Annual Report 2022
01
15
25
63
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Chorus Board and management overview
Management commentary
Financial statements
Governance and disclosures
Glossary
FY22 results overview
Fibre connections1
Broadband connections1
FY22
959,000
FY21
871,000
FY22
FY21
1,189,000
1,180,000
Fixed line connections1
EBITDA2
FY22
FY21
1,304,000
1,340,000
FY22
$675m
FY213
$657m
Net profit after tax
Dividend
FY22
$64m
FY213
$51m
FY22
35cps
FY21
25cps
Employee engagement score4
Customer satisfaction
FY22
8.5
out of 104
FY21
8.5
Fault restoration
Intact
8.2 out of 10
(target 8.1)
7.3 out of 10
(target 7.7)
1 Excludes partly subsidised education connections provided as part of Chorus’ COVID-19 response.
2 Earnings before interest, income tax, depreciation and amortisation (EBITDA) is a non-GAAP profit measure. We monitor this as a key
performance indicator and we believe it assists investors in assessing the performance of the core operations of our business.
3 Previously reported FY21 EBITDA and net profit after tax have been restated to reflect an ongoing change in accounting treatment of field
services revenue for roadworks. Refer to page 34 of the 2022 Annual Report for the detailed accounting adjustments.
4 Based on the average response to four key engagement questions.
Dear investors
Our network and our people proved resilient
in another operationally challenging year.
Data demand and fibre uptake continued
to grow, underpinning a solid financial
performance. With the fibre rollout programme
drawing to a close, Chorus returned to earning
more than it is investing in the network for the
first time in a decade.
Our objective heading into FY22 was to keep unlocking the
potential of fibre by continuing to connect more people and
technology to our network. COVID continued to make that
difficult with lengthy lockdowns, followed by the ongoing
effects of illness on our workforce and consumer activity.
Despite this, we added another 88,000 fibre connections
and fibre uptake grew from 65% to 69% of addresses
within our Ultra-Fast Broadband (UFB) fibre footprint.
With direct contact with householders curtailed, we pivoted
from suburban fibre installation campaigns to promoting
activation of pre-installed fibre sockets. This helped win back
a growing number of connections and kept us on track to
reach one million fibre connections by the end of December.
Our 11-year public-private partnership with the Government
is fast approaching its conclusion. Just 17,000 or so homes
and businesses remain to have fibre built past them and this
will be done by the end of December. During the year we
were pleased to complete another project, largely funded
by the Government’s Provincial Growth Fund, to extend
fibre backhaul along 250 kilometres of the South Island’s
West Coast. This has opened up fibre and mobile network
connectivity for remote but key communities like Haast, as
well as strengthening the resilience of the regional network.
Increased consumer reliance on broadband for working,
streaming and learning continued to drive demand for reliable
high-capacity broadband. The number of 1 gigabit per second
(Gbps) connections increased to 23% of our consumer fibre
connections, up from 19% last year. In December, we gave
more than 600,000 homes and businesses a speed boost.
Residential consumers on our most popular 100 megabit
per second (Mbps) plans were able to upgrade to 300Mbps
at no additional wholesale charge. We’re also starting to see
momentum in the number of consumers taking our next
generation Hyperfibre services of 2, 4 and 8Gbps. Together,
these developments are catapulting Aotearoa New Zealand
up global fixed line broadband rankings.
Fibre’s operational electricity needs and associated carbon
emissions are lower than other broadband technologies,
particularly at higher data speeds. This enabled us to support
a 23% increase in data traffic with only a small uplift in total
network electricity usage during the year. Total traffic across
our network rose the equivalent of 1.3 billion gigabytes,
to 7,140 petabytes, while monthly average household data
usage for fibre consumers grew from 500GB to 567GB.
In our planned fibre areas broadband connections grew
by 27,000. This helped us to grow total fibre and copper
broadband connections nationally by 9,000 to 1,189,000.
This total excludes the 9,000 school student households
we continue to support with partly subsidised broadband
connections as part of a Ministry of Education COVID
response. We ended the year with 1,304,000 fixed line
connections, down 36,000 lines compared with a reduction
of 75,000 lines in FY21. Predictably, most of this reduction
was again in areas where our copper network competes with
alternative fibre networks.
1 January 2022 marked our transition to a utility-style
regulatory framework for fibre, replacing the contractual
framework with government that had applied through
the fibre rollout. After many years of discussion and
implementation we now have clarity on the parameters that
will shape our investment choices. These include the starting
regulated asset base of $5.4 billion1 and our maximum
allowable revenue for the next three years, which includes
some allowance for inflation.
The new framework also brings a regulatory focus on
quality of service and customer satisfaction. Customer
experience has been a priority we’ve worked to embed
within our organisation for many years. In FY22 this included
implementing a new fibre fault restoration measure and
continuing to work on improving the fibre connection
experience for homes with an existing or ‘intact’ fibre socket.
While we achieved a strong result on the first measure at
8.2 out of 10, there’s plenty more to do to lift the intact
experience from 7.3 out of 10.
Our employees spent much of the year working from
home because of COVID restrictions and its flow-on
effects. They continue to embrace flexible working with our
current policy that they can work up to three days a week at
home. Given this and our desire to create a more adaptive
organisation, we’ve moved to a hot-desking model and
reduced our office footprint both in Auckland and Wellington.
Even in the context of a challenging year and continual change,
our employee engagement score remained consistent at 8.5
out of ten and our net promoter score increased from 62 to 64.
Continued strong growth in demand for fibre broadband
delivered underlying revenue of $959 million, up from
restated $955 million in FY212. Careful cost management
partly mitigated inflationary and COVID pressures to achieve
underlying operating expenses of $299 million, up $1 million
from FY21. This produced underlying FY22 EBITDA of
$660 million, up $3 million from restated FY21 EBITDA of
$657 million2.
A further $6 million of revenue from our network optimisation
programme and a legal settlement, together with the
release of a $9 million holiday pay provision, achieved
reported EBITDA of $675 million. Net profit after tax was
$64 million compared to a restated total of $51 million in FY21.2
1 Currently subject to a Commerce Commission finalisation process.
2 Previously reported FY21 results have been restated due to an ongoing
change in the accounting treatment of field services revenue for
roadworks. Refer to page 34 for the detailed accounting adjustments.
1
Annual Report 2022 COVID constraints on fibre installations and general
network investment programmes saw our initial FY22
guidance of $550 million to $590 million capital expenditure
lowered several times through the year. Final spend was
$492 million. This means we returned to positive free cash
flow, earning more than we’re investing in the network, for
the first time since the beginning of the fibre rollout in FY12.
Consequently, our borrowings at the end of FY22 were lower
than expected at 4.08 times net debt to EBITDA and well
within our business tolerance level of 4.75 times.
Our move to positive free cash flow enables us to
increase dividend payments to shareholders. We’ll pay
a final unimputed dividend of 21 cents per share on
11 October 2022, bringing total dividends for FY22 to
35 cents per share. For FY23 we're increasing dividend
guidance from a minimum of 40 cents per share to
42.5 cents per share. FY24 guidance has increased to
a minimum of 47.5 cents per share.
We intend to continue with our share buyback programme of
up to $150 million, with about 25% of the programme already
completed by 30 June 2022.
This report is dated 22 August 2022 and is signed on behalf of the Board of Chorus Limited.
Patrick Strange
Chair
Figure 1:
Our network infrastructure
Mark Cross
Chair Audit & Risk Management Committee
~600 exchanges
~12,000 cabinets
~300,000 poles
~57,000km fibre (excluding service leads)
~130,000km of copper
~65,000km duct network
We’re a wholesale only, fixed line telecommunications
network operator. Our network infrastructure enables
100 retail service providers to connect homes and
businesses nationwide.
At 30 June 2022 we had 1,304,000 fixed line connections on
our network (voice only: 103,000; broadband: 1,189,000; other:
12,000). Our network carried 7,140 petabytes of data in FY22, up
from 5,823 petabytes in FY21.
