Revenue rose 7.1% but flat PBT masks margin compression and rising debt

Inventories fell 22.2% to NZ$188.4m and total liabilities fell 22.9%, yet gross borrowings still rose 33.4% to NZ$94.3m and net debt increased to NZ$83.3m from NZ$58.7m, a weakening leverage position despite the cash freed from destocking.

Revenue grew 7.1% to NZ$1.1b, at the upper edge of the company's historical range (5-period mean 2.2%), but profit before tax was flat at NZ$27.7m (0.0% growth) as PBT margin compressed to 2.6%, below the historical range of 2.7%-4.9% (mean 3.8%). NPAT grew 8.7% to NZ$19.9m, with the effective tax rate steady at 29.5% versus 29.6% prior.

Revenue growth of 7.1% did not flow through to profit, with PBT margin falling to 2.6% against a 3.8% historical average. This matters because it suggests the additional sales volume is being generated at lower per-unit profitability, weakening the underlying earnings quality behind the reported dollar figures.

Working-capital release did not delever the balance sheet. The NZ$94.5m release from inventory and liabilities reduction would normally be read as a cash-quality positive, but gross borrowings rose 33.4% and net debt increased by NZ$24.6m over the same period. This raises the question of where the freed cash went, since it clearly was not applied to debt reduction.

Dividend policy is mixed depending on the period basis. The final dividend per share fell to 25 cents from 35 cents, but the full-year dividend total rose to 40 cents from 35 cents, meaning the annual payout increased even though the final instalment fell. The payout ratio against NPAT of 65.8% sits within the company's normal historical range (mean 113.0%), so the increase looks affordable on a stated-earnings basis.

The half-year result showed net trading profit from continuing operations up 50.0% and an upgraded guidance range issued in December 2025 after a stronger-than-anticipated result, with the first half contributing 53.9% of full-year NPAT and 51.6% of full-year revenue. That means the second half of FY26 delivered materially weaker profit growth than the guided-up first half, a slowdown not explained by any disclosed target or seasonality note in this release, so the read-through on momentum into FY27 is unclear.

A NZ$94.5m release against a historical pattern of builds suggests either a genuine destocking decision or a one-off timing effect tied to vehicle-cycle inventory management, and the interpretation matters because reversal in a future period would remove this year's apparent cash support. Operating cash flow for the current period was not disclosed in this release, so the cash-conversion picture cannot be verified against the prior year's NZ$45.3m operating cash inflow. Combined with rising gross borrowings and net debt despite the inventory release, the balance sheet does not show the deleveraging that the working-capital movement alone would imply, pointing to funding pressure elsewhere in the group.

This briefing cannot assess current-period operating cash flow or free cash flow generation, because those figures were not disclosed in the release materials supplied.