Alfabs Posts FY26 Growth and Nears Dividend Restart After Debt Restructure

Turnaround Year Sees Cash Flow Strengthen Despite EBITDA Dip

Alfabs Australia Limited (ASX:AAL) marked FY26 as a pivotal year, delivering revenue growth and a material improvement in free cash flow generation even as EBITDA declined 19% to $22.6 million. Revenue rose 11% to $105.7 million, underpinned by a 14% increase in mining average daily hire rates to $79,100. The company’s strategic reset, initiated in early 2026, focused on cash generation, disciplined capital allocation, and balance sheet repair, with the benefits particularly evident in the final quarter where free cash flow hit $4.1 million.

Despite a 57% drop in net profit after tax to $5.2 million, Alfabs managed to hold free cash flow steady at $5.7 million year-on-year. This was achieved through operational restructuring, including a 15% headcount reduction and workshop consolidation, which improved cost efficiency and cash conversion rates to around 50% in H2 FY26.

Mining Division Drives Earnings While Engineering Navigates Market Softness

The Mining division remained the backbone of Alfabs’ earnings, with a full year of production from the Malabar contract and high fleet utilisation supporting a 2% EBITDA increase to $23.9 million. The Shell Program transitioned from capital expenditure to revenue generation, with key assets like Continuous Miner CM04 and AX-10 loaders being commissioned and contracted for hire, contributing to the division’s forward momentum.

Conversely, the Engineering division’s EBITDA fell 15% to $5.5 million, reflecting a softer infrastructure market and the absence of material contract awards during the year. Nevertheless, the division maintained strategic positioning, securing the highest level of government steel fabrication registration in Queensland and building a tender pipeline for future growth.

Debt Restructuring Nears Completion, Dividend Reinstatement in Sight

Alfabs has made significant progress on its debt restructuring, completing Phase 1 refinancing and advancing Phase 2, which remains the final milestone before dividend reinstatement can be considered. Net debt decreased to $36.6 million in H2 FY26, with leverage at 1.7x underlying EBITDA, comfortably within the company’s target range of 1.5x to 2.0x.

The Board paused dividends in 1H FY26 to preserve capital and flexibility, but with six of seven conditions for dividend reinstatement met, Alfabs aims to declare a full-year dividend once Phase 2 restructuring concludes. The dividend policy remains a 50% payout of net profit after tax, subject to sustainable cash flow and leverage metrics.

Acquisition Opportunity Shelved Amid Capital Discipline

Earlier in FY26, Alfabs pursued a potential acquisition to accelerate growth but has since discontinued the pursuit due to an inability to agree on commercial terms. The company reaffirmed its commitment to disciplined capital allocation, proceeding only with transactions that meet its return thresholds and value creation objectives.

Looking Ahead: Execution Focused on Growth and Cash Flow

FY27 priorities centre on executing the established plan: finalising debt restructuring, restarting dividends, expanding the mining hire fleet through the Shell Program, and growing the engineering forward order book. Alfabs expects mining average daily hire rates to rise another 5-10% in FY27 as new assets come online, further boosting free cash flow and EBITDA conversion.

The company’s strong operational footprint, with workshops strategically located in New South Wales and Queensland, positions it well to capitalise on a resilient underground coal mining sector, underpinned by stable metallurgical coal demand and ongoing infrastructure projects.