PBT up 24.2% but cash conversion fell to 26.4% on working-capital build

Profit before tax climbed 24.2% to $14.9m, with the release citing 51% growth in continuing-operations NPAT to $12.7m. Reported NPAT, however, fell to $0.09m after a $12.6m post-tax loss on a discontinued operation almost exactly offset the continuing-operations result.

Cash generation moved the other way. Operating cash flow dropped to $6.3m from $13.4m, taking cash conversion (OCF/EBITDA) from 60.7% to 26.4%. Trade debtors rose 45.5% to $40.0m and inventories rose 35.5% to $31.3m, lifting operating working capital by $10.7m. Capex roughly doubled to $8.9m (4.0% of revenue), pushing FCF pre-lease to -$2.6m. Net debt moved to $8.0m from a small net cash position. The full-year dividend was 8.0 cents (FY21: 6.0 cents), with a 4.0-cent final declared.

• OCF/EBITDA fell from 60.7% to 26.4% because receivable days extended from 46.4 to 65.8 and inventory days from 39.0 to 51.6. In a contract-driven business, that combination points to slower customer sign-off and pre-build for backlog, which means reported EBITDA growth has not yet translated into cash and leaves execution risk if delivery timing slips again.
• Headline NPAT is not the operating read. PBT growth of 24.2% and continuing-operations NPAT of $12.7m show the underlying business strengthened, while the $12.6m discontinued-operation loss accounts for essentially all of the NPAT compression. This matters because the surface 99% NPAT decline overstates the operating change; the relevant questions are about what was disposed and whether further drag remains.
• Capital intensity stepped up while cash inflow shrank. Capex of $8.9m versus $4.5m drove FCF pre-lease negative, and the move to $8.0m net debt funds both the working-capital build and a larger development asset. The 8.0c full-year dividend therefore relies on the balance sheet rather than current cash generation.

The supplied HY22 context shows revenue was modestly first-half weighted (HY22 was 53.4% of full-year revenue) and EBITDA was almost evenly split, but NPAT swung negative in the second half because the discontinued-operation loss was absorbed there.

The relevant gap is between continuing-operations earnings momentum and the cash and capex trajectory: the release supports a continuing-operations growth story but does not quantify when working-capital absorption normalises or how large the development-asset spend remains in FY23.

To that extent, the operating read is durable.

The cash picture is weaker than reported earnings imply. EBITDA of $23.9m converted to only $6.3m of operating cash, with the $10.7m working-capital build accounting for most of the gap. Capex nearly doubled to 4.0% of revenue, taking FCF pre-lease to -$2.6m versus +$8.9m, and the 8.0c full-year dividend is not covered by current-year free cash flow. Headline ROE fell to 0.1% from 9.8%, but that is mechanically driven by the discontinued-operation loss and is not a clean read on operating returns. Net debt of $8.0m at 0.3x EBITDA is still modest, so the balance sheet absorbs this year's funding mix, but a repeat of the working-capital absorption alongside elevated capex would compress that headroom quickly.

This briefing cannot assess management's internal forward-order book, segment-level profitability, or the specific entity and terms of the discontinued operation, as those details are not in the supplied data.