Channel lifts dividend 42% as NPAT drops 30% on Wiri discontinued-op swing

What changed

Revenue was essentially flat at $70.2m (+0.5%) and EBITDA edged up 0.7% to $48.5m, with management attributing the result to contracted revenue, PPI escalation and cost discipline offsetting the loss of legacy Wiri lease income. Operating profit fell 10.0% to $26.5m and PBT fell 6.8% to $18.4m on higher depreciation. Reported NPAT dropped 30.0% to $11.6m, but this is distorted below the line: profit from continuing operations actually rose 2% to $13.1m, while discontinued operations swung from a $3.8m after-tax gain in HY24 to a $1.5m loss in HY25. Operating cash flow rose 7.9% to $39.7m on lower working capital absorption, capex eased to $20.5m (from $23.3m), and gross borrowings fell to $301.2m from $328.3m. Net debt/EBITDA improved to 6.2x from 6.8x. Total equity jumped 64.9% to $801.7m and total assets rose 37.8% to $1,334.8m, indicating a significant revaluation or asset recognition event not fully explained in the extract. The interim dividend was lifted 42% to 6.25 cents per share.

What matters

• Underlying earnings are flat, not declining. PBT down 6.8% is the cleaner operating read once the discontinued Wiri lease swing is stripped out. Continuing NPAT of $13.1m (+2%) is the figure that matches the strategic narrative around contracted storage and jet demand.
• Dividend ambition now runs ahead of reported NPAT cover. The 6.25c interim implies a payout of roughly 223% of HY25 NPAT and about 74% of disclosed normalised free cash flow of $35.2m (versus 26% in HY24, when normalised FCF was $63.4m). The dividend is covered on the normalised FCF measure but the coverage buffer has compressed sharply.
• Leverage is moving the right way. Gross borrowings down $27.1m and implied net debt of ~$298.7m take net debt/EBITDA to 6.2x from 6.8x. Against a capital-intensive infrastructure model with ~29% capex/revenue, deleveraging while still funding Z Energy jet storage is the most constructive signal in the release.

Expectations

No quantified FY25 revenue or EBITDA target was disclosed. Management reiterated that jet fuel demand is tracking in line with prior FY25 guidance and noted the Z Energy jet storage project will now complete in H2 2026, roughly two quarters earlier than the previous Q1 2027 schedule — pulling forward the associated contracted revenue stream. Annualised HY25 revenue of $140.4m is effectively flat versus FY24 revenue of $139.8m. HY24 accounted for ~50% of FY24 revenue and ~51% of FY24 EBITDA, so absent contract step-ups the current run-rate points to a flat full-year top line, with the Wiri revenue drop already absorbed in the HY25 base.

Quality of result

The operating result is durable in character: revenue is contracted, EBITDA growth came from PPI escalation and cost discipline rather than volume, and throughput was stable at 1.7bn litres. Cash conversion actually improved (OCF/EBITDA 82% versus 76%), helped by lower receivables (37.5 days from 41.2) and lower inventories — a modest working-capital tailwind but not the primary driver. The gap between statutory NPAT (-30%) and continuing NPAT (+2%) is fully explained by the disclosed discontinued-operations swing, not by tax (the effective rate actually fell to 28.8% from 35.0%). The weaker element is the normalised free cash flow step-down to $35.2m from $63.4m, which is material and not bridged in the extracted material.

Unresolved

• What drove the $28m decline in normalised free cash flow half-on-half, given OCF rose and capex fell? The reconciliation from statutory to normalised is not provided.
• What explains the 64.9% rise in equity and 37.8% rise in total assets year on year? This scale of balance-sheet movement implies a revaluation, asset recognition or equity event that is not detailed in the excerpts provided.
• Is the lifted 6.25c dividend sustainable through the Z Energy build phase, given payout now consumes ~74% of normalised FCF versus 26% previously?
• What is the expected FY25 EBITDA shape once the Wiri lease step-down annualises?

This briefing cannot assess the normalised free cash flow bridge, the composition of the equity and total-asset uplift, or any unstated management guidance, because those disclosures are not in the extracted material.

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Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.