I would now like to hand the conference over to Mr. Clay McDonald, CEO. Please go ahead.
Good morning and thank you for joining us for Lindsay Australia's FY 2026 full year results presentation. I'm Clay McDonald, CEO of Lindsay Australia, and I'm joined today by our CFO, Justin Green, and COO, Craig Baker, who will be available for questions following the presentation. Before we begin, I'd like to acknowledge the traditional owners on the land on which we meet today, and I pay my respects to their elders past, present, and emerging.
Lindsay Australia is a national leader in integrated rural services and refrigerated transport. We operate across Australia's major horticultural regions and freight corridors, delivering essential inputs, packaging, and logistics solutions to the agricultural, manufacturing, and temperature-controlled food sectors. The role we play is both essential and vital, delivering time and temperature-sensitive freight that sustain millions of Australians every day.
For the last three years, the team has focused on creating a scale and efficient national network that provides customers with end-to-end solutions and creates value through our unique integrated model, express road, rail, and sea services, and our modern infrastructure that provides volume and sales flexibility. Regardless of what's happening globally and focusing through the cycles, the key demand drivers for Lindsay's service offering remain positive. Population growth and changing consumption habits is driving strong growth in the freight task.
Through our strategy and investments, we are flexing our core operating model to align with changes in the market and to de-risk our exposure to natural events that impact horticultural volumes. For example, our national network cross-docking infrastructure is designed to support variations in customer order size as demand and inventory management signals change.
As delivery frequency, express flow-through, availability expectations change, we have the network infrastructure and systems to support our customers. Through organic growth and acquisitions, we've intentionally diversified our revenue by region, service, product, and customer to achieve more consistency and volumes. We're particularly pleased with our success in the dairy category. The changing consumption habits and preferences drive demand for protein. Dairy companies are benefiting through increased volumes.
Customers with a national task and products that are in high demand with time and temperature-sensitive characteristics is Lindsay's sweet spot. We're excited to be partnering with blue-chip dairy brands supporting the supply chain side of their escalating demand. We consistently get asked, where are we in the cycle?
There are way too many variables to be definitive about what, when, and how things will play out in our market, other than acknowledging that there are periods of oversupply and undersupply that can influence returns. At Lindsay, we do not try and pick these cycles but have a long-term focus on consistently investing through the cycle and readying the business to take advantage of changes in the market as they occur.
Disruption in the transport market continues to play out as the compounding pressures of high interest rates, deferred tax payments, same-day super and increased property, labor, and maintenance costs are leading to escalating insolvencies and year-on-year reduction in heavy-duty truck sales. I am delighted to provide an update on two developments that define this year for Lindsay, the completions of SRT Logistics integration and our scale entry into the secondary freight market.
First and foremost, I would like to thank Rob Miller, Matt Hefren, and the SRT team on a very successful first year as part of the Lindsay Group. SRT integration is now complete and has delivered everything we set out to achieve. The transaction delivered 15% EPS accretion on an FY 2026 pro forma basis in year one.
We realized AUD 1.5 million of cost synergies against our original target of AUD 1 million and redeployed AUD 5 million of capital from the combined business. SRT's Trans Bass and Tasmanian operations has improved the seasonality and consistency of our earnings and reduced our geographical risk. Also, on the commercial side, our extend and connect strategy has been well-received by SRT customers looking for a national end-to-end solution, plus Lindsay customers who are targeting sale opportunities on the island.
Just as importantly, we recognize the capability SRT had in a sector of the market that is large, attractive, and in which Lindsay does not traditionally compete. By leveraging off their capability combined with our size, scale, and regional presence, I am delighted to announce we have secured a five-year contract to provide secondary freight services to approximately 40 Woolworths and Big W stores from Mackay to Cairns in North Queensland.
This is Lindsay's largest single contract win and will generate between AUD 30 million- AUD 36 million of revenue a year, a return above our hurdle rate of 15%, supported by AUD 20 million of dedicated capital across four sites, including two greenfield sites, Townsville and Cairns. Rollout will begin in October 2026, with full operations in July 2027 and the full run rate captured in FY 2028.
