Thank you for standing by. Welcome to Service Stream FY23 Half Year Results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mr. Leigh Mackender, Managing Director. Thank you. Please go ahead.
Thank you. Good morning, ladies and gentlemen, welcome to Service Stream's FY23 half year results presentation. As for the introduction, my name's Leigh Mackender, I'm joined today by our Chief Financial Officer, Linda Kow, and Head of Investor Relations, Chloe George. We're recording this session today via webcast. It's open to all registered Service Stream shareholders, we have a number of institutional investors and analysts on the conference bridge who are welcome to ask questions at the conclusion of the presentation. I firstly wish to begin by acknowledging the Wurundjeri people, the traditional custodians of the land on which we meet today, pay our respects to their elders past, present, and emerging. I extend that respect to our Aboriginal and Torres Strait Islander people who's joining us today.
We're really pleased to present the group's half results today, providing an update on the group's performance. We'll talk to some of the significant milestones that have been achieved over the last six months and talk about the business' future areas of focus. Service Stream is a different business post the integration of Lendlease Services. Over the last 13 months since completion, the business has undergone a significant and deliberate transformation, which positions us well for the future as a leading tier one essential network service provider across growing markets. I'd first like to take you through some of the group key highlights over the half and refer you to slide three. Over the past six months, we've delivered solid underlying financial performance.
Total revenue is up 75% to AUD 993.6 million, and the group is tracking to deliver over AUD 2 billion of annual revenue for the first time in its history. Our balance sheet remains solid. Closing net debt, AUD 91.2 million, and a closing net leverage of 1.4 times post AASB 16. We are focused on reducing our leverage ratio further to around one times EBITDA, as we set out when announcing the Lendlease Services acquisition. That will take some time. Operationally, our telecommunications division has delivered another strong result and continues to demonstrate our market-leading position. We're seeing consistent performance delivered across our transport division, and we've taken steps to de-risk and reduce the group's exposure to major fixed price design and construction projects across the utility division.
Noting the business update on the ninth of February, which I'll touch on again later in the presentation, and growing our core utility market services. I am pleased to report that the group has successfully reached completion of the integration program with Lendlease Services. We've delivered on the AUD 17 million synergy target that we announced, and the program has been delivered approximately six to nine months ahead of our original 18 to 24 months time period. I credit the hard work and effort by our entire team working right across the business for making this a success. Moving to slide four. The group is strategically repositioned through the integration, and there are many strong attributes to our business, which I think are very favorable. Our strategy over recent years has been deliberate: to grow and diversify operations beyond what was a telecommunications service provider.
With a strong forward-order looking book, with 80% of work contracted to government and the remaining works supporting some of Australia's largest private infrastructure owners and operators. Our operations are capital light, our businesses have demonstrated history of generating strong operating cash flows over our history. We've deepened our capabilities and expanded our addressable markets. I'll touch on some of those specific areas where we expect to see growth over the short, medium, and longer term as we look to increase our annuity style, lower risk operations and maintenance works. Moving to slide five. Briefly touch on some of the key financial headlines for the first half, to which Linda will further expand on later in today's presentation.
Total group revenue for the half, as I said, was AUD 993.6 million. That reflected an increase of 75% or AUD 427 million on the prior period. That reflects a full 6-month contribution from Lendlease Services, as well as underlying growth. The business reported underlying EBITDA from operations of AUD 55 million. Again, that's been underpinned by strong performance across our telecommunications division. Underlying EBITDA from operations excludes an AUD 20 million provision that was increased across a single Queensland design and construction project that we announced on the 9th of February. That will support the project's completion by year-end. The group's EBITDA margin was 5.5%.
The extreme weather, which includes two in 100-year storms across the East Coast, causing significant flooding across Queensland, New South Wales and Victoria during the early months of the half, which did impact aspects of our field operations. Adjusted NPAT was AUD 17.1 million. That was up on the prior period by 4.8%. Underlying operating cash flow was AUD 38.5 million, which equated to a conversion rate of 70% for the half. This is lower than the prior period. We did call out the last half that we expected performance to be below our 80% conversion target, given the benefits that we gained in the prior period where we converted over 100%. Finally, with respect to dividends, the board has declared a half cent interim dividend. Turning to slide six.
