Cash conversion fell 49.5% while borrowings rose 19.7% to fund growth capex

Gross borrowings rose 19.7% to $6.6b and net debt increased to $6.3b from $5.2b, while operating cash flow fell 49.5% to $195.0m from $386.4m.

Free cash flow before lease items swung to -$248.9m from -$71.9m, so capex of $443.9m (14.8% of revenue) increasingly outran cash generated by the operating business. Revenue fell 10.4% to $3b.

Reported profit swung sharply: PBT rose 173.2% to $155.2m and NPAT rose 292.0% to $549.8m, largely reflecting a $280.2m discontinued-operation gain against $0.2m the prior year, alongside an 89.5% effective tax rate.

Capital raise adds balance-sheet context, with NZ$575m capital raised, but borrowings and gearing are the direct leverage evidence.

Capital raise adds balance-sheet context, with NZ$1.5b capital raised, but borrowings and gearing are the direct leverage evidence.

Capital raise adds balance-sheet context, with NZ$500m capital raised, but borrowings and gearing are the direct leverage evidence.

Total assets of $18.2b sit above the company's recent historical range (average $13.2b), and gross borrowings rose 19.7% to $6.6b while net debt climbed to $6.3b from $5.2b. This matters because Infratil is funding portfolio growth increasingly with debt at the same time operating cash generation weakened, narrowing headroom for further investment.

Cash conversion deterioration. Operating cash flow fell 49.5% to $195.0m and free cash flow before lease items was -$248.9m versus -$71.9m a year earlier, leaving free cash flow at -45.3% of NPAT. This means the reported profit improvement was not matched by cash generation, so growth funding leaned more heavily on borrowing than on the operating business.

Tax and one-off distortion. NPAT growth of 292.0% outpaced PBT growth of 173.2% by 118.8 percentage points, driven by an 89.5% effective tax rate and the $280.2m discontinued-operation gain. This means the 292.0% NPAT growth headline is substantially inflated by non-operating and tax items rather than underlying trading improvement, and PBT growth is the cleaner operating read.

The half-year context shows NPAT of $605.7m in HY26 versus $549.8m for the full year, meaning the implied second half was a loss of $55.9m, while revenue was more evenly split (HY26 contributed 48.9% of the full-year total).

That gap matters because the full-year profit growth headline conceals a second-half swing back to a loss, raising the question of whether the discontinued-operation gain and elevated tax charge were concentrated early in the year rather than reflecting a sustained improving trend into year-end.

Much of the reported improvement looks timing- and item-driven rather than durable. The $280.2m discontinued-operation gain, the 89.5% effective tax rate, and an implied second-half NPAT loss of $55.9m all point to a result stronger in the income statement than in cash. Free cash flow before lease items was negative in both years and worsened to -$248.9m, while operating cash flow's 49.5% decline against a 14.8%-of-revenue capex programme means core investment was increasingly funded externally.

• OCF of $195.0m less capex of $443.9m produced a pre-lease free cash flow shortfall of $248.9m, worse than the prior year's -$71.9m shortfall
• Gross borrowings rose 19.7% to $6.6b and net debt rose to $6.3b, consistent with growth capital being sourced externally rather than from operations

This combination suggests the FY26 profit recovery should be read alongside the cash and balance-sheet story rather than in isolation.

This briefing cannot assess whether the referenced FY27 EBITDAF guidance will be met, because no quantified guidance figure was included in the supplied materials.