PBT swung to a NZ$59m loss on 1.2% revenue as capex more than doubled

Despite the swing to a loss, operating cash flow only halved (down 49.8% to NZ$213.0m) because operating working capital released NZ$524.0m of cash — a sharp departure from Annolyse's historical baseline, which shows the prior three half-years all building working capital by an average of NZ$102.0m.

Capex more than doubled to NZ$693.0m (capex/revenue of -20.1% versus -8.7% a year earlier), driving pre-lease free cash flow to -NZ$480.0m. The cash balance fell NZ$448.0m to NZ$1.1b, gross borrowings rose 11.2% to NZ$1.5b, and the balance sheet swung from NZ$154.0m net cash to NZ$450.0m net debt. No interim dividend was declared, against 1.25 cps last year.

• Revenue ground forward 1.2% but PBT fell 138.1% and operating profit dropped 38.1% to NZ$327.0m. Management attributes this to global engine maintenance delays, slower domestic demand recovery, higher aviation system costs, and a weaker NZD. The implication is that current cost pressures are absorbing fare/yield outcomes, leaving little operating buffer until grounded aircraft return.

• The unusually favourable working-capital release flatters the cash read. Operating working capital fell NZ$524.0m, well outside the typical NZ$59–150m build seen in the prior three half-years. Even with this tailwind, OCF halved; cash conversion (OCF/EBITDA of 61.4%) and FCF/NPAT (1,200.0%) both signal a weak underlying earnings-to-cash profile that next half won't repeat if the release reverses.

• Balance-sheet flexibility narrowed sharply. Net debt swung by roughly NZ$604m year-on-year, equity fell 11.0% to NZ$1.8b, and ROE moved from 5.2% to -2.2%. Combined with capex running at >2x prior-period levels, the dividend pause looks like a balance-sheet decision rather than a one-off, and rebuilding net cash will require capex to ease or earnings to recover materially.

That implies a full-year result anchored around the current loss-making run-rate rather than a snap-back.

The shape context is misleading on its own: HY25 supplied 84.1% of FY25 NPAT (NZ$106.0m of NZ$126.0m), meaning the prior 2H was unusually weak. With 1H26 already a NZ$40.0m loss and management guiding similar in 2H, FY26 is shaping up well below FY25's NZ$126.0m NPAT and will not be rescued by a normal seasonal step-up.

Operating cash of NZ$213.0m benefited from a NZ$524.0m working-capital release that Annolyse's historical baseline classifies as below normal range — every comparable prior half-year built working capital. Without that release, operating cash before working capital would have been deeply negative, consistent with the swing in PBT. The release is also at risk of reversing if forward bookings or supplier balances normalise.

On the spending side, capex of NZ$693.0m is structural rather than discretionary, reflecting fleet and maintenance commitments around the engine availability issue. Combined with weaker operating cash, this drove the NZ$604m year-on-year deterioration in net debt and explains the dividend suspension. The loss itself reflects a mix of external pressures (engine delays, FX, system costs) and demand softness, but their persistence into 2H per management's own commentary suggests the operating outcome is not a single-period one-off that can be excluded from the underlying read.

This briefing cannot assess whether the engine-maintenance disruption, capex programme, or working-capital position will normalise on the timetable management is implicitly assuming.