Revenue fell 13.6% and PBT 18% but tax rate halved kept NPAT flat

EBITDA fell 26.6% to NZ$12.2m and the EBITDA margin compressed to 10.0%, below the historical normal range (mean 10.9%, range 10.2% to 11.8%). PBT fell 18.0% to NZ$5.0m, but NPAT was effectively flat at NZ$4.4m (0.0%) because the effective tax rate dropped to 12.9% from 26.4% — an unprecedented low versus the historical mean of 26.3%.

Operating cash flow swung from –NZ$7.7m to +NZ$14.5m, capex fell to NZ$1.9m from NZ$5.1m, and gross borrowings reduced 25.4% to NZ$25.5m. The interim dividend was cut 40% to 3.0 cps; net debt / EBITDA sits at 1.1x, within the historical range.

Management's "stable net profit" framing relies on an effective tax rate that is unprecedentedly low against the supplied historical baseline. PBT is the cleaner operating read and it is down 18.0%, with the gap between PBT growth (–18.0%) and NPAT growth (0.0%) entirely a tax-rate effect. Until the rate driver is explained, NPAT durability cannot be assumed.

Operating performance broke below the supplied historical range, not just versus HY24. Revenue growth of –13.6% sits outside the prior 5.3–13.3% range, EBITDA margin of 10.0% sits below the 10.2–11.8% range, and ROE of 3.6% is below the 3.9–7.4% range. This is an industry-cycle drawdown (management cites the lag from slow FY24 order intake), not a one-period miss.

Cash improved sharply but the quality is mixed. Cash conversion of 119.3% is at the upper edge of the historical range, helped by a working-capital build of NZ$4.6m that was smaller than the historical mean of NZ$8.3m. However, debtor days rose to 60.2 (upper edge) and inventory days to 55.4 (upper edge), so collection and inventory turn did not improve — the smaller absolute build largely reflects a lower revenue base and an unusually weak prior-period comparable.

Annualising current revenue gives NZ$243.5m, around 12% below FY24's NZ$276.1m, so a meaningful 2H step-up is required to keep the FY trajectory intact. The supplied prior shape shows HY24 was 51% of FY24 revenue and 63% of FY24 EBITDA, suggesting H1 has historically been the stronger half — a normal seasonal pattern alone will not close the FY gap.

The Destination 2030 NZ$530m revenue target implies a 16.8% revenue CAGR from current run-rate. The release does not provide segment-level forward work or order intake to support that path.

PBT fell 18.0% and EBITDA margin compressed below its historical range; the 12.9% tax rate, unexplained in the supplied excerpts, is what kept reported NPAT flat. Operating cash improvement is partly real (capex stepped down to 1.5% of revenue from 6.4%) and partly an optics effect against a –NZ$7.7m prior comparable that management itself describes as containing "large anomalies."

The working-capital position is the key tension. The aggregate movement was favourable versus history, but the underlying days metrics moved the wrong way: receivables took 13.8 days longer and inventory 8.5 days longer to turn. In a project-based industrial business, that combination — smaller dollar build but extended days against a falling revenue base — typically signals delayed milestone billings and slower customer sign-off rather than improved working-capital discipline. The dividend cut from 5.0 cps to 3.0 cps and the move to a 55.6% NPAT payout (versus 90.9%) is consistent with management preserving cash against this backdrop.

This briefing cannot assess order intake trends, customer concentration, or the contracted versus pipeline split of the NZ$165m forward work from the supplied excerpts.