Leverage hit 9.8x EBITDA as margins compressed on a 20.7% revenue lift

The ratio spike is driven from the denominator: EBITDA dropped to NZ$1.4m from NZ$2.1m (-33.6%) on 20.7% revenue growth to NZ$20.7m, so EBITDA margin compressed to 6.8%, below the historical range of 6.9%–12.3%.

Below EBITDA, PBT and NPAT both deteriorated to -NZ$2.1m from -NZ$0.8m (-183.1%), with no tax distortion (effective tax rate 0.0% in both periods). Operating cash flow rose to NZ$1.6m (+45.4%), but capex more than doubled to NZ$2.4m for the new Viaduct venue, leaving pre-lease free cash flow at -NZ$0.7m and the cash balance at -NZ$0.1m versus NZ$2.7m a year ago. Equity fell 24.1% to NZ$14.3m.

• 9.8x net debt / EBITDA versus a 5.78x mean and 7.5x prior peak puts the balance sheet in a more constrained position than at any point in the supplied baseline, and the move came from earnings deterioration rather than borrowing growth. This matters because incremental venue investment is being funded from a thinner equity base (NZ$14.3m, down NZ$4.5m) and a cash position that has already gone negative.
• Operating leverage worked in reverse. Revenue grew 20.7% but EBITDA fell, so each dollar of incremental sales produced negative incremental EBITDA. With margin now at the lower edge of the historical range, the read is that cost inflation, pre-opening costs for Viaduct, or mix shift more than offset the revenue lift. The HY22 acquisition-affected comparable makes the 20.7% headline less clean than it looks.
• Cash conversion looks strong but is flattered. OCF / EBITDA of 117.3% sits above the historical mean of 38.2%, but the ratio is elevated partly because EBITDA collapsed and partly because inventory days tightened to 5.9 (lower edge of the historical 5.6–28.0 range). Working capital cannot keep funding the gap if EBITDA stays at this level.

Management commentary points to the Viaduct venue opening in November and "trading… exceeded expectations" in its first 10 days, which provides qualitative second-half support but is not quantifiable here. The supplied second-half shape table is distorted by FY22 impairments (HY22 was 91.8% of full-year revenue but EBITDA was -7.6%), so it offers no usable seasonality anchor.

The release does not support a view that 2H earnings will close the gap; it supports only the existence of new revenue capacity. The gap matters because leverage at 9.8x leaves little room if Viaduct ramps slower than the early commentary implies.

EBITDA fell despite a 20.7% top line, which means the underlying contribution from existing venues is going backwards before any drag from new-venue pre-opening costs. ROE moved to -14.9% from -4.0%, below the historical range of -4.0% to -2.2%, confirming that the deterioration is not a presentation artefact.

The cash story is less durable than the OCF line suggests. Operating cash of NZ$1.6m came alongside inventory days near a historical low, and capex of NZ$2.4m drove pre-lease FCF to -NZ$0.7m. Gross debt did fall NZ$0.5m, consistent with management's statement that NZ$2.5m of third-party debt was paid down in the period, but the funding for that pay-down ultimately came out of the cash balance, which moved from NZ$2.7m to slightly negative. This is balance-sheet-assisted rather than earnings-funded deleveraging.

This briefing cannot assess the standalone economics of the new Viaduct venue or remaining covenant and facility headroom because neither is disclosed in the supplied release excerpts.