Chorus full-year profit growth stalls on lower regulated prices

Chorus [NZX: CNU], the telecommunications network operator, said lower regulated pricing for access to its copper services was to blame for full-year profit stalling, although it sees a resumption of growth in 2017. It separately announced that chief executive Mark Ratcliffe will step down in the middle of next year.

Profit was $91 million in the 12 months ended June 30, unchanged from a year earlier, the Wellington-based company said in a statement. Operating revenue barely budged at $1.008 billion from $1.006 billion.

Both profit and earnings before interest, tax, depreciation and amortisation of $594 million exceeded forecasts by brokerage Forsyth Barr, which also anticipated an uplift in 2017 earnings because of the Commerce Commission's more favourable review of its regulated pricing decision last December. Although that provided "a better price path to 2020" than was initially proposed, the latest annual results still included 5 1/2 months at the lower rates, it said today.

"While the final copper pricing outcome was an improvement on the benchmarked pricing, it has not restored our financial position to demerger levels, and the regulatory framework that may apply from 2020 remains far from clear," Mr Ratcliffe said. "We are therefore continuing to take a measured approach to investment."

Mr Ratcliffe became chief executive in 2011, having led the business when it was an operationally separate business unit within Telecom. That meant he was Telecom's lead executive for the ultra-fast broadband initiative and oversaw the demerger of Chorus.

The copper network still represents 73% of Chorus's revenue and reflected just six months of the commission's final copper pricing determination. Basic copper fell to $489 million from $491 million while what it calls enhanced copper fell to $242 million from $268 million. Fibre revenue climbed to $133 million from $98 million.

Valued added network services and field services were little changed at $35 million and $83 million respectively.

Total fixed-line connections fell to 1.73 million at June 30 from 1.79 million a year earlier. Total broadband connections rose to 1.23 million from 1.21 million.

Chorus gave ebitda guidance for the current year in a range of $625 million to $645 million, even while raising its projected capital expenditure forecast to a range of $610 million to $650 million, from $593 million in the year to June 30.

The company declared a final dividend of 12c a share, making 20c for the year, after it resumed payments for the first time since the original commission ruling on regulated pricing forced it to slash costs and seek changes to its broadband rollout contract with the government. Its guidance for 2017 is 21c .

The stock last traded at $4.63 and has climbed 18%  this year.

(BusinessDesk)

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