Ladies and gentlemen, thank you for standing by. I'd now like to welcome Anthony Stokes, Chief Financial Officer, to begin the conference. Anthony, over to you.
Thank you. Good morning, everyone, and thank you for joining us this morning for the announcement of our 2026 full year audited results. With that today, some significant additional news about changes to our senior executive personnel. My name is Anthony Stokes, and I've been appointed Interim CEO of COSOL following Scott McGowan's decision to step down as MD and CEO. Given the significance of those changes, it's appropriate to start this morning's call with you hearing from our Chairman, Geoff Lewis, whose role has also changed. Once you've heard from Geoff on the executive changes, I'll come back and take you through the 2026 financials with a far stronger second half to the year. I'll also take you through the plan to continue the profit rebound from half two and why we have confidence FY 2027 will be far better than the year just gone.
Over to you, Geoff.
Thanks, Anthony, and hello to everyone. It's great to have you on the call today. You'll notice Scott McGowan is not on the call. Scott stepped down, as Anthony said, as MD and CEO, and as part of a series of changes that we, the board and management of COSOL, believe is appropriate and what's needed to return the business to an upwards trajectory with profitable organic revenue growth and the restoration of shareholder value. The results of the recent reporting periods have not been acceptable and significant decisions have been made and new initiatives launched to get COSOL back on a growth path. The most significant is Scott stepping down as MD and CEO. He's had 10 years in that role through an IPO and listing period in 2020, and he will now transition to a new role leading COSOL's strategy.
Our Chief Operating Officer and CFO, Anthony Stokes, has been appointed interim CEO and brings to this role four years of experience inside COSOL as CFO and more recently, COO. He is also the person who has presided over the reset of COSOL's cost base, which has been reflected in better margins and better profitability in H2 of the financial year just ended. We will now have a process for the recruitment of a permanent CEO, and I have no doubt Anthony will be a candidate for that position. I have also temporarily stepped into the role as executive chairman to help achieve as smooth a transition as possible and to contribute to the big revenue growth push in FY 2027. I will stay in that role until the new CEO is appointed.
We are confident these changes and the introduction of additional new talent in coming months will position COSOL to achieve the organic revenue growth that has eluded us in recent times. I will now pass you back to Anthony and of course, answer any questions you may have in the Q&A section. Anthony.
Thanks, Geoff. Yes, I am pleased to have been asked to take on the role as interim CEO after Scott stepped down. I think COSOL is a great company with outstanding opportunities. Candidly, we have not executed our strategy as smoothly as possible, and that is my primary focus in the coming weeks and months. I believe the platform has been set with the performance in the second half of 2026, where the impacts of our cost reset have started to have an impact on our margins. Better margins, improved underlying EBITDA, and securing two major new contracts in the digital and data consulting business in the mass transportation sector, one here in Australia and one in Canada. There is lots of hard work ahead for us to achieve our goals, but essentially this will be directed by replicating contracts like these in transportation and doing so at scale.
If 2026 was the year when we reset our cost base to give us a solid platform from which we operate and grow, then 2027 is the year where our major focus, which is to driving profitable organic revenue growth. These two major contracts are great examples of the type of deals where our capability of AI industrial mathematics is taking us into long-term, multi-year, high margin work that brings certainty and visibility of the sort we have not previously had. So we are bullish about COSOL's ability to secure contracts like these at scale. Though, as I say, there is lots of hard work to come. Let me now take you through some of the key features of the FY 2026 result, and you will see there is the numbers and presentation in our deck, so I do not propose to run through it in detail.
Rather, I'll take you through a number of key slides that I think are most important and that tell the story of what we've done to reset COSOL. Why we think it's a good platform for growth, and then some things that we're seeing that give us confidence in the way growth is achievable. I'll now move to slide three and add to a couple of different additional items there. As we said, our underlying EBITDA of AUD 9.8 million was underpinned by the strong return of recovery of margin in the second half, with a second half underlying performance of AUD 6.3 million. In addition to that, we've rebuilt the Australian sales team. This has been underway with Damon Rudge joining us in May 2026.
