Investment income up 68.1% restored distribution coverage to 126.2%

PBT grew 71.6% to NZ$151.2m and NPAT 74.4% to NZ$146.0m. These growth rates sit well above Annolyse's historical baseline (mean revenue growth of 1.2% across the supplied four-period window, range -5.4% to 10.1%), reflecting the depressed prior comparable rather than a step-up in run-rate.

Portfolio total return was 6.9%, ahead of the 4.6% benchmark by 2.3 percentage points. Net assets attributable rose to NZ$7.9b. The interim dividend was held at 10 cents per share fully franked, now covered 126.2% by income from operating activities versus a 145.1% NPAT payout ratio in the prior comparable.

The 10cps interim is identical to last year, but the payout ratio against NPAT fell from 145.1% to 83.9%, meaning AFI no longer needs to lean on reserves to maintain the same dividend. ROE of 3.7% sits above the company's historical range of 1.9% to 3.5% supplied for the three subsequent periods. For an LIC, this matters because the franking-credit thesis depends on portfolio income matching distributions over time.

Portfolio alpha was positive but modest. Total return of 6.9% beat the benchmark by 2.3pp, but the benchmark itself printed at the lower edge of its baseline range of 4.2% to 10.8%, so outperformance came against a softer market period rather than against a strong one. The expense ratio of 0.15% sits at the upper edge of the supplied historical range.

Investment income still trails the longer-run baseline. The NZ$161.8m print is the lowest in the four-period baseline window (mean NZ$172.2m, range NZ$168.4m to NZ$178.1m). The 68.1% growth headline reflects HY21 being depressed; HY22 income has not yet returned to normalised levels even after the rebound.

The supplied historical pattern tells us the HY22 growth rates are not a forward indicator: subsequent periods reverted to low single-digit growth, including two negative prints. The second-half shape from FY21 shows HY21 contributed only 35.6% of full-year NPAT and 36.6% of full-year revenue, so seasonal weight has historically sat in the second half – though FY21 was itself distorted by the COVID dividend cycle.

What the release does not support is a claim of structural earnings repair. The income line at NZ$161.8m still sits below subsequent norms, which means the second-half path depends on portfolio dividend timing rather than embedded growth. Distribution coverage at 126.2% leaves headroom but no abnormal buffer.

The 68.1% income lift is a base-effect rebound: HY21 was depressed by portfolio companies cutting dividends through COVID, and the supplied four-period baseline mean of NZ$172.2m sits above the current NZ$161.8m print. The growth rate is unprecedented in the supplied window but durability is the wrong question because it is not a recurring rate.

Portfolio total return of 6.9% beat the benchmark by 2.3pp, which is real alpha, but the benchmark was at the lower edge of its baseline range, so the gap was achieved against a soft market rather than a strong one. The effective tax rate of 3.4% sits below the supplied baseline mean of 6.7%, lifting NPAT growth fractionally above PBT growth – a 2.8pp gap that is too small to alter the read.

This briefing cannot assess the share-price-to-NTA spread, longer-run benchmark performance, or whether the underlying portfolio's normalised dividend yield has structurally changed post-COVID.