I would now like to hand the conference over to Mr. Clay McDonald, CEO. Please go ahead.
Thank you, and good morning. Thanks for joining us for the Lindsay Australia's Half Year 2026 results presentation. Clay McDonald, CEO of Lindsay Australia, and I'm joined today by our CFO, Justin Green. Before we begin, I'd like to acknowledge the traditional owners of the land on which we meet today, and pay my respects to the elders, past, present, and emerging. Throughout the first half of financial year 2026, Lindsay has continued to focus on successfully executing its multi-year strategy centered on strategic growth, transformation, and building a more sustainable, scalable, and performance-based business. Extremely pleased with the progress we have made across all three pillars and how this positions us for both the current cycle and the longer term.
We've expanded the network into Tasmania and southwest WA, connecting into regions where volume is exceeding national averages and further balancing our portfolio towards lower risk and counter cyclical regions. In transformation, we continue to develop high-productivity vehicle solutions that are improving our revenue per kilometer, enabling us to release, repurpose, and redeploy equipment. Finally, investment in safety, people, facilities, and systems has positioned us well for future growth and return on invested capital uplift. The elevated growth capital phase is now tapering, and our focus has shifted to productivity and efficiency to take advantage of the operating leverage created over the last three years of capital spend and acquisitions. Over the last three years, we've invested heavily in our network, progressed the integration of those investments, and positioned the business for the next phase.
Benefiting from an expanded operation and a higher revenue throughput, the focus now turns to converting operating leverage into higher earnings and stronger returns. We've communicated over the last 18 months, competitive intensity in the road transport market remains elevated, driven primarily by an oversupply of capacity. The key market indicators we track, being new truck sales and transport insolvencies, are both moving in a direction that supports a gradual return to more normal market conditions. Despite record insolvencies and slowing new truck sales, the oversupply of capacity in the market is expected to remain elevated for the next 12 months. On the demand side, medium to longer term fundamentals remain positive, supported by population growth, increasing freight volumes, and expanding horticultural output.
Over the last few years, we have invested to ensure Lindsay can cover the full spectrum of temperature-controlled freight, enabling us to satisfy demand from fresh to frozen and from basket of goods to ready-to-eat meals. We were pleased to announce the acquisition of SRT on the 1st of July, 2025, and I'm delighted with the positive progress we have made integrating the business and extracting value from the combined and connected organization. We forecast SRT to continue to achieve strong on island growth, trans-Bass growth, and benefits from the integrated business being attractive to both existing and new customers. Business case hurdles are all being achieved with positive momentum on cost and capital synergies, continued volume growth, and the benefits of a counter-seasonal earnings profile driving double-digit EPS growth. The impact of this acquisition extends well beyond the Tasmanian market.
We're seeing the advantages of combined capability, deeper customer relations, equipment interoperability, greater procurement scale, and the sharing of best practice solutions across the broader business. The cultural fit is strong, and the group is now more robust across growth opportunities, management capability, and the breadth of our service offering. I'd like to note that from this reporting season, Lindsay has transitioned from pre-AASB to post-AASB reporting for its financial results. Reconciliation is included in the appendix to this presentation for reference. Let's start with safety. I'm pleased to report a 30% reduction in lost time injuries and a similar decrease across other lag indicators, including total reportable injuries, incidents, and accidents. Improved performance has been supported by capability and systems investment, plus training and development of our operational leaders.
We still see significant opportunity for further improvement. However, I'm encouraged by the progress we have made in the first half. Moving to our financial results. Group revenue increased 24.8% to AUD 540 million, driven by a full half contribution from SRT and GJ, plus core growth across all three divisions. Underlying EBITDA increased to AUD 66.3 million, up 16%, with underlying NPAT flat at AUD 15.8 million, reflecting high depreciation from the investment cycle, elevated interest rates, and increased interest charges following the SRT acquisition. Importantly, the group now benefits from a more balanced earnings profile, with the contribution from recent acquisitions supporting improved second half earnings.... The board has declared a fully franked AUD 0.021 per share dividend, which is 59% payout ratio compared to 49% in the previous year.
