Vector HY26: PBT up 1.1% but NPAT down 9.2% on higher tax and lost...

What changed

Revenue rose 6.1% to NZ$594.4m, driven almost entirely by electricity distribution, where segment revenue lifted to NZ$537.6m from NZ$489.0m and share of group revenue rose by about 3.4 percentage points to roughly 89.2%. Gas distribution was broadly stable. The "other" segment shrank (NZ$26.0m vs NZ$41.2m) and its operating loss widened sharply to -NZ$13.6m from -NZ$3.4m.

Profit before tax edged up 1.1% to NZ$170.4m, but NPAT fell 9.2% to NZ$113.0m. The divergence has two disclosed drivers: the effective tax rate moved from 29.9% to 33.7%, and the prior-period total included a NZ$7.3m after-tax discontinued-operations (gas trading) gain that does not recur. On the continuing-operations line, NPAT fell a narrower 4.3% to NZ$113.0m.

Capex fell to NZ$222.7m from NZ$264.4m (37.5% of revenue, down from 47.2%). Trade debtors dropped to NZ$87.5m from NZ$159.9m, and inventories fell to nil. Gross borrowings eased slightly to NZ$2.1b, but cash halved-and-then-some to NZ$1.8m, leaving estimated net debt around NZ$2.1b. The interim dividend was raised to 12.5 cents from 12.0 cents.

What matters

• The headline earnings read is cleaner at PBT. PBT growth of 1.1% on 6.1% revenue growth is the honest underlying picture; the 9.2% NPAT decline reflects a higher effective tax rate (33.7% vs 29.9%) and the absence of last year's NZ$7.3m discontinued gas-trading gain rather than operating deterioration.
• Mix is tilting harder to regulated electricity distribution, with the unregulated "other" deteriorating. Electricity distribution EBIT margin held around 41% and the segment now represents roughly 89% of group revenue versus roughly 86% prior. The "other" bucket moved from a small loss to -NZ$13.6m, a NZ$10.2m year-on-year drag that should be tracked.
• Capital return is running ahead of reported earnings. The 12.5c interim dividend implies a payout of roughly 110.6% of HY26 NPAT, up from 96.5% in HY25. Absent disclosed operating cash flow or FCF, the self-funding question cannot be settled from this release.

Expectations

No quantitative HY26 guidance or stated targets were provided in the supplied excerpts. Against the FY25 anchor, annualised HY26 revenue of roughly NZ$1.189b sits about NZ$84.9m above FY25's NZ$1.1b continuing-operations revenue, implying a modestly stronger run-rate. Half-year shape is not a reliable guide here: HY25 represented about 74% of FY25 NPAT, suggesting a second-half weakening pattern in the prior year rather than a reliable seasonal ratio. The release does not support a view on full-year EBITDA (not disclosed at HY26) or on whether the elevated effective tax rate is a period artefact or a new baseline.

Quality of result

The revenue growth looks durable in that it is carried by the regulated electricity distribution segment, which retained a ~41% EBIT margin. Several quality flags, however, weigh against taking the top-line comfort too far:

• Earnings quality is mixed. PBT growth trailed revenue growth by roughly 5 percentage points, implying cost or depreciation absorption is consuming most of the revenue gain. The widening "other" segment loss is the visible pressure point.
• Working capital provided a tailwind that may not repeat at the same scale. Receivable days fell from ~51.9 to ~26.8, a NZ$72.4m reduction in trade debtors, and inventories were run to zero (NZ$17.5m prior). The release does not disclose operating cash flow, so the extent to which this flowed through to cash generation cannot be verified.
• Cash conversion is not assessable. Neither OCF nor FCF was disclosed for HY26, and no EBITDA was reported for the interim period, so net-debt-to-EBITDA and cash-coverage checks are not possible. Cash on hand of NZ$1.8m is thin, though that is typical for a utility reliant on committed facilities.
• The dividend is running above reported NPAT. On reported numbers the 12.5c interim is not earnings-covered.

Unresolved

• What is HY26 EBITDA and operating cash flow, and did the working-capital release actually convert to cash?
• Why did the effective tax rate rise almost 4 percentage points, and is 33.7% the new run-rate?
• What drove the "other" segment loss to widen by NZ$10.2m, and is that cost structural?
• With capex still ~37.5% of revenue and gearing near NZ$2.1b, how is the raised dividend being funded on a through-cycle basis?
• Is there a non-GAAP adjusted EBITDA bridge for HY26 comparable to the FY25 disclosure?

This briefing cannot assess cash generation, leverage multiples, or FCF-based dividend cover because operating cash flow, EBITDA and FCF were not disclosed in the supplied HY26 release.

Key metrics

Segment breakdown

Analytical metrics

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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.