TowerCo gain lifted reported NPAT to NZ$837m as adjusted earnings fell

Reported revenue rose 34.1% to NZ$2.5b, reported EBITDAI rose 93.7% to NZ$1b, and reported NPAT rose 367.6% to NZ$837m. Management's own adjusted disclosures strip the disposal effect and show a different picture: adjusted revenue +3.2%, adjusted EBITDAI –5.2%, and adjusted NPAT –7.8%.

The cash statement does not follow the income statement. Operating cash flow fell 19.4% to NZ$369m, free cash flow fell to NZ$115m from NZ$183m, and the effective tax rate dropped to 9.3% from 30.4% on the disposal-related profit. Gross borrowings fell to NZ$1b from NZ$1.5b and net debt to EBITDAI moved to 0.7x from 2.5x. The interim dividend was lifted to 13.5cps (HY22: 12.5cps).

• Reported NPAT of NZ$837m and the +367.6% growth rate are produced by the TowerCo disposal proceeds; on the adjusted basis Spark itself publishes, every headline line is flat-to-down. The PBT–NPAT growth gap of –169.5pp and the 9.3% effective tax rate (an unprecedented low against Annolyse's historical baseline of 30.4%–40.7%) both point to a non-trading item carrying the result.
• Cash conversion deteriorated and now sits below the historical baseline. OCF/EBITDAI of 35.4% is sharply below the prior 85.1% and well below the company's historical range of 57.9%–134.6%. This matters because the disposal gain inflated reported EBITDAI without contributing to operating cash, so the cash ratio falls as accounting earnings rise. Free cash flow to NPAT collapsed to 13.7% from 102.2%.
• Deleveraging is real and changes capital flexibility. Net debt fell by roughly NZ$657m and leverage moved to an unprecedented-low 0.7x EBITDAI versus a historical mean of 3.19x. That is what is funding the lifted interim dividend (13.5cps, payout 30.2% of reported NPAT versus 130.2% prior) and the previously flagged FY22 plan to return up to NZ$350m to shareholders.

Spark's own commentary already calls out "higher product costs and intensifying competition in broadband and cloud" pressuring margins in the half, with mobile the offsetting strength. This release therefore supports the dividend trajectory and the balance-sheet capacity for capital return, but does not support an inference that underlying earnings are growing — management's adjusted disclosures explicitly say the opposite.

Shape context from HY22/FY22 (HY22 was 50.8% of FY22 revenue and 43.7% of FY22 NPAT) implies a typically second-half-weighted year, but that pattern cannot be extrapolated through a disposal-distorted half.

The same transaction lifts revenue, EBITDAI, and NPAT, suppresses the effective tax rate, and explains the unprecedented-high reported EBITDAI margin of 41.1% and ROE of 40.6% — none of which is repeatable. The cleaner operating read is PBT growth of 198.1% only after removing the disposal, which Spark's adjusted EBITDAI –5.2% disclosure does for the reader.

Cash quality is the weakest part of the result. Operating cash flow fell despite reported earnings tripling, and capex ticked up to NZ$250m (9.9% of revenue) from NZ$216m, leaving pre-lease FCF down NZ$68m year on year. Working-capital movement of NZ$15m and inventories up to NZ$108m are within the company's historical range and are not the driver; the driver is that the gain sits in earnings, not in OCF. The deleveraging and dividend lift are durable balance-sheet outcomes, but they are funded by a one-off disposal rather than by improving cash generation from the underlying business.

This briefing cannot assess management's internal segment economics or the specific tax treatment of the TowerCo proceeds without the detailed note disclosures.