Rivco Australia delivers record $33.5 million profit in transformative FY25
Rivco Australia (ASX: RIV) has reported a record net profit before tax of $33.5 million for FY25, representing a 152% increase on FY24. The company described the period as transformative, encompassing the completion of management internalisation, strategic portfolio rebalancing, and significant deleveraging.
Net profit after tax reached $21.9 million, up 135% year-on-year, translating to earnings per share of 14.0 cents (+133%). The pre-tax NAV total return for the 12-month period stood at 12.9%, while post-tax NAV per share closed at $1.59. Total shareholder return for FY25 was 15.4%.
The company attributed the record profitability to disciplined portfolio management, improving yields on high security water entitlements, and realised capital gains from strategic asset sales executed above carrying value.
When big ASX news breaks, our subscribers know first
What drives returns in water entitlement investing
Water entitlement investing involves owning permanent rights to a share of water from rivers, dams, or groundwater systems. These entitlements generate returns through three primary mechanisms:
- Leasing income: Entitlement holders lease their water to irrigators under multi-year agreements, generating recurring revenue
- Allocation sales: When dams release water, entitlement holders receive allocations they can sell on the spot market
- Capital appreciation: Entitlement values tend to appreciate over time, driven by supply constraints and agricultural demand
Water entitlements are categorised by security level. High security entitlements receive priority allocations even during drought, while general security entitlements receive higher volumes during wet periods but may receive zero allocation in dry years. This distinction affects both income stability and capital value.
Allocation determinations by state water authorities determine how much water is attributed to entitlement holders each season. These percentages fluctuate based on dam storage levels and rainfall, directly influencing spot market pricing and lease demand.
Balance sheet transformation and disciplined capital management
Rivco Australia repaid $93.5 million of debt during FY25, reducing total drawn debt from $116.0 million to $22.5 million. Gearing declined from 31% to 7% at 31 December 2025, well within the company’s maximum LVR covenant of 40%.
Interest paid on debt fell 52% to $3.2 million (FY24: $6.7 million). The effective cost of borrowings for FY25 was 5.76%, down from 5.85% in FY24. Based on current drawn debt levels, a 25 basis point change in interest rates would impact annual interest expenses by approximately $56,000.
During the first half of 2025, the company completed on-market buybacks of 1.6 million shares at an average price of $1.50 per share.
Internalisation delivers lower cost base
The completion of management internalisation marked a structural shift for Rivco Australia, transitioning from an externally managed model to a self-managed operating structure. The company retained its existing management team, ensuring continuity throughout the transition.
All one-off costs associated with internalisation were absorbed in FY25, with no further internalisation costs expected. The company estimates indicative recurring cost savings of approximately $1.0 million per annum, with no performance fees payable under the new structure.
| Expense Line Item | Externally Managed | Internally Managed | Net Cost Impact |
|---|---|---|---|
| Management Fees (External) | $2.2m | – | -$2.2m |
| Admin Fees (External) | $0.3m | – | -$0.3m |
| Overhead Costs (Internal) | $1.1m | $1.4m | +$0.3m |
| Employee Costs (Internal) | – | $1.1m | +$1.1m |
| Office Costs (Internal) | – | $0.1m | +$0.1m |
| Net Cost Base | $3.6m | $2.6m | -$1.0m |
Portfolio positioned for drier conditions with 66% lease coverage secured
Rivco Australia has strategically rebalanced its portfolio toward high security entitlements, which now comprise 77% of portfolio value. High security entitlements receive priority allocations during drought conditions, providing more stable income streams when water availability tightens.
The company has locked in 66% of its portfolio by value into leases and forward contracts for the July 2026 to June 2027 water year, representing 72% of high security assets. This coverage is expected to generate approximately $8.3 million in revenue, with a weighted average lease expiry of 3.2 years.