We have about 800 permanent and fixed term employees and
120 independent contractors for our core operations. Our main
corporate office locations are in Auckland, Hamilton, Wellington
and Christchurch. Thousands of service company workers and
subcontractors undertake activity on our behalf.
80% of our broadband connections are on fibre, enabling rapid
growth in broadband speeds and data demand. Most connections
are on 300Mbps plans, and almost a quarter on 1Gbps plans.
Hyperfibre services of 2, 4 and 8Gbps are also available.
Gigabit broadband and our fibre backhaul is underpinning the
development of sustainable communities through connections
to devices and other network connectivity.
A 2021 study confirmed the carbon emissions profile of our fibre
network stays low regardless of speed, suggesting that fibre will
continue to be energy efficient as data demand grows1.
1. https://company.chorus.co.nz/file-download/download/public/2314
2
Annual Report 2022 1.0
Delivering on our strategy
in FY22
1.1 Winning in our core fibre business
We finished FY22 with 959,000 active fibre connections
nationwide, up from 871,000 the year before. About 919,000
of these connections are within our planned ultra fast
broadband footprint. The UFB1 and 2 projects have now
made fibre available to 1.32 million homes and businesses.
Across the UFB1 area, where deployment work was completed
in late 2019, fibre uptake grew from 69% to 74% of homes and
businesses. Uptake in Aotearoa’s largest city, Auckland, rose
from 75% to 79%. In the Wellington region, where we have had
historically lower market share due to the presence of an existing
cable network, we saw uptake increase by another 6% to 68%.
In the smaller UFB2 communities, uptake grew from 42% to
50%, even with the rollout passing another 42,000 homes
and businesses during the year.
We continued to undertake a range of in-market activity
to promote uptake of fibre services. This active wholesaler
approach is important because the three mobile network
operators have their own commercial incentives to promote
their mobile and fixed wireless network services, rather than
fibre, to their incumbent customers.
The Commerce Commission’s independent broadband
monitoring, performed by SamKnows, continues to show
that nothing beats a fibre connection when it comes to
reliable, uncongested and unlimited broadband. At peak
times, 4G fixed wireless delivers average download speeds
of 27.5Mbps compared to 40.1Mbps for VDSL copper
broadband and 309.1Mbps for fibre 300 plans.3
The report also shows the difference in latency between
broadband technologies when a connection is heavily
utilised. This illustrates the lag or buffering consumers
may experience, particularly when using multiple devices
simultaneously or applications like video conferencing
(see Figure 3). Our 1Gbps plans, defined as Fibre Max by the
Commission, perform the best with the lowest latency. Given
these findings, it is unsurprising that we saw uptake of 1Gbps
connections on our network keep growing strongly over the
year from 19% to 23% of mass market fibre connections.
Fibre has huge potential for further advances in speed
and bandwidth. We’ve already achieved speeds not even
contemplated a decade ago with our new Hyperfibre services.
In FY22, by simply changing the electronics on the end of a
fibre cable to use different colours of light, we demonstrated
how 25Gbps is possible on a fibre strand simultaneously
carrying separate 8Gbps and 1Gbps connections.
Our in-market activity included mainstream advertising
and campaigns focussed on encouraging homeowners
to activate pre-installed fibre sockets. The latter activity is
increasingly important as we issue more notices under our
copper withdrawal programme. It also helped us continue
to drive fibre growth while in-home installation activity was
curtailed by COVID restrictions. About 43,000 addresses
received an installation through our door knocking and direct
marketing efforts, down from 61,000 last year. However,
connections generated through our migration programme
installations grew from 30,000 in FY21 to 32,000 in FY22.
Another important tool is incentives for retailers to migrate
‘late adopters’ from copper to fibre. In April 2022, for
example, we introduced a $75 credit for each eligible
connection migrated on to our new Home Fibre Starter
plan. The plan provides 50Mbps download speeds and is
wholesaled at a reduced rate of $38 if retailers sell it at,
or below, a retail price cap of $60.
Figure x:
Figure 2:
Chorus UFB uptake
Fibre uptake – UFB rollout
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Figure 3:
Average latency under load to test servers by plan
1200
1124
)
s
m
(
y
c
n
e
t
a
L
900
600
300
737.4
486.5
372.3
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
UFB1
UFB2
137.7
25.6
0
66
20.5
44.6
94.9
48.8
20
47.5
27.5
6.9
5.7
18.5
10.5
ADSL
VDSL
FIXED
WIRELESS
HFC
MAX
FIBRE
300
FIBRE
MAX
Idle
Upstream load
Downstream load
3 Measuring Broadband New Zealand, Autumn Report, June 2022, Figure 1.
Autumn Report, June 2022, Figure 10. Averages of monthly household averages.
Source: Commerce Commission data, Measuring Broadband New Zealand,
3
Annual Report 2022
Our other area of focus was the connection experience of
consumers seeking to activate a fibre service in premises
where a fibre socket is already installed or ‘intact’. Satisfaction
scores remained consistent with FY21, averaging 7.5 for the
first half of the year, before slipping to 7.3. This was below our
target of 7.7 despite a number of initiatives to better support
retailers and consumers. These included texting consumers
with set-up information prior to their connection date and
creating a specific handling process for complex scenarios.
An initiative to enable a new connection to be ordered while
an existing connection remains active at the same address
is expected to drive further performance improvements
when it is fully adopted by retailers.
1.2 Growing new revenues
A significant part of our focus in FY22 was the simplification
of our business product portfolio. We reduced more than
400 historical product variants down to a core portfolio of
just 13 to better reflect current retailer focus and consumer
demand. This has reduced unnecessary complexity and will
drive system efficiencies.
In parallel with this programme of work, we continued to
sharpen our product proposition for business customers.
As part of our fibre boost initiative in December, noted above,
we increased the upload speeds on business plans so that
they were the same as the download capability. This shift
to a symmetrical product recognises the different needs
of businesses, particularly for upload capacity, as reliance
on data and cloud-based activity grows. These changes
helped grow business fibre connections by 12% in FY22 and
we estimate approximately three-quarters of the business
market, excluding small/home offices, have moved to fibre.
COVID slowed our plan to expand our EdgeCentre offering
to another Auckland exchange. During the year there were
public announcements by several operators about planned
data centre developments. These and the international trends
we see continue to reinforce our view that our exchange
space can play a role in supporting the growing shift in cloud
computing services to network edges. The peering and
data centre backhaul products we launched in FY21 are also
supporting these developments.
An exciting new product to come out of our innovation
programme uses our fibre network to help electricity line
companies identify the geographic impact of power outages.
Called PowerSense, the service collects ‘last-gasp’ signals
from fibre terminals in customer premises to identify when a
home or business loses electricity in near real-time. This can
give the local lines company better visibility of outages and
support faster restoration.
We completed our largest-ever performance upgrade for
fibre consumers in December 2021. Working closely with
broadband retailers we migrated residential consumers on
our most popular 100Mbps plan to 300Mbps download.
This was at no additional wholesale cost to the consumer.
In recognition of the increased importance of upload
speed for remote working and cloud-based applications
we increased the upload capability from 20Mbps to
100Mbps. Kiwi businesses also benefited with ‘Business
Evolve’ 100/100Mbps plans and ‘Small Business Fibre’
100/100Mbps plans moving to download and upload speeds
of 300/300Mbps and 500/500Mbps, respectively.
With more than 600,000 homes and businesses receiving
broadband speed increases through our fibre boost,
Aotearoa catapulted from 22nd place to 11th on the Ookla
Global Speed Test Index in December.
Another significant development was the Commission’s
request that retailers improve their broadband marketing.
This is something we had advocated for because of the
consumer confusion we’d seen about the status of the
copper network and the broadband choices available
to them. The New Zealand Telecommunications Forum
adopted the Commission’s recommendations and developed
two industry codes that require retailers to:
• obtain express consent from consumers for a change in
their telco service
• provide at least four months’ notice where a copper service
is being withdrawn (note: Chorus is required to provide six
months’ notice)
• give clear, accurate and up-to-date information about
service performance measures, with reporting of actual
likely peak time broadband speed of their broadband service
We believe this will help ensure a more level playing
field for network competition and improve outcomes for
consumers. We’ve adopted relevant elements of the code
in our own marketing.
