Ventia Services Group Limited (VNT) Earnings Call Transcript & Summary

Thank you, Jamie. Good morning, and welcome to Ventia's Full Year '25 Results Presentation. I'm Dean Banks, Group CEO of Ventia. I'm joined by our CFO, Mark Fleming. Also joining me this morning is David Moffatt, our Chairman, who would like to make a few opening remarks before we get the formalities underway.

Thanks very much, Dean, and good morning, everyone. For those on the call this morning who may not know me, my name is David Moffatt, and I'm the Board Chair here at Ventia, a position that I've held and very proudly so since December 2014. Before we begin, I'd like to respectfully acknowledge the traditional custodians of the land that we are broadcasting from today, the Cammeraygal people of the Eora Nation. We acknowledge their ancient and ongoing connection to lands, waters and communities and pay respect to elders past and present. We also recognize and celebrate the heritage and culture of New Zealand, where our teams engage with local iwi and communities across the country every day. This morning, we announced to the ASX and the NZX that Dean Banks, our CEO, will be returning to the U.K. in the fourth quarter of this calendar year. And I wanted to take this opportunity to share with you all and to acknowledge what an outstanding contribution that Dean has made and will continue to make to the company throughout his tenure. Under Dean's leadership, Ventia has been strengthened operationally, strategically and culturally, positioning Ventia as a trusted partner to our clients and creating a resilient organization for the long term. He's led the company through a period of significant and successful change with clarity, discipline and integrity, and we're pleased that he will continue to do so for the majority of Ventia's financial year. Whilst the Board is sad to see Dean go, as he makes the decision to return home, we are also deeply appreciative of the commitment and the energy that he has brought to the role and ultimately, the success that he has driven for the company and for all of you, our shareholders and investors. The Board's succession planning is well underway, and Dean has the full support of the Board to continue leading the business and driving positive performance in the months ahead. Dean, Mark, I'll now hand back to you to share our outstanding '25 results and to respond to any Q&A, and I look forward to engaging with shareholders at our AGM in May.

