DGL Group’s FY26 annual report lays bare a difficult year: revenue and underlying earnings fell, statutory losses widened and the auditor issued a qualified opinion over opening inventory. Management is betting on cost cuts, fuller facilities and a new liquid waste plant to repair performance in FY27.
- Revenue fell 4.8% to $457.9 million
- Underlying NPAT swung to a $5.8 million loss
- $34.4 million of post-tax one-off items and impairments
- BDO issued a qualified audit opinion over opening inventory
- $120 million ScotPac facilities drawn to $105.5 million at year-end
DGL’s FY26 loss deepens as margins retreat
DGL Group Limited (ASX:DGL) ended FY26 with a $40.2 million statutory loss, compared with a $27.9 million loss a year earlier, as weaker margins, higher operating costs and a series of impairments overwhelmed the chemical logistics group’s revenue base. Revenue fell 4.8% to $457.9 million, while underlying EBITDA declined 20.7% to $41.3 million and underlying NPAT moved from a $3.5 million profit to a $5.8 million loss.
The result included $34.4 million of post-tax one-off items, including a $14.7 million goodwill impairment in Logistics and $13.8 million of property, plant and equipment write-downs. DGL attributed the pressure to fuel, raw material and freight costs, competitive imports, driver shortages, subcontractor use and underutilised manufacturing and warehousing capacity. The company’s FY26 loss and expansion costs had already been reported in its results, which highlighted the same recovery plan centred on utilisation and cost control.
Qualified audit opinion keeps controls in focus
BDO issued a qualified opinion because it was appointed on 15 December 2025 and could not observe the physical inventory count at the beginning of the year or satisfy itself by alternative means about inventory quantities at 30 June 2025. The auditor said this prevented it from determining whether adjustments were needed to reported income and operating cash flows, and noted that the FY25 comparative figures were unaudited.
The report also discloses a restatement that increased comparative inventory by $6.7 million at 30 June 2025 and by $6.4 million at 1 July 2024, after DGL included conversion costs in inventory for the first time. BDO identified inventory existence and valuation, impairment testing, revenue recognition and management override of controls as key audit matters. The qualification does not represent a new FY26 inventory shortfall, but it leaves the quality of the comparative financial record as an important governance issue.
Debt refinancing provides time, not a clean balance sheet
Cash generation weakened sharply, with operating cash flow falling to $15.8 million from $44.7 million. DGL reported $11.6 million of cash at 30 June, but $11.25 million was restricted under its debtor finance arrangements. Borrowings stood at $105.5 million and lease liabilities at $75.8 million, while the group’s gearing ratio rose to 68% from 58% on the report’s capital-management measure.
The company refinanced its former ANZ syndicated facility with a ScotPac Business Finance package of up to $120 million, with a minimum tenure to March 2028. The $120 million ScotPac refinancing was announced in March as a replacement for the previous arrangement. At year-end, DGL had drawn the full $20 million term loan, $40.7 million of debtor financing and $44.6 million of chattel mortgage facilities. Directors said cash-flow forecasts indicated sufficient headroom and maintained the going-concern basis, but the restricted cash position and reliance on working-capital funding leave less room for operational disappointment.
FY27 recovery depends on utilisation and project delivery
DGL’s plan for FY27 is operational rather than financial: reduce costs, improve fleet utilisation, fill expanded warehouses, recruit and retain drivers, and convert manufacturing capacity into higher margins. Warehousing capacity rose 8.6% to 1.35 million annualised pallet spaces, but utilisation fell to 78% from 83.4% after expansions in New South Wales, South Australia and Western Australia.
The Unanderra liquid waste treatment plant is expected to become fully operational in the first half of FY27 after delays caused by technical and resourcing issues. DGL has applied for additional licences to process a wider range and higher volume of external industrial liquid waste. The company also continues to roll out its group ERP, finance and logistics systems, intended to replace more than 30 standalone systems.
There are risks beyond the income statement. DGL has pleaded guilty in EPA proceedings relating to alleged environmental breaches at a site in 2024, although management does not consider a material outflow likely. A June fire at the Campbellfield Envirostore remains under investigation, with potential penalties, remediation costs and third-party claims not yet reliably measurable. The recovery case therefore rests on two forms of execution at once: better economics from the assets already built, and tighter control over the systems and risks surrounding them.
Bottom Line?
DGL has bought itself operating time through refinancing, but FY27 must show that new capacity can generate cash before restricted liquidity and impairment sensitivity become more pressing.
Questions in the middle?
- Can DGL lift warehouse utilisation and owned-fleet productivity quickly enough to restore margins?
- Will the Unanderra liquid waste plant open on schedule and secure the additional licences it needs?
- What financial or operational consequences could emerge from the qualified audit opinion, EPA proceeding and Campbellfield fire?