Customer satisfaction with fibre fault restoration was a new
focus area for the year. We were pleased to lift the score from
8.1 in June 2021 to a rolling three-month average of 8.2 by
March, just above our 8.1 target. We achieved this strong
result by working closely with individual retailers to develop
tailored improvement plans. Technician performance is an
important contributor to the score and technicians continued
to be rated very highly. The length of time taken to resolve
the fault is another key driver.
The last quarter saw satisfaction rates drop back slightly
to 7.9. We had expected some effect from changes in our
service company contracts, but this has been compounded
by a combination of factors including weather events,
technician illness and broader workforce constraints.
We’re working closely with service companies to return
performance to previous levels.
4
Annual Report 2022 Figure 4:
Summary of key market trends
Our market drivers
What we’re focussed on
Large vertically integrated retailers are
We’re an active wholesaler, promoting our extensive broadband footprint
encouraging customers to use their own fixed
through advertising, retailer campaigns and our own door knocking initiatives.
wireless, cable and legacy fibre networks to
Our network supports about 100 retailers, including new entrants from the
reduce their wholesale network costs.
electricity and pay TV sectors. COVID-19 has accelerated consumer demand for
high capacity and low latency connections.
Competing fibre companies have overbuilt our
We’re optimising our business in these competing areas and maximising
existing copper network with fibre as part of the
our broadband share in other areas experiencing premises growth,
Government’s UFB programme.
particularly Auckland.
Traditional voice only connections are declining
Broadband penetration is growing, but at a slower rate due to the market effects
with changing demographics and wireless
of COVID-19 (e.g. negative migration). We’re commercialising new potential
service options.
revenue streams identified by our innovation programme, such as data centres
and smart city connectivity.
Technology keeps evolving, with 5G potentially
Fibre is recognised as providing highly reliable broadband, particularly at peak
enhancing the capability of mobile/wireless
usage times. About 23% of our fibre consumers are on 1Gbps services and we’ve
technologies as a fixed line alternative for
launched Hyperfibre products up to 8Gbps. We're forecasting average monthly
low data users.
data usage of 1,000GB by 2025. We see 5G as complementary technology likely
to require more cellsites needing fibre backhaul.
1.3 Optimising our non-fibre assets
We have a number of programmes underway to ensure we’re
optimising our non-fibre assets as more consumers migrate
to fibre.
We realised significant savings in FY22 from our ongoing
efforts to rationalise our legacy network equipment in Spark
exchanges. We also gained $3 million following our exit from
another 14 properties and surplus leases, with subdivision
plans now well advanced for more properties.
Our copper withdrawal team progressed from small scale
trials in FY21, with about 1,100 addresses notified across 129
cabinets, to approximately 10,100 addresses notified across
580 cabinets by the end of FY22. We deactivated services at
84 cabinets after COVID delayed withdrawal activity in some
areas. We’ll continue to focus on cabinets and cables where
customer numbers are low and maintenance costs are high.
Addresses where fibre has already been installed but isn’t yet
activated will also become more of a priority.
With fibre only available to about 87% of the population, our
copper network continues to connect a large customer base
across much of rural Aotearoa. We recognise the importance
of this network for remote communities and are committed
to fulfilling our service obligations. We also keep looking for
ways to improve rural broadband coverage, but this typically
requires government support to make it economically feasible.
During FY22, government funding through the Provincial
Growth Fund did help us complete the rollout of 250
kilometres of fibre backhaul along a remote area of the South
Island’s West Coast. This enabled fibre and mobile services to
very small communities like Haast, as well as providing a new
diverse route to help maintain services to the West Coast
in future extreme weather events. In FY23 we’re partnering
with government again to extend VDSL coverage to 32 rural
broadband cabinets.
Recent market developments and regulatory settings have
made it less economic for us to invest in rural network
upgrades. For example, we’re required to provide our copper
and fibre services at urban prices to even the most remote
customers, while fixed wireless providers subsidised by
government can charge higher rural prices and are only
covering the easier to serve customers. As demand for
these wireless and low earth orbit satellite services shows,
rural customers are prepared to pay for decent broadband.
What might be achieved if fibre could compete on a level
playing field?
5
Annual Report 2022 1.4 Developing the long-term future of
the business
With the introduction of a new regulatory regime and a
more operational phase in Chorus’ evolution, we’ve taken
the opportunity to put renewed emphasis on the kind of
organisation we want to be to thrive into the future.
We continued to drive adaptive practices and the use of
cross-functional teams to help deliver some of our strategic
goals in FY22. This gave our people the opportunity to
develop new skills and collaborate more widely. The shift to
hot-desking across our Wellington and Auckland offices is
helping embed these benefits and builds on the flexible work
practices our people have embraced in response to COVID.
We made progress towards our target of a 40:40:204 gender
ratio with 38% women and 62% men in people leadership
roles at year end. That was up from 36% women in FY21.
We achieved our goal of a career level pay gap no greater
than -2% in eight of our nine career levels. In six of the nine
career levels, on average females are paid higher than males.
We were also pleased to see our Māori and Pasifika employee
population increase from 5% to 8%, but we acknowledge
they continue to be under-represented.
Thriving people is part of our broader sustainability strategy
that includes a focus on ensuring a thriving environment and
working to champion digital futures. Our 2022 Sustainability
Report puts a spotlight on our efforts to reduce our carbon
footprint with a new Science Based Target of a 62% reduction
in our Scope 1 and 2 emissions by 2030, from 2020 levels.
To help achieve this we’ve prepared our first Emissions
Reduction Plan. Electricity makes up more than 90% of our
Scope 1 and 2 emissions and we’re targeting a 25% reduction
in electricity consumption by 2030, from 2020 levels. This is
possible because fibre broadband requires less powered
equipment than other technologies. Sapere Research Group5
found that an entry-level fibre plan, operating at 50Mbps, is
up to 41 per cent more efficient than copper VDSL broadband
and up to 56 per cent more efficient than 4G fixed wireless.
The low carbon emissions profile of fibre stays consistent
as speeds increase while the emissions for alternative
technologies increase with speed. For higher speed plans,
around 300Mbps, fibre is up to 29 per cent more efficient
than Hybrid Fibre Coaxial, and up to 77 per cent more
efficient than 5G fixed wireless.
In April we moved to new service company agreements for
the build, maintenance and connection to our copper and
fibre network. With the fibre rollout coming to an end and
new fibre installation volumes expected to slow, we worked
closely with our service companies beforehand to co-design
a new framework that appropriately balances customer
experience, cost and industry sustainability. The worker
welfare requirements of our supplier code of practice were
also an important feature.
Ultimately, this process saw us consolidate the number of
service companies from three to two, with Downer and UCG
the successful bidders. The Downer contract is for three
years for all services. UCG’s contract is for seven years for all
services in Auckland, Northland and the Waikato and three
years for fibre connect elsewhere in the country.
The agreements provide a platform for the ongoing
simplification of our business and enhancement of
customers' experience as they connect to the network
or have faults repaired. To underpin this, we’ve begun
implementing a single IT gateway we use to process activity
between us and the service companies. This will help us
move off multiple legacy systems and enable us to provide
retailers and consumers with improved information.
4 40% men, 40% women and 20% of any/either gender.
for the full Sapere Research Group report
5 See our sustainability webpage at company.chorus.co.nz/sustainability
Figure 5:
Our sustainability strategic pillars
Our focus on Sustainability is guided by Kaitiakitanga (environmental guardianship)
and Manaakitanga (acts of giving and caring for). Sustainability is at the very heart of Chorus.
THRIVING
SUSTAINABLE
ENVIRONMENT
DIGITAL FUTURES
TE TAIAO PUAWAI
TOA HANGARAU
THRIVING
PEOPLE
NGA IWI
WHAI HUA
6
Annual Report 2022 2.0
The New Zealand market
Figure 6:
The New Zealand fixed line market
Rationalisation, new entrants and new business models are disrupting the New Zealand market.
