Year, we have a really strong Net Promoter Score and a high repeat business level with our clients, so we thank you for putting your faith in us for delivering your construction services. I'm proud to see our successful and sustainable growth continue this year, really underpinned by our three strategic pillars, which are sector, geographic footprint, and capability expansion. It's great to see that dilemma on contemporary results. Our continued focus on a constructive culture through exemplary leadership across all of our operations, which in turn allows us to drive exceptional customer service and leading to that high Net Promoter Score. Thank you to everyone for joining us, and we'll go through the slide deck now without further ado. Financial highlights, Scott, take us away.
Thanks, Peter. As Peter mentioned, this year has set a number of new records for the business. I might just start with revenue. We finished the year for SHAPE with revenue of $956.9 million. This compares with $838 million for FY 2024, so that's a significant increase, up 14%. That has then flowed into EBITDA. We've managed to improve some of our operating leverage. If we take overheads as a percentage of revenue, our overheads have gone from 7.1% of revenue down to 6.9% of revenue, and together with some increase in our management fees coming from our DLG SHAPE, which is an associate of ours, that's allowed us to improve EBITDA by 26%, up to $32.7 million. Of course, that's then flowed down into the net profit after tax, so a significant increase on the prior year. Prior year of $16 million, this year we finished at $21.1 million, which is a 32% increase. Project wins, so the difference between a project win and revenue. Project win, once we've secured a project, we record that as a project win. That's not a statutory number, that's a management number. If we do win a project, for example, we pick up a $1 million project, and as we work through that project, once we're 20% complete through that project, we will record $200,000 of revenue. That's the difference between revenue and project wins. Again, a record number, and again up 4% on the prior corresponding period. Moving across to backlog orders, we finished the year with a very strong backlog order book of $492.4 million. That's work we have won that we are still yet to deliver. That number provides a level of a bit of an indication on future revenues because obviously that's the starting position for the new financial year being FY 2026. Over the last five years, to put it into perspective, the ratio of turnover to backlog orders ranges from 1.7 % through to 2.5%, with an average of around about 2.2% of revenue to backlog, and again up 8%. That backlog order book and the way that turns over does depend on the composition of the book. Obviously, the larger the projects within that backlog, the slower they get turned over and vice versa. Moving across to the identified pipeline, these are projects that they're known projects, they have an approximate value, an approximate start date, and should they come to us on the right terms and conditions, we would tender for those works. Again, up 25%. That pipeline is more than we could actually tender or take on at the moment, given the number of staff that we've got. Our real constraint with growth is our ability to hire and retain good people. That's just a nice way of saying that there is plenty of pipeline there as we move into FY 2026. Very strong order book and a very strong pipeline. From a balance sheet point of view, cash and marketable securities. Marketable securities, they are in highly liquid investment-grade corporate bonds. We've got $128.3 million at the 30th of June 2025, and another significant increase, that's up 30%. Of course, earnings per share up again to $0.255. Moving across to the dividends, the board has just declared the dividend for H2 of $0.125, and that brings the total dividends in relation to FY 2025 to $0.225. Of course, another significant increase, up 32% to the prior corresponding period. Peter.
Thank you, Scott. Some great numbers there and something we're all very proud of. This slide just goes to reiterate our continual growth over the years. For over 35 years, we've continued to grow in both profitability and revenue, with only two real blips in that being GFC and COVID, which we had strong recoveries from. Moving on to our execution of our three growth and diversification pillars. As I mentioned in the opening, that is across non-office sector expansion, geographic expansion, and service offering diversification, the capability side of things. When we talk about non-office sector expansion, that is not to say that we're going to move away from the commercial office sector. We've got a strong DNA and track record in that area, and we'll continue to have that as a major focus of the business. The diversification pillars enable SHAPE to future-proof our revenue growth. As Scott mentioned earlier, we can only grow as quickly as we can hire and retain great people, but on the back of that, we want to be able to have a diverse workbook and diverse pipeline and capability such that we can pivot to follow the money. If you look at non-office sector, we certainly focus there from moving outside of the commercial office sector, which we'll go into a little bit further. You can see the project wins versus the revenue with some good success there. From a geographic point of view, over a 173% increase in revenue coming from different geographies that we've opened up in the last financial year and particularly probably the last six months as well. Two new offices have been added to the portfolio in the second half. Those offices are startup organic offices, so no real capital injection. It's all about having fantastic people and following clients into different geographic regions. The last one there, sector service offering diversification. Big increase in revenue with 66% increase in revenue there, 20% increase in our project wins. You can see there both revenue and project wins continue to grow from FY 2024 and into FY 2025, and again we'll continue to follow that trajectory. Delving in a little bit deeper into the non-office sector, I'd point out a couple of particular ones there, which is health, education, and defence. Typically, whenever we see a downturn in the economy and/or a hiccup or financial instability or uncertainty from a global macroeconomic point of view, the government tends to spend money in health, education, and defense. We're well -positioned there. Those numbers will move around a little bit. You can see FY 2025, some significant project wins in education, which will flow on to revenue. We'll see those go up and down across the various years as we pivot to the most commercially attractive projects. Just because there's a whole heap of work in education doesn't mean we'll continue to focus there. If we had other projects in different sectors that had a better commercial profile, the key takeaway there is that we want to be able to choose where we work and the commercial conditions upon which we work. Importantly, each of those sectors continues to grow and continues to avail ourselves to be able to future-proof that revenue growth. Onto geographic, mentioned we opened a couple of new offices there. You'll see both Geelong and