Capex doubled to 34.3% of revenue, pre-lease FCF swung to NZ$127.5m negative

The driver was capex of NZ$275.5m, up 120.8% on HY23 and equivalent to 34.3% of revenue, against operating cash flow of NZ$156.5m. Gross borrowings rose to NZ$243.2m from NZ$112.4m, funding the gap while the board lifted the interim dividend 2.9% to 18.0 cents.

Underlying trading was strong on the P&L. Revenue grew 16.4% to NZ$803.7m, Hospital +11% and Homecare +26%, with gross margin up 65bps to 60.0%. PBT rose 23.0% to NZ$140.6m, but NPAT growth was held to 11.9% because the effective tax rate normalised from 16.1% to 23.7%, a 7.6pp tax-line headwind.

• PBT grew 23.0% while pre-lease FCF turned NZ$167.1m more negative year-on-year. Capex intensity of 34.3% of revenue (vs 18.1% prior) is the swing factor, so investors need to know whether this is a discrete capacity build that ends, or a new baseline. Until that is clear, headline earnings growth overstates the cash return on this period's trading.
• Tax, not operations, explains the NPAT lag. The PBT-to-NPAT growth gap of 11.1pp is entirely a tax-rate effect (16.1% → 23.7%), and the current rate sits inside Annolyse's historical baseline of 16.1%–25.8%. PBT growth of 23.0% is the cleaner read on operating momentum; the optical NPAT slowdown should not be confused with margin pressure.
• Payout ratio versus pre-lease FCF is suppressed because the source-backed cash-dividend bridge is unavailable.

Historically the business is second-half weighted: HY23 represented 43.7% of FY23 revenue and 38.3% of FY23 NPAT, implying an H2 of NZ$890.5m revenue and NZ$154.4m NPAT in that period. On that shape, the current half points to an annualised revenue run-rate of roughly NZ$1.6bn before any H2 step-up, which would mark a clear recovery from FY23.

Management commentary cites "stable ordering patterns" in Hospital. The release does not, however, indicate whether the doubled capex programme continues at this intensity in H2, which is the single most important variable for full-year free cash flow.

Inventory days fell from 105.1 to 81.6 — within Annolyse's historical range but at the lower end — releasing stock built up in the prior period. Operating working-capital movement was a NZ$2.9m release versus a historical pattern where two of the three comparable halves showed builds averaging NZ$33.0m. That is a favourable, non-repeatable contribution to OCF, and the prior comparable's NZ$1.9m OCF was itself depressed by an unusually heavy inventory build, exaggerating the year-on-year delta.

PBT margin of 17.5% sits at the lower edge of the historical 16.6%–26.1% baseline (mean 21.4%), and ROE at 6.1% is below the historical range of 6.5%–10.9%. So while gross margin expanded, returns on the enlarged asset base (total assets up 14.1% to NZ$2.4b) have not yet followed. Trade debtors rose 23.0% with debtor days at 42.8 (upper edge of the 40.5–42.9 historical range), a modest receivables drag worth monitoring.

This briefing cannot assess whether the elevated capex represents a finite capacity expansion or a structurally higher reinvestment rate, which is the central question for free cash flow normalisation.