I am also joined today by our Chief Operating Officer, Jason Serafino. Say hello, Jason.
Hello.
Our Chief Financial Officer, Victor Peplow. Apologies, we all were attempting to be in the same boardroom today, but hit a little bit of a technical hitch. Anyway, hopefully, that shouldn't be a bother. Before formally commencing, I wanted to pay tribute to Andrew specifically for a wonderful contribution to the business. We are also very pleased that Andrew will remain with the business as an executive director up until the AGM, and a non-executive director thereafter. Specifically helping the business with sales and client relationships, which he is so fantastic at. M oving on. In my time with the business thus far, I've had the time to reflect on and assess where we are positioned. The business has a number of very strong attributes which stand us in good stead for future prosperity.
In particular, as I looked at the business, we are a key service provider to a large, growing, and diverse blue-chip client base, which drives recurring revenue. We enhance the financial and customer outcomes for those clients, creating loyalty and leading to repeatable organic growth. We continue to strive for and drive operating leverage, whereby underlying earnings growth outstrips the revenue growth. This trend is supported by increasing digital collections and operational enhancements. AI-based tools and selective offshoring are a key driver of many of those enhancements. We have a dedicated and talented executive and senior leadership team, and they are committed to driving the business forward. We've also, you noticed, entered the U.K. market, which we estimate to be four times the size of our home Australian market, with a lot of similar attributes. This provides us a new medium-term growth platform.
We continue to see good growth opportunities across digital and traditional channels in the Australian market, particularly in banking, insurance, and utilities industries. Operating cash flows have grown, and a capital raising was completed during the period to assist with the U.K. acquisitions, leading to a strong balance sheet, which will be an enabler for future expansion. Moving to this first slide that we've got here. You will have seen this slide before. It really summarizes the group well. We are a tech-enabled, full-service debt collection business. From an early-stage SaaS platform via Credit Clear and now the DTS business following that acquisition, to what we'd call a tech-enhanced traditional provider via ARMA and now ARC Europe in the U.K. Finally, later stage collection via our legal services firm, Oakbridge. If we can move forward, Mel. Now, to the numbers.
2026 has been a very successful year, with strong growth in all key metrics. Revenue was up 28% to AUD 60 million. This was driven by both organic growth and initial contributions from the ARC Europe and DTS acquisitions. Key drivers of the organic revenue growth have been continued digital-first adoption across the core Australian collections business, growth in the client base, and increased share of wallet. Underlying EBITDA was up 41% to AUD 10.5 million. Continuing operating leverage is evident, with the underlying EBITDA margin increasing from 15.9% to 17.5%. Increasing high-margin digital collections and operational enhancements aid this trend. In particular, AI-based tools will continue to be a key driver for many of those enhancements. These AI-based tools are increasingly assisting our team in their customer discussions. Underlying NPATA was up 65% to AUD 6.7 million.
This is a new measure we are tracking going forward, as it approximates an underlying cash NPAT for the business, and we believe should further assist shareholders in assessing value. Next slide, Mel. Thanks. Underlying earnings per share was up 45% to AUD 0.014 per share. This was calculated as the underlying NPATA, divided by the weighted average diluted share count. This is taking into account the in-the-money share rights under the executive incentive program. Operating cash flows were also strong in the period. Underlying operating cash flow was up 25% to AUD 8.3 million, and the net cash position at balance date was AUD 16.9 million. We will move forward again. Thank you, Mel. Just looking at the attribution of the performance, specifically, looking at the revenue bridge here. Organic revenue growth was AUD 4 million, or 9%.