International
media providers:
Local Media:
(Broadcast)
Local Media:
(On Demand)
Retail Service
Providers:
BBC iPlayer Apple TV Google Play Netflix YouTube Hulu Amazon Disney+
TVNZ
TV3
Sky TV
Spark Sport
OnDemand
3Now
Neon
Vodafone
Spark
+Skinny
2degrees
Vocus
Slingshot, Orcon, Flip
Mercury
Trustpower
Sky
Others e.g.
Megatel
Nova Energy
Contact Energy
MyRepublic
Voyager
NOW
Fixed Line
Access
Networks:
HFC cable in
Wellington +
Christchurch
(~40k customers)
Chorus
Nationwide network access
wholesaled to ~100 retail service providers;
Fibre to pass ~1.36m homes and businesses
Local Fibre Companies:
Enable – Tuatahi First Fibre –
Northpower
Fibre past ~450k homes and businesses
Mobile network
Wireless Broadband
Power + Broadband
Note: Fibre to the premises will cover ~87% of NZ population by the end of 2022
COVID-19 slowed overall growth of Aotearoa’s
broadband market, increasing competitive
intensity between the 100 or so broadband
retailers. FY22 has featured retailer consolidation
and new entrant retailers continuing to grow
market share. This reflects the way our open
access network fosters competition, enabling all
retailers to offer services on an equivalent basis.
electricity and broadband is also becoming a feature in
Australia with Telstra, the national telecommunications
incumbent, adopting a strategic goal of becoming a top five
energy retailer by 2025.
Sky TV entered the broadband market in FY21 and has a
three-year target of achieving 3% to 5% market share. While
their initial bundling focus is on their more than half a million
Sky Box customers, they also report more than 400,000
streaming customers.
2.1 Bundling of complementary services
Retailers bundling electricity or pay TV with broadband
services continued to gain a growing share of fibre uptake
from traditional telcos.
Contact Energy has gained 71,000 broadband customers
since entering the market in 2017, representing about 16%
of its electricity customer connections. In June 2022,
Mercury Energy became the latest power retailer to bundle
broadband. This follows their acquisition of Trustpower,
already the fifth largest electricity and broadband retailer.
With almost 600,000 electricity customers, Mercury’s scale is
expected to drive more broadband bundling momentum.
Vocus New Zealand has been offering electricity to its telco
customers for some time and recently broadened its offer
to include insurance services. The convergence between
2.2 Mobile networks and fixed wireless
FY22 has also seen significant developments in the ownership
of traditional telcos.
The third mobile network operator, 2degrees, merged with
broadband retailer Vocus NZ. This makes the combined
entity, operating as 2degrees, the third largest telco behind
Spark and Vodafone.
International tower ownership trends also reached Aotearoa
with Spark announcing in July 2022 that it intends to sell a
70% interest in its tower unit to Ontario Teachers’ Pension Plan
Board. The deal covers 1,263 towers with a build commitment
of 670 sites over the next 10 years. Vodafone announced
shortly after that it intends to sell an 80% interest in its 1,484
towers to Infrared Capital Partners and Northleaf Capital
Partners with plans to add 390 more sites over the next decade.
7
Annual Report 2022 The funds released by tower deals may assist mobile network
operators with the very large investment needed to fund
spectrum, equipment and sites for any wider rollout of 5G
services. To date, the availability of 5G varies widely between
each network operator and tends to be limited to main centres.
The Commission reported there were 276,000 customers
on fixed wireless in 2020/21, representing about 15% of all
internet connections. Fixed wireless uptake is subject to
competition with fibre and copper services promoted by a
wide range of retailers, as well as between the fixed wireless
providers themselves.
2.3 Data demand
Data traffic on our network during the evening period is
marching ever upwards, driven by consumer adoption
of online streaming services and gaming, and by the
proliferation of internet users and devices within a home.
A new record for peak time traffic of 4.2 terabits per second
(Tbps) was set in March when a Fortnite gaming update was
released. Average peak time traffic grew by 18% during the
year to 3.3 terabits per second (see Figure 7).
We saw the lockdowns and other public restrictions in late
2021 ramp up average data usage on fibre to record highs of
more than 600GB per month. Average monthly data usage
grew by 18% through FY22 from 432GB to 508GB. Fibre
consumers were using an average of 567GB a month in June
2022, up from 500GB in June last year (see Figure 8). Copper
data usage is reducing as copper connections reduce,
although average monthly data usage for copper consumers
still grew from 254GB to 282GB during the year.
Average monthly data usage per customer remains on track
to reach our previous forecast of 1,000GB by 2025. Looking
further out, we estimate usage will exceed more than
4,000GB per month by 2033, with peak throughput on our
network reaching 28Tbps. These forecasts are consistent
with the projected increases of other international broadband
network operators.
Figure 7:
Average daily internet usage across the Chorus network 2018 – 2022
Peak traffic of 3.31Tbps
3.5
3.0
2.5
)
s
p
b
T
(
e
g
a
s
u
y
l
i
a
d
e
g
a
r
e
v
A
2
1.5
1
0.5
0
8
12:00 AM
4:00 AM
8:00 AM
12:00 PM
4:00 PM
8:00 PM
12:00 AM
2018
2019
2020
2021
2022
Annual Report 2022
COVID-19 lockdowns
Figure 8:
Average monthly usage per connection on our fibre network
)
s
e
t
y
b
a
g
g
i
l
(
e
g
a
s
u
y
h
t
n
o
m
e
g
a
r
e
v
A
700
600
500
400
300
200
100
0
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Jun-22
Downstream
Upstream (shown from June 2020 onwards)
4K content is expected to be a significant driver of data
growth, although it isn’t yet widely available to New Zealand
consumers. YouTube provides some 4K content and Disney
Plus is one of the few streaming services to provide 4K
programming at no additional charge to its subscription fee.
Live sports streaming in 4K quality has driven significant data
growth overseas, but it isn’t currently offered for local sports
streaming services. However, Sky TV is now trialling a new 4K
capable set-top box that will enable internet delivered on-
demand content so it may address this in the future.
Xbox has launched cloud gaming that does away with the
need for a console to store games and we expect streaming
services like this will keep driving data usage higher. Global
technology providers are now developing and launching
metaverse applications that will incorporate immersive
technologies such as augmented and virtual reality devices.
These developments will generate bandwidth demand that is
an order of magnitude higher again than what we see today.
2.4 The growing role of Wi-Fi
Wi-Fi has long been a hotbed for innovation and is how most
consumers experience fibre broadband. Mobile devices also
offload most of their data traffic via Wi-Fi. To fully realise
the benefits of a fibre network, and to achieve uninterrupted
access to new and future services that will rely on high-
speed internet to function, in-home Wi-Fi capability needs to
match the demand.
COVID has underlined the importance of Wi-Fi with
lockdowns and remote working meaning more simultaneous
demand on home Wi-Fi networks. We and retailers are,
therefore, increasingly focussed on helping consumers
address poor performing Wi-Fi. For retailers this has involved
including in-home Wi-Fi solutions, like Wi-Fi 6 capable
mesh devices, in their offers.
At the same time, the government’s radio spectrum
management body has been consulting on the potential use
of 6GHz spectrum for Wi-Fi. This unlicensed spectrum could
enable new Wi-Fi 6E capable devices to be used, effectively
doubling the bandwidth available compared to the existing
2.4GHz and 5GHz bands. Consumers would then have a
better chance of achieving peak speeds of 2Gbps through
less interference.
We support the decision to make the lower 6 GHz band
(5925 – 6245 MHz) available for wireless local area network
(WLAN) use. However, we also see potential consumer
benefit in making the upper 6 GHz band available for indoor
WLAN use in future, subject to managing the potential
impacts on incumbent users.
Releasing the entire 6GHz band, like leading tech countries
the USA and South Korea have done, could have far reaching
benefits. For example, Wi-Fi 6E devices could provide an
alternative to 5G mobile access in enterprise and other
private environments where cost-effective capacity and
support for a large number of devices is important.
