NZ exit write-off of NZ$6.0m drives equity to negative NZ$4.0m

On the continuing UK & Ireland franchising business, the picture is the opposite: PBT loss narrowed 88.9% to just NZ$0.4m, and net cash flow from operating activities turned positive at NZ$0.7m, against an outflow of NZ$0.5m a year earlier.

The balance sheet absorbed the cost. Total equity flipped to negative NZ$4.0m from positive NZ$1.4m, NTA per share is now negative NZ$0.116, and total assets fell 13.4% to NZ$29.3m while liabilities edged up 2.7%. Cash held rose to NZ$1.2m from NZ$0.4m, and gross borrowings were broadly unchanged at NZ$3.0m.

A NZ$6.0m discontinued-operation charge has driven shareholders' funds to negative NZ$4.0m, with liabilities (NZ$33.3m) now exceeding assets (NZ$29.3m). This matters because the group is now reliant on continued operating cash generation and franchisor support to remain solvent without a recapitalisation; there is no equity cushion to absorb a further setback.

Continuing operations are improving, but from a small base. Management cites UK store sales up 21% to NZ$38.3m and Ireland up 11% to NZ$19.9m, with total franchisee store sales of NZ$58.2m — store-level momentum that drove continuing-operations PBT loss down from NZ$3.2m to NZ$0.4m and EBITDA (before receivables impairment) of NZ$0.4m. The operating model is approaching break-even, but absolute earnings remain immaterial relative to the capital structure.

Receivables quality is the soft spot inside the operating result. Trade debtors rose 29.9% to NZ$1.7m even as group revenue fell to NZ$4.7m, lifting debtor days from 73 to 134. Management's own EBITDA disclosure is presented "before impairment of receivables", which signals that a charge has been taken below that line and that franchisee collectability is an active issue.

There is therefore no near-term yardstick against which to test execution beyond store-sales growth rates.

The HY24 split shows revenue at 43.7% of the full year and continuing-operations momentum extending into the second half, consistent with the second-half-weighted shape management describes. The release does not, however, support any read-through to FY25 cost base or impairment risk.

Operating cash inflow of NZ$0.7m exceeds reported EBITDA of NZ$0.4m (current OCF/EBITDA of 170.0%), which is unusual and likely reflects favourable timing on payables or receipt of franchise fees rather than a sustainable cash margin. With debtor days having almost doubled to 134, a portion of revenue is sitting in receivables and is the subject of an impairment charge that is excluded from the headline EBITDA figure.

The headline group revenue figure also requires care. The FY23 base of NZ$6.6m included the now-discontinued NZ operation, while FY24 of NZ$4.7m is on a narrower footprint; management's "up 19%" framing is a continuing-operations comparison, while the canonical reported change is -29.4%. The two are not reconcilable from the supplied disclosures, and prior-year EBITDA is not given, so margin trend cannot be independently verified.

This briefing cannot assess solvency, going-concern status, banking-covenant headroom, or the recoverability of trade receivables, because none of those items are quantified in the supplied materials.