Verbrec Limited

Income statement (as originally reported each year; FY2026 continuing basis)

Notes and sources:

• FY2021–FY2025 come from the FY2025 Annual Report five-year summary. Net income for those years is "total comprehensive profit/(loss) attributable to owners". FY2021 and FY2022 EBITDA were labelled "EBITDAI".

• FY2026 revenue and gross profit are continuing operations (FY2026 Results). FY2026 EBITDA reported is statutory EBITDA including the gain on the Competency Training sale; FY2026 adjusted EBITDA is continuing operations; FY2026 net income is statutory NPAT of A$10.419m.

• FY2024 adjusted EBITDA (A$9.058m) and FY2025 adjusted EBITDA (A$8.849m, then-continuing basis) are from the FY2025 Results Announcement.

• FY2024/FY2025 pre-tax income is continuing profit before tax (A$4.378m / A$3.502m), from the FY2025 AR.

• FY2023 statutory NPAT was a loss of A$9.5m (FY2023 Results).

Restated continuing-operations view (FY2026 basis)

Source: FY2026 Results Announcement (31 Aug 2026), including the reconciliation table. FY2026 tax was a benefit of A$0.083m; FY2025 a benefit of A$0.233m.

Margins

FY2026 EBITDA margin uses statutory EBITDA over continuing revenue and is inflated by the A$6.8m gain on sale. The comparable continuing adjusted margin is 7.3%. FY2025 gross margin was 37.3% as reported including Training, and 34.8% on the restated continuing basis.

Revenue CAGR (derived): FY2021–FY2026 as reported is about 4.0% a year (A$97.4m to A$118.5m), but the bases are not like-for-like. FY2022–FY2025 shows a declining trajectory (about -11% a year) as management deliberately shed low-margin work. FY2025–FY2027 guidance midpoint implies about 39% CAGR in revenue and about 35% in adjusted EBITDA (company statement).

Balance sheet

Sources: FY2025 AR (FY2024–FY2025); FY2026 Results; Kalkine on the Appendix 4E (NTA). FY2026 total liabilities are derived (82.1 − 34.6). Derived debt likely includes lease liabilities or equipment finance depending on the company's net-cash definition; the short-term/long-term split is not available from the sources reviewed.

Debt facilities (FY2025 AR): Westpac Flexible-Option Facility with a A$9.0m limit (A$3.1m used at 30 June 2025) and a A$1.5m equipment finance facility (A$0.5m used). The bank guarantee and equipment finance facilities were increased by A$3.5m in connection with the Alliance acquisition (5 Nov 2025 announcement).

Cash flow

Sources: FY2025 AR five-year summary; FY2026 Results. Receipts from customers in FY2026 were A$134.0m (+44%). A minimum-holding (unmarketable parcel) buy-back was completed in February 2026; its value was not disclosed in the sources reviewed.

Ratios (derived from disclosed figures)

Calculation basis: ROE uses average equity (FY2025: average of 19.2 and 23.8; FY2026: average of 23.8 and 34.6). ROA uses average total assets. Net debt/EBITDA is negative because the company holds net cash. FY2025 asset turnover uses the as-reported revenue of A$85.6m. ROIC, current ratio and cash conversion cycle are not computable without the full balance sheet and are therefore NA.

Commentary on trends, inflections and drivers

Phase 1 — Scale without profit (FY2021–FY2023). The merged LogiCamms–OSD group grew revenue to a peak of A$121.4m in FY2022, but EBITDA never exceeded 2.5% of revenue and the group lost money in every year. FY2023 was the low point: a negative EBITDA of A$2.9m, a A$9.5m net loss, a gross margin of 24.5% and A$2.8m of impairments on completed works. The cause was poor project selection (fixed-price write-downs), a sprawling cost base and an underperforming training expansion.

Phase 2 — Turnaround (FY2024–FY2025). Mark Read's team (CEO from March 2023) exited unprofitable training operations and a legacy project, recapitalised with about A$4m at A$0.06 per share (Dec 2023) and enforced bid discipline. Gross margin jumped 11.3 percentage points to 35.8% in FY2024 and reached 37.3% in FY2025, the highest since 2015. FY2025 delivered a project cost performance index of 1.19 across more than 1,600 projects and net project write-ups of 6.7%. Revenue fell (A$93.4m to A$85.6m) partly by design and partly because of exogenous deferrals: the 2025 federal election, US political uncertainty and Tropical Cyclone Alfred in Queensland. Operating cash flow reached A$6.5m, the strongest since 2020, and the company moved back to net cash.

