What changed
The most material movement in HY26 is the collapse in operating cash conversion. Operating cash flow fell NZ$8.4m to NZ$6.1m despite EBITDA rising 7.0% to NZ$13.0m, dropping the OCF/EBITDA ratio from 119.2% to 46.9%. That is the dominant read on this half.
On the face of the income statement, the result looks better than it is. PBT grew 18.5% to NZ$5.9m — a meaningfully stronger number than the 4.1% NPAT growth to NZ$4.5m. Tax expense more than doubled from NZ$0.6m to NZ$1.4m as the effective rate jumped from 12.9% to 23.4%, absorbing most of the operating improvement. No structural change is disclosed, making this look period-specific rather than a new run-rate.
Revenue grew 5.3% to NZ$128.2m. The segment mix shifted materially: Materials Handling gained 6.5 percentage points of group revenue share to 50.3%, while Protein fell 8.0% to NZ$28.0m and Appliances dropped 30.2% to NZ$10.2m. Service revenue grew 14.0% to NZ$42.6m and now represents 33.2% of total revenue, up 2.6pp. Forward work rose NZ$12.0m to NZ$177.0m. The balance sheet strengthened, with net debt turning to net cash of NZ$9.8m. The interim dividend lifted 33.3% to 4.0 cents per share.
What matters
Cash conversion deterioration is the first-order concern. Working capital absorbed approximately NZ$13.0m in the half, driven by inventories rising NZ$8.3m (inventory days up 9 days to 64.4), trade debtors up NZ$5.1m, and contract assets up NZ$2.9m. The build reads as project-milestone timing rather than a collection problem — receivable days only extended 4 days — but the scale of absorption relative to a NZ$13.0m EBITDA business is significant. Pre-lease FCF fell from NZ$13.4m to NZ$4.5m and post-lease FCF from NZ$11.0m to NZ$1.6m. If H2 does not reverse a meaningful portion of this working capital build, the full-year cash profile will look structurally worse than FY25 even on a better EBITDA number.
Materials Handling's 6.5pp revenue share gain is the most consequential mix development for Destination 2030 execution. At 50.3% of group revenue, this segment is now the clear earnings engine. The EBITDA margin edged up from 10.0% to 10.2% on the group level despite Appliances (presumably a lower-margin, more-cyclical segment) declining 30.2% — which implies Materials Handling is carrying better underlying economics than the portfolio average. The Appliances decline is now large enough (down NZ$4.4m, -4.0pp of revenue share) that it warrants scrutiny as a structural rather than cyclical headwind.
Service revenue trajectory is the one unambiguously positive signal for earnings quality. At 33.2% of revenue and growing 14.0%, this is the component most consistent with the Destination 2030 lifecycle services thesis and provides a more predictable earnings base. The direction is right; the question is whether it can keep growing at this pace as project-heavy segments like Protein soften.
Expectations
The stronger-H2 framing has arithmetic support from the seasonal pattern, but the magnitude required is significant. In FY25, H1 contributed only 44.3% of full-year revenue and 38.7% of EBITDA — so H2 delivering roughly NZ$19.3m EBITDA to complete a year comparable to FY25 is not anomalous on precedent alone. Forward work at NZ$177.0m represents 69.1% of annualised revenue and is up from NZ$165.0m a year ago, which confirms near-term activity cover. On that basis, a step-up in H2 is credible.
What is not credible is the Destination 2030 growth trajectory. The strategy targets NZ$530m revenue by FY30, implying approximately 14.0% CAGR from the FY25 base of NZ$275.0m. A straight-line step in FY26 would require approximately NZ$313.5m. The current annualised run-rate is NZ$256.3m — approximately NZ$57m behind that path. Even if H2 delivers an implied NZ$153.3m (the FY25 H2 precedent), full-year revenue would be roughly NZ$281m, consistent with FY25 rather than progress toward the 2030 target. The business is not compounding at anything near 14% at present. Management has not disclosed a specific FY26 numerical target, so there is no formal guidance to test against, but the gap between run-rate and strategy path is now large enough to require an explicit address.
Quality of result
The durable component of this half is the PBT growth of 18.5% and the service revenue lift — both of which reflect genuine operating progress. The tax line is distorting the NPAT headline, and investors should weight PBT as the cleaner operating measure.
The timing-driven and working-capital-driven components are more concerning. OCF of NZ$6.1m against EBITDA of NZ$13.0m means the business consumed NZ$6.9m of cash on the gap between accounting earnings and collections. Decomposing FCF: capex was modest at NZ$1.7m (1.4% of revenue, below D&A of NZ$5.5m, consistent with a period of low capital intensity), but lease repayments stepped up to NZ$3.0m. Pre-lease FCF of NZ$4.5m and post-lease FCF of NZ$1.6m are both thin relative to reported NPAT of NZ$4.5m. The FCF/NPAT ratio fell from 310.8% in HY25 to 101.2% pre-lease in HY26, which ordinarily would signal improvement but here reflects the prior period's unusually strong cash conversion rather than a current-period quality concern. The relevant comparison is the absolute deterioration.
