Mercury NZ EBITDAF margin fell to an unprecedented 23.8% as revenue grew 9.3%

Revenue rose 9.3% to $1.8b, but EBITDAF fell 3.7% to $418m, so the headline volume number masks meaningful operating pressure attributed by the company to lower generation and higher operating expenses, partially offset by sales yields.

The bottom line swung sharply: PBT moved from +$245m to -$96m (-139.2%) and NPAT from +$174m to a -$67m loss (-138.5%), with the PBT-to-NPAT growth gap at only -0.7pp. Operating cash flow fell 19.8% to $227m, capex rose 53% to $202m, and pre-lease free cash flow collapsed to $25m from $151m. The 9.6cps interim dividend was lifted 3.2%, and net debt/EBITDA edged to 5.03x.

EBITDAF margin at 23.8% is the weakest in Annolyse's available history (mean 30.4%, range 27.0%–34.7%), and revenue growth of 9.3% did not translate into earnings because generation was lower and costs higher. For a gentailer, this means the result depended on retail yields and customer growth (888k connections, +33k) rather than wholesale-scale operating leverage.

The NPAT loss is largely below the EBITDAF line, not a tax distortion. The effective tax rate moved only modestly from 29.0% to 30.2%, and PBT and NPAT growth are essentially identical at -139.2% and -138.5%. The $341m swing in PBT on a $16m EBITDAF decline points to depreciation, interest and fair-value movements as the drivers—management commentary in the prior comparable cited the same combination. This matters because the headline loss does not change the operating read materially, but it does flag growing capital intensity feeding through D&A and interest.

Payout ratio versus pre-lease FCF is suppressed because the source-backed cash-dividend bridge is unavailable.

With HY25 EBITDAF at $418m, the implied H2 requirement is roughly $402m—below the $443m H2 outturn implied by FY24's $877m and HY24's $434m. So delivering on guidance does not require a step-up; it requires H2 EBITDAF to be meaningfully softer than the prior H2, which is consistent with the operating pressures already visible.

The release does not quantify hydrology, generation volumes or hedge positions for the period, so the path from the current operating run-rate to the $820m anchor is not transparent from the disclosure provided. The gap that matters is between H2 cash generation and ongoing capex plus dividend cash needs, not the EBITDAF target itself.

Revenue grew but EBITDAF fell, and the EBITDAF margin is at an unprecedented low against the supplied baseline—this is not a working-capital or one-off distortion. Working capital actually released cash ($17m) as receivable days fell from 57.3 to 45.6 and inventory days from 16.4 to 13.9, so the cash conversion at 54.3% (below the historical normal range of 54.5%–76.5%, four-period mean 65.4%) is being driven by the earnings shortfall itself rather than by debtor or inventory build.

Capital allocation is the second quality concern. Capex/revenue rose to 11.5% from 8.2%, FCF/NPAT inverted to -37.3% from +86.8%, and ROE turned to -1.4% from +3.6%. With pre-lease FCF at $25m and the interim dividend uncovered on that basis, the dividend lift is being funded from debt capacity. Net debt/EBITDA at 5.03x remains within the four-period range (3.90x–6.70x), but it is moving the wrong way at a time of rising build spend.

This briefing cannot assess the period's hydrology conditions, hedge positions, or the composition of fair-value movements within finance income/expense, because those details are not present in the supplied excerpts.