Mitchell Services (ASX: MSV) has reported a significant profit and cash generation uplift in its 1H26 results, coupled with a strategic investment in its Loop Decarbonisation business, highlighting a strong operational turnaround and positive outlook.
Mitchell delivered a robust first half of FY26. Revenue reached $102.4m, representing a 3% increase year-on-year.
This was underpinned by a substantial 69% increase in EBITDA, which climbed to $21.4m.
The company also saw a significant improvement in its bottom line, with Net Profit After Tax (NPAT) swinging to a $8.1m profit, a marked turnaround from a $0.3m loss recorded in 1H25.
Return on Invested Capital (ROIC) also improved considerably, reaching a strong 27.0%.
Strong Cash Generation & Net Cash
Operational performance translated into strong cash generation.
Operating cash flow was robust at $20.8m, representing a 96% increase year-on-year.
Critically, the company achieved a net cash position of $7.2m as at 31 December 2025.
This is a notable improvement from the $8.4m in net debt recorded at the end of FY25.
Mitchell Services held $15.5m cash on hand and maintained an undrawn $15m working capital facility, providing substantial liquidity.
Loop Decarbonisation Investment
Further reinforcing its strategic direction, Sumitomo is set to acquire up to a 25% stake in Mitchell Services' Loop Decarbonisation business.
This investment implies a valuation for Loop of approximately $24m.
This strategic investment not only provides capital but also validates the growth potential of MSV's ESG-focused offering.
The partnership with Sumitomo is expected to support capital-light growth for the decarbonisation business.
Capital Management & Shareholder Returns
Mitchell Services continues its disciplined approach to capital management.
The board declared a fully franked dividend of 4.0cps, with a record date of 27 February 2026 and a payment date of 17 March 2026.
The company reiterated its intention to not raise equity, emphasising its focus on internal funding and prudent capital allocation.
Since FY22, approximately $73m has been redeployed into the business, with $27m returned to shareholders through dividends and buybacks since FY24.
Operational Leverage and Revenue Mix
The company's operational footprint shows significant upside potential.
Only 62 rigs were in operation during 1H26 out of a total fleet of 88, indicating substantial leverage to increased demand and utilisation rates.
Mitchell Services benefits from a high-quality, diversified revenue base. 80% of its revenue is derived from global mining majors, with an approximate 50/50 split between surface and underground drilling.
Gold represents roughly 60% of its revenue, while steelmaking coal accounts for 32.8%.
Outlook and Risks
Mitchell Services has demonstrated a significant turnaround in profitability and cash generation, bolstered by operational improvements and disciplined capital management.
The strategic investment in its Loop Decarbonisation business provides an additional growth vector.
Key risks remain related to the cyclical nature of mining capital expenditure, potential weakness in coal demand, and the execution of strategic initiatives.
