Chorus Limited

Thank you for standing by and welcome to the course H526 results. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Ray, CEO. Please go ahead.

Good morning everyone and welcome to Chorus' results presentation for the six months ended 31 December 2025. I'm Mark Owe, Chief Executive and joining me is Drew Davies, our Chief Operating Officer. I'll begin with an overview of our results for the half year and cover some of the progress we're making on our strategy, having just entered our next phase into Horizon 2. Gerard will then take you through the financials and FY26 guidance, and I will close out with the outlook for the second half and longer term. For the past two years, we've noted the economic downturn and its material impact across our country. We'd recognise economic recovery is at best still lumpy. Over the same period, we've continued to highlight the resilience of fibre more seemingly as an essential service, and so are pleased to be reporting another robust result for the first half. From the results perspective, comparing half on half, total fibre connections were up 3% at over $1.1 million, with uptake lifting to 72.4% and fibre revenues growing by 7%. Our ongoing focus on simplicity and efficiency has reduced operating expenses by 3%. Per previous thematics, this is despite inflationary pressures and non-tradable costs such as rent rates and electricity. EBITDA of $357 million is $11 million ahead of the comparative half, with underlying operating cash flows in line with prior year. Gross capex was $158 million, with sustaining capex of $79 million, driven in part by lifecycle planning and project timing shifts into the second half. Finally, the Board has declared an unimputed interim dividend of $0.24 for the half. In our last results announcement, I was pleased to speak to the foundations and groundwork we'd laid to set us up across our 10-year outlook. Now, six months into Horizon 2, focus continues shifting to growth, simplicity and efficiency. We continue to build capability through new leadership and remain optimistic about fibre growth. Likewise, we're alive to adjacent infrastructure opportunities, evaluating several and discounting a number. But we'd also recognise these take time to commercialise and bring to market. Brand fibre messaging continues to land, raising awareness of comparative differences in technology. Research trends continue to move favourably with fibre's preference as first choice interconnection, now over 67% compared to 12% for fixed wireless customers. Our accelerated retirement of copper continues at pace with just 3,000 lines remaining in USB areas. This opens material opportunity through recycling and we see positive pathways to regulatory change as only a question of time. Turning to performance across our four strategic LEED pillars. In LEED, we lifted fibre uptake to 72.4%. UFB2 areas increased to 63% and original UFB1 areas are at 75%. Encouragingly, we've seen pockets where fibre has already exceeded our 80% target, while others like Auckland and Nelson are at 76% already. In the past, copper withdrawal provided a pipeline to fibre growth, but as the right-hand chart shows, we're maintaining fibre connection growth without the copper tailwind and are unlocking other growth pools. Our plan mix remains positive, with over four out of five customers on a 500 megabit plan or higher. Total churn, as in off-net greater than four weeks, is reducing, with indications fixed wireless is plateauing. At the top end, demand for 1 gigabit plans is stable, with Hyperfibre adding roughly 500 connections per month now. There is often discussion about our home fibre starter plan. I'd say we remain resolute. The introduction of our 50 megabit plan and subsequent boost initiative to 100 and 500 megabits were the right decisions. Overlay high cost of living pressure, these provided optionality and we're confident has opened us to markets and customers that existing fibre plans did not appeal to previously. Profiling shows in the main these are distinct customer groups with lower usage and they have greater churn and reactivation rates than higher tier plans. Whilst we saw initial downgrades from higher plans, this was also exacerbated by some retailers moving pricing at the same time in Q1. Now this is settled, we've seen encouraging trends over the past quarter in particular. Demand for the 100 megabit plans is strong, with circa 75% of that growth coming from off-net and 25% from downgrades. Even more favourably, we're seeing a material shift in uptake for long-term inactive fibre premises, with a 24% increase from premises off-net greater than three months, 32% from off-net greater than a year, and 62% from premises off-net greater than two years. Our hypothesis being the previous 50 megabit plan didn't appeal, and or the previous 300 megabit plan was too much. And that was also part of our boost rationale to create clear air between fibre and fixed wireless