Borrowings cut 76% via Highbrook Fund deal as PBT grew 17.1%

Gross borrowings fell to $698.8m from $2.9b a 76.2% reduction while cash rose to $531.8m from $10.9m, leaving net debt at roughly $167.0m versus $2.9b in the prior comparable. Revenue rose 10.4% to $148.8m and profit before tax grew 17.1% to $62.2m, supported by like-for-like rental growth of 5.2% and new management-fee income from the Highbrook Fund. Reported NPAT rose 35.8% to $61.8m, but that headline was flattered by an effective tax rate of 0.6% versus 14.3% in HY25. The interim distribution was lifted 5.0% to 1.70625 cents per unit, and operating cash flow rose 8.6% to $75.9m.

Total assets fell 14.0% to $4.1b and total liabilities fell 42.4% to $939.7m, rotating GMT from a directly held, debt-financed property book toward a lighter balance sheet with $531.8m of cash and an external management-fee revenue stream. This means structurally lower interest cost going forward, but a portion of future earnings now depends on the performance of a fund GMT manages rather than wholly owned property.

PBT is the cleaner operating read. NPAT growth of 35.8% sits 18.7 percentage points above PBT growth of 17.1% solely because the effective tax rate collapsed from 14.3% to 0.6%. Underlying operating progress is the 17.1% PBT improvement, supported by 5.2% like-for-like rental growth and operating earnings after tax of $65.8m versus $62.1m. Modelling NPAT growth at headline rates would overstate forward earnings power.

Capex collapsed to near-zero. Cash capex on investment properties and PP&E was about $0.03m against $56.1m a year earlier, reflecting a deliberate development pause and the fund-related asset rotation rather than ongoing portfolio reinvestment. This materially flatters reported free cash flow optics.

Annualising HY26 revenue gives $297.6m versus FY25's $277.9m, broadly consistent with the company's reaffirmed cash earnings guidance and stated full-year distribution guidance in line with the 3.4125 cents per unit announced for HY26. No specific revenue or earnings target is provided in extraction, so the read on second-half shape hinges on whether like-for-like rental growth holds and Highbrook Fund management fees scale as expected. The release does not quantify either, which limits forward conviction beyond the reaffirmed cash earnings target.

However, OCF growth lagged PBT growth of 17.1%, so cash conversion deteriorated relative to the operating earnings line. The very high FCF-to-NPAT ratio of 122.7% is balance-sheet assisted rather than evidence of stronger organic conversion: capex of $0.03m versus $56.1m last year reflects a paused development pipeline, not improved operating cash generation. The tax benefit driving NPAT growth is also unlikely to repeat at the same scale; a 0.6% effective rate should not be treated as a run-rate, and applying a more normal rate to PBT would compress reported NPAT growth materially.

The reduction in gross borrowings to $698.8m and the cash build to $531.8m do structurally lower interest expense and improve debt headroom, which is a genuine quality improvement provided the proceeds are deployed productively. Reported NPAT growth of 35.8% should therefore be read against the 17.1% PBT advance.

This briefing cannot assess the financial performance of the Highbrook Fund itself, the precise valuation mechanics of the transaction, or the trajectory of capitalisation rates and independent asset values, none of which are quantified in the supplied data.