The following line information is derived from the July 12th 2021 announcement.
Lines Connected |
FY2020 |
FY2021 |
Change YOY |
No Broadband Copper |
194,000 |
147,000 |
plus Copper Broadband |
466,000 |
320,000 |
-146,000 |
equals Copper Broadband & Voice Connections |
660,000 |
467,000 |
Fibre Broadband Connections {B} |
740,000 |
860,000 |
+120,000 |
Total Broadband Connections {A}+{B} |
1,206,000 |
1,180,000 |
We can now work out the underlying 'change in profitability' that these broadband connection adjustments imply.
From my post 2759:
Weighted Average Fibre Annual Revenue Gain Per User |
12 x $48.92= $587 {A} |
Incremental Number of new Fibre Users |
120,000 {B} |
Incremental Annual Revenue from new Fibre Users {E} |
$70.44m {A}x{B} |
Weighted Average Annual Copper Revenue Lost Per ex-User |
12 x $42.49= $510 {C} |
Decremental Number of ex- Copper Revenue Users |
146,000 {D} |
Decremental Annual Copper Revenue Lost from ex-Users {F} |
$74.46m {C}x{D} |
equals Net Change in Revenue from transformation: Copper-> Fibre Broadband User[ {E}-{F} |
-$4.02m |
If the operating costs of the respective 'fibre'; and 'copper' networks are not dependent on the annual change in the number of users on them, then all of this revenue change should flow through to the bottom line.
Change in NPAT = 0.72 x -$4.02 = -$2.9m
The actual impact won't be a great as $2.9m, because that figure assumes the respective increase in fibre broadband users and decrease in copper users that I have described occurred on 1st July 2020. In fact those changes took a whole year to roll through the income statement. So we might expect the actual reported profit decline due to these changes as closer to
$1.5m for FY2021. However, as things sit right now, the underlying profitability of the business has declined by $2.9m per year. The full effect of these changes in profitability over FY2021 will not be apparent in the accounts until FY2022.
Next from my post 2735 (on refinancing debt)
"All other things being equal this refinancing should produce an annual boost in profits from FY2022 of 0.72 x $7.5m = $5.4m"
However this refinancing only took place just over a month shy of the end of the financial year. So the actual incremental increase of profit will be:
$5.4m/12 =
$0.45m
Unfortunately the company wide interest saving overall wasn't even worth this much. Because the new replacement bonds were issued before the old bonds expired.
That meant we had a seven month interest bill from the new bonds that is incremental to the existing debt structure. This presents an after tax decrease in profit of
0.72 x $8.98m x 7/12 =
$3.8m
We have to go back to my post 2650 to find the underlying profit for FY2020 as $67.1m, well north of the headline figure of $52m
My forecast NPAT for FY2021, net of all one off charges, is therefore:
$67.1m - $1.5m + $0.45m -$3.8m = $62.3m
On a per share basis this represents earnings of $62.3m / 444.492m = 14.0cps
Note this is well below the mooted dividend rate of 25cps. But like the gentailers, Chorus is becoming a cashflow story, not a profit story, from here on in.