Return to managing for long term value, as operating context improves.

• Net profit after tax $91m (FY15: $91m)
• EBITDA $594m (FY15: $602m) 
• Operating revenue of $1,008m (FY15: $1,006m) 
• Final dividend of 12 cents per share
• Ultra-Fast Broadband (UFB) rollout 57% complete, and Rural Broadband Initiative (RBI) 100% complete
• Better broadband made available to about 900,000 customers since 2011
• Total fixed lines decreased by 67,000 to 1,727,000 and broadband connections increased by 19,000 to 1,226,000
Chorus has today reported a net profit after tax (NPAT) of $91m (FY15: $91m) and earnings before interest, tax, depreciation and amortisation (EBITDA) of $594m (FY15: $602m) for the year ended 30 June 2016.

Operating revenue for the period was $1,008m (FY15: $1,006m) and operating expenses were $414m (FY14: $404m).

Depreciation and amortisation for the period was $327m (FY15: $324m), delivering earnings before interest and tax (EBIT) of $267m (FY15: $278m).

While the Commerce Commission’s review of regulated pricing for Chorus’ key copper services, completed in December 2015, provided a better pricing path to 2020 than the initial benchmarked pricing, Chorus’ financial result for FY16 was impacted by five and a half months of the lower pricing.

"The combination of greater regulatory clarity and operating momentum has allowed Chorus to return to managing its business for long term shareholder value,” said Mark Ratcliffe, Chorus CEO.

“EBITDA of $594 million is in the top half of guidance, reflecting continued good cost management across the business, and dividends were resumed in February 2016.

“Substantial network investment through our ongoing UFB rollout, the now completed RBI rollout and enhancements to our VDSL service has made better broadband available to about 900,000 customers since we were established in 2011.

“In that time we’ve invested about $2.9 billion in capital expenditure, with $593 million of that during FY16 alone.

“While the final copper pricing outcome was an improvement on the benchmarked pricing, it has not restored our financial position to demerger levels, and the regulatory framework that may apply from 2020 remains far from clear. We are therefore continuing to take a measured approach to ongoing investment.

“A regulatory framework that recognises broadband as an essential utility is necessary if New Zealand is to encourage ongoing improvement and extension of its broadband capability. We welcome the Government’s current review of the regulatory framework for communications services and believe it is an opportunity to align and deliver on the interests of customers and investors.

“A stable transition in pricing at 2020 is central to this and could help New Zealand achieve better broadbandcoverage well beyond the Government’s current goals,” he said.

Service company partnerships

During the financial year Chorus worked closely with its service company partners to almost double the number of fibre field crews from 275 to 524. As a result of this and process improvements, the company lifted the number of connections completed in a month from about 6,000 in July 2015 to 12,000 in June 2016.

In all, Chorus processed more than 110,000 connections during the year and is currently looking to recruit another 250 technicians and support staff by the end of 2016.

“Much more remains to be done to improve the experience we provide to our customers, particularly balancing the growing demand for fibre connections with our requirements to maintain the existing network,” said Mark Ratcliffe.

“We are continuing to review our service company partnerships to ensure we have the right partners and resourcing to be able to deliver a consistently high quality customer experience across both the copper and fibre networks.”

As part of the ongoing discussions with its partners, Downer has confirmed that it does not intend to re-tender for ongoing fibre installation work, preferring to concentrate on the copper network and communal UFB build. 

Downer currently provides fibre installation services primarily in the lower South Island, and is contracted to continue to provide this service until February 2017.

Chorus expects to make further announcements regarding its service company arrangements in the near future. 

“No matter which partner we choose, this will be a managed transition and we will be adding overall to the technician and field support workforce, so we expect the number of roles relating to fibre installation to continue to grow,” said Mark Ratcliffe.

Dividend

Chorus will pay a final dividend of 12 cents per share, fully imputed, on 7 October 2016 to all shareholders registered at 5pm on 23 September 2016. A supplementary dividend will be paid to non-resident shareholders. A dividend reinvestment plan will apply for the final dividend at a discount rate of 3%. Applications to participate must be received by 5pm (NZ time) on 26 September 2016.

FY17 guidance

EBITDA: $625 - $645 million

Capital expenditure: $610 - $650 million

Dividend: 21 cents per share, subject to no material adverse changes in circumstances or outlook.