Townsville with much smaller pieces of the bar chart, given that they're only sort of six months old. Starting to see some good success in each of those. Some really good strong growth in Newcastle. Tasmania remaining very stable, but we've sort of got a good piece of market share down there, all across Tasmania, but in Launceston and in Hobart. From a Gold Coast point of view, you can see there a drop-off in the project wins from FY 2024 to FY2025. That doesn't mean that we're going to have less work in the Gold Coast necessarily. The big spike in FY 2024 from a project win point of view was a very large commercial fitout project that we secured for Gold Coast City Council. It's not every day that you get those types of commercial office spaces in the Gold Coast. You see a bit of a blip there, but it won't be impactful to results. We continue to secure work in the Gold Coast. We're able to pivot from office into a lot of the hotel work, F&B, that type of stuff as well. It continues to give us a robust footprint on which to be able to pivot to the right projects as we go forward. Finishing off on the last growth pillar there, which is the service offering diversification. That picks up things like new build, modular, facade. We talked in, for those who followed us in the previous financial year, around facade dropping off a bit in FY 2024. That was mainly based around commercial conditions, so we knocked back a few projects because we weren't comfortable with the commercial conditions that they came to market with. You can see that's sort of retracted a little bit in FY 2025. We're starting to see some more project wins coming through, which will again flow through in revenue. New build coming off slightly on a very strong base from FY 2025 from a project wins point of view. That comes back to balancing our workbook, which we'll go into a little bit later, but we are somewhat fascinated with our risk profile of having the majority of our work carried out inside spaces, i.e., with limited exposure to weather, industrial, etc. That new build component will stay there, but it will be somewhat opportunistic as we follow clients and look for the right commercial conditions. Modular there, you'll see a really strong, certainly in the last half of FY 2025, H2, some really strong sales on the back of, I think, delivering some fantastic projects around from the modular businesses, continuing to reinforce SHAPE Modular as a brand and continuing to develop that pipeline. I will caveat that I would anticipate that modular will be somewhat volatile, both from a revenue and a pipeline point of view, as Australia is a less mature market in the modular market. It's getting better every year and every sort of six months as the market gets more educated, but we do anticipate that to jump around a little bit, but certainly we've had some really good strong success in the last six months as well, remaining with a good strong pipeline going forward as well. That'll support our growth and diversification into the future. Just on the business model, I talked a little bit there about our fascination with internal projects. You'll see 86% of our work is carried out inside a building. The good parts about that are very limited exposure to weather typically and also limited exposure to other items such as industrial and also a stronger ability to control the safety aspects on site with less, I guess, moving environmental pieces to have to worry about. We look to continue to maintain that. External may become a bit bigger than 14%, but we're certainly very committed to that exposure. You can see there are new clients, 15% of new clients, 85% of our work is repeat business with clients that have known and trusted us for some time. That high percentage of repeat work is on the back of those trusted relationships, which our amazing teams deliver day in, day out. Again, our clients typically are in ASX 100, 200, and blue chip companies, so we operate at the top end of town. Typically, where the finishers are higher-end finishers, probably more complex and perhaps quicker projects is where SHAPE really sort of thrives in delivering that point of difference. We've talked before also about our ability to win projects through all office sector market conditions. In a growing market, depending on which state you're in, the states are in different cycles. Growing market, we are typically helping clients move into additional space and to expand. In a stable market, we're helping building owners maintain their buildings and keep them up to scratch and also look for new end-of-trip facilities and that sort of stuff. In a declining market, we see sub-tenancies, we see make goods, and we also see normally a significant focus from building and asset owners on repositioning A, B, and C grade assets into A grade assets to attract tenants. Across all levels of the cycle, we have a strong ability to future-proof and protect our revenue growth. On the left-hand side there, you'll see a short duration of projects with 82% completed under a year. That 18% of work over 12 months, that has increased from prior year and certainly from prior corresponding period or certainly the first half of FY 2025. That's not a significant change whilst the percentage has increased a bit. It's probably more projects going from 12 months to 13 months or 14 months rather than a significant change in the type of work that we're approaching. We would anticipate that will come back down. Typically, work over 12 months is less than 12% of our book. I would anticipate that will normalize over time. Again, because whilst we do 350 projects a year, our average project is $3 million in 16 weeks. Across that diversification, diversity of projects is projects from $100,000- $100 million, but the average project remains there at a 16-month piece. Backlog? Do you want to talk about that? Yeah, I can work through this. Project wins. You might recall on the front slide there, we had project wins of $980 million. That $1.05 billion, that includes our associate DLG SHAPE, where we're the capability partner for that work. The backlog order book $530 million, that includes DLG, whereas the $492 million is SHAPE's component. The key with this is it's just showing the diversity of the backlog and it's also showing the diversity of the pipeline. You can see there that office inside of the backlog there only makes up 37%. Moving forward in the pipeline, it makes up 49%. Historically, that used to be up around 70% or 80%. As we've continued to diversify our book and protect those revenues so that we can pivot into other sectors depending on how each area is performing at the time, we are able to build and create experience, resumes, and all of those things that are relevant at the time. It just gives us the ability to undertake additional work and continue to grow that pipeline. The pipeline's grown from a sector point of view, but also from a geographical point of view and a capability point of view. I think the key there is really that both those pies have grown and there's significant diversity to protect our book. Moving on to capabilities, demonstrated ability to win and execute work across all our regions and our capabilities. You can see there the split with regions. New South Wales continues to be the larger component of that