Debt fully repaid and FFO turned positive as NPAT fell 30.4%

Following the November 2024 settlement of 35 Graham Street, all bank debt has been extinguished and the asset base reshaped. Total liabilities fell 98.3% to NZ$0.8m as gross borrowings of NZ$33.0m disappeared, total assets contracted 38% to NZ$118.3m, and cash rose to NZ$10.3m from NZ$2.5m. That puts total assets below Annolyse's historical baseline (mean NZ$201.6m, range NZ$190.8m–NZ$221.8m).

Headline metrics moved off a non-comparable base. Revenue eased 1.2% to NZ$3.2m, NPAT fell 30.4% to NZ$1.6m (PBT also -30.4%), and operating cash flow swung to a NZ$1.0m inflow from a NZ$1.2m outflow. Funds from operations, the more relevant property metric, turned to a NZ$1.6m profit versus a NZ$0.4m deficit. The interim dividend stepped down 99.5% to 0.2 cents per share off a prior period that included a special distribution.

The prior comparable included Graham Street earnings since divested, while the current period reflects the residual portfolio operating without interest cost. FFO improving from a NZ$0.4m deficit to a NZ$1.6m profit is the cleaner read on recurring property economics, and revenue at -1.2% sits at the upper edge of the company's recent range (3-period mean -16.3%).

The portfolio is smaller and the capital base is under-deployed. Total assets are below Annolyse's historical range and roughly NZ$83m below the mean. Equity fell 18.1% to NZ$117.5m, and ROE is just 1.4% versus 1.6% in the prior period. For a property investor with NZ$10.3m of unencumbered cash, the question is how that capital is put to work, not whether the income statement grew.

Payout ratio versus pre-lease FCF is suppressed because the source-backed cash-dividend bridge is unavailable.

That asymmetry makes any like-for-like 2H projection unreliable.

The disclosed forward catalyst is completion of works at Munroe Lane, expected February 2026. That is the leasing trigger required to lift recurring rental income off the smaller asset base, but no leasing-progress detail is supplied. The release supports an underlying-FFO read; it does not support a quantified FY26 earnings expectation.

Pre-lease free cash flow of NZ$0.8m is above Annolyse's historical baseline (3-period mean -NZ$15.8m), reflecting the post-disposal cost base with no interest charge. Operating cash flow converts to 52.2% of NPAT, and FFO turning positive shows the rental engine — separated from disposal gains and finance costs — now generates cash.

The offsetting issues are around capital intensity and deployment. Capex rose 173% to NZ$0.2m (6.4% of revenue) on a smaller portfolio. Receivable days extended to 14.5 from 5.9 — small in absolute terms but worth watching against the reduced revenue base. ROE at 1.4% confirms that NZ$117.5m of equity is currently under-earning while cash sits idle and Munroe Lane is still in works. The result reads as a clean operating period inside a transitional balance sheet, not a steady-state earnings snapshot.

This briefing cannot assess the cap-rate, NTA-coverage, or valuation assumptions underlying the property carrying values.