Taking a closer look at the operating results, performance was supported by recent acquisitions, geographic diversification, and increased spend at wide from existing core customers. Transport lifted underlying EBITDA by 15.6% or AUD 9.6 million. Rural was up 17.7%, delivering a record first half result. Hunter's three-year turnaround plan underpinned a 32% improvement in underlying EBITDA. We expect the business to deliver in excess of AUD 1 billion in revenue in FY 2026. The elevated investment phase required to support the 87% growth over the last four years has largely been executed. We've built capacity into our network that has improved current working conditions and can scale at lower incremental costs as the cycle turns and the market grows. I'll now hand over to Justin to take a closer look at the financials.
Thanks, Clay. Let's start by setting the scene for the latest balance sheet and the numbers that I will take you through. You hear us talk a lot about investing for growth, investing for the future, and investing ahead of the curve. That is exactly what we have done and what you will see in these numbers. Simply put, in the past 12 months, we've invested more than any other time in Lindsay history. This equates to AUD 140 million in invested capital, taking us to almost AUD 425 million at the end of December. These investments support our AUD 1 billion + turnover business and support long-term growth. Let's kick off our deep dive and start with the CapEx on slide 11. The first half of 2026, we invested AUD 28 million in fleet and facilities.
Our CapEx profile is skewed to the first half as it supports seasonal volumes. We'll see a similar trend in 2026, with the second half of CapEx being much lower. A key callout on this slide is rail. Although we classify these assets as rail on this table, important to note, these assets are multipurpose and are being deployed to support SRT growth opportunities and improving our overall asset utilization in this category. You'll also note the lower CapEx requirements for these assets on an ongoing basis, as maintenance CapEx is much lower for these long-life assets. You can also see on the slide that investments in facilities is tapering, reducing in 2026 as the key projects have now been completed. We've also called out here the synergy benefits we've been able to extract from the SRT and GJ Freight acquisitions.
Those synergies, when coupled with further transformation and procurement initiatives, we've been able to reduce our original CapEx forecast for the full year to come in around $43 million. Let's now take a look at ROIC on slide 10. Not surprising that investing $140 million in 12 months and more than doubling the invested capital in 3 years, that we see a short-term impact on ROIC through this cycle. Take the long view when making these key decisions and are very comfortable that the investments are delivering immediate benefits and will continue to deliver benefits for many years to come. As we extract those long-term benefits, we will see key metrics like ROIC normalize and trend back towards our midterm target range. Let's move to debt. We'll turn to slide 14 for borrowings and see how these investments have been funded.
As you can see in the bottom table, we came into this cycle with a very strong balance sheet, with plenty of capacity to deliver organic growth and growth by acquisitions. We've delivered on both those growth strategies, and importantly, we come out of the cycle with a very strong balance sheet and a very comfortable level of position. Yes, debt has increased, but that debt is all associated with long-term growth. This point is really highlighted on the next slide, 15, which shows a borrowings waterfall. It's a really good graph and clearly articulates this core versus strategic debt increase. Core debt or pre-acquisition debt, has only increased AUD 4.7 million or 3% in the past 12 months. It's an outstanding result, demonstrating strong balance sheet management during a period where we have transformed the business.
The remainder of the AUD 89 million, AUD 89 million increase is directly associated with acquisitions. AUD 62.5 million of the new debt is one-off and will reduce over the midterm as earnings are delivered from those acquisitions. Coming back to the borrowing slide, I just want to provide some details of the net leverage. No surprises that given the investments that we have highlighted in the first half skewed CapEx plan for FY 2026, that we see an increase on the net leverage for this reporting period. This was expected, and we've flagged this previously. We're comfortable, though, where the leverage sits and remain confident with the large debt-funded investments now executed, that will see the leverage track down back into our target range over the next 12 months. Let's now touch on cash, as there are a couple of key call-outs that I want to take you through.
In a lot of moving parts, in particular of operating cash flow over the last few years, so we really wanted to simplify this graph. We've commented a lot about the government incentives and the deferral of tax payments. In the 2025 year, we saw a large unwind of deferred tax, and we've seen a further unwind in the first half of 2026. Tax paid for this period was almost AUD 18 million. Around roughly 70% of de-deferred tax has now been unwound. The cash tax will be lower going forward. We forecast tax payments in the second half of 2026 to be around AUD 10 million lower than the first half. Operating cash has trended similar to previous years, with a seasonally lower first half conversion. This year, the conversion rate was lower.