I know I've already made some comments with respect to the Lendlease Services acquisition, and this has been an area of focus over the last 12-18 months in our investor presentations, but I wanted to touch on a few final areas. The acquisition has understandably been a major focus since the transaction was announced in July 2021 and reaching completion in November of the same year. Was a large acquisition in terms of our existing business, and effectively doubled our size, the size of our operations, and significantly expanded our capabilities and exposure to some markets. I'm really pleased that we've reached completion, and this marks the successful end to the integration program.
We set out to deliver a number of strategic objectives. It has supported us in creating a broader portfolio of operations across the wider infrastructure services market, complemented our existing capabilities across our utility operations of gas, water, and electricity. Importantly, it's bolstered the annuity style revenues as the nature of Lendlease's service, services revenue was almost totally weighted towards operations and maintenance works or minor capital works and upgrade programs. We expanded our business into new transport, power, and industrial sectors, which represent two exciting markets. They're also exciting as we are relatively a small tier one national provider across what are three very large and growing sectors, and the business is now firmly focused on growing our recurring revenue base across each. More broadly, we've reduced the group's exposure in any one particular market or segment.
We've reduced our reliance on any particular client or individual program of work. This has enabled the business to better weather the cyclic nature of infrastructure investment and capitalize on the recurring maintenance works into the future. Slide seven, we see the group's diversified portfolio across our three operating divisions or reporting segments. I won't provide any specific commentary as we'll walk through each of the divisions' performance in a few moments time. You can see here the revenue, the EBITDA, and importantly, the work in hand that exists across each division. Continuing to slide eight, we've provided further insight into the revenue breakdown across the group over the half year, both in terms of segment and work type, as well as summarizing the group's overall work in hand position.
As I stated earlier, the strategy has been to diversify and target an increase in recurring annuity style revenues linked to longer term operations and maintenance agreements or short-term minor capital upgrades. The revenue diversification has been significantly enhanced following the Lendlease Services integration, with all contracts successfully migrating across at completion. Those contracts which have been recently secured when we announced the transaction, have all mobilized well and are making a positive contribution to the group. 85% of the group's work mix is annuity style operations and maintenance works. The average term of our agreements is generally 3-5 years. However, we are seeing that extending, and many of our clients are recognizing the benefit that longer term agreements can provide for both parties, which support increased investment and drive further operating efficiencies. We continue to target minor capital works.
They reflect short-term upgrade programs over what is generally a three to six-month period of time, and there is a significant pipeline of these occurring across each of our markets, which I'll talk about further. 80% of our work is held with government or government related entities. Moving on to slide nine. I'm very conscious of the current market environment, which with regards to the inflationary pressures in that tight labor market. In terms of the inflationary pressures, we've understandably seen a rise in labor, fuel, and material costs, and they've placed downward pressure on our margins. That's most notable across our utility operations.
We have taken a number of actions over this period to try and mitigate these. They include resetting our contract rates in line with our agreements, to which approximately 87% of revenue is subject to either an annual review, a CPI, or other inflationary index adjustment, or a price on current market conditions for those shorter dated upgrade programs. Cost escalations have been built into all new contracts and pricing commercials, which have been entered into over the last 12 months. The group has also formulated and is in the process of executing a corporate resilience plan, which aims at reducing our operating costs to support further operational efficiencies being realized at a group level. That's often through the use of increased technology.
In terms of labor, most industries are facing some labor challenges at the moment, but pleasingly, the constrained labor market hasn't materially impacted our operational delivery for clients. This is due in part to, I think, our expanded workforce and the flexible resourcing model. We see pockets of operations across different geographies or related to specific operational skill sets that have been impacted and are in short supply. The constrained labor market has inhibited the group's ability to expand some programs over the recent halves, but that's short-term impact and the group has still delivered significant revenue growth. I think it's a positive that we're seeing many of our clients looking to expand their infrastructure programs under our existing agreements and offering additional works. Moving to slide 10, an update on the group's leading safety performance.
As I've stated many times, the health and safety of our workforce, our clients, and the communities in which we operate across remains the number one priority for Service Stream. A lot of work has been undertaken in this area, and we're really pleased with the progress that's been made in terms of our safety performance over the last six months. That's headlined by significant reductions being achieved across all major performance indicators. As we move forward, we'll continue to focus on supporting our strong and proactive safety culture through improved collaboration, deployment, and facilitation of ongoing training and development programs for our frontline staff, and continuing to drive a strong safety culture supported by continual improvement.
