Ladies and gentlemen, thank you for standing by, and welcome to the Service Stream FY 2021 half-year results conference call. At this time, all participants are just in a listen-only mode. Following the presentation, there will be a question-and-answer session today. To ask a question, you will just need to press star one on your telephone. Just please be advised that today's call is being recorded. I'll now hand the conference over to your first speaker for today, Managing Director and CEO, Leigh Mackender. Thank you, and please go ahead.
Thank you, moderator. Good morning, ladies and gentlemen, and welcome to Service Stream's half-year results presentation for the 2021 financial year. My name is Leigh Mackender, the Managing Director of Service Stream, and I'm joined today by our Chief Financial Officer, Linda Kow. We're recording this session today via webcast. It's open to all registered Service Stream shareholders, and 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. Today, we'll run through a brief overview of our company profile, moving into provide key messages and an outline of performance highlights throughout the half year. We'll update in relation to COVID-19 and how the business has been impacted. Move into some greater detail with respect to the group's financial and operational performance, both at group and divisional level.
Finally, we'll touch on the group strategy and outlook, including priorities for the second half of this year. At the end of the presentation, we're happy to take questions from those joining us on the bridge, expecting to take 30-45 minutes, including time for questions. Moving to slide two and just briefly touching on the company profile. Service Stream is an essential network service provider. Our core markets are utility and telecommunications, where the business provides end-to-end services associated with the design and construction and operations and maintenance of the essential infrastructure networks. Business has a strong client base consisting of Australia's leading blue chip industrial asset owners and operators, as well as government and government-related organizations. Business has two reporting segments reflecting telecommunications and utilities. Telecommunications provides integrated design, construction, engineering operations, and maintenance services across both fixed and wireless infrastructure.
Key clients include NBN, Telstra, Vodafone. The company's utility division provides a unique set of end-to-end services associated with design, construction, asset installation, inspection, and operations and maintenance of utility infrastructure. Key clients in this sector are gas, water, electricity asset owners and operators, retail service providers, and local government authorities. Before we move to the group's results for the half year, I'd like to take a moment to provide some brief initial commentary on the last six months and in relation to the period ahead and refer to slide three of the presentation materials. The FY 2021 financial year was characterized previously as a transitional year for the business. A year in which the business had a large number of significant contracts reaching their natural end date and needing to be resecured.
The nature of these agreements, particularly those associated with NBN, were also changing in the future as programs move away from a construction focus to one of ongoing operations and maintenance, and work volumes therefore declining from historical peaks. The group's first half financial performance, whilst down on prior corresponding period, was in line with expectations. The business had, however, forecasted a stronger second half in FY 2021, and that was led by an expected resumption of previously delayed maintenance works that were paused or restricted during COVID across both telecommunications and utilities. The delivery of proactive upgrade or maintenance works, particularly across telecommunication operations that have historically been biased to the latter part of each financial year, and the mobilization of work programs aligned to those resecured contracts. All while the COVID landscape continued to improve and allowing the business to recommence operations without restrictions on travel and movement.
Unfortunately, the outlook has been progressively impacted in terms of lower than expected volumes by clients, and we continue to see restrictions on some work types commencing and longer than expected delays across tender cycles. With these uncertainties, we therefore expect the second half result to be approximately in line with the first. Despite these challenges, the business has been successful in navigating through a period and resecuring a number of key agreements which provide a strong base. We manage Service Stream for the long term and focus on continually driving and enhancing the business model's strong fundamentals with regards to profitability, maintaining a strong balance sheet, a high quality of earnings, and working with our industrial client base to grow operations as opportunities present. As we look ahead, the core of Service Stream remains strong.
Our diversification into utilities has been progressing well, and whilst it will take some time to progressively replace the declining revenues across telecommunications, which have been a major source of historical growth, it does provide several opportunities. The business holds a solid order book, faces into positive markets, and continues to work on securing those additional growth opportunities, both organically and through acquisition, which has served as a catalyst to delivering a step change in future growth.
Moving on to performance highlights and directed to slide four, we have an overview in relation to the group's financial, operational, and strategic performance over the most recent period. In relation to financial performance, the business reported EBITDA from operations of AUD 40.2 million, and whilst down on PCP, was in line with expectations, with the prior period holding construction related programs with NBN, which have concluded, and the activations/connections profile reducing over time.