We expect the previous year's trend to continue with a higher second half conversion, finishing the full year with around a 70% conversion rate. Lastly, I just want to touch on the earnings per share, and you can see on the top right graph here that on first glance it looks like our underlying EPS has dropped 14%. There's one really key point that I want to call out, though. On completion of the SRT acquisition, we issued 46.5 million shares as part of the consideration for the deal. Those new shares were issued on 1 July. SRT earnings, though, are only included in the consolidated accounts for 6 months. The shares issued has had a dilutive impact for the first reporting period.
To try and provide some additional clarity on the EPS graph, we've included a 12-month pro forma EPS, which incorporates SRT as if the acquisition had completed on the 1st of January 2025. This represents an increase of 13% of the FY 2025 EPS. Although not a direct comparison and should not be interpreted as a forecast or guidance, this illustrates the Group's commitment to deliver double-digit EPS growth from the SRT acquisition. Thank you. I'll hand back to Clay now to take us through the outlook.
Thanks, Justin. The near-term trading conditions are expected to remain competitive. However, key indicators such as transport insolvencies and reduced truck acquisitions are moving in a direction that supports market normalization. We have the network capacity and balance sheet flexibility to move quickly on the right opportunity if they present. Our past investment and transformation work is already improving efficiency, and any normalization in industry conditions will come through a more scalable, lower cost platform. The second half focus for the organization will be on utilizing our investments and scale to drive margin improvements through improved terminal efficiency. Integration of SRT is progressing well. We have line of sight on further integration of synergy benefits as we continue to connect the SRT and GJ businesses into the Lindsay core.
With SRT, we expect to be successful in a number of integrated transport offers that will grow trans-Bass volumes and connect into the Lindsay national network. Utilizing SRT's capability and Lindsay's network, we're also targeting secondary freight opportunities that are complementary to our business. Finally, whilst market conditions remain competitive, the low discretionary, essential service nature of our business remains critical in connecting farmers and manufacturers, the wholesalers and retailers, where population growth and expanded horticultural output will underpin high demand for freight. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two, and if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Richard Stevens from Ord Minnett. Please go ahead. Pardon me, Richard, your line is now live. Thank you. Your next question comes from Philip Pepe from Shaw and Partners. Please go ahead.
Hi, guys. Thanks for taking the question. Just on your comments regarding the SRT acquisition, can you give us some example of the integration synergy benefits that have come through in the first few months?
Yeah, thanks, Phil. I mean, they, they cover people, procurement, and operations when you look at it. Synergies in, in redeploying equipment that was previously leased, significant procurement benefits, and obviously people optimization. They're the, they're the, the kind of synergies that are already flowing. We're really confident that that AUD 1 million we outlined in the business case will be achieved, and in fact, we expect it to be above that.
Excellent. Thank you.
Thank you. Once again, to ask a question, please press star one. Your next question comes from Richard Stevens, from Ord Minnett. Please go ahead.
Good morning, guys. Sorry about that. I just had two questions, asking on behalf of Ian Munro. The first one was, how are you seeing cost pressures across the Transport business currently, and how is the environment to pass costs through to customers? Are they open to negotiations on the topic or how are those conversations going?
I'd say from, from cost in regards to our inputs is probably starting to normalize after what was a pretty significant cost increase, say, from, you know, 2022 through to 2024. We're, we're seeing that normalize, so the input side. On the customer side, the market remains competitive, so there's still a fair bit of focus and competition around, around transport rates. How we're looking to offset that is obviously through our transformation program.
Yep. Okay. Thank you. Just one more, if that's all right. The company has added significant capacity in the last 6 months in Adelaide and Perth. Is this enough capacity to support multiple years of growth ahead, or how are you guys approaching that?
Yeah, we're really pleased with the developments in both Adelaide and in Perth, and we've built those businesses, built those sort of facilities for now, but certainly for growth into the future. So there is operating leverage there that we can utilize, both road, rail, operating leverage, but we can, we can expand and take on significant growth in both those terminals.
Great. Thanks very much.
Thank you. Once again, if you do wish to ask a question, please press star one. We'll pause a moment for any further questions to register. Thank you. There are no further questions at this time. I'll now hand back to Mr. McDonald for closing remarks.
Thanks for everyone for attending today's presentation. We strongly support the long-term thematic in transport, the scale, network coverage, and modern, efficient, smart, and hard assets will be critical, critical to success in the future. Therefore, we're pleased with the progress we've made in executing our multi-year strategy, and we're confident that the investment we've made in the core and via acquisition, position us strongly in the market and deliver positive shareholder returns going forward. Thank you.