We recently researched Ventia Services Group (ASX:VNT) in The Dynamic Investor after the Company reported full-year results. Having retraced from its recent peak of $6.35 in mid-January, we assess whether there are enough catalysts for a recovery from current levels.

About Ventia Services Group

Ventia Services Group is an essential infrastructure services provider in Australia and NZ. The Company operates across a broad range of industry segments, including defence, social infrastructure, water, electricity and gas, resources, telecommunications and transport.

VNT has +100 clients with an 93% contract renewal rate and an initial contract term of five years. The Company reports results across four segments: i) Defence & Social Infrastructure (D&SI), ii) Infrastructure Services, iii) Telecommunications and iv) Transport. The two major contributors to group revenue and earnings are the D&SI and Telecommunications segments.

Key Fundamental Drivers

Key Revenue Trends Remain Favourable

For the 12 months to 31 December 2025 (FY25), Work in Hand (WIH) increased by +14% to $22.1b and continues the trend in incremental gains since December 2021. The increase in WIH reflects the award of the NBN Field Module contract and Defence Base Services and Clothing Services contracts.

The WIH profile remains long-dated, with the average contract tenor now 6.4 years (up from 5.7 years in FY24) as a result of long-term contract wins in FY25. Of the $22.1b WIH balance as at 31 December 2025, $13.4b relates to FY26-28 (+17.5% on FY24), $4.7b relates to FY29-30 (+30.6% on FY24) and $4.0b relates to FY31+ (-7.0% on FY24).

The Company has strong revenue visibility for FY26 earnings, with 87% of FY26 revenue already secured. Historically, 70-80% of VNT’s 12-month revenue is supported by prevailing WIH levels, providing strong revenue growth visibility.

Step-Up in Margin Expected from FY26

VNT has provided initial guidance for underlying earnings growth of +7-10% in FY26, which was ahead of consensus estimates of +4% growth prior to the FY25 results release. The Company also upgraded its EBITDA margin outlook – to a range of 8.5-9.0% (8.7% delivered in FY25) and ahead of the prior range of 8.0-8.5%.

We consider that there is upside risk to this guidance, given: i) The positive mix shift on growth in higher-margin telecommunications work, ii) Improved Facilities Management service volumes under the new Defence Base Services contracts, iii) Improved efficiencies via cost out & procurement and iv) Improved labour market conditions.

Regarding the latter, labour markets over last 12 months have eased across Australia & NZ, with the time to fill roles declining and the number of applicants for each role increasing. However, competition for the best people remains challenging. Recent job ads posted by VNT have shown a lift. This is partly seasonal, with a number of new openings for defence roles as new Property & Asset Services contracts commence.

Low Gearing Level Provides Optionality

Gearing (1.3x on a net debt to EBITDA basis) remains at the bottom end of the target range of 1-2x and is well below the covenant of <3.25x. While the Company has significant available liquidity to support growth, capital management appears to be the near-term focus. To this end, VNT has announced a new $100m share buyback for FY26, which is expected to lift gearing to ~1.4x by the end of FY26. Notwithstanding the expected uplift, the balance sheet remains in a solid position. This is supported by strong operating cashflow and moderate increases in CAPEX requirements.

Fundamental View

VNT shares are currently trading on a 1-year forward P/E multiple of ~16.5x. This is only slightly above the average multiple of ~16x over the past year but at a substantial discount to global peers.

We consider that there is potential for a re-rating in the shares given: i) The upside risk to earnings growth and margin from the ongoing mix towards high-margin work – supported by a track record of incremental WIH growth that is skewed towards securing higher-margin work and ii) Balance sheet optionality, in particular the scope for capital management to augment an already-attractive EPS growth profile of +8.5% over FY25-28 on a CAGR basis.

Charting View

VNT has been trending well for the past few years, despite some sharp drops along the way. The recent dip in February has seen it bounce off support and good volume is coming back ito the stock. We expect VNT to continue heading higher from here. Current levels are a buying opportunity and initial stops can be considered back near $5.20.

 

Michael Gable is managing director of Fairmont Equities.

 

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