Financial Data and Key Metrics Changes - For FY 2025, underlying NPAT A was $279 million, a 33% increase from FY 2024, while statutory NPAT rose 82% to $149 million [5] - Underlying EBITDA increased by 25% to $474 million, with a cash conversion rate of 98% [5][22] - Pro forma revenue declined by 2.5% to $10.6 billion, reflecting a focus on revenue quality and selective tendering [18][22] - The net debt to EBITDA ratio improved to 0.9 times, down from 1.4 times in FY 2024 [5][22] Business Line Data and Key Metrics Changes - Transport segment earnings increased by 11.1% to $278 million, with an EBITDA margin of 5.2% [8] - Energy and Utilities segment earnings rose by 43.9% to $122 million, despite a revenue decrease of 7.7% to $3 billion [11] - Facilities segment revenue remained stable at $2.2 billion, with earnings increasing to $151 million and a 7% EBITDA margin [13] Market Data and Key Metrics Changes - Government funding allocated increased by almost 6% in 2025, supporting infrastructure projects [3] - The energy sector is experiencing growth driven by decarbonization and government policies promoting energy investment [12] - The Australian transport agency spend is expected to remain subdued in the short term, while New Zealand's infrastructure programs are anticipated to support demand [35][36] Company Strategy and Development Direction - The company is focused on a portfolio simplification strategy to enhance revenue quality and reduce volatility [4][7] - Future growth will be driven by organic growth within existing core markets, with selective consideration of bolt-on acquisitions [31][34] - The company aims to modernize work practices and invest in technology to improve productivity and customer experience [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 4.5% average EBITDA margin target for FY 2026, emphasizing the importance of quality revenue [42] - The outlook for FY 2026 includes expectations of flat to slightly lower underlying revenue, with a focus on maintaining margin improvements [37] - Management noted that while short-term revenue may be subdued, medium-term opportunities remain strong [41][50] Other Important Information - The company announced an on-market share buyback of up to $230 million and increased its dividend payout ratio to 60%-70% of underlying NPATA [33][32] - Safety metrics improved, with a 20% reduction in injury frequency rates [16] Q&A Session Summary Question: Can you elaborate on the flat to down revenue guidance for next year? - Management highlighted the focus on quality revenue and selective opportunities, acknowledging subdued volumes in road services and the runoff of certain contracts [39][40] Question: What is the confidence level for achieving greater than 4.5% average margin? - Management expressed confidence in achieving the margin target, citing progress in price, cost, and productivity improvements [42] Question: Will there be a cleaner year in terms of significant items next year? - Management indicated that while some legal matters may continue, the nature of significant items is expected to decrease [45][46] Question: What are the expectations for road activity in Australia? - Management noted that road maintenance needs to increase, and while volumes are currently down, there are early signs of improvement [50][51] Question: How does the $4.5 billion in preferred business status influence revenue guidance? - Management confirmed that these contracts are typically long-term and will be factored into revenue expectations [60][64] Question: What portion of FY 2026 revenue guidance is already secured? - Management indicated that typically, about 75% of revenue would be secured at this stage of the year [72] Question: What earnings benefit is expected from the cost-out program in 2026? - Management expects a significant portion of the cost savings to contribute to FY 2026 results, with ongoing cost pressures to be addressed [75][76] Question: Will there be any net cash impact from divestment activity in 2026? - Management anticipates proceeds from the sale of Keolis Downer to impact cash flow in FY 2026 [77][79] Question: What types of M&A are being considered? - Management is focused on complementary bolt-on acquisitions that enhance existing capabilities, particularly in transport and energy [80][81]

