Dividend Suspension Signals Ashley Services’ Focus on Debt Amid Operational Delays
Ashley Services Group reports a slight dip in FY25 EBITDA amid Victorian project delays and funding cuts, opting to suspend dividends to focus on debt reduction and future growth.
- FY25 EBITDA forecast between $8.5M and $8.8M, slightly below FY24
- Delays in Victorian construction and traffic labour hire projects
- Reduced fee-for-service revenue due to state funding cuts
- Free cash flow of $1.3M reduces net debt to $11.2M
- No final dividend declared to prioritise balance sheet strengthening
Context and Performance
Ashley Services Group Limited (ASX, ASH) has released its FY25 earnings update, revealing a modest decline in EBITDA compared to the previous year. The company expects earnings before interest, tax, depreciation, and amortisation to land between $8.5 million and $8.8 million, slightly below FY24’s $8.6 million figure when excluding one-off items. This subtle dip reflects operational headwinds primarily in Victoria, where new project commencements faced delays.
Challenges in Victorian Operations
The Victorian segment, encompassing construction, traffic, and engineering labour hire, experienced slower-than-anticipated starts on new contracts. Additionally, the training business in Victoria grappled with reduced state government funding, which the company struggled to offset through increased fee-for-service revenues. These factors combined to weigh on Ashley Services’ top-line growth and profitability for the year.
Signs of Recovery and Financial Discipline
Despite these setbacks, Ashley Services secured significant project work in the Victorian construction and traffic labour hire sectors, with workers beginning on-site in June 2025. Management anticipates a return to historic revenue and profit levels in FY26, signaling confidence in a rebound. Meanwhile, the company generated $1.3 million in free cash flow during FY25, enabling a reduction in net debt from $12.5 million to $11.2 million, underscoring a disciplined approach to financial management.
Dividend Suspension and Strategic Focus
In a move reflecting cautious stewardship, the Board has resolved not to pay a final dividend for FY25. This decision prioritises debt reduction and balance sheet strengthening to support anticipated growth opportunities. While disappointing for income-focused investors, this strategy may position Ashley Services for more sustainable expansion in the medium term.
Looking Ahead
Investors will be watching closely to see if the Victorian projects deliver as expected in FY26 and how effectively the company manages its debt levels. The suspension of dividends, while prudent, raises questions about the timing and scale of future shareholder returns. Ashley Services’ ability to navigate these operational and financial challenges will be critical to restoring market confidence.
Bottom Line?
Ashley Services is betting on a Victorian turnaround and disciplined finances to fuel its next growth phase.
Questions in the middle?
- Will Victorian project commencements accelerate as projected in FY26?
- How quickly can Ashley Services further reduce its net debt?
- When might dividend payments resume, and on what terms?
