NPAT up 7.1% but operating cash flow fell 11% and leverage climbed to 1.68x

Revenue rose 7.8% to $13.2b, EBITDA grew 6.5% to $605.6m, and NPAT advanced 7.1% to $271.5m. PBT grew only 2.6% to $383.1m, with the divergence to NPAT explained by a lower effective tax rate of 28.7% (versus 29.5%).

Gross borrowings climbed 26.3% to $1.2b and net debt rose to $1b, lifting net debt/EBITDA to 1.68x from 1.35x. Healthcare contributed 95.6% of revenue with a segment result of $548.0m; Animal Care delivered $112.2m on $579.0m of revenue.

• OCF/EBITDA fell more than 11 percentage points despite receivable days tightening to 38.8 (from 42.2) and inventory days to 33.5 (from 36.8). Because inventories and trade debtors both declined, the cash drag sits below working capital lines — likely in payables, tax, or interest — which means the reported earnings growth was not matched by economic cash generation.

• Leverage and capital intensity moved together. Net debt/EBITDA rose to 1.68x, capex stepped up 21.1% to $118.4m, and the prior-period FCF/NPAT cushion of 115.8% compressed to 84.6%. This matters because the group is now both more levered and converting less of its accounting profit into deployable cash at the same time.

• The full-year dividend now consumes almost all free cash flow. The full-year dividend of 118.5 cents per share equates to 83.9% of NPAT and 99.1% of pre-lease free cash flow, versus 42.9% of NPAT in the prior year. So further M&A or capex flex will likely have to come from debt rather than retained cash unless conversion recovers.

The first-half/second-half split was broadly even (HY24 contributed 49.9% of revenue, 50.0% of EBITDA and 50.1% of NPAT), so the second half did not deliver a step-up in earnings momentum. Against the prior comparable's 14.0% revenue and 25.1% NPAT growth — boosted by the LifeHealthcare acquisition — the FY24 trajectory has clearly moderated.

What this release does not support is any read on whether management expects cash conversion to normalise or remain near 57.5%, and that is the variable most relevant to dividend headroom and acquisition capacity through FY25.

PBT growth of 2.6% is a cleaner read on operating progress than the 7.1% NPAT lift, because the tax-rate tailwind narrows when assessed at the pre-tax line.

The cash flow profile is the bigger concern. Working capital movements were actually a modest source of cash (operating working capital fell roughly $35m), so the gap between EBITDA growth and OCF decline must reflect higher cash interest on the larger debt stack, tax payments, or other non-working-capital items. Reported underlying NPAT of $303.4m strips out M&A transaction costs, restructuring and LifeHealthcare PPA amortisation, so the gap between underlying and statutory profit ($31.9m) is meaningful and depends on adjustments the briefing cannot independently validate.

This briefing cannot assess the durability of underlying margins by sub-channel or the pipeline of acquisitions implied by the rising debt stack, because segment-level cash flow and forward-work disclosures are not supplied.