Revenue up 10.1%, FY25 guidance upgraded, maiden dividend declared

EBITDA expanded 5.0% to $118.9m, so margin compressed because revenue grew roughly twice as fast as earnings.

Cash performance moved more than profit. Operating cash flow rose 26.8% to $78.8m, lifting OCF/EBITDA to 66.3% from 54.9%. Capex fell 81% to $2.4m (0.3% of revenue versus 1.6%), pushing FCF pre-lease to $76.4m and FCF/NPAT to 83.2%. Cash on hand rose to $1b and gross borrowings of $66.8m leave the group in a $975m net-cash position.

The board declared the company's first-ever dividend of 8.5cps and upgraded FY25 revenue and earnings guidance. China and Other Asia drove growth (+11.8% to $614.2m, 68.7% of revenue), while ANZ revenue contracted to $157.7m.

With $1.04bn of cash and a maiden 8.5cps dividend, a2 Milk has moved from pure reinvestment to partial distribution. The 67.0% NPAT payout and 80.6% FCF-pre-lease payout indicate this is not a token dividend — it is a meaningful claim on cash generation. This matters because future payouts will depend on whether HY25's 66.3% cash conversion and minimal capex are repeatable, not one-off.

Cash conversion improvement looks largely real, not gamed. Working capital was broadly flat (operating working capital up just $2.2m), inventory days fell to 39.2 from 44.1, and receivable days are stable at 19.1. The OCF lift therefore reflects underlying earnings rather than balance-sheet release. The caveat is the $10.5m capex reduction, which flatters FCF and is unlikely to persist at 0.3% of revenue.

Geographic concentration deepened. China and Other Asia now contributes 68.7% of revenue (up 1.0pp) and $148.0m of segment result at a disclosed 24.1% gross margin. ANZ revenue fell 2.7% and segment result dropped to $29.5m from $34.8m, while USA and Mataura Valley Milk remained loss-making at the segment level. The growth story is increasingly a single-market story.

Annualising HY25 revenue gives $1.79bn versus FY24's reported $1.68bn, and management has upgraded FY25 guidance — the specific target value is not supplied here, so the gap to a stated number cannot be measured.

What this release does support: continued double-digit topline momentum into 2H25 and improved cash quality. What it does not support: a clean read on whether 2H25 carries the same margin pressure visible in the EBITDA-versus-revenue gap, or whether the upgraded guidance assumes further capex restraint.

PBT growth of 5.3% trails revenue growth of 10.1%, which means operating leverage was negative this half — costs grew faster than sales. NPAT growth of 7.5% was helped by a 1.0pp lower effective tax rate, so PBT is the cleaner operating read. Tax distortion is small but present.

Cash quality is genuinely better, but the FCF figure carries a timing flag. Capex of $2.4m is well below prior-period spend of $12.9m and well below FY24 run-rate, so FCF/NPAT of 83.2% likely overstates a normalised run-rate. Adjusting capex back toward the prior half's level would reduce FCF by roughly $10m and pull the payout ratio against FCF closer to 90%. ROE drifted to 6.8% from 7.1% as the equity base grew faster than earnings, so capital efficiency is softening even as absolute earnings rise.

This briefing cannot assess the specific numerical content of the upgraded FY25 guidance or any forward dividend policy parameters because neither was supplied in the disclosed materials.