PBT rose 30% on 14.4% lower revenue as margins expanded

The primary driver was inventory, which rose NZ$7.2m (36.1%) to NZ$27.3m. This cash absorption is the dominant read-through from the result, because it contradicts the earnings improvement at the cash level.

Revenue fell 14.4% to NZ$95.5m, consistent with the company's deliberate exit from low-margin commercial and synthetic carpet business. Despite that, PBT rose 30.0% to NZ$2.6m and NPAT rose 29.4% to NZ$2.2m, as gross margin expansion more than offset the volume loss. The company cited a 44% increase in normalised EBITDA and strong 15% wool carpet revenue growth as evidence its strategy is ahead of plan.

The balance sheet remains debt-free, with cash rising to NZ$14.9m from NZ$10.5m, supported by the prior-period property sale proceeds.

The NZ$7.7m inventory build — pushing inventory days to 104 against a prior FY21 level of 66 days — absorbed almost all of the period's operating earnings in cash terms. While sector seasonality and supply-chain stocking can explain some build, the scale means near-term cash generation depends on whether inventory can be worked down as wool volumes grow. If it cannot, the earnings improvement is largely unrealised in cash.

Margin expansion validates the strategy directionally. The gross margin of 31.1% and a PBT margin of 2.7% (close to the company's historical average of 2.9%) were achieved on materially lower revenue, which means the shift toward higher-margin woollen carpet is genuinely improving unit economics. This is the core strategic claim, and the P&L supports it — within a single period.

The effective tax rate normalised from a prior-period anomaly. The current tax rate of 14.0% compares to -13.8% in FY21 (a negative rate reflecting deferred tax movements on the prior loss year), which is above the company's historical baseline. This had a modest dampening effect on NPAT relative to PBT growth, but the 0.6 percentage-point gap between PBT and NPAT growth rates is not material.

The company framed itself as ahead of its transformation plan, pointing to normalised EBITDA growth and wool carpet revenue momentum. The 1H22 result (NZ$1.0m NPAT, NZ$48.7m revenue) contributed 44.7% of full-year NPAT, with the second half implied at NZ$1.2m — a modestly back-weighted skew that does not raise structural concern.

What the release does not resolve is whether the inventory build is a one-period restocking event or a structural feature of building a wool-focused supply chain. That distinction determines whether FY23 cash generation normalises or whether capital continues to be absorbed as volumes scale.

The earnings result is directionally sound — margin expansion on a lower revenue base is a genuine signal — but cash quality is poor in FY22. FCF relative to NPAT was -259.6%, meaning every dollar of reported profit was more than offset by cash consumed in working capital and capex. Pre-lease FCF was -NZ$5.8m against reported NPAT of NZ$2.2m. While this is within Annolyse's historical FCF range for Bremworth (which has frequently been negative), the swing from NZ$13.7m pre-lease FCF in FY21 is large and driven primarily by inventory absorption rather than investment.

Debtor days of 46.7 days were below the historical mean of 67.1 days, suggesting receivables are well-managed; this partially offsets the inventory concern but does not change the net working-capital picture. The debt-free balance sheet with NZ$14.9m cash provides a buffer, but if the inventory build continues into FY23, financial flexibility will narrow.

This briefing cannot assess the underlying demand trajectory for Bremworth's wool carpet products or the sustainability of its gross margin without segment-level volume and pricing data.