Operating cash outflow widened to $27.3m on $7.9m inventory build

After capex of $4.0m, free cash flow before lease payments was approximately -$31.3m.

Headline profit fell to $4.6m NPAT and $4.4m operating profit, against $11.0m and $11.8m respectively. The like-for-like read is constrained by a basis discontinuity: FY23 NPAT included $35.5m of insurance proceeds related to Cyclone Gabrielle (cumulative proceeds to date $62.0m). Revenue printed at $80.3m versus $89.7m. Cash on hand declined $7.7m to $31.6m, while equity rose to $54.4m.

• The $27.3m operating outflow and inventory build to 133 days are the dominant economic signal of this result. Management commentary attributes lower sales to supply constraints during the year; the inventory swell suggests production has been restored ahead of the demand cycle. This matters because if sell-through does not follow, working-capital absorption will continue to pressure cash before any earnings recovery becomes visible.
• Comparability is broken at the headline level. Because FY23 NPAT was lifted by $35.5m of insurance proceeds, growth-rate comparisons for revenue, PBT, NPAT and ROE are not analytically clean (the underlying basis discontinuity is why these growth percentages carry quality caveats). The cleaner read is that FY24 stands on a $4.6m NPAT with negligible insurance contribution, against a prior year where insurance dominated reported earnings.
• Liquidity buffer remains, but it is being drawn down. Cash of $31.6m still covers the current burn, and total liabilities edged down to $40.5m. However, with FCF deeply negative and capex doubling to $4.0m (5.0% of revenue versus 2.2%), the buffer that insurance proceeds built up is now actively funding the recovery.

The company has signalled a return to dividends by FY26, which implicitly requires sustained profitability and a more normal cash-conversion profile than FY24 delivered. The supplied interim context shows HY24 NPAT of -$1.7m, implying a roughly $6.3m second-half NPAT and $41.3m of second-half revenue. That shape supports management's narrative that supply restoration was beginning to translate into trading recovery, but it is a single half-year data point rather than an established trend.

This briefing has no forward-work or order-book context to test that recovery against, so the trajectory beyond FY24 depends on sell-through of the elevated inventory and on demand in a soft retail and construction backdrop.

Reported NPAT of $4.6m converted to operating cash outflow of -$27.3m, with the FCF-to-NPAT ratio at -674.8%. Even allowing for the inventory build, this is a result where the income statement and the cash statement are pointing in different directions, which matters because the income line is the more flattering of the two.

The effective tax rate rose to 6.1% from 2.3%, still well below a statutory rate, so NPAT is modestly tax-flattered relative to the $4.9m PBT. The $4.4m operating profit is the cleanest read of underlying trading and is sharply below FY23's $11.8m even before adjusting for insurance distortion. Capex doubled to $4.0m, indicating reinvestment that should be tracked against the dividend-by-FY26 commitment. Equity grew $3.9m to $54.4m, broadly consistent with retained earnings, so the balance sheet is absorbing the cash drain rather than the recovery being funded by new capital.

This briefing cannot assess segment-level revenue or margin performance for carpet versus wool, gross margin trends, or the order book underpinning the implied second-half recovery, because none of those are disclosed in the supplied material.