Thank you, David. I appreciate your kind words. It has been a privilege to serve as MD and CEO of Ventia over the last 5 years, and I look forward to continuing my commitment for the balance of my time. I'd like to start, as always, with a focus on safety. In 2025, our total recordable injury frequency rate improved by 15% to 2.81, delivering a 35% reduction over the past 5 years. Over that same period, we reduced High-Potential Incidents by 64%, demonstrating much stronger control of risk in our most critical activities. Together, these outcomes reflect the progress we are making in embedding a safer, more disciplined operating culture. That said, I'm deeply saddened to report that a Ventia employee, Jack McGrath, was involved in a fatal incident while working on a project at Port Kembla in November. Jack was a valued member of our Infrastructure Services team, and this tragedy has touched every part of our organization. Our thoughts remain with Jack's family, friends and colleagues. Events like this must be eliminated from our business and indeed the industry. And everyone at Ventia is fully committed to learning from this tragedy and strengthening the safety practices deployed across all our work sites. Safety is our license to operate. Our commitment is clear. The safety of our people must always be our #1 priority. Moving on to our financial headlines. I'm pleased to be able to present another year of progression in terms of our financial performance. Over the last 3 years, we've built a reputation for continuous improvement and consistent delivery against expectations. This is demonstrated by our 3-year NPATA CAGR of 12.8%. 2025 has been an exceptional year in terms of securing long-term contract awards. Work in Hand has increased to $22.1 billion, up 14.4%, a record high for the organization. This success provides confidence around our future growth ambitions. We have significantly derisked the business with several high-profile long-term contract renewals. This is an illustration of the value and trust our customers continue to place in our business. Contract renewals are a key performance indicator, and I'm proud that over the last 3 years, we have consistently delivered a circa 90% conversion rate, which we aspire to maintain moving forward. Contract growth, cross-sell and new business opportunities are the other critical components of our pipeline. Again, in 2025, it was a standout year with a total of $8.2 billion of new work and renewals secured. This success means we enter 2026 with more than 85% of revenue secured and an average contract tenure of 6.4 years. This financial stability has allowed us to deliver significant and growing returns to our shareholders. In 2025, the total dividend declared of $0.2325 per share equates to a 47.6% increase over a 3-year horizon. Similarly, we have seen impressive growth in our earnings per share, which over the last 3 years has grown at a CAGR of 16.8%. These financial results highlight the strength and reliability of our portfolio, our disciplined approach to work winning and the culture of continuous improvement we seek to embed across the business. Mark will cover the financial results in more detail. But on this slide, I will share the headlines. Please note, all the numbers referenced today will exclude the one-off positive gain of the Toowoomba novation, which is included in our statutory financials. Revenue grew to $6.1 billion and our EBITDA by 6.6% to $532 million. Our EBITDA margin increased to 8.7%, reaching another high since listing and reflecting our strategic focus on quality of revenue. NPATA growth of 13% or $258 million delivers an outcome above our upgraded guidance. Cash conversion rose 2.2 percentage points to 93.6%, our fifth consecutive year of expansion. This reflects the important focus we place on cash management and the discipline embedded at contract level. We closed the year with a record Work in Hand of $22.1 billion. This result not only demonstrates the depth and momentum of our pipeline, but it also reaffirms the trust our customers place in Ventia as a long-term partner of choice. On the next slide, I will focus upon our work winning successes in more detail and highlight some of our key contract awards in 2025. 2025 was our strongest year to date for work winning success with $8.2 billion of work secured across 10 material contract awards, including 3 contracts, each with a value above $1 billion. These awards provide long-term predictable revenue, materially derisk the business and extend average contract tenure from 5.7 to 6.4 years. This outcome reflects the strength and durability of our customer relationships. We also increased our cross-sell revenue to $145 million, a 25% increase on full year '24, reflecting our ability to leverage group capabilities and deepen client relationships beyond the initial service scope. As shown on the slide, we secured 2 major NBN contract awards, the Field Module and Fibre to the Node contracts with a combined value of $3.2 billion over the contract term. Together with a significant Telstra contract award, these wins reinforce Ventia's position as Australia's leading telco services provider. The awards have been secured against the backdrop of ongoing supply rationalization and therefore, is a great testament to the capability that exists in our business and the value proposition we offer to our customers. In Infrastructure Services, we continue to reposition the portfolio and grow market share in the Energy and Water sectors, where we see strong long-term growth potential. This is evidenced by the award of a new 3-year panel contract with Transgrid valued at $240 million and the recent announcement of an extension to our decade-long partnership with Transpower. In September, following a comprehensive and competitive procurement process, Ventia was awarded 2 packages under the Defence Base Services transformation program, valued at $2.7 billion over 6 years. I'm pleased to report that mobilization was successfully completed on February 1. Shortly thereafter, we entered into an initial 7-year agreement valued at $935 million to deliver end-to-end Australian Defence Force Clothing Services. I will offer more insight around this contract on the next slide. These wins support our growth ambitions, reinforce the strength of our long-term collaborative partnerships and recognize the capability of our workforce to deliver service excellence on behalf of our customers and the communities we serve. Our group strategy is to redefine service excellence, setting clear expectations for the culture and behaviors we seek to cultivate across the business. Our strategy is focused upon our people and how we collectively deliver customer focus, innovation and sustainability. In this slide, I offer some illustrations of our approach and the outcomes this has yielded. In 2025, we further strengthened our long-standing partnership with Defence, securing an expanded scope of work for Defence Clothing Services. Commencing in May 2026, Ventia will become the sole provider of Defence Clothing requirements, managing the end-to-end process from design all the way through to disposal for Army, Navy and Air Force personnel. Throughout the bid process, we adopted a highly collaborative approach, engaging closely with the customer to understand both their immediate requirements and future aspirations. Defence saw a fully integrated services provider with national scale and broad capability alongside a partner able to transform the management of the existing clothing system. Ventia responded with a tailored innovative solution designed to meet these needs, embedding continuous improvement across the service model. Given the focus on AI, I would like to briefly share a practical example of how Ventia is applying this capability. In 2025, we supplied more than 2.5 million meals to Defence personnel. Effective planning is essential to ensure menu variety, maximize the use of fresh local produce and minimize waste. By leveraging historical data, the Ventia team developed a machine learning model to improve accuracy of meal planning. This pilot delivered improved meal availability and generated $2.5 million in productivity savings, whilst also increasing customer satisfaction. This approach is now being scaled across other business applications. Sustainability is a core pillar of our strategy. And in 2025, we were honored and delighted to receive a global award for excellence in social value. Ventia was a founding partner of the social value task force, which has grown to include 66 organizations across public, private and social sectors. In the past year, Ventia delivered $6.4 billion in social value through local employment and spend in the communities we serve across Australia. Notably, 99% of our spend remains within ANZ and 91% of our workforce is locally employed. We are proud to have contributed to the introduction of an independent industry-leading methodology to capture, measure and report social value across Australia and New Zealand. Before handing over to Mark, I would like to summarize the key highlights for 2025. It has been a strong and progressive year for Ventia. We outperformed our upgraded NPATA guidance, expanded group margins, maintained high cash conversion and increased return to investors. Our portfolio was further derisked through a record level of contract awards, resulting in an all-time high Work in Hand of $22.1 billion. We entered 2026 from a position of strength with more than 85% of revenue secured and our average contract tenure now extending beyond 6 years. I will now hand over to Mark to run through our group financials in more detail.

