Close the Loop Faces FY25 Earnings Slide, Unveils Bold FY26 Recovery Plan
Close the Loop Limited reported a challenging FY25 with significant declines in earnings and cash flow, driven by shifts in its IT asset disposition business. The company has responded with new leadership appointments and a strategic five-pillar plan aimed at restoring growth and operational efficiency in FY26.
- FY25 revenue declined 7% to $195.1 million
- Underlying EBITDA dropped 59% to $18.4 million
- Net debt rose 26% to $53.4 million amid lower cash flow
- New CEOs appointed for Australia and North America operations
- FY26 strategy focuses on cash conversion, ITAD volume growth, and cost efficiencies
A Year of Headwinds
Close the Loop Limited, a global player in the circular economy and recycling sector, has released its FY25 results revealing a tough year marked by declining earnings and rising debt. Revenue fell 7% to $195.1 million, while underlying EBITDA plunged 59% to $18.4 million. The company’s net profit after tax and amortisation (NPATA) also took a hit, dropping 70% to $7.8 million. Operating cash flow was down 63%, contributing to a 26% increase in net debt to $53.4 million.
The primary driver behind these declines was a shift in product mix within the Information Technology Asset Disposition (ITAD) segment in North America, which affected both revenue and profitability. Meanwhile, the packaging division saw modest revenue growth but was weighed down by one-off costs, leading to weaker-than-expected EBITDA.
Leadership Changes Signal a New Direction
In response to operational challenges, Close the Loop appointed Kesh Nair as Executive Director and CEO of Australia, and Matthew Zimmer as CEO of the USA. These leadership changes underscore the company’s commitment to stabilising and growing its North American ITAD operations, a strategically important market. Mr Nair highlighted the resilience in demand despite earnings pressure and emphasised the management team’s dedication to returning the business to positive performance in the medium term.
Strategic Pillars for FY26
Looking ahead, Close the Loop has outlined five strategic pillars designed to improve financial performance and operational efficiency in FY26. These include improving cash conversion through faster payment terms and inventory management; maintaining packaging performance by expanding sales and leveraging international operations; increasing ITAD volumes globally by capitalising on existing contracts and partner networks; expanding OEM customer acquisition and bundling services; and enhancing cost efficiencies, particularly through the ramp-up of a new Mexicali, Mexico facility.
The Mexicali plant, recently approved to recycle computer hardware under the IMMEX program, is expected to boost operational cost efficiency and support volume growth. Management anticipates that cost-out initiatives will begin delivering benefits from the second half of FY26 onwards.
Balancing Challenges with Opportunity
Despite the financial setbacks, Close the Loop remains optimistic about its long-term prospects in the circular economy. The company’s diversified footprint across Australia, North America, South Africa, and Europe positions it well to leverage cross-selling opportunities and economies of scale. However, the path to recovery hinges on successful execution of its strategic initiatives and stabilising the ITAD segment’s performance.
Investors will be watching closely to see how the new leadership team navigates these challenges and whether the FY26 strategy can translate into tangible improvements in earnings and cash flow.
Bottom Line?
Close the Loop’s FY25 results underscore the urgency of its strategic reset as it aims to turn around earnings and strengthen its position in the circular economy.
Questions in the middle?
- How quickly can the new leadership stabilize and grow the North American ITAD business?
- What impact will the Mexicali facility have on cost efficiency and volume growth in FY26?
- Can the company’s five strategic pillars deliver a meaningful financial turnaround within the next 12 months?