FOS Capital Reports 12% Revenue Drop and $0.5 Million EBITDA Loss in FY26

FY26 Financial Performance Reflects Softer Market and Delayed Projects

FOS Capital Ltd (ASX:FOS) posted a challenging FY26, with sales slipping 12% year-on-year to $22.4 million and an EBITDA loss of $0.5 million, excluding $1.3 million in Aldridge Traffic Systems (ATS) restructuring costs and a $0.6 million inventory write-off. The operating loss before tax widened to $1.4 million from a $1.2 million profit in FY25, underscoring the impact of softer market conditions and extended project award delays across key customer segments.

Despite the downturn, the company maintained robust quoting activity, though conversion to firm orders lagged historical norms, dragging revenue recognition. Management flagged that many delayed projects have started to convert recently, boosting confidence in near-term execution.

Order Book and Pipeline Strength Signal Potential Recovery

The order book climbed to $10 million, marking its highest level in over two years, while the quote pipeline reached a record $130 million, up from $115 million a year earlier. This surge in prospective business provides a clearer revenue runway into FY27.

ATS, acquired in June 2025, showed notable progress with active quotes and tenders rising from $5.5 million to $8 million during FY26. The business secured its first major contract supplying street lighting and control equipment for the Eastern Freeway Project, a milestone expected to catalyse further orders from infrastructure customers.

Meanwhile, Glowing Structures, another subsidiary, generated over $3 million in product specifications, reinforcing its contribution to the group’s growth avenues beyond core lighting manufacturing.

Cost Reduction and Strategic Initiatives Underway

In response to FY26 losses, FOS Capital has identified $2 million in annualised cost savings, with half already implemented. These efficiency measures, alongside the introduction of a new imported commercial lighting range aimed at improving margins, form key pillars of management’s strategy to restore profitability.

The group also continues to leverage its fragmented market position, targeting an increase in market share from 5% to 15% through organic growth and strategic acquisitions. The company’s founder-led management team, with deep industry experience, remains focused on capitalising on infrastructure and urban development projects across Australia and New Zealand.

Balance Sheet and Cash Flow Position

FOS closed FY26 with net assets of $11.1 million and cash reserves of $1 million, down from $14.1 million and $2.5 million respectively the prior year. Receivables decreased by 27%, while payables increased 53%, reflecting tighter working capital management. The company’s borrowings rose slightly to $4.1 million but remain modest relative to total assets.

Operating cash flow was broadly breakeven at a $0.1 million outflow despite the revenue decline, aided by disciplined cost control and improved collections.

Risks and Outlook

The directors highlighted ongoing risks including economic downturns, supply chain disruptions, and cyber threats. They remain confident in the group’s ability to navigate these challenges, supported by a strengthened order book, record pipeline, and ongoing cost initiatives.

With major contracts secured by ATS and a record quote pipeline, FOS Capital is positioned for improved financial performance in FY27, though the timing and scale of project conversions remain key variables to monitor.

Investors will be watching how the company translates its pipeline into revenue and whether cost savings and new product introductions can restore margins in a competitive market environment.