Thanks, Dean, and welcome, everyone. 2025 adds another data point to Ventia's impressive track record of earnings growth over the last 5 years. Revenue has increased by 35% over this period, supported by growth in our target market segments. EBITDA has grown by 40% since 2021, and our EBITDA margin has improved to 8.7%. This improvement demonstrates the consistency of our operational performance and a positive mix shift toward higher-margin segments. NPATA has increased by 75% and earnings per share has risen by an exceptional 98% since 2021, underpinned by disciplined capital management and cash conversion. Ventia has delivered consistent and reliable bottom line growth over the last 5 years. Our track record of consistent performance highlights the resilience of our portfolio and the strong underlying demand for our services. Looking more closely at our financial performance for the year. I won't go over the headline numbers that Dean has already covered, and I'll focus on the underlying numbers that exclude the one-off profit we realized on the novation of our Toowoomba Second Range Crossing contract. Depreciation decreased by $4.9 million or 4.6% in 2025. We saw a modest pickup in the second half due to the higher level of CapEx over the year. Amortization expense decreased by $12.4 million or 37% as historical acquired customer contracts were fully amortized during the year. Our EPS grew a sustained 17.9% on FY '24, which is higher than profit after income tax growth due to the buyback program and the resulting reduction in shares on issue. Overall, 2025 was another year of consistent financial execution. Across our sectors, we saw solid performance and margin improvement. Our Defence and Social Infrastructure revenue declined by 7% to $2.4 billion as a result of lower Defence Base Services project work and exited or revised scope on some lower-margin contracts. Despite this revenue decline, EBITDA grew by a notable 13.3% to $205 million, driven by the prioritization of higher-margin work and strong cost management. Infrastructure Services had a remarkable year, increasing revenue by 8.4% and EBITDA reaching $129 million, up by 17%, driven by the full year benefit of new contracts commencing in FY '24, such as Western Power and Southeast Queensland Water. We expect the mix shift towards higher-margin end markets will continue in the IS sector through 2026. Our Telecommunications sector contributed revenue growth of 6.1% and EBITDA growth of 4.3%, delivering an excellent second half result. This was largely due to the mobilization of the 5-year Telstra contract in January and the $3.4 billion of new work secured in FY '25, including the NBN Field Module contract worth $2.1 billion and the $1.1 billion in NBN copper to fibre upgrades across Australia. 2026 is expected to benefit from revenue associated with these contract wins secured in 2025. Our Transport business remained resilient in FY '25 with revenue up by 1.8% and EBITDA increasing by 6.5% despite the novation of the Toowoomba Second Range Crossing contract. EBITDA margin improved by 0.4% through improved mix and cost management. Looking ahead, the Transport sector is supported by significant future Work in Hand, including the Western Harbour Tunnel upgrade, Northeast Link and Torrens to Darlington projects commencing in 2028, '29 and '31, respectively. These outcomes demonstrate the strength and resilience of our diversified portfolio. Even in areas where revenue stepped down, our disciplined shift toward higher-margin work and efficiency gains have delivered meaningful EBITDA growth across the board. With an increase in Work in Hand due to major contract wins in FY '25, we enter FY '26 with confidence in our ability to maintain our margins and drive continued value creation for shareholders. We also continue to deliver against our capital allocation framework. Cash generation remains strong, and our credit profile is robust. Net debt-to-EBITDA increased to 1.3x as a result of the buyback. We remain focused on maintaining leverage comfortably within our target range of 1 to 2x net debt to EBITDA. At the same time, we continue to invest to grow our business. This year, we saw an uptick in our CapEx to $109 million or 1.8% of revenue, of which the majority was for growth investments on which we expect a return in excess of our hurdles. The increase in 2025 compared to 2024 is largely as a result of investment in our rigs and wells business and enhancing our digital capabilities. Within the digital CapEx, we have commenced a project to upgrade our SAP system to S/4HANA. This program is on track and is expected to be completed by the end of 2026. As a result of the SAP upgrade, in 2026, we expect that CapEx will temporarily increase to approximately 2.5% of revenue before returning to a more normalized level of between 1% and 2% of revenue. Since 2021, we've invested $57 million in acquisitions, supporting our strategy to grow our core business. This year, we acquired PowerNet, which expands our capabilities in high-voltage electricity infrastructure, including substation design and construct. This acquisition is performing well with the team and projects fully integrated into Ventia Systems and is part of our plan to continue to accelerate our growth, assisted by the energy transition thematic. Finally, we've delivered strong returns to shareholders. We've increased our total full year dividend, including both the interim and final dividends by 16.4% to $0.2325 per share, and we've completed nearly $138 million of our on-market share buyback at an average price of $4.72 per share. Our balance sheet remains strong with $236 million of cash on hand and total liquidity of $636 million. We're well within our covenants. And as we execute the next tranche of our buyback, we expect that our leverage will tick up towards the middle of our target band. Our S&P and Moody's ratings remain stable and unchanged. These settings give us the strength and flexibility to grow organically, fund future opportunities and continue to deliver long-term value for shareholders. We recognize the importance of dividends to our shareholders, and we remain focused on delivering a reliable and progressively increasing dividend stream. Today, we announced a final dividend of $0.1254 per share, up by 18%, which will be paid on the 9th of April. This dividend represents a 75% payout ratio of NPATA, which is within our policy range of 60% to 80%. Our franked percentage is 90%, and we expect this level to be maintained until we achieve 100% in the next few years. In addition to our dividend, this year, we have delivered the $138 million in shares bought back. So as a result of our strong financial position and business outlook, we today announced an increase to our buyback program of an additional $100 million, bringing the total program to $250 million to be completed over 2025 and 2026. I'll now hand back to Dean.

