Net debt/EBITDA stepped from 0.7x to 2.8x after TowerCo distribution

Reported revenue fell to NZ$2b from NZ$2.5b, EBITDAI to NZ$530.0m from NZ$1b, and NPAT to NZ$157.0m from NZ$837.0m, all distorted by the FY23 TowerCo sale gain and Spark Sport provision. On management's adjusted basis, revenue rose 1.3% and EBITDAI 3.9% versus adjusted HY23, while adjusted NPAT fell 4.8%.

The more economically material shift is balance-sheet direction. Gross borrowings climbed NZ$587.0m to NZ$1.6b, equity declined NZ$393.0m to NZ$1.7b, and net debt/EBITDA moved to 2.8x from 0.7x. Capex rose to NZ$286.0m, lifting capex intensity to 14.5% of revenue from 9.9%.

Net debt/EBITDA moved from 0.7x to 2.8x as Spark distributed TowerCo proceeds and stepped up capital expenditure. Annolyse's historical baseline classifies 2.8x as within the company's four-period range (mean 2.7x), so the absolute level is not unusual; the speed of the move and the dependence on adjusted EBITDAI growth holding from here are what matter for serviceability and dividend cover.

Capex intensity rose meaningfully. Capex/revenue at 14.5% versus 9.9% prior signals a heavier reinvestment phase, with data centres and high-tech called out by management as growth areas. This matters because free cash flow falls with higher capex even when operating earnings hold, which is exactly what the FCF pre-lease drop to NZ$46.0m from NZ$115.0m reflects.

Reported NPAT comparison is structurally distorted. The effective tax rate moved from 9.3% to 30.8% because the prior comparable included the largely tax-exempt TowerCo gain, opening a 10.8pp gap between PBT and NPAT growth trajectories. The underlying read is management's adjusted NPAT of -4.8%, a softer outcome than the adjusted-EBITDAI growth of +3.9% implies.

The release names a full-year FY24 dividend of 27.5cps versus 27.0cps for FY23. Historically, HY23 contributed 56.4% of FY23 revenue and 60.5% of EBITDAI, so the first half was earnings-weighted on a reported basis; that mix is itself coloured by the TowerCo gain falling in HY23 and is therefore a weak guide to the underlying shape.

The release does not support a confident view on the second-half EBITDAI run-rate or a quantified FCF aspiration for FY24. The gap that matters is whether adjusted EBITDAI growth holds through the second half to support the higher leverage position and the stepped full-year dividend.

FCF-to-NPAT conversion was 29.3%, modest but coloured by the same basis effects.

Cash conversion (OCF over EBITDAI) sits at the lower edge of the supplied historical range versus a four-period mean of 80.2%, so cash quality this half is weaker than the company's recent baseline. Working capital was effectively flat (NZ$1.0m release) and within the historical normal range, so the cash-conversion softness reflects earnings mix rather than receivables or inventory build.

Dividend coverage warrants caution: the company's historical payout-ratio baseline against NPAT sits well above 100% on a three-period mean of 131.9%, indicating that dividends have been funded materially from sources other than current-period reported earnings.

This briefing cannot assess underlying segment profitability trends because comparable HY23 segment-result data is not provided in the supplied extraction.