The secondary transport market is complementary to our existing operations, and this opportunity is a direct dividend of bringing SRT into the Lindsay Group combining our strengths to create customer value. Let us take a look at our key performance highlights for the year. Backed by the network expansion, Lindsay delivered a record full-year result. Revenue exceeded AUD 1 billion for the first time, reaching AUD 1 billion and AUD 72 million, up 26% on FY 2025, with SRT Logistics contributing AUD 149.7 million.
Organic growth and market share gains a further AUD 73.2 million. Underlying EBITDA rose 25.6% to AUD 127.8 million, and underlying EBIT rose 37.7% to AUD 60.4 million, reflecting the first full year contribution from our acquisitions, and improved utilization of a network that is now substantially built. Underlying NPAT was AUD 27.6 million, up 27%. Underlying EPS rose 10% to AUD 0.076.
Our key safety metric, lost time injury frequency rate, improved by 34% to 10.9. A pleasing result following continued investment in safety, leadership, and technology. The board has declared a fully franked final dividend of AUD 0.017, bringing the full-year dividend to AUD 0.038. Taking a closer look at segment performance, transport, including SRT Logistics, delivered revenue of AUD 762.9 million, up 32.9%, with EBIT up 25.9% to AUD 77 million.
Tasmania now represents 19% of transport revenue and expansion into southwest W.A., together with the new Perth facility, continues to broaden our geographic base. The transition to higher productivity vehicles is helping to soften margin pressures across the division. I am also pleased to advise that we have successfully recontracted our rail line haul services with PN for another five years. PN's investment in their sites and fleet make them an ideal partner for Lindsay.
Rural had another strong result with revenues up 15.3% to AUD 190.8 million. EBIT up 22.8% to AUD 12.2 million, and margin expansion from 6% to 6.4% on broad-based growth across cartons, fertilizer, and nutrients. The team leveraged off the GJ Freight acquisition in southwest W.A. to strengthen our integrated rural packaging and transport offer. Rural overcame supply disruptions in key product lines caused by the war in the Middle East to deliver a standout performance.
Hunter contributed AUD 118.9 million in revenue, up 7.9%, with EBIT of AUD 3.2 million, up 11.3%. Pet produce, fertilizer, and cartons all traded positively, and the Nagambie and Seymour stores are now fully embedded. Under Chris Curtin's leadership, and with Rural, Hunter, and Transport now working more closely together, we expect the Hunter's improvement trajectory to continue. I will now hand over to Justin to take a closer look at some of the numbers.
Thanks, Clay. Welcome everybody. Over the next few slides, I will take you through the key financial measures and will draw your attention to several key callouts. Let's start today with cash. Operating cash conversion strengthened in the second half, consistent with our normal seasonal trend. Reported conversion rate for the year came in at 61%. However, after normalizing the prior period tax timing, conversion was 74%, which was above our normalized long-term average.
The bottom left table is a really big call-out for cash, as it shows how the deferred tax balance that we have spoken about over a number of years now has largely been unwound. After peaking in 2024 at just over AUD 40 million, we paid a further AUD 16.4 million of deferred tax in FY 2026, leaving only AUD 16.9 million to unwind.
What this cash slide demonstrates is that the cash-generating capability of the business remains really strong and that the business continues to convert earnings into cash, which underpins the balance sheet's strength. Let's now take a look at CapEx, as it has been a big couple of years. You can see here that the capital spend did moderate in 2026, coming in at AUD 40 million, which was at the lower end of our half-year update. The reduction in 2026 reflects genuine efficiency gains from several key initiatives.
As Clay mentioned, we were able to extract capital synergies from the SRT acquisition. Those synergies, coupled with higher equipment utilization and value extracted from fleet transformation projects, enable the fleet spend to come in line with the prior year at just over AUD 35 million.
CapEx spend on facilities is forecast to normalize as major projects to unlock growth in Perth and Adelaide were completed. The expansion in Adelaide, which is a Lindsay freehold site, came in at just under AUD 9 million. Key highlights for the year included the deployment of another 25 high-productivity road combinations across the network. These combinations now account for over 13% of our total road kilometers.
