Lynch Group Faces Macro Risks Despite Profit Improvement and Acquisition Announcement

Financial Performance Highlights

Lynch Group Holdings Limited has delivered a notable improvement in its financial results for the year ended 29 June 2025. The company reported an 8.2% increase in revenue to $430.5 million, driven by growth in both its Australian and Chinese operations. Despite a statutory EBITDA decline of 7.3%, underlying EBITDA rose by 9.1% to $43.2 million after adjusting for non-recurring costs related to Australian farm closures and an ERP system upgrade.

The net loss after tax narrowed dramatically by 84.5%, from $26.1 million in FY2024 to $4.0 million in FY2025. Excluding impairment expenses, the Group achieved a modest profit of $2.5 million, signaling a turnaround in operational performance.

Operational and Strategic Developments

In Australia, Lynch Group’s vertically integrated production and wholesale operations benefited from stable consumer demand amid cautious spending. The company expanded its sale or return (SOR) store network by converting 50 core stores, now representing approximately 29% of its major customer network. Investment in product innovation and merchandising contributed to premium quality offerings aligned with consumer trends.

In China, the Group experienced an 18.3% revenue increase, supported by higher volumes and pricing of tulips and export growth. Although rose pricing remained subdued, consumer confidence showed signs of gradual improvement, particularly during key events such as Valentine’s Day and Mother’s Day. The Group continued to expand its processing facilities in Shanghai and Guangzhou and increased farm production acreage modestly.

A significant strategic move was the decision to close two of its three Australian farms, recognizing that farm operations added complexity without material earnings contribution. The Group will continue sourcing potted products through long-term third-party growers, focusing on its core competency in value-added floral products and in-store merchandising.

Capital Management and Dividends

Lynch Group maintained a strong balance sheet with $30.8 million in cash and undrawn banking facilities totaling $22.5 million in Australia and $5.0 million in China. The Group declared a fully franked final dividend of 9.0 cents per share, payable on 18 September 2025, reflecting confidence in its cash flow generation.

Acquisition Announcement

On 20 August 2025, Lynch Group announced it had entered into a Scheme Implementation Agreement with Hasfarm Holdings Limited and Darwin Aus Bidco Pty Ltd, entities controlled by private equity fund TPG Capital Asia. The agreement proposes the acquisition of 100% of Lynch’s shares via a scheme of arrangement, subject to shareholder and court approvals. This development marks a significant milestone and potential new chapter for the Group.

Outlook and Risks

While the Directors remain confident in the medium to long-term prospects of both the Australian and Chinese floral markets, they acknowledge ongoing macroeconomic challenges. Consumer confidence in China remains fragile, and cautious spending in Australia persists. The Group continues to monitor risks including foreign exchange volatility, supply chain disruptions, and regulatory changes, particularly in China.

Operationally, Lynch Group plans to leverage its scale and expertise to grow its supermarket penetration in Australia and expand retail partnerships and processing capacity in China. The closure of farms and focus on value-added products aim to streamline operations and improve profitability.