OCF fell 25% as capex doubled and cash conversion dropped to 76.2%

• Revenue rose 1.9% to NZ$378.6m, the lower edge of the historical range (mean 3.4%).
• PBT fell 6.8% to NZ$37.1m and NPAT fell 7.8% to NZ$26.1m, both within historical norms; PBT margin of 9.8% sits inside the historical band.
• OCF fell 25.1% to NZ$56.1m; capex more than doubled to NZ$40.2m (10.6% of revenue versus 5.0%); pre-lease FCF dropped to NZ$16.0m from NZ$56.4m.
• Sky resumed dividends at 6.0 cps and announced a buyback against a NZ$55.2m net cash position.

Cash conversion at 76.2% sits below the three-period range of 77.0%–126.7%, and pre-lease FCF compressed to NZ$16.0m versus the historical mean of NZ$39.5m and prior-period NZ$56.4m. The income-statement decline is modest and within normal range; the cash decline is where the period actually weakened, which changes the read on the headline result.

Inventory build is unprecedented. Inventory days reached 63.6, well above the four-period range of 31.6–55.7 days and mean of 42.3 days. Management cited securing key rights for World Rugby and Formula 1, which points to programming-cost timing, but the build needs to convert to revenue and margin in H2 to validate the cash deployed.

Payout ratio versus pre-lease FCF is 86.4% based on the source-backed deterministic derivation.

Management reiterated a NZ$35.0m permanent cost-savings target for FY23, which is the only quantified anchor in the release.

For shape, H1 FY22 represented 50.5% of full-year revenue, 45.5% of NPAT and 62.6% of OCF — meaning FY22 was H1-heavy on operating cash. If that pattern holds, H2 OCF is typically the smaller half, and current-period cash conversion is already running below historical norm. That makes the FY23 cash trajectory dependent on either the working-capital build reversing or cost savings delivering ahead of pace; the release does not provide enough detail to judge which is more likely.

On the income statement alone, this is a flat result with revenue at the lower edge of historical growth.

The quality concern sits below operating profit. Capex of 10.6% of revenue is more than twice the prior-period 5.0%, the working-capital movement absorbed cash on a scale outside recent history, and inventory days are unprecedented. Pre-lease FCF/NPAT compressed from 199.6% to 61.2%, so the resumed dividend is being declared at a much weaker conversion ratio than in prior comparable periods. If the inventory build and capex step-up reflect transitional content-rights investment, the cash position should rebuild in H2; if they reflect a new structural run-rate for content acquisition and infrastructure, dividend and buyback cover narrows materially from here.

This briefing cannot assess H2 content-cost phasing, programming-rights amortisation timing, or the eventual quantum and pacing of the announced buyback.