We also, obviously, had the initial contributions from the ARC Europe and DTS acquisitions, with a contribution of AUD 9.1 million. If we were to pro forma a 12-month contribution from those acquisitions, the pro forma annual revenue would be AUD 70 million. Moving to the, likewise, the underlying EBITDA. Organic EBITDA growth was AUD 1.3 million, or 17%. Again, the initial contributions from the ARC Europe and DTS acquisitions was approximately AUD 1.7 million. Jason will talk a little bit more on those acquisition performances, but they are ahead of investment case, which is very pleasing. Again, if we were to pro forma a 12-month contribution from ARC Europe and DTS, pro forma underlying EBITDA would be AUD 12 million. Moving forward, again, more numbers. This shows the detail, reconciling the underlying EBITDA that we have spoken about to the reported NPAT. Some items to call out, an accounting thing.
There was a AUD 2.8 million credit to the P&L upon the fair value of the ARC Europe contingent payment, because part of that payment is payable in two years' time. This payment is to be made in a set number of shares, and this fair value change reflects a reduction in our share price. So as I say, just a non-cash accounting charge. There was approximately AUD 2.4 million in non-operating costs, the main of which relates to the costs associated with our busy acquisition year, and a smaller amount of legal costs relating to the ACCC matter, which we will touch on shortly. The share-based costs reflect the non-cash costs associated with the executive incentive plan, and the dilutionary impact of this plan is reflected in the underlying EPS numbers that we have already stated.
The depreciation and amortization capture the AASB 16 charges on our rental properties, and also the amortization of capitalized software costs. Moving on. Thank you, Mel. Just a little more information here related to this and following on, I guess, from the previous slide. This shows the bridging items between the reported NPAT of AUD 4.3 million and the underlying NPATA of AUD 6.7 million that we've called out. In particular, a few things there. The tax credit reflects a further addition to the deferred tax assets, which are now on balance sheet. It is therefore expected that no tax will be payable for up to the next two financial years. The amortization on the intangible assets is added back. We've spoken earlier about the fair value of the deferred consideration, the tax-adjusted non-operating costs, and the share-based costs are also added back in the way that we've calculated this underlying NPATA.
Moving on to the balance sheet. Thanks, Mel. The balance sheet is in a strong position. The cash and liquidity position is strong and has improved over the period. The net cash position was AUD 16.9 million at balance date. Intangible assets increased as a result of the ARC Europe and DTS acquisitions. Further, we entered into a new debt facility with ANZ in the period. The initial loan was AUD 6 million, reducing over a three-year period. This new relationship provides funding flexibility for future growth plans, which I think places us in good stead as we look forward to grow. Share capital increased over the period by a net AUD 17 million. We raised approximately AUD 21 million in equity for acquisitions, offset partially by the share buyback program that we enacted during the year, which was approximately AUD 8 million.
The balance related to shares issued as part of the ARC Europe acquisition, and there was also a movement in shares relating to the executive incentive plan. N ext one. Thank you, Mel. This is just talking about our cash flow here, which was very good in the period. Cash generation and conversion was strong. Underlying operating cash was up 25% to AUD 8.3 million. This number adjusts for the costs associated with the acquisitions, which was about AUD 1.7 million. The reported cash was also up 14% to AUD 6.6 million, and this represents good cash conversion, which is very pleasing. Investing cash was AUD 14 million for the acquisitions, and a further AUD 2 million across both capitalized IT costs and plant and equipment. Finally, we've sort of touched on this.
The financing cash captures the net equity and debt raised from various raising activities, offset by the share buybacks and the cost of the rental leases. I will now hand over to Jason, who will run you through some various items as well. Thanks, Jason.
Thanks a lot, Josh. This is a nice slide to start on. We are very pleased how this one is looking. As you can see, we have a large, growing, and very diverse blue-chip client base, very evident here. Great to see the expansion into new geographies. Both our two recent acquisitions in DTS and ARC Europe have strong client bases into the U.K., which will be a focus for us for growth into the coming year. A smaller footprint into the U.S. and Canada, with somewhat of a niche offering from DTS servicing libraries there. To the next slide, thank you. Now, peering under the hood of the numbers. As Josh said, one of the key contributors to improving margin is the use of digital. The numbers here show payments on our digital platform.
