NPAT fell 18.9% on a 9.0% revenue decline as dividend held flat

The effective tax rate was essentially unchanged at 28.3% versus 28.5%, so the NPAT decline reflects operating deleverage rather than a tax distortion.

Cash flow moved the other way. Operating cash inflow rose 80.0% to $189.8m and reported free cash flow lifted to $126.0m from $41.2m, lifting cash conversion (OCF/EBITDA) to 68.8% from 34.8%. Trade debtors fell 6.8% and inventories fell 6.6%, releasing working capital alongside the revenue contraction.

The interim dividend was held at NZ 57.0 cents per share. Gross borrowings fell to $1.3b, but cash also dropped to $237.9m, leaving net debt broadly flat at $1.1b and net debt to EBITDA edging up to 3.86x from 3.59x.

• A 9.0% revenue decline produced a 9.0% EBITDA decline and an 18.9% NPAT decline, so each dollar of lost revenue cost more than proportionally as fixed cost absorption fell. This matters because it shows the cost base did not flex with the top line within the half, and the prior year's release flagged the underlying business excluding the now-departed contract — the read on that underlying remains harder to verify from the disclosure here.
• The dividend now exceeds reported NPAT. Holding the interim at 57.0 cents lifted the payout ratio versus NPAT to 100.2% from 80.3%. It is still covered by reported free cash flow at an 87.8% payout ratio, but only because working capital released cash this half. Sustaining the distribution relies on either earnings recovery in 2H or further balance-sheet support.
• Leverage drifted the wrong way despite lower borrowings. Net debt to EBITDA rose to 3.86x from 3.59x because the EBITDA denominator shrank faster than gross debt. That is a passive deterioration rather than an active releveraging, but it narrows the cushion against any further earnings softness.

Within the mix, Animal Care revenue rose to $304.0m with segment result up to $59.0m, while Healthcare revenue fell to $5.7b with segment result down to $250.0m. Healthcare still drives 94.9% of revenue, so segment-level diversification did not offset the headline.

On the FY24 pattern (HY24 contributed 49.9% of full-year revenue, 50.0% of EBITDA, 50.1% of NPAT), the business was not historically second-half weighted, which means a 2H rebound would need a step-change rather than a normal seasonal lift.

Annualising the current half implies revenue around $12b versus FY24's $13.2b. Closing that gap in 2H requires the underlying ex-contract growth referenced in management's prior commentary to actually deliver in the second half; the release here does not quantify that path.

The 18.9% NPAT decline is a clean operating signal because the tax rate is steady and there is no disclosed discontinued operation or one-off in the calculation pass. So the headline understates rather than overstates underlying weakness — there is no obvious below-the-line distortion to add back.

Cash quality is more flattering than it looks. The 80.0% jump in operating cash flow is largely a working-capital release: trade debtors fell $103.4m and inventories fell $87.8m, consistent with a smaller revenue base requiring less working capital rather than improved underlying conversion. That cash supports the held dividend and the modest debt reduction this half, but it is not a repeatable lever — once the working-capital base resets to the lower revenue run-rate, future cash flow will track earnings more closely.

This briefing cannot assess the underlying ex-contract growth rate, segment-level cost actions, or any FY25 guidance because none is quantified in the supplied release excerpts.