NPAT fell 57.6% as net debt/EBITDA jumped to 1.91x, dividend suspended

Revenue fell 11.2% to NZ$83.8m, EBITDA fell 35.7% to NZ$7.4m, PBT fell 57.3% to NZ$3.5m and NPAT fell 57.6% to NZ$2.5m. Gross margin compressed 140bps to 47.9%.

Net debt/EBITDA jumped to 1.91x from 0.51x at HY23, which is above Annolyse's historical range of 0.51x-1.20x and the 0.83x historical mean. Gross borrowings rose 137.8% to NZ$14.3m. No interim dividend was declared, versus 3.0 cents at HY23.

This is an amended release for HY24, so the figures should be read as the corrected disclosure rather than the original announcement.

Net debt/EBITDA of 1.91x sits above the supplied 0.51x-1.20x range, driven by both the EBITDA contraction and an NZ$8.3m increase in gross borrowings. With EBITDA down 35.7%, leverage is being pushed up by both numerator and denominator at once, which compresses headroom against any covenant or future trading shock.

Operating leverage worked against the business despite volume growth. Bargain Box delivery volumes were up 12% and active customers rose to 61,600 from 57,500, yet revenue still fell 11.2% and gross margin slipped 140bps to 47.9%. That gap suggests pricing, basket size or product mix is moving the wrong way, and that volume gains in the value brand are not offsetting weakness elsewhere.

The dividend decision reframes capital allocation. HY23's 3.0 cent interim represented a 150% payout against that period's NPAT, which was not sustainable through a downturn. Suspending the interim conserves cash, but it also signals that the board is prioritising balance sheet repair over income to holders – a material change in the equity story.

Annolyse's second-half shape context shows HY23 contributed 53.7% of FY23 revenue but 74.9% of FY23 NPAT, so the prior year was second-half-weighted on profit. That implied a 2H23 NPAT of only NZ$2.0m on EBITDA of NZ$6.7m.

Against that shape, the HY24 NPAT of NZ$2.5m does not yet establish a credible path back toward FY23's NZ$7.9m, because the second-half profile last year was already thin. Annualising current revenue gives NZ$167.7m versus FY23 reported revenue of NZ$175.7m, which leaves the trajectory pointing further down rather than recovering. The release does not provide enough forward commentary to size a 2H rebound.

OCF/EBITDA was 66.6%, classified as within Annolyse's historical 47.7%-80.6% range, and pre-lease FCF of NZ$3.6m sits within the historical NZ$2.7m-NZ$6.1m range. Pre-lease FCF was 143.0% of NPAT, well ahead of HY23's 45.4%.

That FCF strength is partly mechanical. Capex was cut to NZ$1.3m from NZ$2.8m (1.6% of revenue versus 3.0% prior), which means lower investment is propping up the conversion ratio rather than improved working-capital discipline. Operating working-capital movement of NZ$-0.7m is within the historical range, debtor days at 1.2 are normal, and inventory days actually fell to 4.2. So the cash result is durable on a like-for-like basis but flattered by reduced reinvestment, which matters because it suggests near-term cash comfort has been bought partly at the cost of future capability.

This briefing cannot assess management's specific operating plan for 2H24, covenant terms on the increased borrowings, or the competitive dynamics affecting basket economics, because the supplied release excerpts do not address them.