The working capital build — NZ$13.0m absorbed — is the single largest driver of the cash gap. Inventory days of 64.4 against receivable days of 64.4 suggests the business is carrying more work-in-progress and project stock ahead of H2 deliveries. If these convert to revenue and then cash in H2, the full-year OCF/EBITDA picture normalises. If they do not, they represent earnings that have been recognised ahead of cash realisation. The cash conversion ratio deterioration must be monitored at the FY26 result.
Unresolved
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What is driving the Appliances segment's 30.2% revenue decline? At NZ$10.2m, the segment is now only 8.0% of revenue. Whether this is a structural customer or market exit, a project timing gap, or a deliberate strategic de-emphasis matters for how to read the portfolio going forward. No disclosure is made on segment-level margins, so the margin impact of this decline is unquantified.
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What caused the effective tax rate to jump from 12.9% to 23.4%? The variance is NZ$0.8m on a NZ$4.5m NPAT result — it is not immaterial. Without a disclosed explanation, investors cannot assess whether the H2 rate normalises or the prior period was the anomaly.
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Will the NZ$13.0m working capital build reverse in H2? The H2 stronger-than-H1 framing depends partly on inventory and contract assets converting to cash. The composition of the build (inventory-heavy) suggests project deliveries are staged for H2, but there is no project-level disclosure to confirm this reading.
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What is the segment margin structure, and how is Materials Handling's margin evolving? With Materials Handling now 50.3% of revenue and the dominant driver of group EBITDA, the absence of segment-level EBIT or gross margin disclosure is a meaningful gap. A 6.5pp revenue share shift of this magnitude has a direct margin implication that cannot be quantified from the available disclosures.
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Is the Destination 2030 strategy timeline still intact given the current revenue run-rate gap? The NZ$57m shortfall against the straight-line path to NZ$530m by FY30 represents a gap that will only widen if H2 merely recovers to FY25 levels. No management commentary in the available text explicitly addresses whether the timeline or target has been recalibrated.
This briefing cannot assess management's qualitative framing of project pipeline quality, customer concentration within the Materials Handling segment, or the competitive dynamics driving the Appliances decline, as no investor presentation, conference call, broker consensus, or macro context was available for review.
Key metrics
| Metric | HY26 | HY25 | Change |
|---|---|---|---|
| Revenue | $128.2m | $121.7m | +5.3% ↑ |
| EBITDA | $13.0m | $12.2m | +7.0% ↑ |
| Net profit after tax | $4.5m | $4.3m | +4.2% ↑ |
| Net cash inflow from operating activities | $6.1m | $14.5m | -57.9% ↓ |
| Dividend per share | 4.0c | 3.0c | +33.3% ↑ |
| Net debt | −$9.8m | $13.2m | -174.2% ↓ |
| Service revenue | $42.6m | $37.3m | +14.0% ↑ |
| Materials Handling revenue | $64.5m | $53.3m | +21.0% ↑ |
| Appliances revenue | $10.2m | $14.6m | -30.2% ↓ |
| Total assets | $268.0m | $244.4m | +9.7% ↑ |
Analytical metrics
| Metric | HY26 | HY25 | Context |
|---|---|---|---|
| PBT growth | +18.5% | — | cleaner earnings measure |
| Effective tax rate | 23.4% | 12.9% | non-recurring variance |
| OCF / EBITDA (cash conversion) | 46.9% | 119.2% | deteriorated |
| FCF pre-lease | $4.5m | $13.4m | −$8.9m |
| FCF post-lease | $1.6m | $11.0m | −$9.4m |
| FCF / NPAT | 101.2% | 310.8% | complementary conversion metric |
| Capex % revenue | 1.4% | 1.5% | Below D&A |
| Debtor days | 64.4 | 60.3 | +4.1 days |
| Inventory days | 64.4 | 55.4 | +9.0 days |
| Operating working capital | $89.8m | $76.8m | +$13.0m absorbed |
| Net debt | −$9.8m | $13.2m | −$23.0m |
| Net debt / EBITDA | -0.40x | 0.50x | Strengthening |
| Payout ratio vs NPAT | 33.8% | — | — |
| Payout ratio vs FCF pre-lease | 33.4% | — | covered |
| ROE (annualised) | 7.1% | 6.9% | Improving |
| Net cash dividend | $1.5m | — | after DRP participation |
| H1 share of FY25 revenue | 44.3% | — | H2 was 55.7% |
| H1 share of FY25 EBITDA | 38.7% | — | H2 was 61.3% |
| H1 share of FY25 NPAT | 30.4% | — | H2 was 69.6% |
| Forward work | $177.0m | $165.0m | +$12.0m |
| Forward work / annualised revenue | 0.69x | 0.68x | — |
| Required CAGR (Destination 2030) | 14.0% | — | $530m by FY2030 |
This analysis was generated using Annolyse, an AI-powered tool that extracts and analyses NZX/ASX company announcements. The underlying data is extracted from official company filings and verified against source documents. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.