Phase 3 — Portfolio transformation and scale-up (FY2026–FY2027E). Verbrec sold Competency Training for 1.5 times its FY2025 revenue, realising a A$6.8m gain, and bought Alliance Automation for about five times FY2025 EBITDA (A$5.5m, roughly 0.09 times revenue). Alliance is a low-margin but large business: its EBITDA margin was 1.1% under Telstra and 4.8% in seven months under Verbrec. The mix shift diluted the adjusted EBITDA margin from 7.6% to 7.3% on a restated basis, while lifting revenue scale and diversification (Energy fell from 64% to 36% of revenue). Gross margin still rose to 35.5% (continuing basis), the fourth straight annual improvement. The balance sheet strengthened markedly: net cash of A$11.7m, net assets of A$34.6m and NTA per share up 83% to 8.8 cents.

Quality-of-earnings flags:

1. Statutory NPAT of A$10.4m is about 68% one-off. Continuing PAT was A$3.3m and NPATA A$4.2m.

2. FY2026 included a A$1.784m one-off gain on acquisition (a bargain-purchase element on Alliance), excluded from adjusted EBITDA but inside continuing statutory EBITDA.

3. Operating cash conversion weakened: A$5.8m operating cash against A$8.7m adjusted EBITDA, as working capital was absorbed by the larger revenue base.

4. Organic growth excluding Alliance was roughly flat (about +1.6%, derived).

Guidance and consensus

Management guides FY2027 revenue of A$140–160m (+18% to +35% on FY2026's A$118.5m) and adjusted EBITDA of A$10–12m (+15% to +38% on A$8.7m). EBITDA margin is guided to stay broadly flat (about 7.1–7.5%), with the 8–10% group target positioned beyond FY2027. Opening work in hand of A$78m covers about 52% of the guidance midpoint on a twelve-month look-ahead basis. The A$277m pipeline at a 34% dollar win rate implies roughly A$94m of potential conversion over time. No verified broker consensus exists.

Bull case

1. Full-year Alliance plus operating leverage. Alliance alone contributed A$39.4m in seven months, roughly A$67m annualised (derived). Combined with legacy revenue of about A$79m, the business runs at around A$145m before any organic growth. Alliance's margin moved from 1.1% to 4.8% within seven months, and each extra point of margin on about A$65m of Alliance revenue adds about A$0.65m of EBITDA.

2. Gas reinvestment cycle. AEMO's warnings of southern shortfalls from 2029, Beetaloo first gas (September 2026) and more than A$36m of energy-security awards in under two months of FY2027 point to a multi-year flow of pipeline, compression, in-line inspection and O&M work. Verbrec's operator status (more than 2,000 km) gives it privileged access.

3. Deep value with a net-cash buffer. At about 4.4x EV/FY2027E EBITDA and 0.3x EV/sales, with net cash at about 20% of market cap and insiders holding about 25.6%, a modest re-rating towards small-cap engineering peers would deliver material upside if the company meets guidance.

Bear case

1. Growth is bought, not built. Organic revenue was roughly flat in FY2026 (about A$79.1m against A$77.9m, derived). The company already trimmed the top of its FY2026 EBITDA guidance once (July 2026), showing sensitivity to award timing.

2. Mix dilution and fixed-price risk. The fixed-price share of revenue rose to 44% (from 37%). Alliance's margin profile (4.8%) structurally holds down group margins, and the company's own FY2027 guidance implies no margin progress. Verbrec's FY2023 write-down history shows how quickly this can reverse.

3. Earnings quality and liquidity. About 68% of FY2026 statutory NPAT is one-off; continuing EPS was 1.1 cents. Cash conversion slipped (A$5.8m operating cash against A$8.7m adjusted EBITDA). The stock is illiquid, tightly held and has no broker coverage, which limits re-rating catalysts.

Catalysts and monitorables (next 12 months)

Concluding analyst verdict

Verbrec has moved through three distinct phases in four years: loss-making scale (FY2021–FY2023), disciplined turnaround (FY2024–FY2025) and acquisitive repositioning (FY2026). The turnaround is real and well evidenced. Gross margins rose roughly eleven points from the FY2023 trough, the balance sheet went from net debt to A$11.7m net cash, dividends were reinstated, and management has now met two consecutive sets of numeric guidance. The FY2026 portfolio swap was shrewdly priced. Selling a A$7.8m-revenue training business for A$11.5m and buying a A$62m-revenue automation and cyber business for A$5.5m changed the group's scale, diversification and technology content without diluting shareholders or borrowing.

