Perenti (ASX: PRN) holds revenue flat but lifts record margin and sells BTP for A$100m

Perenti Limited (ASX: PRN) has reported record underlying EBIT(A) of approximately A$340 million for FY26 despite revenue remaining broadly flat at A$3.46 billion, pushing EBIT(A) margin to a record 9.8%. Underlying NPAT(A) increased 8% to A$192 million, adjusted free cash flow reached A$182 million and leverage fell to 0.4 times, giving the mining-services group what management described as its strongest balance sheet to date.

The results landed only days after Perenti agreed to sell BTP Group, its equipment rental and parts business, to Beetle Industries for A$100 million. The consideration comprises A$80 million in cash at completion, subject to customary adjustments, and an unconditional A$20 million deferred payment 12 months later. Completion is targeted by the end of October after buyer financing and other conditions are satisfied.

Perenti expects total capital recycling of approximately A$140 million-A$155 million across BTP, the Iduapriem fleet and other idle equipment. The proceeds are intended to support higher-return opportunities including newly won underground contracts rather than simply rebuilding the revenue lost with divested activities.

How did Perenti achieve record profitability without growing revenue?

FY26 revenue of A$3.46 billion was broadly unchanged from approximately A$3.49 billion in FY25, while EBIT(A) increased to A$340 million from around A$333 million. The resulting margin improvement to 9.8% shows why management has increasingly emphasised contract quality and capital returns rather than maximising revenue.

Contract Mining revenue fell 4% to approximately A$2.43 billion, yet segment EBIT(A) increased 2% to A$291 million and margin reached 12%. Drilling Services moved in the opposite direction on revenue, growing 8% to A$843 million while producing record operating performance.

This mix change matters. A mining contractor can increase revenue rapidly by accepting lower-quality or capital-intensive work, but doing so may dilute margins and returns on equipment.

Perenti’s FY26 numbers suggest the group is deliberately accepting slower top-line growth in exchange for stronger earnings quality.

Why sell BTP for A$100 million if it remains an operating business?

Management said BTP has faced market headwinds and no longer fits as closely with Perenti’s preferred areas of competitive advantage. Selling it releases capital that can be redeployed toward contract mining and other opportunities expected to exceed the group’s return hurdles.

The transaction will also result in an approximately A$64 million non-cash loss in FY26 accounts. That writedown is economically relevant because it indicates the sale price is below the relevant carrying value, but it is not another A$64 million of cash leaving the business.

Investors should therefore separate the accounting loss from transaction liquidity. Perenti is receiving A$100 million of consideration while acknowledging that the asset had previously been carried at a higher accounting value.

That makes BTP an example of portfolio discipline rather than a claim that every previous capital allocation was successful.

How much stronger is Perenti’s balance sheet entering FY27?

Gross debt fell to approximately A$594 million and net debt to A$271 million, while leverage declined to 0.4 times. Liquidity reached roughly A$911 million, including cash and undrawn facilities.

That financial capacity matters because Perenti has recently won large contracts requiring mobilisation capital, including Bellevue in Australia and Fourmile in Nevada. The company also has a tender pipeline of around A$20 billion and work in hand of A$6.2 billion.

Selling BTP and other equipment can therefore fund new revenue rather than merely shrinking the company. The quality of that trade will depend on whether the new contracts deliver returns superior to the businesses and equipment being exited.

Does FY27 guidance imply another step-change in earnings?

Not immediately. Perenti guides to FY27 revenue of A$3.45 billion-A$3.65 billion and EBIT(A) of A$335 million-A$355 million. At the midpoint, revenue would be around A$3.55 billion and EBIT(A) approximately A$345 million, only modestly above FY26’s record A$340 million.

Capital expenditure is expected at roughly A$370 million as new projects ramp up, and earnings are again expected to be weighted toward the second half.

The FY27 story is therefore more about establishing the next growth base than producing another dramatic earnings jump immediately.

Perenti exits FY26 with record margins, lower leverage and A$140 million-A$155 million of capital being released from assets it considers less attractive. The real test is whether that capital recycling makes the next A$3.5 billion of revenue more valuable than the last.