Chorus Limited · NZX:CNU
Chorus — H1 FY25 Earnings Presentation
36 slides from Chorus's earnings presentation, February 2025
Slide 1: HY25 Investor Presentation
CH@RUS Was, ton ae Investor " For the six months ended 31 December 2024.
Slide 2: Disclaimer
Disclaimer This presentation: • Is provided for general information purposes and does not constitute investment advice or an offer of or invitation to purchase Chorus securities. • Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They inv
Slide 3: Agenda
Agenda Mark Aue, CEO HY25 overview, 2030 strategy and opportunities 4-6 o Lead 7-9 o Expand 10 o Adapt 11 o Pioneer 12 Drew Davies, COO Financial results 13-16 Capex and net debt 17-19 Dividend and FY25 guidance 20-21 Mark Aue, CEO Outlook for H2 FY25 21-24 Appendices Market information 26-29 Fi
Slide 4: Half year result overview 2025
Half year result overview 2025 % COMPARISONS ARE HY25 VS HY24 1% © REVENUE (S million) 11% © EBITDA? ($ million) =k © CAPITAL EXPENDITURE ($ million) +21% @ DIVIDEND (cents per share) STEADY RESULT DESPITE ONGOING RECESSION HY23 487 H2 FY23 493 H2 FY23 yes 1223 ESD Hy24 Hy24 ED Hy24 232 Hy24 werres
Slide 5: Our Road to 2030: Growth, Simplicity & Efficiency
Our Road to 2030 Growth, Simplicity & Efficiency PURPOSE Unleashing potential through connectivity. Enabling better futures for Aotearoa. ASPIRATION Simplified all fibre business with 80% uptake by 2030. BUSINESS Efficient Network Market Infrastructure MODEL Operator Challenger Player CORE Regulator
Slide 6: Exploring a range of new revenue options
Exploring a range of new revenue options Option 1: Option 2: Option 3: IoT Solutions Scale EdgeCentres Trans-Tasman Ring Option 4: Option 5: Option 6: Fibre Expansion Copper recovery Property optimisation HY25 INVESTOR PRESENTATION 6
Slide 7: Fibre growth continues in slower market
Fibre growth continues in slower market • 71.7% fibre uptake across Chorus fibre area (FY24: 71.4%; target: 80% by 2030) • mass market fibre connections up 15k in HY25, with slowing tailwind from copper migration • fibre footprint +14k in HY25 to 1,520,000 addresses passed Fibre uptake in Chorus fib
Slide 8: Entry level plan meets cost-of-living need
Entry level plan meets cost-of-living need • Home Fibre Starter (50Mbps) connections grew by 21k to 68k in HY25 • business and residential connections of 500Mbps+ grew by 17k • demand for multi-gigabit Hyperfibre plans (2Gbps and above) gained momentum, nearing 5k connections • 88% of business conne
Slide 9: Record data use and more peak events
Record data use and more peak events • monthly average data usage on fibre increased strongly to 644GB (June: 623GB) • the proportion of fibre connections using more than 1 terabyte of data was 17.5% (June: 16%) • HY25 average daily peak traffic 10% higher than HY24 • 10 peak traffic events in HY25
Slide 10: Driving digital infrastructure revenue growth
Driving digital infrastructure revenue growth • Infrastructure revenues $77m in HY25 (target: annual $180m-$200m by 2030) • ‘greenfield’ property activity stabilising back at pre-Covid levels (~20k-25k lots p.a.) • steady growth in data connectivity demand (e.g. smart locations, mobile backhaul, Edg
Slide 11: Regulatory certainty on fibre to 2029
