Comvita swung to $4.6m NPAT, but FCF leans on $52m inventory unwind

Revenue rose 18.3% to $118.0m and PBT swung to $4.3m from a $9.0m loss (+147.4%), with NPAT at $4.6m versus a $6.5m loss (+170.8%). Operating cash flow more than doubled to $20.8m and free cash flow reached $16.4m, up $14.4m.

The mechanism behind the cash result is visible on the balance sheet. Inventories fell from $120.8m to $68.3m (-43.4%), with inventory days dropping from 220 to 105. Capex was cut 75.6% to $0.5m, only 0.4% of revenue. Net debt fell to $48.7m from $81.6m, and gross borrowings dropped 38.1%. Equity is now $58.3m, 61.5% below prior comparable, reflecting the $104.8m FY25 loss that sits between these two halves.

FCF-to-NPAT at 357.3% is not a durable conversion rate. The $14.4m year-on-year FCF uplift sits against a $52.5m inventory drawdown and a $1.5m capex cut. This means the underlying cash-generation capacity of the business at a normalised inventory level and a normalised capex profile cannot be inferred from this half.

Leverage has materially improved, and that changes financial flexibility. Net debt dropped $32.9m to $48.7m, and the leverage direction is strengthening. Combined with a smaller, simpler balance sheet (total assets -44.3%), Comvita has bought itself runway. The implication is that the next leg of the turnaround can be funded from operating cash if working-capital normalisation does not reverse the gain.

Operating profitability is genuine even before the cash discussion. Operating profit swung to $7.7m from a $5.2m loss, on revenue up $18.3m. PBT growth of 147.4% and NPAT growth of 170.8% diverge by 23.4 percentage points, driven by an effective tax rate of -7.4% versus 28.1% in HY25, so PBT is the cleaner read on operating performance. ROE moved to 7.9% from -4.3%, although the smaller equity base flatters the ratio.

HY25 was 51.8% of FY25 revenue but only 6.2% of FY25 NPAT, because H2 FY25 absorbed a $98.3m implied loss tied to prior-period writedowns. That makes FY25 a poor anchor for full-year shape. Annualising HY26 revenue gives $235.9m, around 22.6% above FY25's $192.4m, but seasonality and channel timing in this business make that a directional reference only.

What the release supports is that H1 priorities were delivered: a return to profitability, positive operating cash flow, and debt reduction. What it does not support is a view on H2 earnings power, because the H2 outcome depends on whether revenue growth holds without the inventory tailwind.

Receivable days actually improved to 51.4 from 56.6, so the revenue uplift is not being extended through customer credit.

The cash result is lower quality than the headline implies. Three items materially help reported cash:

• Inventory release of $52.5m drove most of the $50.2m fall in operating working capital.
• Capex of $0.5m versus $2.0m prior contributed $1.5m to FCF and is well below typical maintenance levels at 0.4% of revenue.
• A negative effective tax rate (-7.4%) added to NPAT rather than subtracting from it, widening the gap between PBT and NPAT growth by 23.4 percentage points.

Once inventory normalises and capex returns to a maintenance run-rate, free cash flow would be expected to compress materially from the $16.4m reported here, even if operating profit holds.

This briefing cannot assess underlying demand strength by region or channel, because segment revenue is not disclosed in the supplied financial statements.