Cash conversion fell to 58.3% while tax relief lifted NPAT, PBT down 1.0%

Net cash from operating activities fell to $348.9m from $418.5m in the prior comparable period, taking operating cash flow to EBITDA conversion down to 58.3% from 75.3%, and free cash flow to NPAT conversion down to 90.6% from a much stronger 126.9% previously.

Headline growth still looks solid on the surface: revenue rose 9.9% to $13.5b and EBITDA rose 7.8% to $598.7m, helped by Healthcare and Animal Care volumes plus recent acquisitions. But profit before tax fell 1.0% to $299.2m, while net profit after tax rose 4.7% to $225.2m, a divergence driven by the effective tax rate falling to 24.4% from 28.6%.

Balance sheet leverage also weakened, with gross borrowings up 15.5% to $1.3b and net debt to EBITDA rising to 1.73x from 1.65x.

EBITDA growth of 7.8% did not translate into equivalent cash generation, which means the reported profit improvement is not yet fully backed by cash in hand, a relevant signal for anyone assessing dividend cover or reinvestment capacity.

Second, the tax rate is doing the heavy lifting on NPAT. PBT fell 1.0% while NPAT rose 4.7%, a gap driven entirely by the lower effective tax rate rather than better operating performance, so PBT is the cleaner read on underlying trading this period.

Third, segment mix and leverage both moved the wrong way. Animal Care's disclosed margin nearly halved to 15.3% from 32.0%, with segment result falling to $138m from $215m, while gross borrowings and net debt to EBITDA both rose, narrowing headroom just as cash conversion softened.

The half-year shape shows first-half NPAT at 55.4% of the full year versus a more even 50.2% revenue split and 50.6% EBITDA split, meaning the second half carried a lighter profit share than its revenue and EBITDA contribution.

Without a disclosed cash flow or leverage target, the deterioration in conversion and gross borrowings cannot be assessed against management's own bar. That gap matters because investors are left inferring whether current cash and leverage trends are transitional or the start of a new pattern.

Yet the absolute net working-capital movement was still an outflow of about $140m, and combined with acquisition-related borrowing, it is consistent enough with revenue growth to look partly organic rather than purely timing-driven.

The bigger quality caveat is the cash conversion gap: with capex broadly flat at 1.1% of revenue, the shortfall in operating cash relative to EBITDA growth is not explained by increased capital spending, which means the underlying cash cycle bears closer scrutiny before treating EBITDA growth as fully cash-backed.

This briefing cannot assess whether management has addressed the cash conversion decline in commentary not captured in the supplied excerpts, or whether the tax rate change reflects a one-off item.