Media Release: 24 August 2015

FY15 impacted substantially by regulatory pricing decisions 

• Net profit after tax $91m (FY14: $148m), no dividend
• EBITDA $602m (FY14: $649m)
• Operating revenue of $1,006m (FY14: $1,058m)
• Chorus’ UFB rollout now 44% complete (FY14: 31%)
• Broadband uptake grew 4% to 1,207,000 

• Net profit after tax $91m (FY14: $148m), no dividend
• EBITDA $602m (FY14: $649m)
• Operating revenue of $1,006m (FY14: $1,058m)
• Chorus’ UFB rollout now 44% complete (FY14: 31%)
• Broadband uptake grew 4% to 1,207,000

Chorus has today reported a net profit after tax (NPAT) of $91m (FY14: $148m) and earnings before interest, tax, depreciation and amortisation (EBITDA) of $602m (FY14: $649m) for the year ended 30 June 2015.

Operating revenue for the period was $1,006m (FY14: $1,058m) and operating expenses were $404m (FY14: $409m). Depreciation and amortisation for the period was $324m (FY14: $322m), delivering earnings before interest and tax (EBIT) of $278m (FY14: $327m). 

Chorus’ financial result for FY15 was substantially impacted by the requirement to implement initial regulatory pricing decisions based on international benchmarking, with EBITDA down $47m when compared to FY14.

The regulatory pricing remains under review and the ongoing uncertainty has overshadowed positive increases in fixed line and broadband connections, as well as Chorus’ work on the Ultra-Fast and rural broadband rollouts that continue to deliver better broadband ahead of schedule. 

"The business initiatives we implemented in managing for cash have delivered results ahead of target for the year, going some way towards offsetting the very significant reduction in regulated pricing. This together with the slightly improved draft copper pricing, has helped the share price recover some value, although we remain unable to pay a dividend,” said Mark Ratcliffe, Chorus CEO. 

“Chorus is well placed to help New Zealand realise the socio-economic benefits of broadband as demand for digital connectivity grows. We are seeing growing demand for better broadband for educational, business and entertainment purposes, reinforcing Chorus’ role as an essential utility provider. A fit-for-purpose regulatory framework will help New Zealand realise even greater broadband potential,” he said. 

Operating performance 

Broadband connections grew by four percent to 1,207,000 during FY15 and for the second consecutive year, fibre broadband connections more than doubled to 88,000.

Forty-four percent of Chorus’ Ultra-Fast Broadband (UFB) rollout is now complete taking fibre past 368,000 premises. The UFB build is complete in five towns –Ashburton, Blenheim, Oamaru, Taupo and Timaru – with a further five towns expected to be completed in FY16.

Rural New Zealand is also a benefitting. The first phase of the Government’s Rural Broadband Initiative (RBI) is nearly complete with new or upgraded broadband coverage extended to 93,000 rural lines, with just 10,500 more to be covered in FY16. 

Regulation

Regulatory developments continued to be the single most important factor affecting Chorus and its shareholders during the year. Revenues from Chorus’ copper network provide the basis for Chorus’ ongoing investment in better broadband infrastructure, particularly the multi-billion dollar investment to build and connect New Zealanders in Chorus UFB areas. 

While the Commerce Commission’s recent regulatory decisions support an increase in copper pricing relative to its prior benchmarked price, until the final pricing decision is announced later this year Chorus must continue to operate on the reduced pricing introduced on 1 December 2014. Chorus continues to believe that the draft pricing significantly undervalues the true cost of network investment in New Zealand. 

Longer term investment decisions also remain challenging in this context, exacerbated by the absence of a post-2020 regulatory framework.

Chorus remains focused on improving returns to shareholders and securing a regulatory environment that enables shareholders to earn a fair return on the investment they are making in bringing better broadband to New Zealand. 

Dividend 

Chorus remains unable to update investors on dividend policy until the Commerce Commission’s final pricing review is complete. This has been delayed until December. 

FY16 outlook 

FY16 Gross Capex: $580m—$630m 

FY16 EDITDA: A modest decline relative to adjusted* FY15 EBITDA of $546m 

*Adjusted EBITDA is a non-GAAP profit measure which provides comparable period on period information. Please refer to page 27 of the Chorus 2015 annual report for more detail on the adjustments made. 

ENDS

Chorus Chief Executive, Mark Ratcliffe, and Chief Financial Officer, Andrew Carroll, will discuss the final results at a briefing in Wellington from 10.00am (NZ time). The webcast will be available at www.chorus.co.nz/webcast.