Financial highlights. From AUD 78.2 million down to AUD 16 million. We run a conservative balance sheet, and we're well-positioned to withstand any turbulence that comes about with the commodity pricing turbulence that we are seeing. Our statutory net profit after tax was a loss of AUD 12.8 million. This was driven primarily as a result, or completely as a result of taking on impairments. We've taken aggressive position to write off goodwill in the business or assets that aren't performing. Let's turn to slide seven. As mentioned, BDO have completed their audit of our business for the first half of FY 2026. It was a comprehensive and in-depth audit, and we passed, so we're very pleased about that. As a consequence of passing that invoice, sorry, that audit, we can now start trading again.
Since listing the business in 2021 and buying some 30 small businesses, we've now built a substantial scaled industrial operation across Australia and New Zealand. The focus now is on organic growth and extracting maximum productivity and return from the extensive network of assets that we've built up, assets and licenses. I have to say, people, 850 qualified, dedicated staff running a complex chemical company in a highly regulated market. We continue to exit small, inefficient, outdated sites and then concentrate our operations on larger, more efficient sites. There's considerable cost in doing these relocations. If we are leasing the sites, we're often up for double rent in the move. We're often held up as we go through the licensing regime to get all the new licenses in place for the new premises, but we are making good progress with it.
For the last three years, we have been installing a comprehensive and robust ERP system throughout the business. We're a long way through this project. It's hard work, but we are getting there. We have successfully consolidated some 30-plus payrolls onto one payroll system, and we will shortly start consolidating the ABN, so we end up with one primary operating ABN and company in Australia and one in New Zealand. As a result of this investment, we will substantially reduce our administration costs across the business and also have better visibility into our operations. Let's turn to slide eight. We look at the key drivers in the first half of FY 2026. Very strong demand for our formulated agricultural chemical products, primarily in Western Australia, but also in the East. Increasing demand for our chemical storage capabilities.
We have seen established operators go out of business, and we have seen an increased focus from the authorities on businesses that aren't compliant with the law, which results in stock being driven into our network. Strong demand for our trucking network, for our packaged logistics, and our bulk chemical capabilities. Increasing demand for our liquid waste treatment transport capabilities, primarily in Wollongong. We're in the process, as we have been for some time, of completing this large liquid waste treatment plant that is expected to come on in the next two or three months. We've reduced debt, and we have put in place a new finance platform. Although we enjoyed the support of our previous banks, the facility that we had was complex and didn't really suit our business. We elected to move to a more flexible finance package that's in place now.
This finance package allows us to invest in stock when we need to and gives us considerably more flexibility to reinvest into the business and to grow our company. We dispose of property when it's not needed, or when it's surplus to our requirements or no longer suitable for our operations, and we continue to reinvest back into property that better suits us. Revenue has been impacted on in our recycling business from the illegal exports of car batteries out of Australia. There's less batteries to buy locally. We've sold the Laverton plant that wasn't making any money, and we've focused our energies on our New South Wales plant, and we are finding plenty of batteries for that plant now.
We have taken the write-downs, as I've mentioned, on non-performing assets, and we've also suffered some delays in production as we roll out this group-wide ERP system, but we are catching up on that work now. We're still suffering from a shortage of drivers for our transport fleet. As a consequence of that, we have to use subcontractors, which erodes our profit margin in our transport division. Let's turn to slide nine. Health and safety. We're a large, complex chemical company. We have a throughput of over 1 million tons of chemicals a year through our network, operating of some 80+ sites. We have a comprehensive health and safety structure through the business, ongoing training and management and oversight, and we continue to improve and learn year on year. Let's turn to slide 10.
For some time we've been trying to encapsulate who we are and what we do and to really write down and record our core values, and we set them out here. Obviously, our key focus is safety. We all work together. We're a team of 850 or 900-odd people. We look after the environment. We're focused on making sure that our operations are safe and don't damage the environment. We spend obviously a lot of our time recycling chemicals and treating chemicals correctly at the end of life. We focus on our financial performance, and we focus on delivering exceptional service to our 6,000+ customer network. Let's go to slide 11. DGL is made up of three core divisions. As I see it, the central division is manufacturing. That's the formulation and manufacturing of chemicals.
