Working capital absorbed $13.0m as debtor and inventory days hit new highs

Debtor days reached 64.4 and inventory days reached 64.4, both unprecedented in the four-period historical window (debtor mean 51.7, inventory mean 48.3). That absorption drove operating cash flow down 57.9% to NZ$6.1m from NZ$14.5m, and pulled OCF/EBITDA conversion to 46.9% from 119.2%; the 46.9% level itself is within the historical normal range (4-period mean 44.7%) because the HY25 comparable was unusually strong.

Revenue rose 5.3% to NZ$128.2m and EBITDA rose 7.0% to NZ$13.0m. PBT grew 18.0% to NZ$5.9m, but NPAT was flat at +0.0% as the effective tax rate reset to 23.4% from an unusually low 12.9%. Materials Handling (+21%) and Mining (+9%) offset Protein (-8%) and Appliances. Forward work climbed to NZ$177m from NZ$165m, and the interim dividend was lifted to 4.0 cps from 3.0 cps.

• Trade debtors rose 12.6% to NZ$45.4m and inventories rose 22.3% to NZ$45.3m, with both day-counts at unprecedented highs. For a project-based industrial this can reflect pre-delivery build and contract timing, but the scale (NZ$13.0m absorption versus a NZ$5.7m historical norm) and the simultaneous receivables stretch raise execution and customer sign-off risk that the release does not directly explain.
• PBT is the cleaner operating read. PBT growth of 18.0% reflects real operating leverage on a 5.3% revenue lift, but NPAT growth of 0.0% is dominated by the tax rate normalising to 23.4% from 12.9%; the 23.4% rate is itself within Annolyse's historical baseline (4-period mean 23.7%), so the prior period was the anomaly, not the current one.
• Dividend lifted into a tighter cash result. The 33.3% interim DPS increase pushed the payout ratio versus NPAT to 76.9% from 55.6%, sitting at the upper edge of the historical range (4-period mean 63.5%). FCF pre-lease of NZ$4.4m covers the dividend (76.4% payout on FCF), but only just, and only because capex stayed light at 1.4% of revenue.

Forward work of NZ$177m (versus NZ$165m at the same point last year) supports management's stated expectation of a stronger H2, alongside cited contract wins in Protein, Materials Handling and Appliances.

The Destination 2030 target of NZ$530m revenue by FY30 implies a 19.9% revenue CAGR. Annualised HY26 revenue is roughly NZ$256m, so the implied trajectory requires step-changes well above the current 5.3% growth rate. The release does not bridge that gap.

PBT growth of 18.0% is consistent with that operating picture, and FCF/NPAT of 100.7% looks healthy on the surface.

The cash-quality read is weaker than the conversion ratio alone suggests. Reported FCF pre-lease is only NZ$4.4m on capex held to NZ$1.7m (1.4% of revenue), so the conversion arithmetic is helped by underspending. The NZ$13.0m working-capital absorption — concentrated in receivables and inventory at unprecedented day-counts — means the H1 earnings number sits inside the balance sheet rather than in cash. Whether that reverses in H2 depends on contract delivery and customer sign-off timing, neither of which is quantified in the release.

This briefing cannot assess the contractual milestone schedule or customer-specific receivable ageing that would confirm whether the working-capital build releases in H2.