Lines company Chorus reported reduced profits for the
year ended June, with chief executive Mark Ratcliffe saying the
result was overshadowed by the ongoing uncertainty about sector
Operating earnings for the period fell 2.1% to $649 million
from $663 million in the period.
Earnings before interest, tax and depreciation were down 4.9%
to $327 million from $344 million and the reported profit
fell 13.4% to $148 million from $171 million.
Income remained flat at $1.05 billion. No final dividend was
Profit guidance for the current financial year was between
$590 million and $605 million.
Mr Ratcliffe said the success of Chorus was overshadowed by
the need to reshape Chorus operationally and financially to
address the challenges posed by the ongoing uncertainty with
the regulatory framework and revised copper pricing.
''Chorus has a credible but demanding plan through to 2020 to
manage this shortfall, and has implemented a number of
operational initiatives with more in train.
''We have worked closely with Crown Fibre Holdings to
negotiate amendments to our contract to roll out fibre that
give Chorus additional flexibility, as well as a funding
Chorus had also presented banks with a plan they had
supported with some important changes to funding
arrangements, he said.
The dividend policy had been suspended until it was
financially sustainable and there was sufficient certainty
over the outlook.
While progress had been made, the funding gap remained
challenging and more needed to be done to return the company
to stability, Mr Ratcliffe said.
Craigs Investment Partners broker Chris Timms said the area
of focus in the result was capital expenditure.
Fibre capital expenditure was $566 million out of a total of
The Rural Broadband Initiative accounted for $53 million of
the fibre investment, down from $106 million in the previous
Common capital expenditure increased from $33 million to $52
million as IT-related investment associated with separation
from Spark (formerly Telecom) increased. Copper capital
expenditure was down at $61 million from $69 million.
The ultra-fast broadband roll-out was 31% complete and ahead
of target, he said.
There was no change to separation guidance of $900 million to
$1.1 billion but that did not deal with high non-standard
''The time is approaching where Chorus and Crown Fibre
Holdings will have to engage on this topic.
"And while we take some comfort from Chorus' contractural
position, we have concerns about the Government's approach to
the fiscal envelope of this project, and a public policy
desire not to see take-up being hindered by end-users having
to fund it.
"Something will have to break at some point,'' Mr Timms said.