pie. The other pieces of the pie move around a little bit with Victoria coming off from sort of 22% in the prior corresponding year. That's more around a dip in approvals to start and probably perhaps related to local conditions from a state government point of view and delays there. We would anticipate that to flip around over the coming 18 months with a lot more work coming through there. Some really strong performance out of South Australia and Queensland and WA and ACT, NT, and Tasmania again continuing to hold their piece of the pie as well. From a revenue point of view, we can see there that 83% of our work is in fitout and refurbishment. We continue to have a strong focus there. New build close to 10%, which is similar to what we had last year. Facade had come off in the prior year, which I talked about earlier, and then you can see modular there maintaining 3%. We'll probably see that come up a little bit over the next 12 months given the strong backlog of sales that we sold in H2 of FY 2025. Importantly to note there, strong tender conversion rates, so 53% by number. We do a lot of work with Salesforce, our CRM, on not just entering pipeline and works, but also in making sure that we've done everything that we can to increase our chance of winning it. We have a sophisticated algorithm system in the background that looks at the way we answer 27 questions around our approach to the sales and marketing of that particular project, and depending on how we answer it, that will give us an opportunity win rate, which helps to guide where we put our resources and where we focus that investment in our people from a tender point of view. Operational highlights, there's a lot to talk on this screen, and you all have availability of the deck, so I won't read it verbatim, but just to pick out a couple of items. From a tripper and a lifter point of view, very importantly, we continue to trend in the right direction. Let me start from the onset of saying there is no level of incident or injury that we find acceptable in our business, and we have a strong desire in building into our culture that we want every single person that comes into contact with our sites to leave in a better state than when they came. Whether that's through better learnings or better environment or better safety or better physiology, we want to have a positive impact on our stakeholders, our people, and our clients. Whilst we are still seeing incidents and injuries, we are pleased that those are continuing to trend down. Recordable injuries decreasing from 28 in the prior corresponding period down to 25. That's driven by a number of things. Obviously, our exposure has actually increased because we're doing more hours, but we're still managing to drive those incidents down. Over 57,000 proactive safety, quality, and environmental observations logged, with an increase of 10%. We really have a strong focus on getting our teams and our management out and about on sites, leading from the front and identifying issues before they become a safety issue. Interestingly, we've come up with a few really good uses of technology, using AI, risk management. In particular, I'll call out our approach to hazardous materials, where we've implemented a new system which makes it easy for our teams to get quick access to hazardous material data sheets, enabling, again, continuing to use technology wherever we can to enhance the safety of those on our sites. From a people and culture, a 7% increase to 686 people, 551 hours were allocated to training. We continue to really focus on hiring the right people, but also continuing to help them develop their careers so that they stay with us and we can retain those people. Our unplanned churn's down under 11%, which is fantastic because we don't hire to fire, we hire to develop people. Our female participation above industry, it's actually up at about 30% now, 29% at June 30. We continue to focus on not just gender diversity, but diversity in general because we find diverse teams are more successful, both from a commercial, safety, and a client satisfaction outcome. Partnerships, really strong performance through securing that amount of orders with repeat business, which is fantastic. Net Promoter Score + 85, which is again integral to our ability to attract and retain those clients going forward as well through delivering exceptional customer service. You see there a really large network of our subcontractors. From an environmental point of view, our corporate operations have again maintained climate active certification and will continue to focus on that, delivering seven Green Star certified projects. We also do a lot of work on trying to keep both furniture and waste out of landfill. Over 6,000 furniture items are either donated or reused on projects, and we continue to really drive that because I think the construction industry is still too big a contributor to landfill. Over 1,450 tons of waste recycled on our projects, which is fantastic. We have established a new ESG manager role. That's to support state teams going forward. Obviously, there's more reporting requirements coming out for businesses as well, gearing up for that. It remains a strong focus of SHAPE as well. Back to our communities and supporting our teams and our employees in achieving CSG, we've delivered over $1.3 million worth of value in goods, labor, or services as we've worked through with our community plus programs. From a safety point of view, I talked earlier around a lot of those statistics. It's pleasing to see the graphs go down and to the right. As I say, there is no level of incident that we find acceptable, but we find through not only introducing continued evolution of our safety teams and how we support our site with additional site roles, but also in how we support those sites by having management attend site and issuing proactive safety notifications and observations to again lead from the front on all those EHS AQ items. Sustainability, I've talked a little bit about that already. We are preparing for the SHAPE ESG plan developed to help comply with the mandatory reporting coming in for FY 2026. We are well ahead of the curve there. Carbon neutral, our operations remain carbon neutral. It is interesting there that you can see across all of our projects, a total of 290,000 kW of energy sourced from green energy providers, which is fantastic to see. We continue to offset where we can as well. I think we've covered off on the circular economy and the green power part there. Just a brief snapshot of some of our projects. You've got the deck so you can sort of draw back on that. If you look across the diversity, whether it be refurbishing of hotels across 24 weeks, whether it be refurbishments in Geelong across 12 weeks, 12,000 sq m, modular buildings, project duration of 41 weeks, that includes obviously the manufacture of the modular as well. Just a bit of diversity to give you a bit of a taste of the type of work that we've completed and/or are completing. Down to Hobart, into Adelaide with some healthcare. In the graph, the other portion of revenue in the graph did include transport, which would bring in projects such as Sydney Airport Bussing Terminal, where we're still there working for SACL at the moment. Onto financial management, which Scott's getting excited about.