We continue to focus on the basics. We'll be reviewing critical controls across the group's high-risk work activities to identify opportunities to take recent learnings forward and drive further improvement. We're focused on supporting and rewarding safety innovation, to which we've had some really positive works undertaken by our teams working across the country over recent months. Safety is understandably a critical area of focus for our market, given the nature of our services, and our performance and commitment forms an important pillar for Service Stream's values and our value proposition to our clients. Again, recognize and congratulate the team working right across the country for their commitment and performance in this area. Moving to Slide 11 and 12, we've outlined some of the recent milestones with regards to the group's sustainability performance and includes some high-level case studies.
Sustainability is understandably a growing area of focus for our business, and like many organizations, we're on a journey of continual improvement. We have five very clear and specific pathways which support and guide that journey, they being health and safety, people, community, environment, and governance. Each of those pathways has a range of initiatives which are being developed and are being delivered over the short, medium, and longer term. Over the first half of 2023, in addition to the safety performance I just touched on, other highlights include the celebration of a major milestone in releasing the group's inaugural Innovate Reconciliation Action Plan that was endorsed by Reconciliation Australia and guides our journey over the next two years. I mentioned that challenging labor market, which we've been successfully navigating, and the group has significantly expanded our support and investment for apprenticeships, traineeships, and our graduate program.
We continue to expand our work and support for local community organizations. And where possible, look to increase our use of local businesses and suppliers to provide services and provide the materials that we use day to day. We're committing our sustainability plan to increase our emissions reduction target and increase our renewable electricity usage across our sites by 2030. We are taking steps to realize that as each of those agreements reach their natural end term. Our chairman has previously advised of a board refresh, with several appointments made. The business is really proud to have a strong female representation across the board. I won't touch on the individual case studies that we've included on Slide 12. I'd direct you to the segment performance, which commences with utilities on page 14.
Utilities revenue was AUD 408 million for the half, an increase of AUD 131 million or 47% on the prior period. The increase in revenue reflects a full six-month contribution from Lendlease Services, as well as recently mobilized water operations. Utilities underlying EBITDA was AUD 12.5 million. It was a decrease of AUD 3.8 million against the prior period, and that performance was impacted by some extreme weather events, as I mentioned before. I know they're probably a distant memory for many, but have been quite extraordinary. They delayed multiple field-based operations, particularly in those earlier months of the year, and it did improve throughout the half. Residual labor and material inflation pressures not recovered through contractual mechanisms was another factor.
Additional costs incurred to proactively close out and descope other large D&C projects, which has effectively eliminated the group's future risk exposure. Importantly, we do expect future margins to improve across the utility division as those factors start to dissipate. As we announced on the ninth of February, the FY23 half year accounts includes a further AUD 20 million provision to support the completion of the Queensland D&C project by the end of calendar year 2023. The increased costs relate to design delays, scope redevelopment, increased labor and material costs, and additional overheads to cover that schedule slippage. I'll talk further in a few moments times. I've got a dedicated slide to go through that content.
The division's growth strategy over the last 6 to 12 months has been successfully repositioned to focus on pursuing opportunities across the lower risk operations and maintenance works, and in particular, the large and rapidly growing power, new energy and industrial maintenance sectors for which we've now got significant capabilities are in, and are within strong demand. Sector outlook is strong also. It's driven by increasing infrastructure investment, population growth, expansion into regional areas, aging infrastructure requiring significant upgrade, and the transition to renewable energy. We have a strong mix of work across water, gas, electricity, industrial, and network services, with network services encompassing our new energy operations, such as the deployment of solar, electric vehicle charging infrastructure, and battery storage. Moving now to Slide 15, I'll touch on our telecommunications division, a future outlook and some of the opportunities that present for the business.