Group EBITDA margins remain steady and healthy when compared to industry averages, with movement really reflective of scale benefits that we've seen when work volumes are higher. Strong cash flow generation with EBITDA to OCFB conversion rate of 108%, particularly positive, and working capital continues to remain at a low 1.3% of revenue. On the back of these results, the board announced an interim dividend of AUD 0.025 a share, which whilst down on prior periods, retains a historical payout ratio of circa 60%. In terms of operational performance, the re-signing of both the Unify Services and Networks agreements with NBN cement Service Stream's role as a major service provider and provide work over a potential eight-year term, expecting to generate in excess of AUD 800 million in revenue.
The business secured the next contract iteration with Telstra for the design, construction, operation, and maintenance of both wires and fixed line infrastructure. The utility segment secured a number of opportunities over the last six months, most notably an agreement with Seqwater in Queensland and several clients in New South Wales. In total, the business has resecured in excess of AUD 1.5 billion in works over this recent period. Finally, the most important aspect of the business operations is our safety performance, and we're very pleased to see the business continuing to deliver positive improvements across key indicators. Finally, touching on strategic highlights. The business's diversification strategy in utilities is progressing well and supporting opportunities which will assist in replacing those historical NBN construction and activation revenues across a more diversified base.
Comdain Infrastructure, which is a major step in the diversification program, has performed well with work in hand is on target to deliver 15% growth in revenue during the year. The business more broadly has a solid pipeline of organic growth opportunities across both markets, and we continue to assess a number of M&A opportunities which would further support the expansion of addressable markets, diversification of group revenues, and a platform for future organic growth. Moving to slide five, I'll provide an update in relation to the COVID-19 pandemic and how this has impacted the business over the recent period. As I mentioned in my opening comments, the group's balance sheet, cash flow, liquidity all remain strong, and the group's exposure to essential infrastructure markets has certainly limited the impact that COVID-19 has had across the business.
There have, however, been impacts, and some of which we do expect to continue over the near term, and these are most notably across delays to client procurement programs, many being pushed back several months. Restrictions on the movement of people, both within state borders and across borders, has really hampered the business's ability to effectively mobilize and support some programs and restricted the ability to move resource across borders to capitalize on opportunities as they present. We incurred client-initiated delays to proactive maintenance programs across utilities and telecommunications networks, such as the continued moratorium on gas and electricity disconnections and reconnections, as well as meter exchange operations, which still exist today across many states, but are starting to ease with each month that passes over the year.
Victorian operations were also heavily impacted in the last period due to stage 4 lockdowns, particularly across our inspection and quality assurance operations. All the above has previously been outlined and certainly top of mind in terms of key variables that the business needed to monitor over the course of the year. Moving on to slide six on the group's safety performance. Service Stream's incredibly proud of the safety culture and industry-leading performance that's delivered by the organization. Our HSE performance remains one of the major priorities for the business, and we're really committed to ensuring that our people, our customers, and the community with whom we engage with while we deliver our services remain safe at all times. As you can see from the lag indicator performance graphs outlined at the bottom of the page, our total recordable injury rates decreased, reaching a new low of 1.57.
Medical treatment injury rates continued 1.12, a further reduction from the prior period. Finally, our lost time injury rates continue to be maintained at low levels. Safety is one of our core values and an area where, despite our positive results, the business really needs to continue to place great emphasis and strive to deliver further improvements as we continue on our journey towards zero harm. Ultimately, I'm very proud of the group's performance, and the business continues to work on targeting high-risk work activities and identifying further opportunities to improve the safety of our operations. I'm going to hand across to Linda to run through the key financial performance in greater detail.
Thanks, Leigh, and good morning, everyone. As Leigh has outlined earlier, the FY 2021 first half results reflects a reduction in NBN telecommunications volumes and continuing COVID effects restricting near-term performance. Revenue for the half was AUD 409.9 million, which is 17.7% lower than the first half of FY20 and driven by the lower telco segment revenue. EBITDA from operations was AUD 40.2 million, 30.8% lower than PCP, but consistent with our expectations of a much lower first half due to the reduced telecommunications revenue and compounded by additional operational input costs from COVID. EBITDA from operations excludes AUD 1.1 million of non-operational expenditure associated with the assessment of M&A opportunities during the period. Adjusted NPAT or NPATA for the half was AUD 20.1 million, a 37.8% reduction compared to last year.
