AVADA Faces Margin Squeeze and NZ Losses as Transformation Continues

FY25 Financial Performance Amidst Challenging Conditions

AVADA Group Limited’s FY25 results reveal a company grappling with a tough trading environment. Revenue dropped to $183.1 million, down from $204.9 million in the previous year, while adjusted EBITDA declined to $12.8 million from $18.8 million. The decline was driven by margin compression in New South Wales, unionised labour challenges in Victoria, and weak economic conditions in New Zealand.

Despite these headwinds, Queensland operations remained stable, providing some regional resilience. However, escalating costs and competitive pressures have squeezed gross margins, which fell from 23.4% to 20.7%. The company’s borrowings stood at $35.3 million, with cash reserves slightly down to $7.3 million, reflecting ongoing capital investment and tax payments.

Strategic Transformation and Operational Consolidation

FY25 marked a pivotal year for AVADA’s transformation journey. The company completed Phase 1 of its business transformation, which included the implementation of a new ERP system and the consolidation of eleven operating Australian platform businesses into a single unified brand. This consolidation aims to streamline operations, reduce costs, and enhance AVADA’s market presence.

Management has also focused on strengthening safety culture and improving operational efficiencies, with ongoing cost reduction initiatives already delivering benefits. The appointment of a new CEO and CFO signals a refreshed leadership approach to navigate the company through its next phase of transformation.

New Zealand Operations and Impairment Impact

One of the more significant challenges highlighted in the report was the $9.7 million impairment on New Zealand operations, reflecting the impact of weak economic conditions and competitive pressures in that market. A strategic review of the New Zealand business has been completed, resulting in a management restructure and rebranding to AVADA Traffic Direct. The company is actively exploring all options to restore profitability and improve operational performance in this region.

Looking Ahead, Phase 2 and Market Outlook

Phase 2 of the business transformation is underway, with a consultancy engaged to identify further cost efficiencies and optimize resource deployment. AVADA is focused on building its competitive strengths, enhancing client relationships, and leveraging a positive pipeline of infrastructure and maintenance projects.

The outlook remains cautiously optimistic. The company is committed to operational discipline, safety excellence, and governance improvements to adapt to prevailing market conditions. While challenges persist, particularly in NSW and New Zealand, AVADA’s strategic initiatives position it to capitalize on future growth opportunities.