The Environmental Group's Strong Compounding Meets an ERP Setback
A remarkable track record of 28-50% annual compounding growth was overshadowed by a botched ERP system implementation and Middle East conflict disruption.
30 Jun 2026 · 3 min read
In short
The Environmental Group compounded revenue, EBITDA and cash EPS at 28%, 50% and 44% since 2021, before collapsing 55.5% on a botched ERP implementation and Middle East conflict-related disruption.
The ERP system implementation issues at EGL Energy, particularly around job cost allocation and cost recoveries, are expected to impact FY26 EBITDA by $1.7 million.
Investors Mutual Limited believes the 55.5% collapse is an overreaction to short-term issues, given the company's largest-in-Australia boiler maintenance business generates around 70% recurring revenue.
The Environmental Group, an industrial environmental engineering business that had compounded revenue, EBITDA and cash EPS at rates of 28 percent, 50 percent and 44 percent since 2021, collapsed 55.5 percent after downgrading earnings guidance by around a third due to a botched ERP system implementation and Middle East conflict-related disruption, in what Investors Mutual Limited views as an overreaction to short-term issues.
A remarkable compounding track record
HD Capital Partners said that since 2021, The Environmental Group had compounded revenue, EBITDA and cash EPS at 28 percent, 50 percent and 44 percent respectively, going a long way to explaining why it featured in the Top 10 for Aussie Super Stocks, with the FY24 result and bullish outlook suggesting this compounding wasn't going to stop anytime soon.
Since 2021, EGL has compounded revenue, EBITDA and cash EPS at 28%, 50% and 44%, respectively. This goes a long way to explaining why it's in the Top 10 for Aussie Super Stocks.
— HD Capital Partners, Article, November 2025
A well-timed first investment ahead of solid results
Salter Brothers said that after monitoring EGL's progress for several years, the fund initiated its first investment in February, describing a company providing environmental engineering solutions that help industrial customers reduce emissions, improve energy efficiency and treat waste streams, reporting a solid first-half FY26 result with revenue up 8.6 percent to $58.9 million and EBITDA up 25.9 percent to $4.9 million, with the Waste division continuing to progress its PFAS extraction technology.
A botched ERP implementation triggers a sharp downgrade
Investors Mutual Limited said The Environmental Group fell 55.5 percent after downgrading its earnings guidance by around a third due to higher one-off IT costs and disruption from the war in Iran, believing this an overreaction to short-term issues. Salter Brothers said EGL provided a negative trading update in May, driven by issues relating to the implementation of a new ERP system and broader operational headwinds, with management identifying issues following the February ERP implementation in EGL Energy, particularly around job cost allocation and cost recoveries, expected to impact FY26 EBITDA by $1.7 million, in addition to a $400,000 historical job balance clean-up and a further negative $400,000 impact from higher costs elsewhere.
Management identified issues following the February ERP implementation in EGL Energy, particularly around job cost allocation and cost recoveries. These issues are expected to impact FY26 EBITDA by $1.7m, in addition to a $400k historical job balance clean-up.
— Salter Brothers, Monthly Report, May 2026
A diversified environmental engineering platform
DMX Asset Management described The Environmental Group as an environmental engineering company focused on the resources and waste sector through four divisions: EGL Energy, boiler sales, service and maintenance; EGL Clean Air; EGL Waste Services; and EGL Baltec, with EGL Energy contributing the majority of group earnings as the largest boiler maintenance business of its kind in Australia, with around 70 percent of its revenue recurring from mandated regular inspections.
EGL Energy contributes the majority of group earnings, and is the largest boiler maintenance business of its kind in Australia, with ~70% of its revenue recurring from mandated regular inspections.
— DMX Asset Management, Monthly Report, June 2026
What fund managers say they are watching next is resolution of the ERP system implementation issues affecting job cost allocation and cost recoveries at EGL Energy, whether the Middle East conflict-related disruption proves temporary, continued progress on the Waste division's PFAS extraction technology, and whether the 55.5 percent collapse proves an overreaction given the underlying compounding track record.
Questions
Why did The Environmental Group's share price collapse 55.5%?
The Environmental Group fell after downgrading earnings guidance by around a third due to higher one-off IT costs from a botched ERP system implementation and disruption from the war in Iran.
What specific issues did The Environmental Group's ERP implementation cause?
Management identified issues following the February ERP implementation in EGL Energy, particularly around job cost allocation and cost recoveries, expected to impact FY26 EBITDA by $1.7 million.
How strong is The Environmental Group's underlying business?
The Environmental Group has compounded revenue, EBITDA and cash EPS at 28%, 50% and 44% respectively since 2021, with its EGL Energy division the largest boiler maintenance business of its kind in Australia, generating around 70% recurring revenue.
5 managers, 6 comments, with each manager's latest recorded position.
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