Net debt hit 8.3x EBITDA as NZ$1.2bn capex outpaced operating cash

The mechanical driver is a capex program of NZ$1.2bn (precise: NZ$1.2b, +79.1% on prior) that exceeded operating cash flow of NZ$496.3m by more than two times and pushed gross borrowings from NZ$1.8b to NZ$5.1b.

Reported NPAT fell to NZ$5.5m from NZ$43.2m despite PBT rising to NZ$343.3m from NZ$44.2m, with the effective tax rate jumping to 98.4% from 2.3%. Revenue grew to NZ$895.5m from NZ$625.9m (FY23 reported on an EBITDAFI basis, so trend comparisons warrant a basis caveat). The full-year dividend was declared at 13.25 cents per share versus 4.0 cents in FY23.

Net debt to EBITDA at 8.3x sits well outside the historical range of 1.80x–4.31x, and FCF pre-lease widened to -NZ$662.4m from -NZ$322.0m. This is the company's historical baseline running at roughly NZ$307.8m of pre-lease outflow on average; FY24 is more than double that. The implication is that further capex in FY25 will continue to be debt-funded, and interest cost will press on PBT in periods where the program continues.

The NPAT collapse is a tax-line phenomenon, not an operating one. PBT and NPAT diverged by 764 percentage points of growth because the effective tax rate moved from 2.3% to 98.4%. The supplied commentary does not directly explain the tax movement, so PBT is the cleaner operating read this period. Investors should not anchor on NPAT margin of 0.6% as a forward indicator.

The dividend is being funded by borrowings, not free cash. The FY24 full-year payout of 13.25 cents (versus 4.0 cents in FY23) is being declared while pre-lease FCF is -NZ$662.4m and net debt has risen NZ$3.2bn. The policy is sustainable only while debt headroom and capex pacing allow.

Second-half shape shows revenue split roughly evenly across the halves, but NPAT was concentrated in HY24 (NZ$118.7m) with an implied second-half NPAT loss of approximately NZ$113.2m. The size of that 2H swing — even with the headline tax distortion accepted — points to charges or one-off items concentrated in the second half that are not separately quantified in the materials available here.

The absence of forward guidance combined with the unprecedented leverage and capex intensity (capex was 129.4% of revenue) means the release does not support a confident view on FY25 earnings shape or dividend cover.

Cash conversion sits above the historical mean of 44.5%, although FY23 used the EBITDAFI label while FY24 uses EBITDA, so the comparison carries a basis caveat.

That said, the result is balance-sheet-assisted in a structural sense. The NZ$3.3bn rise in gross borrowings is funding both the runway/infrastructure build and the dividend step-up. PBT of NZ$343.3m is the cleaner operating measure; NPAT of NZ$5.5m should not be used as evidence of underlying earnings deterioration because the 98.4% effective tax rate is unprecedented in the historical baseline (mean 11.3%, range 2.3%–24.1%) and is not explained by disclosed commentary. ROE has weakened on the same basis distortion and is not analytically meaningful this period.

This briefing cannot assess whether the regulated aeronautical pricing reset and asset revaluation outlook will deliver enough operating cash growth to absorb the increased debt load through the remainder of the investment cycle.