Thank you, Mark. I will now move on to the outlook section. Our broad capabilities and the scale of market opportunity underpin the resilience of our business. Structural tailwinds across our 4 priority growth areas, namely Defence, Digital Infrastructure, Energy and Water presents a compelling opportunity to accelerate our growth ambitions. In Defence, we have established long-term relationships across multiple contracts and are recognized as a trusted partner. There's a clear opportunity to further expand our service offering in line with Defence's future development priorities. For example, significant AUKUS-related investment in Western Australia will require an integrated services provider. And Ventia is well positioned to support through our proven capability and established local presence. In Digital Infrastructure, rising demand for connectivity and data is reshaping customer network requirements. We maintain strategic partnerships with established and emerging infrastructure providers, supporting their needs for cyber resilient, high-capacity data networks. Our capability is aligned to their need for a trusted solutions provider who can operate at speed and scale. Likewise, we are navigating a significant energy transition, balancing the need for reliable power services with the development of new energy solutions. Ventia undoubtedly has a role to play through delivery of new critical infrastructure and the long-term operations and maintenance of these assets. In relation to Water, maintaining availability and access to clean water is a fundamental and basic expectation, but the current infrastructure is aged and requires upgrading. Our clients face increasing pressure to invest additional capital to maintain existing assets while also adopting new technologies to meet rising demand. Across all 4 growth areas, the addressable market is substantial and expanding, and Ventia is well positioned to capitalize on these structural tailwinds. Innovation is a central component of our strategy. We continue to invest to evolve our digital capability, simplify and standardize our solutions, enhance end user experience and drive productivity improvement. In 2025, we launched VenSpark, an enterprise-wide platform designed to capture business improvement ideas and help accelerate into deployed solutions. One idea submitted via VenSpark is an AI-driven solution to authenticate how we capture, review and verify artifacts. This technology is used to review photos submitted remotely to confirm work is completed and keep a history of asset condition. It replaces the traditional practice of manual inspection. The tool will have the ability to validate more than 20 million artifacts annually and will do so faster and more accurately than the current human validation process. Our sustainability example is the Tauhei Solar Farm, New Zealand's largest solar project. Ventia has played a principal role connecting this asset into the grid, installing a new substation, overhead lines and underground cabling. Once complete, the solar farm will generate over 280 gigawatt hours annually, enough to power 35,000 homes. This is a great example of Ventia bringing its capability to the fore to support the energy transition. In summary, 2025 was a strong year for Ventia. A record year of work winning has materially derisked the business and significantly strengthened our revenue visibility. The high quality and long tenure of these contracts bring stability and confidence for 2026 and beyond. Accordingly, we are guiding to full year '26 NPATA growth of 7% to 10%, with performance weighted to a stronger second half, consistent with 2025. Alongside continuous earnings growth, we expect to deliver resilient cash conversion and further margin improvement. We remain committed to creating long-term value for shareholders. This will include dividend payouts targeted at 75% of NPATA and a further $100 million increment to our on-market share buyback, taking the total program value to $250 million across 2025 and 2026. Finally, I want to sincerely thank our Board, employees, subcontractors, suppliers, customers and shareholders for their continued support and contribution to Ventia's success. I will now hand back to Jamie, the operator, to open the lines for any questions.

