Gowing Bros dividend faces pressure from negative operating cash flow

Loss widens despite stable shopping centre operations

Gowing Bros Limited (ASX:GOW) finished FY2026 with another statutory loss, as international weakness in its surf hardware business combined with a $3 million unrealised write-down across its investment properties. The net loss after tax widened to $3.49 million from $3.29 million, while revenue fell to $58.8 million from $60.8 million.

The result was broadly in line with the company’s previously reported figures, including the $3.49 million annual loss reported earlier. The loss per share increased to 6.48 cents from 6.17 cents, although total comprehensive income remained positive at $2.19 million, helped by a $5.59 million increase in the fair value of equity investments recognised outside profit or loss.

Surf Hardware remains the main operating drag

Gowings Surf Hardware International generated $35.9 million in revenue, down from $37 million, and recorded a $4.66 million net loss. Management attributed the pressure to weak discretionary spending, geopolitical disruption, higher freight and raw material costs, and softer trading in Europe and Japan.

The company said a stronger Australian dollar improved Australian margins and that tariff refunds helped reduce volatility. It is also restructuring the supply chain, has completed the move of Alvey manufacturing to Coffs Harbour and expects stronger gross margins, improved supplier terms and a better bottom line in FY2027. Those are management expectations rather than reported outcomes, leaving the loss-making division as the clearest operational test for the year ahead.

Property portfolio holds up operationally but valuations soften

Gowing’s Coffs Central, Port Central and Kempsey Central shopping centres delivered broadly stable specialty and major tenant sales, with centre EBITA slightly above the prior year. Rental income rose to $20.6 million from $19.9 million, while net rental income increased to $8.1 million.

That operating stability did not prevent the portfolio’s recorded value from falling. Investment properties were valued at $191.3 million at 31 July 2026, down from $193.7 million, after the $3 million revaluation loss. The weighted average capitalisation rate for the centres rose to 7.58% from 7.42%; the company’s sensitivity analysis indicates that a further 0.5 percentage-point increase would imply an additional $12.5 million loss, while a comparable decrease would imply a $14.3 million gain.

Dividend maintained as cash flow turns negative

Gowing declared a fully franked final dividend of 3 cents per share, taking the FY2026 total to 6 cents. The final payment is scheduled for 6 November 2026. The board said its dividend policy remains prudent because capital is required across developments and investment opportunities.

That caution matters because operating activities consumed $4.65 million of cash during the year, compared with a $1.55 million outflow in FY2025. Cash and cash equivalents fell to $11.6 million from $16.4 million, while current borrowings included $6.12 million secured against Sawtell Commons and $2.96 million for Surf Hardware. Total borrowings rose to $104.9 million from $95.9 million.

Sawtell Commons advances while net assets remain broadly flat

Statutory net assets increased marginally to $196.3 million from $196.1 million. The company also reported net assets per share before tax on unrealised gains of $3.86, compared with $3.87 a year earlier, and total shareholder return of 1.3%, including the 6 cents paid during the year.

Sawtell Commons Stage 4, comprising 26 lots, was completed and registered for sale during the period. The company has begun drawing on development debt and is progressing plans for future stages, including potential build-to-rent funding. It also continues to develop Solitary 30 in Coffs Harbour, while its Tasmanian farming assets are being improved through pasture, irrigation, biodiversity and carbon-sequestration projects.