NPAT grew 28.6% but pre-lease FCF fell to NZ$15.6m, a 3-year low

Cash followed the opposite direction. Operating cash flow fell 14.6% to NZ$21.6m, and pre-lease free cash flow dropped to NZ$15.6m from NZ$23.1m, the lower edge of Annolyse's three-period historical range (mean NZ$21.5m).

The segment mix shifted meaningfully. Medical services revenue rose to NZ$82.7m and segment result jumped to NZ$11.6m from NZ$8.2m, while Pharmacy services revenue was roughly flat at NZ$181.7m and its result fell to NZ$7.7m from NZ$8.9m. Net debt improved to NZ$2.0m from NZ$5.7m, and the interim dividend was lifted 20% to 3.0 cps.

• OCF fell 14.6% on a 1.8% revenue lift, and FCF pre-lease landed at the lower edge of the historical baseline. Operating working capital absorbed NZ$8.7m more cash than the prior comparable, and capex more than doubled to NZ$6.0m (2.3% of revenue, up from 0.8%). This matters because the headline NPAT growth rate of 28.6% is not being supported by underlying cash generation in the half.

• Earnings mix is rotating toward Medical services. Segment result improved by NZ$3.4m in Medical services while Pharmacy services lost NZ$1.2m of result on essentially flat revenue. Derived margins moved from 10.6% to 14.1% in Medical services and from 4.9% to 4.2% in Pharmacy. The group's PBT growth of 13.5% is therefore being carried by the smaller segment, with the larger one going backwards on margin.

• Capital allocation moved ahead of cash. The interim dividend was raised 20% to 3.0 cps, lifting the payout against pre-lease FCF to 27.6% from 15.6%, even though the pre-lease FCF base shrank. Net debt nonetheless fell to NZ$2.0m, indicating leverage was already low enough to absorb the squeeze, but the trend in payout-versus-cash bears watching.

The supplied second-half shape shows HY25 contributed 49.6% of FY25 revenue but only 35.3% of FY25 NPAT, so the business is materially second-half weighted on earnings. On that pattern, the implied H2 NPAT last year was NZ$10.3m, which is the relevant reference point for the FY26 H2 print rather than a like-for-like extrapolation of this half.

The 28.6% NPAT lift therefore does not, on its own, support a confident upgrade to the full-year run-rate, because the cash backing is weaker and Pharmacy result has deteriorated. The release does support the read that profitability is improving against a soft historical baseline; it does not yet support the read that this is translating into stronger cash generation.

The effective tax rate at 28.0% is consistent with the historical mean of 28.2%, so NPAT growth of 28.6% is not being flattered by tax distortion; the 15.1 percentage-point gap to PBT growth is mathematical, driven by a higher prior-period tax charge on a smaller base, not by a one-off below-the-line item disclosed in the data.

What is less durable is the cash quality. Pre-lease FCF of NZ$15.6m converts to 217.5% of NPAT, but that ratio is down from 408.4% in the prior half and is the weakest in the supplied three-period window. Two specific items absorb cash this half:

• Operating working capital up NZ$8.7m, with debtor days actually below the historical range at 8.1 (favourable) but inventories and contract balances absorbing the offsetting movement.
• Capex up 171.6% to NZ$6.0m, a step-change in intensity that the release does not separately explain.

Until the working-capital movement reverses and capex intensity normalises, the headline earnings growth should be discounted for cash backing.

This briefing cannot assess management's forward outlook, given that no stated targets, guidance, or forward-work disclosures are present in the supplied data.