EBITDA margin hits record 12.7% but PBT swings to -NZ$9.4m loss

PBT swung from NZ$0.6m profit in HY23 to a NZ$9.4m loss, while NPAT followed to a NZ$9.2m loss, as depreciation, amortisation, and financing charges consumed the EBITDA gain and more. Revenue fell 5.7% to NZ$130.2m, with New Zealand declining roughly 13% on residential construction softness while Australia grew from NZ$38.2m to NZ$43.2m, lifting its revenue share from 27.6% to 33.1%.

Operating cash flow surged to NZ$13.4m from NZ$1.8m, supported by a NZ$9.6m working-capital release and capex falling sharply to NZ$2.0m from NZ$4.9m. Pre-lease free cash flow of NZ$11.4m is an unprecedented high against the historical range of NZ$-3.1m to NZ$4.2m. Gross borrowings fell NZ$11.6m to NZ$59.5m, and net debt/EBITDA improved to 3.2x from 3.9x.

EBITDA rose 9.5% to NZ$16.5m against a 5.7% revenue decline — a genuine margin story driven by easing supply-chain costs and the Australia segment's growing contribution — but depreciation, amortisation, and net interest charges absorbed that gain entirely. The PBT margin of -7.2% is below the company's historical range of -6.0% to +4.2% and well below the four-period mean of -0.2%, which means EBITDA improvement alone does not yet translate into economic profit.

2. The working-capital release is unusually large and may partially reverse. The NZ$9.6m operating working-capital release sits below the company's historical normal range; the four-period mean is a NZ$3.1m build, and prior releases have averaged only NZ$4.4m. Combined with capex running at 1.5% of revenue versus 3.5% in HY23, the NZ$11.4m pre-lease FCF and 81.2% cash conversion — above the historical range of 11.7%–78.6% — are partly cycle- and timing-assisted rather than purely structural. If working capital rebuilds or capex normalises in 2H, reported cash generation will soften materially.

3. Australia is growing as a counterweight but NZ remains the earnings engine. Australia's revenue grew 13% and its gross margin expanded to 37.3% from 33.1%, while New Zealand's contribution still represents two-thirds of group revenue. The mix shift toward Australia provides some diversification from the NZ residential downturn, but the dominant segment's contraction continues to set the group's revenue trajectory.

No formal forward targets are supplied in the filing, so the release cannot be assessed against a quantified full-year target. The 2H seasonality context from FY23 is instructive: HY23 accounted for 80.1% of the full year's EBITDA, implying an implied 2H EBITDA of only NZ$3.7m — so a repeat of that skew would mean the full-year EBITDA outcome depends heavily on whether current NZ construction volumes stabilise.

The working-capital tailwind that supported 1H cash generation is unlikely to repeat at the same magnitude in 2H, and capex may normalise from its current low level. The NTA per share of NZ$0.168 also provides limited buffer if losses continue.

However, cash conversion at 81.2% and pre-lease FCF at NZ$11.4m are both at unprecedented highs relative to the company's historical baseline, and the NZ$9.6m working-capital release is the primary driver of both. Inventory days of 40.2 and debtor days of 51.9 are lean but within or at the edge of normal ranges, suggesting limited further benefit from this source.

The PBT and NPAT losses largely reflect the fixed cost and debt-service structure sitting above EBITDA; they are real economic charges, not accounting distortions. Leverage at 3.2x net debt/EBITDA is at the lower edge of the company's historical range and is improving — that is a genuine structural positive — but the equity base has eroded to NZ$66.5m from NZ$89.6m year on year, limiting financial flexibility if the NZ market downturn extends.

This briefing cannot assess the duration or depth of the New Zealand residential construction downturn or its ultimate impact on group revenue and the debt-reduction timeline.