Looking ahead to 2027, our capital plan is expected to be around AUD 57 million across fleet facilities, which includes the AUD 20 million of growth capital for the new SRT freight work. Touching now on returns. You can see on the ROIC table the strategic investments made over recent years take our invested capital to AUD 400 million. Those investments have built a larger, more diversified, and more capable network and positions the business for the long term.
Although returns for the year at 13.9% are below our medium-term target range of 15%-20% and down slightly from 14.3% in 2025, important to note, much of that step up in invested capital was recently deployed in the past year. Encouragingly, the returns have already improved from 12.6% at the half year.
The level of investment we have made over recent years naturally takes us now to a deeper dive on the borrowing slide. The increase in debt in the past 12 months was driven by strategic growth investment. Net leverage for the year finished at 1.92x , which was a reduction from 2.23x at the half year, and importantly, finishing within our target range. Looking to 2027, net leverage may be above the top of the target range at the half year due to capital deployment timing.
L ike this year, we forecast it to normalize in the second half and reducing to around 1.8x by next year then. We finished the 2026 year with plenty of funding capacity of around AUD 85 million in available facilities, which provides flexibility to support future opportunities.
What these borrowing graphs demonstrate is that our balance sheet remains strong, net leverage is being managed through the cycle, and that we remain well-placed for the next phase of the group's development. As Clay called out, the board has declared a fully franked final dividend of AUD 0.017 per share, bringing the full-year dividend to AUD 0.038 per share, fully franked and in line with the prior year.
The dividend reflects confidence in the strength of the balance sheet and the cash-generating capability of the business, which we expect to strengthen further as the remaining deferred tax unwinds and earnings continue to build. Our approach to capital management remains unchanged. We will maintain balance sheet strength, stay disciplined in allocating capital, and pursue growth opportunities that support sustainable shareholder returns over time.
FY 2026 marks an important transition for the Lindsay Group. The platform is built, SRT is integrated, and the fleet and facilities are in place to support a larger and more capable business. With that, I'll hand back to Clay.
Thanks, Justin. Turning to how we grow from here. Over the last three years, we have intentionally been in build mode, expanding our reach, building out our customer offering, and unlocking infrastructure constraints. We have deployed AUD 400 million of invested capital into making Lindsay stronger and resilient in our market and more valuable and efficient for our customers. The way we have shaped the business has us positively positioned for growth, and we see three key opportunities.
The first growth engine is refrigerated primary logistics, growing where we already lead. It is a market worth around AUD 5.7 billion, and we hold the number one position in rail and road and number two in Trans Bass. Our investment in equipment, sites, and people will enable us to efficiently grow our share on the lanes we already compete, lifting utilization and continuing our transition to high-productivity vehicles. This is about capturing incremental volume over capacity we have already paid for, so it comes with only modest sustaining capital.
The second opportunity that has been unlocked is the secondary freight market. This is a complementary sector with a market size of roughly AUD 3 billion. Contracts in the market are usually larger, have reasonable term, and more consistent volumes. As a group, we are very focused on the successful rollout of the North Queensland contract, and from that process, we will develop critical skills and capability that will set us up for further opportunities.
The third is ag services, deepening our integrated model across rural and Hunter. This is a network-led growth that requires minimal capital. It means growing our unique integrated offer and packaging across our rural regions, gaining share where we already operate, and continuing the turnaround we are driving through Hunter.
All of these three growth engines are underpinned by the transformation work running across the business that targets a medium-term ROIC of 15%-20%. Looking ahead to FY 2027, the team is very focused on extracting operating customer and financial benefits from the investments we have made over the last three years. Externally, the transport sector remains in flux due to a combination of cost, regulatory, supply, and customer pressures. Refrigerated transport is expected to remain competitive in the near term, with the volume outlook anticipated to be flat, driven by static customer demand.