Thanks, Peter. As we mentioned before, we certainly have very strong liquidity. We still pay very much, a very high focus on diligent liquidity management. We are constantly chasing up all of our clients to ensure that they pay on time and that we meet all of the pre-qualifications and external financial assessments to place us in the best position when we're tendering a project to secure that work. We've positioned ourselves in such a way that we have the ability to secure single contracts of $100+ million projects. As we mentioned before, total cash and marketable securities is $128.3 million. On that slide there, it shows you what the high and the low was. Most importantly, our average position throughout the course of FY 2025 was $98.8 million, so the best part of $100 million. Very strong cash conversion. If you look at your operating cash flows to EBITDA ratio, we're about 160% odd. That's up a little bit against last year. For those of you that have gone through and had a look at the financial statements there, operating cash flow this year, $53 million versus $30 million last year. Primarily, that's made up of obviously an increase in EBITDA in this year, but also with the security of payment acts that dictate the payment terms in the relevant jurisdictions of which we operate. We had ACT and WA last year effectively having to make 13 monthly payments rather than the 12. They're the two key differentials between this year and last year. The graph there on the right, a lot of people on the call have probably seen that before. For those that are a bit newer to the story, really that's just showing you a typical monthly cash flow cycle. Where you can see sort of towards the back end of the month, there's a couple of dips there. There's a bigger dip sort of around the 23rd, 24th of the month. These are when the payment runs are made. ACT, for example, has a 15-day payment term, business day payment terms, New South Wales 20, ACT and WA 25, and then everybody else is paid on the first business day of the month. You can see we're constantly collecting cash throughout the month from clients, and then there's a few dips there that correspond to the payments. This graph has been put into the deck just to illustrate, for those people that are new to the story, it's just illustrating how the margin sort of falls out over the life cycle of a project. It's just illustrative purposes. Let's assume that you have a $1 million project. We have an entry margin of 5% and an exit margin of 10%. What that's saying is when we tender for a project and we go in, we have a starting margin. That starting margin will generally build over the course of the project. That can happen through trade lettings. As we work with the subcontractors and we start to pull out the risk and we do some value engineering with the subcontractors, we can extract a little bit more margin out of that. Of course, as the project continues throughout the life cycle, generally the clients will want either additional work or changes, and they'll all constitute variations, again, increasing the margin on the project. As we tend towards the end of the project, we're closing everything out, removing all of the risk, all the contingencies in relation to risk, and then we get to where we talk about an exit margin. What that does is when you're looking at the first half of a project versus the second half of the project, if you cut the project into two, we're still doing $500,000 worth of revenue in the first half and $500,000 in the second half. Because the margin's continuing to build, what ends up happening is that particular project would record a margin of 7.5% at the first half and 12.5% at the second half to get a blended margin of 10%. The reason that we're going through that is because at times, depending on if we have larger projects or the projects are closing out over a particular point in time, that can move the needle a little bit and bias towards a lower or higher gross margin percentage. In saying that, though, our margins have been very consistent over FY 2024 and FY 2025. In fact, they've ticked up just slightly in the back half of FY 2025.
