Revenue up 89.5% on acquisition, but leverage hit an unprecedented 4.0x

This matters because it removes most of the balance-sheet headroom the company has historically operated with.

Revenue rose 89.5% to NZ$30.6m and EBITDA rose 62.9% to NZ$3.0m, both acquisition-led. PBT growth was -63.0%, with the loss widening to NZ$5.0m from NZ$3.1m. Reported NPAT growth of +23.5% to a NZ$5.0m loss is not an operating improvement: the prior period carried a NZ$3.5m discontinued-operation loss that did not repeat in FY22, so PBT is the cleaner read this year.

• Net debt/EBITDA at 4.03x is unprecedented in the supplied historical baseline (mean 1.58x). Cash fell 60.3% to NZ$1.4m while borrowings nearly doubled, so the buffer for trading volatility, integration costs, or further venue spend has materially narrowed. This matters because servicing capacity now depends on holding the Hipgroup contribution at or above current run-rate.

• Underlying earnings worsened despite scale. EBITDA margin of 9.8% is below the historical range of 10.0%-14.2% (mean 11.9%), and PBT growth of -63.0% is classified as an unprecedented low against the supplied baseline. The acquired venues added revenue but did not yet add operating leverage at the PBT line once depreciation, finance costs, and integration are absorbed.

• NPAT optics flatter the result. Reported NPAT improved 23.5% only because FY21 included a NZ$3.5m discontinued-operation charge that is absent this year. On continuing operations, the loss deepened. Anyone working off the headline NPAT line will overstate the year's progress.

The supplied half-year shape shows HY22 delivered 56.1% of full-year revenue but 70.5% of full-year EBITDA, implying a second-half EBITDA of only NZ$0.9m on NZ$13.4m of revenue. That is a sharp 2H deceleration in profitability, which the commentary attributes to seasonal winter trading but does not quantify.

There is no stated target against which to test follow-through, so the read is what the release does and does not support. It supports acquisition-driven scale; it does not support a thesis that the enlarged business is yet earning a margin consistent with its own history.

However, the working-capital movement of +NZ$0.2m is classified as above the normal range, because the four prior periods all delivered working-capital releases averaging -NZ$1.8m. The current year did not get the usual tailwind, which means OCF was built on EBITDA delivery rather than balance-sheet help.

Pre-lease free cash flow of NZ$1.0m sits at the lower edge of the historical range (mean NZ$3.1m), with capex up 50.2% to NZ$1.9m (6.3% of revenue). The combination of weaker FCF, a working-capital build rather than release, and a 60.3% fall in cash means the leverage figure was driven by both new acquisition debt and reduced internal cash generation relative to history. Debtor days (2.8) and inventory days (7.4) are within normal range and do not flag operational stress at the working-capital level itself.

This briefing cannot assess venue-level profitability, integration cost run-off, covenant headroom on the enlarged borrowings, or the durability of the Hipgroup contribution without segment- and venue-level disclosure that the release does not provide.