As I stated at the start of the briefing, the telecommunications division has delivered another really strong result. Revenue over the half was AUD 458 million, an increase of AUD 224 million or 95% on the prior period. Significant growth was underpinned by a full six-month inclusion of Lendlease Services and strong volumes being seen across both fixed line and wireless network operations. The division had a 10% increase in wireless works as a percentage of the division's revenue, as the deployment of 5G gathers pace and our clients look to increase the deployment programs. EBITDA was AUD 41.4 million, reflecting increase of 96% on the prior period, and the EBITDA margin was pleasingly maintained at 9% following a period of rebasing and the integration of lower margin Lendlease Services operations.
The integration of telco operations has gone exceptionally well. It's been the first area of focus for our integration program, and we've leveraged our best-in-class capabilities that exist across the business. I'm really pleased to say that our division is stronger and bigger post the integration of Lendlease Services. I think we've got a number of really strong growth opportunities laying ahead of us. They include significant investments as the economy progresses through a digital transition, increased dependency on the telecommunication networks as an essential service, and we again are seeing strong demand for improved speed and bandwidth across both fixed line and wireless network infrastructure. Directed at slide 15, which provides an update on the transport division's performance. Revenue over the half is AUD 126 million, an increase of AUD 71 million or 130% on the prior period.
The increase reflects a full half-year contribution from Lendlease Services operations and improved weather conditions across WA and New South Wales in the latter months of the half, which supported a resumption of some previously delayed maintenance works. EBITDA of the half was AUD 8.1 million, an increase of AUD 4.2 million or 107% on prior period. The EBITDA margin remains steady, 6.4% for the half, and that was in line with management's expectations. Further progress has been achieved with the Inland Rail opportunity we previously announced and our role as a future maintenance provider, with an early work stream being executed during the period by a joint venture.
Additionally, the division has successfully secured and commenced an intelligent transport systems upgrade with Transurban, which commenced works in December and reflects an exciting project where we're deploying cutting-edge technology in terms of lighting, which assists in road safety. The business has secured additional programs of work with Main Roads WA despite the demobilization of our operations that we previously advised. They remain a valued client. As we look to the future, there's a number of opportunities associated with increased road and rail projects being announced, increased maintenance requirements across existing and new assets, and further investment in intelligent transport systems such as variable traffic flow controls, lighting projects, and enhanced monitoring systems. They're all unique capabilities that are possessed within Service Stream.
Slide 16 provides a summary of the announcement by the business on the 9th of February with regards to a single design and construction project in Queensland. As per the announcement and my prior comments, the group's FY23 half year results reflect an increase to the owner's contract provision of AUD 20 million to support successful completion by late 2023. Projects have successfully completed design activities for all packages and we now move into a lower risk final construction phase. We continue to take a conservative approach to the future recovery of variations and claims against third parties. Most important, as I stated earlier, division's growth strategy has been refocused over the last 6-12 months towards lower risk operations and maintenance works to capitalize on those expanded capabilities and recurring works.
In terms of balance sheet, the project had a net cash outflow during FY23 first half of AUD 16 million, with a further AUD 30 million of remaining costs to be incurred, including the contingency which will cover through to project completion. I'm going to hand across to Linda to run through the group's financial performance in greater detail.
Thanks, Leigh , good morning to everyone on this call. Slide 19, we set out the profit and loss summary. Total revenue for the half was AUD 993.6 million, which is AUD 427 million or 75% higher than last year. Much of this increase is due to the inclusion of a full six-month contribution from Lendlease Services, as opposed to only two months in the prior comparative period. On a like-for-like basis, underlying revenue growth for the period was circa 7.2%. Reported statutory revenue for the period was AUD 955.4 million, with the circa AUD 40 million difference to total revenue due to revenue for our incorporated joint ventures not consolidated for statutory purposes. Underlying EBITDA from operations was AUD 55 million, an increase of 39.8% from last year.
An underlying group margin for the half was 5.5%, which was impacted by the performance in utilities. This result includes further benefits from the synergy delivery, with analyzed run rate now exceeding the acquisition target of AUD 17 million. The group will continue to target additional synergy opportunities, such as through further site and systems consolidation. However, going forward, we will be managing and reporting any incremental savings as part of our BAU operations. As with past periods, EBITDA from operation excludes non-operational acquisition and integration expenses and joint venture adjustments. We have also excluded the additional AUD 20 million provision recognized for the Queensland utility project to provide a view of the group's underlying trading results. A reconciliation of underlying metrics to reported statutory results is included in the appendix for your information.
