Duratec (ASX:DUR) reported record first-half profitability for FY2026 despite softer revenue, pointing to margin strength across its portfolio, contributions from acquisitions, and a growing pipeline of tender and early contractor involvement (ECI) opportunities. Management also emphasized a strong cash position and increased exposure to master services agreement (MSA) and “annuity-style” work.
Financial performance: record EBITDA and NPAT on lower revenue
For the first half of FY2026, Duratec delivered revenue of A$273.3 million, which management said was lower than the prior corresponding period due to “project timing and delivery phasing,” particularly in Defence, mining and industrial, and energy.
The board declared an interim dividend of A$0.0175 per share, fully franked, which management described as consistent with a balanced approach between shareholder returns and funding growth.
Margins, costs, and cash: gross profit up and net cash remains strong
CFO Ashley Muirhead said gross profit increased to A$55.4 million, up 3.9%, marking the “highest half-year gross profit achieved by the group.” He attributed the result to strong margins across sectors, supported by Duratec’s strategic focus on increasing self-performed work and earlier engagement through ECI.
Overheads increased during the period, reflecting investment tied to acquisitions and continued spending on business systems and initiatives aimed at supporting growth and improving operational efficiency.
Duratec ended the half with net cash of A$76 million as of 31 December 2025. Muirhead said cash conversion was 67%, lower than recent periods, due to the timing of upfront procurement to support second-half delivery. Investing cash outflows totaled A$7.6 million (including A$3.6 million capex and A$4.6 million for the EIG Australia acquisition), while financing outflows totaled A$9.8 million, including A$5.6 million of dividend payments and net repayments of borrowings and lease liabilities.
Net assets increased by 14% to A$84.8 million. Management noted trade debtors reduced, contract assets increased due to invoicing milestone timing, and intangible assets and contingent consideration increased after the EIG Australia acquisition.
Portfolio expansion: acquisitions and capability build-out
Managing Director Chris Oates said the company’s growth has been “nearly all organic,” though Duratec has intensified a targeted acquisition strategy in recent years. During the half, Duratec expanded WPF’s footprint by establishing a Brisbane branch, supported by a recent APA MSA Works agreement.
Duratec also acquired EIG, an electrical infrastructure provider specializing in fuel and fluid transfer services with in-house consultancy and design capabilities based in Canning Vale, Western Australia. Oates said the acquisition expands Duratec’s “end-to-end self-performed capability” in “high-barrier, high-value sectors.”
Separately, at the end of January 2026, wholly owned subsidiary MEnD acquired 100% of RGK Resources, based in Port Kennedy, Western Australia. Management said RGK adds asset integrity, non-destructive testing, and rope access capabilities, supported by multiple NATA and Intertek SAI Global accreditations.
Sector updates: Defence work progresses; buildings and emerging sectors stand out
Duratec provided segment commentary highlighting varied revenue drivers but broad-based margin strength.
- Defence: Revenue of A$82.2 million at a 16.3% gross margin. Oates said margins “returned to high levels.” The company initiated early procurement activities for DEJV works at HMAS Stirling, including approximately A$5 million of long-lead items under ECI head contracts, and later received an additional “order to proceed” for a further A$9 million of on-site early works. Landside activities are scheduled to begin in late Q3 or early Q4. Duratec also said it became the first construction company and the second overall company in Australia to earn ISO 19443 accreditation for services to the nuclear sector. The Tindal project reached final completion with formal handover, and Duratec submitted a tender for the Learmonth Fuel Project near Exmouth based on a replica design of the completed Tindal project.
- Mining and industrial: Revenue of A$57.7 million with a 20.4% gross margin. Management said major awards were delayed, reducing first-half revenue, but the business broadened its client base and service offering. The company noted BHP portfolio diversification via a port maintenance revenue stream and ongoing pursuit of Rio Tinto opportunities.
- Buildings and facades: Record revenue of A$64.3 million and 20.2% gross margin. Management cited conversion of ECI projects in Brisbane and Perth into main works and commencement of the Curtin University project, alongside ongoing heritage remediation demand.
- Energy: Revenue of A$27.3 million with a 29.3% gross margin. Performance was affected by award timing and the conclusion of the Western Sydney Airport contract. Management highlighted the EIG acquisition, WPF’s Queensland expansion, and a recent award for the Santos Barrow Island B tank refurbishment project, with stronger second-half growth anticipated from awards and pipeline.
- Emerging sectors (marine, transport, water infrastructure): Management described “record levels,” including revenue of A$14.8 million and gross margin of 21.8%, citing contract wins across multiple states and expansion in water infrastructure, plus diversification into high-security federal and state clients.
Order book, pipeline, and guidance: management points to second-half skew
Duratec said its order book increased slightly to A$400 million, while tenders and pipeline remained “very strong,” with ECI content at “record levels.” Oates said a number of ECIs were scheduled for award shortly and expected to commence immediately upon award.
During Q&A, Oates addressed questions on margin sustainability and the earnings skew between halves. He said sector margins were broadly “in about the right position,” though they may move “up or down 1% or 2%” depending on mix, and added the company believes margins are sustainable based on current positioning and pipeline mix.
On the second-half outlook and potential guidance, Oates said the company was anticipating revenue growth in the second half and referenced a historical revenue split during periods of growth that was closer to “45/55.” He also said Duratec had five major projects worth more than A$0.5 billion due for award between the time of the call and the end of the financial year, adding that the board would consider providing guidance “at the right time.”
Management also discussed contract assets, with Muirhead saying movements in contract assets and liabilities are driven by the project mix and tend to unwind as milestones are achieved and invoices are issued.
Closing the call, Oates reiterated that the company’s order book was strong, balance sheet robust, and that Duratec was tracking a number of large projects due for award soon, while continuing to evaluate additional M&A opportunities.
About Duratec (ASX:DUR)
Duratec Limited, together with its subsidiaries, engages in the provision of assessment, protection, remediation, and refurbishment services to a range of assets, primarily steel and concrete infrastructure in Australia. It operates through Defence, Mining & Industrial, Building & Facade, and Energy segments. The Defence segment delivers capital facilities infrastructure and estate works program projects. The Mining & Industrial segment offers preventative maintenance programmes. The Building & Facade segment provides façade condition assessments and restorations services.
