Sky lifts dividend to 7.0c but free cash flow before distributions falls

This matters because the cash available to fund that increase has shrunk sharply from prior periods.

Alongside this, revenue rose 3.7% to NZ$392.7m, EBITDA rose 10.9% to NZ$81.7m, and the EBITDA margin of 20.8% sits above the historical range (mean 18.0%). PBT grew 8.9% to NZ$40.4m and NPAT grew 10.3% to NZ$28.8m. Cash and equivalents fell 16.3% to NZ$47.4m from NZ$56.6m, while total liabilities fell 13.6% and equity rose 5.2%, indicating a lighter but more cash-constrained balance sheet.

The payout ratio against pre-distribution free cash flow reached 147.8%, well above the historical mean of 60.8%, meaning the current dividend is not comfortably funded by free cash flow this half. This matters because a full-year dividend guided to at least 17.5 cents (from at least 15.0 cents) now leans more heavily on second-half cash generation.

Cash conversion sits at the low end of its own range. OCF/EBITDA of 77.0% is barely above the prior comparable's 76.1% and near the bottom of the historical 76.2%-126.7% band (mean 102.1%). This means reported earnings growth is translating into cash at a historically weak rate, even though it is not a fresh deterioration versus the prior half.

Margin strength coexists with inventory build. The 20.8% EBITDA margin is above the historical range, but inventory days of 55.7 sit at the upper edge of the historical band (mean 44.3 days), which could mask working-capital pressure behind the margin improvement.

The historical pattern shows the first half typically delivers around half of full-year revenue and EBITDA, so a comparable second half would support the dividend step-up, but this result alone does not demonstrate that free cash flow will recover enough to cover it comfortably. The gap between profit growth and thin free cash flow is the key uncertainty heading into the second half.

However, cash quality is softer than the profit growth suggests: OCF/EBITDA conversion sits at the lower edge of its historical band, and free cash flow before distributions of NZ$6.8m is materially below the historical average, meaning a larger share of earnings growth this half did not convert into distributable cash. The dividend increase therefore looks more dependent on the balance sheet cushion (cash fell to NZ$47.4m) than on current-period free cash generation, which affects how durable the higher payout is if cash conversion does not improve.

This briefing cannot assess forward segment-level drivers or the sustainability of the margin expansion beyond the disclosed figures.