Company Interview / Ventia upgrades FY guidance

Key points:

Focus on delivering on year guidance with a stable margin:Over 93% contract renewal rate and $17.2 billion work at hand as strong factors for strategic growthVentia's emphasis on diversity and corporate responsibility wraps up a key part of its ongoing strategy

Reflecting on Ventia's (ASX: VNT) financial report, CEO Dean Banks believes their $3.1 billion revenue in the first half of the year is a testament to their efficient delivery on promises. Ventia (ASX: VNT), according to Dean, sailed through the financial year's first half triumphantly, keeping their NPAT, EBITDA, and margin intact. This success has offered the company the confidence to upgrade their full-year guidance from 7-10% to 10-12%. Additionally, Dean underlines the stability of Ventia, brought by an average seven-year contract tenure and a high renewal rate.

The commendable jump in revenue, up by nearly 11%, Dean attributes to impressive results across three of their four sectors. He highlights their work in defence and social infrastructure, infrastructure services focusing on energy, renewables, and water, and also emphasises their role in implementing telecommunication infrastructure. Dean further sheds light on Ventia's work in the maintenance of major highways and tunnels, adding that the market growth propelled by population growth paints a promising future for their business.

Spotlighting their 93% renewal rate in the first half, Dean predicts a continuing pattern of an 80 to 95% renewal range. He celebrates their $17.2 billion work hand at the end of June, with notable contract awards in defence and South East Queensland Water. Dean discusses their work around labour diversity, advocating for better gender and indigenous representation, and veterans' employment. Lastly, expressing optimism about the future, Dean suggests aiming to maximise shareholder returns and considering potential on-market share buybacks if surplus capital is available.

Full unedited transcript below:

0:11

Contractor Vantaa Services has posted a $3.1 billion revenue in the first half of the year, a rise of 10.6% from the same period last year. Net profit up 12.5% to $106.7 million. An interim dividend of 9.3 $0.05 per share to be paid to shareholders, franked at 80%. The company also giving an upgraded guidance for the full year for profits to be between 1210, rather to 12%. Let's get more on those results of NTA. CEO Dean banks joins me now. Dean, I guess, in your words, what were some of the highlights for the year?

0:46

Well, I think from from my perspective, you know, what is important is we deliver on what we say we would do. Um, and we originally for this year had a um, 7 to 10 guidance range for NPA. I think we've had a very good result in the first half of the year with NPA, EBITDA and our margin being stable, and that gives us a platform for, you know, the opportunity to upgrade our guidance for the full year, 24 to 10 to 12%, as you said, versus, um, full year 23 and hopefully also a platform to, you know, move beyond into future years confidently as well. One of the advantages of our company is the average seven year tenure of contract and the high renewal rate, which gives us real stability as an organisation. So what was behind the near 11% jump that you saw in revenue?

1:38

We saw really good results across three of our four sectors. We operate in, in numerous sectors, as I said. So the first being defence and social infrastructure, where we do everything from cleaning and catering on defence bases here in Australia through to um, engineering works for mechanical and electrical, um, and also firefighting services. So lots of facilities management, soft and hard. We have a sector infrastructure services which really looks into in particular energy, renewables and water. And then we have a telecommunications business that is really putting the infrastructure out there for telecommunication carriers across Australia and New Zealand. And finally, we have a transport business that is really focused on operations of maintenance of major highways and tunnels and defence and social infrastructure, telecommunications and transport. Also growth in the period driven by, you know, the market growth we're seeing around demand drivers for population growth, which is really

2:38

aiding our business. You saw a 93% renewal rate in the first half. What sort of forecasts do you have in terms of sustainable growth for the remainder of the year?

2:50

Yeah. So, you know, I think the first thing on a renewable rate is it illustrates that you've performed well in the current contract and the client trust you to be their partner moving forward. Um, so we don't take that lightly. We're very, very pleased to see a 93% renewal rate, um, in this particular marketplace, essential services that we provide, meaning that people are quite risk averse. So I would anticipate that we're going to continue to see, you know, renewal rates in that sort of 80 to 95% range and hopefully at the upper part of that particular range. So let's talk about some of your contracts and I guess bid successes as well. You've got work in hand, $17.2 billion as at the end of June. And we mentioned that renewal rate of 93%. So defence firefighting Western power distribution. What are some of the other contracts.

3:39

So we announced a number of new contract awards in the first half of the year. The two that you've just covered there in terms of defense, you know, being a critical client, it was actually 75% of our revenue across the group comes from government entities, be that federal, state or local council. Um, and, you know, post the result, we yesterday announced a contract award with, uh, South East Queensland Water, which is a new contract for us and a new client for us. Really, really good for us. I mean, as I said, water utilities is a great opportunity for us moving forward. We announced an award with Defense Firefighting Services, which is the first contract in a suite of defense based services contracts. Um, yes. We have 17.2 billion of work in hand, and we only include in our work in any contracts that are signed. So he's not where we're preferred bidder. Um, we would anticipate in the second half of the year that we can see that work in hand grow. We exited full year 23 at 18.1 billion, and I would hope

4:39

to be above that figure by the end of the year. You also employ a number of veterans. Just tell us about, I guess, some of this in terms of your corporate responsibility.

4:51

Well, I think, you know, on a personal basis as well as a corporate basis. I think we have a moral responsibility to leave a lasting legacy that's better than when we arrived. Um, it's a really big part of the venture business. We are a people business. We don't make things. It's all about people. Clearly, over the last few years, you know, there has been challenges around Labour, and we've seen considerable growth over the last few years. So our ability to retain the best and brightest people, but also attract people is fundamental. And that's really driven us to look in more diverse pools. So I'm really pleased to see that we're starting to see better diversity from a gender perspective. We're seeing better diversity from an indigenous people perspective. And as you said, you know, veterans is a great opportunity for us, particularly with our defence profile. They know the client very really well. Um, and they feel very proud about serving the client. So we have partnerships with people like Invictus to try and drive, you know, additional, um, recruitment in those particular

5:50

Spaces. How are you planning on maximizing total shareholder returns? You are considering potentially an on market share buyback if you have excess capital.

6:02

Um, so the first thing from my perspective to say is I think we've, you know, demonstrated in a relatively short time because we only listed on the market in November 2021, that an opening share price of $1.70 that the business has delivered on what I said it will do, gave good shareholder return through that period, both in terms of dividend appreciation, but also share appreciation with the the share price today at circa $4.30. Um, going forward, I hope that we can continue to be a resilient stock that offers stability for people in the portfolio. And I think that's what we, you know, wish to be known for and wish to be seen for. And hopefully investors will value that proposition and see the business continue to grow going forward, both in terms of revenue but also in terms of NPA conversion and growing dividend.