GMT operating earnings up 10.6% as valuation drag reverses to $45.5m profit

The swing from a prior-period statutory loss of $163.2m to a $45.5m profit is almost entirely a reversal of property fair-value movements rather than an improvement in recurring income generation, so the year-on-year NPAT and PBT comparisons carry limited analytical weight on their own.

Operating cash flow improved to $69.9m from $50.1m. Capex fell sharply to $56.1m from $99.2m in HY24, reflecting a lower development spend in the period rather than a permanent step-down in capital intensity.

Gross borrowings rose to $1.5b from $1.4b, and NTA per unit declined to $2.012 from $2.305 a year earlier, reflecting ongoing portfolio revaluation pressure alongside the higher debt load.

Capital raise adds balance-sheet context, with NZ$40m capital raised, but borrowings and gearing are the direct leverage evidence.

Capital raise adds balance-sheet context, with NZ$106.7m capital raised, but borrowings and gearing are the direct leverage evidence.

The disclosed operating earnings after tax of $62.1m compares to $61.3m in HY24 — modest growth, but durable. However, the effective tax rate has moved to 14.3% from an anomalous -4.3% in the prior period following the removal of tax depreciation on buildings, which the release confirms. Investors should use cash earnings per unit (3.74 cpu, with full-year guidance of 7.5 cpu) rather than statutory NPAT as the primary earnings benchmark.

NTA erosion and leverage increase warrant attention. NTA per unit fell 12.7% to $2.012, while gross borrowings rose $108.6m to $1.5b. The loan-to-value ratio disclosed in prior periods was 28.7%; the direction of both metrics in HY25 points to tighter balance sheet flexibility, even if absolute leverage remains moderate relative to asset base. The $3.1bn portfolio with 98.1% occupancy and a 6.0-year weighted average lease term provides support, but the NTA trajectory matters for refinancing and covenant headroom.

Distribution is not covered by post-capex cash flow. The interim distribution of 1.625 cents per unit represents a payout ratio of 354.3% against post-capex free cash flow (OCF of $69.9m less capex of $56.1m = $13.8m). Distributions are funded by operating cash flow in aggregate, consistent with property trust convention, but the capex-intensity of development activity (41.6% of revenue) means distributions require external or balance-sheet funding during active development phases. Full-year guidance of 7.5 cpu has been reaffirmed and is underpinned by cash earnings rather than FCF.

The first half contribution of 3.74 cpu is broadly on-track for the full-year guide. The prior comparable period showed revenue was 41% first-half weighted in FY24, with a heavier second half; the current annualised revenue run-rate of approximately $269.6m implies continued growth, though the pace will depend on development completions and leasing velocity.

The key test in the second half is whether the funds management initiative referenced in the release begins to generate fee income, and whether development spend accelerates again. Operating earnings growth from HY24 to HY25 was only 1.3% on an after-tax basis — modest relative to the revenue uplift — which limits the earnings leverage visible so far.

The 7.3% like-for-like rental growth and near-full occupancy (98.1%) suggest the income base is well-supported. The much sharper 34.7% revenue headline partially reflects development completions flowing into income, which are lumpy by nature.

The statutory $45.5m profit includes property fair-value movements and is not a clean run-rate measure. Cash conversion from operating activities is healthy at $69.9m, but post-capex free cash flow of $13.8m is slim given the active development pipeline, meaning distribution sustainability rests on cash earnings rather than residual cash after investment. The higher tax rate going forward is a structural earnings headwind that was not present in the prior comparable.

This briefing cannot assess the cap-rate assumptions embedded in the portfolio valuation, the specific covenant structures governing GMT's debt facilities, or the probability-weighted outcomes of the funds management strategy.