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UPDATE: Chorus resumes dividends after ComCom ruling, 1H profit plunges 48%

Friday 19th February 2016

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Chorus will start paying dividends again after the Commerce Commission's decision to let the telecommunications network operator charge its customers more for access to its copper lines, easing some of the regulatory burden that dragged first-half profit down 48 percent. 

The Wellington-based company expects to pay 20 cents per share this year, and the board declared an interim dividend of 8 cents payable on April 5, it said in a statement. Chorus stopped paying dividends after regulated price cuts strained its balance sheet, forcing it to renegotiate its banking arrangements and reassess its spending programmes. 

"During the UFB (ultrafast broadband) build programme to 2020, the board expects to be able to provide shareholders with modest long-term dividend growth from a base of 20 cents per share per annum, subject to no material adverse changes in circumstances or outlook," Chorus said in its report. "The conclusion of the copper pricing review process means we can now focus on running the business from a longer term shareholder value perspective rather than managing for cash." 

Net profit fell to $33 million, or 8 cents per share, in the six months ended Dec. 31, from $64 million, or 16 cents, a year earlier. Earnings before interest, tax, depreciation and amortisation dropped 14 percent to $275 million, while revenue fell 9.1 percent to $479 million. Forsyth Barr analyst Blair Galpin anticipated profit of $28.6 million on sales of $477 million in the half, and an interim dividend payment of 6 cents per share for an annual payment of 13 cents. 

Chorus got a reprieve from the regulator in December when the commission judged earlier decisions to cut prices for internet retailers to access the company's copper lines network were too severe, and set the wholesale broadband price at an average $41.69 a month over the next five years, up from $38.43. The company's shares rallied on the news, and Chorus upgraded its earnings guidance for annual ebitda to be between $580 million and $600 million, having previously projected a modest decline from the adjusted $546 million reported in 2015.

The company today said it's tracking in the top half of the forecast ebitda range. 

The shares last traded at $3.77, and have fallen 5.1% this year. The stock is rated an average 'hold' based on seven analyst recommendations compiled by Reuters, with a median target price of $3.99.

Chorus affirmed annual capital expenditure guidance to be between $580 million and $600 million, with gross spending of $254 million in the half, the majority of which was on the national fibre build. Chorus managed to keep its cost per premises passed at $1,643 in the half, below the $1,700 bottom end of its forecast.

Total fixed lined connections fell 1.8 percent to 1.76 million as a retail service provider dropped some copper lines, though fibre connections were up 42 percent to 125,000. Broadband connections increased 1.3 percent to 1.22 million, with gains in the higher end products, including a 49 percent increase in fibre connections to 112,000. Chorus has taken over the lead role in managing customer connections to fibre after delays in getting connected left some customers unhappy with the service, which is spread across a number of providers.

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