Chorus : Media release | Chorus FY17 Full Year Result

Published 28/08/2017

Chorus full year result for FY17

Fibre uptake soars, despite connections headwinds

• Net profit after tax $113m (FY16: $91m)

• EBITDA $652m (FY16: $594m)

• Operating revenue of $1,040m (FY16: $1,008m)

• Final dividend 12.5 cents per share

• Chorus' UFB rollout now 70% complete, uptake of 35%

• Total fixed line connections down 7% to 1,602,000

• Broadband connections down 3% to 1,186,000

Chorus has today reported a net profit after tax (NPAT) of $113m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $652m for the year ended 30 June 2017.

Operating revenue for the period was $1,040m (FY16: $1,008m) and operating expenses were $388m (FY16: $414m). Depreciation and amortisation for the period was $339m (FY16: $327m), delivering earnings before interest and tax (EBIT) of $313m (FY16: $267m).

Chorus' financial result for 2017 was underpinned by a strong focus on costs as we streamlined copper provisioning processes and began capitalising labour expenses relating to certain fibre provisioning costs.

Chorus' FY17 EBITDA declined relative to adjusted EBITDA for FY16 of $677 million. This reflects a reduction in revenue as other fibre companies continued to gain connections in their fibre rollout areas and large vertically integrated retailers began encouraging their customers on to their own wireless broadband networks.

'In response to this change in market dynamics, we launched an advertising campaign in May to promote the benefits and availability of better fixed line broadband and early indications are that this has had positive results,' said Kate McKenzie, Chorus CEO.

'Meanwhile, our UFB build programme continues at pace and we're now 70% of the way through the first phase, compared with 57% at this time last year.

'This means 778,000 customers are now able to connect to the best possible broadband at speeds of up to one gigabit per second. Across the Chorus UFB footprint more than one third have connected to fibre, with 275,000 connections at the end of June 2017. That's a big jump from 156,000 connections or 24% uptake last year.'

Improving the customer experience

During FY17 considerable focus was directed to improving customer experience. Chorus' fibre installation workforce grew to 615 field crews by the end of FY17, up from 524 crews at the start. They completed 129,000 new fibre connections nationwide, a substantial increase on the 93,000 connections in the previous year. Productivity improved significantly after a reorganisation of service company responsibilities for fibre installations in October.

'Perhaps the best measure of our improvement is customer satisfaction with fibre installations. Pleasingly, we've seen customer satisfaction scores increase from 6.9 out of 10 last year to 7.4 at the end of June.

'But there remains some way to go before we achieve our goal of offering a frictionless fibre install experience,' said Kate.

Better Broadband

'Our promotion of better broadband has been supported by a growing awareness of the importance of reliable broadband at peak demand times,' said Kate.

'In the last year we saw a 51% increase in the average amount of internet traffic through our network around 9pm each evening. This trend seems set to continue as more and more New Zealanders use their broadband connection to stream video content on demand.'

The strong demand for fibre means we're now trialling new connection approaches, such as working with various retailers in completed fibre areas or encouraging residents to connect as we build the street network in new areas.

Our goal is to improve the customer experience further by reducing the time they need to be at home for an installation to less than a day, while also balancing fluctuations in orders for our workforce.

Chorus undertook a strategic review during the year to consider technology and industry developments.

'Fibre is clearly the best technology to meet ever increasing and changing data demands. Given the likely infrastructure requirements and service characteristics of future wireless technology, and the extensive nature of our fibre to the home network, we believe wireless will continue to be a largely complementary access technology,' Kate said.

Dividend

Chorus will pay a final dividend of 12.5 cents per share, fully imputed, on 10 October 2017 to all shareholders registered at 5pm on 26 September 2017. 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 27 September 2017.

FY18 guidance

EBITDA: $625 - $650 million

Capital expenditure: $780 - $820 million

Dividend: 22 cents per share, subject to no material adverse changes in circumstances or outlook.

ENDS

Chorus Chief Executive, Kate McKenzie, 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.

Adjusted to reflect the change in regulated copper pricing from 16 December 2015 and the effect of capitalisation of certain labour and IT costs previously expensed.

For further information:

Nathan Beaumont

Stakeholder Communications Manager

Phone: +64 4 896 4352

Mobile: +64 (21) 243 8412

Email: nathan.beaumont@chorus.co.nz

Brett Jackson

Investor Relations Manager

Phone: +64 4 896 4039

Mobile: +64 (27) 488 7808

Email: brett.jackson@chorus.co.nz