Cash conversion slid to 46.8% as inventory days nearly doubled to 53.7

The drag came from a working-capital build of $148.5m (owed capital moving from $200.9m to $349.4m), driven by inventory days nearly doubling to 53.7 from 26.7.

Revenue grew 4.0% to $2b and profit before tax rose 2.5% to $296.6m, but NPAT fell 44.0% to $113.6m, largely reflecting a $96.4m after-tax loss from a discontinued operation against profit from continuing operations of $207.5m. Total equity fell 25.0% to $1.1b, gross borrowings moved to zero from $77.8m, and cash fell 28.7% to $784.5m.

Acquisition adds balance-sheet context, with NZ$281m acquisition price, but borrowings and gearing are the direct leverage evidence.

OCF/EBITDA at 46.8%, down from 73.4%, combined with inventory days climbing to 53.7 from 26.7, means reported profit growth is not yet being matched by cash generation; this matters because a business funding more stock without a proportional cash release faces tighter near-term liquidity if sell-through slows.

PBT, not NPAT, is the cleaner operating read. PBT growth of 2.5% reflects underlying trading, while the 44.0% NPAT decline is explained by the discontinued-operation loss rather than a tax problem: the effective tax rate actually improved to 30.0% from 33.6%. Continuing-operations profit of $207.5m versus $202.9m prior shows the core business modestly ahead.

Balance sheet moved from net-debt-free to cash-funded distributions. Gross borrowings fell to zero and cash dropped 28.7% to $784.5m, while equity fell 25.0% and ROE weakened to 10.6% from 14.2%. The full-year dividend rose to 21.0 cents per share from 20.0 cents, though the final component fell to 9.5 cents from 11.5 cents, so headline balance-sheet strength has been partly used to fund shareholder returns rather than purely retained.

First-half NPAT of $10.9m represented just 9.6% of full-year NPAT of $113.6m, implying a much stronger second half of roughly $102.7m, even though management has flagged supply-chain cost pressure affecting second-half sales and earnings.

This matters because the release does not support a clean read on whether the strong second-half NPAT recovery reflects durable operating momentum or timing effects tied to the discontinued-operation accounting and working-capital build, and there is no disclosed target against which to test forward delivery.

Part of the result looks durable: revenue and PBT growth, plus a modest gain in continuing-operations profit to $207.5m, point to genuine trading improvement, and the effective tax rate improved rather than flattered results artificially. However, a meaningful share of the year's cash position is not durable in the same sense — free cash flow to NPAT conversion fell to 52.5% from 97.5%, and capex-to-revenue rose to 3.7% from 0.2% as investment ramped up, both consistent with cash being absorbed into working capital and capital spending rather than distributed.

The move to zero gross borrowings and a still-substantial $784.5m cash balance suggest financial flexibility remains intact, but the 25.0% fall in equity and the payout ratio of 73.4% against NPAT indicate that balance-sheet strength has been actively deployed rather than simply preserved, which changes how sustainable current distribution levels are if cash conversion does not recover.

This briefing cannot assess whether the implied second-half NPAT strength reflects underlying demand recovery or one-off timing effects, since no segment-level quarterly cash-flow detail or FY27 guidance was disclosed.