This is when a customer clicks on an SMS or an email, WhatsApp message that we send them, makes a payment through our web portal without human intervention. These kinds of payments are higher margin than when our team is on the phone with the customer, taking payments that way. You can see our top-line organic revenue growth was 9%, but our digital payments grew by 26%, and that is one part of what is underpinning the 41% growth in underlying EBITDA. Very pleased to see that. The numbers there are not including acquisitions, so we have not put DTS or ARC Europe in there just to keep that story simple.
However, with these acquisitions, Software as a Service, SaaS, revenue now accounts for 18% of company revenue, and that is very pleasing to see, because not only is it high margin, but it is very sticky because we integrate it into our clients' back-end collection processes. Next slide, there Mel. Talking more about digital and AI, we do see a further opportunity to expand the use of digital automation and AI across the business for further operating leverage increase. That is through automating the tasks that are currently done by our teams today, more and more of those tasks. In the center here, I have a diagram of our platform capabilities, either live today or in development and expected to be released over the course of this financial year.
Starting at 12 o'clock and going clockwise, we have digital communications, our self-service capabilities, our human operators and documents, and their current and very mature capabilities that we have been leveraging for many years to get to the kind of results that we have today. But adding to those capabilities, we now have a number of new technologies in play for this year. We have recently added digital voice with the addition of the DTS digital IVR technology. That allows us to make outbound, inbound phone calls using pre-recorded messages that you use your keypad on your phone. If you have ever made an appointment to your electricity company or similar on an IVR, you know what that experience looks like. It is just another technique for us to remove these higher-cost activities from our call center.
Further down the dial there, we are also investing into the exciting new world of agentic AI that everybody's talking about at the moment, I suppose. Think ChatGPT and other technologies. We're starting with emails because it's a big overhead in our teams. They spend a lot of time answering emails from customers. In fact, in our insurance team, where it's the highest, they spend three and a half hours per day per operator doing that, and we think that there's a significant opportunity to reduce this by having an AI read the customer email, draft a response, but still have a human review that before it goes back to the customer so that we've got the human loop, and it keeps it safe. We're also looking at deploying AI voice, which is where we have robots speaking to customers in voice calls.
I do not want to over-hype that technology at this point. It's got a lot of promise, but there's a lot of risks and issues to work through in our space, particularly in collections where we're dealing with customers in vulnerable circumstances. So, there's a lot to do in terms of evolving that technology and getting the right guardrails in place. But we do plan to remain on the forefront of that technology and continue to invest in that space. Finally, in the center, we have our own AI agent, ARI. This is a rebrand of our Next Best Action AI that we've been winning awards for all the way back to 2021. And that sits in the center optimizing the best channels, approaches, strategies to use with an individual customer, in order to achieve the best collection result, but in order to optimize our costs as well.
So we're very excited to continue to invest in that technology. To the next slide. Thanks, Mel. Turning to the acquisitions now. So, we're very pleased with how both the acquisitions are progressing. First, here we have ARC Europe. This is our U.K.-based debt collection agency. We're presenting a couple of numbers here. We've got the revenue and EBITDA as was announced, and then we've taken the first half of this calendar year and annualized that to give you a sense of how that's progressing. And as you can see, in both cases there, it's meeting, perhaps exceeding our expectations, which is very pleasing to see. The integration's gone very well. Financial integration is complete. We've developed a tech roadmap to combine ARC, DTS, which is also in the U.K., and the Credit Clear technology, and we're working through the implementation of that over this year.
The sales pipeline's very strong. So we're in very promising discussions with a number of blue-chip opportunities. With the combined ARC, DTS, and CCR services, we had a successful launch event a month ago. It was very well attended, and very pleasingly, we already have our first new Tier 1 client in onboarding. So, this will be a big focus for us for growth across this year. To the next slide, Mel. Similarly, with DTS, as I mentioned, it's a technology provider of collections capabilities. So voice and other capabilities that we're leveraging. DTS is strong in the U.K. as well as presence in New Zealand, Australia, and as I mentioned, a bit of a niche presence in the U.S. Again, a blue-chip customer base. Really great opportunities to cross-sell our ARC and CCR services. Again, the transition and integration are complete. All the technology services have been transitioned over.
