PBT up 61.4% on operating leverage; capex still 108.5% of revenue

NPAT swung from NZ$5.5m to NZ$420.7m, but the headline growth figure is not analytically meaningful: the prior effective tax rate of 98.4% normalised to 24.1%, so PBT growth is the cleaner operating read.

Operating cash flow fell 4.4% to NZ$474.3m, capex was NZ$1.1b (108.5% of revenue), and pre-lease free cash flow was NZ$-615.6m. Gross borrowings dropped from NZ$5.1b to NZ$2.5b while total equity rose NZ$1.9b to NZ$10.5b, leaving net debt/EBITDA at 2.32x versus 4.22x prior. Total assets reached NZ$14.1b, an unprecedented high against Annolyse's historical baseline (4-period mean NZ$10.8b, range NZ$9.8b to NZ$12.4b).

Capex of 108.5% of revenue and pre-lease FCF of NZ$-615.6m sit at the lower edge of the company's historical range (4-period mean NZ$-319.5m, range NZ$-134.7m to NZ$-662.4m). This matters because operating earnings can keep compounding while the business continues to consume cash, and the durability of the dividend depends on funding choices rather than internally generated cash.

The capital structure has been reset, not just rolled. Leverage at 2.32x is at the lower edge of the recent range against a 4-period mean of 4.68x, and gross borrowings have halved alongside an equity uplift of NZ$1.86bn. This expands headroom to continue the capex programme, but the leverage compression looks balance-sheet-assisted rather than earnings-driven.

The NPAT print overstates the underlying step-up. PBT grew 61.4% on revenue growth of 12.2%, which is the genuine operating result; the swing from NZ$5.5m to NZ$420.7m in NPAT also captures the unwind of last year's near-100% effective tax rate. ROE of 4.0% is at the upper edge of the recent baseline (4-period mean 2.2%) but remains low for a regulated infrastructure asset of this size.

HY25 supplied 49.8% of full-year revenue, 48.7% of EBITDA and 44.5% of NPAT, so the second half was modestly weighted on profit but broadly balanced on revenue and EBITDA. That implies the H2 run-rate did not deteriorate, but it also does not give a clean read on FY26 trajectory.

The full-year dividend of 13.25 cents (versus 6.5 cents) implies a payout of 51.2% of NPAT, which the release set does not tie to a stated policy framework or a forward dividend guide.

Cash conversion of 57.4% (OCF/EBITDA) is within the supplied historical range (4-period mean 51.4%, range 8.6% to 85.0%) despite the headline drop from 85.0% — the prior comparable was at the top of that range rather than the new period being weak. Working-capital movement of NZ$1.2m and debtor days of 6.8 are not driving the cash result.

The capital-allocation picture is where caution applies. With capex running above revenue and pre-lease FCF at the lower edge of the recent range, the improved leverage ratio is doing work the operating cash flow is not. The dividend is supported by reported earnings, but not by free cash, so its sustainability depends on continued access to debt or equity at the current cost.

This briefing cannot assess the regulated aeronautical pricing path, expected returns on the in-flight capex, or any specific funding plan, because none of those are supplied in the release set.