Duxton Farms faces asset sale and funding pressure after going concern warning

Going Concern Warning Lands After Merger Year

Duxton Farms Limited (ASX:DBF) has put a hard edge on what was already a difficult annual result: its auditor has highlighted a material uncertainty related to going concern. The warning does not modify Grant Thornton’s audit opinion, but it records that the group’s ability to continue operating depends on executing a mix of asset sales, spending reductions, debt amendments and further funding.

The numbers explain the concern. Duxton Farms posted a statutory net loss of $40.324 million for FY2026, compared with a $12.505 million loss a year earlier, while total comprehensive loss reached $43.055 million. Revenue from continuing operations fell to $18.114 million from $20.048 million. Operating and investing activities consumed $38.248 million in cash, leaving the group with $1.217 million of cash against $103.924 million of borrowings at year-end.

Merger Costs and Dilution Reshape the Result

The October 2025 merger with four private agricultural businesses created a much larger portfolio, but FY2026 captured only eight months of their operations and a full bill of transaction and integration costs. Business combination expenses reached $6.912 million, including $4.209 million in stamp duty. The group also recognised $5.358 million of asset impairments and revaluation decrements, $543,000 of goodwill impairment and a further $2.432 million write-off linked to the apple business.

Management reported an underlying EBITDA loss of $12.921 million after adjusting for predominantly non-recurring merger costs, against a statutory EBITDA loss of $27.192 million. That distinction matters, but it does not remove the balance-sheet pressure. Statutory net asset value rose to $115.080 million, yet NAV per share fell to $1.07 from $2.39, with the company attributing roughly 91 cents of the decline to shares issued below NAV as merger consideration. No FY2026 dividend was declared.

Asset Sales and Bank Amendments Become Immediate Tests

Duxton Farms is trying to turn assets into liquidity without accepting what the board considers an excessive discount to book value. The Forbes aggregation was classified as held for sale at $59.168 million, although no binding sale contract had been signed by 30 June. The apple business, acquired as part of the merger, was agreed for sale at approximately $9.186 million and became unconditional after year-end, with settlement expected in early October.

Debt terms have also tightened. Under an August amendment with Commonwealth Bank, the $8 million second overdraft tranche must be repaid by 31 October 2026, while no management fees may be paid to the investment manager until that repayment is complete. The group’s loan-to-value covenant is set at 60% until June 2027 and 45% thereafter, with quarterly reporting to lenders. These are concrete near-term obligations, rather than distant strategic aspirations.

Development Portfolio Still Awaits Its Earnings Test

The board is deliberately moving away from a strategy centred on NAV growth and towards earnings growth from horticulture, apiculture and Northern Australia. Piambie had 648 hectares of pistachios planted by the time of the report, with the first commercial crop expected within three years. Wildman had more than 1,400 hectares re-cleared during FY2026, while the group had secured contracts for approximately 44,000 hives for the August 2026 almond pollination season.

Those assets remain works in progress, however. Viticulture produced 2,722 tonnes of dried fruit, well below budget, while honey production was 320 tonnes against a 660-tonne forecast. The group also faces varroa mite pressure in apiculture and acknowledged that funding support will be needed into FY2027. Its convertible note offer, carrying either a 7.5% cash coupon or a 12% capitalised return convertible into equity, had raised $4.933 million of a potential $9.737 million when the report was prepared.

FY2027 will provide the first full-year view of the merged portfolio, but the immediate scorecard is narrower: whether the apple sale settles, whether Forbes can be sold without a damaging discount, whether the overdraft tranche is repaid and whether development spending can be matched to available funding. Until those pieces move, Duxton Farms’ promised long-term earnings profile remains dependent on a balance sheet that is already under strain.