Bostock acquisition lifted revenue 54% but cash conversion fell to 56.4%

PBT grew 122.2% to NZ$135.3m and NPAT grew 229.0% to NZ$101.0m, with the gap driven by the effective tax rate falling to 13.0% from 17.9%.

Operating cash flow fell 1.8% to NZ$95.8m despite the EBITDA step-up, so OCF/EBITDA cash conversion dropped to 56.4% from 106.4%. Trade debtors rose 66.9% to NZ$63.5m and inventories rose 379.2% to NZ$119.6m, lifting operating working capital by NZ$120.1m. Total assets reached NZ$899.9m (vs an FY21–FY24 range of NZ$580.5m–NZ$608.9m), and net debt/EBITDA edged to 0.5x from 0.4x.

Inventory days hit 48.5 versus a four-period historical range of 15.6–25.2 days, and debtor days reached 25.8 versus a 16.5–23.7 range. This matters because the NZ$120.1m operating-working-capital build is what turned an 85.2% EBITDA increase into a 1.8% OCF decline; the cash quality of FY25 earnings is materially weaker than the income statement suggests until management demonstrates the inventory unwinds.

Acquisition shifts the comparison. Total assets jumped NZ$290.9m to an unprecedented NZ$899.9m, and the inventory build is consistent with consolidating Bostock onto the balance sheet rather than pure trading deterioration. Because the prior period did not include Bostock, the 53.9% revenue print and 85.2% EBITDA print are not the organic run-rate; investors need a stand-alone Scales versus Bostock split to gauge underlying performance.

Tax distortion inflates the NPAT optic. The 13.0% effective rate sits below Annolyse's historical baseline of 16.2%–23.9% (mean 18.8%). PBT growth of 122.2% is the cleaner operating read; the 229.0% NPAT growth and 22.1% ROE (vs 8.1% prior) flatter the picture by roughly the tax differential and should not be extrapolated.

The half-year shape shows HY25 contributed 41.3% of full-year revenue but 51.7% of EBITDA and 48.1% of NPAT, implying 2H revenue of NZ$528.1m on EBITDA of NZ$82.1m — a revenue-heavier but margin-lighter second half consistent with apple-harvest seasonality plus a part-period Bostock contribution.

What the release does not support is an FY26 base. Without disclosed organic-versus-acquired splits, normalised working-capital targets, or a tax-rate guide, the durability of the FY25 step-up cannot be assessed from this filing alone.

The PBT margin of 15.0% and EBITDA margin of 18.9% are both unprecedented in the FY21–FY24 baseline (means 8.1% and 12.5%), and segment results show breadth — Horticulture EBITDA NZ$65.2m, Global Proteins NZ$73.9m, Logistics NZ$7.6m — so the operating uplift is not a single-segment story. However, the unprecedented inventory build, the tax-rate benefit, and the consolidation of an acquired business each individually flatter the headline, and they compound.

Free cash flow pre-lease of NZ$74.9m gives an FCF/NPAT conversion of 74.1% with capex at 2.3% of revenue. The interim dividend lifted to 7.25 cents (FY24 interim 4.25 cents), and the announced payout against NPAT sits at 10.3% versus 19.7% prior — well below Annolyse's 19.7%–162.2% historical range, suggesting capital is being retained to fund the enlarged balance sheet rather than reflecting a sustainable payout policy.

This briefing cannot assess the organic-versus-acquired split of FY25 earnings or the steady-state working-capital intensity of the enlarged group from the disclosures provided.