NPAT up 32.0% and pre-lease FCF lifts to NZ$86.4m, above historical range

Both earnings growth rates sit well above Annolyse's historical baseline (PBT mean -15.6%, NPAT mean -16.0% across the prior three halves), while revenue growth is within the normal range. Operating cash flow climbed 64.3% to NZ$94.8m and pre-lease free cash flow reached NZ$86.4m versus a historical mean of NZ$31.5m. The working-capital release was only NZ$5.8m against an average historical release of NZ$66.5m, which means OCF strength was earnings-driven rather than balance-sheet-assisted. Gross borrowings fell to NZ$31.0m and cash rose to NZ$51.7m, swinging the group to a net cash position of NZ$20.7m from net debt of NZ$9.8m at HY25. No interim dividend was declared, consistent with HY25.

PBT growth of 30.3% and NPAT growth of 32.0% come off a soft prior comparable and against a three-period historical mean of roughly -16%. ROE has lifted to 11.7% from 9.1%. However, the 8.4% PBT margin remains within the historical band of 6.0%-14.9%, so this reads as base-rate recovery rather than structural breakout.

Cash conversion is genuinely high-quality. FCF pre-lease of NZ$86.4m is 388.2% of NPAT and NZ$54.9m above the three-period historical mean of NZ$31.5m. Because the working-capital release was only NZ$5.8m versus historical releases averaging NZ$66.5m, the cash result is supported by earnings rather than inventory unwinds. Inventory days fell to 99.1 from 107.7, at the bottom of the historical band.

Balance sheet has materially strengthened, but capital is being retained. Net cash of NZ$20.7m represents a NZ$30.5m swing year-on-year, yet no interim dividend was declared. This matters because flexibility has improved without translating into shareholder returns, leaving capital allocation intent unstated.

The relevant context is the second-half shape: HY25 NPAT was NZ$16.9m but FY25 full-year NPAT was only NZ$2.1m, implying H2 FY25 lost approximately NZ$14.8m. The supplied commentary references FY25 H2 "targeted cost reduction initiatives" but does not quantify the H2 driver. If HY26's NZ$22.3m starting point is followed by anything resembling the FY25 H2 pattern, the full-year result will materially undershoot what HY26 momentum suggests. The release does not support a confident annualisation of the H1 run-rate.

The effective tax rate at 28.1% is below the prior comparable of 29.0% and the historical mean of 29.8%, but the gap between PBT growth (30.3%) and NPAT growth (32.0%) is only -1.7pp, so the tax effect is small and the operating read is clean. Cash flow is high-quality: OCF tracked earnings rather than working-capital unwinds, capex at 2.3% of revenue is contained, and the FCF/NPAT ratio of 388.2% reflects genuine cash generation rather than a one-off release.

The watch-worthy quality items relate to durability. Inventory has been worked down to 99.1 days against a historical low of 99.3 days, and contract liabilities (customer deposits) fell NZ$5.4m, which means prior-period deposits were recognised as HY26 revenue rather than rebuilt. Both are favourable to the H1 print but reduce the buffer entering the seasonally important second half. The earnings step-up looks durable on the P&L; the constraint is that the FY25 H2 outcome shows how quickly the half-year shape can reverse in this business.

This briefing cannot assess H2 trading momentum or whether the HY26 step-up annualises into FY26, because no forward targets, like-for-like sales detail, or post-period trading update is supplied.