The investment debate now turns on execution of the integration rather than survival. The FY2026 headline growth of 52% was almost entirely acquired, and the company's own FY2027 guidance implies flat margins. Investors are therefore underwriting management's ability to lift the combined group from about 7% to the 8–10% target over FY2028 and beyond, while converting a record A$277m pipeline in a labour-constrained market and with more fixed-price exposure than before.

The external backdrop is unusually supportive for a company of this profile. Australia's gas system needs reinvestment, Beetaloo has started producing, water utilities are spending, and SOCI Act obligations create recurring OT-cyber demand. Verbrec's status as an independent pipeline operator gives it an annuity-like base and preferred access to brownfield scopes that larger peers often overlook.

On derived multiples of about 4–5x EV/EBITDA, with insiders aligned and net cash in hand, the risk/reward looks asymmetric, provided H1 FY2027 shows Alliance margins continuing to rise and organic growth resuming. The key risks are integration slippage, fixed-price overruns and award timing. Verdict: a credible small-cap turnaround now in the growth phase, attractive on valuation but contingent on proof of organic growth and margin delivery during FY2027.

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SOURCES (primary unless noted)

1. Verbrec Limited, FY2026 Results Announcement (31 Aug 2026), ASX — announcements.asx.com.au/asxpdf/20260831/pdf/073hbht10s01kv.pdf

2. Verbrec Limited, Annual Report 2025 (28 Aug 2025), ASX — announcements.asx.com.au/asxpdf/20250828/pdf/06ngtmdlr0fq80.pdf

3. Verbrec Limited, FY2025 Results and Final Dividend (28 Aug 2025), ASX — announcements.asx.com.au/asxpdf/20250828/pdf/06nh38sv5kdp9n.pdf

4. Verbrec Limited, FY2026 Appendix 4E (31 Aug 2026), via Webull bulletin; summary via Kalkine Media

5. Verbrec Limited, FY2026 Revenue & Earnings Guidance (27 Feb 2026); H1 FY2026 Results (27 Feb 2026), via Webull/Investorpa/Grafa

6. Verbrec Limited, Revenue & Earnings Guidance for FY2026 & FY2027 (27 Jul 2026), via InvestSMART/Kalkine

7. Verbrec Limited, Verbrec secures $21 million contract in Beetaloo Basin (29 Jun 2026), ASX

8. Verbrec Limited, Verbrec secures $16 million in new Energy Security contracts (25 Aug 2026), via Webull bulletin

9. Verbrec Limited, Acquisition of Alliance Automation (5 Nov 2025), ASX; Investor Presentation (5 Nov 2025), via Investorpa/IRESS

10. Verbrec Limited, Completion of Competency Training divestment (1 Dec 2025), via Webull/Investorpa

11. Verbrec Limited, Mark Read appointed as Managing Director (16 Mar 2026), via Webull/Investorpa

12. Verbrec Limited, FY2023 Results (30 Aug 2023); Capital Raise Results (13 Dec 2023); H1 FY2024 Results (28 Feb 2024), ASX

13. ASX company announcements list for VBC (Mar–Sep 2026), asx.com.au

14. Verbrec website news (verbrec.com/news): Oyu Tolgoi (15 Sep 2026), Beetaloo first gas commentary (8 Sep 2026), Moranbah SAMP

15. The Australian Pipeliner, LogiCamms corporate entity to rebrand (2020)

16. Miningnews.net, Engineering firm weighs merger (2019); Stockhead (2019); Kalkine (4 Mar 2019) — secondary, for LogiCamms–OSD history

17. Reuters via Stockopedia (29 Jun 2026 share reaction); InvestSMART and Market Index (share price, market cap, holders) — aggregators

18. StockWireX, FY2026 results presentation coverage (Alliance margins, insider ownership) — secondary

19. Strawman.com investor-forum timeline (2023 events) — secondary, used only for corroboration and flagged

20. Peer data: Lycopodium FY26 results (19 Aug 2026); GR Engineering Services FY26 results (24 Aug 2026); Southern Cross Electrical Engineering FY26 results (19 Aug 2026), via ASX/Webull/Motley Fool/SmallCaps