We have multiple sites that carry out this activity, stretching from Perth in the west to Christchurch in the southeast, from Adelaide to Townsville, primarily focused on crop protection, mining, automotive, water treatment and construction. It's a comprehensive service that we offer right through from procurement of raw materials overseas, the shipment to Australia, the formulation, the quality control, packing, label printing, warehousing and distribution. We are unique providing this service on one platform to our extensive customer base, and we're enjoying increasing support from our existing customers and new customers coming into the network. Our logistics is obviously the glue that holds it all together, the international transportation and shipping of chemicals, clearing port, movement of containers, warehousing and transportation. Environmental services is obviously dealing with chemicals at the end of life or chemical waste.
This is tied into manufacturing and into logistics because you're involved with the transportation of waste, which is a highly regulated industry. We're completely comfortable with how these three divisions sit and fit and work together. Let's turn to slide 12. Over the last 30 years, we've built an extensive network of assets across Australia and New Zealand. We have operations in all major metropolitan regions. We have manufacturing, warehousing, and transportation networks across both countries. Where appropriate, we have environmental assets treating industrial waste. We will continue to refine our network. We will open new sites, and we will look to close sites that aren't performing. The network is always under review. I'm going to hand the pack now over to Gagan, our CFO.
Thank you, Simon. Slide 14, please. Revenue for the half year was impacted by the sale of the battery recycling plant in Laverton, along with ongoing scarcity of used lead-acid batteries. Chemical manufacturing and logistics have performed well in half year in a challenging environment. Earnings were impacted by continued price normalization for AdBlue, reduced demand in the mining sector and delayed production at one of our sites related to the rollout of the ERP system in early FY 2026. Commissioning of the new liquid waste treatment plant has been delayed, with commissioning expected by the end of FY 2026. Slide 15. Gross margin percentage improved in the half year, driven by strong demand in the crop protection sector and improvement to manufacturing efficiency through productivity improvements. Operating expenses decreased due to cost reductions in the ULAB business and a strong focus on cost control throughout the business.
The delay in commissioning of the new liquid waste treatment plant drove a prudent approach to the forecast used in the environmental impairment assessment, leading to a non-cash impairment of AUD 11.6 million to the assets of the segment. A further non-cash impairment charge of AUD 5.3 million was taken to two chlorine plants, in respect of which DGL entered into terms of sale with the buyer post-year-end. The exit from the chlorine business was due to changes in market conditions, which made operations of the plants uneconomical. While underlying NPAT was positive, being down on the comparative period, the non-cash write-downs led to a statutory loss after tax for the half year. Slide 16. Performance of the manufacturing division has been stable with record demand in Western Australia for our agricultural chemicals. This strong demand is expected to continue. However, the long-term outlook is uncertain.
AdBlue sales volumes increased throughout Australia and New Zealand. However, we saw further price normalization during the half year. The implementation of the new ERP system in early FY 2026 delayed manufacturing production at one of our sites, which impacted earnings for the half year. The delay is being caught up with and a full catch-up is expected by the end of FY 2026.
In terms of outlook for the manufacturing division, there is uncertainty around fertilizer supply and prices caused by the Middle Eastern war, and the resulting impact on demand for agricultural chemicals remains to be seen. Slide 17. There was solid demand for packaged chemical logistics during the half year. The response from customers to new and improved facilities has been positive. DGL has invested in new larger warehouse facilities in New South Wales, South Australia and Western Australia, along with investment in new trucks and training equipment.
This was offset by a shortage of drivers in transport operations, which increased our reliance on subcontractors and led to higher operating costs. In response to this, DGL has rationalized routes, which enables a lower requirement for subcontractors and better utilization of our own drivers. The half year also saw some competitors leaving the market, increasing the demand for DGL's logistics services. Slide 18, please. As mentioned earlier, the new liquid waste treatment plant in New South Wales has been delayed but is progressing well. Full commissioning is expected by the end of FY 2026. DGL sees strong demand for liquid waste transport and treatment, and the new plant, once commissioned, will be positioned to take full advantage of this demand. The sale of the loss-making Laverton battery breaking facility reduced revenue by AUD 9.8 million versus the comparative period, but it reduced recycling losses in the half year.