[Operator Instructions] Our first question today comes from Megan Kirby-Lewis from Barrenjoey.

I've just got a couple of questions on the segments, just to help with the profile into '26. So firstly, on DSI, it sounds like Defence was pretty soft in the second half ahead of the contract change. So just wanting to get a feel for the extent that, that has sort of rebased to the new contract levels? Or is there still some further reduction to come into '26?

Yes, Megan, thanks for the question. I think as you said, Defence and Social Infrastructure in 2025 saw some softness, whether that was budgetary or connected to the contract changes, we're uncertain. Clearly, we were successful in winning some major awards from Defence last year. But it does mean for us some changes for the Defence Base Services where previously we held a higher number of territories. I'm pleased to report that we did demobilize and mobilize those contracts successfully through January into a February 1 commencement date. But it does probably mean some further reduction in Defence Base Services revenue in 2026. And then later in the year, we will see Defence Clothing come online, which we're looking to mobilize in May of this year. But I think over the net of the year, there will be a reduction with a bit lower revenue certainly in the first half.

Yes, that's right. And I might just add to that, Megan. I mean I think offsetting that is obviously really good growth in our other segments. And as we've said, in the Telco segment, we've got the new Telstra and NBN contracts assisting there and IS continues to have really strong momentum in particular. So as usual, there will be downs and ups, but Defence will be a little bit weaker in the first half, particularly.

Yes, that's clear. And then just on Telco, I just wanted to understand, I guess, where you sort of got to in the ramp-up of the new Telstra and NBN contracts in '25, just to help with the thinking into '26?

Yes. So look, I think when we presented at half year, I think, first of all, we were really pleased with the success that we've seen on those Telco awards given that both Telstra and NBN as the key Telco carriers rationalize their supply base, and we've managed to not only retain our position as a provider to them, but gain some market share as a consequence. So we've certainly seen both those contracts mobilize successfully through 2025, but we should get some full year benefit in 2026 as a consequence. But I'd look at the run rate in the second half is really a good picture of 2026. Obviously, all dependent on volumes that flow through in the year. But I think that's a good indicator of what to expect in 2026. And just to amplify what Mark said on the answer to Defence and Social Infrastructure, and I've said this to you, Megan, our business is -- one of its strengths is it is a portfolio. And that means that at some point, certain capabilities move upwards and some move downwards. But overall, it sort of balances out. And I always see it as a bit of a set of scales. And I've certainly said in the last 12 months or so, we've certainly seen sort of Telco do particularly well from that space, a little bit of downside in the short term in Defence. But IS again going up and transport maybe coming down a little bit in the short term, but have a really good long-term prospects on the back of contracts previously won, namely Western Harbour Tunnel here in New South Wales, Torrens to Darlington in South Australia and Northeast Link in Melbourne. So I think generally, the portfolio piece plays out. There'll be some balancing. And of course, we do need to see some volumes from these particular contracts. But -- we also enter the year a really good start point with 87% of revenue secured.

Our next question comes from Cameron Needham from Bank of America.

Just first one, on the buyback, is there a chance it's a little conservative given leverage is at the lower end of your target? And I'm just intrigued what made you choose or extend to the $250 million target. Why didn't you go higher essentially?

Cameron, I think it's a great question, and I'll allow Mark to give you a comprehensive answer.

Thank you, Dean. Thank you, Cameron. Look, I think the buyback is one tool in our capital allocation framework. And obviously, there are multiple considerations there as we set out on our slide. So as you say, maintaining financial strength and flexibility is a core pillar, and we define that as remaining in the 1 to 2x net debt-to-EBITDA range. We have ticked up to 1.3x due to the buyback. And as I said, this year, we expect to increase more towards the middle of that range as a result of the increase in the buyback. So that's one consideration. Another consideration is just the speed at which we can buy back, which is making sure that we're not impacting the share price. So we don't want to be a large percentage of the buying on any one day. We also don't want to be predictable. So we don't want to be buying back the same amount every day. We want to have holidays. And obviously, sometimes that will be because we have particular announcements coming out, but also it will be just us taking randomized holidays. So there's a whole range of considerations that go into the choice of that number. And the other thing I should say is that, as we say on the capital allocation slide, we want to make sure that we retain capacity to invest to grow as well. So as I said, a range of considerations that come into that number. I think we'll have a look at it again in August. So we'll see how we go through the first half of this calendar year. And depending on where we are at that time, we'll reconsider whether it's -- we stay with the $250 million or whether we change that number.

