Operating cash fell 33% on inventory build despite 11.1% revenue growth

The gap between the top line and cash is the central feature of the result.

PBT grew 4.2% to NZ$54.3m and NPAT grew 1.3% to NZ$37.6m, a 2.9 percentage-point gap explained by the effective tax rate rising from 28.7% to 30.8%. EBITDA rose 6.8% to NZ$87.3m.

Inventory rose 12.8% to NZ$198.2m, cash on hand fell 20.6% to NZ$78.7m, and the interim dividend was lifted to 4.0 cents per share from 3.5 cents. Australia delivered all of the segment-result growth; Canada and New Zealand results declined.

Annolyse's historical baseline records operating working-capital movement of NZ$-61.8m as the upper edge of the supplied range (mean NZ$-72.1m), so this half's build is actually milder than the recent norm. The harsh comparison is against an unusually strong HY22 cash result, but the practical implication is the same: cash on hand fell roughly NZ$20.4m and earnings did not translate to cash this period.

Segment-mix is masking divergent unit economics. Australia revenue rose to NZ$190.6m with segment result up to NZ$38.4m, increasing its share of group revenue to 52.4%. Canada result fell to NZ$20.5m on essentially flat revenue (NZ$102.9m), and New Zealand result fell to NZ$15.7m on +9% revenue. The headline 11.1% revenue growth flatters what is really an Australia-led result with weakening profitability in two of three geographies.

The tax line distorts NPAT. With ETR up roughly 2.1 percentage points to 30.8% (above the historical baseline mean of 28.9%), PBT growth of 4.2% is the cleaner operating read than the +1.3% NPAT figure. The underlying earnings progression is modest but positive; the apparent flat NPAT overstates how soft the half was.

The supplied second-half shape data shows HY22 was 55% of full-year revenue but 79.5% of full-year NPAT, so the prior pattern implies a seasonally weaker NPAT half ahead even before considering any cost or margin pressure. Annualising HY23 revenue gives NZ$726.8m, well above FY22's NZ$595.2m, but that linear extrapolation ignores the prior first-half weighting on profits.

Capital allocation provides one anchor: management has referenced a 50% target payout. Current NPAT payout is 40.9% and FCF-pre-lease payout is 46.4%, so the higher interim dividend is covered but the policy is not yet fully funded out of the lower cash result.

Revenue growth of 11.1% sits well above the historical baseline mean of 0.7%, and PBT margin at 14.9% is above the supplied historical range (mean 7.0%). Those readings suggest genuine operating strength in the half, concentrated in Australia.

Cash quality is the offset. OCF/EBITDA at 54.5% versus 86.9% prior, FCF pre-lease at NZ$33.2m (within the supplied historical range but NZ$16.1m below the baseline mean of NZ$49.3m), and a NZ$22.5m inventory build all point to a result where earnings ran ahead of cash conversion. Inventory days at 99.3 sit at the lower edge of the supplied range, which means the absolute inventory build reflects scale and stocking decisions rather than slowing turnover — but it still consumed cash this half.

The Canada segment result falling 24.0% on flat revenue is the single biggest quality concern: it implies margin compression that is not visible in the consolidated PBT margin.

This briefing cannot assess whether the inventory build will unwind into second-half cash flow or persist as a structural working-capital step-up.