Financial Data and Key Metrics Changes - The underlying NPAT A for FY 2025 was $279 million, a 33% increase from FY 2024, while statutory NPAT increased by 82% to $149 million [5] - Underlying EBITDA rose to $474 million, a 25% increase from FY 2024, with a cash conversion rate of 98% [5][25] - The pro forma revenue for FY 2025 was $10.6 billion, reflecting a 2.5% decline adjusted for divested businesses [20][21] - The net debt to EBITDA ratio improved to 0.9 times, down from 1.4 times in FY 2024 [5][25] Business Line Data and Key Metrics Changes - The Transport segment saw earnings increase by 11.1% to $278 million, with an EBITDA margin of 5.2% [9] - Energy and Utilities earnings increased by 43.9% to $122 million, despite a revenue decrease of 7.7% to $3 billion [12] - Facilities revenue remained stable at $2.2 billion, with earnings increasing to $151 million and a 7% EBITDA margin [14] Market Data and Key Metrics Changes - The government allocated funding increased by almost 6% in 2025, supporting infrastructure projects [3] - The energy sector is experiencing growth driven by decarbonization and network resilience needs, particularly in New South Wales, Queensland, and Western Australia [13] - The transport sector in New Zealand is expected to benefit from significant infrastructure programs, with $6 billion in projects announced [11] Company Strategy and Development Direction - The company is focusing on portfolio simplification and enhancing revenue quality, targeting a 4.5% average EBITDA margin for FY 2025 and 2026 [4][21] - The strategic focus is shifting from turnaround to sustainable growth, with an emphasis on organic growth within core markets [34] - The company plans to invest in modernizing work practices and technology to enhance productivity and customer experience [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving ongoing improvement across key metrics and maintaining balance sheet flexibility for growth [4] - The outlook for FY 2026 anticipates flat to slightly lower underlying revenue, with a focus on quality revenue and margin improvement [42] - Management highlighted the importance of being selective in pursuing opportunities to ensure quality revenue [46] Other Important Information - The company announced an on-market share buyback of up to $230 million and increased its dividend payout ratio to 60%-70% of underlying NPATA [36][37] - Safety metrics improved, with a 20% reduction in injury frequency rates [5][18] Q&A Session Summary Question: Can you elaborate on the flat to down revenue guidance for next year? - Management emphasized the focus on quality revenue and being selective about opportunities, leading to a comfortable assessment of flat to slightly down revenue for FY 2026 [46][47] Question: What is the confidence level for achieving greater than 4.5% average margin? - Management expressed confidence in achieving the 4.5% target, citing progress in price, cost, productivity, and quality improvements [48][50] Question: Will there be a cleaner year in terms of significant items next year? - Management indicated that while some legal matters may continue, the nature of significant items is expected to decrease, transitioning towards sustainable growth [51][52] Question: What are the expectations for road activity in Australia? - Management noted that road maintenance spending needs to increase, with expectations for gradual improvement in volumes [57][58] Question: How does the $4.5 billion preferred business status influence revenue guidance? - Management confirmed that the preferred bidder status typically indicates a high likelihood of contract awards, which are expected to be multi-year projects [62][68] Question: What portion of FY 2026 revenue guidance is already secured? - Management stated that typically around 75% of revenue would be secured at this stage, incorporating expectations for contract awards [75] Question: What earnings benefit is expected from the cost-out program in 2026? - Management indicated that approximately two-thirds of the gross annualized cost benefits would contribute to FY 2026 results, helping to offset cost escalation pressures [79] Question: Will there be any net cash impact from divestment activity in 2026? - Management expects proceeds from the sale of the Keolis Downer business to impact FY 2026, estimating cash inflows between $60 million to $65 million [81][83] Question: What types of M&A opportunities are being considered? - Management clarified that any potential M&A would focus on complementary businesses that enhance current capabilities, particularly in transport and energy sectors [85]

Financial Performance - The company's statutory NPAT increased by 82% to $149.1 million compared to FY24[9] - Underlying EBITA increased by 25% to $474.2 million compared to FY24[9] - The company achieved an EBITA margin of 4.4%, exceeding the management target of 4.2%[9] - The company's cash conversion was 98%, exceeding the target of >90%[9] - The company's leverage ratio improved to 0.9x net debt to EBITDA, compared to 1.3x at Dec-24[9] - The company achieved annualised gross cost out of $213 million, exceeding the upsized target of $200 million[9] Revenue and Work-in-Hand - The company's FY25 revenue was $10.6 billion[101] - The company's work-in-hand is $35.1 billion[53] Shareholder Returns - The company announced an on-market share buy-back of up to $230 million, representing approximately 5% of issued capital[8, 73, 78] - The company's total dividend increased by 46% on FY24[9, 75] - The company's final dividend is 14.1cps, 100% franked[9] Outlook - The company is targeting underlying earnings and EBITA margin improvement in FY26, with underlying revenue forecast to be flat to slightly lower than FY25 pro forma revenue[84]

Core Viewpoint - The Dow Jones Industrial Average is reaching new record highs, driven by rate cut optimism, sector rotation, and strong corporate earnings, particularly in sectors like industrials, retail, financials, and real estate [1][3][5]. Sector Performance - The SPDR Dow Jones Industrial Average ETF (DIA) has increased by 2.1% over the past week, outperforming the Vanguard S&P 500 ETF (VOO) and Invesco QQQ Trust Series (QQQ), which gained 1.2% and 0.7% respectively [2]. - Investors are moving away from high-growth tech and AI sectors towards undervalued sectors, contributing to the Dow's rally [3]. Key Company Contributions - Home Depot (HD) and UnitedHealth (UNH) have significantly contributed to the Dow's performance, with Home Depot showing strong guidance despite an earnings miss, and UnitedHealth rising after Berkshire Hathaway disclosed a $1.6 billion stake [4]. Interest Rate Expectations - The Dow is benefiting from increasing market expectations of Federal Reserve interest rate cuts, with futures indicating two 25-basis point reductions, which would favor cyclical sectors [5][6]. Investment Characteristics - The Dow Jones index is composed of less risky, value-oriented stocks, providing stability and potential for higher returns with lower volatility compared to growth stocks [7]. - The SPDR Dow Jones Industrial Average ETF (DIA) has $39.2 billion in assets under management, holding 30 stocks with a maximum 10% share per security, and is diversified across several sectors [9].

