Key Highlights

  • Continuing Revenue rose 5.9% to AUD 125.6 million.
  • Continuing EBITDA increased 34.2% to AUD 12.4 million.
  • Divestments and write-downs drove a large statutory loss.
  • Refinancing, deleveraging and delivery of FY27 guidance are key priorities.

Close the Loop (ASX: CLG) has built its Business on a simple but increasingly relevant proposition: that the packaging, printer consumables and electronics people throw away every day can be captured, reprocessed and turned back into useful materials rather than landfill. Its FY26 results, released on 24 August 2026, tell a story that is genuinely instructive about what a circular-economy transition looks like in practice — not a smooth upward line, but a business actively cutting away underperforming parts of itself to concentrate on the segments that actually work.

On the surface, the headline number looks alarming: a statutory net loss of AUD 105.3 million, compared with a AUD 22.2 million loss in the prior year. But that figure is dominated by the costs and asset write-offs associated with a deliberate, large-scale restructuring, including the divestment of ISP Tek Services LLC on 19 May 2026, along with Alliance Paper Pty Ltd and O F Flexo Pty Ltd. Strip out the discontinued operations and one-off write-downs, and the picture looks considerably healthier: net profit after tax from continuing operations came in roughly at breakeven at AUD 0.031 million, a marked improvement on the AUD 10.8 million loss recorded in FY25, while NPATA (profit after tax before Amortisation of acquired intangibles) turned positive at AUD 1.4 million, up from a AUD 5.4 million loss.

What the Numbers Show

Revenue from continuing operations rose 5.9% to AUD 125.6 million, and EBITDA from continuing operations climbed a more substantial 34.2% to AUD 12.4 million. Margins improved meaningfully across the board: gross Margin expanded 5.7 percentage points to 36.8%, and EBITDA margin rose from 7.8% to 9.9%. That combination — modest top-line growth paired with a much larger jump in profitability — suggests the cost and portfolio simplification work is starting to flow through to the Bottom Line of the businesses management has chosen to keep.

The Balance Sheet also improved. Net Debt fell AUD 15.3 million, or 28.7%, to AUD 38.1 million, aided by roughly USD 16 million in debt retired using divestment proceeds. Post year-end, the company said net debt had reduced further, to approximately AUD 18.3 million, helped by the conversion of outstanding convertible notes into 60.35 million new shares on 10 July 2026 alongside a new Loan deed arrangement. It's worth noting that banking covenants were breached during the reporting period before being brought back into compliance by 30 June 2026, and bank debt remains classified as a current Liability pending an expected refinancing by the end of December 2026 — a detail that underscores this is still a company navigating real financial pressure even as its underlying operating metrics improve.

What Has Happened?

Management has been explicit that the strategy going forward is to concentrate on what it calls its "core, higher-performing Packaging and Resource Recovery divisions," effectively shedding the parts of the group — including US-based ISP Tek and the paper and flexo packaging Assets sold this year — that were dragging on overall performance. Within the retained business, the Packaging division was the standout performer, with revenue growth of 15.6%, driven in part by strong momentum in South Africa, where revenue rose 38% and EBITDA expanded even faster, up 42%. The Resource Recovery division, which includes the group's long-running printer cartridge collection and remanufacturing network — spanning some 260,000 collection points and processing roughly 50 million cartridges annually — saw revenue decline 4.3% over the period, a reminder that not every part of the retained portfolio is firing evenly.

Close the Loop does not currently pay a dividend, consistent with a business still working through balance sheet repair and reinvestment priorities; the screener data showing no distribution appears accurate rather than an artifact, and a return to dividends would likely only follow sustained deleveraging and profit consistency.

The Bigger Industry Picture

Close the Loop sits within a genuinely growing global thematic: regulatory pressure on packaging waste, extended producer responsibility schemes, and corporate sustainability commitments are all pushing more materials back into formal recycling and remanufacturing Supply chains rather than landfill. The company's printer cartridge network is one of the more established examples of a circular business model operating at real scale in Australia, while its packaging operations — spanning multiple geographies including South Africa — give it exposure to a broader, more internationally diversified customer base than many ASX small-caps in the sector.

That said, the circular-economy label covers a wide range of business models with very different economics, and Close the Loop's own FY26 experience — needing to divest three separate businesses to refocus the group — is a reminder that not every adjacent opportunity within "sustainability" translates into a profitable, scalable operation. The market opportunity is real, but building a coherent, profitable portfolio within it clearly takes discipline and, at times, painful strategic retreat.

Key Risks

The most pressing near-term risk is refinancing: with bank debt classified as current pending an expected refinancing by the end of December 2026, execution risk around securing new facilities on acceptable terms is real, particularly for a company that breached covenants earlier in the same financial year. Integration and stability risk also remains elevated after a year of significant portfolio change — divesting three businesses in relatively quick succession can create operational disruption even as it simplifies the group. The Resource Recovery division's revenue decline warrants monitoring, as does the group's ongoing reliance on relatively concentrated end markets (printer consumables collection, and packaging manufacturing) that can be sensitive to customer contract renewals and Commodity input costs. More broadly, small-cap industrial and recycling businesses can be sensitive to funding market conditions, and further Capital raisings or refinancing on dilutive terms remain a possibility if operating performance does not continue to improve as guided.

What Could Drive the Stock Next?

Management has issued FY27 guidance for EBITDA of AUD 14–16 million, implying growth of 13–30% on the FY26 continuing-operations base, alongside a target net debt to EBITDA ratio of 1.0 to 2.0 times, Capital Expenditure of AUD 1–3 million, and expected annual interest savings of AUD 1.0–1.1 million as debt continues to fall. Investors should watch closely for confirmation of the December 2026 refinancing, further evidence that the Packaging division's growth — particularly in South Africa — is sustainable, and whether the Resource Recovery division can stabilise after this year's revenue softness. If Close the Loop can deliver on its FY27 targets while completing its refinancing on reasonable terms, it would go a long way toward validating the FY26 restructuring as a genuine reset rather than merely a smaller version of the same challenges.