Chorus Limited · NZX:CNU
Chorus — FY2012 Earnings Presentation
29 slides from Chorus's earnings presentation, Aug 27, 2012
Slide 1: Chorus Inaugural Result, FY12
Chorus Inaugural Result, FY12 27 August 2012, Wellington
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements > This presentation may contain forward-looking statements regarding future events and the future financial performance of Chorus, including forward looking statements regarding industry trends, strategies, capital expenditure, the construction of the UFB networ
Slide 3: Mark Ratcliffe
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Slide 4: Agenda
Agenda > Update on strategic progress Andrew Carroll, CFO > Results > Comparison to scheme booklet > Dividend policy Mark Ratcliffe, CEO > Regulation > Looking ahead > Q&A
Slide 5: A successful seven months
A successful seven months > EBITDA of $399 million > Total fixed line connections basically static at 1,776,000 > Steady broadband growth: ~50,000 connections > Progress with UFB and RBI roll out > RBI Phase 2 contract win > Aon Hewitt Australasia best employer: 85% staff engagement
Slide 6: Deliver UFB and RBI agreements
Deliver UFB and RBI agreements • Meet key performance thresholds for UFB and RBI • Deliver FTTP within UFB areas to ensure coverage reaches 75% of NZ by 2019 UFB > 225 work gangs now in the field > 1,179km of fibre laid > 57,000 end users within reach of UFB > 42,000 premises passed > 119 schools >
Slide 7: Transition to a fibre world
Transition to a fibre world • Improve service for customer loyalty and satisfaction • Fibre products that enable customers to move to high bandwidth technology > More than 30 RSPs signed up for UFB > Retail offers launched in market > Fibre services trials on-going for most RSPs > 100 UFB end users
Slide 8: Drive copper and fibre network efficiencies
Drive copper and fibre network efficiencies • Cost minimisation for efficient network operations • Deliver further capex optimisation > Plans in place to reducing cost per premises passed for UFB > Proactive maintenance delivering results with best ever network performance > Technology choices that
Slide 9: Andrew Carroll
Andrew Carroll Chorus CFO
Slide 10: Income statement
Income statement FY12 (7 months) $m Operating revenue 613 Operating expenses (214) Earnings before interest, tax, depreciation and amortisation 399 Depreciation and amortisation (189) Earnings before interest and income tax 210 Net interest expense (68) Net earnings before income tax 142 Income tax
Slide 11: Understanding Revenues
Understanding Revenues • core regulated products that are earlier technology or products Basic Copper with limited scope for further development e.g Baseband copper (UCLFS), Basic UBA, Naked UBA, UCLL, SLU, SLES • products enhanced to deliver higher speed capability and better Enhanced Copper custom
Slide 12: Connections
Connections Fixed line connections Approx. No. of connections Baseband copper 1,585,000 UCLL 97,000 SLU/SLES 19,000 Fibre 10,000 Naked Basic and Enhanced UBA 50,000 Legacy data services over copper 15,000 Total fixed line connections 1,776,000 Broadband connections Approx. No. of connections Basic U
Slide 13: FY12 Revenue (7 months)
FY12 Revenue (7 months) Revenue category $m Basic copper 399 2012 $m Enhanced copper 89 Fibre 28 Value Added Network Services 18 Field Services 47 Infrastructure 14 Other 18 Total revenue $613m
Slide 14: Operating expenses
Operating expenses FY12 (7 months) $m Labour costs 31 Provisioning 23 Network maintenance 52 Other direct costs 22 Electricity 11 Rents and rates 6 Property maintenance 8 Insurance 3 IT costs 30 Consultants 5 Other 23 Total operating expenses 214
Slide 15: Illustrative comparison to Scheme Book
Illustrative comparison to Scheme Book > Need to be aware of challenges in comparing FY12 result with Scheme Book data (requires annualising, normalising and adjustments – refer Appendix 2 of management commentary) FY12 FY11 (Annualised, (pro forma, normalised) normalised and $m adjusted) $m Operati
Slide 16: Capex overview
Capex overview FY12 (7 months) FY13 guidance $m (unchanged) $m Fibre capex 274 450 – 480 Copper capex 49 75 – 85 Common capex 23 35 - 45 Gross capex 346 560 - 610 > FY 12 capex consistent with May guidance > FY13 guidance unchanged
Slide 17: FY12 gross capex by category
FY12 gross capex by category Common capex 23 Fibre capex $274m Information 12 UFB communal 162 technology 7% Building & engineering 10 services 14% UFB connections & 13 fibre layer 2 Other 1 Fibre products & 7 systems Copper capex 49 Other fibre 33 Network sustain 20 79% connections & Copper connect
Slide 18: UFB build update
UFB build update FY12 UFB communal build costs were $162m > Build work for 42,000 premises by 30 June > Another 10,000 premises recognised as work in progress, many were substantially complete > CPPP for year 1 work (including WIP to be completed in year 2) is unchanged at approximately $3,300 Mediu
Slide 19: Cash flow statement
Cash flow statement Year 1 cash flow has been unusual > Chorus began effectively with nil working capital > No dividend payout due to seven month period FY12 (7 months) $m Cash flows from operating activities 332 Cash flows from investing activities (259) Cash flows from financing activities 27 Net
Slide 20: Debt maturity profile
Debt maturity profile As at 30 June debt of $1,609m comprising: > $1,105m syndicated bank facility > $513m Euro Medium Term Note ($677m mark to market) Board committed to investment grade BBB rating 800 Bank EMTN 700 600 $m 500 April 2020 400 300 200 100 0 Current Due 1-2 Due 2-3 Due 3-4 Due 4-5 Due
Slide 21: FY12 and FY13 Dividend
FY12 and FY13 Dividend > FY12 dividend of 14.6 cps, fully imputed. ▪ Record date: 21 September ▪ Payment date: 5 October > Expect FY13 dividend to be fully imputed 25.5 cps subject to no material adverse change in outlook > Given the current regulatory uncertainty, Chorus is unable to provide longer
Slide 22: Capital management
Capital management > Chorus Board is committed to maintaining a „BBB‟ long term credit rating from Standard & Poor‟s and a „Baa2‟ long term credit rating from Moody‟s Investor Services > It is Chorus‟ intention that in normal circumstances the ratio of net debt to EBITDA will not materially exceed 3
Slide 23: Mark Ratcliffe
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Slide 24: Regulation: Which road forward?
Regulation: Which road forward?
Slide 25: Key regulatory dates
Key regulatory dates SEP OCT NOV DEC 2013 19 Sep: UCLL conference 29 Sep: Decision on UBA + UCLL backhaul competition review 1 Oct: Draft decision on UBA cost-based review 1 Nov: UBA conference Nov: Systems transition plan 23 Nov: UCLL decision 30 Nov: UBA review decision Dec: TDL cost decision due
Slide 26: Leading the market to fibre
Leading the market to fibre > Best practice standalone business will be the standard > Fibre success is about building UFB and driving uptake > Our vision is to ensure New Zealand realises the benefits fibre can enable Manage Drive cost efficiencies Retain Sustain value growth
Slide 27: Chorus fibre network
Chorus fibre network What are you going to do with yours?
Slide 28: Looking ahead
It‟s been an inaugural “year” full of learning and hitting the ground running… Looking ahead: Increase efficiencies for seamless operations that earns us the license to lead the fibre journey.
Slide 29: Any questions?
Any questions?