Emeco delivers FY26 earnings growth and greenlights 10% buy-back
In its FY26 results presentation, Emeco Holdings (ASX: EHL) reported Operating NPAT of $89.0M, up 5%, alongside a Board-approved on-market share buy-back of up to 10% of shares on issue.
Emeco is described in the presentation as Australia’s largest mining equipment rental and maintenance services provider. The FY26 update carried a clear theme: earnings growth, strong cash generation, and further deleveraging, achieved despite a softer second half.
Key figures from the presentation include:
- Revenue: $792.8M (up 1% vs FY25)
- Operating EBIT: $148.0M (up 2%)
- Operating NPAT: $89.0M (up 5%)
- EPS: 14.8 cents (up 2%)
- Return on Capital: 16.9% (up 30 bps)
- Net leverage: 0.43x (down 0.22x)
The result continued a multi-year pattern of lower leverage and stronger returns, with management framing FY26 as further deleveraging.
The FY26 result extends what has now been six consecutive halves of earnings growth, a run that reflects embedded operational discipline rather than a cyclical bounce from any single commodity cycle.
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FY26 financial results at a glance
The presentation set out a full-year profit and loss snapshot, with earnings quality driving the story more than headline revenue growth.
| Metric | FY25 | FY26 | Change |
|---|---|---|---|
| Revenue ($M) | 785.4 | 792.8 | +1% |
| Operating EBITDA ($M) | 301.1 | 292.5 | (3%) |
| Operating EBIT ($M) | 145.7 | 148.0 | +2% |
| Operating NPAT ($M) | 84.5 | 89.0 | +5% |
| Return on Capital | 16.6% | 16.9% | +30 bps |
The divergence between a 3% decline in Operating EBITDA and a 2% rise in Operating EBIT reflected a shift in earnings composition. Management noted a higher contribution from low-capital maintenance services, combined with carefully controlled costs and lower depreciation.
The second-half softness was attributed to lower-than-anticipated surface fleet utilisation. The presentation cited prolonged Queensland wet weather, which reduced site activity and operational equipment utilisation, and separately noted that supply chain challenges and fuel price uncertainty affected the timing of customer operational decisions, delaying fleet redeployment.
The business model: why the shift from rental to maintenance matters
Emeco rents heavy mining equipment such as trucks, dozers and loaders, and increasingly maintains and rebuilds that equipment through its Force business.
The presentation detailed a strategic pivot in the gross revenue mix. What was 66% rental and 34% maintenance in FY23 has moved to a 50% / 50% split in FY26. Maintenance carries lower capital intensity and recurring characteristics, which supports higher returns without heavy asset spending.
Signals of this maintenance growth included:
- Rental on-site maintenance revenue up 44%
- Force field service hours up 37%
- Maintenance Gross EBIT rising to $67M in FY26 from $49M in FY25
Management described the maintenance and technology offering as the company’s key differentiator and growth driver, and the presentation positioned this mix shift as a core contributor to rising Return on Capital.
Balance sheet strength unlocks the buy-back
The presentation framed the buy-back as a high-return use of balance sheet capacity, supported by continued deleveraging.
Net debt reduced by $67.8M to $127.1M, taking net leverage to 0.43x. Liquidity stood at circa $315M, including $125M in cash, supported by a refinanced $350M revolving syndicated facility maturing in December 2030, with $190M undrawn at 30 June 2026.
Operating Free Cash Flow was $127.6M (adjusted to $114.5M), with cash conversion of 108%. The presentation also noted a Moody’s credit rating of Ba3 and Net Tangible Assets of $1.51 per share, up from $1.36.
Emeco FY26 Results Presentation
“Strong balance sheet with industry leading low net leverage1 of 0.43x, maintaining strength to provide flexibility for growth and shareholder returns.”
The combination of the buy-back and balance sheet flexibility was presented as a signal of capital discipline and confidence in the company’s outlook.
Segment performance: Rental and Force
The presentation covered both operating segments, showing resilient earnings across each.
Rental
Rental revenue reached $637M, up 4%, with Operating EBIT of $184M, up 2%. The segment operated a fleet of 840 units across 134 projects. Gross average utilisation was 82% for surface and 67% for underground, with the second half impacted by wet weather and deferred customer redeployments.
Force (maintenance and rebuild)
Force reported Gross Revenue of $277M, up 1%, and Gross Operating EBIT of $29M, up 6%. The business completed 143 machine rebuilds, with field service hours up 37%. A forward catalyst highlighted was battery electric vehicle maintenance via the Fortescue/XCMG program, expected to commence delivery in FY27.
Force was positioned as the key enabler of the maintenance growth thesis and broader diversification.
Outlook: the pathway to a 20% ROC target
Management set out guidance across FY27 and FY28, framing utilisation recovery as the central lever for value creation.
For FY27, Emeco expects:
- Utilisation forecast to recover to ~90% surface and ~80% underground by the end of FY27
- Earnings in line with FY26, with a second-half weighting
- Continued strong free cash flow and further deleveraging
- Capex forecast at circa $155–$165M net of disposals, depreciation of circa $145–$150M, and ERP spend of around $5M
For FY28, the presentation stated the company expects its utilisation run rate to deliver earnings growth in line with its 20% ROC target. Continued focus areas include expanding the maintenance platform and pursuing opportunistic sector consolidation.
M&A in the fragmented rental equipment market was flagged by CEO Ian Testrow as a live strategic option ahead of the full-year result, with the combination of sub-0.5x net leverage and $100-110 million in operating free cash flow cited as the capacity enabling that pursuit.
The presentation reiterated a disciplined capital allocation framework, targeting a net leverage range of 0.5–1.0x. This range is intended to provide flexibility to reinvest in the business, pursue inorganic growth, reduce debt, or return capital to shareholders.
The lift from 16.9% to a 20% ROC target sits at the heart of the value-creation narrative, with utilisation recovery presented as the primary driver.
The investment case in brief
The presentation summarised the investment thesis around the following points:
- Resilient business with ROC exceeding WACC over eight years
- Market leadership as Australia’s largest national mining equipment rental and maintenance service provider, more than twice the size of its nearest competitor
- Returns-driven, with a clear pathway from 17% toward a 20% ROC target
- A growing, low-capital maintenance platform with technology-enabled asset management
- Disciplined capital management and balance sheet strength
The overarching message was one of sustainable growth and stronger returns, anchored by capital discipline and a recovering utilisation profile.
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