plans. Downgrades of the 500 meg plan have now stabilised the post boost, with overall churn also reducing. We're also increasingly seeing upgrades into the 500 megabit plan with customers wanting either more speed or those customers who may have downgraded previously but are now returning back to the 500 meg plan. Finally, we note intention to switch research continues to highlight fiber tenure over fixed wireless. Fiber at 6.7%, even for the 100 megabit plan, versus 23.6% for fixed wireless. Data demand continues to accelerate. Average monthly usage at 699 gigabytes in December increased even further to 722 in January, up 12% from a year ago. Across our base, 20% of fibre customers now use more than a terabyte of data each month. Peak events also continue to grow with a 14% average increase in peak usage. In part, that's also reflected with both the number and quality of connected devices, which has almost doubled over the past five years to 25 and is expected to do the same again over the next five. We see this only playing to fibre's strength of resilience, quality and the scalability of the networks. Turning to our expand pillar, we continue to see opportunities for new infrastructure growth, but we'll take a disciplined approach to investment where the returns must be scalable to reach our Horizon 2 aspirations. These relate specifically to natural adjacencies, with several we are exploring now and expect to have a more fulsome update at our full year results. In our core, while property sector has continued to see subdued activity, our new property development volumes have continued in line with pre-COVID levels. We delivered 11,000 lots in the first half, and our pipeline continues to support our estimates of 20,000 to 25,000 lots per annum. Encouragingly, consenting volumes have grown 9% off their cyclical lows, and while early days, this is starting to show up again in incoming NPD volumes. Mobile infrastructure connectivity continues to grow. Broader opportunities and connectivity of data centre are also now being realised. Our new product, Express Connect, is now in five data centres and has materially enhanced our go-to-market proposition and delivery, with plans to double the number of DCs served by end of this financial year. Our ADAPT pillar is a key lever in Horizon 2 in driving operational excellence. During the half, we've continued our focus on simplification and efficiency, refining our operating model. This has seen a realignment of teams, processes, and a 12% reduction of roles, whilst building new leadership and capability in customer retention, data and analytics, and AI integration. Copper retirement is progressing well, enabling us to power down over 400 cabinets in the half, with an intent to accelerate that in H2. We also continue to see positive regulatory pathways developing, having collaboratively worked with government and broader industry stakeholders. We're hopeful a decision relating to copper deregulation and the related CSO review within Q3. Likewise, a decision from the Ministry for Regulation Review over a similar timeframe. And finally, to our pioneer pillar. As I noted, just 3,000 copper lines remain within USB areas. and we're on track to retire this fully by end of June. In non-fibre areas, copper connections have declined by 26,000 over the last year, with only 54,000 lines now remaining. Relatedly, we've seen a $4 million reduction in reactive fault spend with a 22% reduction in truck rolls. The copper network itself remains free cash flow positive But we continue to highlight our imperative with government to shift regulation and enable a pathway to a full exit of legacy technology that has been far superseded by alternatives. To other strategic opportunities, copper recycling remains positively on track. We're transitioning out of trial now into final contract phase of a fully operationalised work stream. With metals pricing at historic highs, our estimates for returns are now at the top end of the 30 to 50 million range. To fibre expansion, we were encouraged the Infrastructure Commission had endorsed our fibre expansion plan to 95% of the population. However, the reality of funding and competing government priorities during an election period had forced us to refocus. Whilst we maintain New Zealand would benefit significantly, both financially and societally, it is clear even joint funding and partnership is not viable in the short term. We've instead shifted greater focus to our other large opportunity pool at Brownfields Infill, where roughly 200,000 premises had previously been tasked with fibre during the initial USB rollout, but were not installed or connected. Finally, to property optimisation, where alternatives are enabled as we retire and exit from the copper network. We continue to review high sites and how these may be broken into tranches as a test case, and we have several parties interested. I'll now hand back over to Drury to take us through the financials.

