Net debt/EBITDA jumped from 0.8x to 3.7x as PBT fell 44.7%

Net debt rose to $79.2m from $23.1m, and net debt/EBITDA moved from 0.8x to 3.7x as gross borrowings climbed 53.5% to $99.4m and cash fell 51.4% to $20.3m. This matters because it lands in a soft residential market that management itself flags as challenged.

Earnings followed unit volumes lower. Revenue fell 10.4% to $155.4m on 266 unit settlements, EBITDA fell 27.9% to $21.3m, PBT fell 44.7% to $15.2m, and NPAT fell 34.4% to $10.3m. The shallower NPAT decline reflects the effective tax rate dropping from 42.7% to 32.0%, so PBT is the cleaner operating read.

Operating cash flow rose to $42.3m from $14.2m, but inventories fell $21.6m, indicating the inflow is partly a working-capital release rather than higher earnings. No FY25 dividend was declared, against 0.55 cps in FY24.

Gross borrowings rose $34.7m while cash fell $21.4m, taking net debt/EBITDA to 3.7x. For a residential developer carrying $225.7m of inventory through a slow market, the capacity to absorb further unit price or absorption pressure has narrowed, and any refinancing or covenant test now sits closer to the line.

Cash conversion flatters the underlying result. Reported OCF/EBITDA is 198.9% versus 48.1% prior, but $21.6m of that inflow is the inventory drawdown that also drove the revenue line. Stripping that back, cash earnings sit closer to the EBITDA print than the headline suggests, which means the strong-looking conversion ratio does not signal a structural improvement in earnings quality.

Mix has shifted into less profitable segments. Residential revenue fell to $130.3m from $162.5m and the segment result more than halved to $21.1m from $44.3m. Commercial revenue rose to $24.7m but produced a $6.0m loss, while Retirement turned to a $4.4m result on a tiny $0.5m revenue base (helped by valuation effects). The dominant earnings engine slowed sharply, and the growth segments are not yet self-funding operating contributors.

Management points to a c.5,750-unit landbank and an unconditional/conditional pre-sales book, but neither a dollar value nor a coverage ratio is in the supplied excerpts.

The shape of the year was heavily second-half weighted: H1 FY25 produced a $0.1m EBITDA loss and a $2.0m NPAT loss, so essentially all of the FY25 EBITDA ($21.3m implied) and NPAT ($12.3m implied) was earned in H2. That concentration means the FY26 entry run-rate depends on whether the H2 settlement cadence repeats, not on extrapolating the full-year average.

The $42.3m operating inflow combines a normalising working-capital position with a -$19.5m property, plant and equipment outflow to give roughly $22.9m of free cash flow before financing. Yet borrowings still rose $34.7m and cash fell $21.4m, indicating that development funding needs ran ahead of internally generated cash even after inventory was monetised.

A few items support the durability call:

• The tax-rate fall from 42.7% to 32.0% is the main reason NPAT fell less than PBT; it is not an operating improvement.
• The Retirement segment swing from -$2.6m to +$4.4m on negligible revenue suggests valuation/non-cash contributions, not recurring earnings.
• ROE moved to 1.9% from 3.0%, consistent with a lower-quality, lower-return year rather than a one-off setback.

Together, these point to an FY25 result where the cash optics are better than the earnings optics, and the balance sheet has absorbed the gap.

This briefing cannot assess facility covenants, pre-sales dollar value, or unit selling price trends because none of those are quantified in the supplied disclosures.