Underlying profit up 21.5% while IFRS NPAT fell 50.5% on revaluation

Revenue grew 16.2% to $238.7m on 1,007 occupation right sales (up 3%) and a 29.7% development margin. These Financial Results are for the Year Ended 31 December 2022.

Operating cash flow slipped 3.7% to $369.2m, but capex on investment property and PP&E stepped up materially to $633.8m, taking free cash flow to -$14.7m. Gross borrowings rose 43.8% to $1.1b, lifting net debt to roughly $1b from $738.6m. The board declared a final dividend of 11.6 cents per share, taking the full-year dividend to 22.3 cps (FY21: 18.5 cps).

• FY21 NPAT was inflated by very large fair value gains on investment property during a hot residential cycle. The 21.5% rise in underlying profit, the 16.2% revenue lift and 1,007 occupation right sales describe an operating business that improved year on year. The PBT/NPAT divergence (a -0.7 percentage-point gap) and the unusually low effective tax rate (-1.5% current vs 0.0% prior) reinforce that the statutory line is the wrong read for operating momentum; PBT is also distorted by the same revaluation tailwind unwinding.
• Development intensity has lifted leverage materially. Capex of $633.8m represents 265.5% of revenue, reflecting active land, build and refurbishment across New Zealand and Victoria. That investment drove gross borrowings up by $327.4m and net debt up by roughly $310m. Management notes development assets exceed net debt, but the funding mix has clearly tilted toward debt during a higher-rate cycle.
• Cash from operations remains the underwriter of the model. Despite a softer resale settlement cadence, operating cash flow of $369.2m is only $14.2m below the prior year, supported by deferred management fees and resale gains. This matters because the development pipeline depends on operating cash plus debt; any sustained slowdown in unit settlement times would compress that funding capacity.

Half-year shape shows revenue and NPAT close to evenly split (HY22 was 47.8% of full-year revenue and 50.0% of full-year NPAT), so this is not a heavily second-half-weighted result and there is no obvious run-rate uplift to extrapolate.

Management flags that settlement timing is normalising as the residential market eases, which means resale-driven cash flows and realised resale gains may face a tougher comparable in FY23. The release does not quantify forward sales, development backlog conversion or debt capacity, so the briefing cannot judge how much of the lifted capex run-rate is sustainable beyond FY22.

The 21.5% rise in underlying profit is grounded in higher unit volumes, a 29.7% development margin, and rising average proceeds per new sale ($658,000 vs $630,000), with deferred management fees and realised resale gains both higher. Operating cash flow of $369.2m, only 3.7% below FY21, confirms the cash engine still works through a softening housing tape.

The lower-quality elements sit below the operating line and on the balance sheet. Free cash flow of -$14.7m and capex at 265.5% of revenue mean shareholder returns are being funded alongside meaningful incremental debt rather than from operating cash alone, with the full-year dividend at 22.3 cps representing 19.1% of statutory NPAT (versus 3.6% in FY21, when NPAT was revaluation-inflated). Reported ROE fell to 12.3% from 28.2%, but that decline is again largely a reflection of the prior period's revaluation-fattened earnings base rather than an operating deterioration.

This briefing cannot assess forward occupancy, settlement velocity, unit pricing trajectory, or the company's internal hurdle on development returns, none of which are disclosed in the release.