Emeco (ASX:EHL) executives said the company delivered another period of operational and financial improvement in the first half of fiscal 2026, extending what management described as six consecutive halves of period-on-period growth in earnings and cash flow. Chief executive officer Ian Testrow and chief financial officer Theresa Mlikota highlighted progress toward the company’s 20% return on capital (ROC) target, balance sheet strengthening, and a debt refinancing completed on improved terms.
First-half results show revenue, earnings and cash flow growth
Management reported group revenue increased 9% to AUD 421 million in the first half. Operating EBITDA rose 7% to AUD 155 million, while operating EBIT increased 13% to AUD 77 million compared with the prior corresponding period. Operating net profit after tax climbed 21% to AUD 46 million.
Maintenance services mix supports improving returns
Both Testrow and Mlikota emphasized that revenue growth was driven by increased maintenance services activity. They noted that maintenance work typically carries lower margins but also requires less capital, contributing to higher returns on capital. Testrow said the first-half revenue mix reflected “high levels of maintenance work” compared with the prior year, and described services as a key driver of improving ROC.
Emeco said ROC reached 18% in the first half, up 100 basis points over the past six months and up from 15% in the first half of fiscal 2024. Testrow said the company remains focused on its 20% ROC goal, and in the Q&A he linked the remaining uplift largely to utilization, suggesting that moving surface fleet utilization from about 85% toward 90% would materially help reach the target, alongside continued growth in maintenance earnings.
On a longer-term view, Testrow said the company has made steady progress since introducing the 20% target a couple of years ago, attributing improvements to utilization and the growing contribution from non-capital-intensive services.
Cash generation and de-leveraging continue; refinancing completed
Operating free cash flow increased 37% to AUD 67 million, with management citing cash conversion of 110%, aided by improved working capital. Mlikota said strong debt collections and timing benefits on creditor payments released AUD 11.3 million in working capital, though she expects the timing effects to reverse by year-end.
Staying-in-business capital expenditure totaled AUD 90.7 million in the half, up 17% from the prior period, with net CapEx of AUD 86.7 million after AUD 4 million in disposal proceeds. Mlikota said second-half CapEx is expected to be lower and align with full-year guidance.
Free cash flow was applied primarily to debt reduction, including lease liabilities and other financing obligations, which declined by AUD 13.7 million. No shareholder distributions were made as the company prioritized debt reduction ahead of refinancing. Cash rose by AUD 45 million to AUD 171 million at period end.
Management said net leverage improved to 0.5x EBITDA, down from 1.1x in the first half of fiscal 2024. Mlikota highlighted a AUD 52 million reduction in net debt since June, driven by earnings and cash conversion.
Emeco refinanced its debt facilities in November 2025, securing a new AUD 355 million syndicated bank debt facility on better pricing and conditions, according to management. The refinancing was used to replace the existing revolving credit facility and redeem a AUD 250 million Australian medium-term note, which occurred on Jan. 19, 2026, after period end. Mlikota said liquidity improved by about AUD 50 million to AUD 271 million after taking account of the note redemption.
Credit ratings were reaffirmed during the half, with Moody’s maintaining Ba3 and Fitch at BB-, the company said.
Segment commentary: rental utilization, Force workshop mix, and technology investment
Testrow said Emeco’s rental business performed strongly, with rental revenue up 14% to AUD 342 million, driven primarily by increased maintenance services across key contracts. Operating EBITDA increased 6% to AUD 168 million, and operating EBIT rose 9% to AUD 94 million.
Operationally, the company highlighted a successful ramp-up of a new large fully maintained operation in Queensland, where Emeco provides mining fleet and full maintenance services for both Emeco and customer fleets. Surface fleet utilization was reported at 85%, while underground utilization increased to 69% and was “currently running at 75%,” according to Testrow. He said Emeco has operating leverage within existing fleet capacity, limiting the need for growth CapEx to increase earnings.
Testrow said wet weather in Queensland impacted utilization early in the second half, but he characterized the medium-term production outlook as robust.
In the Force maintenance business, management described the segment as strategically important due to workshop, field maintenance, asset management, and condition monitoring capabilities. Force completed 84 machine rebuilds in the first half and provided support services to XCMG for battery-powered equipment, according to Testrow. Force delivered gross revenue of AUD 141 million; external revenue declined year-on-year as workshop capacity was redeployed to support internal rental fleet needs. The business reported gross operating EBITDA of AUD 18.3 million and gross operating EBIT of AUD 15 million. Testrow said Force’s focus will be increasing external work across eastern and western regions, with field-based services in strong demand.
Management also pointed to investment in digital tools and technology, including rolling out in-field digitization and pursuing artificial intelligence and machine learning applications for predictive maintenance and reliability. Testrow said Emeco has in-house telemetry on more than 200 machines and is developing “first-generation in-house agentic reliability solutions.” The company’s second-half priorities include delivering the build phase of its D365 ERP project and continuing digitization of operational technology.
Outlook: disciplined growth, limited fleet investment until utilization rises
Looking to the second half, management reiterated priorities focused on disciplined capital expenditure, cost efficiency, and increasing utilization by building a portfolio of fully maintained projects and expanding the company’s service offering. Testrow said fleet investment will be limited until existing fleet is more fully utilized, positioning utilization as a key driver to reaching the 20% ROC target.
Executives said Emeco will also evaluate potential M&A, including low capital intensity businesses adjacent to its core, and continue monitoring competitors for consolidation opportunities. In response to an analyst question, Testrow said the company has not been “overly active” in M&A yet, emphasizing the company’s improved leverage position and describing two areas of focus: competitor consolidation where Emeco can apply its maintenance model, and potential expansion in field-based maintenance services.
For fiscal 2026, Emeco guided to staying-in-business capital of approximately AUD 170 million to AUD 175 million, depreciation of about AUD 160 million to AUD 165 million, and non-recurring spend of around AUD 15 million. Management said it expects positive financial performance in the second half, subject to wet weather events in Queensland impacting client operations.
About Emeco (ASX:EHL)
Emeco Holdings Limited provides surface and underground mining equipment rental, complementary equipment, and mining services in Australia. The company rents trucks, excavators, dozers, loaders, and graders. It is also involved in the maintenance, repair, and rebuild of machines and components for heavy earthmoving equipment; mechanical and boilermaker repair services; and sandblasting and painting services. In addition, the company offers fabrication and boiler making; and labor hire and field services.