Constraints on the supply of used lead-acid batteries impacted earnings. However, there are signs of stabilization in terms of costs and availability of these batteries. DGL continues to invest in the environmental division, including the battery breaking facility in New South Wales. Next slide, please. An increase in working capital at December 2025 was driven by seasonal build-up of inventory to support production for the crop protection market. Note that the comparatives are for June 2025, which has led to the seasonal increase in working capital. A non-cash write-down of AUD 11 million was taken to fixed assets of the environmental segment. As discussed earlier, this was driven by a prudent approach to the forecast used in the impairment assessment, given the delay in the commissioning of the new liquid waste treatment plant. A write-down of AUD 5.3 million was taken to the Mount Isa and Nambour chlorine plants.
As mentioned earlier, DGL has entered into terms for the sale of these plants post-year end. Next slide. DGL continues to focus on cost control and productivity improvements. This is seen in reduced people costs for the half year versus the comparative period. The sale of the Laverton ULAB site and rationalization of headcount at the Annandale site also contributed to the reduction in people costs. It should be noted that we have incurred one-off expenses on legal fees in relation to the disclaimer of opinion and the need for a full audit of the half year period. However, this has now been resolved. Slide 21. Operating cash flow was lower than the comparative period, driven by increased investment in working capital and reduction in gross profit dollars. This led to a lower operating cash conversion compared to the comparative period.
DGL rationalized its property portfolio by selling non-core properties in the half year. However, it continues to invest for future growth, including an investment of AUD 11.9 million in fixed assets during the half year. During the half year, debt was lower by a net AUD 21.2 million, largely through the sale of non-core properties. In terms of dividend, DGL's dividend policy remains unchanged with all earnings reinvested for future growth. I'll hand over now to Simon.
Thank you very much, Gagan. Turning to slide 23. We look here at our strategic priorities. Obviously, health and safety comes first, and I've talked about that, and that is the central focus of our business and our board, something that we work on, that we are proud of, and that we'll always put front and center of all our operations. Now that we've built a business of scale, the future focus will be on extracting organic growth, reinvesting our earnings, improving our financial performance, extracting full value out of the extensive network of assets and licenses we have. Financial returns. Through the centralization of all our administration services and requirements into our Parramatta office, we are substantially reducing the spend necessary to run the business, and this efficiency drive will continue. We will continue to integrate the smaller companies we've bought into the larger group.
As they come onto the ERP system, we will continue to migrate from small inefficient sites to larger sites where we extract far more value and reduce costs. Let's turn to slide 25. When we look across the business, we see strong demand for the materials that we formulate and manufacture, for the logistics services that we provide, and we see significant potential to ramp up the volumes of liquid waste treatment we treat and can treat and will be able to treat at our new plant in Unanderra. The Unanderra plant, which is in Wollongong, has taken us years to build and cost, I think, something like AUD 12 million of investment, and we are still working through the tail end of all of the complex licenses we need to operate the plant.
The plant is a substantial asset, and I'm completely confident that once it's completed and fully commissioned, that it will be a significant profit center for DGL. It's been worth the battle. We are seeing an increased focus on regulations regarding the handling and movement and treatment of chemicals. As a result of this, we are seeing competitors leave the market. There is significant turbulence coming through in the price of raw materials as a direct result of the conflict in the Middle East. Some key raw materials have already doubled in price. DGL has experienced it, and during these challenges, we have a strong balance sheet. We've got experienced traders, and we've got a great network of suppliers around the world. I think we are well-positioned to sit through the turbulence and turmoil that we are seeing at this time.
There is significant disruption in shipping around the world. Probably not so much on this side of the globe coming out of the Pacific, but anything coming through from Europe. We've got solid forward orders for chemicals out through the balance of FY 2026. We remain focused on keeping our costs down and reducing our administration costs and becoming a more efficient business. We are pleased to have got through the challenges that we had last year, and we are very much looking forward to the future of investing and growing the business. I will conclude our presentation there, and I'll open up the webinar for questions, please.