In addition to the non-operating M&A costs we exclude from operating EBITDA, this metric excludes the amortization of historical acquired customer contracts to provide a view of underlying business performance. Statutory NPAT inclusive of the non-operational M&A and amortization expenses was AUD 16.2 million. Net cash at December was AUD 10.5 million, compared to a net debt position of AUD 4 million last year. The group had a very strong cash flow result for the half, with EBITDA cash conversion or OCFB percentage as we define it of 108%.
On dividends, the board has declared an interim dividend of AUD 0.025 per share, fully franked, which maintains the group's payout ratio in the range of 50%-60%. The record date of the interim dividend will be the 26th of March, with payment on the 14th of April. Slide nine sets out the group's key financial measures, both operational and their statutory reported equivalents.
I refer you to appendix two of the results presentation for a reconciliation of the adjusted profitability measures back to their statutory or IFRS equivalents shown here. I've already spoken to many of the financial metrics outlined on this page, but we'll touch on the group EBITDA margin, which was 9.8% for the half compared to 11.7% in the last half year. Again, this is mainly driven by the reduction in telecommunications and also noting the margin achieved by that segment during FY 2020 leveraged the scale benefits from a much higher volume of work. We have previously indicated there is a 1%-2% margin variability across telco depending on work mix and volume. Moving on to slide 10, which is the segment results.
Across the group, the utility segment share of group revenue and earnings has continued to increase as the business shifts from the Comdain integration program to growth. Utilities now account for 49% of group revenue, up from 40% last year, and 34% of group EBITDA, which is up from 25% last year. Utilities revenue for the half was AUD 199.6 million, just slightly up on last year. However, within that segment, Comdain revenue increased by 5.1%, but was offset by a reduction in metering and technical services revenue of AUD 7.1 million or 13.7%, primarily due to COVID restrictions. Utilities EBITDA was AUD 14.7 million, 5.2% lower than PCP due to margin mix between Comdain and metering revenues and COVID related impacts. Telecommunications revenue for the half was AUD 209.9 million, which was AUD 88 million below PCP due to two main factors.
Firstly, OMMA activation and assurance revenues decreased by AUD 42.5 million, following peak NBN activations in FY 2020. Secondly, the prior comparative period included AUD 40.6 million of revenues from the NBN D&C construction program, which was completed in FY20 and therefore not repeated this year. Telecommunications EBITDA was AUD 28.7 million, a reduction of 36.6%, driven by the reduced revenues as noted.
The P&L items below EBITDA are relatively straightforward. Overall D&A, including depreciation of lease assets, has reduced slightly with savings in depreciation expense on owned assets offset by an increase in depreciation on leased assets. Tax expense for the half was AUD 8.6 million, tracking at an effective tax rate of approximately 30%. The group is not expecting to derive any significant tax benefit from government incentives for CapEx incurred up to December 2020. Adding all that up, adjusted NPAT was AUD 20.1 million, which is AUD 12.2 million or 37.8% below last year.
On to cash flow and capital management, which is on slide 11. As touched on earlier, the group derived a strong cash flow result for the half, emphasizing the quality of earnings. In conjunction with the group's balance sheet position and the recently completed refinancing, this places the group in an excellent position to fund future growth. Cash flow EBITDA to OCFB conversion was 108%, which is well in excess of the 80% target we have generally guided to. Working capital as a percentage of LTM sales remains highly efficient at 1.3%. We do expect this to normalize over the full year with the mobilization of new project work and change in work mix between segments. Net interest and financing payments increased by AUD 0.8 million this half, reflective of the refinancing undertaken during the period.
CapEx spend was AUD 4.6 million and in line with expectations, and primarily relates to the Comdain IFS implementation and customer-related IP solutions. Free cash flow was AUD 15.6 million, an improvement of AUD 7.9 million from the corresponding half, and the group closed the half year in a net cash position of AUD 10.5 million. The group's existing debt facility, which was due to expire in September 2021, was recently refinanced and replaced with a new three-year syndicated debt facility, which was increased to AUD 275 million to provide headroom to fund future growth opportunities. The new facility incorporates improved commercial terms, covenants, and operational flexibility, with the ability to increase debt further over time to fund further growth. The refinance was well supported and with an expanded banking group, and the offer was oversubscribed.
