I'll be honest, I went in expecting all the usual headaches of construction (cyclicality, wafer-thin margins, cost blowouts etc) but the conversation with Peter and Scott did soften those concerns.
Shape seem extremely selective in what they bid for. Their CRM (built on Salesforce) scores every opportunity, and they’ll only price roughly half the pipeline; of what they do price, they win about ~50% by number (34% by value), which they tell me is unusually high for the industry.
What they're going for is short-duration, mostly indoor work, which naturally limits weather and cost escalation risks. Average job is ~$3m over ~16 weeks; over 80% of projects complete inside 12 months. That short, fast book means they can reprice quickly if input costs move.
Peter was also very deliberate on how Shape removes/manages risks for clients. Their whole model is built around buying the risk, managing it tightly, and pushing it down to subcontractors through firm lump sum agreements. That locks in pricing early, so if materials jump in cost they are not exposed and all time, cost, and quality risk sits with the trades rather than Shape.
They also reduce risk through early contractor involvement on complex jobs. By helping finalise the design, they remove buildability issues, swap out impractical materials, shorten programs, and give clients more certainty. At the same time, they negotiate better margins because the work is awarded before a competitive tender.
Just as important is what they refuse to take on. Peter said they are contractors, not gamblers, and if they cannot identify and control a risk they simply walk away. Even before work begins they improve their position by re-tendering trade packages once the job is secured, which usually results in sharper pricing and less risk from day one.
The balance sheet is also a real edge. They finished FY25 with $128m in cash and marketable securities, no debt, and daily averages near $99m (low point ~$60m during the year). They hold liquidity partly to meet pre-qualification ratios for $100m+ projects and to keep tender boxes “green.”
Cash generation looks strong for this model too: FY25 operating cash flow was ~$53m, ~160% of EBITDA (helped by the month-in, month-out cash cycle on subcontracted works).
The customer engine is all about trust and repetition: NPS of +85 and ~85% of work from repeat clients, heavily skewed to ASX100/200 counterparties with transparent lease expiries (which gives forward visibility and recycling of work every ~7 years).
They describe themselves as the only truly national builder across all mainland states and territories, with recent regional office openings. They’ve diversified beyond pure office fit-outs into Health, Education, Defence, and added Modular and Facade remediation, all in an effort all to smooth sector swings while staying in short-cycle work.
The corporate structure and employee incentive angle was also interesting. They run a central corporate backbone with most decision making left to the regional teams. It is a decentralised structure with clear authority levels and multiple layers of review, which keeps things moving quickly while still maintaining strong checks and balances. Estimating flows up through bid managers, commercial managers, general managers and the executive team before landing on Peter’s desk when needed. It creates discipline without slowing the business down.
On incentives, people get paid more when the business performs better, and the incentive structure is designed to feel like a genuine win-win rather than a zero-sum internal contest. They want collaboration, not sandbagging. Peter emphasised that in a people driven services business, culture is the moat, so they work hard to make Shape a place where staff want to stay and where good behaviour is rewarded. The overall effect is a structure that empowers teams, keeps risk in check and aligns incentives with outcomes that matter to clients and shareholders.
All told, this is a people/services business with a long profitable history, low capital intensity, and a deliberate bias to short-cycle, repeat client work, and all underwritten by a fat cash buffer. On the near-term outlook, the $492m backlog and $4.0bn pipeline give decent visibility. And on that score, a PE of ~24x doesnt seem too onerous.
Still, there are risks such as sustained office weakness (their core is still office), execution as they push harder into modular/new build, and any slippage in tender conversion. But on balance, after the chat, this feels less like “construction roulette” and more like a repeatable, cash-generative niche.
You can see the recording on the meetings page and access the transcript here: Shape Australia Transcript.pdf