Dropping down to NPAT, the group's adjusted NPAT or NPATA for the half was AUD 17.1 million or 4.2% higher than PCP. Depreciation and amortization expense for the half was AUD 23.2 million, with the increase due to the acquired and subsequently revalued fleet assets as noted at June. Interest expense for the half was AUD 6.8 million as compared to AUD 2.4 million in the prior period, which is reflective of the acquisition funding and increased interest rates over the period. Statutory net profit after tax was a loss of AUD 6.3 million. In addition to the items we have excluded from underlying EBITDA from operations metric, statutory NPAT includes the tax effective value from the amortization of customer contracts, which has now increased to AUD 7.6 million for the half following the acquisition.
We have also carved out the loss and sale of assets of AUD 4.1 million, which relates to the write-off of acquired software assets that were decommissioned post-integration. Slide 20 now sets out the cash flow. Underlying first half EBITDA to OCF bit conversion was 70%. Whilst this is lower than what we normally target, it was in line with expectations for the half due to a few timing factors. This includes a ramp-up in telecommunications and transport operations, particularly over the last quarter, requiring a build in working capital. Also impacting is the reversal from the strong June year-end result, where we delivered an OCF bit of 108.3% for the year, which is always going to naturally reverse.
You'll also note an adjustment of AUD 1.4 million for joint ventures, which simply reflects the timing of EBITDA recognition versus dividends received for our equity account in joint ventures. The non-operational cash flow item of AUD 17.3 million largely relates to the net cash paid for the Queensland project and some integration expenses. Post-acquisition, the group's business model continues to remain capital light. Combined CapEx and leasing payments were AUD 15.1 million for the half, which represents circa 1.5% of total revenue. CapEx for the period was AUD 4 million, which was lower than expected, but we do expect to see an increased spend over the second half with systems consolidation projects currently underway.
Over the short to medium term, we will also be progressively refreshing the acquired fleet such that we would expect total capital investment outflows to increase to our target range of 2%- 2.5% of total revenue. Finally, the acquisition working capital completion adjustment was finalized in December at AUD 12.9 million, with the amount being paid in January. Hence, you will see it in the full year cash flow statement. Now moving on to slide 21, which covers the group's balance sheet. Following on from the previous comment, acquisition accounting was finalized during the half to reflect the final completion adjustment. This has resulted in additional intangibles and deferred taxes recognized. No other adjustments have been made to opening acquisition working capital since June.
I refer you to the notes in the Appendix 4D for a summary of the final acquisition accounting balances. With regards to working capital, net working capital for the period was AUD 76.6 million, which represents circa 3.8% of LTM sales and remains comfortably below the group's target of 5%. We have reported net working capital here excluding amounts pertaining to the Queensland project, again, to provide an underlying view of performance without the impact of the owner's contract provision. The increase in net working capital of AUD 7.7 million since June has been due to the ramp-up in telco operations during Q2 and also standard seasonal timing variations in prepayments and provisions relative to June.
With regards to debt, the group's indicated debt facilities of AUD 395 million were refinanced during the half and extended for a further two years to mature in November 2025. There were no material changes to the terms of the FFA arising from this refinance. Closing debt at December was AUD 91.2 million, and bank guarantees issued at December were AUD 136 million, leaving substantial headroom across the facilities. Finally, all of the group's banking covenants were comfortably met at December. That's all from me. I'll now hand you back to Leigh Mackender to take you through the remainder of the presentation pack.
Thank you, Linda. Moving now to the group's outlook, I'll first touch on some of the exciting growth opportunities which present across our addressable markets and direct you to slide 23. Our group's core markets continue to see an increase in maintenance-related expenditure, and that's driven by several factors: the increased technology deployment supporting that digital transition, aging infrastructure requiring increased maintenance and upgrade programs, population growth, and particularly expansion across regional and remote areas of Australia, the renewable energy transition through the deployment of technology, as well as the upgrade of our existing electricity infrastructure networks. The impacts of natural disasters, such as fire and floods, will require increased maintenance support to support the essential infrastructure that Australians depend on each and every day.