9
Annual Report 2022
3.0
Regulatory environment
We operate our wholesale only network within
the regulatory framework established by the
Telecommunications Act. We’re also subject
to the requirements of four open access deeds
of undertaking for copper, fibre and Rural
Broadband Initiative services that focus on the
provision of services on a non-discriminatory
basis. This regime operates alongside the revised
utility model that applies to Chorus’ fibre fixed
line access services from 1 January 2022.
3.1 New regulated utility model for fibre
From 1 January 2022 our fibre investment is regulated
according to a utility style building block model. This model
is used to regulate monopoly utility businesses, such as
electricity lines and gas networks. It is intended to support
private sector investment to meet network upgrades and
increasing consumer demands, by giving ongoing incentives
to innovate, invest and improve efficiency for the long-term
benefit of consumers.
To implement the new framework the Commerce
Commission established the Fibre Input Methodologies and
the Price-Quality Determination for the first regulatory period
for fibre (2022-2024). These establish the key elements of the
new fibre regime that determine the revenues we can earn
from our regulated fibre network, including:
• a starting regulated asset base of $5.42 billion,
comprising a core RAB of $4.03 billion and a financial loss
asset of $1.39 billion.6
• a mid-point vanilla WACC of 4.72% and a post-tax WACC
of 4.52% for the first regulatory period from 2022 to 2024.
• maximum allowable revenue (MAR) that ranges from
$690.2 million to $789.5 million (nominal) per year over 2022
to 2024. The MAR for 2023 and 2024 will be updated for
the latest inflation forecasts with a wash-up against actual
inflation included in the following regulatory period MAR.
On 31 March 2022 we submitted our first price-path
compliance statement. This forecasts our regulated fibre
revenue for the 2022 calendar year will be approximately
$657 million, which is below the Commission’s MAR.
Where our actual revenues fall below the MAR the difference
will be added to the MAR for the next regulatory period.
6 Currently subject to a Commerce Commission finalisation process.
Figure 9:
New regulatory framework from January 2022
Areas where fibre is available (~87% of population)
Areas where fibre is not available (~13% of population)
Regulated asset base for fibre access services with revenue
• Telecommunications Service Obligation applies to residential
cap set by the Commerce Commission
• first regulatory period 2022-2024
• price caps on ‘anchor’ or declared services
• unbundled fibre available in UFB1 areas
• Commission can review the revenue cap model
(subject to statutory criteria) from 2025.
• Chorus can choose to withdraw copper service with six months’
notice to consumers
addresses existing in 2001
• copper pricing subject to annual inflation adjustment
• Commission required to review copper regulatory settings no later
than 2025
10
Annual Report 2022 3.4 Copper Withdrawal Code and
Telecommunications Service Obligation
The telecommunications legislative framework provides
for the deregulation of copper services in areas where fibre
is available. This enables us to withdraw copper services
once consumer protection requirements are met, as set
out under the Commission’s Copper Withdrawal Code.
This includes providing affected consumers with at least six
months’ notice of our intention to withdraw copper services.
By the end of FY22 we had provided notice to approximately
10,100 customers and we supported a range of consumer
groups with information about the copper withdrawal
programme.
Copper services remain regulated in areas where fibre is not
available, with copper prices annually adjusted for inflation.
In these areas, the Commission is required to review the
copper pricing framework no later than 2025.
Under the Telecommunications Service Obligation (TSO),
we are required to maintain telephone services to residential
premises that were connected to our copper network in
December 2001. Our obligation at the network level is shared
with Spark (formerly Telecom NZ) as the provider of the voice
service layer. The TSO Deed recognises that additional funding
may be sought for commercially non-viable customers.
3.2 Quality requirements for fibre services
The Commission has set three quality standards we are
required to meet:
• Two standards measuring availability of the network in
23 geographic regions, based on downtime in the Layer 1
(physical) and Layer 2 (electronic) parts of the fibre network.
• One standard based on national port utilisation each month
to ensure sufficient network capacity to meet demand.
In addition to the quality standards there are a number of
measures that Chorus is required to report on through an
information disclosure regime. These include provisioning,
ordering, switching, faults, availability, performance and
customer satisfaction.
3.3 Commercial services for fibre unbundling
Our fibre network enables unbundled fibre services by
providing a second fibre to each premises. This means
retailers can choose to use our passive infrastructure
– fibre optic cables, ducts, and poles – and their own
broadband electronics, to deliver services to customers.
Unbundled services are not required to be made available
in UFB2 areas until 2026.
Our layer 1 fibre access service (PONFAS) includes a monthly
access charge of about $28 to cover access to the fibre
between the premises and the splitter, as well as $200 per
month to access the feeder fibre from each splitter to a
central network point. Pricing reflects the significant passive
infrastructure costs of our rollout investment, with layer 2
broadband electronics representing a very small component.
The Commission has developed guidance on fibre
equivalence and non-discrimination obligations for PONFAS.
It is currently conducting a compliance assessment of our
non-price terms.
11
Annual Report 2022 4.0
Outlook
With the core elements of our regulatory
framework now settled and the finish line for
our fibre rollout in sight, we’re shifting focus to
a more operational future. Connecting Aotearoa
so that we can all live, learn, work and play is our
refreshed organisational purpose. Achieving this
means continuing to grow uptake of our network
so its socio-economic benefits help power the
country’s digital future.
By the end of 2022 we’ll have brought fibre to the last
community under our public-private partnership with the
Government and we expect to have reached our target of
one million fibre connections. That still leaves just under
30% of homes and businesses that have yet to choose fibre
within our fibre footprint.
Auckland, with about a third of the national population, has
shown that more than 80% uptake is achievable. To keep
driving uptake we need to keep refining our fibre value
proposition and continue making the customer experience
as seamless as possible for our retailers and consumers.
This isn’t simple when we don't have the direct relationship
with consumers, but our retail service provider survey shows
the improvements we’ve made over FY22 are heading in the
right direction. Our new service company structure is an
opportunity to simplify and enhance our operations further.
In the short term, COVID will continue to cast a shadow
over our business and the wider economy. Although our
pipeline of new housing developments remains strong
given historical housing shortages, population growth has
slowed with net migration trending to negative. We’re seeing
inflationary pressures, particularly in our direct labour costs
and through our service companies. We’re also conscious of
the pressure on consumers, so we’ve chosen not to apply the
full inflationary increases we're permitted across all products
from October. On our most popular 300Mbps service we’re
holding the increase at 5.5% while our 1Gbps service will only
increase 3.6% after no price changes for several years.
At the same time, we’re reducing the pricing of our multi-gigabit
Hyperfibre services. Of the almost 1,000 Hyperfibre
connections to date, more than three-quarters are residential
consumers. This points to the continued consumer appetite for
better broadband. Schools have also begun to adopt Hyperfibre
services so they can provide enhanced bandwidth and reliability
across multiple users as more student learning moves online.
Our confidence in fibre’s future proof capability keeps
growing. International investment in fibre is surging and in
2021 fibre became the most prevalent broadband technology
in the OECD, with New Zealand ranked eighth for fibre
uptake. Like here, multi-gigabit fibre services are emerging
in overseas markets. There’s no doubt that future consumer
applications, whether cloud-based gaming or virtual reality in
the metaverse, are going to drive demand for higher speeds
and consistency. When these propositions develop mass
market followings, the network demands will be substantial.
Fibre is easily scalable for that demand and our 25Gbps trial
demonstrated a clear roadmap for even better capability.
While COVID-19 has accelerated digital adoption, we need to
work hard to ensure this doesn’t widen the socio-economic
digital divide and reinforce the multiple barriers to digital
inclusion. We’re committed to achieving true digital equity
through understanding, collaboration, and effort so that no
one gets left behind. During the pandemic we’ve focussed
our support on student connections, digital skills uplift for
seniors and helping the charitable sector embrace digital.
These initiatives are continuing into FY23 and we’re holding
pricing flat on our low-cost Home Fibre Starter service.
As broadband capacity and reliability needs grow, so too will
the digital divide between rural and urban Aotearoa. There’s
a growing body of evidence that broadband penetration
needs a high-quality broadband connection to maximise the
socio-economic benefits. Fibre offers a path to reliable high-
capacity broadband that doesn’t need recurring government
funding top-ups and supports national carbon emissions
reduction goals. That’s why other countries are extending
fibre as far as they can.