Regulatory certainty on fibre to 2029 • final MAR decision (December) defers $256m of core fibre asset depreciation from PQP2 • we expect opening core RAB to grow from $4.99bn (Commission forecast at 13 Dec 2024) to ~$5.4bn through PQP2, based on final capex allowances and core asset depreciation PQ
Slide 12: Copper retirement is coming into focus
Copper retirement is coming into focus • shutdown of copper in Chorus fibre areas now expected by end FY26; fewer than 28k lines in service • 21% reduction in non-fibre area copper lines since HY24 (target: copper shutdown by 2030) • 1.5k remote radio customers: ~30% of addresses have moved to an al
Slide 13: Financial Performance
Financial Performance Drew Davies, Chief Operating Officer 13 13
Slide 14: Income Statement
Income Statement H1 H2 H1 FY25 FY24 FY24 $m $m $m Operating revenue 500 507 503 decline in legacy revenues offsetting fibre growth Operating expenses (154) (154) (156) legacy costs reducing, but savings partly offset by inflation and spend to explore new revenue opportunities Earnings before int
Slide 15: Revenue
Revenue H1 H2 H1 FY25 FY24 FY24 $m $m $m Fibre broadband 361 356 341 growing uptake; ARPU: $55.34 (Dec 2024) vs $55.71 (June 2024) due to (GPON) growth of entry level plan and delay of fibre price changes to 1 Jan 2025 Fibre premium (P2P) 32 34 35 growing demand for mobile access and backhaul of
Slide 16: Expenses
Expenses H1 H2 H1 FY25 FY24 FY24 $m $m $m Labour 43 41 39 45% capitalisation rate (HY24: 48%) as fibre investment reduces; $1m change costs Network maintenance 25 26 27 reducing fault volumes partly offset by service company CPI increases IT 20 21 23 reducing as legacy systems are exited Other
Slide 17: Capex
Capex Gross capex H1 H2 H1 Sustaining vs growth capex FY25 FY24 FY24 250 $m $m $m Sustaining capex* 94 88 117 200 115 Discretionary growth capex 105 107 115 150 105 107 Gross capex 199 195 232 Less Third-party contributions** (24) (25) (30) 100 Net capex 175 170 202 117 50 88 94 0 H1 FY24 H2 FY24 H1
Slide 18: Capex
Capex H1 H2 H1 H1 H2 H1 RAB capex* FY25 FY24 FY24 Non-RAB capex FY25 FY24 FY24 $m $m $m $m $m $m Extending the network – growth 45 26 29 Copper - growth 2 4 1 Installations – growth 54 70 81 Copper - sustaining 4 6 12 IT & Support - sustaining 27 33 31 Other - growth 4 7 4 Network capacity - sustain
Slide 19: Leverage: 4.54x net debt/EBITDA
Leverage: 4.54x net debt/EBITDA As at 31 Dec 2024 ($m) Debt maturity profile Borrowings 2,774 900 + PV of CIP debt securities 314 NZ $M 800 (senior) 700 112 + Net leases payable 166 600 105 Sub total 3,254 500 - Cash 83 400 820 364 Total net debt 3,171 325 300 514 500 207 Net debt/EBITDA* 4.54x 200
Slide 20: HY25 dividend and FY25 guidance (unchanged)
HY25 dividend and FY25 guidance (unchanged) • HY25 interim dividend • FY25 EBITDA $700m to $720m* o 23cps, unimputed o tracking to lower half of range • record date: 18 March 2025 o original guidance excluded exploratory opex for subsea cable • payment date: 15 April 2025 o fibre price increases app
Slide 21: Getting future fit
Getting future fit Mark Aue, Chief Executive Officer 21 21
Slide 22: Fast track to an all-fibre business
Fast track to an all-fibre business • fibre price changes effective 1 January • fibre speed ‘boost’ from end FY25 (50/10Mbps > 100/20; 300/100Mbps > 500/100) • final Commission decision on broadband marketing guidelines expected Q3 • new RSP-led propositions tailored to market segments: (e.g. retire
Slide 23: Fast track to an all-fibre business (cont.)