That annual maintenance is complemented by an unprecedented level of investment by government and private asset owners and network operators across the country. They include more than AUD 7 billion in fixed and mobile telecommunication network expansions, which have already been announced and are in the process of being deployed. AUD 20 billion committed by the federal government to support the electricity network infrastructure upgrades under the rewiring of the nation commitment. Significant investments being made in a number of major road and rail projects across the country. The business is also in the process of targeting significant organic opportunities associated with the maintenance of social infrastructure across networks such as gas, water, electricity, telecommunications, and the deployment of new energy across sectors such as defense and other major areas of government assets.
Finally, before we move to question-and-answer session, we conclude with the group's outlook on page 24. I stated earlier, we're seeing strong underlying performance across the portfolio, despite some of those performance issues being faced across our utility division, which we believe are behind us. The half reflects the successful strategic repositioning of the group following the acquisition of Lendlease Services and completion of the integration program. Service Stream operates across attractive markets, each with significant opportunities to support future growth. The group does expect incremental revenue and profit growth during the second half of FY23, supporting a small second-half bias. We're well-positioned for consistent and reliable growth thereafter. That concludes the formal aspects of our presentation. I'll now hand back to the moderator, and happy to take questions from those joining us today.
Thank you. We'll now begin the question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone. To cancel your request, you can press star one one again. Please stand by while we compile the Q&A roster. Again, to ask question, please press star one one. One moment for the first question. First question comes from the line of Ian Munro from Ord Minnett. Please go ahead.
Good morning, Leigh. Good morning, Linda. Thanks for taking my questions. Just firstly, looking at the Lendlease Services contribution and noting that you've captured all those synergies on a run rate and actual basis for the second half, can you maybe give us a sense of on a standalone basis, what that business is contributing overall. I think at the time of acquisition, the numbers circulating were around AUD 45 million EBITDA. How are we tracking versus that as a benchmark? Thank you.
Ian Munro, I think I'll answer that. Look, to answer that question is really challenging because of the integration that we've undertaken. As you know, we embarked on the telco integration very early on and was basically complete this time last year. To all intents and purposes, we stopped tracking the telco separation between Lendlease Services and the legacy Service Stream, and the synergies on top pretty early on. It's really hard for us to say that. I think if we were to really look down, top-down, I would say that we've met our targets on Lendlease Services. Certainly hasn't gone backwards. It's been a very good experience for us.
Yeah, I'd certainly complement that, Ian. I think, again, to Linda's point, it is difficult to pull apart those numbers, but I think the contribution from Lendlease Services has met our expectations. Yeah, I don't think there's been any deterioration or major movement away from what we initially intended. We've actually seen, as I said, I think some really good growth opportunities across that portfolio, which have started to manifest in this half year results.
We always said that we would use the initial period to integrate and consolidate. What we're now seeing is, and then, you know, we've made a couple of comments along those lines in the Lendlease slide, Lendlease Services slide, I should say. We are starting to see organic growth now coming from those business lines.
Just focusing on the telco segment. You've noted 85% visibility into next year. Can you just maybe clarify, is that for this calendar year or next financial year? Perhaps able to just elaborate on what's giving you that increased visibility into the segment at this point.
Yeah, that's really sort of like a rolling 12 months view from where we stand today, Ian. It is certainly a positive aspect. I think that's due to a number of factors. One, we've certainly seen, the business has been able to retain all contracts as they've come across through the integration, so nothing's fallen away. Our clients are, I think, more proactive now than they've ever been in talking about their future aspirations and what they'd like to see in terms of increases across programs, because they are very conscious of a tight labor market. We are playing a big role in deploying some of that infrastructure. It's really great to see that forward visibility as we stand here from 12 months today.
Thank you. Just one final one in the utility segment. Just your comments around, margins increasing or likely to increase in the second half. Can you perhaps give us a sense of, what are the kind of ins and outs for the, are leading to that improved, potential outcome? Thank you.
Yeah, no problems at all. Look, I think part of what has compressed our margin over this period, as I said, was some of those weather impacts. We've had significant weather impacts. I know that it's probably a distant memory for some as we've just gone through summer. The first few months of this year, we had really significant wet weather events. Some of our sites, and one in particular, was under 7 foot of water. We had significant flooding, and that did delay some of those works. We had some increases in costs associated with it. That's certainly been one aspect.
I think also we've taken steps over the last half to really look at how we can de-risk the portfolio of the business, particularly around sort of D&C projects, and look to really clean that up so that moving forward, the group's got a much better risk portfolio into the future. Those aspects will support, we believe will be an improvement in the utilities margin.
