PBT fell 29.9% as hotels result halved and capex doubled to NZ$52.3m

The cleaner operating read is therefore negative: revenue growth did not flow through to earnings. Reported NPAT of NZ$20.2m is +621.4% only because the prior period carried an effective tax rate of 81.3% from a one-off non-cash deferred tax adjustment; the current effective rate normalised to 25.0%.

Beneath the headline, segment mix shifted sharply. Hotel Operations revenue grew to NZ$130.9m (70.1% of group revenue, up 7.9pp), but its segment result halved from NZ$17.4m to NZ$7.3m. Residential Land Development revenue fell to NZ$35.0m and its result roughly halved to NZ$9.2m as the property cycle weighed on CDI Investments.

Capex jumped 83.7% to NZ$52.3m, pre-lease FCF deteriorated to -NZ$26.5m (below Annolyse's historical baseline mean of NZ$30.1m and outside its NZ$-14.8m–NZ$80.1m range), cash halved to NZ$20.4m, and gross borrowings rose from NZ$3.0m to NZ$20.0m.

Hotel revenue lifted 19.5% but the segment result fell from NZ$17.4m to NZ$7.3m, so the unit economics of the additional volume are weaker than the prior comparable. This matters because Hotels now drives 70.1% of group revenue, so margin recovery there is the single biggest lever on group PBT.

The investment cycle has overtaken cash generation. Capex at 28.0% of revenue (versus 16.1% prior) drove pre-lease FCF to -NZ$26.5m, against a historical baseline mean of NZ$30.1m. Cash fell NZ$19.4m and borrowings rose NZ$17.0m, so this year's investment was effectively funded from the balance sheet rather than from operations. The declared NZ$0.03 final dividend is not covered by FCF (FCF payout ratio -17.9%), although it is well covered against NPAT at 23.5%.

Tax distortion masks the underlying operating direction. PBT growth of -29.9% is within Annolyse's recent range (3-period mean -13.5%), but PBT margin compressed to 17.7%, which is below the historical baseline range of 26.7%–39.2%. The 621.4% NPAT growth should not be read as operating recovery; it is a tax-base reset against a distorted prior comparable.

The HY25 context shows the first half delivered 42.5% of full-year revenue and 32.9% of full-year NPAT, so the business retains its second-half weighting. Implied H2 revenue of NZ$107.4m and NPAT of NZ$13.6m indicate the second half carried the result, consistent with hotel seasonality.

The release does not clarify whether Hotels margin compression is cyclical (cost inflation absorbed during occupancy ramp) or structural. Pre-lease FCF sitting outside the historical range matters because it constrains how long the current capex pace can continue without further drawing on cash or debt.

Operating cash flow of NZ$25.7m is up 88.2% on the prior year, which is a genuine improvement at the working-capital level. Working-capital movement was small (operating working capital -NZ$0.2m), with debtor days at 20.0 marginally above the historical range of 15.5–19.9 days but only 0.1 day above prior — not a material drag on the cash result.

The earnings quality concern sits elsewhere. Reported NPAT is flattered by tax normalisation rather than operating leverage, so the durable read is the 29.9% PBT decline and the PBT margin compression to 17.7% (below the 26.7%–39.2% baseline). The capex-driven FCF gap of NZ$56.6m below the historical mean is balance-sheet-funded, which means the result depends on Hotels margin recovery to validate the investment outlay. ROE of 3.0% sits at the lower edge of the historical 0.4%–6.5% range despite the optical NPAT lift.

This briefing cannot assess whether Hotels margin compression reflects a transient cost cycle or a permanent shift in unit economics without segment cost detail not supplied in the release.