FCF collapsed from $2.4m to $0.3m as capex tripled and OCF fell 43%

Revenue declined from $27.3m to $25.0m and EBITDA from $3.6m to $3.3m, broadly matching total system sales falling 7.59% to $108.2m off FY24's record $117.1m base. Cash reserves nearly halved from $9.6m to $4.8m, and equity contracted from $13.2m to $9.9m. No dividend is included in this release; the prior year disclosed a $0.21 per share final dividend.

Operating cash flow fell 43% on an EBITDA decline of only 7.5%, and FCF/NPAT dropped to 31.8% from 179.8% prior. Every dollar of reported earnings is now producing materially less cash, which means the headline profit understates the squeeze on internal funding capacity.

Capex intensity stepped up to 5.3% of revenue from 2.0%. The $1.3m FY25 spend was driven predominantly by intangible asset acquisition ($1.0m) rather than property and equipment ($0.3m), so the nature of the reinvestment is materially different from prior years and warrants explanation.

Balance sheet shrinkage exceeds the earnings shortfall. Cash fell $4.7m and equity $3.3m against $1.0m of NPAT, implying roughly $4-5m of net distributions or other equity reductions. Half-year commentary referenced a proposed capital return contested by a shareholder, with associated legal costs eroding HY25 profit; management says litigation costs continued into FY25 and contributed to the profit decline.

Implied H2 FY25 NPAT of roughly $0.6m followed HY25's $0.4m, so the second-half shape was broadly consistent with the first half rather than rescuing the result. Management explicitly frames FY25 as benchmarking against an unusually strong FY24 base (the strongest sales year since 2007 NZX listing) and against the introduction of delivery, which inflated the prior comparable. This release does not provide a basis to assess whether FY26 stabilises at the FY25 run-rate or continues to drift lower.

The effective tax rate rose to 33.2% from 29.6%, compressing NPAT relative to PBT, and direct year-on-year growth comparisons at the profit lines should be read against a basis-comparability caveat in the source. More material is the earnings-to-cash gap: contract assets rose 53.5% to $0.6m (a working-capital drag), debtor days extended modestly to 29.8 from 28.9, and the surge in intangible capex absorbed almost all operating cash.

The litigation costs disclosed in HY25 commentary are non-recurring in character but their dollar size is not quantified in the supplied release, so it is not possible to isolate underlying operating profitability with precision. The cash decline is the cleaner signal: $4.7m left the balance sheet in a year that generated only $0.3m of pre-lease FCF, so any distribution or capital action came largely from the opening cash buffer rather than current-period cash generation.

This briefing cannot assess store-level unit economics, franchise versus company-owned mix, or the underlying margin trajectory because gross margin, store count, and royalty income are not disclosed in the supplied release.