Finally, the refinance has enabled a net reduction of drawn borrowings of AUD 20 million, which can be seen in the cash flow. That's all from me. I'll now hand you back to Leigh, take you back through the rest of the presentation pack.
Thank you, Linda. I'll now move into the divisional highlights and work through both reporting segments, starting with utilities on slide 13. Much of the focus for the utility division over the first half of the year has been on building momentum across our BD pipeline and securing growth opportunities whilst we also continue to drive improved systems and processes. A key component has been the migration of Comdain across to the group's ERP system, which has gone well and is expected to go live in a matter of days. That'll provide enhanced levels of control and visibility across operations, ensuring that as the business grows, it does so with a solid foundation. Linda's touched on the headline numbers already, and we see revenue largely flat on PCP with EBITDA of AUD 14.7.
To pick this apart, the metering operations were down, largely associated with COVID impacts that I've previously mentioned, particularly associated with stage 4 restrictions and the moratorium on reconnection and disconnection works. The decline in metering services revenue was however offset by increased revenue growth of 5% across Comdain operations, as the group was successful in securing a number of opportunities in the preceding period, which are starting to deliver benefit. The business has recently been successful in securing a number of work programs and maintenance contracts. One referenced here with Seqwater in Queensland for the provision of a 27 km water pipeline, bulk water storage, and pump station infrastructure, supporting the business's ability to grow our Queensland presence, which has only commenced over recent years.
In summary, a pleasing result for the utility division, considering the impacts of COVID and the restrictions across our operations, with Comdain on track to deliver 15% growth ahead of the full year. Slide 14, telecommunications. As for the headline numbers, the division generated AUD 209 million of revenue and AUD 28.7 million of EBITDA during the half, down on the prior corresponding period, which included those one-time NBN construction programs that management have previously talked about not reoccurring and a higher proportion of activation volumes being completed. Revenue from the activation and assurance or maintenance operations in the period was actually higher than we expected, with a favorable work mix and additional ad hoc programs of work offsetting the reduction in the overall volume.
Wireless revenue of AUD 37 million was down on PCP, and this continues to be an area which is difficult for the business to predict work volumes, and we continue to see a slower ramp-up of 5G expenditure. The last half has been a busy and productive period for the telecommunications division, as many agreements came up to their natural expiry date. Pleasingly, the business was able to achieve favorable outcomes and resecured all agreements. Of these, important to note is our agreements with NBN under Unify Services and Networks, previously referred to as ARMAP and NMRAP, and they cover the provision of activation, maintenance, both planned and reactive works across the NBN network, and each being secured for up to an eight-year term.
The business announced in January that it was successful in securing a new agreement with Telstra for the scope of works, including fixed line and wireless infrastructure upgrades and deployments. Each of these agreements provide the business with the opportunity to expand our market share and grow work volumes on the back of positive performance, something which the business has done historically very well. As we look ahead, the business is working to secure work under NBN's future upgrade program, which was announced last year. We're currently taking part in initial trials and responding to NBN's formal RFT process, which will determine the volume of works to be awarded as one major opportunity for growth. We've also referenced additional opportunities in terms of broader mobile infrastructure customer base that we believe will be an opportunity for the business over the coming 12 months.
Moving now into the group strategy and outlook and direct you to Slide 16 and provide an update on some of the key focus areas. If you look at our current state, telecommunications work, which have been a large portion of the group's historical growth, have declined from their historical construction-led peak in FY 2020. As a result, the group will need to continue to work to replace these revenues across a more diversified base to support future growth. Our strategy over recent years has been focused primarily on diversifying group earnings away from what was a strong bias to telecommunications. That's certainly not to say that there's not immediate opportunities to secure additional growth programs across the telecommunications sector. It's quite the opposite, and we've referenced two immediate opportunities over the next half associated with NBN's upgrade and other wireless infrastructure works, which are pleasing and positive.