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Market Overview - U.S. stock futures declined on Wednesday following mixed trading on Tuesday, with major benchmark indices showing lower futures [1] - The S&P 500 and Nasdaq 100's retreat was attributed to failed peace talks involving President Trump and European leaders [1] - The Dow Jones index ended slightly higher, while the S&P 500 and Nasdaq Composite saw declines of 0.59% and 1.46% respectively [6][7] Economic Indicators - Investors are focused on Federal Reserve Chair Jerome Powell's upcoming speech for signals on interest rates, with an 82.9% likelihood of a rate cut projected for the September 17 decision [2] - The 10-year Treasury bond yielded 4.31%, while the two-year bond was at 3.76% [2] - U.S. housing starts increased by 5.2% to an annualized rate of 1.428 million in July, while building permits declined by 2.8% to an annualized rate of 1.354 million [5] Company Performance - Intel Corp. saw a 7% rally, extending its monthly gains to 27% after a $2 billion investment from SoftBank Group [5] - Palo Alto Networks Inc. jumped over 3% after reporting strong quarterly results [5] - La-Z-Boy Inc. dropped 24.57% after reporting weaker-than-expected financial results for Q1 of fiscal 2026 [15] Sector Performance - Real estate, utilities, and consumer staples stocks recorded the biggest gains on Tuesday, while information technology and communication services sectors closed lower [4] - Small-cap and value stocks have shown a tight correlation with interest rate expectations, becoming increasingly reactive to the Fed's next move [10][11] Analyst Insights - Economist Jeremy Siegel emphasized that Powell's speech could significantly influence market direction, with two primary scenarios outlined [9][10] - A dovish tone from Powell could signal a 25-basis-point rate cut, potentially benefiting small-cap stocks [14] - Conversely, a hawkish signal could lead to negative reactions in risk markets [14]

Group 1: Overview of High-Yielding Stocks - The Dow Jones Industrial Average is a prime source for reliable dividend-paying stocks, which have shown the ability to generate profits in various economic conditions [2] - The average dividend yield in the Dow is currently 1.6%, with UnitedHealth Group, Coca-Cola, and Amgen offering above-average yields [3] Group 2: UnitedHealth Group - UnitedHealth Group's stock price fell significantly after the company suspended its 2025 outlook and announced a CEO exit, yet it raised its dividend payout by 76.8% over the past five years, currently offering a 2.7% yield [5][6] - The company mispriced premiums for 2025 due to higher-than-expected healthcare costs and increased care usage by new members [6] - Despite recent challenges, the management team is expected to avoid similar mispricing errors in the future [7] Group 3: Coca-Cola - Coca-Cola's stock is near its all-time high, with a dividend increase of 24.4% over the past five years, currently yielding 2.9% [8][9] - The company has a strong competitive advantage with its popular beverage brands, allowing for consistent profits, and it announced a dividend raise for the 63rd consecutive year [9] - Although sugary soda sales are declining, Coca-Cola's BodyArmor brand is gaining market share, contributing to revenue growth [10] Group 4: Amgen - Amgen's shares are trading about 12% below their all-time high, with a dividend increase of 48.8% over the past five years, currently offering a 3.2% yield [11] - The company faces competition for its top revenue products, Enbrel and Prolia, but has launched new products that are driving double-digit sales increases [12] - Amgen's sales growth is expected to remain strong in the coming decade, despite the challenges posed by biosimilars [12]

Market Overview - The Nasdaq experienced a significant drop, shedding -314 points (-1.46%), while the Dow and S&P 500 showed minor fluctuations, closing up +10 points (+0.02%) and down -37 points (-0.59%) respectively [1] - The decline in tech stocks has been a continuing trend, with Palantir (PLTR) falling -9.3% on the day and -16.5% over the past five sessions [2] Company Earnings - Toll Brothers (TOL) reported fiscal Q3 earnings of $3.73 per share, exceeding the Zacks consensus estimate of $3.59, with revenues of $2.88 billion, surpassing the projected $2.85 billion [3] - The company achieved its fourth earnings beat in the last five quarters, although gross margins remained steady at +27.5% [4] - Orders for Toll Brothers were down -4% compared to expectations of flat, and the average home sold was $974K, slightly below analyst expectations [4] Upcoming Earnings Reports - Anticipation is building for retail earnings reports from Target (TGT), TJX Stores (TJX), Lowe's (LOW), and Estee Lauder (EL), with expected year-over-year earnings changes of -18.7%, +5%, +3.2%, and -87.5% respectively [5] Federal Reserve Insights - The Federal Open Market Committee (FOMC) minutes will be released, highlighting that the Fed has maintained rates at 4.25-4.50% for the fifth consecutive meeting, with notable dissent from two voting members for the first time in over 30 years [6]

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