Thanks, Scott. And just finally to finish off, we're nearly there, just a bit of outlook and growth. As those who follow us, we don't generally provide sort of outlook. We rely on the analysts covering us to make their assessment. Obviously, we correct if we think they're incorrect. As we enter FY 2026, I think we're in a really strong position underpinned by a solid backlog there, $492 million. That pipeline of up over $4 billion worth of work is actual projects that we know the name of, we know the estimated start date and the estimated sort of value of the work. It's real projects that if it were to come to market under the right commercial contractual conditions and we had a team available in the relevant state or geography, we would price that work. It doesn't include, you know, a fuel refinery out at Kurnell or something like that. It only includes the work that we would classify as SHAPE work. Looking at non-office sector, in addition to expanding the commercial office sector, which we will continue to expand, we'll continue to grow in those non-office sectors. As I mentioned, that'll include education, health, hotels, defense, transport, aged care is a new one for us as well that we're starting to have a look at, and community and entertainment and recreation. Macro trends such as population growth, aging population, along with the geopolitical tensions, are expected to drive ongoing investment in these areas. I think it'll position SHAPE well going forward. From a geographic expansion, the current geographies that we've expanded to, we expanded very quickly across Australia as a private business. As a publicly listed business, we've continued that growth. We'll continue to evaluate additional regional locations, but typically we follow GDP and population and also our clients. We'll follow clients in the regions and we'll continue to look for those opportunities going forward. Finally, the service offering. Target short-duration new build projects. We will do those new build projects typically for key clients that we value them and they value what we can offer. I mentioned before that SHAPE deliver a better value for money where it's at the upper end of the quality spectrum. Highly complex projects that require a lot of planning and pre-planning and supervision is where we sort of can put our talents to the best use. Continue to focus on growth in the modular industry. As I mentioned, Australia's market for modular is growing day by day, albeit it is less mature than perhaps Europe and the U.S. and those sorts of markets, but we'll continue to see growth there, which is really exciting. Design and build, we have introduced that in the past. We will continue to expand our design and build services. That is where we're a one-stop shop for our clients, where we can provide, and we use a lot of our design and consultant partners to do so, but provide a one-stop shop for our clients, which is gaining in popularity. We'll continue to grow our aftercare and facilities maintenance service. That's where we will stay behind after we've completed a larger project and provide ongoing maintenance, provide aftercare. When there's churn or changes that are required, just stay sticky with our clients to provide that additional level of customer experience and customer service. Finally, actively evaluate M&A opportunities. We've talked about in the past that M&A will be part of our growth. We've carried out one acquisition in our history. The board has looked to continually assess the skill set on the board. As a part of that, you would have seen the announcement today that we welcome Peter Massey to the board. Peter's got some significant M&A experience, which will add to the existing board capabilities and will also provide management another level of support when we're assessing those M&A activities going forward. We're all sort of ready to talk about a particular deal, so to speak. We are about making sure that we've got the right skill set, capability, and experience both in management and on the board in order to be able to ensure that M&A is a part of our growth strategy going forward. Watch this space on that one. That was the end of the slide deck. We can open now for questions, and I'll hand back to you, Mel.
Thanks, Pete. We've gotten a few questions through. A reminder, if anyone has any further questions, please submit them at the bottom of the screen. On the pipeline, you achieved $800 million in year-on-year growth in FY 2025. What is the potential for further growth in FY 2026? Would it be similar? How should we think about traction in the vertical segment expansion?
Go ahead .
With the growth, you would have remembered the pipeline there. The pipeline's grown quite significantly, as you've mentioned, $800 million year-on-year growth. That does provide opportunity for further growth. Our growth, the speed at which we do grow outside of M&A, would be the ability to hire and retain good people because, as Pete talked about, the culture that we have embedded within the business. As we bring in new people to learn and understand the systems, processes, and the way that we operate, that requires other people to be showing them those systems. That means they wouldn't be able to take on necessarily as much if we brought in too many people too quickly. It certainly provides an opportunity for further growth.
I think just to add to that, if we look at the pipeline, obviously in the last 12 months or 18 months, we've had a number of sectors and diversification strategies. That pipeline today includes Geelong, it includes Townsville, it includes Newcastle, it includes Tasmania, whereas two years ago, it didn't include those. Whilst we've had that strong growth in that period, that is also linked to our diversification. Would we anticipate another $800 million year-on-year? Not necessarily. However, suffice to say that pipeline is in excess of what we could service anyway. It's not going to be the preventer of growth, as Scott mentioned.
Thanks, Pete. I guess continuing with the pipeline, Patrick's asked, what's the main drivers behind the 25% growth?
Yeah, I think that's, as I sort of mentioned at the end there, there's a couple of things there. One is we, you know, as per our 35-year slide graph that we put up, we've continued to grow year-on-year typically. The country grows, net migration typically increases, etcetera, etcetera, GDP. Certainly with those diversifications, the expansion both into sectors, because again, you know, go back two years, we weren't doing a lot of education work, say in Victoria, for example. Therefore, because we weren't chasing it, we didn't have that in our pipeline. Now if you look at everywhere where we go to diversify into, whether it be sector, geographical capability expansion, that opens up an additional pipeline to us. It's a combination of both general growth in the economy as well as our diversification strategies.
Thanks, Pete. Just talking to the diversification, John's asked, there's been some changes to the team in Victoria. Is the mandate different? Could it get back to 22% total contribution in FY 2026?
