Chorus Limited

Thank you for standing by and welcome to the Chorus FY26 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the start key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr Marco Ware, CEO. Please go ahead.

Good morning and welcome to the Chorus Results presentation for the 12 months end of 30 June 2026. I'm Mark Owek, Chief Executive and joining me is Drew Davies, our Chief Operating Officer. I'll begin today with an overview of our results for the FY26 year and cover the progress we're making on our strategy. Drew will cover the financials and FY27 guidance before I close out with our outlook and the role we see Corus playing as core infrastructure for New Zealand's rapidly evolving AI future. We characterise FY26 as strong financial and operational performance, reflecting the resilience of our business model, disciplined execution and focus on driving simplicity and efficiency as we transition to an all-fibre business. Fibre connections increased by 3% at over 1.1 million connections. Uptake continued to strengthen, reaching 75.9% with Fibre revenue growth of 6% during the year. EBITDA increased 3% to $726 million, underpinned by continued revenue growth and disciplined cost management. We delivered further efficiencies across the business and maintained tight control of discretionary spend, helping offset persistent inflationary pressure, particularly in non-tradable costs. Net profit improved significantly to $37 million and strong cash generation reinforced the quality of earnings with operating cash flow up 4% to $740 million. Gross capex was $375 million and while lower than FY25, this primarily reflected the timing and phasing of projects rather than any change in our commitment to maintaining and enhancing network quality. Reflecting our confidence in the business and consistent with our previously signalled The total FY26 dividend increased 4.3% to 60 cents per share. We're now firmly in Horizon 2 of our multi-phase strategy, a four-year program through to the end of FY29 focused on driving growth, simplicity and efficiency. Fibre uptake continues to progress during the year. Our opportunity still sits with around 400,000 addresses where fibre is available but not yet connected. We've taken further steps to simplify the business, streamlining our plan suite and introducing new retailer incentives, whilst retaining a strong debt profile and our BBB or equivalent credit rating. We're encouraged by the positive regulatory change and we're accelerating copper retirement, with fewer than 1,000 copper lines now remaining in fibre areas. In parallel, our copper recycling programme is fully operational and our multi-year property optimisation programme is underway. We're also building momentum across a number of infrastructure initiatives, with the launch and expansion of new products like Express Connect and Unified Transport, and the recent announcement of TimeSync, a precision timing service, all of which creating future growth opportunities. Finally, while maintaining our disciplined investment approach, we're evaluating several medium-term infrastructure opportunities, including a potential inter-island subsea cable and a trial for the deployment of distributed battery energy storage systems. While the financial results this year are important, they also reflect something deeper, how we're bringing our purpose to life and embedding it in the way we work. Our core purpose, unleashing potential through connectivity, enabling better futures for Aotearoa, resonates widely. During the year we clarified the purpose-led areas that matter most for Chorus. That work has shaped three interconnected pillars for connectivity, being future fit, resilient and equitable. Together these bring focus where Chorus' strengths align with the needs of our wider ecosystem and where we can create the most meaningful shared value. So we're continuing to deliver value beyond financial performance. One example is our focus on driving digital inclusion. with the launch of our Equity Fibre product. Fundamentally, we believe everyone deserves to benefit from the potential that connectivity unlocks. By combining affordable fibre access alongside community partners, we can help remove barriers to digital participation and create lasting benefits for New Zealanders. Feedback to date has been positive and we have over 3,000 connections on plan. With climate, we've reduced scope 1 and 2 emissions by 43% from our FY20 baseline. Almost all waste has been diverted from landfill, and electricity consumption has reduced by 7% compared with prior year, despite the growth in data traffic. Our people remain central to our success. Employee engagement remains strong, with a score of 8.4 out of 10, well within top quartile, and we continue to compare favourably with industry on safety performance. Turning now to performance across our four strategic lead pillars. First, in LEED, fibre uptake increased to 75.9%. Original UFB1 areas increased to 77.3%, and UFB2 areas at 67.5%, with major urban areas like Wellington and Dunedin now close to our 80% fibre uptake target. Encouragingly, as the right-hand chart shows, without the copper withdrawal tailwind of past, we're still maintaining new fibre connection growth. As we noted previously, we have two clear fibre growth pools, around 200,000 premises where an ONT is already installed and we can win the customer back to fibre, and