Chorus first-half net profit fell 29% on continuing line losses

Telephone lines company Chorus [NZX:CNU] has reported a 29% drop in first-half net profit, reflecting the impact of lost lines but says that losing trend is abating.

The company made a net profit of $47 million in the six months ended December, down from $66 million in the same six months a year earlier.

Its total fixed line connections fell 3% to 1.56 million and its broadband connections slipped by 5000 to 1.18 million. Chorus also reported 70,000 new fibre connections and 76,000 new VDSL connections.

“While the impact on revenue of lost lines from previous periods was apparent in the financial results this period, it was pleasing that the line loss trend showed signs of abating during the half,” chief executive Kate McKenzie says.

“During the half year we continued our campaign to promote better broadband and this, coupled with an expanded field force, helped drive a strong increase in fibre and VDSL uptake while also slowing connection losses to other networks significantly.”

Operating revenue fell to $499 million compared to $529 million in the previous first half but operating expenses also fell to $170 million from $194 million.

Depreciation charges rose to $192 million from $164 million, delivering earnings before interest and tax (ebit) of $137 million, down from $171 million.

Reducing line losses
“Losing just 5000 broadband connections over six months, largely as anticipated, to other local fibre companies, is a positive outcome,” Ms McKenzie says.

“Ensuring line loss trends continue to improve will be strongly influenced by the improvements we continue to make in customer experience,” she says.

“For example, we are aiming to consistently deliver one-day installs for fibre by the end of next financial year.”

Average lead times for fibre fell from 22 days to 14 days during the half year, despite record order volumes, Ms McKenzie says.

“Despite the pressures in the New Zealand construction industry, we’ve kept our fibre rollout costs within plan and we’re maintaining a tight focus on other costs,” she says.

“We will also continue to be an active wholesaler, aiming to stimulate competition amongst retailers in the market.”

Ms McKenzie says the company is tracking toward the top end of its guidance for annual ebitda to come in between $625-650 million despite capital spending also tracking toward the top end of guidance of $780-820 million.

Chorus will pay a first-half dividend of 9c a share, up from 8.5c for the previous first half.