industry average of 6. These results reflect strong planning, care and discipline from our teams in the field. That said, we're not taking this for granted and we'll never stop pushing for improvement. During the period, our workforce grew beyond 1,500 people, making this result even more meaningful. On integration, acquisitions only create value if they're integrated well. We apply a structured integration framework with clear executive oversight from day 1, ensuring alignment on objectives, risk management and value creation. Cultural alignment is equally important. We work closely with founders and leadership teams throughout the process to preserve what makes each business successful while strengthening it with Symal's systems, client networks, safety standards and commercial discipline. This approach allows us to scale confidently while protecting performance and culture. Since completing the integration process, Locale has expanded its service offering and increased its capacity to deliver works on larger, more complex projects. The team has also been awarded an emergency works contract with Powercor and also established itself at the Mildura depot, strengthening its regional footprint. Locale was recently also an important part of Powercor's disaster recovery response after the Victorian bushfires. We are now working on our strategy to broaden the Locale offer. Moving on to delivery profile. You'll note the market opportunities we're seeing are aligned to the things Joe touched on earlier, with Symal increasing its exposure to power and renewables, defense, data centers and AI. Our work is also more geographically spread with over 30% of our work-in-hand now in Queensland, New South Wales and South Australia. As we've always done, we've invested in positioning Symal to take advantage of the next wave of growth opportunities. And you've seen this through our investment in Timms and L&D in Queensland along with McFadyen, in South Australia with Davison and through Locale in Searo, which expand our vertically integrated electrical solutions. In defense, Symal and Wamarra are continuing to grow our reputation as a reliable partner, and we're being rewarded with a broader range of opportunities to participate in. We finished the half with a strong $1.6 billion of work-in-hand. And despite this move away from traditional infrastructure, our contractual mix remains consistent. On the right-hand side, you can see that over the past 6 months, we added a further $380 million worth of work-in-hand and completed around $500 million of work during that time. As we've explained previously, work-in-hand is a point-in-time measure that can fluctuate significantly as projects move from either ECIs or tenders into executed contracts. But it's safe to say this remains an absolute strength of the business, and we have a great deal of visibility for years ahead. ECIs play a significant role in that visibility with circa $1.4 billion worth of ECIs in hand, remembering, these are only the formal paid engagements where we partner with clients to develop projects and finalize pricing. These do not form part of our work-in-hand until they have converted into signed construction contracts. We also work on a variety of informal ECIs that also do not form part of this metric. Historically, we've been successful in converting 90% of ECIs. However, even if we convert 50%, this will materially grow our position. You can see on this slide, we're working on a variety of ECI opportunities, including a solar farm and battery storage system. This is actually one of the largest opportunities in our pipeline and a great example of how we leverage our vertical integration by bringing Searo and our other civil businesses into large subcontracting opportunities. In the middle of the page, you can see we're working on two wind farm ECIs for the one client in Victoria and New South Wales, both representing exciting opportunities. And in Queensland, we're working on a regional airport opportunity where we're in a competitive ECI process and one of two. Now on to operational performance for the half. We look at Symal as a holistic operation. However, for the purposes of reporting, we break it into three segments: contracting services, plant and equipment, and other. In contracting services, we deliver engineering and construction projects as both a head contractor and a subcontractor under a variety of contract models. In plant and equipment, we deliver internal and external plant hire, conduct quarry operations and perform some regional civil projects. In our other segment, we house our fledgling strategic companies such as Sycle, and group eliminations and corporate services. In contracting services, we delivered 83% of the group's revenue for the half and 52% of the EBITDA, while P&E accounted for 17% of the revenue and 42% of the EBITDA. Our other segment accounted for 6% of EBITDA. It's important to recognize that the group's integration sometimes leads to each of the segments working on the same projects and for one another. It is often the contracting services business, which brings through the other segments such as plant and equipment, Sycle and Ascot. While these businesses predominantly deliver out to market, it's our integration, which often delivers the greatest value outcomes. Diving now into contracting services. Normalized revenue grew by 26.5% against the first half last year to $419.3 million, driven by continued ramp-up across major projects, including our data centers and roads portfolios. Normalized EBITDA grew by 8.4% to $26.9 million, and the EBITDA margin was 6.4%, which was down 1.1 percentage points. This reflects a greater contribution from relatively lower-margin projects as well as our continued investment as we expand into the Northern states. We've also added Locale Civil to the segment and welcomed continued growing contribution from Searo. The overhead investment in Searo and Locale as well as the integration teams working on Davison, Timms and L&D will provide strong benefit over coming years. Turning to plant and equipment. Normalized revenue grew by 5% against the prior corresponding period to $87.3 million, with a normalized EBITDA of $21.3 million and an EBITDA margin of 24.4%. You'll notice the difference from the prior corresponding period, which was largely due to some exceptional outcomes this time last year. EBIT fell to $8.6 million with the EBIT margin coming in at 9.8%, which is broadly consistent with the second half of FY '25. Our underlying fleet utilization remains strong across the portfolio. However, we've invested in plant and equipment ahead of time, causing some softness in EBIT. This fleet will provide competitive advantage as the market continues to expand for us in Queensland ahead of the Olympics. It's been another productive half for the business. We've continued to invest in our future and build a strong platform from which to support our next phase of growth. I'll now pass you over to Geoff to provide further details on the financials.

