Capex jumped 354% to $132.4m, pushing FCF to -$22.1m

Capex rose to $132.4m, a 354% jump on the prior period, equal to 50.8% of revenue. That investment turned free cash flow pre-lease from +$41.2m to -$22.1m even though net operating cash inflow was a healthy $110.3m.

Revenue fell 1.8% to $260.6m, while underlying EBITDA rose 4.1% to $86.0m. Reported NPAT of $30.4m was 3.5% below FY24, and PBT was flat at $25.9m. The board declared no final dividend. Gross borrowings stood at $627.7m and cash at $7.5m, leaving net debt of $620.2m and net debt/EBITDA at 7.2x. Reported gearing fell to 36.3% from 38.3%.

1. At $132.4m versus $110.3m of operating cash inflow, the development cycle has shifted Oceania to a cash-absorbing position before any financing. This is the proximate reason no dividend was declared and is the single most important fact in the result for assessing near-term financial flexibility.

2. The headline NPAT decline is cleaner than it looks at the operating line, but worse than it looks at the tax line. PBT was flat at 0.0%, while NPAT was supported by a -17.8% effective tax rate (i.e. a tax credit) versus roughly 0.0% in the prior period. PBT is the cleaner operating read here, and it shows no growth despite the EBITDA uplift, implying depreciation and finance costs absorbed the EBITDA gain.

3. Leverage of 7.2x net debt/EBITDA is high in absolute terms even with the gearing percentage moving favourably. In a sector that requires ongoing development capex to refresh and grow the portfolio, this constrains the ability to fund the next investment cycle from the balance sheet without further sales conversion or asset recycling.

The half-year shape is unusual: HY25 reported a $17.1m NPAT loss, which means essentially all of the FY $30.4m profit was earned in H2 (an implied $47.5m). Revenue split roughly 51%/49% H1/H2 and EBITDA 45%/55%, so the H2 step-up is real at the earnings line but is not large at the revenue line.

The release does not explain when the elevated capex translates to EBITDA. Without that bridge, the investor cannot judge whether FY26 EBITDA growth will be sufficient to bring leverage and free cash flow back into a more conventional range for the sector.

EBITDA growth of 4.1% on declining revenue is a genuine operational positive and is consistent with the disclosed 12.5% lift in premium care revenue. However, the read down the income statement weakens: PBT was flat, and reported NPAT only outperformed PBT growth because of a tax credit. ROE of 2.8% on $1.1b of equity is modest.

The cash quality is the harder issue. Operating cash conversion at the EBITDA line looks strong at 128.3%, but free cash flow pre-lease of -$22.1m and FCF/NPAT of -72.7% show that the period was funded by working-capital release and external sources rather than by free cash generation. The 354% capex jump may seed future revenue and EBITDA from new units, but FY25 itself shows the cost without the return.

This briefing cannot assess the unit economics of the development pipeline or the settlement timing that would determine when the FY25 capex starts generating returns.