Settlements collapsed to 14 units, swinging operating cash $37m negative

Residential settlements fell to 14 units from 90 in HY25, dragging revenue down 60.0% to $32.4m and pushing operating cash flow from a $27.1m inflow to a $9.9m outflow — a $37.0m swing inside a single half. Inventories rose $31.0m to $249.8m and gross borrowings increased 50.4% to $119.4m, lifting net debt from $53.3m to $104.9m and reducing cash from $26.1m to $14.5m.

Headline earnings tell a softer story than the operating result. EBITDA edged into positive territory at $0.8m (HY25: -$0.1m) on a stronger commercial contribution, but profit before tax worsened 34.8% to -$3.3m. Reported NPAT improved 55.5% to -$0.9m only because the effective tax rate moved to +72.8% (HY25: 17.4%), a tax credit on the loss rather than an operating gain.

Segment mix shifted materially: commercial revenue grew 67% to $17.4m and turned the segment to a $1.1m result; residential development revenue fell to $14.7m from $70.6m and produced a -$1.3m result.

The $37.0m operating-cash swing combined with $31.0m of inventory build and a $40.0m increase in gross borrowings means the development pipeline is being financed by debt rather than settlement proceeds. Current OCF/EBITDA is n/m and free cash flow before leases was -$11.7m. For a residential developer, this matters because cash earnings and balance-sheet flexibility are tied directly to the timing of unit settlements.

Tax-driven NPAT improvement masks an operating step-down. PBT growth of -34.8% is the cleaner read on operating performance; the +55.5% NPAT growth reflects a 72.8% effective tax rate on a small loss, not improved trading. Treating NPAT as the headline would overstate progress against HY25.

Mix is rotating from settlements to commercial rent. Residential's share of revenue fell from 87.1% to 45.4% while commercial moved from 12.9% to 53.8%. Commercial rental and sub-developer income now carries the segment result, but at $17.4m it is too small to backfill a $55.9m fall in residential revenue.

The release flags a $239.8m pre-sale book at 31 December 2025 and Fast-track Approvals Act decisions expected in H2 FY26. Pre-sales equate to 3.7x annualised current-half revenue of $64.8m, which supports forward revenue capacity but does not specify timing of settlement recognition.

The supplied shape context shows HY25 represented 52.1% of FY25 revenue but only -19.4% of FY25 NPAT, with the implied H2 FY25 contributing $74.4m of revenue and $12.3m of NPAT. HY26 has started weaker than HY25 on both revenue and operating cash, so any material recovery to FY25-style full-year earnings would need to come through H2 FY26 settlements that are not yet quantified in the release.

First, the move from -$0.1m to $0.8m EBITDA is small and explained largely by commercial portfolio swing rather than core residential margin; residential gross margin moved to -9.2% from 8.8% on the dramatically lower volume. Second, the apparent NPAT improvement is a tax-line effect — PBT actually deteriorated by $0.8m.

The cash result is weaker than reported earnings imply. Operating cash flow turned negative by $9.9m, capex of $1.8m took free cash flow before leases to -$11.7m, and the FCF-to-NPAT ratio of n/m is a sign of disconnect rather than strong conversion. Capex spend collapsed from $46.9m to $1.8m, which cushioned the cash outflow but represents reduced investment rather than improved trading. The combination of inventory build, lower cash, and higher borrowings indicates the half was balance-sheet funded.

This briefing cannot assess project-level pre-sale conversion timing, debt facility covenants and headroom, or fair-value movements within the commercial portfolio because those details are not in the supplied materials.