Revenue grew 3.8% but a $4.4m working-capital build drained cash

The driver is a step-change in trade debtors, which rose to NZ$4.6m from NZ$0.6m and pushed debtor days to 9.8 versus a historical mean of 1.1. That balance-sheet movement matters because it sits behind a result where the operating P&L itself looked mixed.

Revenue grew 3.8% to NZ$85.4m, the first positive comparable in the historical window (3-period mean -5.7%). But EBITDA of NZ$7.2m delivered only an 8.4% margin, below the historical range of 8.8%-12.2%. PBT fell 12.2% to NZ$3.6m, while NPAT fell only 3.3% to NZ$2.9m as the effective tax rate dropped to 19.8% from 28.1%. Operating cash flow fell 7.3% to NZ$5.8m and pre-lease FCF was NZ$3.1m. Gross borrowings halved to NZ$5.6m and leverage eased to 0.77x.

A NZ$4.4m build, against a historical pattern of small releases, is the single biggest movement in this result. Trade debtors at NZ$4.6m versus NZ$0.6m a year ago implies receivables behaviour materially different from prior halves, and the company's cash balance fell to NZ$0.1m from NZ$1.8m. This matters because it is the difference between a result that funds itself and one that relies on the existing facility.

The tax line is doing real work. PBT growth of -12.2% is the cleaner read on operating performance, but the headline NPAT decline is only -3.3% because the effective rate dropped 8.4 percentage points to 19.8% (historical mean 28.2%). Without commentary on the rate driver, investors should not assume the gap persists into the second half or FY27.

Margin compressed despite revenue growth. An 8.4% EBITDA margin against a historical range of 8.8%-12.2% says the 3.8% top-line lift did not translate into operating leverage. EBITDA of NZ$7.2m on NZ$85.4m of revenue is a smaller absolute earnings outcome than the prior comparable's implied figure, which is unusual when revenue is the strongest in the historical window.

Annualising HY26 revenue gives NZ$170.8m versus FY25 of NZ$162.1m, which would be a step up if the trajectory holds. No FY26 revenue, EBITDA or margin target was disclosed in this release, so the second-half judgement rests on whether margin recovers and whether the working-capital build reverses.

The implied second-half NPAT shape from FY25 was NZ$3.4m. To match FY25 NPAT of NZ$6.4m, HY26's NZ$2.9m starting point requires a stronger H2 contribution than the prior pattern, particularly if the tax rate normalises toward 28%.

Pre-lease FCF of NZ$3.1m is in line with the historical mean of NZ$3.2m, and FCF-to-NPAT of 108.4% looks healthy only because NPAT was held up by the low tax rate. The cash balance falling to NZ$0.1m, alongside the NZ$4.4m working-capital build, indicates the result was supported by drawing down liquidity rather than generating incremental cash.

The 75% NPAT payout (up from 65%) on a 0.75 cps interim dividend therefore deserves scrutiny: dividend coverage is being declared on an NPAT figure that benefits from a tax tailwind and that did not convert into higher operating cash flow than the prior comparable.

This briefing cannot assess whether the receivables build reflects a change in customer mix, payment terms, or a one-off timing effect, because no segment or commentary detail on the receivables driver was supplied.