We believe that rather than kicking the can down the road with
piecemeal solutions, pragmatic policy settings are available to
enable us to reach 90% of Kiwis with fibre. That three percent
increase represents 65,000 customers located relatively close
to rural centres. Perhaps we can go even further.
In urban areas, growing fibre uptake means we’re moving
from trialling the withdrawal of copper services to a more
production-like process. Of the approximately 2,500 copper
broadband cabinets in our fibre areas, a quarter have
now been notified for withdrawal because they have few
remaining connections. The electricity savings from cabinet
shutdowns will become a growing contributor to our carbon
reduction goals. Our new emissions reduction plan forecasts
a 25% electricity reduction by 2030, assisted by the potential
expansion of solar generation on our exchanges.
12
Annual Report 2022 Embedding sustainability in our business strategy has included
a close look at our future organisational needs. Like many
businesses, recruiting and retaining people is increasingly
challenging. We’re continuing to evolve to be a more adaptive,
diverse and inclusive organisation as we transition from a
focus on building to operating the fibre network. This includes
working on developing the capability needed to thrive in our
new regulatory and dynamic market environment.
At the next annual meeting in late October, the Board will
farewell chair Patrick Strange who has been with us since
2015. Mark Cross, currently chair of the Audit and Risk
Management Committee, will be our new Board chair. As a
director since 2016, Mark has a strong understanding of our
role as an essential infrastructure provider and the balance
needed to encourage ongoing investment that delivers
future consumer benefits and value to shareholders.
We know that competition will keep growing as mobile
network operators seek to recover their 5G investments.
With more than 90% of fibre connections now on 300Mbps
plans or higher, we believe we’re providing consumers with
the best broadband technology. We’ll keep developing our
role as an active wholesaler and explore new and potentially
innovative ways to leverage our fibre network and our
network infrastructure. Our new PowerSense product is a
good example of this approach.
With our return to positive free cash flow, we’re now in a
position where we can make choices about discretionary
investment. This may include close adjacent opportunities
that offer better returns than the regulatory WACC. Whatever
opportunities arise, at our core we’ll remain a regulated utility
focussed on providing shareholders with stable returns.
To learn more about our focus on sustainability, please see
our Sustainability Report 2022 at: www.chorus.co.nz/reports
Our strategic focus
13
Annual Report 2022 14
Annual Report 2022 Management
commentary
16 In summary
17
Revenue commentary
18 Expenditure commentary
21 Capital expenditure commentary
22 Long term capital management
15
Annual Report 2022 Management commentary
Operating revenue
Operating expenses
Earnings before interest, income tax, depreciation and amortisation
Depreciation and amortisation
Earnings before interest and income tax
Net finance expense
Net earnings before income tax
Income tax expense
Net earnings for the year
In summary
2022
$M
965
(290)
675
(427)
248
(142)
106
(42)
64
2021
RESTATED
$M
955
(298)
657
(427)
230
(152)
78
(27)
51
We report earnings before interest, income tax, depreciation
and amortisation (EBITDA) of $675 million for the year ended
30 June 2022 (FY22), an increase of $18 million from restated
FY21 EBITDA of $657 million.1 When one-off operating
revenue and expense gains are excluded, underlying EBITDA
in FY22 was $660 million.2
Net profit after tax was $64 million compared to a restated
total of $51 million in FY21.1
Careful management of maintenance costs and the release of
a $9 million holiday pay provision helped mitigate inflationary
pressures and COVID-19 impacts during the year. Operating
expenses reduced by $8 million from $298 million in FY21.
Revenues increased by $10 million to $965 million largely due
to gains from our network optimisation programme.
COVID-19 constraints on fibre installations and general
network investment programmes saw our initial FY22
guidance of $550 million to $590 million capital expenditure
lowered several times through the year. Final spend was
$492 million, with the winding down of the fibre rollout and
lower fibre installation spend the main contributors to the
decrease from $672 million in FY21.
Depreciation and amortisation expenses were flat year on
year while interest costs reduced due to the full year effect of
refinancing of debt at lower interest rates in FY21.
We will pay a final unimputed dividend of 21 cents per share
on 11 October 2022. The dividend reinvestment plan will be
available with no discount.
Fibre broadband (GPON)
Fibre premium (P2P)
Copper VDSL
Copper ADSL
Data services over copper
Unbundled copper
Baseband copper
Total fixed line connections3
Connections
2022
Connections
2021
Connections
2020
949,000
10,000
118,000
122,000
2,000
1,000
102,000
860,000
11,000
157,000
163,000
2,000
10,000
137,000
740,000
11,000
221,000
245,000
4,000
15,000
179,000
1,304,000
1,340,000
1,415,000
1 Previously reported FY21 results have been restated due to an ongoing change in the accounting treatment of field services revenue for roadworks.
Refer to page 34 for the detailed accounting adjustments.
2 Underlying EBITDA of $660 million represents a reduction of $15 million for one-off operating revenue and expense gains recognised during the
period. Refer to page 12 of the FY22 investor presentation for the detailed reconciliation to EBITDA.
3 Excludes education connections partly subsidised as part of Chorus’ COVID-19 response.
16
Annual Report 2022 Revenue commentary
Fibre broadband (GPON)
Copper based broadband
Field services products
Fibre premium (P2P)
Copper based voice
Value added network services
Infrastructure
Data services over copper
Other
Total revenue
2022
$M
548
153
71
66
52
27
30
6
12
2021
RESTATED
$M
477
203
70
68
68
30
27
9
3
965
955
Revenue overview
Chorus’ product portfolio encompasses a broad range of
wholesale broadband, data and voice services across a
mix of regulated and commercial products. Revenues of
$965 million increased by $10 million from restated FY21
revenues of $955 million.1 This increase reflected gains from
our network optimisation programme and continued strong
growth in fibre broadband revenue.
In our planned fibre areas broadband connections grew by
27,000, helping grow broadband connections nationally
by 9,000 to 1,189,000. We ended the year with 1,304,000
fixed line connections, down 36,000 lines compared with
a reduction of 75,000 lines in FY21. Most of this reduction
continues to be in areas where our copper network
competes with alternative fibre networks.
Fibre broadband (GPON)
Fibre broadband revenues continue to grow as customers
migrate to our expanding fibre network and broadband
penetration increases. Fibre broadband connections grew
by 89,000 to 949,000, with about 68% of connections on
300 Mbps plans. Average fibre monthly revenue per user
grew from $49.87 to $50.67 in FY22. This was driven by an
inflation related price increase to some services in October
2021 and uptake of the higher value 1 Gbps service growing
from 19% to 23% through the year.
Copper based broadband
Copper based broadband revenue continues to decline with
80,000 connections migrating from our ADSL and VDSL
broadband services to either our fibre network or alternative
fibre and wireless networks.
Field services products
Field services revenue increased by $1 million relative to
a restated $70 million in FY21. This was due to increased
new property revenues, offset by a reduction in chargeable
maintenance and installation activity.
Fibre premium (P2P)
Fibre premium (point to point) revenues decreased slightly
in FY22 as customers continued to migrate from high
value legacy connections. This trend is slowing as legacy
connections diminish and demand grows for Direct Fibre
Access Service, mobile access and other backhaul connections.
Copper based voice
Copper based voice revenues continue to decline as customers
migrate to either a fibre based connection on our network,
or to alternative fibre and wireless networks. These copper
connections declined by 35,000 lines in FY22 compared with
42,000 in FY21. Unbundled copper connections declined by
9,000 lines and are no longer material.
Value added network services
Value added network services revenue was lower in FY22 due
to a one-off historic dispute resolution recognised in FY21.
The main driver for this revenue is national data transport
services which provide network connectivity across legacy
backhaul and aggregation handover links.
Infrastructure
Infrastructure revenues increased $3 million to $30 million in
FY22 reflecting a change in lease treatment for retailers’ use
of Chorus’ buildings.
