PBT down 61.7% and H2 swung to a $21.2m NPAT loss

Profit before tax dropped 61.7% to $13.8m, and NPAT fell 71.9% to $7.7m as the effective tax rate jumped to 43.9% from 24.0%. Because LIC reported HY24 NPAT of $29.0m, the implied second-half outcome was a loss of roughly $21.2m, swinging the result from a strong H1 to a materially loss-making H2.

Operating cash flow rose 8.9% to $40.1m despite the earnings collapse, but capex more than doubled to $27.7m (10.4% of revenue, up from 4.0%), inventories grew 61.1% to $19.9m, and the cash balance fell from $54.6m to $42.3m. The balance sheet remains debt-free. The declared final ordinary dividend is 5.84cps versus 16.38cps a year earlier, alongside a separate 13cps special paid earlier in the year from UK share-sale proceeds.

A 3.3% revenue fall does not produce a 61.7% PBT collapse without something more structural happening in H2. With H1 NPAT of $29.0m flipping to an implied $21.2m H2 loss, the year contains a material adverse second-half event or charge that the headline figures do not isolate. This matters because the underlying H2 run-rate, not the full-year average, is the relevant base for FY25.

Tax distortion compounded an already weak operating result. The effective tax rate of 43.9% (versus 24.0% prior) adds roughly 10 percentage points to the NPAT decline beyond the PBT decline. With PBT still down 61.7%, the cleaner operating read remains poor; the tax line simply made a bad result look worse. Whether the elevated rate reflects non-deductible items, prior-period adjustments, or jurisdictional mix is not explained in the release excerpts.

Capital intensity stepped up sharply while returns fell. Capex rose 151.8% to $27.7m — driven heavily by software development at $16.1m — lifting capex/revenue to 10.4%. ROE dropped to 2.8% from 9.2%. The combination of rising reinvestment and falling returns is the central capital-allocation tension for FY25 unless management can demonstrate the spend is generating future earnings rather than maintenance burden.

Reported NPAT of $7.7m falls well short of that range, and the company-disclosed payout (60% of underlying earnings, implying about $13.8m of underlying earnings) confirms the result missed guidance even on a non-GAAP basis. The release attributes the year to "challenging conditions" without disaggregating the H2 deterioration.

The release excerpts contain no FY25 revenue, earnings, capex, or dividend guidance, and no stated multi-year target. That absence matters: investors are left without a quantified anchor for whether the H2 weakness was a one-off, a step-down to a new base, or a sign of further pressure as the lower milk price environment continues to flow through to farmer demand.

The cash conversion is supported by a working-capital release at the receivable line — debtors of $37.6m at the prior balance date have been replaced in the inventory line by a $7.6m inventory build, with inventory days nearly doubling to 27.2 from 16.3. That direction in inventory is unfavourable for cash quality going into FY25 and is the opposite of what a deteriorating earnings backdrop normally wants.

Free cash flow pre-lease fell to $12.4m from $25.8m as capex absorbed most of the operating cash uplift. The 5.84cps ordinary dividend is covered by FCF (67.0% payout) but exceeds NPAT (116.8% payout), meaning capital return is being funded out of pre-investment cash rather than reported earnings. With cash on hand down $12.3m year-on-year and capex running at roughly 2.5x its prior rate, the room for further policy of this kind is narrower than the debt-free balance sheet implies in isolation.

This briefing cannot assess what specific events or charges sit inside the H2 result, because the release excerpts do not disaggregate them.