Pre-lease FCF collapsed to NZ$19m as capex rose 31% and OCF halved

Operating cash flow fell 56.3% to NZ$810.0m from NZ$1.9b, while capex rose 31.4% to NZ$791.0m on fleet and digital investment.

Reported earnings stepped down sharply, as management had flagged. Revenue grew 6.7% to NZ$6.8b, but PBT fell 61.3% to NZ$222.0m and NPAT moved to NZ$146.0m. The NPAT change is not analytically comparable as a clean trend because the FY23 base carried an effective tax rate of –28.2% versus 34.2% this year, a denominator discontinuity that makes the post-tax growth figure not meaningful.

The balance sheet absorbed the squeeze: cash fell NZ$948.0m to NZ$1.3b, gross borrowings dropped to NZ$1.4b, and the full-year dividend per share was NZ$0.035 (interim NZ$0.020 plus final NZ$0.015), versus a NZ$0.060 special-only payout in FY23.

Pre-lease FCF of NZ$19.0m sits far below the supplied historical mean of NZ$544.7m, while the NPAT payout ratio has moved to 81.4% from 49.2%. The payout-ratio comparison is itself affected by the tax-basis discontinuity in the NPAT denominator, but the directional point holds: the dividend is being funded from balance-sheet cash rather than current-period cash generation.

Tax distorts the headline post-tax comparison. The effective tax rate of 34.2% is outside the company's historical baseline (mean 10.7%), versus –28.2% in FY23 when a tax credit flattered NPAT. Because that denominator basis shifted, the NPAT comparison is not analytically meaningful as a clean trend; PBT growth of –61.3% is the cleaner read on operating performance and is consistent with the post-reopening normalisation management signalled.

Capex intensity is rising into softer earnings. Capex grew 31.4% to NZ$791.0m, lifting capex/revenue from 9.5% to 11.7%. With revenue growth at only 6.7%, FCF is likely to remain pressured until earnings rebuild faster than the investment program.

The HY24 read-through is, however, informative: first-half NPAT of NZ$129.0m represented 88.4% of full-year NPAT, implying second-half NPAT of about NZ$17.0m on revenue of roughly NZ$3.3b. That is a sharp 2H deterioration on a revenue base only modestly below 1H, suggesting unit economics weakened materially as the year progressed.

In February management guided FY24 pre-tax earnings (excluding significant items) into a NZ$200–240m range; reported PBT of NZ$222.0m sits inside that band, but the post-tax outcome and the cash gap deserve more attention than guidance simply landing.

OCF/EBITDA at 86.1% looks acceptable in isolation, but FCF/NPAT compressed to 13.0% from 303.4% as capex outpaced earnings; that ratio comparison is itself distorted by the FY23 tax-credit basis in the NPAT denominator, so the directional message — cash coverage of earnings has collapsed — matters more than the precise multiple. The operating working-capital movement of NZ$12.0m sits at the lower edge of the supplied historical range, where the three prior periods averaged a NZ$20.0m build; working capital therefore offered a modest cash tailwind rather than a drag, but is too small to explain the FCF shortfall.

Capital allocation is the part to watch. ROE of 7.3% versus 19.8% prior is across a non-comparable tax basis and should not be read as a clean trend; equity stands at NZ$2b, and the dividend at 81.4% of NPAT now sits against only NZ$19.0m of pre-lease FCF. Durability of the dividend at this payout depends on earnings recovery, capex moderation, or further balance-sheet deployment — none of which this release commits to.

This briefing cannot assess forward unit revenue, fuel-cost trajectory, or the split between maintenance and growth capex.