Fast track to an all-fibre business (cont.) International copper retirement progress • Chorus internal focus on getting ‘future fit’ for Horizon 2 (% of incumbent network lines on fibre vs copper) (FY26-29) with ongoing iteration of operating model Portugal • Commission draft decision on copper serv
Slide 24: Simpler, more focused, more competitive
Simpler, more focused, more competitive • Chorus’ business remains resilient, but ongoing recessionary headwinds expected in H2 • we have regulatory clarity on fibre for next 4 years • copper retirement is enabling removal of legacy costs; clarity required on copper policy settings • we’re exploring
Slide 25: Appendices
Appendices CH @ RU S___HY25 INVESTOR PRESENTATION
Slide 26: Appendix A: Market information
Appendix A: Market information 30 Sept 31 Dec 31 March 30 June 30 Sept 31 Dec 2023 2023 2024 2024 2024 2024 Baseband 64,000 57,000 51,000 45,000 40,000 34,000 copper (no broadband) Copper ADSL 75,000 68,000 62,000 56,000 49,000 44,000 Copper connections (includes naked) declined 16k in Q2 and VDSL 7
Slide 27: Connection changes by zone
Connection changes by zone (indicative as at 31 December) Quarterly change (’000s) by zone -15 -5 5 15 Other fibre Copper lines (no broadband) 6,000 Local Fibre Company and fixed wireless provider company (LFC) activity is driving a gradual decline in copper Q2 FY24 -2 -2 zone Copper broadband lines
Slide 28: Pricing update
Pricing update Fibre plan - consumer Current wholesale price Price before 1 Jan 2025 Notes Voice line $30.59 $29.11 Home starter $38 $35 Wholesale price applies where retail price is $65. 50/10Mbps 50/10Mbps upgrades to 100/20Mbps from end FY25. 50/10Mbps $53.96 $50.43 100/20Mbps $56.28 $53.54 100Mb
Slide 29: Market composition
Market composition NZ broadband market – by retailer NZ broadband market – by technology 2,000,000 2,000,000 1,500,000 1,500,000 1,000,000 1,000,000 500,000 500,000 0 - Spark One Chorus xDSL Chorus mass market fibre 2degrees (incl Vocus) Mercury (incl Trustpower) Chorus premium fibre Local fibre com
Slide 30: Appendix B: Additional financial information
Appendix B: Additional financial information Interest rate hedges Crown financing summary Amount Current hedge profile Crown 30 30 30 30 Bond (NZ$m) securities June June June June $m 2025 2030 2033 2036 TOTAL EMTN 2026 514 100% fixed for life of bond at 3.39% Equity securities 85.3 197.0 404.0 768.5
Slide 31: Copper cost outlook
Copper cost outlook Tight cost control keeps direct copper revenues and costs FCF positive • Copper capex, net of contributions, $15m (FY24) and declining as activity transitions to fibre • Direct copper opex of ~$54m (FY24) steps down as copper customers migrate to other networks, or to fibre with
Slide 32: Accelerated copper depreciation rolls off rapidly
Accelerated copper depreciation rolls off rapidly 100 90 80 70 NPAT impact 60 reduces by $m ~$50m in FY26 50 40 30 20 10 0 FY22 FY23 FY24 FY25e FY26e FY27e Cables: CNU area Cables: LFC area Duct: LFC area Poles: LFCarea Cables: rural Poles: rural Estimate HY25 INVESTOR PRESENTATION 32
Slide 33: Capital management principles and policy
Capital management principles and policy A digital infrastructure business maximising long-term value and returns Dividend policy: pay an ordinary dividend of 70% to 90% (on average, over time) of net cash flow from operating activities less sustaining capital expenditure Capital allocation underpin
Slide 34: Appendix C: Regulatory information
Appendix C: Regulatory information Final building blocks revenue components 2025 2026 2027 2028 ($m, nominal) Total return on capital 255.1 270.4 269.4 266.1 Return on assets (RAB x WACC), Core fibre assets 384.6 396.6 404.3 408.5 Return on assets (RAB x WACC), Financial loss assets 74.0 63.8 54.6 4
Slide 35: Pathway to simplification by 2030
Pathway to simplification by 2030 TODAY* 2025 2026 2027 2028 2029 TSO variation for deep rural assets Copper dereg review Fibre input methodologies review (tbc) Fibre dereg review (tbc) Streamlined PQP3 process (if needed) Working towards fit-for-purpose regulation in all reviews *Calendar years HY2
Slide 36: Consumer transparency opportunities
Consumer transparency opportunities TODAY* 2025 2026 2027 2028 2029 Updated marketing guidelines Product disclosure guidelines Update industry marketing codes Billing and switching review Commission reviews Telco Disputes Resolution Scheme Future Retail Service Quality programme TBD Ongoing: Measuri