Bremworth has restored internal yarn production, cut costs and improved its inventory profile, but FY26 still ended with an NZ$11.4 million loss. The company now enters FY27 under new ownership and board dynamics, with positive operating cash flow still to be achieved.
- Revenue rose 21% to NZ$106.8 million, led mainly by Elco Direct
- Normalised EBIT loss narrowed to NZ$9.4 million, but the statutory loss was NZ$11.4 million
- Both yarn plants are operating, with all woollen yarn now produced internally
- Available cash fell to NZ$22.0 million, excluding NZ$4.9 million of restricted cash
- Mangawhai Collective's NZ$0.90 partial takeover offer and board transition reshape FY27
Operational repairs have not yet produced profits
Bremworth Limited (NZX:BRW) has spent FY26 rebuilding the machinery and operating model behind its carpet business. The repair work is visible in the numbers, but not yet in the bottom line: revenue rose 21% to NZ$106.8 million, while the company still recorded an NZ$11.4 million net loss after tax and used NZ$9.1 million in operating cash excluding insurance-related items.
Normalised EBIT improved from a NZ$15.9 million loss to a NZ$9.4 million loss, and gross margin edged up to 13.6%. That progress came alongside a simpler cost base, lower complexity and the completion of the latest staged reinstatement of the Napier yarn plant. It remains progress from a weak base rather than evidence that the turnaround is complete.
Elco Direct carried the revenue increase
The headline revenue growth needs careful reading. Wool sourcing business Elco Direct generated NZ$44.8 million of external revenue, up from NZ$28.9 million, while carpet and rug revenue increased more modestly to NZ$62.0 million from NZ$59.5 million. Bremworth said stronger demand from wool exporters in the second half, together with higher volumes and wool prices, drove the sourcing business.
The carpet operation remained exposed to weak residential construction, renovation activity and household spending in New Zealand and Australia. Wool represented 95% of carpet sales volumes, and although wool carpet sales in both home markets exceeded the prior year, demand was not sufficient to deliver the utilisation and financial performance management requires. The Origin Collection solution dyed nylon range made only a small contribution in FY26, leaving its expected FY27 contribution as an execution test rather than a demonstrated growth engine.
Internal yarn production restores control
Bremworth ended the year with both spinning plants operating to expectations and 100% of woollen yarn produced internally, compared with 44% in April 2025. The company said internal production is improving product quality while reducing product and supply-chain costs and lead times. The two plants employed 194 people at year end, up from 120 at the start of 2025.
Inventory also underwent a considerable clean-up. Substandard yarn and carpet were sold down, slower-moving lines were rationalised and the inventory provision fell to NZ$3.1 million from NZ$5.2 million. Yet total inventory increased to NZ$29.1 million from NZ$28.0 million, so the financial benefit will depend on whether Bremworth can reduce the cash tied up in stock without compromising product availability.
Cash remains the hard constraint
Available cash stood at NZ$22.0 million at 30 June, with a further NZ$4.9 million restricted as security for bank guarantees and other commitments. Bremworth had no borrowings, but cash and bank fell from NZ$42.2 million a year earlier. The company attributed the decline to trading outflows, scheme-related costs, capital expenditure including NZ$4.4 million on Napier reinstatement, lease obligations and the transfer of cash into restricted accounts.
The audited statement records net operating cash flow of NZ$8.3 million outflow, compared with NZ$15.7 million of inflow in FY25, a year distorted by Cyclone Gabrielle insurance proceeds. Management says the immediate target is positive operating cash flow, while the annual report states that forecasts support continued operation despite uncertainty around future performance.
Takeover and board changes alter the next phase
The financial reset is unfolding alongside a change in ownership. The Floorscape scheme was terminated after shareholders representing about 38% of Bremworth committed to vote against it, while Mangawhai Collective made a partial offer at NZ$0.90 a share seeking to increase its holding from 19.73% to between 51.975% and 55%. Bremworth's directors recommended acceptance, describing the offer price as within the Independent Adviser's valuation range and the offer as very likely to become unconditional.
Three independent directors, Trevor Burt, Julie Bohnenn and Murray Dyer, resigned on 25 September, with David Ferrier and Greg Knowles joining the board. Ferrier is not considered independent because of his interests in Mangawhai Collective, while Knowles has been classified as independent. The company also disclosed an estimated NZ$564,000 financial adviser fee linked to the takeover offer, which was not recognised at year end because the contractual conditions had not then been satisfied.
FY27 is therefore less about announcing another restructuring than proving that the existing one works. Bremworth says it will target higher carpet volumes, stronger gross margins, better manufacturing utilisation, tighter working capital and positive operating cash flow. The crucial evidence will be whether those improvements arrive through carpet sales and manufacturing economics, rather than continued support from Elco Direct or one-off balance-sheet events.
Bottom Line?
Bremworth has rebuilt its supply chain, but FY27 must show that the carpet business can convert that platform into cash before liquidity and execution become the dominant questions.
Questions in the middle?
- Can the restored Napier and Whanganui plants achieve the utilisation needed to lift margins?
- Will the Origin Collection generate material, profitable volume in FY27?
- How will Mangawhai Collective's ownership position and the new board affect capital allocation and operating priorities?