Revenue halved to $44.7m as cash burn deepened and working capital ballooned

What changed

Revenue fell 53.8% to NZD 44.7m from NZD 96.7m, with the loss widening at both PBT (-$6.3m vs -$3.9m, a 62.5% deterioration) and NPAT (-$6.4m vs -$4.0m, a 58.3% deterioration). Operating cash flow reversed from a $3.5m inflow to a $1.9m outflow, while capex more than doubled to $5.4m, driven by reinstatement of the Napier plant ($4.2m) and Whanganui assets ($0.4m). Pre-lease free cash flow swung from +$1.0m to -$7.3m.

The balance sheet moved in the opposite direction: cash rose from $4.0m to $17.8m and total equity expanded from $39.8m to $65.4m. That $25.6m lift in equity against a $6.4m loss points to a material capital injection during the period, and prior-period gross borrowings of $14.8m are not redisclosed, so leverage cannot be quantified.

What matters

• The top-line contraction is the dominant story. A 53.8% revenue decline against a loss that widened by only ~$2.4m implies either aggressive cost discipline or a very different mix, but no gross margin or segment data is disclosed to confirm which.
• Working capital absorbed cash even as sales fell. Receivables rose 4.7% and inventories rose 8.9% despite revenue halving, pushing receivable days from 39.8 to 90.2 and inventory days from 89.4 to 210.7. Inventory is now equivalent to roughly 58% of annual revenue — a sharp deterioration in capital efficiency regardless of whether it is deliberate stockbuilding or unsold product.
• Liquidity has been rebuilt, but through equity not operations. Cash up $13.8m is more than explained by the $25.6m equity increase; underlying cash generation was negative. That leaves the balance sheet stronger today but does not validate the trading model.

Expectations

No quantitative guidance or forward-work backlog is disclosed, and management states that the anticipated improvement in sales performance "has not come through." The extraction reports HY26 revenue of $42.1m against a full-year $44.7m, implying H2 revenue of only $2.6m and a small H2 NPAT swing to +$1.7m — a shape inconsistent with normal trading and more likely reflecting reinstatement-related recoveries or classification effects tied to the Napier event. The release does not support a view on run-rate revenue or when losses narrow; it explicitly signals continued challenge.

Quality of result

Low. The reported loss is GAAP and unadjusted — no non-GAAP reconciliation is provided — but several quality flags stand out:

• Cash conversion deteriorated materially. OCF moved $5.4m the wrong way against a $2.4m larger loss, confirming the loss is cash-consuming rather than accrual-driven.
• Inventory build into a falling top line raises obsolescence and margin risk if that stock ultimately clears at discount.
• Capex is partly non-recurring. The $4.2m Napier reinstatement and $0.4m Whanganui reinstatement should not repeat, so headline capex overstates the ongoing maintenance burden — but that also means any associated insurance recoveries, if present, are propping up H2 cash optics rather than underlying trading.

Tax is immaterial (1.4% effective rate on a loss), so PBT and NPAT tell the same story; there is no tax distortion to look through.

Unresolved

• Current gross borrowings and net debt are not disclosed, so the leverage picture post the equity movement is incomplete.
• No gross margin, segment, or channel split is provided — the 53.8% revenue decline is unexplained at the mix level (NZ vs Australia, wool vs synthetic, residential vs commercial).
• The extreme second-half shape ($2.6m implied H2 revenue; +$1.7m H2 NPAT; +$19.9m H2 OCF) is not reconciled in the extracted materials, leaving open whether this reflects insurance proceeds, a one-off recovery, or a data classification issue.
• The composition of the $25.6m equity increase (placement, rights issue, conversion) and its dilution impact per share is not captured.
• Inventory realisability and receivables ageing are not disclosed despite the blow-out in days outstanding.

This briefing cannot assess the underlying demand trajectory, unit economics, or the sustainability of the H2 cash inflow without segment-level disclosure and a breakdown of the capital raise and any insurance-related items.

Key metrics

Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.