Thank you, Mark, and kia ora, everyone. Overall, as Mark said earlier, we delivered robust results in a challenging economy, and we continue to see solid fiber revenue growth annually, offset by the continuing copper legacy revenue reductions. Turning firstly to our overall income statement, EBITDA was $357 million, up $11 million from half year 25. Revenues of $506 million were up by a net $6 million. For operating expenses, we made cost savings from the changed operating model, incurred lower consulting fees, and made good progress on reducing legacy costs. That helped us absorb inflation and a number of cost lines. Having completed the accelerated depreciation on our copper assets in Coors U of B areas in the prior period, depreciation and amortization was $216 million and a half, down 19 million from half-year 25. As a reminder, copper cables and copper-related ducts and poles in local fiber company areas will be fully depreciated by June this year. Those in non-fiber areas will be fully depreciated by June 2030. Net finance expense was 6 million higher half-on-half. While our weighted average interest rate on debt reduced from 5.7% to 4.9%, we repaid the majority of our Euro 300 million notes early with $9 million of settlement costs. Income tax expense of $11 million is up $4 million from half-year 25, primarily driven from our higher profits. Overall, this meant we recorded $15 million of net profit after tax for the half-year compared to a loss of $5 million in half-year 25. Looking in more detail at our revenue categories, our fiber broadband revenues were up 7% or $26 million from the prior year, driven by fiber connections up 31,000 lines, along with an approximate 4% increase in ARPU, to end at $57.73 for the year. With total copper connections down 60,000, almost 50%, this resulted in combined copper broadband, voice, and data revenues being down 18 million, or 43% lower annually, as we continue to execute our multi-year copper exit strategy. We continue to see copper connections and revenue declining in the second half, similar to the first half. Field service revenues were down slightly, primarily driven by lower new property development activity, as Mark spoke to earlier, and was partly offset by higher revenue from new connections and brownfields projects. Other revenues were stable annually and were lower on a sequential basis, as the prior half included approximately a $3 million net gain from copper cable recycling sales, based on the trial we conducted in that fiscal year. Based on the learnings from that trial, we have completed a tender process with vendors and expect in the second half of this fiscal year to implement this program to realize a similar level of net sales from copper recycling in the low single millions. As I've spoken about previously, we intend to adopt the new accounting standard IFRS 18 for this financial year, reporting to June 30. The new structure allows us to be more prescriptive in our income statement, and we're currently working through what this will look like in our four-year results. Total operating expenses were $149 million for the half year and were $5 million or 3% lower than the comparative period. We continue to drive strong cost management disciplines to offset the persistent inflationary pressures which rose in the half year, mainly for non-tradables such as rents and rates. Labor costs were $41 million, down approximately 4% annually as a result of our new operating model, with about 100 fewer roles in the business. The labor capitalization rate reduced from 45% to 42% as network build activities declined versus prior periods, primarily from fewer fiber footprint expansion projects. For network maintenance, costs were down $7 million on half-year. The key drivers were lower copper fault volume supremacists as copper connections continued to decline, resulting in a 22% reduction in truck rolls, partly offset by network-related fault costs. This has been complemented by improved cost efficiency programs implemented across maintenance activities. For half two, network maintenance costs will not decline as much as prior periods as contractual CPI increases occur along with the seasonal increase in weather-related faults, which impact network-related fault volumes, especially in more rural areas. IT expenses were up slightly as a result of some one-off cloud-based system implementation costs included in this half. Other network costs were $5 million higher than HY25. This was mainly due to higher payments to service companies from better service levels this year, higher engineering activity as a result of weather events. We also saw timing differences on project spend annually, including the one-off copper cabinet shutdown costs we incurred to power down each cabinet. Electricity expense was up $1 million annually, and while our electricity consumption continues to decline annually by approximately 6%, this favorable trend was more than offset by higher lines charges. Consultant expense was down $4 million annually, as the prior year consultant spend included investments to explore the potential new revenue opportunity in the trans-Tasman subsidy cable. Advertising expenses of $5 million are traditionally lower for chorus in the first half, and we expect this will increase in the second half similar to prior years. Moving now to CapEx. Gross CapEx for the half year was 158 million, down 41 million from the prior half. Within gross CapEx, 79 million was sustaining, and 79 million was for growth. Gross CapEx was supported by 20 million