Yeah, I think so, and the changes in Victoria is mainly GM Adam Head, who has been with us for, I think, 17 years and remains a good friend of the company's. He'll continue to, I guess, do what he does going forward. The team underneath him, very, very mature, very established, and had been there for some time. I don't see too much change in the team. Probably the reflection in the revenue dip from 22% down to where it is now is probably more a reflection of the local economy and construction starts in Victoria. If we map non-residential construction starts, as sort of published on Oxford Economics, for example, non-residential construction starts matches the revenue that we have in Victoria. It's commensurate with the activity. In saying that, going forward, our pipeline for Victoria is much stronger than it was in the last 18 months. I would anticipate that Victoria will certainly get back to in excess of 20% of the revenue piece of pie again, with the caveat of, as the other states continue to grow as well, it's a bit of a positive fight in who's got the bigger piece of the pie.
Thanks, Pete. Pete, just on DLG, how should we think about the DLG earnings contribution going forward? It did have an impact this period, and you flagged $200 million of pipeline. Are the duration profiles the same?
Yeah, Mel, it's Scott. I'll jump on that. With the DLG earnings, what John would be referring to there would be primarily the management fees that are coming through DLG SHAPE, which is our associate. Us being the capability partner and providing effectively all of the back office support, there's a management fee that flows through into that. The DLG management fee jumped up quite significantly this year. That was primarily because of the makeup of the project. Historically, we've only done BAU work. There was a large modular project that went through that business that generated a higher management fee that was coming through that line item. Had that job gone through SHAPE rather than DLG SHAPE, then that would have gone through the gross margin line item rather than the DLG SHAPE management fees. As far as the type of work that we undertake in DLG, there's probably more of a bias towards defence works. As far as the duration profiles of that work, fairly similar, depending on the size of those jobs, but generally fairly similar. There obviously still remains a very strong pipeline of work there. Because there is a bias towards defence or set-aside works, we're starting to see more and more defence works come back on. There was a push away from the jobs in defence that we once did, and that all got pushed into AUKUS. That's now coming back online, and we're starting to see that pipeline open up and more opportunities in that space.
Thanks, Scott. We also have [Abe from George Online] who would like to ask some questions. I'll just pass to Abe.
Thanks, Melanie. Hi, Peter. Hi, Scott. Just got a few questions on my end. You mentioned the great performance in regards to EBITDA year-on-year in the accounts. I noticed labor expense was down $2 million in the second half of 2026, versus the first half. Headcount was up overall about 6% in the same time period. Do you mind providing some color as to how labor expense was down? Is that the new base into FY 2026?
That moved around a little bit, primarily because it's in relation to the provision of bonuses. There's a bonus scheme amongst every single person within that business, and there are certain gatekeepers that need to be met. Those gatekeepers apply on a state-by-state or a branch-by-branch basis. Of course, as each branch performed differently across that year, there was effectively a release of some of those provisions in H2 compared with H1. That's why you're seeing that movement, because we generally provide at the start for full bonuses, and then they can move around depending on the performance of each state.
It's normalized employee expenses, I suppose. Is the first half a better number, that $22 million? Analyze that. What if that million for the FY 2026?
We have also got to take into the full year effect of new people coming on. You have seen the headcount, as you mentioned, have gone up 7%, and our headcount continues to rise. Whilst you have got the base there, you have got the effect of continual CPA, pressure on wages, but also that increase in headcount. You will see that rise into FY 2026. As I mentioned previously, there is a level of leverage though. As we continue to grow the revenues, we do not anticipate that the overhead line items will grow at the same rate.
Yep. Thanks for that, Scott. I've got another question here. I guess Pete mentioned, I suppose, the proportion of 12-month projects in terms of duration jumped quite a bit in the second half of 2025. I think tripled on numbers versus the first half. You said it was due to project extensions, not new wins, taken on high -duration projects. My question is, what is the cause of the extension or elongation of these projects? If it's due to variations, should we expect a gross margin boost, I suspect, in FY 2026?
I think where you're talking about this is the 18% above 12 months. I think last time we reported that would have been 9%, so that's doubled. Twelve months is a cut-off point. We may have had projects in there before that were, say, 11 months, and now they've tipped over to 13 months. For example, we had three projects that were in Canberra that totaled $27 million. There's been a lot of stop-start on that work. There have been state elections, federal elections, and a lot of design changes and the like, so they've been extended out. We've also had a new build project up in Queensland, and again, there's been some pretty horrendous weather up in Queensland, and that has also extended out. You're seeing that just tip over the 12-month line. If we had another line item, another break in that wagon wheel at 18 months, then that would probably alleviate some of the concerns that you may have there. There's not a significant change, it's just that ticking over from, say, 11 months to 13 months. There's not a significant change in relation to that. Most of that stuff is delays rather than new variations or extensions of work. Part of it is some variations, like that Gold Coast City Council that Pete mentioned before. That's a $40 million project with some significant variations in relation to that, and so that project obviously pushed out a little bit as well.
Yeah, understood. Lastly from me, both of you guys have been mentioning about people being constrained regarding how much of that pipeline you guys can chase. Being an analyst, love to find out the potential revenue opportunity, given the number of people you have on board. Is there an average metric I can use for average revenue per employee going through time? I've noted $1.56 million is the high in the first half of 2023. Just curious as to what you think the upper range is for revenue per employee?