The nature of these works is the infrastructure is heavily impacted by advances in technology and will require regular upgrades to support into the future. Business is well-positioned with the agreements that have now been resecured in this most recent period to capitalize on these opportunities as they present. A key component to the group's diversification strategy was the acquisition of Comdain two years ago, which provided the business with solid earnings and expanded capabilities. Business has access to a wider addressable market of infrastructure projects, and the operations, as stated earlier, are on track to deliver revenue growth of 15% over FY 2021 full year. More broadly, the group's operating model is strong and fundamentals are robust.
This will provide a platform which will support the next change in growth as we look to further diversify our revenue and serve as a catalyst to support a step change in future growth. As we look ahead, the group is focused on maintaining that strong focus on enhancing our core fundamentals, continuing to execute works well and meeting or exceeding our clients' expectations whilst working to secure organic growth opportunities across what is an expanding pipeline and a recently secured contract base, all while ensuring that we maintain a flexible and scalable model and a proportionate group cost base to protect margins as work volumes flex. As I stated earlier, diversification is certainly a key focus. The business will continue, though, to take a disciplined approach to assessing M&A opportunities, which will support that next step change in growth.
Finally, we move to the group outlook on Slide 17. The group expects continued demand for services across core markets. However, the outlook for FY 2021 has been progressively impacted by the COVID landscape and client delays to work programs. This has unfortunately occurred at a time when revenues across our telco construction-related operations had concluded and activations were declining from historical peaks, and the business entered a cycle that needed to resecure future agreements for their next contract cycle. Taking these factors into account, the group now expects the current trading conditions, including the COVID impacts, to continue throughout half two, with results approximately in line with half one.
Business fundamentals, as I said, are strong with regards to profitability, the strength of our balance sheet, quality of earnings, and our favorable industrial client base and the markets which we face into and operate across. Our priorities for the second half are outlined on the page here on the right-hand side, and they include the mobilization and transition of those recently secured agreements. Securing additional organic opportunities, most notably associated with NBN's upgrade program, but more broadly across our entire client base, with many opportunities across the utilities and a growing pipeline. Whilst we continue to assess those external growth opportunities to support that step change in future growth. That concludes the presentation of the results, and I'll now hand back to the moderator and be happy to take questions from those joining us today.
Thank you. Ladies and gentlemen, we will now begin that question and answer session. Once again, if you did wish to ask a question, just please press star one on your telephone and then just wait for your name to be announced. Your first question today comes from Piers Flanagan from CLSA. Please ask your question, Piers.
Morning, Leigh and Linda. Thanks for your time. Just a couple from me if I can. Firstly, just on the guidance, maybe a bit more color on the second half. Obviously, telco revenues rolling off and you've called out a growth rate for Comdain. Do you have full visibility on that revenue for the balance of the year, or is there any ongoing COVID risks?
Yeah. Thanks, Piers. As you know, the nature of our operations, we don't have guaranteed volumes across our work programs. We work closely with clients to try and understand their future forecasts around all of our programs. We've taken that into account when we've reflected that statement and expectation around a flattish second half year or in line with the first. In terms of COVID, we've had to unfortunately, look at the current environment and expect that to continue. We do expect to see continued restrictions around movement across borders, and that will impact our ability to mobilize and support some of those other opportunities. We've certainly taken many of those factors into account.
Sure. Then just on telco margins and COVID implications aside, how should we think about our telco segment margins going forward as you roll onto these new NBN contracts?
We're pretty comfortable with the margins there. As I've always stated, Piers, at every reporting period, we always do have that 1%-2% flex just driven by work volume and the work mix. That's always something that we do caveat. But in terms of the rates and detail agreed, we're very comfortable. They're pretty much in line with where we've historically performed. We're now mobilizing for the Telstra piece. That's obviously a major focus for us moving forward. Again, pretty comfortable where that is expected to land.
Sure. Just looking ahead and again, in the telco division, aside from existing growth or growth opportunities from existing contracts, can you maybe give some color on what other opportunities with new customers are out there or potentially some near-term tenders that are out there at the moment?