A major milestone for the business will be in October when we commence the first region in our Woolworths contract, with all regions operating by July 2027. On the rural side, growing conditions across our rural regions remain broadly favorable.
Lower biannual avocado and citrus volumes in W.A. and Central Queensland are expected to be offset by continued growth in Tasmania and other key regions. Lower forecast rainfall in the 12 months ahead is largely negated as the regions we service are irrigated and have good water supply as a result of the last three years. With that, I will hand back for questions.
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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Philip Pepe from Shaw and Partners. Please go ahead.
Hey, guys. Thanks for taking the question. Well done on a pretty solid second half. Just on the expansion into secondary freight, can you just give us a bit more detail, please, on how that contract came about and how quickly you hope to expand into some of the other states?
Yeah, thanks, Philip. I think we flagged reasonably early on that the SRT acquisition had a whole bunch of benefits, and one of those benefits was their expertise and reputation in secondary freight. As part of that, as we integrated the business, we then started looking for opportunities to expand our secondary freight capability on the mainland.
That really came through a combination of both what we have is in a network and coverage, and the SRT capability and reputation in that sector. I do not know whether there is any Craig Baker sitting here dying to answer a question, whether there was anything else we want to add to that, Craig.
Yeah, I think when you look at the North Queensland particular, Philip, it is our network, like Clay said, in the north, but it is also our expertise in and outage. The rail in North Queensland is particularly unreliable, and I guess our road services and scale actually lends itself to be a great partner in that space.
Thanks. If I can sneak in a second one, please. You mentioned AUD 85 million balance sheet capacity for M&A. I would imagine at the moment, probably plenty of businesses coming across your desk waving a white flag up for sale. Have prices adjusted accordingly? Is there much interest that's out there?
I think the main thing here, Phil, is and we're trying to emphasize through the presentation is we've built capacity into our business. As the market gets disrupted, bringing that volume across into We've got that operating leverage, bringing it across cheaply, it would probably be our goal rather than any immediate M&A activity. Justin, is there anything you want to add to that?
No, spot on, Clay. We always want to maintain sufficient capacity to be in a position like we were in 2023 to act swiftly, if opportunities arise. That's why it's always important to make sure that we maintain sufficient capacity on the balance sheet to do that.
Excellent. Thank you for taking the question. Yeah, well done.
Thank you. Your next question comes from Ian Munro from Ord Minnett. Please go ahead.
G ood morning, Clay and team. Thanks for taking my question, and congrats on the result. Just with respect to the secondary freight expansion, can you maybe just give us a sense of the CapEx involved? I know you flagged some numbers there. Just interested in the, I guess, the leasing component relative to the fixed facilities, and is it a case of investing that capital and potentially getting more throughput in excess of the numbers that you've flagged from a revenue perspective?
Munners, we've got AUD 20 million of dedicated capital against that five-year contract at this point in time. Most of that is in kind of rolling stock. N ew fleet, trails, et cetera. We will be opening two new sites in Cairns and Townsville, and they'll be leased sites for us. What's the second part of your question? Sorry, Ian.
Just wondering whether, associated with that capital investment, is there any incremental revenue opportunities above what you've flagged to the market?
S orry. Yes. G reat. Thank you, for reiterating that. L isten, that opens up a whole new market for us. Today, we don't have a depot in Cairns, and we don't have a depot in Townsville. T hey are sizable towns and cities. T here is other incremental opportunity that is available to us there that we will seek to expand those operations. O ur main focus being on a really positive integration and a really positive startup for this particular contract. Certainly, it does open new markets for us today where we don't have a significant presence. Craig, anything you want to add to that?
Yeah, I think look, currently, Ian, how we do Townsville and Cairns is our drivers actually have to complete the deliveries in those sites. You are limited to what freight we can actually push into North Queensland. Having our own hub-and-spoke model, as you will, with the ability to be able to manage freight in those areas, we should be able to grow out our Lindsay network that is outside of the secondary freight task.
Very good. Just confirming your go-to-market brand in secondary freight is SRT or Lindsay Transport?
