Revenue fell 19.6% and EBITDA swung to a $2.5m loss as net debt hit $36.3m

Revenue fell 19.6% to $385.4m, EBITDA reversed from $31.4m to a $2.5m loss, PBT growth was -971.3% (-$33.1m versus +$3.8m) and NPAT growth was n/m (-$24.4m versus +$2.6m).

The balance sheet shifted at the same time. Gross borrowings rose from nil to $50.0m, taking the group from an $8.7m net cash position to $36.3m of net debt, while equity contracted 8.0% to $182.3m. The drawdown coincides with the Perry Metal Protection acquisition flagged at HY25.

Operating cash flow fell 75.3% to $10.4m, and the final dividend (2.0 cents prior year) was not declared.

The $50.0m new facility funded acquisitions described by management as "quality businesses at bottom of cycle", but the year delivered negative EBITDA, so net debt/EBITDA is not meaningfully calculable. ROE moved from +1.4% to -12.8%. The strategic case rests on cyclical recovery; the timing risk has clearly increased because debt service now sits on a cost base that lost money at current volumes.

Cash quality deteriorated sharply through the year. Full-year OCF/EBITDA of -417.8% reflects negative EBITDA, but the more telling read is the half-on-half shape: HY25 generated $23.1m of operating cash, which means 2H25 ran a $12.7m operating cash outflow. That contradicts the "activity lift in 2H25" framing in the release because volume recovery did not convert into cash.

Working capital is sticky despite weaker volumes. Receivable days rose to 52.1 (from 41.7) and inventory days to 107.6 (from 92.4). Inventory in dollars did fall 6.4% to $113.6m, but not enough to offset the revenue collapse, so the relative working-capital intensity worsened against the "prudent inventory management" claim.

Management points to "some activity lift in 2H25" and expects improvement through FY26, supported by a ~$7m annualised cost-out programme and the Perry integration tracking ahead of plan.

The release does not support a clean recovery read. 2H25 EBITDA (-$3.1m implied) and 2H25 NPAT (-$14.0m implied) were both worse than 1H25, and 2H operating cash was negative. So any FY26 improvement starts from a deeper exit run-rate than the headline full-year numbers suggest. The market commentary in the release also describes conditions as "highly competitive", which limits pricing recovery as a lever.

That is an accounting effect, not operating performance — the cleaner read remains PBT growth of -971.3%.

Cash quality is mixed and largely balance-sheet-assisted. Reported OCF of $10.4m exceeded the EBITDA loss because inventory unwind released cash and trade payables/contract liabilities helped. FCF before leases of $3.6m is positive only because capex was cut 27.7% to $6.9m (1.8% of revenue, down from 2.0%). Cash on hand rose to $13.7m almost entirely because $50.0m of new debt was drawn; the underlying business did not self-fund the acquisition. With 2H operating cash flow negative, the durability of full-year OCF is the central concern: this looks more like a 1H working-capital release into a 2H operating cash burn than an even run-rate.

The dividend suspension (no current declaration versus 2.0 cps prior, a 125.0% prior-year payout-vs-NPAT ratio) is consistent with that read.

This briefing cannot assess Perry Metal Protection's standalone contribution, organic versus acquired revenue split, or order-book/forward-work position because none were disclosed in the supplied materials.