Leverage rose to 8.89x EBITDA as equity fell 35% to $430m

Gross borrowings rose $449m (+15.6%) to $3.3b, while total equity declined 35% to $430m from $662m. This reframes a result that, on the headline lines, looks like progress: EBITDA rose 3.2% to $357m on revenue of $506m (HY25: $500m), EBITDA margin reached 70.6% (above the supplied historical range of 69.0%–70.2%), and NPAT swung to a $15m profit from a $5m loss.

Capex fell 18.1% to $163m, taking capex intensity to 32.2% of revenue from 39.8%. That step-down lifted pre-lease free cash flow to $149m — above the supplied historical baseline range of $11m–$58m and well above the three-period mean of $28.3m. Operating cash flow, however, fell 11.3% to $228m, and the interim dividend was 24cps (HY25: 23cps).

Net debt / EBITDA at 8.89x sits above the historical range and is rising. Borrowings rose $449m while equity contracted by $232m, a combination consistent with distributions and capex being funded ahead of earnings accretion. This matters because incremental capital flexibility for further shareholder returns, network spend, or a downside scenario is narrower than a 3.2% EBITDA uplift implies.

Cash conversion deteriorated despite a stronger EBITDA margin. OCF / EBITDA fell to 63.9%, below Annolyse's historical baseline range of 69.6%–74.3% (three-period mean 71.3%). Operating cash flow declined $29m even as EBITDA rose $11m, so reported earnings translated into less cash than the recent pattern. The release does not explain the gap, so the working-capital or timing driver remains an open question.

The headline FCF gain leans heavily on lower capex, not operating cash. The capex step-down (–$36m) more than offset the OCF decline (–$29m), producing the $149m free-cash result. Management language flags "full withdrawal" from Chorus fibre areas by mid-2026, consistent with a structural transition off heavy build spend rather than a one-off timing benefit — but the durability of the lower run-rate is not yet anchored by guidance in the supplied context.

HY25 was 49.3% of FY25 revenue and 49.1% of FY25 EBITDA, so the prior half-year split was close to balanced; on that pattern, annualised current revenue is around $1b and implied H2 EBITDA would be roughly $359m. The interim dividend of 24cps cannot be read as a full-year policy signal because the FY25 total was 57.5cps and no FY26 full-year figure is disclosed here.

The gap that matters for the next print is whether the capex step-down sustains as copper withdrawal completes, because the FCF and leverage trajectory both depend on that level holding.

Conversion at 63.9% is below Annolyse's historical baseline and falling, which means the reported EBITDA improvement was not matched by cash generation. NPAT moved from a loss to a $15m profit, but PBT growth carries an implausible-outlier flag (small prior denominator of $2m) and the effective tax rate moved from 350.0% to 42.3%, so the bottom-line swing is partly a tax-rate normalisation rather than a clean operating gain. PBT at $26m is the cleaner read on the operating improvement.

The free cash flow result is structurally meaningful — pre-lease FCF of $149m sits well above Annolyse's historical baseline range of $11m–$58m — but it is being delivered mainly through lower capex, not stronger operating cash. Concurrently, gross borrowings rose $449m and equity fell 35%, suggesting capital returns and other outflows continue to exceed earnings accretion. The combination of margin expansion, weaker conversion, and rising leverage means the result is durable on margins but balance-sheet-assisted on returns to shareholders.

This briefing cannot assess management's planned capital-return policy, covenant headroom on the $3.3b debt stack, or segment-level economics, because none of those disclosures are in the supplied context.