Yes, that's very clear. And just a second one, if I may. Just on the IS margin improvement. I'm just interested, to what extent is that driven by structural factors in terms of your volume of opportunities coming to market and the ability for Ventia to be more selective in the work you take on versus being driven by your own internal sort of performance improvements.

Yes. Great question, Cameron. I'm going to sort of answer it in a few component parts, if that's correct. So we've always said that we always focus on quality of revenue rather than quantity. We could certainly grow faster, but maybe that will bring some additional risk into our business. And this year, we've done just over $6 billion of revenue in a market opportunity that we see as addressable about $88 billion, growing at 5% CAGR. So we have the option to be selective on opportunities, which is important. If you look at our portfolio, and I've talked about this previously, we probably went through a transition of the Telecom sector some 2 years ago, where we found that we weren't really getting the commercial return we expected on wireless activity. And therefore, we transitioned to more fixed activity. And I think that stood us in very good stead in terms of winning opportunities, but also getting premium margins in the Telco sector. In IS, which is more of a component business of different business units, what we've sort of seen is that the resources component of that, where we offer mechanical and electrical support to major infrastructure plants across Australia has been a lot more competitive. So it's driven lower margins. And people are willing to do that because where they do large construction work, they've been managed to sort of balance off the operations and maintenance piece to get an appropriate return. So we've been transitioning off from that. And you can see in our portfolio that we've been reducing our exposure and revenue in that particular component, whilst trying to grow in Energy and Water, where we see better commercial terms, but also the need for greater capacity moving forward. And currently, we've got quite a small market share. So there's plenty of headroom for us to get better commercial terms. So I'm really pleased to see that, that transition is starting to yield results, but we actually believe there's still headroom for further growth in terms of top line and earnings associated to IS.

Our next question comes from John Purtell from Macquarie.

Dean, firstly, congrats on all your achievements at Ventia. Just had a few questions, if I can. Look, the first one, just on Telco. It's pleasing to see the ramp-up in the contract work there with NBN and Telstra flowing to revenue. How do you think about the growth opportunities more broadly in Telco? And are data centers an opportunity, for example?

Yes, John, first of all, thank you for your kind words and greatly appreciated the challenge from good analysts like yourself, but also the support through my tenure. And hopefully, that will continue as I continue my CEO role at Ventia until we find the next person to come in and do this role. In terms of Telco, clearly, we've got considerable market share. And the other thing that I didn't mention in those awards this time, but I've talked about previously is traditionally, those contracts were about an 18-month tenure. So now both of those large contract awards with NBN and Telstra are a 5-year term. So it really gives us longevity and stability of revenue coming forward through Telecommunications, which is fantastic. But we do see really big opportunity in Digital Infrastructure as we now determine it, which is much broader than just Telecommunications. And that brings into that conversation exactly what you just mentioned, which is data centers. At the minute, it's quite a small component part of the opportunity. But given what we expect to happen moving forward, we have all the capabilities to support that, both in terms of helping to build those assets, not just with our telecommunication skills, but also using capabilities in our IS business around power, et cetera. And therefore, we would expect to see growth in that area moving forward. And we're very excited about Digital Infrastructure. We see it as one of the 4 thematics that are really, really going to drive our growth above average market CAGR moving forward.

And the second one, you've talked in the past about your focus on cost out and efficiency in areas such as procurement. It looks like that's starting to flow to margins. So the question is sort of where are you on that journey? Would you expect greater flow-through in '26, for example, than what we've seen so far?

Yes. So a couple of things I'd say there immediately, and Cameron probably asked a little bit of this, and I didn't answer it. So I'm glad you've reminded me about that. We always look at continuous improvement on everything. So I don't think we say it needs to be anywhere. I mean the whole culture of the business is about trying to be better tomorrow than you are today. So it comes on all fronts. Procurement is a great example of I would describe the business maturing, where previously a lot of the procurement activity was either broken down and delivered by the projects or delivered by the silos in the business units or the sectors. And we felt there was a big opportunity to really better understand our spend with suppliers and subcontractors and look to see how we can leverage that across the group. And I'll give a simple example where we do a lot of air conditioning services, and we found in that HVAC area, we had a really wide range of cost from the suppliers, which we could really work through and start to get the optimum cost for the scale of purchase we make. So that's a great example of where it is. But I'm pleased to say there are lots of areas that we are driving across the business to look at costs. So there's always a fine balance between growing top line and driving cost. The one thing I would say though, and I think this is important that our results are really clean as well. And I think that's important. So we do have costs coming into the business sometimes that balance some of our progress. And when they unwind, we expect to see better results. And we've talked about that on numerous occasions. It actually will affect us to some degree in 2026 because in the first half of the year, we've had a couple of major demobilizations in New South Wales schools and also on Defence Base Services. And of course, on the other side, mobilizations, but that will bring some redundancy costs into the business, which we'll just take within the P&L. So we don't drive exceptionals for those. But hopefully, our continuous improvement allows us to offset that cost. And hopefully, then in future years, we'll realize the benefit of that.

