$105.7 million revenue, $22.6 million EBITDA in FY26

Profit falls as Alfabs prioritises cash conversion

Alfabs Australia Limited (ASX:AAL) has completed a year of operational surgery with a distinctly mixed result: revenue climbed 11% to $105.7 million, but statutory profit after tax plunged to $1.6 million from $12.2 million and underlying EBITDA fell 19% to $22.6 million. Free cash flow, the measure management now places at the centre of the business, held at $5.7 million.

The cash result was heavily weighted to the second half. Alfabs generated $4.1 million of free cash flow in the fourth quarter, according to the annual report, despite lower earnings for the full year. Management attributes the reset to a business review launched in January, workshop and corporate restructuring, tighter working capital management and a headcount reduction of about 15%.

Mining carries the earnings recovery plan

Mining remained the group’s economic engine, producing FY26 EBITDA of $23.9 million, up 2% on the prior year. The average daily hire rate increased 14% to $79.1 thousand, with the Malabar fleet operating for its first full year at run-rate and fleet utilisation remaining above 80%.

The Shell Program is now moving from workshop investment into commercial deployment. Continuous Miner CM04 and the first AX-10 loader entered 12-month hire arrangements after year-end, while two Driftrunners were already on hire and two more were near completion and forward sold at 30 June. Alfabs expects Mining daily hire rates to rise by a further 5% to 10% in FY27, although that remains a management expectation rather than contracted financial guidance.

Debt restructuring sets the dividend test

Alfabs reported management net debt of $36.6 million at year-end, equivalent to 1.7 times underlying EBITDA. The financial statements show a different measure: total borrowings of $50.1 million less cash of $13.6 million produced reported net debt of $36.6 million before the company’s broader gearing calculation, while the report’s capital-risk definition, which includes trade payables, gives net debt of $47.1 million. That distinction matters when assessing leverage and the company’s dividend timetable.

Phase I of the debt program refinanced the NAB Malabar loan, extending facility tenor from three to 4.5 years and reducing amortisation expected to release about $3 million in annual cash flow. Phase II is targeted for completion in the first half of FY27 and is the final milestone identified before the Board considers dividend reinstatement. Alfabs has reiterated a policy of distributing 50% of net profit after tax, but any payment remains subject to sustainable free cash flow, leverage requirements and debt facility terms.

Engineering absorbs the weaker infrastructure cycle

Engineering EBITDA fell 15% to $5.5 million as infrastructure activity softened and no material contract awards were secured during the year. Contracted work in hand dropped to $11.6 million, although the St Mary’s Train Station package was about 95% complete at year-end and asset remediation generated $1.1 million of earnings in its first full year.

Management has reduced fixed costs while retaining fabrication capability, customer pre-qualifications and its Queensland Government registration. The annual report expects infrastructure conditions to remain subdued through FY27, with recovery weighted towards FY28. That leaves Engineering as the less predictable part of the near-term plan while Mining supplies the recurring base.

FY27 execution carries the investment case

Alfabs is targeting an $8 million annualised pre-tax cash improvement in FY27, including about $5 million from reduced workshop capacity and $3 million from corporate cost reductions. It is also targeting a two-to-threefold improvement in free cash flow by FY28 and applies a discretionary growth hurdle of more than 15% IRR.

The tension is straightforward. The reset has improved late-year cash generation and lowered the operating cost base, but reported profit is sharply lower, receivables absorbed a $2.8 million expected-credit-loss provision largely linked to Dartbrook’s administration, and the dividend remains a prospective outcome. The next evidence will come from Phase II refinancing, the remaining Shell assets moving onto hire or sale, and whether FY27 cash conversion can hold without another favourable one-off.