NPAT up 17%, but deferred fleet capex and inventory destock flatter cash

Revenue rose 4.1% to $477.3m, EBITDA rose 11% to $125.8m, PBT rose 15.6% to $40.7m and NPAT rose 17.0% to $29.6m. Mix shifted toward services: management cites an 11% lift in sale of services (primarily rentals) against a 4% decline in sale of goods.

Operating cash flow jumped 66.9% to $40.5m, and capex fell from $17.4m to $5.8m, taking capex intensity to 1.2% of revenue from 3.8%. Inventories were reduced by $78.4m (–33%) and total operating working capital fell roughly $82m. Despite this, cash on hand fell to $22.8m from $48.7m and net debt rose to $492.6m from $477.3m. The interim dividend was lifted 20% to 3.0 cps.

• OCF/EBITDA rose to 32.3% from 21.4% and FCF pre-lease/NPAT was 117.6%, but capex was down 66.7% and management explicitly flags that ANZ fleet investment timing will "normalise in H2". This means reported H1 free cash flow overstates the underlying cash-generation rate at the current operating profile, and full-year cash conversion should compress as fleet capex returns.

• The inventory release is a deliberate RV destock, not a recurring tailwind. Inventory days fell from 94 to 61 and inventories dropped $78.4m, consistent with the FY25 commentary about reducing Australian retail RV inventory by over $35m. Once balance-sheet cleanup is complete, working capital stops being a source of cash, so the H1 OCF uplift cannot simply be annualised.

• Leverage remains the binding constraint and the source of forward earnings leverage. Net debt/EBITDA improved modestly to 3.9x from 4.2x but absolute net debt rose despite stronger H1 cash. Management's target of net debt below $400m at year-end implies roughly $92m of further reduction in H2, which is the lever behind the ~$6m FY27 interest saving cited in the release.

THL has historically been H2-weighted on revenue (HY25 was 48.9% of FY25 revenue), but FY25's full-year statutory NPAT was a $25.8m loss, so the prior-year H2 shape is not a useful base.

The two near-term tests are visible in this release: H2 fleet capex must return without erasing the leverage progress needed to hit sub-$400m year-end net debt, and the Australian RV cycle must stabilise enough for that segment's 7.2% derived margin to expand toward group levels.

PBT growth of 15.6% on revenue growth of just 4.1% indicates real operating leverage, services-revenue mix improved, and the effective tax rate of 27.3% (vs 28.2% prior) is not distorting the NPAT read. North America stands out at $30.5m segment result on $126.6m revenue (24.1% derived margin), carrying a disproportionate share of group profitability.

The cash result is lower quality than the headline. Three items support that view:

• Capex of $5.8m is well below a sustaining run-rate; fleet spend is deferred to H2, not avoided.
• The $82m working-capital release reflects inventory normalisation rather than ongoing trading-cycle improvement.
• Net debt still rose despite the cash flow lift, and the cash balance halved, indicating the operating cash was absorbed by financing, lease and prior commitments.

ROE rose to 4.7% from 3.9%, but on equity that itself contracted 3.7% to $623.0m, so the improvement partly reflects a smaller denominator.

This briefing cannot assess underlying segment-level prior-period comparability because prior-half segment revenue and result figures are not supplied in the extraction data.