Absolutely. Well, we've obviously talked to one many times before, which is NBN's upgrade program. We're currently partaking in trials there and working through that RFT process over the next few months, which will determine award scenarios and work volumes. That's one major opportunity there. There will, of course, be in the telecommunications sector, other opportunities around mobile infrastructure. We've seen historically low spends from our clients in that space in terms of the work that we've received. I think there's opportunity there for us to grow that into the future. There's a couple of additional opportunities where we don't provide mobile or wireless infrastructure services for clients, and they're indicating their interest to go out to the market and look at securing service providers for the period ahead. There are a couple of major opportunities there.
You also continue to have organic driven opportunities across our contract base, and we've referenced some of those here, which assisted the telco division in the most recent half, ad hoc work programs, et cetera. Naturally, given the contract base, I think the business is positioned well to secure some of those as we move ahead. Very conscious that we need to continue to focus on that as those revenues, particularly around activations, will continue to decline over the next period.
Great. That's it from me. Thanks, Leigh. Thanks, Linda.
Thank you, Piers.
Your next question comes from Marni Lysaght from Macquarie. Please ask your question, Marni.
Good morning, Leigh. Good morning, Linda. Piers has beat me to it and asked about the bridge with the revenue growth given you flagged the growth of 15% in Comdain. Another question I have. This is more around, I understand what your exposures are. You're not exposed to guaranteed volumes. Is there any opportunity in the utility space to obtain work that does have some guarantee on volumes? My understanding is that telco traditionally, you have no guarantee on volumes, but there may be the potential for guaranteeing volumes in utilities?
Yeah, no problems at all, Marni. Certainly, in the relation to utility work, if you look at the nature of those operations, when it's design and construction work, that's obviously probably one of the better opportunities to have a firm view on the expected value of revenue associated with individual opportunities. You've obviously got questions around the ability to deliver that over what period of time, but that's one area. Some of our operations and operations across state are moving to different models, so total operating costs or outturn costs. We've seen that in the water space in particular. Some of those opportunities as we move forward, I think will provide an ability for the group to understand what will be a stable base as we move forward.
How soon can we expect those opportunities? Because you've given commentary on the diversification into utilities being quite robust. Is COVID impacting your ability to pursue business development in utilities?
No, the business development pipeline has been really strong, Marni. We're actually tendering on a large number of works, we have been obviously over the last 12 months as we've reflected, we see that now in what Comdain are delivering in terms of growth. The pipeline is strong. COVID has impacted, as I said, some of the BAU operations, also impacted our ability to mobilize some of those operations across state borders. We talked previously about an example such as Western Australia, where we've secured some work there, that's been a real challenge for us to mobilize resources from Victoria, New South Wales, Queensland in to assist with various aspects of that. That's been a challenging period, as well as movements up into Queensland.
The COVID restrictions certainly impacted our BAU metering operations and inspection services and did inhibit, I think, some way of the business realizing potential growth around design and construction operations in WA and potentially a little bit in Queensland. That's been the main areas that COVID's impacted the group.
That's understood. I can tell from NBN disclosures that there was a trial late last calendar year for the AUD 4.5 billion spend and another trial recently. Do you have any visibility just in wireless, in terms of that 5G spend potentially gaining momentum and, because I'm sure that there is a focus in the industry on 5G, but could that ever recover or would the ramp up or the spending improve?
I think there's certainly, absolutely, there's the bias to the upside there. We've seen historically low levels of work across our mobile space from what we've received to complete. I think the resigning of our Telstra agreement now provides that stable base for us to engage with Telstra around their future volumes of work. We've got defined areas where we'll be mobilizing into. That unfortunately has been a delay from where we had intended that to mobilize, and we're now looking at that transition occurring around July in terms of the new contract model. That will provide an opportunity then to work on how we forecast forward and what visibility the group receives. Certainly opportunities around the broader client base with Vodafone, Optus and others, where we've seen low volumes of work.
We understand they're trialing and moving to their new technology platforms, and they work closely with the equipment vendors during that initial period. Certainly that'll be a major focus for us to just ensure that we are closely engaging with those wireless providers to seek opportunities to grow.
That's understood. I'll jump back in the queue. Thanks for answering my questions.
No problems at all. Thank you.
Your next question comes from Steven from Bell Potter. Please ask your question, Steven.
