Operating cash flow fell 44% as gross borrowings climbed to $1.0bn

Net cash inflow from operating activities fell 43.7% to $44.7m from $79.5m, taking cash conversion (OCF/EBITDA) from 180.3% to 102.3%. Gross borrowings rose 33.9% to $1b, lifting net debt to roughly $1b and net debt/EBITDA (on annualised half-year EBITDA) to about 23.5x from 17.4x.

The headline swing from a $64.0m profit to an $8.2m loss is largely an investment-property revaluation effect: HY25 included a $72.9m fair value gain on investment property, while the current half ran without that tailwind against the "subdued" property market management noted in commentary. This is also Arvida's first half-year reporting as a debt-only issuer following the issuer transition.

OCF/EBITDA fell from 180.3% to 102.3% even though EBITDA was essentially flat. The $34.8m year-on-year shortfall in operating cash reflects ORA settlement and working-capital timing rather than a profit shortfall, but it lands at a moment when the debt stack has grown materially. Cash to service that larger stack came in well below the comparable.

Leverage trajectory. Gross borrowings rose $260.5m while equity rose only $31.2m on a 9.5% larger asset base. The headline 23.5x net debt/EBITDA looks extreme but is partly an artefact of how EBITDA excludes resale and revaluation contributions in this sector; the directional move from 17.4x is what matters, particularly for a debt-only issuer where covenant headroom drives flexibility.

Underlying operating engine is steady. Revenue +5.1% on growth in deferred management fees and care/village services, with resale settlements 4% higher than HY25. Stripping out fair value movements, the recurring earnings base is broadly flat — the dramatic NPAT line is doing more work than the operating read warrants.

The FY25 shape shows H1 represented 49.5% of full-year revenue but only 43.7% of full-year Operating EBITDA — second-half weighted, with implied H2 FY25 EBITDA of $56.9m versus $44.1m in H1.

If the FY25 cadence repeats, full-year Operating EBITDA could again approach $100m. But reported NPAT is unlikely to benefit from a repeat of HY25's $72.9m fair value tailwind given the "subdued" property market commentary, so the reported earnings shape and the operating earnings shape will likely diverge again at year-end.

Revenue growth came from deferred management fees and care/village service revenues — durable, recurring streams — and receivable days improved to 25.6 from 29.4. But operating cash flow at $44.7m is sharply below the $79.5m comparable, and FCF (pre-lease) of $40.8m against a -$8.2m NPAT yields a -499.1% conversion that is not informative this half. Capex of $3.9m, just 3.0% of revenue, is light and likely reflects timing rather than a structural step-down.

The reported NPAT loss is overwhelmingly an accounting effect. The 2.0pp gap between PBT growth (-114.8%) and NPAT growth (-112.8%) is small, so this is not a tax distortion — it is the absence of the prior fair value gain on investment property flowing through both PBT and NPAT. The operating read sits with EBITDA, not the headline loss line, but the cash and leverage trajectory is the more economically material development this half.

This briefing cannot assess covenant headroom, refinancing terms, or the specific fair value movement on investment property without those disclosures.