Pinned straw:
20-Aug-2025: Nothing alarming in this report, but the market clearly would have preferred a better set of numbers based on LYL being sold down a little on the results after a decent run-up over the past few weeks, so trading right now - @ $11.76 - at the same levels they were on August 8th and also through the second half of July, and still above where they were trading throughout the majority of the 8 month period from mid-November through to mid-July.
There was a fair bit to unpack, so I'll try to cover off the more important stuff. Firstly, I'm happy with the report, and the dividend. I would have preferred a higher dividend, as in a return to the circa-36 to 45 cps final dividends we have seen over the past three financial years (prior to FY25), but this slide from their presentation makes it clear that their dividends will return to normal levels in FY26:
The bit I've highlighted there in green (above) is why I think the lower dividends are now done (after the 25c FF one they just declared). Importantly, they still have a super-strong balance sheet and have accumulated an even higher cash balance:
And they have a growing pipeline of work:
They have more than 40 studies ongoing plus 10 major projects in Engineering/early stages, another 6 major projects being delivered currently, and another 7 that have either been recently completed and/or are in the commissioning phase currently, as shown above. While that table only covers their Resources division, that's the one that matters most, as shown below:
Around 94% of LYL's revenue is derived from that Resources division, and only 6% from Industrial Processes and Rail Infrastructure combined (circa 3% from each of those).
Here's what Peter De Leo, their MD & CEO had to say in today's report to shareholders for FY25:
I'm going to skip now to what he said about their Resources division:
They remain busy!
Here's what he had to say about their outlook:
It's fairly positive, remembering that Peter and his team are one of the most conservative management teams I've come across in terms of being careful to never overpromise and risk underdelivering later. The SAXUM majority acquisition - with an option to buy the remaining 40% later - should not be underestimated in terms of LYL getting a solid foothold in South America and the work that's going to bring in for them in future years.
Here are their historical results against FY25:
Sure, FY25 was down on FY24, but we knew that, it was flagged at their AGM last year (in November) and again in February with their H1 results; Both revenue and NPAT achieved in FY25 are at the top end of the guidance they provided in February (Full Year Guidance: Revenue $320m - $340m, NPAT $37m - $43m).
They're in good shape - and the nature of their E&C work is that revenue and earnings will be lumpy, but they're growing over time, you have to zoom out a little with these sorts of companies and look at their overall trajectory rather than just a single year.
Importantly, they're set up for a good couple of years from here by the looks of that.
Sources: LYL-Full-Year-Results-Announcement.PDF plus FY2025 Investor Presentation.PDF plus FY2025 Shareholder Report.PDF plus FY2025 Financial Report.PDF.
My investment thesis remains intact for Lycopodium. Still my largest real money position and one of my largest positions here on SM as well.
Interesting moves by LYL today after their report - they got sold down -6.3% to $11.46 in the morning from yesterday's $12.23 close and then finished the day up +2.94% @ $12.59, so that's a +9.86% recovery from their day low to their closing price of the day - and they closed on their day high, so once the report had been digested there were buyers in the market, remembering that they can be a fairly illiquid stock because of the high insider ownership plus the small size of the company.
The market went from appearing to be disappointed with their result to taking them back up to an 11 month high - the last time they were at $12.59/share was mid-September last year, so it seems like I got that one right too. I'm also happy to be out of AD8 now, even more so when reading other commentary which mostly aligns with my own thinking on Audinate, which I shared on Monday morning after reading their report and selling out at $5/share.
EGL is another story - a few orange flags there, particularly the precipitous drop-off of their Clean Air division EBITDA (-50.9% yoy) which they are blaming on challenging lithium markets - I would hope that division has a much broader addressable market than just the lithium sector.
We know about their cost blow-out with Baltec IES, but a -19.1% EBITDA decline on the back of a +31.9% increase in revenue in Baltec means a major margin compression there.
EGL Energy was good, and EGL Waste was terrific to finally see some traction there after bugger all happening there in prior years, however I also took note of @Wini's comments about their declining cash balance (they have no cash now) and 20% of their revenue sitting as work in progress not aligning with what management are saying: that over 50% of revenue is now recurring maintenance.
"This feels like aggressive revenue recognition to me, overstating earnings through the P&L."
See Wini's post on EGL here: https://strawman.com/forums/topic/10752#post-37413
This looks interesting to me:
Revenue growth but payments to suppliers and employees was greater than total receipts from customers resulting in a $3.8m loss from operating activities vs a $4.2m profit the previous year. Also they had a negative cash position at June 30 vs over $10m in the bank the previous year. So they will likely need to raise money to shore up their balance sheet. Or at least that's how it looks to me. I prefer companies of this small size to be in a net cash position and EGL are no longer in that position.
I sold all of my remaining EGL @ $0.27 this arvo and was considering doing the same here, but would have only got $0.255 here because that's where they closed. I think EGL has a good story and will likely be worth substantially more in future years, but my faith in their management has diminished today, so I moved to the sidelines IRL and will likely do the same here this week also. I think there are better opportunities out there for that capital at this point in time, and too many unknowns and eventualities that could drive the EGL SP back down in the near term, in my opinion. This is actually the wrong thread for this analysis actually - or opinion - so I'll copy it across to EGL.
Anyway, LYL was good, and tomorrow I've got NST and NWH.