King Honey disposal flipped NPAT to NZ$3.2m while continuing revenue fell 31.7%

Continuing operations remain loss-making: PBT was –NZ$0.9m versus –NZ$2.4m, a +62.9% improvement, on revenue of NZ$2.554m down 31.7% from NZ$3.738m. PBT is the cleaner read on operating performance because the effective tax rate is 0.0% in both periods and the divergence between PBT and NPAT growth (–169.5pp) is explained by the disposal.

The disposal also reshaped the balance sheet. Total assets fell 65.3% to NZ$6.6m — Annolyse's historical baseline classifies this as an unprecedented low against a four-period mean of NZ$29.9m and prior range NZ$19.0m–NZ$46.2m. Gross borrowings dropped 85.6% to NZ$2.25m, inventory cleared from NZ$13.5m to NZ$2.4m, and equity rebuilt to NZ$3.055m from NZ$1.272m.

• The NZ$4.121m disposal gain accounts for more than the entire reported profit; continuing operations lost NZ$0.902m on revenue that fell 31.7%. This matters because investors comparing headline net profit to the prior period would see a 232.4% swing that does not reflect any improvement in the underlying trading business.

• The business is materially smaller and simpler. Total assets at NZ$6.6m are unprecedented in the four-period history, with inventory days collapsing from 654.8 to 173.7 (Annolyse's historical baseline shows a prior mean of 1,368 days) and net debt now effectively nil at NZ$0.024m versus NZ$14.0m. The disposal cleaned the balance sheet, but it also removed the asset and revenue base the company previously stood on.

• Cost discipline is real but on a shrinking top line. EBITDA loss narrowed 53.8% to –NZ$0.827m and EBITDA margin of –32.4% is the best in Annolyse's four-period baseline (mean –76.6%). The improvement is genuine, but the operating loss narrowed while revenue fell 31.7%, so the read is cost-out rather than scale-up.

HY26 reported revenue annualises to roughly NZ$5.1m, leaving a meaningful gap to the target — the implied required step-up is a 27.3% lift on the annualised base, and H1 has just declined 31.7% year-on-year. Management cites 21% growth in continuing-operations gross revenue versus prior, but the statutory revenue line shows a decline, so the framing depends on which baseline is used.

The supplied second-half-shape context (HY25 at 50.1% of FY25 revenue) implies no meaningful H2 weighting historically, so reaching the NZ$6.5m gross target requires a step-change in H2 trading rather than a normal seasonal lift. The release does not provide a bridge for that step-up.

NPAT depends on a one-off disposal gain; pre-lease free cash flow was –NZ$1.1m, classified as above the historical baseline of –NZ$3.8m but still negative, and FCF/NPAT conversion of –33.8% confirms cash generation did not match the reported profit. Operating cash outflow of –NZ$0.999m is essentially flat versus –NZ$1.047m. Cash conversion of 120.8% sits within Annolyse's historical range (mean 137.3%), so the OCF-to-EBITDA ratio is not flagging deterioration — but it is being measured against a still-negative EBITDA.

The continuing-operations improvement is more durable in direction than in magnitude: the loss narrowed because costs fell faster than revenue, not because revenue grew. Working capital improvements (inventory days down 481, debtor days at 113.7) reflect the disposal of inventory-heavy King Honey rather than tighter trading discipline in the core brand. Until continuing-operations revenue stabilises and turns up, the operating loss trajectory remains the binding constraint on cash.

This briefing cannot assess whether the FY26 NZ$6.5m gross-revenue target is supported by signed orders, channel commitments, or pipeline because no forward-work disclosure is provided.