NPI grew 9% but NPAT swung to a $1.8m loss as revaluation gains faded

Net property income reached $66.6m, up 9.0%, and net operating income before tax rose 12.7% to $51.3m on revenue growth of 13.7%. Below the line, PBT fell 94.6% to $2.7m and NPAT swung to a $1.8m loss from $42.2m, with total comprehensive income of just $0.6m versus $40.7m.

Operating cash flow rose 26.6% to $64.2m, but capex jumped 80.5% to $152.7m, pushing pre-lease free cash flow to -$88.5m. Annolyse's historical baseline classifies that level as below the normal range against a three-period mean of -$33.6m and a prior low of -$57.8m.

Gross borrowings rose 9.6% to $1.2b and equity slipped 1.5% to $2.4b. The interim dividend was held at 1.675 cps.

NPI +9.0%, net operating income before tax +12.7%, and AFFO of 3.42 cps (+6.2%) all moved up on leasing momentum and market rental growth. The reported loss reflects the absence of a HY22 revaluation gain plus an effective tax rate that jumped to 166.7% from 15.1%, so PBT is the cleaner operating read and AFFO is the cleaner cash read.

Development capex is now the binding constraint on cash. Capex of $152.7m equals 138.6% of revenue, and pre-lease FCF of -$88.5m sits well below the supplied historical range. Higher operating cash flow was overwhelmed by $119.4m on development properties and $28.0m on investment properties, so growth is being funded by debt and asset sales rather than retained cash flow.

Leverage drifted weaker despite $275m of capital-partnership sales settling in the period. Borrowings rose by roughly $108m while equity fell. Management's pro-forma gearing of around 30% depends on remaining contracted sales completing as expected.

The supplied seasonality context shows HY22 represented 48.4% of FY22 revenue and 38.4% of FY22 NPAT, so the second half is normally heavier on profit and lighter on operating cash conversion.

Annualising the current run-rate implies FY23 revenue around $220.4m, consistent with continued NPI growth. The credibility of the dividend reaffirmation rests on AFFO holding up while development capex remains elevated and sale proceeds continue to land.

NPI and net operating income before tax growth come from leasing and market rental gains, which means the underlying rental cash engine is in better shape than statutory profit suggests. The PBT collapse of 94.6% and the swing to a NPAT loss are dominated by the prior period's revaluation gain not repeating and by a 166.7% effective tax rate that mechanically inflates the tax charge against a small pre-tax base. On a like-for-like operating basis, the AFFO and NPI lines are the more durable signal.

Cash quality is weaker than the operating story implies. Operating cash flow was strong at $64.2m, but capex nearly doubled and pre-lease FCF deteriorated to -$88.5m against the supplied historical range that previously bottomed at -$57.8m. The interim dividend was funded against rising borrowings and capital-partnership proceeds rather than free cash flow, which matters because that funding mix is contingent on continued sale settlements and debt headroom.

This briefing cannot assess directional valuation movements, occupancy and weighted average lease term changes, or debt headroom and covenant positions because those disclosures were not supplied.