How Is EGL Navigating ERP Costs While Driving 8.6% Revenue Growth?

Solid Revenue Growth Despite Operational Challenges

The Environmental Group Limited (EGL) has delivered a robust first half for FY26, with revenue climbing 8.6% to $58.9 million compared to the prior corresponding period. This growth underscores the effectiveness of EGL’s strategic initiatives and operational execution, even as the company navigated significant internal changes.

EBITDA before significant items rose impressively by 25.9% to $4.9 million, reflecting improved operational efficiencies and strong demand across key divisions. However, the company reported a net loss after tax of $0.3 million, primarily due to $2.7 million in one-off costs related to the implementation of a new enterprise resource planning (ERP) system, restructuring, relocation, and integration expenses.

ERP Implementation and Relocation, Short-Term Pain for Long-Term Gain

The rollout of the company-wide ERP system and the relocation of multiple business units in New South Wales and Queensland have been major undertakings for EGL during the half-year. While these initiatives caused temporary operational disruptions and increased costs, management emphasises their strategic importance for future scalability and efficiency. The new ERP platform consolidates three legacy systems, enhancing data visibility and resource coordination across the group.

Staff engagement was high throughout the ERP rollout, with extensive testing and training undertaken to ensure a smooth transition. The relocations, although challenging, are expected to strengthen the company’s “One EGL” culture and improve resource sharing, positioning the business well for sustainable growth.

Division Performance Highlights and Market Positioning

The Energy division was a standout performer, posting a 39.8% increase in revenue to $34.1 million and a 32.6% rise in EBITDA to $4.1 million. This growth was driven by a strong recurring revenue base from boiler services, which now accounts for nearly 69% of recurring revenue. Despite slight margin pressure from site relocations, the division’s outlook remains positive with ongoing tender activity and new product introductions, including distribution agreements for boiler controls and valves.

Conversely, EGL Baltec experienced a 30.1% revenue decline to $13.8 million and an 18.5% EBITDA decrease, reflecting the completion of a large, lower-margin project in the prior period. However, a strong project pipeline and engineering completions bode well for a stronger second half. EGL Clean Air faced a 3.0% revenue drop and a significant EBITDA decline due to restructuring and relocations but is preparing for growth with new product trials and expected contract awards.

Innovation and Strategic Acquisitions Bolster Future Prospects

EGL Waste delivered a notable turnaround with revenue of $2.3 million and EBITDA of $0.7 million, supported by the commissioning of a large-scale PFAS extraction plant and enhanced testing capabilities through a new trial vessel at Victoria University. These developments highlight EGL’s commitment to addressing critical environmental challenges and expanding its technological edge.

The acquisition of Advanced Boilers & Combustion Pty Ltd in April 2025 has expanded EGL’s footprint in the industrial boiler market, complementing existing capabilities and opening cross-selling opportunities. The integration is expected to yield operational synergies and strengthen EGL’s leadership in boiler and energy services.

Financial Position and Outlook

At 31 December 2025, EGL maintained a strong balance sheet with net assets of $45.6 million and cash reserves of $4.4 million, supported by manageable debt facilities. The company reaffirmed its guidance for FY26, anticipating a 15% to 20% increase in normalized EBITDA over FY25, driven by growth initiatives and a traditionally stronger second half.

No dividends were declared during the period, reflecting the company’s focus on reinvestment and strategic transformation. The board and management remain confident in EGL’s trajectory despite the short-term earnings impact from significant costs.