Surf Hardware loss and property write-down deepen Gowing Bros earnings pressure

Surf Hardware Loss Drives Another Difficult Year

Gowing Bros. Limited (ASX:GOW) ended FY2026 with a $3.49 million loss after tax, deepening the $3.29 million loss recorded a year earlier. Revenue fell to $58.8 million from $60.8 million, while the company’s Surf Hardware International business delivered a $4.66 million net loss as weaker international demand compounded supply-chain and cost pressures.

The outdoor-products business generated $35.9 million in revenue, down from $37.0 million, with the company pointing to difficult economic conditions in Europe and Japan. Gowing Bros said a stronger Australian dollar, tariff refunds in the United States and ongoing supply-chain restructuring helped margins, but the segment result remained negative at $4.87 million after operating costs.

Property Revaluation Adds to Earnings Pressure

Investment properties produced $20.6 million in rental revenue, up from $19.9 million, and net rental income rose to $11.1 million. That recurring income was not enough to offset a $3.0 million unrealised downward revaluation, which reduced the carrying value of the property portfolio to $191.3 million.

The valuation adjustment came as the weighted average capitalisation rate for Gowing Bros’ Coffs Central, Port Central and Kempsey Central shopping centres increased to 7.58%, from 7.42% a year earlier. The company said specialty and major tenant sales across the portfolio remained broadly stable, with centre earnings slightly above the prior year, but the accounting revaluation still flowed directly into the pre-tax loss.

Net Assets Hold Despite Cash Flow Strain

Statutory net assets edged up to $196.3 million from $196.1 million, although cash and cash equivalents fell to $11.6 million from $16.4 million. Operating activities consumed $4.4 million during the year, compared with an outflow of $1.5 million in FY2025, while investing activities used a further $6.0 million as Gowing Bros continued spending on development properties, investment properties and private-equity investments.

Borrowings remained at $95.9 million on a non-current basis, while current borrowings increased to $9.1 million. The company’s reported net tangible asset backing was $3.80 per share before tax on unrealised gains and $3.56 after tax, compared with $3.81 and $3.59 respectively a year earlier. The preliminary figures remain subject to audit.

Final Dividend Maintains Six-Cent Annual Payout

Gowing Bros declared a 3 cents per share final dividend, fully franked at a 30% corporate tax rate and payable on 6 November 2026. Combined with the 3 cents interim dividend, the FY2026 payout remains 6 cents per share. The final distribution is wholly sourced from qualifying listed investment company capital gains, with an attributable pre-tax LIC capital gain of 4.2857 cents per share.

The dividend decision preserves the company’s recent payout pattern while management says it is maintaining a prudent approach because capital is required for developments and investment opportunities. The key test now is whether Surf Hardware can deliver the stronger gross margins and lower operating costs forecast by management for FY2027, while Sawtell Commons Stage 4 converts its 26 completed lots into cash without further pressure on liquidity.