Kilimanjaro operating profit fell 57% despite 13.6% revenue growth

The critical issue is that Kilimanjaro's operating profit fell from NZD 1.2m to NZD 0.5m — a decline of approximately 57% — on that higher revenue base, meaning incremental revenue is not converting to profit at the segment level.

At the group level, PBT improved 35.6% to a loss of NZD 0.3m (from a loss of NZD 0.4m in FY24), a narrow improvement that reflects both Kilimanjaro's cost deterioration and iSell's swing from a NZD 0.4m loss to a NZD 0.3m profit. Operating cash flow fell sharply from NZD 1.8m to NZD 0.7m, and capex quadrupled from NZD 0.1m to NZD 0.4m, compressing FCF to approximately NZD 0.3m.

Revenue at the dominant segment grew 13% but operating profit fell by more than half. The annual report notes that operating profit reduced to NZD 537,000 from NZD 1.25m, which means Kilimanjaro absorbed cost growth well in excess of its revenue growth. Without an explanation of whether this reflects investment in headcount, the Recipe Marketing acquisition integration, or structural margin deterioration, this compression is the most important unresolved issue in the result.

Cash generation deteriorated significantly on a growing revenue base. Operating cash flow of NZD 0.7m compares with NZD 1.8m in FY24, a decline of 62%. The second-half shape worsens this picture: with HY25 contributing NZD 0.25m of the NZD 0.68m full-year operating cash flow, the implied second half generated only NZD 0.43m. Capex intensity rose from 0.4% to 1.6% of revenue, leaving FCF at approximately NZD 0.3m and net debt moving from a net cash position of NZD 1.1m to NZD 0.5m. The business is thinning its financial buffer while still loss-making.

iSell's turnaround is a genuine positive but modest in scale. iSell reversed a NZD 0.4m operating loss to a NZD 0.3m profit on NZD 1.7m of revenue, which reduced the corporate-drag burden on the group. However, at 6.8% of group revenue, iSell's contribution cannot offset Kilimanjaro's deterioration.

The HY25 commentary described the group as trading ahead of budget with continued profitability and revenue growth forecast, but the full-year result delivered a net loss, with the second half recording a loss of NZD 0.25m against the first half's profit of NZD 0.15m. The trajectory reversed materially in the second half, which is inconsistent with the mid-year optimism.

With no stated targets for FY26, the release does not provide a basis for assessing the path back to sustained profitability. The acquisition of Recipe Marketing is described as being in the early stages of delivering synergies, which suggests integration costs may persist into FY26 before any revenue benefit matures.

At Kilimanjaro, the 13% revenue increase accompanied a 57% decline in operating profit, which is an operating leverage outcome that is the opposite of what scale should deliver in a software and consulting business. Whether this reflects deliberate growth investment or uncontrolled cost escalation is not determinable from the financial statements alone.

Cash conversion deteriorated sharply: OCF of NZD 0.7m on revenue of NZD 24.8m represents a thin conversion rate, and FCF of approximately NZD 0.3m leaves minimal financial flexibility given gross borrowings rose 68% to NZD 1.1m. The effective tax rate of 52.2% (versus 89.0% in FY24) distorts the NPAT line relative to PBT; PBT at a NZD 0.3m loss is the cleaner operating measure and shows a modest improvement, but the underlying segment-level dynamics are more instructive than the headline PBT trend.

This briefing cannot assess the recurring versus project-based mix of Kilimanjaro's revenue, the contracted revenue pipeline, or whether cost pressures are temporary integration-phase items or a reset in the business's cost structure.