SRT at this point, mainly focused on the island and some associated pieces, but in North Queensland it will be Lindsay Australia.
Yeah, very good. Just looking at the rural performance, just conscious of fertilizer prices and nutrients kind of spike during the second half. How are you kind of seeing, I guess, that performance relative to prices amongst some of those key imports? Did that help the result? Are we kind of cycling any kind of high watermarks into FY 2027? Thank you.
I will get Craig to answer that question.
Yeah, and if I think about the performance of the division, it was an absolute standout underneath that uncertainty. I mean, supply from the normal supply channels, with foreign supply, it was fairly challenging. I would say the team's strategy of sourcing from multi-supply points, improved forecasting, and pleasingly, our end customer engagement, which allows us to do some volume planning and timing, has led to some consistent supply to our customers. That has also given us the opportunity to fill supply gaps from competitors that are impacted by the supply shortages.
It is, for me, such a standout what the team has been able to manage through this whole uncertainty phase. I f you look at growers at the moment, they are certainly under pressure with their cost centers on farms. The input costs are highly discussed when we are out there on the farms. Our teams have managed to not only hold our ground but improve our position in the marketplace. I t was a great outcome for me where we managed that uncertain supply chain.
Hey, Munners, if part of that question is, "Was there a buy-sell arbitrage that influenced that result?", it is immaterial. It was fundamentally based off expansion into southwest W.A., ongoing growth in their core markets, and really good sort of cost control and margin control on the sales side.
Yeah, very good. Thanks, guys. Just one more, if I may. Just reading the outlook statement, just highlighting the kind of challenging conditions in some parts. O bviously, noting the opportunities for market share, and there is a lot of investment gone into the business. I guess, on a net basis, how are we thinking about kind of weights and volumes through the transport business in sort of July, August to date? Are we up on PCP? How are we thinking about the kind of net of those market factors? Thank you.
What I would say, we talk about the transport, the refrigerated transport market being reasonably flat at the moment. That is kind of been our experience kind of in the last sort of the last part of Q4, and then probably it has continued that way into the first sort of early parts of FY 2027. In saying that is where your HPV and your transformation program becomes really important. As those volumes come flat, you have just got to become more efficient at actually moving those volumes. That has been kind of our experience in just the early parts of this financial year. Anything you want to add on that, Craig?
Yeah. I would say Munro, inquiry from major customers is still strong and tender opportunities are really consistent still. We have not seen that back off. I think we have touched on it already, but since the acquisition of SRT and the secondary freight inquiries are starting to hit our trading desk as well. We have got some opportunity to sort of look at different regions and different streams of revenues in that space. Customers are fairly wary of the exit transport suppliers from the market.
Pricing, although we need to be relevant to the market still, it is not the key driver of every decision, and performance and reliability still remain key. The supermarkets are still driving towards an improved on-delivery metric. All they are doing is trying to chase the end customer, ensure there is product on the shelf. Munro, you need to please the customer. For us, guys, like Clay said, the market is fairly flat as far as volumes goes, but the inquiry is still pretty strong.
If you think, Munners, why we have been so excited about the SRT acquisition and what we can learn from them and combine those businesses, we have got sort of, it is a smoother profile over the year, but that entry into secondary freight, their volumes are, they can vary a little bit, but generally, the variation is a smaller percent than the primary freight. T here is that benefit of trying to smooth over the year with your freight but also bringing some resilience to some of your volumes through the cycle.
Yeah. Thank you, Clay. Thanks, Craig. Appreciate the answers.
Thank you. Once again, if you wish to ask a question, please press star one and wait for your name to be announced. We will pause a moment for any further questions to register. Thank you. There are no further questions at this time. I will now hand back to Clay McDonald for any closing remarks.
Thank you. I would like to thank our Lindsay employees for their effort in FY 2026. This year is a culmination of our three-year strategy to grow our network, transform our offering, and deliver for our customers. We could not do that without their ongoing commitment and support. I would like to thank them. Thank you, everyone, and have a wonderful day.
And that does conclude our conference for today. Thank you for participating. You may now disconnect.