That went very smoothly. We will be, again, looking for growth in this area, but also some rationalization of infrastructure costs, in order to improve EBITDA. Over to you, Josh.
Thanks, Jason. D espite these positive advancements, business is often not plain sailing, and we were served with legal proceedings on the 24th of June , brought against us by the ACCC. We are working through this. We are well-represented, and are defending the proceedings. In terms of an update, look, the matter is following usual legal procedure, in this regard. We confirm that there was an initial federal court case management hearing, so that is not a trial, but a case management hearing. That occurred on the 31st of July . There were various procedural orders made by the judge at that time. The first of which was, the ACCC were to provide further and better particulars, to their concise statement by the 14th of June . That has occurred. We, being ARMA and Force Legal, are to file and serve any sort of adjustments to that by the 18th of September .
Probably the most substantive update that we can share is that there is a further case management hearing on the 16th of October this year. The matter has not impacted our day-to-day financial results or operations in a material manner at the present time. Of course, we will provide material updates as and when required under our continuous disclosure obligations. To the next slide. Thanks, Mel. Now, looking forward, that was the year that was. We are very pleased with it. Made a lot of great strides. But looking forward to the 2027 year, we remain confident in the future prospects of the group with an expectation of continued organic revenue and earnings growth across core operations in both Australia and the U.K. At present, the ACCC proceedings have not materially impacted the financial results, as I sort of said.
On this basis, the company provides the following guidance for FY 2027. FY 2027 revenue, we expect to be in the range of AUD 73 million-AUD 77 million. We expect underlying EBITDA to be in the range of AUD 12 million-AUD 14 million. We expect a skew to the second half performance consistent with prior periods. Also noting that ARC Europe are further weighted in this half also. That is important to note, as we look forward into 2027. This guidance assumes no material operational impact from the ACCC proceedings. A couple of other things that we have called out here. We are expecting good growth on the U.K. side. We have got a couple of new sales executives there to help build out and grow the business there. Likewise on the SaaS and BPO side, we are expecting some good growth there.
To Jason's point, we are expecting further AI deployment and enhancements across the group. There are a few interesting technologies that we are looking at there. To wrap up, Mel, just the final slide, almost a bit of a summary that we touched on at the start. Key attributes that we are really looking at here that I have certainly been impressed by since I started here is, there is a blue-chip client base here, which is growing, a loyal client base. That leads to a repeatable organic growth. We are expanding our expertise in collections into a new market in the U.K. We sort of see that as a medium-term growth platform. Operating leverage is a key focus internally with the management team, looking to get earnings growing more than revenue from all those efficiency measures that Jason has referred to. Good domestic market opportunity as well.
Particularly, we sort of see in the banking, insurance, and utility sector. We still see good growth in those areas particularly. Importantly, we have got a strong balance sheet, good capital position, and a fantastic executive and senior leadership team. Very pleased with the year and we are looking forward to FY 2027. That is it for the formalities, Mel. Happy to open to Q&A at your convenience.
We have Larry Gandler from Shaw and Partners online. Larry, if you would like to ask your questions live?
Yes. Can you hear me, Mel?
Yes. Thank you.
Great. Josh, welcome aboard. Congrats on your appointment and congrats to Andrew, moving up to the board. First question is, and not wanting to pressure cook the organization, when you look at the guidance at the midpoint, I think it is something like AUD 14+ million of revenue growth. Looking at the EBITDA, it is AUD 2.5 million of EBITDA growth at the midpoint. Normally, Credit Clear has a higher conversion for marginal profits. When I think that there might even be synergy with the acquisitions or some acquisition investment unwinding, it seems like maybe AUD 2.5 million is very conservative, or that EBITDA guidance range is conservative. Can you talk to what factors have gone into that EBITDA guidance range?
