EBITDAF up 86% but PBT fell 40% on acquired-swap unwinds

The HY22 base was depressed by a $65m revenue hit from the early exit of the Norske Skog long-term hedge, and HY23 includes the first full half of acquired Trustpower retail. Below EBITDAF, non-cash unwinds on acquired Norske Skog, Tilt and Trustpower swaps reduced PBT, while the effective tax rate normalised from 5.1% in HY22 to 24.8%. Operating cash flow rose 161% to $345m and OCF/EBITDAF conversion lifted to 76.5%, an unprecedented level versus the supplied historical baseline (mean 59.8%, range 54.3–65.4%). Net debt/EBITDAF improved from 6.7x to 3.91x and the interim dividend rose 8.7% to 8.7 cps.

The Trustpower retail acquisition delivered its first full half of contribution and the HY22 base carried a $65m hedge-exit drag, so the +48.8% revenue and +86.4% EBITDAF prints overstate organic momentum. The reconfirmed FY23 EBITDAF guidance of $620m — or $795m normalised before the non-cash swap unwinds — is the more useful anchor than the headline growth rates.

Cash quality is the durable story. OCF rose 161% to $345m, conversion lifted to 76.5% versus a baseline mean of 59.8%, and FCF/NPAT reached 117.4% with working capital essentially flat. The cash generated reduced net debt/EBITDAF from 6.7x to 3.91x — the lowest reading in the supplied historical range — while capex was modest at 5.8% of revenue. This matters because the doubled EBITDAF translated into balance-sheet repair rather than working-capital build.

PBT is the cleaner operating read. PBT fell 40.0% and NPAT fell 50.0%; the 10pp gap is explained by the effective tax rate normalising from 5.1% to 24.8%. The PBT decline itself reflects the non-cash unwind of swaps acquired with Norske Skog, Tilt and Trustpower, not the underlying generation and retail businesses.

HY23 EBITDAF of $451m sits at 72.7% of the reported $620m target, implying only $169m in H2 on the reported basis — well below the $339m H2 FY22 print. The gap reflects the back-loaded swap-unwind drag, which is why management points to the normalised $795m view; on that basis H2 implied EBITDAF is roughly $344m, close to the prior comparable H2. Hydrology was supportive in H1, with the largest generation volume in company history and a further 675GWh spilled to keep lakes within resource consents, so H2 hydrology is now the principal swing factor for delivery against guidance.

The EBITDAF margin of 34.7% — unprecedented in the supplied baseline (mean 27.7%, range 23.8–32.3%) — is supported by the Trustpower retail mix and a hydrology-supported generation half rather than timing, because OCF/EBITDAF of 76.5% and a near-flat working-capital movement say cash followed earnings. Leverage falling from 6.7x to 3.91x net debt/EBITDAF is also a real balance-sheet outcome, not an accrual artefact.

What is not durable is the headline growth rate. Revenue +48.8% and EBITDAF +86.4% include the Trustpower step-up and the $65m hedge-exit reversal in the base, so neither annualises. The 50% NPAT decline is similarly mechanical: a low HY22 tax rate of 5.1% combined with non-cash swap unwinds dragging PBT. The economic read is closer to the normalised $795m FY23 EBITDAF guide than to either headline growth rate, and the cash-conversion and leverage progress are the lines most likely to carry forward.

This briefing cannot assess the quarter-by-quarter schedule of the acquired swap fair-value unwind or the organic-versus-acquired split inside the integrated Trustpower retail book.