- Revenue from leases: $7.5 million (61% of portfolio)
- Revenue from forwards: $0.8 million (5% of portfolio)
- Combined committed revenue: $8.3 million
- Effective yield on leases: 4.3%
- Effective yield on forwards: 5.6%
Leasing revenue for FY25 totalled $5.8 million (FY24: $7.0 million), with 54% of the portfolio locked into long-term leases at 31 December 2025 (31 December 2024: 37%).
$38.7 million in realised capital gains from strategic sales
During FY25, the company sold 18.1 GL of high security entitlements and 15.5 GL of general security entitlements for a combined total of $143.4 million. These sales generated realised capital gains of $38.7 million, executed at prices materially above carrying value.
The portfolio value stood at $292 million at 31 December 2025. Permanent water assets decreased from $387.1 million to $286.3 million due to the strategic sales, while temporary water assets increased to $5.3 million (FY24: $4.4 million). The company held approximately $5.3 million in fair market value of unleased water allocations at year-end, with sales continuing into Q1 2026 to support summer irrigation programmes.
Drier conditions support higher allocation prices and improved yields
Water allocation prices in the southern Murray-Darling Basin have risen significantly amid tighter supply conditions. Average allocation prices reached $450/ML in February 2026, with some zones recording prices as high as $550/ML.
At 28 February 2026, weighted average southern Basin dam storages stood at 43% of capacity, broadly comparable to levels observed in early 2019 when Lower Murray spot prices last peaked. Historical data indicates a clear correlation between dry periods and elevated allocation prices.
Three key supply-side factors are supporting higher allocation prices:
- Lower dam storage levels: Weighted average dam capacity at 43% constrains available supply ahead of summer irrigation demand
- Reduced allocation determinations: Drier conditions have resulted in lower allocation percentages across key southern basin systems, with combined average allocations of 52% as of 1 March 2026 compared to 64% in 2025
- Government buybacks: Ongoing recovery programmes continue to remove entitlements from the market
Government buybacks continue to tighten supply
The Australian Government has recovered 169.8 GL toward the 450 GL target, leaving 280.2 GL to be secured by 31 December 2027. The Government has indicated plans to recover up to 230 GL in 2026 through existing and expanded buyback programmes.
Against a backdrop of improving yields and limited supply, select high security parcels are transacting above prevailing market prices in early 2026. Water entitlement values have demonstrated a compound annual growth rate of approximately 7% since 2007, reinforcing water’s role as a long-term, defensive, and largely uncorrelated real asset.
The next major ASX story will hit our subscribers first
Dividends and outlook for FY26
The company declared a fully franked final dividend of 3.72 cents per share, payable 30 April 2026. Total dividends of 7.43 cents per share were paid during FY25 (FY24: 7.30 cents per share). Since November 2017, Rivco Australia has paid total dividends of 52.4 cents per share to shareholders.
The Board has adopted an evolved dividend framework underpinned by core operational earnings. Realised capital gains from water entitlement sales will be assessed separately and may be allocated to reinvestment in entitlements, debt reduction, on-market share buybacks, or additional dividends, depending on market conditions. The Board intends to pay a dividend in October 2026 under this framework.
Strategic priorities for 2026
Management outlined five key focus areas for FY26:
- Increase earnings stability: Target lease coverage of ≥70% to enhance recurring cash flow and reduce earnings volatility
- Refine investment proposition: Launch an updated investment thesis and communicate the company’s strategy
- Portfolio optimisation: Rebalance capital into high-income and high-growth zones using a selective, valuation-led approach
- Leadership and governance: Finalise leadership structure and enhance Board capability and composition
- Disciplined capital management: Deploy capital to the highest risk-adjusted return opportunities while preserving flexibility
The company has entered 2026 with strong momentum and a positive operating outlook, supported by improving lease demand, higher yields on high security entitlements, and favourable market conditions.
Want the Next Utilities Breakout in Your Inbox?
Join 20,000+ investors getting FREE breaking ASX news delivered within minutes of release, complete with in-depth analysis. Click the “Free Alerts” button at StockWire X to start receiving alerts the moment market-moving news breaks across Utilities and beyond.