Damon was most recently at Tata Consultancy Services and has a proven track record in leading high-performance sales teams of IT service companies across the APAC region. His experience spans both customer acquisition and account growth with a strong focus on developing sales capability and improving execution discipline. Since joining COSOL, Damon has been actively recruiting the expanded sales team to drive the revenue growth for 2027 and onwards. Recent wins provide a platform for this growth and are proof points of the quality of the proprietary IP and domain knowledge that sets COSOL apart from its competitors. Moving to slide four, FY 2026 at a glance. As I said earlier, our underlying EBITDA of AUD 9.8 million was underpinned by the turnaround in the half two earnings of AUD 6.3 million on similar revenue to the first half of the year.
Pleasingly, this saw EBITDA margin improve by around 570 basis points on the half one performance to 12.8%. I acknowledge there's still more work to be done to recover our historic EBITDA margins. The second half performance was driven by the recovery of the data and digital consulting margin to 37.9%, with the reset of the cost base and improved operating cadence, providing a cost base to grow profitably. Net debt reduced, including deferred consideration of AUD 20 million, down from AUD 20.6 million at 30 June 2025. Solid cash position of AUD 5.3 million has been delivered through a focus on management of working capital and driving cash conversion above 100% of this year's earned EBITDA. Unfortunately, we had to take an impairment of goodwill due to the reduced profitability of the asset management services unit and the Australian data and consulting businesses this year.
The AMS impairment reflects the reduced operating performance, specifically in the East Coast business, of around 60% of historical levels. Management and the board consider these appropriate and conservative position to take in terms of the goodwill on balance sheet. Now, moving forward, I'll take you to slide eight, which sets out our five-point plan for FY 2027 and beyond. This focuses on returning and driving shareholder returns. Focusing on the first point being expanding our transport sector revenue. As I've covered off earlier, the two recent wins in our proprietary IP transport solution being implemented in Canada and the new major new rail project in Australia.
This sets us apart and is well-positioned to leverage further opportunities both in Australia and the Americas, as we're leveraging COSOL's expertise and have successfully been a preferred tenderer for a large transport authority system implementation that will begin to contribute revenue in Q2 FY 2027. That's on the back of the win earlier this year in relation to a large infrastructure operation in the U.S. as well. The second point is focusing on leveraging our sales investment to drive higher margin revenue and growth through the expansion of that team. This team has been significantly expanded over the last four months since Damon joined us, and we are beginning to see momentum in the pipeline with a focus on the existing customer base. We anticipate this to begin to have a material impact on the revenue from the second half of this year.
The most exciting component of our five-point plan is the growth of our AI revenue. We are uniquely positioned with a combination of engineering and data knowledge. This provides great outcome for clients, and we are seeing this as our secret sauce, where the domain expertise of both these components are applied with cutting-edge technology and making big and tangible benefits for clients as they now progress to value-based judgments around their AI investment. At the moment, these projects are generally consulting in nature and client-specific. However, we are seeing early signs and opportunities for these to move into the AI agent space, driving significant business efficiencies and are likely to be turned into repeatable solutions and a recurring revenue base in the future. As I said earlier, we still have work to do in the asset management services space.
Half two performance remains soft, with EBIT effective relatively flat on the first half performance. We have appointed Jack Wood to take the executive responsible for this business and a review of the operating model has commenced, together with an executable plan to recover the revenue and profitability of this unit. There is some early momentum in the first quarter. However, there needs to be a more robust operating model put in place to achieve sustainable and profitable growth moving forward. The last point of our plan is to build on our American sales growth. As I mentioned earlier, we had a large win this year in relation to an infrastructure implementation of IBM Maximo, that will take place over a number of years and roll into a managed services client.
In addition, we have been recently preferred tenderer, which will go to contract in the first quarter of a large-scale transport authority in the U.S. These two implementations provide a strong positioning for the business as it continues to grow. If we reflect on the strategy for the U.S., we invested by sending Australian capability across the U.S. to grow the Maximo business. From a standing start in FY 2023, the Maximo revenue in the U.S. is expected to represent half of the revenue for FY 2027 year from a standing start in FY 2023. This growth has been delivered by a combination of acquiring existing customers within the Maximo client base, as well as working with new greenfield IBM Maximo clients in conjunction with the partnership with IBM.
