EBITDA halved as 2H slipped into loss; leverage hit 10.8x

On a revenue base of NZ$213.9m (down 10.6% from NZ$239.3m), that earnings collapse pushed net debt to NZ$60.5m from NZ$53.0m and lifted net debt/EBITDA to 10.8x from 4.3x. Operating cash flow dropped 89% to NZ$2.1m.

The mix shifted geographically: New Zealand revenue fell 16.1% to NZ$133.9m and the segment swung to a NZ$2.9m result loss from a NZ$1.3m profit, while Australia held revenue at NZ$80.1m but segment result halved to NZ$2.6m from NZ$6.8m. Reported NPAT loss narrowed 51.1% to NZ$13.5m from NZ$27.5m, but that year-on-year improvement reflects the absence of prior-year items rather than an operating recovery.

Net debt/EBITDA at 10.8x versus 4.3x is the direct mechanical consequence of EBITDA falling faster than debt can be paid down, and total equity dropped 27.4% to NZ$35.6m while gross borrowings rose 12.4% to NZ$67.0m. This matters because the prior year's FY24 release flagged the company was already "looking at capital raising and other alternatives to reduce debt"; the FY25 outcome makes that conversation harder, not easier.

The intra-year trajectory is worse than the headline. H1 EBITDA of NZ$9.2m became full-year EBITDA of NZ$5.6m, implying second-half EBITDA of negative NZ$3.6m and second-half NPAT of negative NZ$8.4m versus H1's negative NZ$5.0m. The exit run-rate is therefore weaker than the FY25 average, which is the relevant base for thinking about FY26 cash generation and covenant headroom.

Cash conversion has deteriorated sharply. OCF/EBITDA fell to 37.0% from 153.8%, so even the small reported EBITDA did not translate to cash. Free cash flow pre-lease was negative NZ$0.9m after NZ$3.0m capex (1.4% of revenue), meaning the business funded none of its lease obligations or interest from operating generation this year.

The May 2025 indicative update flagged New Zealand revenue of "c.$134m" representing a 16% decline, and the audited result landed at NZ$133.9m for NZ — so the geographic shape was pre-signalled. What was less explicit was the Australia margin compression: revenue stayed flat but segment result fell NZ$4.2m, and that is the swing factor between a flat group result and the loss reported.

Without management's stated FY26 cost-out trajectory or covenant terms in the supplied materials, the release does not support a view on whether 2H run-rate EBITDA can recover to a level that services the higher debt stack.

Annolyse's historical baseline shows PBT growth at the upper edge of its range and NPAT growth above normal range, but both reflect lapping of unusually large prior-year losses rather than current-year operating strength; PBT margin at -7.8% is below the historical range (3-period mean -1.4%). The current-period effective tax rate of 19.2% sits above the historical norm (3-period mean 3.3%), and the cleaner read is the PBT loss of NZ$16.7m on a NZ$5.6m EBITDA, which exposes the depreciation, lease and interest burden against a thin operating profit pool.

Working capital provided some support: trade debtors fell NZ$5.0m (debtor days improved to 48.4 from 50.9), and operating working capital reduced by NZ$5.1m. That is balance-sheet-assisted cash, not earnings-driven cash, and it cannot repeat at the same scale next year. Inventory days drifted up to 43.5 from 39.1, which the historical baseline classifies as the upper edge of range — modest pressure rather than alarm, but the wrong direction given falling revenue.

This briefing cannot assess covenant compliance, lender support, or any specific FY26 cost-out and pricing actions because none are quantified in the supplied materials.