Data services over copper
Data services over copper connections continue to decline
as retailers transition business customers from legacy
services to cheaper fibre based services, either on our fibre
network, or on alternative local and CBD fibre networks.
Other
Other income included a $3 million gain from the disposal of
surplus property and one-off benefits from a $3 million legal
settlement and $3 million from a change in lease contract.
17
Annual Report 2022 Expenditure commentary
Operating expenses
Labour
Network maintenance
Information technology
Other network costs
Electricity
Rent and rates
Property maintenance
Advertising
Regulatory levies
Consultants
Insurance
Provisioning
Other
Total operating expenses
2022
$M
2021
$M
64
59
50
29
17
14
14
11
9
8
4
1
10
290
74
63
48
29
18
12
12
13
8
7
4
2
8
298
Total operating expenses of $290 million in FY22 reduced
by $8 million compared to $298 million in FY21. In addition
to our ongoing focus on reducing discretionary costs,
COVID-19 restrictions in the first half of FY22 affected some
expense lines, and we released a labour expense provision.
Labour
Labour of $64 million reduced by $10 million in FY22 from
$74 million in FY21. A one-off benefit of $9 million was
recognised in FY22 after a judicial ruling on the interpretation
of the Holidays Act.
At 30 June 2022, we had 799 permanent and fixed term
employees representing a 2% decrease from 817 employees
at 30 June 2021. We capitalise the labour costs and the
associated overheads in relation to the UFB build and
connect activity. As the UFB rollout ends, we expect to
capitalise a lower proportion of labour costs.
Network maintenance
Network maintenance costs reduced by $4 million from
FY21. Overall fault volumes continued to reduce as more
customers connect to the newer fibre network and total
connections declined. FY22 was also impacted by COVID-19
restrictions on activity which reduced faults.
Information technology
Information technology costs were up $2 million compared
to FY22, largely due to inflationary pressures.
Other network costs
Other network costs are variable year to year and include
a range of costs associated with service partner contracts,
fibre access from third parties, roadworks and other network
relocation projects, fibre order cancellations, network spares,
and network and property optimisation costs.
Electricity
Electricity costs reduced due to lower electricity prices in
FY22 relative to FY21. Electricity consumption increased
over FY21 as a result of one-off metering washups as we
transitioned to a new supplier. Chorus hedges approximately
70% of its consumption with hedge contracts entered into up
to 24 months in advance.
Rent and rates
Rent and rates costs relate to the operation of our network
estate including exchanges, radio sites and roadside cabinets.
These costs include rates that are levied on network assets
both above and below ground. Costs increased by $2m
from FY21 due to inflationary increases from councils and
increasing rateable values from our network build.
Property maintenance
Property maintenance costs have increased by $2 million
relative to FY21. FY22 costs includes higher levels of network
property maintenance and around $1 million of one-off
“make good” costs relating to corporate office changes
(including relocation in Auckland and rationalisation in
Wellington).
18
Annual Report 2022 Advertising
Advertising costs were $2 million lower than FY21 due to
reduced brand activity in the year.
Regulatory levies
Regulatory levies increased by $1 million compared to
FY21 due to the levy for the Commerce Commission’s
implementation of the new fibre regulatory framework.
Depreciation and amortisation
Consultants
Consultant costs increased by $1 million from FY21.
This reflects the timing of external advice required to support
both the implementation of the new regulatory framework
from January 2022 and our transition to an adaptive
organisation.
Other
Other costs include general expenditure such as
telecommunications, travel, training and legal fees.
Other costs appeared to increase in FY22 because FY21
benefitted from an adjustment to a doubtful debt provision.
2022
$M
2021
RESTATED
$M
Estimated useful
life (years)
Weighted average
useful life (years)
Depreciation
Fibre cables
Ducts, poles and manholes
Copper cables
Cabinets
Property
Network electronics
Right of use assets
Less: Crown funding
Total depreciation
Amortisation
Software
Customer retention
Total amortisation
122
114
61
61
22
19
62
15
(27)
335
62
30
92
58
63
30
18
62
15
(27)
333
60
34
94
20–30
20–50
10–30
5–20
5–50
2–25
10–50
2–10
1–4
20
50
22
18
25
10
28
4
4
Depreciation and amortisation
427
427
The weighted average useful life represents the useful life in
each category weighted by the net book value of the assets.
During FY22, $492 million of expenditure on network assets
and software was capitalised. The ‘UFB communal’ and
‘Fibre connections and fibre layer 2’ included in ‘fibre’ capital
expenditure was largely capitalised against the network
assets categories of fibre cables (34%) and ducts, poles and
manholes (40%). The average depreciation rate for UFB
communal infrastructure spend is based on an estimated life
of 41 years, reflecting the very high proportion of long life
assets being constructed.
With the commencement of Chorus’ copper withdrawal
programme, Chorus has revised the depreciation profile for
copper cables in areas where fibre is available. Depreciation of
copper cables will be accelerated from FY23 so that those in
UFB2 areas will be fully depreciated by June 2025, and those in
local fibre company areas are fully depreciated by June 2026.
Software and other intangibles largely consist of the software
components of billing, provisioning and operational systems,
including spend on Spark owned systems.
Chorus expects that incremental costs incurred in
acquiring new contracts with new and existing customers
are recoverable. These costs are capitalised as customer
retention assets and amortised against revenue or within
amortisation expense, depending on their nature. In the
period to 30 June 2022, $30 million was recognised to
amortisation expense.
Our depreciation profile is expected to continue to change,
reflecting the greater mix of longer dated UFB assets being
built. The offset of Crown funding against depreciation
will continue to amortise as a credit to the associated
depreciation expense accordingly.
19
Annual Report 2022 2022
$M
–
6
51
32
23
(2)
110
(7)
103
39
142
2021
$M
(1)
5
47
43
30
(2)
123
(4)
119
34
153
Ineffectiveness largely consists of the cumulative change in
fair value of three interest rate swaps, designated as cash flow
hedges that were restructured in prior years. Two of these
restructured interest rate swaps have a combined face value
of $500 million and relate to the 10 year resettable NZD bond
issued in 2018. The other restructured interest rate swap has
a face value of $200 million and relates to the EUR 300m
EMTN bond. In FY22, ineffectiveness was credit $7 million
(FY21: credit $4 million) across all hedge relationships.
Taxation
The FY22 effective tax rate is 39% (FY21: 35%). The increase
reflects confirmation of the appropriate tax treatment for
funding received for the relocation of communications
network. When excluding the prior period adjustment, the
effective tax rate for FY22 is 34%. The effective tax rate is
higher than the statutory tax rate of 28% due to permanent
differences between tax and accounting arising from the tax
treatment of the CIP securities and Crown funding for the
Rural Broadband Initiative (RBI).
The accounting interest and depreciation credit recognised in
the profit and loss in relation to CIP securities are non-taxable
as confirmed via binding rulings issued by Inland Revenue.
RBI assets were funded by non-taxable government grants.
The accounting amortisation of RBI government grants and
RBI accounting depreciation recognised in the profit and loss
are non-taxable and tax depreciation is not claimed.
Finance income and expense
(Income)/expense
Finance income
Finance expense
Interest on syndicated bank facility
Interest on Euro Medium Term Notes (EMTN)
Interest on fixed rate NZD bonds
Other interest expense
Capitalised interest
Interest costs
Ineffective portion of changes in fair value of cash flow hedges
Total finance expenses excluding securities (notional) interest
CIP securities (notional) interest
Total finance expense
Finance expense is lower in FY22 due to the lower cost of
NZD Bonds refinanced in December 2020.
Interest costs decreased by $13 million year on year with the
weighted effective interest rate on debt reducing to 3.77%
from 4.16% in FY21.
Other interest expense includes lease interest of $15 million
(FY21: $20 million) and amortisation arising from the
difference between fair value and proceeds realised from
interest rate swap resets of $7 million (FY21: $7 million).
Notional interest on Crown Infrastructure Partners (CIP)
securities also increased as Crown funding continued to grow.
At a minimum, we aim to maintain 50% of our debt
obligations at a fixed rate of interest. We have fully hedged
the foreign exchange exposure on the EMTNs with cross
currency interest rate swaps. A portion of the floating interest
on the cross currency interest rate swaps has been hedged
using interest rate swap instruments.
