Ventia Services Group Limited (ASX:VNT) reported higher underlying Earnings for the six months ended 30 June 2026 despite lower revenue. Underlying NPATA increased 7.4%, while underlying EBITDA rose 8.2% and margins improved. The result indicates that contract mix, cost control and operating efficiency helped offset lower Revenue from the Defence and Social Infrastructure division, while a A$21.1 billion work-in-hand position supports future revenue visibility.

Revenue Falls as Defence Contracts Transition

Revenue declined 4.7% to A$2,893.6 million in HY26 from A$3,037.2 million in the prior corresponding period.

The reduction was primarily driven by the transition from the previous Defence Base Services contract to new arrangements, together with reduced scope across certain housing and community contracts.

Defence and Social Infrastructure revenue declined 20% to A$999.4 million.

This decrease was partly offset by revenue growth across Infrastructure Services, Telecommunications and Transport.

Underlying Earnings Move Higher

Underlying EBITDA increased 8.2% to A$273.3 million from A$252.6 million.

The underlying EBITDA Margin improved to 9.4% from 8.3%.

Underlying NPATA increased 7.4% to A$128.2 million from A$119.4 million, while underlying Basic Earnings Per Share increased 14.4% to 15.81 cents.

The increase in underlying earnings reflected margin improvement across Defence and Social Infrastructure, Infrastructure Services and Transport.

Statutory profit after tax, however, declined 5.1% to A$127.6 million because HY25 included a A$24.9 million one-off gain associated with the novation of the Toowoomba Second Range Crossing contract.

Infrastructure Services Delivers Stronger Growth

Infrastructure Services revenue increased 6.3% to A$733.9 million.

EBITDA rose 24.6% to A$75.5 million, with the segment margin improving to 10.3% from 8.8%.

Growth was supported by the ramp-up of Energy and Water contracts and the full-period contribution from contracts secured during 2025.

Ventia also secured a nine-year renewal of its Yarra Valley Water maintenance services agreement, valued at approximately A$405 million, during the half.

Work in Hand Reaches A$21.1 Billion

Work in hand increased 2.5% to approximately A$21.1 billion at 30 June 2026.

Ventia secured several strategic contract wins and renewals during the period across water, transport, defence and infrastructure.

These included the Yarra Valley Water agreement, an extension to operate the Australian Marine Complex and Victorian road maintenance contracts.

The company reported a customer renewal rate of 98.5% during the first half, supporting the contracted nature of its future revenue base.

Cash Conversion Remains Above 90%

Underlying Operating Cash Flow before interest and tax increased 8.9% to A$256.4 million.

Underlying cash conversion was 93.8%, compared with 93.2% in HY25.

Statutory cash generated from Operating Activities was A$178.0 million, slightly below the prior period due largely to higher tax payments.

The high cash-conversion rate supports Ventia’s ability to fund dividends, Capital Expenditure and capital-management initiatives.

Net Debt Increases

Net debt increased by A$44.4 million during the half to A$748.3 million.

Ventia attributed the increase mainly to higher capital expenditure and its on-market share buyback program.

The company also issued A$300 million of seven-year fixed-rate notes during June 2026 as part of its Australian Medium-Term Notes program.

Ventia retained investment-grade Credit ratings of Baa2 with a stable outlook and BBB with a stable outlook at 30 June 2026.

Buyback Program Expands

Ventia increased its on-market share buyback program to a total of A$300 million.

During HY26, the company repurchased 8.6 million shares for A$48.2 million at an average price of A$5.65 per share.

Since the buyback commenced in 2025, Ventia had repurchased 37.7 million shares for A$185.8 million by 30 June 2026.

The company continues to balance Buybacks with Investment requirements and its target of maintaining financial flexibility.

Interim Dividend Increases

Ventia declared a fully franked Interim Dividend of 11.76 cents per share.

The dividend represents a Payout Ratio of 75% of NPATA and falls within the company’s target payout range of 60% to 80%.

The Record Date was 28 August 2026, with payment scheduled for 8 October 2026.

Ventia expects future dividends to remain fully franked, subject to the availability of franking credits.

FY26 Guidance Remains Unchanged

Ventia maintained guidance for underlying NPATA growth of 7% to 10% in FY26 compared with FY25.

The guidance excludes the prior-year one-off benefit associated with the TSRC contract novation.

The second-half outlook is supported by the company’s contracted work base, high renewal rates and opportunities across defence, digital infrastructure, energy and water.

Continued margin discipline will remain important given the lower revenue base reported in the first half.

Key Risks and Areas to Watch

Contract execution remains important because Ventia derives a substantial proportion of revenue from long-term government and infrastructure agreements.

The company is also involved in civil proceedings brought by the competition regulator in December 2024 concerning alleged conduct relating to services supplied at Defence bases. The proceedings remain subject to the court process.

Net debt increased during HY26, while the company continues to fund capital expenditure and its buyback program.

Revenue pressure in Defence and Social Infrastructure, contract renewals and the ability to maintain margin improvements will therefore remain important measures during the second half.

Mark Ralston commenced as Managing Director and Group CEO on 1 September 2026, adding a Leadership transition to the operational priorities for the remainder of the year.