Loan Reclassification and Tax Adjustments Narrow Avada’s FY25 Loss, But Risks Remain
Avada Group Limited has updated its FY25 financial results, reducing its loss after tax by $2.04 million due to tax benefit adjustments and reclassification of borrowings, while confirming no impact on operating revenue or cash flow.
- Income tax benefit increased by $2.04 million reducing net loss
- Reclassification of borrowings from non-current to current liabilities
- Net current assets decreased by $1.125 million
- Reallocation of assets and liabilities between operating segments
- No change to operating revenue or cash flow from operations
Material Adjustments to FY25 Results
Avada Group Limited (ASX – AVD), a prominent player in Australian traffic management services, has announced material adjustments to its audited financial statements for the year ended 30 June 2025. These adjustments, disclosed on 30 September 2025, follow the company’s preliminary results released last month and reflect refined calculations and reclassifications that impact reported losses and asset classifications.
The most notable change is an increase in the income tax benefit by $2.038 million, which has reduced the company’s loss after tax by a corresponding amount to $15.78 million. This adjustment stems from the finalisation of deferred tax calculations upon completion of the audit process, highlighting the importance of awaiting audited figures before drawing firm conclusions on tax positions.
Borrowings Reclassified Amid Loan Negotiations
Another significant update involves the reclassification of certain borrowings from non-current to current liabilities. This $1.125 million shift relates to principal repayments under Avada’s loan facility with the Commonwealth Bank of Australia (CBA). The company is currently engaged in ongoing negotiations to defer repayment clauses within this facility, a factor that introduces some uncertainty around short-term liquidity and covenant compliance.
As a result of this reclassification, Avada’s net current assets have decreased, reflecting a more immediate repayment obligation. While this does not affect cash flow from operations, it is a critical detail for investors monitoring the company’s financial flexibility.
Segment Reporting Adjustments
In addition to tax and borrowing changes, Avada has reallocated assets and liabilities between its cash-generating units (CGUs) to correct previous misallocations. This reallocation ensures that each operating segment’s financial position is accurately represented, enhancing transparency for stakeholders assessing segment performance across regions including Queensland, New South Wales, Victoria, and New Zealand.
Despite these adjustments, the company confirms that operating revenue and cash flow from operations remain unchanged, underscoring that these are largely non-cash accounting refinements rather than indicators of operational shifts.
Outlook and Market Implications
The Avada Board maintains confidence in the company’s strong financial position despite the reported loss. The adjustments, while material, do not reflect deteriorating business fundamentals but rather the finalisation of accounting treatments and loan facility negotiations. Investors will be watching closely for the outcome of discussions with CBA, as any changes to loan terms could influence Avada’s liquidity and capital management strategies going forward.
Bottom Line?
Avada’s FY25 adjustments clarify its financial position but spotlight loan negotiations that could shape its near-term outlook.
Questions in the middle?
- Will Avada secure deferral terms with Commonwealth Bank to ease short-term repayment pressures?
- Could further tax or asset reclassifications emerge in future filings as audits conclude?
- How will these adjustments influence investor confidence and Avada’s access to capital?
