Investor sentiment towards Ventia Services Group (ASX:VNT) took a hit late last year following ACCC price fixing allegations pertaining to prior Defence contracts. However, several factors have led to steady gains in the shares over the course of this calendar year. These include stronger operating results; consistent contract wins and strong growth in its work backlog. The strong run in the share price recently came to an end following the release of interim results and uncertainty pertaining to the renewal of defence contracts. Accordingly, we recently researched VNT in The Dynamic Investor, to assess the investment case.
About Ventia Services Group
Ventia Services Group is an essential infrastructure services provider in Australia and NZ. Operations span across a broad range of industry segments. These include defence, social infrastructure, water, electricity and gas, resources, telecommunications and transport.
The Company reports results across four segments: i) Defence & Social Infrastructure (D&SI), ii) Infrastructure Services, iii) Telecommunications and iv) Transport. The D&SI segment is one of the largest providers of integrated facilities management in Australia. The Infrastructure Services segment provides comprehensive and multi-disciplinary maintenance and improvement solutions to a range of owners and operators of critical infrastructure.
Key Fundamental Drivers
Implications from Loss of Defence Contracts
VNT has an incumbent position as a Defence Base Services provider. On 11 September 2025, VNT announced that it was awarded two Defence Base Service contracts by the Department of Defence. These contracts are valued at approximately $2.7b over an initial 6-year term (i.e. $450m per annum of revenue). In context, annualised revenue for the D&SI segment is ~$2.4b. The contracts are expected to commence operation from 1 February 2026. Overall, the contract award of $2.7b is largely in line with the previous revenue contribution ($460m per annum of revenue).
The announcement has removed the risk of VNT losing some contracts, which derived from ACCC price fixing allegations raised in December 2024 pertaining to prior Defence contracts. As well, industry feedback suggested that the Department of Defence was eager to increase diversification in the number of providers (which eventuated).
However, of the 12 Defence Base Services contracts (previously split amongst three contractors), VNT has been awarded four contracts. VNT previously had seven contracts. The loss of contracts for VNT in some regions (and reduction in VNT’s volume of work) was not unexpected and a known risk. This was due to strong prior market share and feedback that the Department of Defence was seeking to diversify the number of providers.
Overall, the loss of revenue from the Defence Base Services contracts is expected to have a slightly negative impact on overall group earnings. This is due to the quantum of revenue loss being minor (from $460m p.a. to $450m p.a.) and the likelihood that this will be mostly offset by additional revenue from the Infrastructure Services and Telecommunications segments.
Strong Outlook for Infrastructure Services Segment
The segment has benefited from an ongoing mix shift towards higher margin end markets. This trend is expected to continue in 2H25. For the six months to 30 June 2025 (1H25), revenue increased by 9.6%, largely driven by a strategic shift toward securing new contracts in Energy and Water. Earnings (EBITDA) grew by 21.4% based on a shift to higher margin work and productivity improvements.
Telecommunications Segment the Key Growth Driver
Telecommunications is the highest-margin segment within VNT’s portfolio. The segment is expected to be the key growth driver in 2H25 and into FY26 as a result of significant contract wins secured in 1H25. Revenue in FY26 is expected to growth at low double-digits and represents a significant step-up from the -1.2% revenue reported in 1H25.
Low Gearing Level Provides Optionality
Gearing (on a net debt to EBITDA basis) was 1.1x as at 30 June 2025 and is at the bottom end of the target range of 1-2x. Gearing is expected to decline further in FY26, supported by strong operating cashflow. The Company has significant available liquidity (~$720m) to support growth. However, capital management appears to be the near-term focus. To this end, VNT increased its share buyback program (which commenced in March 2025) to $150m ($100m prior) and with $82m completed at the end of the 1H25 period.
Fundamental View
The recent announcement on the Defence Base Services contracts has removed an overhang risk for the shares. However, VNT shares are currently trading slightly above the average multiple of ~15.5x over the past year and an average multiple of ~13.5x since listing on the ASX in November 2021.
Accordingly, we take a cautious view given that the current multiple is unappealing in the context of an EPS growth profile of +7% over FY25-27 on a CAGR basis.
Charting View
Since the start of the year until mid-August, the uptrend in VNT was very smooth. However, it took a big hit in August before bouncing again, and then it took another hit again last week. The fact that it has bounced well off the lows on both occasions is a positive, however, the increase in daily volatility is a bit of a concern. The shares might drift sideways here at best for the time being and a dip under $5 would be viewed as a negative.
Michael Gable is managing director of Fairmont Equities.
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