AJ Lucas EBITDA Surges 335% on $25.9M UK Settlement and Aussie Efficiency
AJ Lucas Group Limited has swung to a $38.9 million half-year profit, buoyed by a significant UK settlement and improved Australian drilling operations despite revenue pressures.
- Half-year net profit of $38.9 million versus prior loss of $11.5 million
- UK settlement payment of £12.5 million ($25.9 million) drives EBITDA surge
- Australian operations boost EBITDA by 37.7% despite 11.8% revenue decline
- Net debt reduced by $40.3 million through loan repayments and cash inflows
- Ongoing UK hydraulic fracturing moratorium limits shale gas development prospects
Strong Half-Year Turnaround
AJ Lucas Group Limited has reported a remarkable turnaround for the half year ended 31 December 2025, posting a net profit after tax of $38.9 million compared to a loss of $11.5 million in the previous corresponding period. This swing was largely driven by a £12.5 million (A$25.9 million) settlement related to a dispute over UK shale gas exploration licences, alongside improved operational performance in its Australian drilling business.
The Group’s reported EBITDA from continuing operations soared to $38.5 million, up from $8.8 million a year earlier. The UK settlement contributed significantly to this uplift, while Australian operations delivered a 37.7% increase in EBITDA to $14.1 million despite an 11.8% drop in revenue to $66.9 million. This was attributed to enhanced operational efficiencies, reduced overheads, and fewer disruptions from maintenance and weather.
Australian Operations: Efficiency Amid Market Challenges
In Australia, AJ Lucas continues to face headwinds from suspended mining operations at two client sites and a subdued metallurgical coal market. Nevertheless, the company’s focus on cost control and operational improvements has paid off, lifting the EBITDA margin to 21.1% from 13.5% in the prior period. Management remains optimistic about the long-term outlook for metallurgical coal and is exploring opportunities to expand its drilling services portfolio.
UK Operations: Navigating Regulatory Constraints
The UK business remains constrained by the government’s moratorium on hydraulic fracturing, reinstated in October 2022 after a brief lift. AJ Lucas completed the plug and abandonment of two shale gas exploration wells at Preston New Road as required by regulators, but retains its shale exploration licences covering approximately 1,000 square kilometres. The Group is actively engaging with regulators and partners, including Spirit Energy and Egdon Resources, to pursue conventional gas development and appraisal drilling where feasible.
The recent court ruling allowing testing at the Balcombe licence provides a potential avenue for progress, but the moratorium continues to limit shale gas development prospects. The Group’s UK operations also incurred $1.5 million in administrative expenses related to licence maintenance and decommissioning liability revaluations during the period.
Balance Sheet and Cash Flow Improvements
AJ Lucas has made significant strides in reducing its net debt position, which fell by $40.3 million to $79.6 million at 31 December 2025. This was achieved through repayment of $12 million on related party loans following the UK settlement, alongside lower utilisation of the senior syndicated facility. The Group holds $5.7 million in cash and cash equivalents and continues to comply with financial covenants.
Net cash from operating activities improved markedly to $26.4 million, supported by the settlement inflow. Capital expenditure was modest at $1.6 million, while financing activities reflected $22.9 million in debt repayments. Despite a net liability balance sheet position of $34.4 million, the directors remain confident in the Group’s ability to continue as a going concern, supported by positive cash flow forecasts and operational momentum.
Outlook: Cautious Optimism Amid Uncertainty
Looking ahead, AJ Lucas plans to maintain its focus on servicing existing customers and expanding drilling services in Australia. In the UK, the Group will continue to advocate for the removal of the hydraulic fracturing moratorium and explore development options for conventional gas discoveries. The company underscores the role of gas as a transition fuel in the UK’s net zero ambitions, but acknowledges the challenging regulatory environment.
No interim dividend has been declared, reflecting a prudent approach amid ongoing market and regulatory uncertainties. Investors will be watching closely for developments on the UK regulatory front and the Group’s ability to sustain operational improvements in Australia.
Bottom Line?
AJ Lucas’s half-year rebound underscores resilience but hinges on regulatory shifts and sustained operational gains.
Questions in the middle?
- Will the UK government’s moratorium on hydraulic fracturing be lifted, enabling shale gas development?
- Can AJ Lucas sustain and grow its Australian drilling EBITDA amid subdued coal market conditions?
- How will the Group manage its net liability balance sheet position and related party loan maturities?
