Trimming hard in Feb 2026

I am taking most of my gains in Duratec and looking for better options elsewhere after 18 months now of stalling progress. Sales, profit, order book, tenders and pipeline have all slowed significantly from the first 5 years as a listed business. Perhaps Co-Founder and former CEO Phil Harcourt got his timing "just right" when retiring 2 years ago...

The newish CEO seems OK but the result for 1H 2026 is the weakest ever, when several other companies in mining services and maintenance have reported excellent results (MND, MAD etc).

With a multiple of 25 right now, they are priced for a lot stronger growth than is being delivered and there may be more cyclicality to the business than I first thought.

Updated valuation in Aug 2025 based on 9 cents EPS for FY25, a growth rate for the next few years of 12%, a PE of around 14 (bottom quartile of their average) and div payout ratio of about 45%. I get an expected return of around 12% p.a. for the next 5 years at the current share price of $1.52

At the FY25 results I was disappointed with the single digit revenue and EPS growth. This is well below the previous 4 years trend. And this is with several acquisitions being made over the past few years that would have hopefully delivered more growth.

In addition the order book hasn't grown this year, despite the tenders and pipeline buckets increasing - they are not converting as much work as they were a couple of years ago.

Newish CEO Chris Oates asks for some patience and that's lots of their ECI's are soon to convert to orders and revenue - to date there is no reason to have a high degree of confidence in his explanation, so time will tell.

Their injury rate also roughly doubled for the year, which is not a good trend.

Duratec is now on closer watch for me. I intent to head over for the AGM this year and put some tough questions to them.

Expecting some progress on order book and topline growth in FY26, back to at least low double digit levels, for my confidence to be fully restored.

Updated valuation in May 2025 based on 10 cents EPS for FY25, a growth rate for the next few years of 12% (which is 1/3 of what they have been doing), a PE of around 14 (bottom end of their average) and div payout ratio of about 45%. I get an expected return of around 14% p.a. for the next 5 years at the current share price of $1.47

It won't all work out exactly like that of course but plenty of margin of safety built in based on what's known today.

Why do I own it?

# Small cap which provides maintenance and repairs to all kinds of infrastructure in Australia (bridges, tunnels, defence facilities, offices etc)

# Has 10 years of 30% p.a. growth including pre listing and also has founder / owners who hold 30% of the company.

# Has approx. 1% market share of their stated domestic market so should be lots of room to take share still

# Debt to equity ratio of 53% and high ROE / ROCE of over 36% / 27%.

# Solid MOS at current price of $1.47 in May 2025 at only one third the previous growth rate.

# They can deliver double digit revenue and earnings growth for 5 + years so the return should meet my 15%p.a. + target

# Probably has structural tailwinds as Australia keeps growing and spending more on infrastructure that will need maintenance

What to watch

# Net profit margins are low - need to see it steady or growing and execution needs to be strong

# Board is very concentrated - good to push for / see some independence and new skills added over time

# May have lumpy years due to contract nature of business - win a big govt contract and sales spike and vice versa

# Dept of Defence is 40% of business. Their spend is planned to grow for next 10 years but Duratec must keep them onboard

# Read Sohra Peak updates for another holders views