EBITDA up 27% but operating cash fell 79% on working-capital build

NPAT of $10.7m (+245.2%) is flattered by the effective tax rate normalising to 23.8% from 42.5%, so PBT growth is the cleaner operating read.

Cash quality moved in the opposite direction. Operating cash flow fell 78.5% to $12.4m, and cash conversion (OCF/EBITDA) dropped to 22.1% from 130.7%. Operating working capital built by $23.8m, driven by a $19.4m rise in trade debtors to $129.0m. Gross borrowings rose 40% to $88.2m, taking net debt/EBITDA to 1.52x from 1.34x.

Capital raise adds balance-sheet context, with NZ$100m capital raised, but borrowings and gearing are the direct leverage evidence.

OCF/EBITDA at 22.1% versus 130.7% reflects $23.8m of working-capital absorption. Debtor days extended to 48.3 from 43.6, and free cash flow pre-lease swung to -$5.0m from +$34.9m. The reported earnings recovery is therefore not yet showing up in cash, which matters because the higher receivables balance has been funded with debt rather than internally generated cash.

The second half was loss-making. HY25 delivered $16.0m of NPAT and $41.4m of EBITDA. That means the implied H2 contribution was a $5.3m net loss on $14.8m of EBITDA, even though revenue was reasonably balanced (H1 took 58.5% of the year). The FY recovery is real but is concentrated in the first half, so projecting an H1 run-rate forward would overstate the underlying earnings trajectory.

Leverage stepped up. Gross borrowings rose to $88.2m and net debt/EBITDA moved to 1.52x. The increase funded working capital rather than capex, which fell 23.7% to $17.4m (1.8% of revenue). This narrows balance-sheet headroom if receivables do not release in FY26.

Against the FY25 EBITDA guidance reaffirmed at HY25 ($51m), the delivered $56.1m is a modest beat. However, the very strong first-half / loss-making second-half shape means models built on H1 momentum risk overstating run-rate earnings.

The H2 swing is what matters most for setting FY26 expectations: it suggests either seasonal phasing different from FY24 or genuine softness in the back half of the year. Without forward-work disclosure or a stated FY26 target, the release does not support a clean projection of either earnings or cash conversion into next year.

PBT growth of 164.2% from a low FY24 base, combined with EBITDA margin expansion, reflects improving conditions in the agri-sector. NPAT growth of 245.2% overstates progress because the prior period carried an unusually high 42.5% effective tax rate; the 23.8% current ETR is closer to a normal run-rate, so the cleaner operating read is PBT.

Cash quality is the weak link. Working-capital absorption of $23.8m exceeded the entire year's NPAT and pushed FCF pre-lease to -$5.0m, giving FCF/NPAT of -47.2%. The full-year dividend of 6.5cps (final 4.0cps) was not covered by free cash flow on a pre-lease basis, and the cash shortfall plus higher trade debtors was funded by additional debt drawn during the year. The 46.1% NPAT payout ratio looks moderate on the income statement but understates the cash strain because reported NPAT is itself not converting to cash. On a durability read, the earnings recovery is exposed to continued agri-sector improvement and to whether H2 weakness persists, while the cash result is balance-sheet-assisted rather than self-generated.

This briefing cannot assess whether the H2 weakness reflects seasonal phasing or trend deterioration, because the release does not provide a segmental or category walk between H1 and the implied H2.