PBT fell 17.0% while FCF swung to NZ$25.5m on a 45% capex cut

PBT fell 17.0% to NZ$78.4m and NPAT fell 11.6% to NZ$50.4m, even though the effective tax rate eased from 39.7% to 35.7%. The cleaner read on operating performance is PBT, and it weakened.

Operating cash flow was effectively flat at NZ$81.8m (+1.7%). Pre-lease free cash flow swung from –NZ$22.0m to NZ$25.5m, which the supplied historical pattern puts at the upper edge of the company's recent range (4-period mean –NZ$27.5m). The driver was a 45% step-down in capex on investment properties to NZ$56.4m, not earnings growth.

Gross borrowings fell to NZ$1.2b, gearing reduced 100bps to 37.4%, and the weighted average interest rate dropped from 5.30% to 4.81%. NTA per share eased from NZ$1.14 to NZ$1.12.

Capital raise adds balance-sheet context, with NZ$1b capital raised, but borrowings and gearing are the direct leverage evidence.

Plaza sale adds balance-sheet context, with NZ$118.9m disclosed value, but borrowings and gearing are the direct leverage evidence.

PBT fell 17.0% on revenue up 2.9%, so something in the cost, fair-value, or financing stack absorbed the rent uplift. At the same time, the headline FCF improvement is almost entirely a capex story — capex/revenue dropped from 38.9% to 20.8%. The cash quality therefore looks better than the earnings quality, but only because spend was deferred.

Dividend coverage versus statutory earnings has widened. The full-year dividend of 5.6cps (vs 5.4cps) sits at 182.4% of NPAT, up from 151.3% the year prior. Guidance of 5.75cps for FY27 implies a further step in cash distribution against an earnings base that just shrank. This matters because the deleveraging narrative depends on internal cash retention and disposal proceeds, not on dividends moving in line with profitability.

Segment mix shifted materially. The Office segment fell from 24.6% to 17.8% of revenue, while Retail-led mixed-use rose to 65.1% and a re-grouped "Other" line jumped from 0.3% to 15.5%. Reported leasing spreads (office +13.4%, retail-led mixed-use +6.6%) suggest rent growth is intact within categories, so the headline revenue rate understates underlying leasing momentum once the portfolio composition change is stripped out.

No quantitative FY27 financial targets were supplied beyond the 5.75cps dividend guidance. The half-year shape was unusually second-half-weighted: HY26 carried 50.3% of full-year revenue but only 19.5% of full-year NPAT, so the H2 NPAT print of roughly NZ$40.6m carried the year. That skew means the next interim is unlikely to look like a clean run-rate.

Forward revenue continuity is a real question because the portfolio has been reshaped through disposals during and after the period, and a further large disposal is set to settle in FY27. The release does not quantify the rental income lost, so the FY27 starting base for like-for-like revenue cannot be triangulated from the supplied materials.

Pre-lease FCF at NZ$25.5m sits at the upper edge of Annolyse's historical baseline (range –NZ$72.7m to NZ$34.2m), but it is anchored on capex falling NZ$46m, not on operating cash conversion improving. Operating cash flow itself rose only 1.7%. If capex normalises toward the historical pattern, the FCF print does not repeat at this level.

Working-capital and receivables signals are constructive but secondary. Operating working-capital build of NZ$7.8m is within the historical range (4-period mean NZ$22.8m), and debtor days at 11.1 sit below the historical baseline of 14.1 days, which is favourable but small in dollar terms. Inventory days rose to 132.5 from 123.4, reflecting development-land holdings. The interest rate reduction to 4.81% is a durable benefit to FY27 net interest if held, but the disposal-supported gearing improvement is non-repeating once the asset base finishes resetting.

This briefing cannot assess fair-value movements on investment properties or the specific line-by-line bridge between PBT and the prior comparable.