NPAT fell 17.9% as working capital and capex pushed leverage to 4.7x

The decline is not tax-driven: the effective tax rate moved only modestly from 27.3% to 27.9%, so the gap reflects higher depreciation and interest costs rather than presentation effects.

The bigger change sits on the balance sheet. Trade debtors jumped 32.8% to NZD 86.0m, lifting receivable days from 56.4 to 77.1, while inventories rose 8.0% to NZD 151.2m. Capex climbed 47.6% to NZD 44.8m, equivalent to 22.1% of revenue versus 14.5% in HY23. The combined effect: pre-lease free cash flow swung from +NZD 4.9m to ‑NZD 9.1m, gross borrowings rose to NZD 357.6m, and net debt/EBITDA stepped up from 4.1x to 4.7x.

• Receivable days extended by 20.7 days and operating working capital grew NZD 32.5m, even as the company itself flagged distributors and retailers "resetting inventory." That combination — slower collections plus higher own inventory — is unusual and suggests channel pressure, not just timing. It matters because EBITDA-level stability hides genuine cash deployment into the working-capital cycle.

• Below-EBITDA costs are now compressing reported earnings. EBITDA is flat, but PBT is down 17.1% and ROE has weakened from 7.9% to 6.0%. With gross borrowings up NZD 43.6m year-on-year, financing costs are a structural drag, and depreciation is rising as the capex programme lands on the balance sheet. This means flat top-line performance no longer translates into flat bottom-line outcomes.

• Capex intensity has stepped up materially. At 22.1% of revenue, capex is well above the prior-period 14.5% and is the proximate cause of negative FCF. Without commentary on whether this is a single-period spike or a multi-year programme, the duration of negative FCF generation cannot be sized, which is what drives the leverage trajectory from here.

Using HY23 as a shape proxy, the first half historically carried 54.8% of full-year revenue, 57.9% of EBITDA, and 62.8% of NPAT, meaning the second half is structurally lighter. Annualising current first-half revenue at NZD 406m sits above FY23's NZD 381m, but EBITDA and NPAT are unlikely to scale in the same way given the second-half mix and the rising D&A and interest base.

No interim dividend was declared with this announcement, which is consistent with the negative FCF profile but limits the read on capital-allocation intent for the full year.

However, that stability is misleading once capex is included: free-cash-flow conversion to NPAT moved from +12.0% to ‑27.1%, and absolute FCF turned negative. The earnings result is therefore lower quality than the EBITDA print suggests — it leans on a balance sheet that has expanded debt by 13.9% to fund both working capital and asset investment.

The segment data sharpens the read: the USA segment result collapsed from NZD 4.6m to NZD 1.4m on lower revenue, and the dominant Delegat Limited segment's result fell from NZD 35.9m to NZD 26.7m. Margin pressure is therefore not evenly distributed, and the USA channel reset cited in the release is the clearest pressure point.

This briefing cannot assess management's internal expectations for FY24, dividend intent, or the underlying volume and price mix because none of those were disclosed in the supplied release.