PBT up 31.1% on margin highs, but working-capital release flatters cash

That swing drove operating cash flow from NZ$-8.8m to NZ$26.0m and lifted OCF/EBITDA cash conversion to 178.8%, which means the standout cash result rests on a pattern break rather than recurring trading dynamics.

Underneath that, the operating read is genuinely stronger. Revenue grew 6.9% to NZ$126.5m, EBITDA rose 19.7% to NZ$14.6m, and PBT grew 31.1% to NZ$9.7m at a 7.7% PBT margin — the highest in the supplied historical baseline (mean 4.8%). Reported NPAT was up 68.1% but the effective tax rate fell from 36.2% to 19.3%, so PBT growth is the cleaner operating read.

Net debt moved from +NZ$12.9m to -NZ$12.8m as cash more than doubled to NZ$30.0m and gross borrowings fell NZ$9.5m.

A NZ$4.9m release versus an average NZ$10.1m build across three prior periods — none of which showed a release — drives the entire OCF swing and the NZ$24.5m of pre-lease free cash flow, itself flagged as unprecedented against a four-period mean of NZ$-1.4m. Cash quality reverses if working capital normalises, even with EBITDA holding up.

Margin expansion looks more durable than the cash result. Group gross margin rose from 22% to 26% and PBT margin reached 7.7% (against a historical range of 4.1% to 6.3%), with Mining at 46% gross margin and Meat at 36%. The three core sectors delivered 77% of group revenue, suggesting the lift reflects mix and execution rather than one-off contract effects.

Leverage has flipped from net debt to net cash, expanding capital flexibility. Net debt/EBITDA at -0.88x is the lowest in the supplied historical baseline (mean 1.10x). With the dividend held flat at 4.0 cps and the payout ratio at 40.8% (versus a historical mean of 72.5%), Scott retains capacity to fund Scott 2025 investment or absorb a working-capital reversal without straining the balance sheet.

The FY22 shape shows HY22 was 53.4% of full-year revenue and 50.8% of EBITDA, suggesting no meaningful second-half weighting. Annualising HY23 revenue implies roughly NZ$253m. The FY22 anchor includes a discontinued operation that pulled total NPAT to NZ$0.09m against continuing-operations NPAT of NZ$12.7m, so HY23-versus-FY22-total NPAT comparisons are invalid; continuing operations is the only fair reference.

What this release does not support is any conclusion about whether the working-capital release will reverse, the path of the effective tax rate after its drop from 36.2% to 19.3%, or the dollar value of forward work.

Margin expansion is broad-based, with Mining at 46% and Meat at 36% gross margin, and PBT margin of 7.7% sits clearly outside the prior historical range (4.1% to 6.3%). Capex at 1.2% of revenue indicates the result was not balance-sheet-assisted through deferred investment.

Three parts are timing- or balance-sheet-driven. First, the NZ$4.9m working-capital release is outside the historical range of builds and is the main driver of FCF/NPAT of 311.4%. Second, the effective tax rate of 19.3% (versus 36.2% prior) accounts for the -37.0pp gap between 31.1% PBT growth and 68.1% NPAT growth; a normalisation would compress NPAT growth materially. Third, ROE of 14.9% benefits from the same tailwinds, so the through-cycle level is likely lower.

The earnings improvement looks more sustainable than the cash improvement: PBT margin expansion is the underlying story, while the cash result is amplified by working-capital and tax tailwinds that the historical baseline flags as outside normal patterns.

This briefing cannot assess forward work, project-by-project margins, or any quantitative target underpinning the Scott 2025 strategy.