Sky swings to $57.7m PBT and $87.1m free cash flow as Sky Free lifts revenue...

What changed

Revenue rose 7.7% to $414.4m, which the company attributes to the Sky Free (Three) acquisition. Profit before tax swung from a $2.4m loss to $57.7m, and NPAT from a $2.0m loss to $52.2m. Underlying EBITDA, as disclosed in the release, was $78.2m, up 29% on HY25. Operating cash flow rose 57.9% to $99.0m, capex fell to $26.4m from $40.8m, and company-reported free cash flow was $87.1m versus $7.5m. The balance sheet shifted from roughly $27.5m net cash to about $99.9m net cash, with gross borrowings at nil and the bank facility undrawn. Inventories (largely programme rights) grew 20.6% to $80.5m, consistent with the expanded content footprint. The interim dividend was lifted to 15.0 cps from 8.5 cps, described as ~50% of full-year dividend guidance.

What matters

• Earnings base has reset upward, but partly through M&A. The $60.1m PBT swing is large versus a near-breakeven base, and management explicitly credits the Sky Free acquisition for the top-line lift. That means a meaningful portion of the uplift is inorganic rather than like-for-like.
• Cash generation materially outran earnings. FCF of $87.1m versus NPAT of $52.2m (166.9%) reflects both stronger OCF and a sharp drop in capex (10.6% of revenue last year to 6.4% now). Capex intensity is a swing factor to watch into H2 and FY27.
• Capital return signal. The 76.5% lift in the interim DPS, framed as half of full-year guidance, implies a full-year dividend meaningfully above FY25's level. Dividend cover from FCF (23.7% payout of pre-lease FCF) is comfortable on current-half numbers; cover from NPAT (39.6%) is tighter but still adequate.

Expectations

No explicit FY26 revenue or EBITDA guidance and no forward-work balance were disclosed in the extracted materials, so target-relative judgement is limited. On shape, FY25 was not strongly second-half weighted (HY25 was ~51% of FY25 revenue and ~36% of FY25 EBITDA, the latter reflecting an unusually weak HY25 EBITDA base). Annualising HY26 revenue gives ~$828.9m, about 10.4% above the FY25 $750.7m anchor; the release also states HY25 programming costs were first-half heavy and that pattern reverses, suggesting H2 margin dynamics will differ. The declared 15.0 cps interim is stated by the company to be ~50% of full-year dividend guidance, implying a ~30 cps full-year dividend signal — this is the clearest forward marker in the release.

Quality of result

Mixed but better than headline optics suggest. Positives: operating cash flow genuinely improved, the balance sheet is debt-free with a $99.9m cash buffer, and the prior-year tax credit on a small loss distorts NPAT comparability — using PBT (the cleaner read) the swing is still a $60.1m improvement. Qualifiers: (i) revenue growth is acquisition-assisted rather than organic, (ii) capex fell ~$14.4m half-on-half and is a visible FCF tailwind that may not repeat, (iii) inventory days rose to ~35 from ~32, a working-capital build in programme rights that can reverse through the P&L, and (iv) the $78.2m "Underlying EBITDA" is not reconciled in the supplied data to statutory PBT of $57.7m, so the gap between underlying and statutory earnings cannot be quality-tested here. The effective tax rate of 9.1% on HY26 PBT is low and flatters NPAT relative to a normalised rate.

Unresolved

• What is the organic (ex-Sky Free) revenue and EBITDA growth rate, and what are the acquired business's standalone economics and integration costs?
• What drives the 9.1% effective tax rate, and is it sustainable or a timing item?
• How does $78.2m Underlying EBITDA reconcile to $57.7m PBT — which items are add-backs and are any recurring?
• Is the ~$14m capex step-down a phasing effect (post-migration) or a structurally lower run-rate, and what is FY26 capex guidance?
• With inventories up 20.6%, how much of the FCF uplift is offset by forward programme-rights commitments not yet on balance sheet?
• What is the outlook for core Sky Box/streaming subscriber economics, which are not separately disclosed in the extracted data?

This briefing cannot assess subscriber trends, segment profitability, or the organic-versus-acquired split of the result, as those disclosures are not present in the supplied extraction.

Key metrics

Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.