And just a final one question for Mark. Is there any sort of change in your approach towards potential acquisitions? Obviously, you've sort of flagged bolt-ons in the past, but clearly, organic growth has been the focus there. So any change in that approach?

No real change, John. Our focus is primarily on organic growth. And as we've been discussing, we think there's strong revenue growth potential for us across various parts of our business, particularly those 4 areas that we've mentioned being Defence, Digital Infrastructure, Energy and Water, but also in the rest of our business, we see the top line opportunity. As per your previous question, we think there's further efficiency gains we can achieve and opportunities like procurement to help support margin. So we see a really strong outlook for our business in the organic space. So M&A for us is very much an add-on to that and not something that we feel we have to do. To date, we've done 4 small acquisitions, as you know, they've all been bolt-ons, and they've all been incremental, if you like, or additive to our organic growth strategy. I think that is likely to continue. And you never want to say never, but we're really focused on M&A where it's complementary to our organic growth strategy, either adding a capability or a geography or a new customer relationship, for example, that supports our organic growth strategy.

Our next question comes from Nick Daish from RBC.

And first of all, Dean, congrats on your time with Ventia. It's been an outstanding period and congratulations to you and best wishes going back to the U.K. Just had a very quick one. I think in the first instance, Dean, you used a very specific word to describe your role in Western Australia, taking on board the fact that your preference historically has not been to take on significant capital works projects. And given the infrastructure required for AUKUS, I'd imagine that a lot of that type of work. So I'm just curious on the role you see Ventia playing as that capital is deployed by Defence over time, please?

Yes, Nick, if I use a specific word, it wasn't to try and suggest we were going to do anything different in our strategy moving forward. I think the word that we often try and stay away from is construction. So I'll use the word construction. The reason we believe at our heart that we're a services company is it brings really reliable revenue and stability in our business. And part of the boring reliability that's been around since we listed is because of that. We've never been against construction. We're against often the risk that's associated with construction. And for instance, we've got fixed price work on construction often means when things go wrong, it can impact the business. So I'm definitely not trying to indicate to you that we're going to start doing construction work in the future. But if construction work comes along that we've got the capability to deliver, like we've done on other projects like scale in Western Australia, where we've had a cost-plus type mechanism, I think it's logical for us to do it. But I'm definitely not suggesting on AUKUS, that's the route we're going to take. I see us very much as the operations and maintenance provider in that region. And the great thing is we've now got long-term contracts with really good people and really good capabilities already on the ground in that territory.

Yes. Very clear. So I guess the inference of that being then if there are significant projects that need to occur at Henderson and Stirling over the next 12, 24 months, the opportunity that presents as an O&M provider is primarily beyond that. Is that a fair statement, taking on board your comments around being able to manage risk within a construction contract, the opportunity as an O&M provider is really beyond that. Is that a fair statement?

I think that's a fair statement, Nick.

And then the other one is just around CapEx, probably one for you, Mark. I know CapEx is going up. I think you quoted 2.5% of sales in '26, and that's been relatively well flagged. So I think that's fine. I'm just curious to unpick it a little bit as to what that incremental CapEx is being spent on. Is it -- should it be viewed as growth CapEx, should it be viewed as sustaining, those types of questions, please?

Yes. I think -- thanks, Nick. I think as we've said before, our maintenance or sustaining CapEx has been relatively stable at a little bit under 1% of revenue. That hasn't changed. So really, everything over 1% is what I'd call growth CapEx and therefore, has to have a really good return on investment. If I look at the 2 areas that have grown this year, it's, firstly, the rigs and wells business; and secondly, digital capabilities. In relation to rigs and wells, we get a really strong return on that investment. And the approach we've taken there is that we need to get our full return on investment over the term of the relevant contract. So if we're signing a rig up for 5 years, we want to get a full return on our capital over that contract term with 0 residual value. So very, very happy with those sort of investments. On the digital side, there's a range of things, and it comes back a little bit towards the cost out and efficiency that we were talking about before. We see that there is certainly productivity improvements through some of these digital capabilities and also potentially creating competitive advantage for Ventia in the future by having the best systems and the best technology, which will help with revenue growth as well. So those are the 2 areas we've been focused on. I think 2026 is a bit of an unusual year because we -- as part of that digital capability uplift, we also have the SAP upgrade. And that's why I've said that this year, 2026, we will temporarily increase to above 2% of revenue in terms of CapEx. But thereafter, I'd expect that we would return to that 1% to 2% range with a little bit less than 1% being maintenance or sustaining and the balance being growth CapEx with a good return on investment.

