EBITDAF up 25.5% but $367m Tilt sale gain inflated NPAT to +232.6%

Reported NPAT of $469m (+232.6%) and PBT of $510m (+194.8%) are inflated by a disclosed $367m net gain on the sale of the Tilt Renewables shareholding, which was immediately reinvested into the associated NZ wind farm acquisition. The growth rates are therefore not a like-for-like operating signal.

Cash and balance-sheet movements went the other way. Net operating cash flow rose only 4.1% to $352m, working capital absorbed $258m (operating working capital now $595m versus $337m), and gross borrowings rose 31.2% to $2b. Cash on hand fell to $65m from $163m and net debt/EBITDAF moved to 3.25x from 2.87x.

• The $367m Tilt gain accounts for the bulk of the NPAT step-up, and the effective tax rate dropped to 8.0% from 18.5%, likely reflecting the tax treatment of that gain. Strip it out and the cleaner read is EBITDAF +25.5% and the disclosed $47m EBITDAF lift from Trustpower in FY22. This matters because the reported NPAT growth materially overstates the change in recurring earning power.
• Cash conversion deteriorated even as EBITDAF rose. OCF/EBITDAF fell to 60.6% from 73.0%, with trade debtors up 51.4% to $471m, inventories up to $94m from $24m, and contract assets up to $30m from $2m. Some of that reflects consolidating Trustpower's retail receivables, but the scale of the build means a large share of the FY22 EBITDAF lift did not convert into operating cash.
• Leverage has stepped up post-deals. Net debt rose to $1.9b and net debt/EBITDAF moved to 3.25x. With FCF essentially flat at $284m and full-year dividends absorbing 81.7% of pre-lease FCF, the balance sheet has less headroom heading into the FY23 dividend guidance of 21.8 cents per share.

Synergy targets on the Trustpower acquisition are described as confirmed, and a $47m EBITDAF lift in FY22 is already flagged. The FY22 result was heavily second-half weighted, with HY22 EBITDAF of $242m implying around $339m in the second half once Trustpower consolidated.

The release supports continued Trustpower integration and the wind portfolio coming through, but does not quantify the run-rate uplift, the synergy phasing, or an FY23 EBITDAF range. The gap matters because reported FY22 leverage and cash conversion both lean on FY23 EBITDAF normalising upward.

EBITDAF growth of 25.5% is the cleanest measure, but it is supported by the acquired Trustpower book and the acquired wind generation rather than purely organic expansion, and the sector context cautions against reading EBITDAF without checking hydrology and hedge effects. PBT and NPAT are not clean operating measures this period given the $367m Tilt gain and the unusually low 8.0% effective tax rate.

Cash quality is weaker than the earnings line suggests. Free cash flow of $284m was effectively flat on $282m, with the apparent EBITDAF tailwind absorbed by the $258m working capital build and despite capex falling to $68m from $250m as the prior year carried $194m of growth capex. FCF/NPAT of 60.5% versus 200% in FY21 reflects both the one-off NPAT inflation and the weaker cash translation. The full-year dividend of 20.0 cents (vs 17.0 cents) is covered by pre-lease FCF at 96.2%, leaving little buffer if working capital does not release in FY23.

This briefing cannot assess hydrology assumptions, hedge book positioning, or the synergy realisation timetable underpinning FY23 earnings recovery. Mercury NZ Limited's binding agreement to acquire Trustpower Limited's retail business for NZ$441m, announced prior to this result period, is noted as disclosed context; no line-item reconciliation of that transaction's contribution to the reported figures has been provided in the release.