You're quite right. We use a rough metric of $1.5 million per person. That does also depend on the composition of projects. The larger projects, you can generally extract more out per person. That $1.5 million includes all employees, including all of the corporate services and back office. If we started to do that on a branch-by-branch basis, that does change. New South Wales, for example, has an average project size of $6 million-$7 million, and they'll look at maybe $2.1 million-$2.2 m illion per person. We also then overlay that with how we can use things like AI, improve systems, processes, and gain efficiencies to continue to grow that per -person metric and just get more out of what we've currently got.
Very helpful. Thanks, Pete. Thanks, Scott.
No problems.
Pete and Scott, a few other questions have come through online. One is, could you talk through the type of company you were targeting in M&A?
Type of company. We have a long list and a short list. The types of companies we would look at are synergistic to the SHAPE business. Businesses that we, the management and the board, are able to suitably understand the risk profile of the business. It would be construction -related. It wouldn't necessarily be a competitor. For instance, it would be to gain entry to a new market. If you look at the acquisition we did, we didn't have a presence in modular. We acquired a modular business. On the back of learning what we did there, we started a new modular business in Adelaide. You can either buy or build. The acquisition would be to fast -track our ability to get traction into a different sector. That might be, I don't know, something we're not in a strong way. Retail, it could be fuel, it could be maintenance. Those sideways synergistic companies could even be into, you know, furniture or that type of stuff. Areas that are related to the risk that we understand, to the projects that we understand, but that are complementary. Number one, that's the types of areas. We have a number of hurdle criteria, one of which is that the margins that that business has need to be, one, earnings accredited from day one, but also need to be above that of the SHAPE BAU margins. When I say BAU, that's typically 8 to 9% of gross margin that we're talking about there. It's looking to, as we continue to grow the top line, we want to thicken the bottom line with higher gross margin opportunities, if that makes sense.
Thanks, Pete. Can I just talk to the competitive landscape? Has there been any development in commercial fitout? For example, have any competitors exited the industry? Are there opportunities to absorb work and take market share?
Yeah, typically not. None of the major players. Remembering that SHAPE don't really have a true national competitor. In each different state, we compete with different companies. The businesses that we tender against most commonly over the last 12 months are certainly all still trading. It's a very fragmented market. For instance, in Canberra, we've tendered against 75 different fitout companies in the last 12 months. There are a lot of companies out there. What we do typically see is when the larger construction firms get into trouble. Typically, the risk profile of the fitout and refurbishment contractors is similar to ours in that it's shorter duration. That risk profile has some level of immunity towards those sorts of financial issues. We don't tend to see a lot of people in the fitout and refurbishment market experience significant financial hardship on an ongoing basis. I'd say that the short answer there is no, we're not seeing a lot of movement in that space.
Thanks, Pete. We've got some questions here on FY 2026. Can you talk to what the revenue is secured for the first half of 2026 with the current order book?
Yeah, for SHAPE, we had a closing or carry -forward workload of $492 million. The workload or the backlog at the 30th of June 2025, the composition of that was slightly different to the composition of that at the same time last year. What I mean by that is it's made up of smaller works that will be turned over a little bit quicker. That comes back to that ratio. It'll be a slightly higher ratio for the accelerated revenues. That's probably a long way of saying that a lot of that revenue for H1 FY 2026 is already secured in that backlog order book.
Thanks, Scott. Just one other question. We've got a question here on the treasury shares purchase. They increased from just under $1 million- $3.5 million this year. Could you talk to that?
Those treasury shares that we're buying, that's in relation to our Senior Executive Long-Term Incentive Scheme where we are issued rights. In three years' time, we then can compare the performance of the business against the base year, if you like, which is three years earlier. That'll determine the level of vesting. Because the business has improved its performance and its profitability, the level of vesting has increased. On that basis, we've been acquiring more treasury shares for that purpose on the back of the success of the business.
Thanks, Scott. We just have a few questions on margins and specifically future margins. Thomas asked, gross margin in the second half was about 9.2%. Given the increase in modular work into FY 2026, should that gross margin increase off the second half base? Further to that, we've had another question on your future views on margins.
Yeah, so I guess with the gross margins, you're quite right. That was circa 9.2%. If you have a look at the backlog order book and you have a look at the percentage of modular, for example, if we go back to this time last year, modular represented 3%, whereas now it represents about 7% in that number. All other things being equal, modular does produce better margins. Modular produces margins of north of 15%. All other things being equal, that does provide opportunity for increased margins.
Thanks, Scott. Just looking to FY 2026, we have a couple of questions. One, what is the expected increase of the number of employees? I mean, you've touched on in the hiring at SHAPE. Two, what sectors or project types are you seeing the strongest demand for in the year ahead? How does SHAPE plan to capture that demand? Are there any new industries you are seeing emerge?