Got it. And very last one for me. Just margins in Defence and Social Infrastructure, obviously, very strong. Revenue was backward 7%, but EBITDA up 13.3%. I'm just curious on the go forward, and I take on board the changes in that division with demobilizing and things like that throughout the year. But just curious on margins for '26 within that division, please, just a nudging in the right direction.

Yes. Look, I mean, I think on all 4 sectors, we obviously challenge them, as I said earlier, to drive continuous improvement. So we'd like to see continuous improvement across the group. I think historically, at a group level, we've always said margins are between 8% to 8.5% with very little deviation from period to period. I think in the last 12 months, we've started to see some of the cost efficiencies we're driving bear fruit. We've seen some mix benefit because our higher-margin sectors, namely telecommunications and IS have started to take a bigger proportion of the group revenue. And therefore, we're a bit more bullish still going forward, and we believe we're probably in the margin range now of 8.5% to 9% going forward, and we believe that's certainly sustainable. So we're looking good on margins, and you will see, obviously, our results in the second half year was the best we've had at a consolidated level on margins. These things will always move up and down depending on contract types. And if you take somewhere like Defence and Social Infrastructure because you asked about that specifically, it really depends on the mix of capabilities we're delivering. And I've said before, certain capabilities drive certain margins and others give us much better outcomes. So in D&S as a simple example, if we've got a 10-year contract doing cleaning services going to the same location every day, relatively low skilled labor, it attracts a lower margin versus highly qualified engineers doing facilities maintenance at hospitals, et cetera, in different locations each day. So it really does depend on the contract mix a little bit, and there'll be some movement. But as I said, we have a very good and confident outlook on margins moving forward across the business.

And our next question comes from Nathan Reilly from UBS.

I just wanted to ask about the order book outlook. Obviously, pretty substantial growth in the order book this year. Maybe if you could just give us an update just in terms of current tendering activity and just some insights in terms of which end markets some of those tendering activities might be skewing into just to get a sense of where we might see some of those new contracts sort of flow through going forward?

Yes. Great question, Nathan. Look, last year was a record, as I said, for us, so ending the year at $22.1 billion. The other thing is that we have 10 contracts that we announced to the ASX, NZX and our sort of rule of thumb, if you like, is contracts above $100 million. And also, we entered 2026 with 87% of revenue secured. So I think if you put all that together, it says we've probably not got a lot of renewals coming to the fore in 2026, which obviously is good news. And therefore, there's probably a bit more focus on new work opportunities. In terms of opportunities that are in the public domain, there's probably 2 that I'll mention, I think we've talked about before. One is Yarra Valley Water, where we are a current incumbent, so that would be a renewal and then Auckland Council in New Zealand, which is a renewal. They're the only ones that are on the immediate horizon. But back to that, last year was probably exceptional in 10 contract awards. Our average through the 4 years in the market has been about 8 contracts per year above $100 million. And I would expect us to be around that 8 this year. And as and when the year progresses, we'll put some of that news out. I'm really pleased as well to say that already this year, we put 2 announcements out of extensions so Transpower, really long-term customer. And then again, an extension of our maintenance contract for equipment for Defence. So great customers, great to see that we've now got long tenure in those contracts. And again, we've obviously performed on the current contract and they trust us going forward. So we started the year really well and the start point into the year was good. So I'm not necessarily saying it's going to grow this year, but I think that we should be holding the position that we achieved by the end of 2025.

And there are no further questions at this time. I would like to hand the floor back to Mr. Banks for closing remarks.

Jamie, thank you for facilitating the call. To all of the analysts and investors on the call today, I'd like to say a massive thank you for your support. And I'd also like to say that for Mark and I, we have the great honor of presenting these results. And of course, it's always a lot easier when they're good results. So I'd like to say a massive thank you to all the people in Ventia who have contributed to delivery of this result. And I look forward to engaging further over the next few days and weeks around our story for 2025, but also our go-forward trajectory. We are looking for a really good year in 2026, and we are looking forward to sharing more narrative about that. Thank you, everybody, for your time. I wish you a good day. Talk soon.