Revenue up 16% but working-capital absorption turned operating cash flow

BLIS Technologies grew FY26 revenue 16.0% to NZ$14.7m, above the company's historical range of 9.7%–14.2% and 3.8 percentage points above the three-period mean of 12.2%—but the revenue strength did not flow through to cash, because operating working capital absorbed NZ$1.8m, compared with a historical average release of NZ$0.2m across the prior three years. Operating cash flow swung from +NZ$1.8m in FY25 to -NZ$0.6m, and pre-lease free cash flow fell to NZ$-1.1m against a historical mean of +NZ$0.7m.

PBT declined 11.1% to NZ$0.8m despite the revenue gain, and NPAT fell 12.5% to NZ$0.7m. Both metrics are below the company's historical range, where PBT growth had averaged 76.8% over the prior three years. The working-capital build is the primary mechanical explanation for the cash deterioration; the earnings decline reflects the cost base growing faster than gross revenue.

Inventory days expanded to 39.6 days (historical mean 23.3 days) and debtor days reached 50.5 days (historical mean 41.0 days), together accounting for the bulk of the NZ$1.8m working-capital absorption.

The NZ$1.8m operating working-capital build—NZ$2.0m above the historical mean—is unprecedented in the company's recent record. Inventories nearly doubled to NZ$1.6m and trade receivables rose 91.9% to NZ$2.0m against a 16.0% revenue increase. Until these balances normalise, reported profitability and cash generation will continue to diverge, which matters because the company has no debt facility to buffer the gap.

PBT decline is structurally more informative than the headline revenue number. Revenue growth at 16.0% was genuinely above the historical range, yet PBT fell 11.1%. This means operating cost growth outpaced revenue growth, compressing the margin even before the cash impact of working capital. The effective tax rate also rose to 8.2% from 5.9%, adding a modest additional headwind to NPAT beyond the PBT decline.

Cash position remains adequate but deteriorating. BLIS holds NZ$4.0m in cash with no gross borrowings, providing near-term buffer. However, the FCF-to-NPAT conversion turned to -158.1% from +197.8% in FY25, and the balance sheet expansion to NZ$15.0m (historical range NZ$12.8m–NZ$14.3m) primarily reflects inflated working-capital assets rather than productive investment.

The first-half share of full-year NPAT was 60.5% (NZ$0.4m in HY26 versus NZ$0.3m implied in the second half), suggesting the profit weighting was skewed to the first half—a pattern that warrants scrutiny if revenue growth slows into FY27.

The revenue trajectory supports a constructive view of commercial momentum, with the announcement describing B2B and B2C channel growth. However, whether the inventory build reflects deliberate stocking ahead of demand or supply-chain precaution, and whether the debtor expansion reflects customer mix shift or collection pressure, are material questions the release does not resolve. Without clarity on working-capital normalisation timing, it is difficult to assess whether FY27 cash generation will recover toward the historical mean.

PBT of NZ$0.8m on NZ$14.7m of revenue implies a 5.5% PBT margin, which is within the historical range, but the margin was achieved while absorbing a cost base expansion that more than offset revenue growth in absolute profit terms.

The cash result is clearly not representative of normalised earnings quality. Operating cash outflow of NZ$0.6m and pre-lease FCF of NZ$-1.1m are both well below historical norms, driven by working-capital absorption rather than capital investment alone. Capex rose to NZ$0.5m (3.4% of revenue, up from 1.1%), which adds to the cash drag but is a secondary factor. If debtors and inventory revert toward historical days ratios in FY27, operating cash flow should recover materially; if they do not, the structural cash generation of the business is weaker than the profit line implies.

This briefing cannot assess whether the working-capital build reflects deliberate commercial strategy or operational stress, as no management commentary on working-capital targets or debtor-term changes was available in the supplied materials.