Thank you.
Thank you for the questions. As a reminder to ask questions, please press star one one on your telephone. One moment for the next question. Next up, we have the line from William Park from Citi. Please go ahead.
Hi, Leigh. Hi, Linda and Chloe. Thanks for taking my question. My first question is on your outlook statement around incremental profit growth. Were you talking about growth from AUD 35 million base in first half or AUD 55 million?
Talking about, thank you, William. We're talking about incremental revenue and profit growth during the second half. That's the current half from the first. We expect to see a slight bias. We're expecting a larger bias in the second half, and we have over the latter months, particularly in telco, been able to bring work forward because, again, clients are looking to deploy some of these networks faster. We brought forward some work which has reduced what would have been a larger second half bias, but we still expect to see improvement in the second half of this year.
Is that on a statutory EBITDA number or underlying EBITDA number? Sorry if I
We're talking about the EBITDA from operations. EBITDA from operations are AUD 55.
Okay. Okay. Yeah. Okay. That's clear. Just thinking about transport, I know some of your competitors have said in the event of, you know, when you've got adverse weather events, obviously in the near term, there are disruptions to operations, but there should be a sugar hit from elevated maintenance activities in the future once the operations resume. Is that a fair assessment of how you're looking at the transport business? Around potential objects?
Absolutely, William. That is an attribute that is favorable for transport operations. Certainly, some of these more significant weather events do provide opportunities to assist with recovery efforts. I certainly think that that will be the case for us as we move forward. I think it really depends on the nature of the services you provide. We're very specific in terms of the operations and maintenance services we provide. We've got specific capabilities. When some of our competitors talk about that, they probably have broader capabilities. I think we certainly will see some attributes of program coming through over the next 6-12 months, which will support that recovery.
I think the other thing to be conscious of is our clients are very focused on ensuring that they have federal government support often for those recovery efforts, and that does take some time often to come through. It's not an immediate response in some instances, but certainly will provide, I think, benefit to us as we, as we move forward.
We've seen aspects of that. That's really been the drive that we refer to as the ramp-up in activities in second quarter, as the weather got better.
Yeah. Yeah, that delayed maintenance work had to be released, and will continue to grow.
Yeah. No, that makes sense. Just on the synergies, obviously 69 months ahead of schedule, but you've also highlighted some future synergies in your previous releases and today's release. Do you have any sense around the quantum and the timing when these, I guess, potential future synergies could be realized?
I mean, that's a never-ending or a never-ending objective. What I mean by that is, you know, we the same way that it's hard for us to separate the Lendlead Services from our underlying businesses, the pursuit of synergies for us then just morphs to cost-cut opportunities as opposed to calling it synergies. There are opportunities, particularly around systems consolidation going forward, but they'll take a little bit of time as anyone who's ever gone through a system consolidation would understand. There are further opportunities for us to combine our sites, our operating footprint, leveraged procurement, all the usual things that an organization goes through. Yeah, certainly there's opportunities out there. We're not putting a number on it, but, you know, it will be part of our BAU operations going forward.
Yeah. Thank you, Linda. While I've got you, I just wanted to understand, just a quick question on D&A. Obviously it's stepped up. How should we sort of think about the sustainable level of D&A going forward for the business?
Yeah, we had guided this year to think about an underlying rate of about AUD 4 million a month, which you can see that we're slightly behind that, again, due to a ramp-up. I think what we had guided was AUD 4 million a month and allow for the revaluation of fleet assets that we had completed at June. I think we're just a little bit below that, but that's timing. I do expect that to step up over future years as we undertake the fleet refresh, but that'll be phased.
Okay. Thank you. Thanks for taking my questions.
You're welcome, William.
Thank you for the questions. As a reminder, to ask question, please press star one one on your telephone. Once again, to ask question, please press star one one. I'm seeing no more questions from the line. Allow me to hand the call back to the management for closing.
Well, thank you very much for everyone for joining us. We do certainly appreciate your time, and we look forward to engaging with many of our investors over the coming days and weeks to provide further update and insight into the results. Thank you very much. Appreciate it.
Please conclude today's conference call. Thank you for participating. You may now disconnect.