Good morning. Just a quick one, firstly. The dividend was obviously cut, and you've got the big new debt facility, so there's a clear indication of a larger M&A focus. If you're just able to talk to your thinking or strategy behind a potential acquisition? Are you thinking something big like another Comdain or maybe two or three smaller acquisitions just to get your foothold in a new service or market, which you can then build internally? Just your thinking there.
Absolutely. Absolutely, Steven. It's a great question. As many would know, I've talked previously about that focus on diversification. The business is very conscious of taking a measured approach to looking at potential opportunities. In terms of size, we've cast the net wide. We've got a number of opportunities both to bolt on or expand the group's capabilities through smaller acquisitions, particularly in the utility space. They have been presented with a number of opportunities of larger size. I think that that's certainly been a major focus for us over this recent period to look at what would be the catalyst for a step change in growth. Obviously, with a larger organization, we expect that we'll have open to or access to a larger addressable market, increased service offerings.
That's certainly been a focus over the recent period, and looking at whether or not we go for something a little larger.
If you were to do something larger, is there a particular area or two that you would be more interested in than others?
Absolutely. I think we're still very much focused on the utility market. If we look at our current opportunities there, telco is a great market for us, but has really five customers across the business. They're large customers, but therefore you've got a small customer base. Utilities, due to the nature of their geographic patches or areas they're responsible for, provide significant opportunity. There's probably 60 - 70-odd utility customers in terms of electricity, gas, and water. We've certainly seen that as a favorable market for us to further expand into. The expenditure in that area is much, much greater than utilities, just given the size, and the nature of their operations in terms of, or their assets rather, in terms of the cycle of needing to replace and upgrade them is favorable. Looking at other opportunities to expand our water and gas operations.
Electricity is something that we're probably under-weighting in terms of our current capabilities. We've got a number of metering operations in electricity, but that probably is a very small section of what is a large market spend of, I think about AUD 2.5 billion a year in distribution maintenance costs. Looking at those areas, particularly within the utility sector, and assessing opportunities.
Okay. That's fantastic. The NBN investment program, you've noted you've got some tenders and a few things out at the market at the moment. Are you able to provide any idea on the potential size of work that you're targeting that you might hope to achieve under that program?
It's certainly challenging for us to comment on the size of that. That will be dependent on the number of providers that NBN choose to engage with. The pace of that program over the next few years, I think it's sort of scheduled to be an FY 2022-2023 program. We are working through that tender cycle. We expect to know an outcome of that commercial process, and market process they're running through at around April or May this year. Hopefully before the next cycle, we'll be able to provide firm visibility on what we believe we've secured, at least in that initial phase of the program. The trial now is going well, we've got to continue to work through that commercial process to be able to then provide that clear visibility in the future.
Sure. Just the last one, the wireless. By the sounds of it, no real expectation for any pickup this half, but FY 2022 with the new Telstra agreement might be a little bit more positive.
Yeah, I certainly hope. We've talked previously about what has been a larger historical spend in mobile, and that's somewhere reflective of the change in infrastructure as they've moved through 3G, 4G, et cetera. There's certainly a lot of hype around 5G, and as many will know, I'm always quite cautious to talking to the potential growth there. I do think the Telstra agreement, that's been a long process for us to work through that refined and revised model that's been proposed by Telstra. We've now got that in place. It's secured for up to a five-year term, and we've got clear areas where we will be working in the future. That will provide, I think, opportunity for the business to try and grow into those areas and secure additional market share.
Sure. Just again, I know you mentioned it earlier, but you definitely don't think there's any additional margin pressure on the telco side given these new contracts and the drop-off in activation volumes?
Well, there's certainly always pressure on margins. As one of the comments I said earlier around our priorities is maintaining that proportionate group cost base to ensure that as work volumes flex, the business flexes with that. We try and drive a flexible resourcing model so that we don't see significant impacts. As Linda and I have outlined, the major impacts we've seen this period is just around that scale benefit that's been missing as work volumes come off. As you move to the future in your question, I think there's always pressure there. I'm pretty comfortable with where the business has landed in terms of our contracts that have been resecured into the future. You can't comment or have visibility on an absolute work volume, but the margins associated with the delivery of those works, I think are positive for us.
Okay, great. That's all from me. Cheers.
Thanks, Tim.