another 200,000 brownfield and infill addresses where fibre has passed the premise but the ONT still needs to be installed. Turning to connection trends. With ongoing cost of living pressures, our home fibre starter plan continues to play an important role in keeping customers on fibre, while demand for higher speeds continue to grow. More than four out of five customers are now on a 500 megabit plan or faster. Hyperfibre continues to gain momentum as our premium growth platform, offering symmetrical plans from 2 to 8 gigabits, with around 54% of total addresses already network ready. we expect ongoing growth in high-speed services supported by increasing household data usage and emerging AI-driven requirements. Our medium-term ambition is to reach 80% address availability with 70,000 hyperfibre connections by 2030. In parallel, we continue to be buoyed by research highlighting the relative differences in broadband technology, with first-choice preference for fibre at 66% compared to 12% for fixed wireless. Data consumption continues to grow strongly, reinforcing the importance of high-capacity fibre infrastructure. Average monthly fibre usage reached 731GB per connection in June 2026, up 9% on prior year. Heavy usage is also increasing, with 21% of fibre customers now consuming more than 1TB of data per month, and 5% of those customers using over 2TB per month. Total network traffic grew nearly 10% on FY25, and I often like to put this in context. That increase alone is the equivalent of over 30,000 years of continuous HD video streaming. Speaking of streaming, our congratulations to TVNZ, successfully running the recent FIFA World Cup tournament predominantly online. This demonstrated delivery credibility and bodes well for the future with a retirement of legacy broadcast services. And this represents another growth opportunity for fibre uptake that we've highlighted as services increasingly move to IP-based delivery. During the tournament, we were pleased but unsurprised by the fibre network's performance, peaking at over 180,000 concurrent streams for the final, with each game in high resolution accounting for about five gigabytes of data. We continue to drive the expansion of fibre. Whilst new property development was subdued in FY26, we're still past 22,000 new lots, strengthening relationships with developers and renewing key partnership agreements. Beyond our core fibre network, we're continuing to expand and diversify our infrastructure portfolio. As I noted, we've launched several new products with Express Connect, Unified Transport, and more recently, TimeSync, the precision timing service. With the intent of expanding further through FY27, all are designed to simplify our offering and speed to market for customers. In mobile infrastructure, demand for fibre backhaul remains strong as operators continue investing in network densification and we see steady demand for rack space in our regional edge centres where access diversity is becoming more prevalent. Together these initiatives broaden our addressable market, increase utilisation of existing network assets and support sustainable long-term growth beyond traditional fibre connections. To our ADAPT pillar, we've continued to evolve our operating model and capabilities. In Q4, Matt Bolton was appointed as Executive GM for Infrastructure, further strengthening our leadership team. In Regulation, we've made a material step forward. The final report from the Telco Sector Review highlighted opportunities to simplify legacy record tree settings with the prior shareholder caps to be removed. This is an outcome we've been advocating for over some time and removes an unnecessary layer of complexity. There are still formal steps to work through, including seeking shareholder approval at our annual shareholder meeting later this year. We're also seeing progress in copper services when we continue to work with government and industry stakeholders to establish a clear and efficient pathway for retiring copper services in areas where fibre is not available. This obviously has a benefit to us, but equally provides certainty to the market and to customers. And finally to our pioneer pillar. Copper to fibre transition is now largely complete across New Zealand's fibre footprint, with fewer than 1,000 copper connections remaining to migrate. A total of 48,000 copper lines disconnected in the year, leaving roughly 44,000 services, nearly all in areas where fibre is not available. Given the rate of decline, we announced earlier this year that we would bring forward the estimated date of the copper network retirement to the end of 2028. The right-hand chart continues to show the efficiency gains from retirement with a $7 million reduction in reactive fault spend this year. Progress continues on a number of other initiatives to highlight two. Copper recycling has transitioned from a successful trial to a scaled operational program, contributing $4 million in EBITDA for the year. With metals pricing at historic highs, our estimates for cumulative returns are now in the $50 to $70 million range from where we started the program out to 2030. We're also progressing our property optimization program. If the copper network is retired, the focus is not only on value realization, but also on reducing future operating costs and avoiding unnecessary capital expenditure. I'll now hand over to Drew to take us through the financials.

