EBITDA up 37% but Contract Logistics collapse masks ongoing structural losses

The EBITDA gain therefore reflects cost-reduction progress rather than any volume recovery.

The segment picture is the most important detail beneath the headline. Contract Logistics revenue fell NZ$20.8m to NZ$56.7m and swung from a NZ$14.9m profit to a NZ$0.7m loss, wiping the segment's prior contribution entirely. Freight revenue grew NZ$7.8m to NZ$69.5m but deepened its loss to –NZ$3.9m from –NZ$0.8m. Specialist and International were smaller offsetting positives.

Cash generation fell: operating cash flow declined to NZ$8.9m from NZ$10.3m, while capex dropped to near-zero at NZ$0.1m, suggesting maintenance investment is being deferred. Cash on hand fell NZ$4.8m to NZ$7.2m.

The segment contributed NZ$14.9m in HY24 and is effectively breakeven at –NZ$0.7m in HY25, a NZ$15.6m swing on NZ$20.8m less revenue. This is not a marginal volume shortfall; at this scale it calls into question whether the lost revenue is recoverable or structural customer attrition.

Cost reduction is real but fragile. Management's commentary references gross margin improvement of 5.2 percentage points versus HY24 and cites this as the highest gross margin since 1H23. This is genuine operational progress, but the EBITDA improvement is still insufficient to cover depreciation, amortisation, and financing costs — the PBT loss remains –NZ$8.1m, which matters because it signals the cost base must fall further, or revenue must recover, to reach breakeven.

Cash conversion has deteriorated sharply, reducing earnings quality. OCF/EBITDA fell from 77.6% in HY24 to 49.4% in HY25, meaning the EBITDA improvement is converting into cash at a materially lower rate. With NTA per share at NZ$0.11 and equity down to NZ$18.5m from NZ$64.2m a year ago, balance-sheet headroom is thin.

The prior comparable period's FY24 pattern is instructive but concerning: HY24 EBITDA of NZ$13.2m was the sole positive contributor to FY24 EBITDA of NZ$7.9m, implying the second half of FY24 produced a negative EBITDA of approximately –NZ$5.3m. Management commentary points to gross margin improvements continuing and cost programmes delivering further benefits from 2H25, which would need to reverse that second-half EBITDA decay pattern if FY25 is to show meaningful progress.

There are no stated revenue or EBITDA targets against which to judge this result. The 1H25 release references a sales-led recovery and demand improvement as conditions for full-year progress, but with market conditions described as still weak and customer demand subdued, the forward trajectory depends heavily on factors not yet visible in the numbers.

However, cash conversion at 49.4% versus 77.6% in the prior comparable period means approximately half the reported EBITDA is not reaching operating cash flow, which reduces confidence in the earnings improvement as a durable cash-generative outcome. Near-zero capex (NZ$0.1m versus NZ$1.4m in HY24) flatters free cash flow and raises the question of whether the asset base is being adequately maintained or refreshed during a period of cost discipline.

The tax line creates a further distortion: the effective tax rate swung from +27.2% in HY24 to –5.6% in HY25 on loss-making positions, producing a 26.4 percentage-point gap between PBT improvement (42.9%) and NPAT improvement (16.5%). PBT is the cleaner operating read.

This briefing cannot assess the sustainability of Contract Logistics margins, the recoverability of lost revenue, or the adequacy of liquidity headroom without management's customer pipeline data and bank facility terms.