PBT jumped 43.8% on margin expansion despite a 5.3% revenue decline

The disconnect is the margin: EBITDAF margin reached 30.9%, which Annolyse's historical baseline classifies as above its normal range against a 3-period mean of 21.1% (range 12.7%–27.1%). This matters because it is the central reason a contracting top line still produced step-change earnings.

Cash generation amplified the operating result. Operating cash flow rose 51.7% to NZ$308m and pre-lease free cash flow climbed to NZ$249m, also above the historical range (mean NZ$129m).

The balance sheet was reshaped alongside the result. Total assets grew 52.4% to NZ$9.7b, gross borrowings rose 54.4% to NZ$3.2b, and equity expanded 67.9% to NZ$4.4b, with management announcing a $525m equity raise to fund the Contact31+ investment programme.

With revenue down 5.3% and EBITDAF up 23.8%, the lift is a margin story rather than a growth story. The 30.9% EBITDAF margin sits 9.8pp above the historical mean, so the read on durability depends on whether wholesale generation mix, hedge timing, and retail pricing can hold these conditions through the second half rather than reverting toward the 21.1% baseline.

The capital structure has been repositioned. A 52% jump in total assets, a $1.1b increase in gross borrowings, and a $525m equity raise indicate a strategic build cycle rather than a steady-state period. Net debt/EBITDA moved to 5.8x from 4.5x — still within the historical range (mean 6.31x) but weakening — which means the leverage headroom is being consumed deliberately to fund growth rather than absorbed by operating stress.

Retail is loss-making at the segment line. Wholesale produced a NZ$577m result on NZ$839m of revenue, while Retail posted a NZ$25m loss on NZ$752m of revenue. That divergence flags how concentrated the earnings power is in generation economics, and how dependent the group result is on conditions outside the customer-facing book.

The supplied second-half shape from FY25 shows HY25 at 49.6% of FY25 revenue, 46.3% of EBITDAF, and 42.9% of NPAT — a second-half-weighted pattern. Mechanically annualising current revenue gives NZ$3.2b, modestly below FY25's NZ$3.4b, so the revenue trajectory understates how much earnings could compound if HY26's margin holds into a seasonally stronger second half.

The gap that matters is between this margin level and the historical baseline. The release does not support a confident view on whether 30.9% is the new operating range or a hedge-cycle and hydrology windfall, and that question will dominate the FY26 read.

Pre-lease free cash flow of NZ$249m converted at 122.1% of NPAT, and OCF/EBITDA of 61.6% sits within the historical range (mean 70.8%) and rebuilt from 50.2% in HY25. The effective tax rate of 29.1% is essentially flat against 29.4%, so there is no tax distortion in the headline NPAT growth — PBT growth of 43.8% and NPAT growth of 43.7% read as the same underlying story.

What tempers the quality view is the structural element. Margins above the historical range are by definition harder to underwrite as durable, particularly in an integrated gentailer where wholesale conditions can swing with hydrology and hedge timing. ROE eased to 4.6% from 5.4% as equity grew faster than earnings via the raise, which means the shareholder return on capital is moving the wrong way during the build phase even as absolute earnings rise. The interim dividend of 16 cents was held flat and is comfortably covered (62.2% of pre-lease FCF, 76.6% of NPAT versus 89.4% prior), giving room to fund Contact31+ without immediate distribution pressure.

This briefing cannot assess the underlying generation, hedge, and retail-pricing drivers behind the margin expansion without segment-level disclosure beyond what is provided in the release.