Capex doubled to $28.1m and FCF swung to -$4.3m

Net cash from operating activities fell to $23.8m from $34.6m even as revenue moved to $84.9m from $78.1m, and capex more than doubled to $28.1m from $13.6m. The reported revenue comparison is not a clean like-for-like trend because the period basis carries a source-flagged discontinuity, so the dollar movement should be read with that caveat. Pre-lease free cash flow swung to -$4.3m from +$21.1m, and gross borrowings rose to $131.2m from $104.1m, taking net debt to $129.5m from $102.5m.

Reported NPAT was $18.0m versus $20.2m and operating profit was $27.4m versus $33.1m. The company notes that the prior comparable included proceeds from the final Cyclone Gabrielle insurance settlement, which is itself a basis caveat against treating the year-on-year earnings comparison as same-base; on its underlying basis, NPAT was $17.9m versus $14.8m.

Directors declared a fully imputed interim dividend of 5.25 cents per share. HY25's 6.5c headline included a special component declared alongside the insurance receipt; the company frames the current declaration as a 31% increase over the underlying interim base, and a period-basis caveat applies to any direct interim-versus-interim comparison.

Capex of $28.1m equals 33.1% of revenue versus 17.4% in HY25, and total assets sit at $617.6m — above Annolyse's historical baseline range of $425.0m–$585.0m and above the five-period mean of $539.6m. The business is in an investing phase, and the funding gap is being met with debt rather than retained cash.

The headline earnings decline is at least partly a basis effect. The prior-period NPAT included Cyclone Gabrielle insurance proceeds, so a reported-versus-reported NPAT comparison is not analytically comparable and understates underlying trading momentum. Container services revenue is the disclosed growth driver, partly offset by softer log exports.

Leverage is rising into the capex cycle. Net debt grew by roughly $27m in six months while equity moved only $2.8m to $430.4m. Combined with a negative free cash flow result, the interim dividend is being funded from borrowings rather than current-period cash generation.

FY25's split was 49.5% of revenue and 65.3% of NPAT in the first half, indicating a roughly even revenue cadence with a first-half-skewed earnings profile. On that shape, the current HY26 run-rate annualises to about $169.8m of revenue, though the same period-basis caveat applies to extrapolating the year-on-year revenue step.

The unanswered question is the FY26 capex profile. If second-half capex stays near the first-half pace, full-year capex would be materially heavier than the FY25-implied trajectory and would keep FCF under pressure. The release does not quantify the remaining FY26 investment programme or its expected duration.

Profit-before-tax margin of 29.7% and NPAT margin of 21.2% both sit within or at the upper edge of Annolyse's historical baseline ranges on the same-basis margin series, suggesting the operating engine remains intact. Container services revenue growth is the disclosed quality driver, while bulk volumes — particularly logs — were softer.

Cash quality is the weak link, but the read is nuanced. The prior comparable absorbed a one-off insurance receipt that inflated HY25 operating cash flow, which is itself a basis caveat against treating the OCF decline as a clean trend, and the current period saw receivable days at 52.9 versus an unusually low 29.1 in HY25 — closer to the supplied historical mean of 55.5 days. Pre-lease FCF of -$4.3m remains within the company's historical FCF range (mean -$1.4m), and the swing is driven almost entirely by the step-up in capex rather than core operating deterioration. The risk for an investor reading these numbers is conflating an investing-phase cash drag with weakening underlying economics — they are different stories with different durations.

This briefing cannot assess the FY26 capex commitment schedule or debt covenant headroom from the supplied release.