Cash conversion fell to 90% as acquisitions drove 7.5% revenue growth

The shift in mix toward the GP portfolio expanded gross margin from 60% to 63%. NPAT reached $1.2m and PBT $1.6m, with the effective tax rate dropping from 32.9% to 24.9% — the bulk of the after-tax earnings movement. The Board declared a 4.05 cps final dividend; cash on hand was $1.1m, down from $1.8m, consistent with acquisition consideration leaving the balance sheet.

FCF to NPAT fell from 148.8% in FY21 to 90.4% this year, with capex still negligible at $3k. Receivable days lengthened from 20.9 to 23.9, so part of the gap looks like working-capital absorption from the acquired GP businesses rather than a structural break. This matters because reported earnings now run ahead of cash generation rather than below it, which weakens the read on how much of the headline result is bankable.

Tax distortion flatters the NPAT line. ETR fell roughly 800bps to 24.9%, well below the 28% statutory rate, while PBT was essentially flat. PBT is therefore the cleaner read on underlying operating performance, and the result is more a low-tax outcome than an operating step-up. If the rate normalises in FY23, the NPAT comparable becomes harder.

Acquisition lifts mix but dilutes capital efficiency. The 63% gross margin reflects the GP portfolio carrying a richer margin than aged medical care services NZ, which was the dominant FY21 segment at 86.6% of revenue. ROE eased from 73.4% to 50.2% as equity rose with acquisition-related funding. This matters because the acquired earnings still need to ramp before the larger denominator pays back.

The H1 release flagged strategic focus on growing the patient population through acquisitions, with earnings benefits "expected from 2H22"; the full-year shape is consistent with that, with implied H2 revenue of roughly $3.1m and H2 NPAT of about $0.5m. Without disclosed forward work or stated guidance, the FY23 read hinges on integration of the acquired GP operations and whether the lower ETR holds. Anchoring expectations on PBT rather than NPAT matters here because the tax-rate benefit is unlikely to repeat in full.

Gross margin expansion to 63% looks more durable provided the GP mix sustains, because it reflects portfolio composition rather than a one-off. Capex of $3k is consistent with an asset-light service model, so FCF tracks OCF very closely.

Cash quality is the weak link. OCF of $1.063m sits below the $1.173m NPAT — a 90.4% conversion versus 148.8% in the prior year — and receivable days lengthened by about three days. The 4.05 cps final dividend absorbs 34.0% of NPAT and 37.7% of FCF; coverage holds, but headroom is narrower than the prior conversion rate would have implied.

This briefing cannot assess organic versus inorganic revenue contribution, the sustainability of the lower tax rate, or the consideration paid and integration profile of the acquired GP practices without further disclosure.