PBT up 169.6% but working-capital build hits unprecedented NZ$27.7m

Revenue from continuing operations fell -1.8% to NZ$560.5m, sitting below the company's historical mean growth rate of 3.3% and at the lower edge of its historical range, reflecting the wind-down of gas-related revenue streams. NPAT grew 405.7% to NZ$124.4m, amplified by the effective tax rate falling from 65.4% to 29.9%—PBT growth is the cleaner operating read here.

Operating cash flow rose to NZ$276.9m from NZ$188.0m. Against that, operating working capital absorbed NZ$27.7m in the period, which is an unprecedented position versus the company's historical average release of NZ$118.9m across prior comparable periods.

The NZ$27.7m working-capital absorption is NZ$146.6m above the historical mean of NZ$-118.9m (i.e., a release). Debtor days of 28.4 days are above the company's historical range of 18.3–26.8 days, and the receivables balance on the balance sheet rose materially. This absorption partially offsets what would otherwise be a stronger operating cash flow quality read, and if collection normalises slowly it represents a timing headwind into the second half.

Segment-mix shift supports PBT but requires context. Electricity distribution revenue rose to NZ$489.0m (87.2% of group versus 82.1% prior), while gas distribution revenue fell to NZ$39.9m from NZ$68.3m. Electricity distribution segment earnings grew to NZ$200.4m from NZ$149.3m. The segment margin expansion is the dominant earnings driver, but gas distribution's sharp revenue decline means the group mix has structurally shifted, which matters for the forward revenue trajectory.

Tax rate normalisation inflates NPAT growth optics. The effective tax rate fell from 65.4% in HY24 to 29.9% in HY25—closer to the statutory 28% rate and at the lower edge of the company's historical range of 24.8%–65.4%. The prior period included a NZ$60m gas distribution impairment that distorted the HY24 tax line. The 405.7% NPAT growth substantially overstates the underlying operating improvement; 169.6% PBT growth is the appropriate measure.

The HY24 comparable period was depressed by the NZ$60m gas distribution impairment, making HY25 PBT growth optically very large. In prior full-year structures, HY24 contributed approximately 50% of full-year revenue, suggesting the second half shape is broadly balanced. Annualised revenue from continuing operations of approximately NZ$1.1bn is modestly below FY24's NZ$1.1bn, consistent with the gas revenue step-down.

The interim dividend of NZ$0.12 per share compares to NZ$0.0925 in HY24. The full-year dividend basis from FY24 was NZ$0.2225 per share, and an annualised comparison to the current interim component suggests capital returns are moving ahead of the prior year, though second-half final dividend policy will determine the full-year outcome.

The PBT improvement is substantively real: electricity distribution delivered higher earnings on volume and efficiency, and the HY24 comparable was impaired. The tax normalisation adds optics to NPAT that do not reflect ongoing operating performance. Pre-lease FCF of NZ$15.5m is within the company's historical normal range, though capex intensity at 46.6% of revenue reflects heavy investment spending of NZ$261.4m. Free cash flow conversion to NPAT was only 12.5%, meaning the strong earnings result is not yet fully converting to cash, partly because of the working-capital build.

The unprecedented working-capital absorption—NZ$27.7m versus historical releases—is the primary quality caveat. Whether this reflects timing on receivables or a more structural change in collection patterns will determine whether operating cash generation in the second half recovers to historical norms. Net debt declined to NZ$2.2b from NZ$2.2b, indicating modest deleveraging, which is a positive balance sheet signal.

This briefing cannot assess the future trajectory of regulated revenues, the outcome of any regulatory reset processes, or the second-half recovery in working capital from the disclosed financial statements alone.