EBITDA up 23% but pre-tax loss widens to $4.3m as D&A and interest bite

What changed

Reported revenue rose 4.1% to $88.9m, though on a normalized basis (stripping a $7.0m one-off Coretex acquisition accounting entry in H1 FY23) the release frames growth at 13%. EBITDA improved 23.1% to $25.6m, but the gain did not drop through: operating profit fell to $0.4m from $1.0m, the pre-tax loss widened to $4.3m from $2.7m, and NPAT flipped to a $1.2m loss from a $0.6m profit. Continuing operations still posted a small $0.2m profit, down from $0.6m.

Cash tells a very different story. Operating cash flow jumped to $20.7m from $11.9m, capex eased to $12.8m from $14.3m, and the cash balance climbed to $16.8m from $4.4m. Gross borrowings rose modestly to $52.5m, but net debt fell to about $35.7m, taking net debt/EBITDA to 1.4x from 2.1x. New Zealand (≈$44.7m revenue, ~64% inferred EBITDA margin) remains the dominant and most profitable segment; North America grew to ≈$38.6m; Corporate & Development remains loss-making at roughly -$20.7m.

What matters

• EBITDA-to-earnings disconnect. A $4.8m EBITDA uplift was more than absorbed below the line. With a negative effective tax rate of -72.1% (a benefit on a loss), PBT is the cleaner read and it deteriorated by $1.6m. The lever is depreciation, amortisation and interest — consistent with a business carrying a larger post-Coretex asset and debt base.
• Cash generation vs. debtor quality. OCF/EBITDA rose to 80.9% from 57.2%, and reported free cash flow to the firm narrowed to a $0.2m outflow from a $21.7m outflow. Against that, trade debtors rose 26.5% to $34.4m and receivable days stretched to 70.5 from 58.0 — a 12.5-day blow-out that sits awkwardly alongside the cash improvement and warrants watching.
• Leverage direction. Even with gross borrowings up $5.0m, the larger cash position and higher EBITDA pulled net debt/EBITDA down meaningfully. That materially reduces balance-sheet risk relative to HY23.

Expectations

No quantified FY24 guidance or target is disclosed in the supplied materials, so any comparison is to shape context only. FY23 was mildly second-half weighted (H1 = 48.8% of revenue, 46% of EBITDA). Annualising H1 FY24 revenue gives $177.7m, modestly above FY23 reported revenue of $174.9m and above FY23 normalized revenue of $165.3m. A simple repeat of the H1 run-rate would therefore track slightly ahead of FY23 on the top line; the release does not support a firmer statement than that.

Quality of result

The EBITDA lift looks largely operational — revenue grew across all four geographic segments and the two largest (New Zealand and North America) carry high inferred margins. However, several durability caveats apply. First, the headline revenue growth rate depends on whether the Coretex normalization is accepted; reported growth is 4.1%, normalized growth is 13%. Second, the improvement in "free cash flow to the firm" is exaggerated by comparison to a very weak prior-period base rather than by a large absolute cash surplus today ($0.2m outflow is still an outflow). Third, the stretching of receivable days by 12.5 days is a flag: OCF benefited from timing of other working-capital and tax items rather than from a clean collections performance. Finally, the NPAT swing into loss is real at the statutory level, even if PBT is the more comparable metric.

Unresolved

• Why did receivable days lengthen by 12 days while OCF improved so sharply — which working-capital line bridged the gap?
• What is the split between depreciation/amortisation step-up and interest cost growth driving the EBITDA-to-PBT gap, and how does that evolve as the Coretex asset base matures?
• What is the trajectory of Corporate & Development losses, and is there a stated plan to narrow them?
• Management cites normalized revenue and "free cash flow to the firm"; a fuller reconciliation between these measures and the statutory numbers would sharpen the earnings-quality read.
• FX is flagged as material but is not quantified in the supplied excerpts.

This briefing cannot assess valuation, management commentary on outlook, or any segment-level profitability trend beyond the single half-on-half comparison shown.

Key metrics

Segment breakdown

Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.