From an employee point of view, we could look to the past to predict the future. One is the ability to hire, and then the other is the ability to retain. From a retention rate, our unplanned churn is circa 10% or sub 10%. That's quite healthy from a construction industry point of view. Our ability to hire people, at the junior level, we have a cadet intake every year, which is very strong. We're very strong advocates of you can build a lot better than you can buy, typically from a resource point of view, and our only asset is our people. Typically, we would see growth of between 7% and 10% as being able to sustainably continue without putting a burden on existing staff. If you think about every time you bring in another person, you need to train them in the SHAPE ways of working, which includes our system, our process, etcetera. Some of that is done by osmosis, but some of it needs to be done by the teams and the people around them. As we bring in new people, a new project manager or site manager, we'll tend to blend them into existing teams. That puts an onus onto the team to train and upskill that employee, which they tend to do fairly quickly. We can't just drop in a significant amount of new employees and then expect them to follow the rules because they know them and because they want to, versus follow the rules because we tell them to. That's a long way of saying that we're very particular about how quickly we can grow the headcount because we only employ the best talent in the industry, and we really want to make sure that we onboard them adequately so that increase in staff doesn't represent a new risk that we haven't seen. What was the second one?
Yeah, just in terms of the sectors and project types you're seeing the strongest demand for in the year ahead and how you would plan to capture that demand or if there are any new industries you are seeing emerge.
Yeah, so there's a couple of, again, it's probably different state by state. If we look at certainly in Victoria, for instance, there's a significant amount of commercial office projects coming to market that are on the more fulsome end of, you know, we're seeing some large commercial fitouts. Strong focus there in Victoria, coupled with their focus on health and education as well from that diversification point of view. In Victoria, there's not a lot of defence work. That's a little bit different to perhaps, say, if you look at Sydney or New South Wales, we are looking to develop some expertise in aged care, for instance, with that growing population. It's probably different in each state, and it's all about coming back to that pipeline of identified work and how do we build it, how do we approach it. Defence is probably a good example. Five years ago, we were doing very little to no defence work, and then we went out and hired defence people. We're putting a Head of Defence. We've recently brought in another senior defence employee to bolster the ranks there because for each sector, a capability, whilst it's still in construction, fitout and refurbishment, there are slight nuances to that type of work. We need to buy the people before we can buy the work, if that makes sense.
Thanks, Pete. Okay, just going back to the employee question, we've had a subsequent question. Given employee costs will likely increase by greater than 10%, given headcount, CPI, and provisioning for incentives, will overhead leverage be driven by lower other expenses?
Part of that with the increase in headcount, not all of that relates to the line item that is referenced as an overhead. If we split that out, again, very high level, two-thirds is like project costed, one-third is overhead costed. We won't necessarily see that move in the same rate as headcount goes because we still want to leverage our overheads. We can put on more people, undertake more work, but that's above the line, if you like, rather than below the line. As I said earlier, we certainly will see an increase, but not at the same rate as revenue. The other expenses line item is primarily going to be consistent with headcount from an overhead perspective. Our overhead headcount is going to rise more slowly than the production headcount.
Thanks, Scott. If we go back to the pipeline, of the $800 million increase in pipeline, how much relates to Victoria? Would it be possible to provide a pipeline split by state, or is it similar to a revenue pie chart provided?
A lot of that increase, or let's say half of that increase, is in relation to Victoria. As Pete mentioned, there is a lot of opportunity coming up in Victoria and a lot more of larger commercial office fit-outs than we've historically seen in Victoria coming to market at a similar time. The other part of that question is, can we provide a pipeline split by state? The short answer to that is yes. The long answer is I don't have it right at hand right here, right now, but John, happy to catch up at a later stage and we can walk you through that.
Thanks, Scott. Final question is, back to DLG's pipeline, how has it changed on a year-on-year basis, or does it stay at a similar level?
It's been relatively similar, but again, when we talk about defence, that's moved around a little bit. We're seeing more defence opportunities coming to market, and therefore the pipeline has grown in that particular sector.
A lot of the work that DLG SHAPE relies on is IPP work, so work that's carried out under the federal government's Indigenous Procurement Policy. The government department that most sort of follows that is the Defence Force and typically in NT. Depending on Defence Force spending and certainly in the NT, you see the DLG pipeline pick up because the intent of that business is to focus on set-aside work or where we're competing against majority-owned Indigenous businesses.
Thank you. That takes us to the end of our Q&A, so I'll pass back to you, Peter, for final comments.
No problems at all. Thank you again for those that are still online. We had a good turnout today online, so very pleasing to see that. It was very pleasing to see the share price perform, not just from a pride point of view for the business, but certainly we've got some both new shareholders and some longstanding shareholders that have stayed with SHAPE for a long time, and certainly the founding shareholders who've been very loyal to the business. It's great to deliver on those exceptional and really good shareholder returns. Again, importantly, all on the back of our people. As I mentioned earlier, SHAPE doesn't have any assets other than our people, and that's what we've built the success of this business on the back of. A big thank you to all of our staff for all of the hard work over FY2025. Thank you for supporting us, and we look forward to catching up with those people that we're catching up on the roadshow with. Watch this space and see you at the next presentation. Thank you.