Your next question comes from Ian Munro, from Ord Minnett. Please ask your question, Ian.
Hi, Leigh. Hi, Linda. Apologies, I've just been juggling other calls, this may have been asked already. Just on the utilities segment and the contract wins that have come through. How much of this is incremental in the second half, how should we think about the growth rate into FY 2022 within utilities? Then perhaps just how should we be thinking about margins in utilities, whether that's maintainable versus the first half now that there's less productivity constraints. Perhaps just a third follow-up on the maintenance piece in the telco segment. Perhaps how's that tracking versus PCP, is it reasonable that we think about that growing into the second half? Thank you.
No problems at all, Ian. I'll try and go through that. If I miss anything, Linda will update me. Your first point around utilities, that growth, as we said, what we've seen, Ian, is the metering services area, that has been sort of the core of our utilities focus prior to the acquisition of Comdain. That suffered some impacts around the moratoriums on disconnection and reconnection of the meter exchange works but was offset by growth in Comdain. Comdain has grown revenue by over 5% in this period. That's incremental growth. That's reflecting a business securing more design and construction and operations and maintenance agreements. We've referenced a couple of those major ones there in the presentation. Most notably, Seqwater, a D&C contract for a new pipeline and pumping infrastructure. There have been a number of other contracts that have been secured over that period.
You often see that they'll be secured in a period of time, and then it will take sort of three, six, 12 months for us to deliver that work, depending on the nature of the operations. That's really what's happened in the utility sector. In terms of margins, we've always guided that our margins historically have been a little higher in our metering services space. They came down as we consolidated and integrated Comdain into the business, which was a lower margin business. We're pretty comfortable with those margins there. They're always under pressure, as all of ours are across the business. Generally, we see that as pretty consistent in terms of where we've delivered to this half.
There's always swing factors and hopefully with the COVID moratorium sort of coming off and us recommencing some of those metering services, which have historically been higher margins, that will provide some opportunity. We're not calling out at this stage. We expect them to grow over the next period.
Just in terms of the third piece around the maintenance component of the telco segment.
Certainly. Sorry. Maintenance in terms of telco, obviously two of our major agreements there are those with NBN, Unify Services and Networks. Pleasingly now we've gone through that period of having to re-sign those. What we expect to see is a core base around both reactive and planned maintenance across those. Obviously, activations, which is under the Unified Services agreement, has been a major part of our growth over the prior years, and that will continue to sort of decline as we continue to activate customers and they complete their process over to the migration of NBN. We're conscious of that starting to come off, but there is a strong maintenance base there, and that will grow over time as more customers are connected across to the network. What we haven't seen in the second half, I should mention, is those proactive maintenance upgrades.
That's something that if we look back over the last two years, and we've talked about this at the AGM and over our briefings, we'd always had this second half bias around proactive upgrades of infrastructure. That was initially delayed during the COVID pandemic, and we've not seen that come back on. Normally it's around this February time period where we start to see those volumes kick in. You would've seen that through those appendices that we have in the pack where you see NBN minor projects and other works sort of having that second half bias, and that's one of the factors in the outlook for the rest of the year.
Just on that shorter-term outlook, if we looked at the second half and split it between things that are subject to contract timing and things that are subject to contract wins and slash blue sky, how are we sort of thinking about the buckets in order to get to that second half guidance?
There's little blue sky. We don't often forecast for blue sky. We have to look at current programs and engagement clients. Certainly, we've had to take, I suppose, a reasonable view of where we are in February and the ability of the business to secure extra work. I think that the second half really reflects the work in hand. We've still got to ensure that we deliver well and volumes are delivered in line with our expectations, and that's always an area where we continue to see challenges in terms of gaining that visibility. I think at this stage, we're very comfortable with the guidance we've provided in the second half reflecting the first.
Thanks, Leigh. Appreciate it.
Thank you.
Once again, if you did wish to ask a question, you can press star one on your telephone and then just wait for your name to be announced. Okay, we appear to have no further questions on the queue, so I'll hand back to you for now, Leigh.
Thank you very much. Appreciate everyone joining us today, and no doubt we'll speak soon. Thank you.
Ladies and gentlemen, that does conclude today's conference call. Once again, thank you all for participating today, but you may now all disconnect.