Thank you, Mark, and kia ora, everyone. Overall, we delivered a strong set of financial results. Looking firstly at our income statement, which aligns to the IFRS 18 standard presentation, EBIT was $726 million, in line with the upper end of guidance and ahead of FY25 by $21 million. For operating expenses, which declined by $6 million from the prior year, we made cost savings from the changed operating model, incurred lower consulting costs, and reduced copper costs. That helped us absorb inflation in a number of cost lines. Accelerated depreciation on our copper assets in chorus UFB areas occurred in the prior period, resulting in lower depreciation and amortization in FY26 of $439 million. Net finance expense was $5 million higher year on year. While our weighted average interest rate on debt reduced to 4.95%, we repaid the majority of our Euro 300 million notes early with 9 million of settlement costs. Income tax expense was up 15 million from FY25, primarily driven by higher profits. The FY26 effective tax rate was 46% versus 81% in FY25, and higher than the statutory rate of 28%, mainly due to permanent differences arising from the tax treatment of the grants received from the Crown project-related funding. As a result, we recorded $37 million of net profit after tax for the year, compared to $4 million in FY25. Looking in more detail at our revenue categories, total fiber broadband revenues were up 6%, or $47 million from FY25, driven by fiber connections up 32,000 lines, along with an approximate 2% increase in ARPU to end at $59.51 for the year. With total copper connections down 48,000, or 52%, This resulted in combined copper broadband, voice and data revenues being down $34 million or 45% lower annually as we continue to execute our multi-year copper exit strategy. Field service revenues were up slightly with higher brownfields projects and roadworks and was partly offset by lower MPD revenue given the lower volume of development activity across New Zealand and FY26. Other revenues were stable annually and included approximately a $4 million net gain from copper cable recycling sales as activity started to ramp up in the second half. In the prior year, $3 million was from that trial undertaken. Total operating expenses were $303 million for the year and were $6 million or 2% lower than the prior period. We continue to drive strong cost management disciplines to offset the persistent inflationary pressures, mainly from non-tradables, such as rent, rates, and electricity lines costs. Labor costs were $81 million, down approximately 5% annually as a result of a new operating model. The lower capitalization rate of 42% was mainly from fewer fiber footprint expansion projects. Network maintenance costs were $11 million lower year on year. The key driver was lower copper fault volumes to premises as copper connections continued to decline, resulting in a 23% reduction in truck rolls. As we noted at the half year, Second half network maintenance costs did not decline as much as prior periods, as contractual CPI increases occurred, along with a seasonal increase in weather-related faults, which impact network-related fault volumes, especially in more rural areas. Other network costs were up $9 million, higher than FY25. This was mainly due to the higher engineering activity as a result of weather events and higher payments to service companies from better service levels. We also saw timing differences on project spend annually, including the 1F copper cabinet shutdown costs we incurred to power down each cabinet. While electricity consumption declined annually by approximately 7%, electricity expense was up $2 million due to higher lines charges. Consultants' expense was $4 million lower with spend relating to specific investments to explore potential new revenue opportunities. Meanwhile, we focus on lowering discretionary spends, which helps reduce other expenses by $5 million. Moving now to CapEx, gross CapEx for the year was $375 million, down $35 million from the prior year, and in line with the bottom end of the guidance range. Within gross CapEx, $205 million was sustaining CapEx, and $170 million was for growth. Gross CapEx was supported by $41 million of customer contributions for roadworks, new property development, and rural broadband upgrades. As signaled previously and as noted in the chart, the half-year phasing shows total second half CapEx was in line with the prior year second half. This included phasing of large national fiber bill projects underway, major network property refurbishment projects, and large IT project deliveries. This slide shows CapEx using regulated categories for the fiber regulated asset base, RAB. with the tables noting FY26 allocations, which are subject to audit at the end of the calendar year. CapEx attributable to investing in the RAB, which excludes capital contributions, is estimated to be about $297 million for the year. For the non-RAB CapEx, Copper CapEx was $6 million down annually and was mainly third-party funded. As reported in our information disclosure update in May, total RAB increased by $101 million over the 25 years calendar year to $6 billion, with core RAB increasing to $5.1 billion, up $221 million, partly offset by the financial loss asset declining by $130 million to $862 million as the flood appreciates further. Our net debt as of June 30 was $3.2 billion, up $72 million from the prior year, primarily as a result of issuing $400 million in Euronotes in November. Proceeds were used to repay €243 million of the EMTN 300 notes due in December 26, along with paying down entirely the revolving credit facility. Moody's rates chorus as BAA2 stable, with a threshold of 5.25 times debt to EBITDA, which we are currently at approximately 4.75 times. S&P rating is BBB positive outlook, with a threshold of 9% funds from operations to debt ratio, which we are currently well above at 17.2%. The table on the slide provides our bank covenant calculation under the revolving credit facility, and we are currently at 4.37 times. Moody's rating trigger of 5.25 times debt to EBITDA is the focus of our capital management policy. The board considers that a credit rating of at least triple D, or equivalent credit rating, is appropriate for a company such as Corus. It intends to maintain capital management and financial policies consistent with these credit ratings. Lastly, about 65% of our interest rate exposure is fixed for the next three years. On August 7th, the New Zealand government announced that it agreed to the sale of the securities NIF held in course to a select group of domestic and international institutional investors with settlement recurring by the end of August 2026. For reference, the key terms of the securities are set out in the left-hand side of the slide, and the face value of the combined securities is $1.16 billion. Coarse's obligations remain the same as pre-sale, but those obligations will now be owed to a number of parties and not just NIFs. From a ratings agency perspective, we expect S&P may treat the $683 million equity securities as debt rather than equity, which will increase our calculated leverage per S&P towards 5.5 times debt to EBITDA.