NPAT rose 40.9% but cash conversion fell to 62.4% on working capital build

Operating cash flow, however, fell 6.2% to NZD 544m, so cash conversion (OCF/EBITDAF) dropped from 85.9% to 62.4%. The gap reflects a NZD 155m working-capital absorption: receivable days rose from 20.8 to 27.9 and inventory days from 9.8 to 14.0. Gross borrowings rose 28.0% to NZD 2.4b, but net debt to EBITDAF improved to 2.2x from 2.5x on stronger earnings. Free cash flow of NZD 434m was broadly held against NZD 471m prior, supported by a 22.6% capex reduction to NZD 449m.

1. Cash conversion at 62.4% versus 85.9% prior is the central tension. Reported NPAT grew 40.9%, but the NZD 155m working-capital build means cash earnings did not scale with accounting earnings. For a gentailer this matters because sustained higher receivables and fuel inventory carry would pressure distributable cash even if EBITDAF growth holds.

2. The retail segment result deteriorated to a NZD 49m loss from a NZD 32m loss, even as retail revenue grew. Wholesale carried the entire segment uplift (result NZD 895m versus NZD 746m). Earnings growth is therefore more reliant on wholesale conditions than the consolidated print suggests, and retail mix is moving against the result, not with it.

3. Leverage tightened on a ratio basis — net debt/EBITDAF fell to 2.2x from 2.5x — but gross borrowings expanded NZD 536m and cash rose NZD 285m to NZD 514m. The balance sheet is being positioned for a step-up in scale rather than deleveraging from operations.

The shape was second-half weighted on earnings: HY25 delivered 49.6% of revenue but only 42.9% of NPAT, so the second half carried the bulk of profit growth. Repeatability depends on hydrology and wholesale price conditions, neither of which is forecast in the release.

Forward dividend guidance is 40 cents per share against the 39 cents declared for FY25. The full-year payout against pre-lease free cash flow rose to 82.0% from 62.0%, so coverage tightened materially even though the dividend remained covered by FCF on this basis.

The effective tax rate fell from 30.5% to 28.5%, widening NPAT growth (+40.9%) above PBT growth (+37.0%) by 3.9 percentage points. More importantly, capex fell 22.6% to NZD 449m and capex intensity dropped from 20.3% to 13.1% of revenue. That reduction is the principal reason free cash flow held at NZD 434m despite operating cash flow falling NZD 36m, and it is why FCF/NPAT prints at 131.1%.

Underlying cash quality is weaker than the EBITDAF growth implies. Cash conversion of 62.4% sits well below the prior comparable, and the NZD 155m working-capital absorption — receivables now at 27.9 days and inventory at 14.0 days — is the dominant driver. Whether that build reverses in FY26 will determine how much of the FY25 earnings uplift converts into distributable cash, particularly with the FCF payout already at 82.0%.

This briefing cannot assess hydrology conditions, hedge positioning, or the post-period portfolio integration that will shape FY26 cash generation and leverage trajectory.