PBT up 37.8% but cash conversion fell from 93.8% to 55.6%

Revenue rose 9.3% to NZ$514.6m and EBITDA climbed 26.2% to NZ$71.6m, lifting PBT 37.8% to NZ$48.5m and NPAT 28.1% to NZ$26.9m on a continuing-operations basis. Yet net operating cash flow fell 25.1% to NZ$39.8m, dragging OCF/EBITDA from 93.8% to 55.6% — at the floor of the four-year baseline range of 56.4%–120.5% and 32.7 percentage points below the historical mean of 88.3%.

The like-for-like comparison strips out FY20's NZ$73.0m discontinued-operation gain, so the growth shown here is the cleaner continuing read.

Mix shifted toward Food Ingredients, which grew to NZ$218.9m (42.5% of revenue, from 36.9%) with segment gross margin lifting to 16.0% from 13.3%. Horticulture revenue was broadly flat at NZ$243.4m, but segment result rose sharply to NZ$39.1m from NZ$16.0m. Logistics expanded to NZ$81.9m (15.9% share).

Operating working-capital movement of NZ$8.3m sits within normal range, and debtor days at 17.0 are at the lower edge of the historical range (16.5–25.8 days). So the cash gap is not driven by a stretched receivables cycle. The question is what specifically eroded conversion when the visible working-capital build looks modest.

Earnings growth is real but segment quality is shifting. Food Ingredients delivered the dominant dollar uplift and exceeded its divisional EBITDA target, while Horticulture revenue stagnated even as its segment result improved on in-market pricing. The diversification narrative is now carrying more weight than the historical apples-led story.

Balance sheet capacity remains very strong. Net debt is effectively nil at NZ$2.9m (0.04x EBITDA, from 0.12x), gross borrowings fell 29.7% to NZ$38.3m, and equity rose 3.1% to NZ$390.3m. ROE improved to 6.9% from 5.6%. There is ample capacity to absorb cash-flow volatility without strategic constraint.

The half-year shape is unusual: HY21 captured 76.1% of full-year EBITDA and 105.2% of full-year NPAT, implying second-half EBITDA of only NZ$17.1m against NZ$54.5m in HY21 and an implied 2H NPAT slightly negative. A first-half-weighted shape is normal for an apples-led horticulture business, but the magnitude of the 2H softening matters as a baseline for FY22 expectations. The release does not quantify what was 2H weakness versus shipping-related timing.

The durability questions sit on the cash side. Pre-lease FCF of NZ$23.3m is below the historical range of NZ$30.3m–NZ$74.9m and NZ$25.6m below the four-year mean of NZ$48.9m. This came despite capex falling 31.8% to NZ$16.5m, or 3.2% of revenue — that drop flatters FCF rather than reflecting structurally lower investment intensity, and it warrants scrutiny on sustainability.

The 49.7% NPAT payout ratio looks comfortable on earnings, but at 114.8% of pre-lease FCF the payout sits well above the three-year historical mean of 16.3%. Dividend coverage by FCF is intact, but the cushion has thinned materially. The effective tax rate of 23.9% is essentially flat against the prior 24.6%, so tax is not distorting the operating read in either direction even though it sits above the longer-run historical norm.

This briefing cannot assess management's detailed outlook commentary, segment-level cash conversion, or the orchard yield and pricing variables that determine Horticulture's seasonality.