In addition, the team has put together a partnership model with a number of leading complimentary system implementers to position the best in breed options across finance, HR payroll, and asset management systems. We see this as a significant opportunity in the Australian market as well, and we are working with Jack, our EGM of Americas, to build a similar partnership model in Australia. All in all, we are confident where we are and our plan ahead to grow the business and recover our profitable growth. We are positive that the profitable growth lies ahead, and we will provide an earnings guidance for the first half of the year at the AGM in November, consistent with our previous approach. Thank you for your time. I will now be happy to answer questions you may have.
If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your first question comes to the line of Greg Wood from GWJW Family Trust. Your line is open. Greg, your line is open.
Can you hear me? Hello?
Yeah. Hi, Greg.
Hi, Anthony. This is a question for Geoff. Geoff, with this search for the new CEO, what are we looking for? Is it an Australia-wide search, and what sort of competencies are we looking for now to take the company forward? Will the shareholders be kept informed of this important person?
Hi, Greg. Well, we're going to pull together that over the next few weeks, just exactly what we're looking for, and we will start an Australia-wide search. Obviously, we're looking for someone who's got very good public company knowledge and able to drive the business at a corporate level from a public knowledge perspective, understanding of the industry, and some entrepreneurial business development type skills for growth, because we think we want to focus on a growth period. So those are the things. But we've got to sit down as a board and put those into a well-defined criteria and then start the process. We'll be obviously looking for someone to assist us in all of that. But we've got to get that started now. These processes don't happen overnight, so we will obviously keep the shareholders abreast of what's happening.
If you go and look at previous things like this, you're probably looking at least three to six months to finalize it, maybe even a bit more. So we just got to work through and get the right person. It's really important. In the short term, we're very, very confident in Anthony's ability to run the business.
Okay, thanks. So what happens to the CFO/CLO role during this process?
Well, Anthony's going to start looking for an operational person to help run it, and we're, in the short term, putting Nicola, who's General Manager of Finance, up to an interim CFO role.
Okay, thanks.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from the line of Bradley Skeggs, Private Investor. Your line is open.
Question for Anthony. Anthony, can you give us some color or a view as to what the sales funnel looks like?
The sales funnel at the moment is growing and quite strong. We have a number of renewals that we've taken place in Q4. As we move forward, there are a number of large-scale opportunities we are in final processes with and negotiating MSAs with that we'll hopefully announce in the next month or so. We see good momentum specifically in the Maximo business and also good momentum across our data practice. As I said, the U.S. has got that large-scale preferred tenderer that they've won, and we'll look to announce that once the contract's, which is due to complete by the end of Q1.
Anthony, can I just jump in there? Brad, obviously we've got Damon now started. He started in May. He's getting his feet under the table. As you'd know, Brad, these opportunities can take a while to develop. We're building a more capable sales team, and so we expect the pipeline to develop and grow over this first half, off the back of what Anthony's saying. But we've still got a lot of work to do to get the pipeline really in the position that we as a board will feel comfortable with, that we're starting to get traction in the strategic areas where we get high IP, high margin revenue. That's obviously where we see Scott working closely with Damon on that area.
Yeah, thanks. There's obviously been radio silence with ASX announcements for quite some time now. Anthony, with respect to the prospects and contracts you're talking about, do you expect that there will be more frequent communication and announcements with these?
Yeah
contracts?
Yeah, Brad. In terms of our approach in specific contracts, based on materiality, we take our guidance around how that appropriately takes place. But in terms of ASX announcements coming up, you'll note that we haven't done the glossy component of the annual report that we would normally do for today based on the changes that have been announced. So that will come out during September. We have a number of progressions in relation to some items that we think are relevant. My job is to work with the board and keep investors informed over the period. So we see a number of information flows coming out as we head towards the AGM in November, and that the shareholders have some information flow for that period.
Yeah. Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. There are no further questions at this time, so I would like to hand back.
Thank you, Gavin. As interim CEO, I appreciate the investors dialing in for the call. As always, we are available to take any calls or any specific questions you have, and I will make myself available for those. Thank you for your time. Geoff, any closing comments from yourself?
No, no. Just thanks very much for dialing in. As Anthony said, if you want to talk to us, just reach out.