NPAT up 41.6% as net debt jumped to $1.7bn and cash conversion fell to 53.5%

NPAT rose 41.6% to $432m and PBT grew 38.1% to $598m on revenue up 4.7% to $8.5b, with EBITDA up 7.2% to $1.1b. Operating cash flow, however, fell 33.4% to $592m, cash conversion (OCF/EBITDA) dropped to 53.5% from 86.1%, and capex jumped 72.7% to $399m. Net debt rose to $1.7b (~$1.7bn) from $191m, lifting net debt/EBITDA from 0.2x to 1.5x, while cash balances nearly halved to $351m. The full-year dividend of 40cps (final 22cps) sits at 74.8% of NPAT and 151.3% of pre-lease free cash flow.

OCF/EBITDA fell from 86.1% to 53.5% as operating working capital absorbed $129m of cash, including a $90m build in contract assets (+243.2%) and a $49m inventory build. Pre-lease free cash flow collapsed from $658m to $193m, so FCF/NPAT conversion fell to 44.7% from 215.7%, which means headline NPAT growth substantially overstates the cash actually available to fund dividends or debt reduction.

Leverage rebuilt and the dividend is no longer covered by free cash flow. Gross borrowings more than doubled to $2b and net debt rose roughly $1.5bn, taking net debt/EBITDA to 1.5x. The 40cps full-year dividend equals 151.3% of pre-lease FCF and 74.8% of NPAT, so this year's distribution was effectively funded from the balance sheet rather than current cash generation.

Segment mix flatters the headline. Residential and Development EBIT margin jumped to 31.4% from 21.0% despite revenue falling to $692m, contributing a disproportionate share of the operating profit step-up. Australia (32.7% of revenue at a 4.2% margin) and Construction (margin slipping to 1.8% from 2.1%) suggest the core volume businesses were not the engine of the year.

The interim shape points to a second-half-weighted year on earnings: HY22 contributed 47.8% of revenue, 45.6% of EBITDA, and 39.6% of NPAT, implying 2H NPAT of around $261m versus $171m in 1H. The disclosed FY22 ROFE of 19.3% sits above the company's ≥15% reference, but no FY23 quantitative guidance is supplied.

The same shape is much less favourable for cash: HY22 produced only 26.5% of full-year OCF, so the second half delivered most of the operating cash even as conversion deteriorated. Whether that 2H run-rate is repeatable in FY23 will determine how quickly leverage normalises and whether the current dividend stays inside free cash flow.

The PBT-to-NPAT growth gap of −3.5pp is small and the effective tax rate normalised to 26.6% from the prior-year −26.8% (a tax credit), so the strength of headline earnings is not a tax artefact. The cash-conversion shortfall, by contrast, is real: OCF/EBITDA at 53.5% versus 86.1% reflects the $129m working capital build (notably the $90m contract-asset jump) and capex intensity doubling to 4.7% of revenue from 2.8%.

The Residential and Development EBIT margin step to 31.4% from 21.0% also flags durability risk because it came on lower revenue, consistent with timing of housing settlements rather than recurring volume growth. Combined with $1.5bn of additional net debt and a payout that exceeds pre-lease FCF by a wide margin, FY22 earnings appear to have benefited from mix and settlement timing while the cash and capital base moved in the opposite direction.

This briefing cannot assess management's FY23 volume outlook, project pipeline visibility, or cost-inflation pass-through assumptions because no forward guidance or backlog figures are supplied in the disclosed materials.