of customer contributions for roadworks, new property development, and rural broadband upgrades. While CapEx was lower during the first half, we see an uplift in CapEx spend in H2, as a result of our planned project expenditures during this financial year. This includes phasing of large national fiber bill projects underway, major network property refurbishing projects, and large IT project deliveries. This slide shows CapEx using regulated categories for the fiber-regulated asset-based RAB. CapEx, attributable to investing in the RAB, which excludes capital contributions, is estimated to be about $125 million for the half-year. For the non-RAB CapEx, you can see the Copper CapEx was $3 million down annually and was mainly third-party funded. Total RAB increased by $73 million over the calendar year to $5.98 billion, with Core RAB increasing to $5.11 billion, up $203 million, offset by the financial loss asset declining by $130 million, to $0.86 billion as the slot appreciates further. Our total net debt as of December 31st was 3.2 billion, up approximately 100 million from June 30th, primarily as a result of issuing 400 million in euro notes in November. Proceeds were used to repay 243 million euros of the EMTN 300 notes due in December 26th, along with paying down entirely the revolving credit facility. We have two rating agencies that issue credit opinions on our leverage, Moody's and S&P. Moody's rates chorus is BAA2 stable with a threshold of 5.25 times debt to EBITDA down driver, which we are currently at approximately 4.8 times. S&P rates chorus is BBB positive outlook. As we have updated previously, S&P introduced a new digital infrastructure rating criteria covering tower companies, fiber companies such as chorus, and data centers. This new criteria uses a funds from operations to debt ratio for its leverage calculations and have set a threshold of 9%. CoRS is currently well above this threshold at 17%. This new leverage criteria is equivalent to seven times down driver of debt to EBITDA when using their prior methodology. As I will speak to shortly on the status of the NISCO security sale, the final determination by S&P on their leverage calculations and final down driver metrics will depend on the outcome of the NIPCO security sale later this year. The table on this page provides our bank covenant calculation using the Revolving Credit Facility, which has remained at no greater than 5.5 times senior debt to EBITDA ratio, and we're currently at 4.49 times. While S&P have changed the methodology, importantly, Moody's have made no change to their threshold of 5.25 times, So, this is our leverage down driver that is our focus for our capital management policy. Lastly, about 70% of our interest rate exposure is fixed for the next three years. Turning to the next slide, it's in December, the New Zealand government announced the sale process will proceed for its bespoke Crown funding securities provided to Chorus. The key terms of the securities are set on the right-hand side of this slide, and the state's value of the combined securities is $1.16 billion. of which 683 million are classified as equity securities. Corus will not participate in buying these NIFCO securities in the current government sale process. And importantly, if the securities are sold to a third party and transferred from the Crown, the terms of the securities to Corus cannot be altered without Corus's agreement. If the sale process does conclude later this year, And depending on the acquirer, S&P may reclassify the $683 million of equity securities as debt rather than as equity as they currently treat them in their leverage calculations. On a pro forma basis, if S&P treat all of the NISCO equity as debt, this would mean the S&P leverage calculation would be increased to approximately six times net debt to EBITDA. So still well below the current seven times down driver. On an SFO to debt basis, this would be approximately 13%. We will not know the final S&P leverage calculations, of course, until later this year. Until after the NIFCO sale process is complete. But in all scenarios, we are below the leverage thresholds. Finally, on dividend and guidance, we've announced an interim dividend of 24 cents unimputed to be paid in April. The DRP is not available. Dividend guidance for the full financial year remains $0.60, unimputed, and reflects the ongoing positive trend in cash flows. Net cash flows from operating activities were pro forma $257 million on the same basis as last year, as we note that a $29 million payment from one customer missed the cutoff for half-year results and was paid in early January. FY26, the EBITDA guidance remains at $710 million to $730 million, and we now expect to be in the upper half of this EBITDA range, and we base this expectation to be in the upper half based on increasing fiber connection growth and corresponding revenue increases and continuing discipline cost management. CAPEX guidance for fiscal 26 also remains at $375 million to $415 million, and we now expect to be in the lower half of this range. Correspondingly, our sustaining CapEx guidance range of $195 million to $215 million for fiscal year 26 also remains, and we expect to be in the lower half of this range. This reflects the capital project deliveries in the second half that I spoke to earlier. Overall, we continue to track well and we're pleased with the progress we are making in this early phase of our strategic objectives for eyes and truth to 2030. And I'll hand back to Mark to run through the outlook. Thanks, Drew.