Thank you, Simon. We've got a number of questions coming through. As you would appreciate, a lot of them do repeat, so apologies if your question's not read out verbatim as you typed it in. If I start with one for Gagan. What's the sustaining and growth CapEx expected to be moving forward? Sorry, you're on mute, Gagan.
Thanks, Andrew. CapEx, in terms of the growth CapEx, we expect in the region of AUD 8 million-AUD 10 million over the next 12 months.
Thank you. For Simon, there's been continual delays, obviously, with the liquid waste recycling facility. There's a number of questions on this topic. What gives you confidence that it will be open within the foreseeable future?
That is a very valid question. There have been ongoing delays. I was down at the plant a week ago myself. We have very little construction work to do now. We're really talking about some piping and that's being carried out as I speak. The physical plant will be completed probably within a couple of weeks. We have some licenses in place, but every different waste stream that you treat needs another license. We've applied for a broad license that we are comfortable and confident that we will have in place probably within two months, and that'll allow us to ramp up production to, or throughput to around 65,000 tonnes a year. I'm confident now that we are close to winning the battle and that the plant will be making a contribution, a profit contribution, in the first half of FY 2027.
Thank you. There's been a number of acquisitions since the IPO. Not all have been accretive. What is being done to address capital allocation going forward?
As I've mentioned in the presentation, we don't have the same appetite to buy businesses as we have in the past. We have now built a business of scale, and we're comfortable with where it sits. The primary focus will be on reinvesting our earnings to extract organic growth out of our existing assets. We will still buy businesses from time to time, but we will be highly selective. As Gagan's pointed out, our CapEx for the next 12 months, I think it was, is sort of AUD 8 million-AUD 10 million. We don't actually have a lot of heavy spend programmed, which leaves us plenty of spare cash to buy stock through this turbulent time and increase our stock holdings where it's necessary, and also have the cash on hand should opportunities come along.
Thank you. Is the New South Wales plant currently producing the lead?
Yes, it is.
Thank you. Can you please elaborate on what's next for DGL? Where do we go from here?
Yeah. I like the question a lot because it's something I ask myself. As I've mentioned, we've built a business of significant scale now, a great network of assets and people, licenses and customers, capabilities. Really it's just about hard grind of keeping costs down, maximizing profit, and reinvesting our free cash in the business to grow the business year on year.
Thank you. There's a couple of comments on share price. Have you got any comments on the share price, particularly since listing?
Well, obviously, being the major shareholder, I'm personally very unhappy with where the share price sits. As the CEO of the business, really it's up to me to work with our key managers across the business to ensure that we do everything possible to improve our financial performance, which, all things being equal, should lead to an improvement in share price.
Thank you. One for you, Gagan. What is embedded within the intangible assets of AUD 133 million, and do you foresee any further impairment charges?
It's substantially comprised of goodwill of AUD 129 million. The goodwill relating to the environmental segment has already been 100% written off. The manufacturing and logistics segments, I do not anticipate any impairments. They are performing well, and there is more than sufficient headroom to preclude impairment as of this point in time.
Thank you. This one's probably for Simon and/or Gagan. There has been a concentration on cost control, which has been noted, but it doesn't seem to be reflected in the financials. Were there a number of one-off costs incurred?
I'm going to answer that. Absolutely. Relocating our office from Auckland to Parramatta took a substantial investment. Centralizing our finance, HR, and other shared services into one office all comes with cost. The substantial investment into people costs and software as we roll out this ERP system and centralize and automate our payrolls. There has been AUD millions invested in building this shared services hub and centralizing administration and management, but you will see the benefits of that investment coming through in the very near future.
Thank you. Just with regards to the suspension, have any new policies and procedures been introduced to ensure that it doesn't occur again?
Firstly, we didn't agree with the auditor's position that led to the suspension, so we need to consider that. Most certainly, the board and I and senior managers are extremely focused on ensuring that we have all of the necessary controls in place to ensure that it never happens again. You talk about governance, you talk about stock control. Gagan and I work very closely and very intensely on these elements of the business, and I'm confident that it will not happen again.