Look, we are always looking to be, with guidance, you have got to strike the balance between a confident position but also being sufficiently conservative. I guess all I can say is we are very focused on organic revenue growth and being efficient with turning that into profitability. They are some of the key factors we have thought about with it.
Did you have some integration costs in FY 2026 that might unwind in FY 2027, Josh?
Well, we've called out the one-off costs in the FY 2026 result. Those one-off costs we've called out.
They might be already captured below the management EBITDA number. I see that. The other question I had is, SaaS as a proportion of your revenue kind of steps up with the acquisitions. Just wondering, maybe Jason, you could talk to, is that DTS, which is largely integrated with its customers, how does that change, that SaaS?
That's correct, Larry. DTS is entirely SaaS business integrated with the customers. You're part of their collections process.
Great. So it's fully integrated. That's good to understand. That's my questions. Thank you.
Thank you, Larry. Josh, can we just talk to the ACCC. What specific systems or processes and governance changes have been made in response to the matters underlying the proceedings? What independent assurance has the board obtained that those historical issues cannot recur, and how is Credit Clear engaging with the ACCC regarding that remediation?
I'll hand that to you to start with, Jason.
Let me cover the first part of that question in terms of operational changes. Certainly we've specifically reviewed all the allegations and put in place improvements around those. Let me say though, more broadly, we're in a process of continually reviewing these things, and the areas that the ACCC look to, the same areas that our clients and our internal audit functions, et cetera, look. With all of our major clients, we will be in an annual and quarterly audit, largely compliance-focused. With many of them, we have a monthly review as well. So we genuinely are constantly reviewing and improving the processes around all of these points all the time. We actively encourage our clients to do that.
As you can imagine, post the ACCC announcement, many of our larger clients did come in and do exactly that, do a deep audit, and I'm pleased to say weren't able to identify any issues at all out of that. So very confident about the state of play of our compliance and controls.
On that last point, Mel, I think you sort of said to what extent are ACCC involved with us on those. They aren't involved in that. This is something we're doing independently of them. It's not something that we're liaising with ACCC directly on at this point.
Thank you. Maybe just to continue with that, Jason, you touched on it in terms of compliance and customers, but could you maybe talk about your pipeline conversion rate with customers and if the proceedings have affected the group's ability to win new business at all?
I'll take that in the first instance. In terms of the impact on the operations at the moment, Mel, the impact has been immaterial, particularly if we look at the existing client base. The clients have been generally very supportive. If we look almost at a worst-case scenario at the moment, estimate of current impact is probably 1%, maybe 2% of group revenue, and that's if you're being conservative. That equally doesn't mean that the revenue ceases immediately from what is a very small number of clients that have questioned, or that have been asking questions. What it has led a little bit to, as Jason sort of said, is an increase in out-of-cycle client reviews, and all of those have come up very well. At this stage, as I say, the impact have been immaterial.
In terms of new clients, we continue to win and progress new business opportunities, particularly in the U.K. is a key focus, and to get the sales momentum up there, particularly in DTS. DTS is a really good, strong business, but having come out of a corporate the way it had, it didn't have a strong sales and growth culture. So we see good opportunity there. Also in the SaaS area and those digital sales, we see good opportunities there. So the pipeline there is good. Our prospect list is good. Possibly the ACCC matter has led to sort of longer sales conversion cycles. They've probably had sort of extended internal reviews and procurement processes as a result. But Eddie and the team have a good pipeline and really good sort of discussions occurring with clients.
Particularly on sort of new business, it's probably more an issue of timing. But existing clients, new business can also mean existing clients giving you sort of increasing work. Our performance on our panels has been good over the period, or probably better than good.
Thanks, Josh. Just further to that, could you maybe talk to the financial resilience of Credit Clear given the uncertainty around the proceedings? Has the board stress tested Credit Clear's balance sheet for potential penalties? Under what range of outcomes could the group fund these costs from existing facilities without needing to raise additional equity?
