PBT up 45.6% but operating cash flow swung negative on NZ$39.7m inventory build

Revenue rose 22.4% to NZ$535.7m, PBT lifted 45.6% to NZ$26.5m and NPAT grew 41.4% to NZ$18.1m. PBT margin printed 4.9%, sitting above Annolyse's historical baseline range of 2.2%–4.2%.

The cash bridge broke down. Operating cash flow swung from +NZ$31.3m to -NZ$1.5m, a NZ$32.7m deterioration, driven almost entirely by a NZ$39.7m operating working-capital absorption as inventories climbed from NZ$129.8m to NZ$169.5m. Gross borrowings stand at NZ$89.3m and net debt at NZ$75.8m, equivalent to 2.32x EBITDA. The interim dividend was held flat at 15cps.

OCF/EBITDA was -4.5% in the half because the entire EBITDA and more was absorbed by inventory. The NZ$39.7m working-capital build sits at the upper edge of the supplied historical range, where prior periods showed an average build of NZ$50.2m versus an average release of NZ$24.2m. Earnings look strong, but the cash to back them is sitting on the lot.

Margin and growth performance is unprecedented versus the supplied baseline. PBT growth of 45.6%, NPAT growth of 41.4% and a PBT margin of 4.9% are all above the historical baseline range covering HY23–HY26. That frames the result as a peak rather than a new run-rate, particularly given management commentary flagging "challenges in the second half".

Capital allocation tilted toward retention. The 15cps DPS was held flat while NPAT rose 41.4%, dropping the payout ratio to 27.1% from 38.4%. That is well below the historical 34%–71% range and is consistent with funding the inventory build internally rather than leaning further on the balance sheet.

The HY21/FY21 seasonality shows H1 represented 48.6% of full-year revenue and 51.5% of full-year NPAT, so this business is not heavily second-half weighted on the bottom line. Annualised on current run-rate, revenue would imply ~NZ$1.07bn, but management commentary explicitly warns the second half "will present a number of challenges", and that the current run "could be expected to continue for the short to medium term" only absent further shocks.

The gap that matters is whether the inventory holding converts to H2 sales without margin give-back. The release does not quantify how much stock is pre-sold.

The effective tax rate of 28.4% is within the supplied historical 28.1%–33.9% range and close to the NZ statutory 28%, so there is no tax distortion masking the operating read — PBT growth of 45.6% and NPAT growth of 41.4% are essentially saying the same thing. ROE strengthened to 13.4% from 11.0%.

What lowers the quality is the working-capital position. NZ$39.7m of inventory absorption translated PBT of NZ$26.5m into negative operating cash flow, with inventory days at 70.4. Floorplan finance of NZ$55.9m is funding part of that stock. If supply normalises and franchisor allocations continue arriving, the stock should convert; if demand softens into the flagged H2 challenges, the inventory position becomes a margin and cash risk simultaneously. The flat dividend and lower payout ratio look prudent in that context rather than ungenerous.

This briefing cannot assess gross margin movement, dealership-level mix, or how much of the inventory build is matched by signed customer orders, because the release does not disclose those splits.