Thanks, Nabeel, and good morning, everyone. Slide 22 talks to our normalized financial performance for the first half of FY '26. Consistent with our prior results, we've chosen to highlight normalized figures to exclude the nonrecurring impacts of the IPO and other one-off items. A breakdown of these items is included in the next slide and in the appendix of the presentation. Symal delivered strong revenue and earnings growth compared to the prior corresponding period, with normalized revenue increasing by 20.7% to $504.2 million and normalized EBITDA growing by 5.5% to $51.4 million. Our EBITDA margin came in at 10.2%, lower than prior corresponding period, but still within our guided target range of 10% to 12%. The lower margin was driven by a combination of project margin mix and investment in overheads to support future growth, particularly in new regions as previously flagged. Depreciation and amortization expenses have increased circa 40% versus the first half of last year to $20.5 million. This is due to both our investment in plant and equipment and incremental lease asset depreciation associated with new leases at South Melbourne, Brisbane, Adelaide and Avalon. We expect this to continue to trend up slightly in the second half as the depreciation on current year fleet investment starts to flow through. We may also see higher amortization of acquired intangibles as M&A transactions are completed. However, we plan to pull that out as part of the NPAT-A metric. Interest expenses increased to $5.4 million for the half. Once again, this reflects both a greater average debt balance during first half FY '26 associated with the investment in plant and equipment as well as AASB 16 interest charges on new leases, which represented the majority of the uplift. Interest costs will continue to trend up as we draw on the new debt facilities to fund future M&A activities, but that is dependent on completion timing. You'll see at the bottom of the table that we have also introduced the NPAT-A metric, which we'll continue to report going forward. This excludes the noncash impacts of the amortization on acquired intangibles such as the Locale customer contract. NPAT-A for the half was $20.9 million, up 3.9% on the prior corresponding period. The next slide presents our statutory results for the half and provides a reconciliation between statutory and normalized net profit after tax. You will see in the table on the right-hand side of the slide that there are four things we have normalized for across the two periods. The impacts of the pre-IPO restructure, including a one-off tax benefit in the current period, the impacts of the IPO process itself, a historical project settlement, which impacted the prior period and the nonrecurring costs associated with acquisitions and other one-off projects in the current period. The net impact of these normalizations on net profit after tax is immaterial overall for the current half year. Turning to Slide 24 and our cash flow for the period. Operating cash flows for the half were $37.7 million. After normalizations, this provides a cash conversion of 108%, which is above our target and historical average of over 100%. Total investment cash outflow for the period was $76 million. $36 million of this was associated with the upfront payments for the acquisitions of Locale and McFadyen. $40 million was the net investment in property, plant and equipment after taking into account some asset sales during the period. Within this PP&E figure, approximately $29 million related to plant and equipment, which was broadly in line with expectations for the half, we are expecting full year CapEx on plant and equipment to land closer to $50 million, including some additional CapEx for Locale and McFadyen. The balance of approximately $11 million related to leasehold improvements across our new office and plant yard locations, which was partially offset by lease incentives. In line with past practice, the plant and equipment expenditure was largely funded through additional debt drawdowns. However, the ending debt balances from June to December 2025 have remained fairly flat after installments on existing asset finance arrangements. Turning now to the balance sheet on Slide 25. We closed the half with a cash balance of $126.1 million compared to $169 million at 30 June last year, largely due to the acquisitions of Locale and McFadyen during the period. Intangible assets have grown to $75.4 million, driven primarily by the recognition of goodwill and other intangible assets as part of these acquisitions. As flagged earlier, we have invested in several new growth locations, resulting in an increase in both right-of-use assets and lease liabilities. On to Slide 26 and the summary of our funding position. We closed the half with a net cash position of $6.1 million, excluding lease liabilities. During the period, we established $300 million of new revolving corporate debt and bank guarantee facilities. The amount drawn as of 31 December relates primarily to bank guarantees, including a rollover of all existing bank guarantees from our historical facilities. Additionally, we continue to have asset financing of approximately $120 million, which is expected to remain in place for the duration of each loan. We expect to see the benefits of improved interest costs as these asset financing facilities roll off and new capital expenditure is funded by the new group facilities. We also took the opportunity to increase the size of our bonding facilities by $50 million, taking the total facility to $100 million. Combined with the group debt facilities, this provides significant headroom to fund organic and inorganic growth moving forward. The Board declared an interim dividend of $0.033 per share. This equates to 40% of normalized net profit after tax, which is in the middle of our stated dividend policy of 30% to 50%. I'll now hand it back to Joe.

As we look ahead, we do so with confidence in what we've built and the opportunities in front of us. We again reaffirm our guidance of $117 million to $127 million EBITDA, supported by substantial work-in-hand and clear visibility across our markets. The demand across our key end markets remains elevated, supported by government investment and private sector expansion. What gives us confidence is not just the pipeline, but the capability of our people, our integrated approach and our discipline in where we go. We're building a business with greater scale, deeper capability and a national footprint. We're remaining focused on delivery profitability and long-term value for our shareholders. On behalf of the Board and leadership team, I want to thank our people for their commitment, our clients and partners for their trust and our shareholders for their continued support. We're excited about the path ahead and remain focused on delivering sustainable growth and enduring value. We will now open to questions.[Audio Gap]