Well, look, in the presentation, I spoke about the strength of the balance sheet. There's a net cash position of AUD 17 million. The balance sheet's never been in a stronger position. So , that's probably about as simple as that, Mel.
Thanks, Josh. We have James Filius online from Morgans. James, you're open to ask your questions.
Thanks, Mel. Welcome to the Credit Clear team, Josh.
Thank you, James.
Thank you. I just wanted to ask a question. Obviously, you called out that you have won a Tier 1 customer in ARC Europe, which is going to go live in September. I guess, how should we think about the ramp-up of that Tier 1 customer? I think historically there has been a bit of a lag in onboarding volumes as customers sign up. But can you sort of talk us through, I guess, your expectations and sort of help us think through the ramp-up of that and how it sort of plays into the guidance for FY 2027 as well?
I will let Jason perhaps speak about that specific client. But in terms of the guidance, that is based on internal budgeting, and the internal budgeting is, unsurprisingly, a ground-up budgeting process where each business puts forward their plans and growth plans and what have you. So, as part of that, in the internal budgeting, the ARC Europe business shows a pleasing amount of growth compared to the investment case. As part of that, the phasing of that new Tier 1 client is sort of reflected in the guidance. But, Jason, you are probably better off speaking about the timeline with which these start becoming sort of mature revenue earners.
As you said, Joshua, that is included in the guidance there, James. I t is similar to, as we have said, here in Australia. So quite commonly, your onboarding process is three months by the time everybody, particularly with the Tier 1, have been through all these checks and balances. Really quite commonly, it takes your first 6 to 12 months is really proving results, getting deeper allocations. So it does usually grow slowly, particularly with these Tier 1s over that kind of course. But that, again, has been included in the guidance for this year.
Maybe just to unpack further, I guess you guys talked to a pretty robust pipeline of opportunities that are out there for the year ahead. How many, I guess, would you consider within the Tier 1 sort of level, and even Tier 2, just so we can sort of think through, I guess, the opportunity set?
I don't have that in front of me, and I want to be clear that this is a pipeline that's building. I don't think we're at a point to say we want to start counting them in just yet. It's fairly early days. I think we can provide more information on that a little bit further down the track.
I think you're at risk of making it slightly more complicated than it needs to be. I guess the guidance reflects our current view of the next 12 months. We're constantly talking to new clients, new opportunities. Look, there's other growth opportunities. If I look at the ARMA business, it's got a large number of clients we've called out at 500+ . There's a lot of opportunity. The new news is always new and sexy, but there's a lot of opportunities within existing relationships where we're probably not optimizing the revenue with existing customers. I think sort of only focusing on the new news, p ossibly doesn't look at all the opportunities that might be there. Eddie and the team here in Australia, and the sales team are constantly looking at enhancing and growing the existing client relationships as well.
Understood. Thanks for that. Appreciate the responses.
Josh, Jason, are you looking to target school fees with the digital collections business? It would be a natural fit, asks Scott.
Actually, something has been in discussion. We do a small part of that. No doubt Eddie is looking at that. Maybe there is a broader kind of point here around targeting niche markets and adjacent markets. We have been really successful at doing that in the insurance space with a specific product for collecting or engaging and collecting on third-party at fault motor vehicle claims. You see the same thing with DTS in New Zealand, with a niche piece around libraries, which have been very successful there. It is a really good call-out and exactly the kind of niches that we are targeting.
Thank you. Finally, can we ask what is the current status of the share buyback?
There is approximately 13 million shares available still left under the original share buyback plan. At this point, the board is still considering its position as to whether we will continue that.
Josh, that brings us to the end of the Q&A segment, so I will pass back to you for final comments.
Well, thank you, Mel, and thanks everyone for joining us. As I sort of say, we are all very pleased with the way the 2026 year has gone. The results are good. The business is really well positioned. We have a great team here. It is a strong, robust team. The last couple of months there has been some ups and downs. But the core of this business is really strong and pleased with the results. Looking forward to next year. As one year ends, the next one begins. That is what we are really focused on. So thank you, Mel.