EBITDA grew 3.7% but PBT collapsed 80.2% as finance costs erased operating gains

Profit before tax fell -80.2% from $106.0m to $21.0m, and net profit after tax swung from a $64.0m gain to a $9.0m loss (-114.1%). Operating profit itself only slipped 4.0% to $238.0m, so the bulk of the PBT collapse sits in higher depreciation and finance costs rather than in trading.

The balance sheet absorbed the shortfall. Gross borrowings rose $304.0m to $2.6b, cash fell from $88.0m to $45.0m, and net debt-to-EBITDA stepped up from 3.3x to 3.7x. Total equity declined 18.3% to $841.0m. Operating cash flow fell 10.0% to $513.0m even though EBITDA grew, and the final dividend was raised 35.7% to 28.5 cents per share.

EBITDA was up but PBT fell -80.2%, which means the incremental depreciation on the fibre asset base and higher interest on $304.0m of additional borrowings are now larger than Chorus's operating uplift. This matters because revenue growth no longer flows to statutory profit, and any further rise in average funding cost will keep NPAT pressured even if EBITDA continues to expand.

Cash conversion weakened materially. OCF/EBITDA dropped from 84.4% to 73.3%, so $25.0m of additional EBITDA produced $57.0m less operating cash. Capex remains heavy at $442.0m, or 43.8% of revenue, leaving FCF pre-lease at $71.0m versus $78.0m in FY23. The business is still self-funding capex, but the buffer above the dividend and interest bill has thinned.

The dividend was lifted into a loss-making year. With NPAT at -$9.0m and FCF pre-lease of $71.0m, a 28.5 cps unimputed dividend cannot be covered by current-year earnings and is only thinly covered by free cash. The implication is that the higher distribution is being supported by debt headroom rather than by improving profitability.

The half-year shape is informative: HY24 carried $26.0m of NPAT, implying a roughly $35.0m loss in the second half, while EBITDA was almost evenly split (HY24 47% of full year). That points to depreciation, finance costs, or below-the-line items intensifying through 2H rather than a trading deterioration.

Without management guidance attached here, the read-through is that FY25 NPAT is unlikely to recover materially unless either depreciation rolls off or finance costs stabilise; EBITDA growth alone, on the FY24 trajectory, is not sufficient to lift PBT back to FY23 levels.

First, the effective tax rate of 142.9% (versus 39.6% prior) tipped a small pre-tax profit into a reported loss, indicating non-deductible items, deferred-tax adjustments, or write-downs are influencing the bottom line; PBT is the cleaner operating read. Second, FCF/NPAT of -788.9% reflects how little of the cash result reaches statutory earnings once depreciation and interest are charged, so the apparent EBITDA growth overstates economic progress.

Working capital is benign – receivable days at 36.1 versus 36.7 prior, and trade debtors only $3.0m higher – so the cash conversion drop is not driven by debtor stretch. The deterioration sits in non-debtor working capital and timing, which is more reversible than a structural debtor problem but does not yet explain the full $57.0m OCF shortfall against rising EBITDA. ROE has fallen to -1.1% from 6.2% as both earnings weakened and equity contracted.

This briefing cannot assess Chorus's regulatory revenue path, fibre uptake economics, or covenant-level leverage limits because none of those are quantified in the supplied data.