Bhagwan Marine Lifts EBITDA Margin to 19% Despite Revenue Dip Amid Contract Timing

Bhagwan Marine delivers 19% EBITDA margin in 1H26 amid contract timing shifts

Bhagwan Marine has posted a core EBITDA margin of 19% for the six months ending 31 December 2025, up from 18% in the prior corresponding period, despite an 8.5% decline in core revenue to $116.9m. The marine services operator attributed the revenue dip to the timing of major contract awards, while underlying demand remains robust. Operating cash flow surged 21% to $25.4m, driving free cash flow of $8.6m. The Board declared an interim dividend of 0.5 cents per share, fully franked, with a record date of 12 March 2026.

CEO Loui Kannikoski

“FY26 has started positively, with steady activity across our markets and a strong pipeline of opportunities.”

The financial performance underscores the company’s pricing discipline and cost control, positioning it to capitalise on improving market conditions. With the Riverside Marine acquisition pending shareholder approval on 24 March 2026, Bhagwan Marine is set to materially expand its earnings base and diversify its revenue streams.

What is EBITDA margin expansion and why does it matter?

EBITDA stands for earnings before interest, taxes, depreciation and amortisation. It represents operational profitability by measuring how much cash a company generates from core activities before accounting for financing and non-cash expenses. EBITDA margin is calculated by dividing EBITDA by revenue, expressed as a percentage.

Margin expansion indicates a company is retaining more of each revenue dollar as profit. For Bhagwan Marine, the improvement from 18% to 19% during a period of declining revenue signals operational efficiency gains and disciplined cost management. This is particularly relevant for capital-intensive marine services businesses where fixed costs are high.

Key points:

• EBITDA margin = EBITDA divided by revenue
• Expansion indicates improving profitability efficiency
• Critical metric for capital-intensive industries like marine services

In Bhagwan’s case, the margin lift occurred despite an 8.5% revenue decline, suggesting stronger pricing power or reduced variable costs per dollar of revenue generated.

Cash flow strength supports debt reduction and shareholder returns

Bhagwan Marine generated $25.4m in operating cash flow during 1H26, a 21% increase on the $21.0m recorded in 1H25. Disciplined working capital management drove the result, with debtors normalising from elevated June 2025 levels. The company deployed $9.2m in sustaining capital expenditure to maintain fleet quality and $3.3m in growth capex, including the acquisition of the Seawind 1 landing craft vessel. After accounting for lease repayments of $7.6m, free cash flow reached $8.6m.

Net financial debt (excluding operating leases) fell to $1.0m, representing just 1% of equity. Including operating leases, net debt stood at $42.0m, or 0.9x EBITDA. Net tangible assets per share remained stable at $0.61.

Balance sheet snapshot

The conservative balance sheet provides flexibility to fund the Riverside Marine acquisition and pursue organic growth opportunities without material equity dilution. Tax payments are expected to commence in FY27.

Riverside acquisition set to reshape Bhagwan’s earnings profile

In February 2026, Bhagwan Marine announced the acquisition of Riverside Marine Holdings, a 99-year-old vessel management business founded in 1926 by the Campbell Family. The transaction is subject to shareholder approval on 24 March 2026 and is forecast to contribute $63.3m in revenue and $26.2m in EBITDA during FY26, representing a 41% EBITDA margin. This compares to Bhagwan’s standalone FY25 EBITDA margin of 18%.

Riverside operates approximately 30 vessels across five brands (Rivtow Marine, AIMS Vessel Management, Riverside Industrial Sands, Magnetic Island Ferries, and Riverside Oceanic), with long-term contracts supporting tier-one clients in iron ore, metallurgical coal and industrial sand markets. The business model is capital-light, focused on vessel management and operations rather than ownership.

Five key strategic benefits of the Riverside acquisition:

1. High EBITDA margin (~40%)
2. Capital-light vessel management model with minimal sustaining capex
3. Diversification across iron ore, metallurgical coal and industrial sand
4. Long-term contracts with tier-one customers providing revenue visibility
5. Geographic expansion into North Queensland, Mackay and Port Hedland

On a pro forma basis, the combined group’s EBITDA margin is expected to increase from 18% to 24%, with repeatable revenue rising from approximately 40% to 50% of total revenue. EPS accretion is forecast at approximately 14% for FY26, with return on equity accretion exceeding 20%. Bhagwan’s oil and gas exposure will fall from 66% to 53% of revenue, with the balance supported by iron ore, coal and industrial sand.

Operational momentum across core and emerging markets

Bhagwan Marine reported strong activity across its four operating segments during 1H26. The company secured a five-year contract with Jadestone Energy for the Coral Knight anchor handling vessel and obtained contract extensions with Vermilion. Subsea operations included ROV and diving projects in Western Australia, with a strong decommissioning pipeline building. The Ports & Inshore division won a six-year maintenance contract with the Port of Melbourne and secured the Alkimos Seawater Desalination Plant contract with Acciona and the Water Corporation. Defence activity increased, with facility upgrades at the Henderson Marine Precinct and early engagement with the Office of Defence Industry Support.

Sector highlights

Offshore Energy:

• Five-year Coral Knight contract secured with Jadestone Energy
• Two-year contract extensions with Vermilion
• Continued five-year support contract off the Pilbara coast, Western Australia

Subsea:

• Completion of decommissioning diving project, Western Australia
• ROV debris cap replacement project, Western Australia
• IMR support diving project and platform inspection ROV project
• Strong tendering activity in core and decommissioning sectors

Ports & Inshore:

• Six-year Port of Melbourne maintenance contract plus associated works
• Alkimos Seawater Desalination Plant marine works contract with Acciona and Water Corporation
• Ongoing Groote Eylandt wharf repair project support, Northern Territory

Defence:

• Upgrading Henderson Marine Precinct facility
• Early engagement with Office of Defence Industry Support
• Ongoing projects with Australian Fisheries Management Association and border protection
• Strong pipeline of defence opportunities

Multi-sector activity reduces concentration risk and positions Bhagwan to benefit from structural demand drivers in offshore decommissioning and defence infrastructure spending.

FY26 priorities and market outlook

Management is focused on generating quality revenue in an improving pricing environment while maintaining disciplined cost control and procurement optimisation. The company aims to commence integration of the Riverside businesses upon transaction completion, with a focus on building presence in defence and offshore wind sectors. Operational efficiency remains a priority, with investments in systems automation and enhanced governance processes to support scale.

FY26 strategic priorities:

1. Generate quality revenue in an improving pricing environment
2. Disciplined cost control and procurement optimisation
3. Commence Riverside integration following shareholder approval
4. Build presence in defence and offshore wind sectors
5. Enhance systems and operational automation to drive efficiency

Management noted that near-term economic uncertainty may persist, but medium and long-term demand drivers remain supportive. The offshore decommissioning pipeline continues to build, with over 1,000 wells and 8,000 kilometres of pipelines requiring decommissioning work across Australia’s offshore oil and gas sector. Defence spending is accelerating, supported by $12bn in government funding for the Henderson Marine Precinct and broader AUKUS commitments.

The Riverside Marine shareholder vote scheduled for 24 March 2026 represents the next material catalyst. If approved, the transaction is expected to complete shortly thereafter, with Riverside’s FY26 contribution incorporated into Bhagwan’s full-year results.

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