EBITDA margin fell to 2.2% while working capital absorbed NZ$9.8m

This drove operating cash outflow of NZ$4.4m compared to an inflow of NZ$3.9m in FY21, and pushed pre-lease free cash flow to NZ$-4.8m—NZ$7.0m below the historical mean of NZ$2.2m and below the entire prior three-year range of NZ$0.1m–NZ$3.8m.

EBITDA fell 38.6% to NZ$1.6m, compressing the EBITDA margin to 2.2%—against a historical mean of 4.7% and a prior range of 3.2%–6.8%. NPAT declined 38.9% to NZ$3.3m, though the headline NPAT figure is heavily distorted by an effective tax rate of 382.4% on a pre-tax loss of NZ$1.2m; the NPAT result is not a meaningful indicator of underlying operating performance.

The IoT segment grew revenue 44.8% to NZ$36.5m and now represents 49.1% of total revenue (up 9.8 percentage points), while Motors revenue slipped slightly to NZ$37.8m. IoT gross margin, however, compressed from 42.7% to 37.8%, and gross margin was broadly stable overall at 27.7%.

Trade debtors rose 53.9% to NZ$25.4m with debtor days at 124.7 days—40.7 days above the company's historical mean of 84.0 days and outside the entire prior range of 76–94 days. Inventory days also extended to 43.6 days versus a historical mean of 29.4 days. Together these movements signal that receivables collection has deteriorated and inventory has been built ahead of demand, both of which represent real cash that has not yet been converted—and which may not be recovered at full value.

Cash generation has structurally disconnected from reported earnings. With NPAT at NZ$3.3m but operating cash flow at NZ$-4.4m (FCF/NPAT of -146.6%), the headline profit is not supported by cash. The prior year's OCF/EBITDA conversion of 150.3% was unusually strong; this year, given the near-zero EBITDA denominator, the ratio is not analytically meaningful—but the absolute cash outflow is. The business has moved from a net cash position to net debt of NZ$1.1m, and leverage at 0.7x net debt/EBITDA is above the company's historical range where it had been consistently net cash.

IoT margin compression offsets the segment mix improvement. While IoT's growing revenue share is strategically positive—it carries roughly double the gross margin of Motors—the segment's gross margin fell 4.9 percentage points to 37.8% in FY22. If that compression continues as IoT scales, the anticipated margin benefit of the mix shift will not materialise.

The FY22 EBITDA of NZ$1.6m sets a low base for that target, though achieving it would require both revenue growth and a reversal of the working-capital and margin pressures that characterised FY22. There are no disclosed formal targets against which to measure progress, so the FY23 EBITDA aspiration is the only forward benchmark available.

The second-half shape is notable: HY22 generated positive EBITDA of NZ$1.8m, while the implied second half was a NZ$0.2m EBITDA loss, with operating cash outflow of NZ$7.5m concentrated in H2. This deterioration in the back half raises questions about whether conditions worsened through the year or whether timing of receivables collections inflated the H1 result.

A pre-tax loss of NZ$1.2m was converted to positive NPAT entirely via a deferred tax benefit; the effective tax rate of 382.4% (versus 1,075.9% in FY21) signals that the tax line is dominating the bottom line in a way that obscures operational reality. The cleaner read is PBT, which was a loss of NZ$1.2m, worsening from a loss of NZ$0.6m in FY21 despite a 15.7% revenue increase.

Cash quality is poor. Pre-lease FCF of NZ$-4.8m against NPAT of NZ$3.3m (FCF/NPAT of -146.6%) means the profit is entirely paper at this stage. Whether the NZ$9.8m working-capital build is temporary—pending collection of the extended receivables book—or structural will determine whether FY23 cash generation recovers. There is no evidence in this release that the receivables are impaired, but 124.7 debtor days is a material credit and collection risk.

This briefing cannot assess the recoverability of the extended receivables book or the credit quality of the underlying IoT customer contracts.