Thank you. Just a follow-up question to that. In the event that the accounts had been lodged on time and there was no suspension, would you have looked to have changed the auditor?
It's a very open question, but yes.
No problem. DGL is a large business, many operating sites, and in that context, can you explain how the business can manage without a CEO, which was dispensed with.
I think it means a COO.
Sorry, COO. Sorry.
Yeah.
Got you out of a job.
I like the question because it gives me an opportunity to explain what we have done. Having now centralized our administration and finance in our office in Parramatta, and having Gagan at the head of our finance, has allowed me to focus on operations. I have 10 direct reports, and they're all experienced, skilled, and dedicated managers. I'm close to the operations now. Gagan looks after the finance. Gagan and I work closely together. We simply didn't need a level of management between me and the senior divisional managers.
Thank you. The logistics division appears to be loss-making at an EBIT level. This is on top of increased revenue. That's an 8% margin swing from last year. Is this primarily caused by subcontractor drivers? Is this loss temporary?
No. Most of it comes about through double rents as we move from dated sites into new facilities, and the investment and the costs that go into setting up a new site, and the time to fully utilize the new facility. There's just simply a significant drag caused by double rents.
Okay.
Let me say, also subcontractor drivers, which we have largely eliminated now.
Another one, I think for Gagan, which primarily you have answered. Are we satisfied that the impairments taken in the first half are sufficient?
I'm reasonably confident that the impairments are sufficient. As I mentioned earlier, we have taken a very prudent view in the environmental impairment assessment. Now, given the delay in the commissioning of the LWTP plant, there was inherent uncertainty around the forecast. We have taken into account a prudent view, and I do not anticipate, at this point in time, further impairments to the environmental division.
Thank you. One shareholder has commented that they believe updates over the last six months have been fairly limited. Is the company going to be a little bit more proactive perhaps in its future updates with shareholders?
Look, it's something that comes up regularly at our board meetings. I work closely with our Chairman, Tim Hosking, who has extensive experience in the share market in Australia. We don't update the market unless we've got something meaningful to update the market. I will continue to be guided by the board on when it is appropriate to update the market.
One regarding debt. Is the medium-term plan to continue to pay down debt?
Well, we're very comfortable with where our debt sits today. We've got the headroom and the balance sheet strength to buy the stock that we need. We don't have any heavy capital expenditure projects planned. I'm completely comfortable with our current debt, core debt of around AUD 100 million. I think it's moved up to there with the stock that we have bought. I don't see any need to increase or decrease debt as such over the next 12 months.
Thank you. Just regarding the ERP implementation, do you have an estimate of the cost savings that will be available once this is fully operational?
Look, it's only high level. We talk about cents in the dollar of revenue to run the business. We have been as high as $0.045 in the dollar, and I believe that when it's fully implemented, and the other automation investments that we have made will be closer to $0.2 in the dollar of revenue.
Thank you. Just having a look. I don't think there's too many more open questions. There were a number of questions on the buyback, potential buyback. That's not something that we can answer at this point in time. That's something that would be conveyed via.
I will answer it, Andrew. I understand we have a buyback policy in place, so we can buy back shares if we decide to do it. At this time, the focus, the primary focus, is to reinvest and grow the business and improve the financial performance.
Thank you.
It is something that is regularly discussed in our board meetings.
Just regarding the chlor-alkali plant up at Mount Isa.
Mm
What has been learned through this process, particularly around DD?
The dependency on local authorities as a key customer and the political interference that can come into their buying patterns. It simply is a very specialized asset, and it's one step out of our core capability and focus. We prefer to formulate and transport chemicals. Operating a complex chlor-alkali and chlorine plant is not central to what we do. In hindsight, we shouldn't have bought the business, that's clear. What it has done, it has reminded us to stick to our core competencies.
Thank you. Now I believe that answers the questions that have been submitted. If anyone feels that they haven't had their question answered, by all means you can email it into the company and someone will get back to you.
Thank you very much, Andrew, and thank you very much, Gagan. Thank you to all those that have dialed into our call. Thank you and goodbye.
Thank you and goodbye.