Ineffectiveness
As at 30 June 2022 Chorus held all interest swaps in
designated hedging relationships. These relationships are
designated as either cash flow hedges, or fair value hedges.
Provided that the cash flow hedges remain effective, any
future gains or losses will be processed through the hedge
reserve in the statement of changes in equity. Effective fair
value hedges will be offset within the finance expense. Minor
differences in the hedged values will flow to finance expense
in the income statement over the life of the derivatives as
ineffectiveness. Minor differences in the credit valuation
portion may also flow to the finance expense. Neither
the direction, nor the rate of the impact on the income
statement can be predicted as it is influenced by external
market factors.
20
Annual Report 2022 Capital expenditure commentary
Fibre
Copper
Common
Gross capital expenditure
2022
$M
403
38
51
492
2021
$M
567
45
60
672
Gross capital expenditure for FY22 was $492 million. This was
$180 million less than FY21 capital expenditure spend. Fibre
spend decreased due to lower installation volumes and lower
UFB communal expenditure as we approach the end of
the rollout. Copper related expenditure reduced by 16% on
Fibre capital expenditure
FY21 because copper network demand continues to reduce.
Crown funding of $41 million was recognised for the UFB
rollout and $16 million for the West Coast fibre project.
2022
$M
77
195
12
79
13
27
403
2021
$M
147
275
14
91
11
29
567
Network sustain refers to capital expenditure where the
fibre network has been upgraded or network elements such
as poles, cabinets and cables are replaced. This is typically
where network replacement is deemed more cost effective
than reactive maintenance, or network is being relocated for
reasons such as roadworks.
Customer retention costs decreased by $2 million from FY21
due to decreased market activity.
UFB communal
Fibre installations and fibre layer 24
Fibre products and systems
Other fibre and growth
Network sustain
Customer retention costs
Total fibre capital expenditure
UFB communal network spend was $77 million in FY22,
down from $147 million in FY21. The UFB rollout is now
98% complete.
Fibre installations and layer 2 expenditure was $195 million.
117,000 fibre installations were completed nationwide,
including 41,000 for UFB2 customers. $30 million was
invested in ‘backbone’ network to enable the connection
of multiple customers located along rights of way and
multi dwelling units.
The average cost per premises connected (CPPC) in UFB1
areas was $1,0155, which was just under the FY22 guidance
range of $1,025 to $1,175. The CPPC in UFB2 areas was
$1,1875, which was in the lower half of the revised FY22
guidance range of $1,150 to $1,300.
Other fibre and growth decreased $12 million compared
to FY21, mainly due to $17 million lower expenditure on
the West Coast fibre rollout. The West Coast fibre project
is primarily government funded and is expected to be
completed in FY23.
4 Layer 2 equipment, such as gigabit capable passive optical network ports, is installed ahead of demand as the UFB footprint expands.
5 Excluding layer 2 and backbone costs for multi dwelling units and rights of way and including standard installations and some non standard
single dwellings and service desk costs.
21
Annual Report 2022 Copper capital expenditure
Network sustain
Copper connections
Copper layer 2
Customer retention costs
Total copper capital expenditure
2022
$M
27
1
3
7
38
2021
$M
29
1
4
11
45
Copper capital expenditure decreased by $7 million from FY21 reflecting lower spend as customer numbers on our copper
network reduce. Less investment in layer 2 capacity and customer retention was needed as more customers migrate to fibre.
Common capital expenditure
Information technology
Building and engineering services
Total common capital expenditure
2022
$M
31
20
51
2021
$M
46
14
60
Information technology spend decreased by $15 million in FY22 after completion of large lifecycle system developments
and shifting to an agile delivery approach in FY21. Building and engineering services increased by $6 million and includes
expenditure related to corporate office relocation.
22
Annual Report 2022 Long term capital management
We will pay a final unimputed dividend of 21.0 cents per
share on 11 October 2022 to all shareholders registered at
5.00pm 13 September 2022. The shares will be quoted on an
ex dividend basis from 12 September 2022. As the dividend is
unimputed, there will be no supplementary dividend payable
to shareholders outside of New Zealand.
The dividend reinvestment plan will remain in place for
the final dividend, with no discount applied. Shareholders
who have previously elected to participate in the dividend
reinvestment plan do not need to take any further action.
For those shareholders who wish to participate, election
notices to participate must be received by 5.00pm (NZ time)
on 14 September 2022.
Our move to positive free cash flow enables us to increase
dividend payments to shareholders.
Dividend guidance for FY23 has been set at 42.5 cents per
share, subject to no material adverse changes in circumstance
or outlook. The FY23 dividend will be unimputed.
The Board considers that a ‘BBB’ or equivalent credit rating
is appropriate for a company such as Chorus. It intends
to maintain capital management and financial policies
consistent with these credit ratings. It is Chorus’ intention
that in normal circumstances the ratio of net debt to EBITDA
will not materially exceed 4.75 times.
At 30 June 2022, we had a long term credit rating of
BBB/stable outlook by Standard & Poor’s and Baa2/stable
by Moody’s Investors Service.
23
Annual Report 2022 24
Annual Report 2022 Consolidated financial
statements
26 Independent auditor’s report
29 Consolidated income statement
29 Consolidated statement of
comprehensive income
30 Consolidated statement
of financial position
31 Consolidated statement
of changes in equity
32 Consolidated statement of cash flows
34 Notes to the consolidated
financial statements
25
Annual Report 2022 Independent auditor’s report
To the shareholders of Chorus Limited
Report on the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated financial
statements of Chorus Limited (the ’company’) and its
subsidiaries (the ‘Group’) on pages 29 to 61:
We have audited the accompanying consolidated financial
statements which comprise:
— the consolidated statement of financial position as at
30 June 2022;
— the consolidated income statement, statements of other
comprehensive income, changes in equity and cash
flows for the year then ended; and
— notes, including a summary of significant accounting
policies and other explanatory information.
Materiality
The scope of our audit was influenced by our application of
materiality. Materiality helped us to determine the nature,
timing and extent of our audit procedures and to evaluate
the effect of misstatements, both individually and on the
consolidated financial statements as a whole. The materiality
for the consolidated financial statements as a whole was set
at $8.5 million determined with reference to a benchmark of
Group revenue. We chose the benchmark because, in our
view, this is a key measure of the Group’s performance.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
company and group financial statements in the current
period. We summarise below those matters and our key
audit procedures to address those matters in order that the
shareholders as a body may better understand the process by
which we arrived at our audit opinion. Our procedures were
undertaken in the context of and solely for the purpose of
our statutory audit opinion on the consolidated statements
as a whole and we do not express discrete opinions on
separate elements of the consolidated financial statements.
i. present fairly in all material respects the Group’s
financial position as at 30 June 2022 and its financial
performance and cash flows for the year ended on that
date; and
ii. comply with New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) and
International Financial Reporting Standards.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with
Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International
Independence Standards) (New Zealand) issued by the
New Zealand Auditing and Assurance Standards Board and
the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants
(including International Independence Standards) (‘IESBA
Code’), and we have fulfilled our other ethical responsibilities
in accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in
the auditor’s responsibilities for the audit of the consolidated
financial statements section of our report.
Our firm has also provided regulatory and other assurance
services to the Group. Subject to certain restrictions, partners
and employees of our firm may also deal with the Group on
normal terms within the ordinary course of trading activities
of the business of the Group. These matters have not
impaired our independence as auditor of the Group. The firm
has no other relationship with, or interest in, the Group.
Emphasis of Matter – prior period restatement
We draw attention to the prior period restatement note
in the consolidated financial statements, which describes
the adjustments that have been made to the consolidated
financial statements in relation to funding towards the cost
of relocation of communications equipment.
Our conclusion on the consolidated financial statements is
not modified in respect of this matter.
26
Annual Report 2022 The key audit matter
Recoverability of assets
Capitalisation and the carrying value of assets are a key
audit matter due to the significance of assets to the Group’s
consolidated statement of financial position, and due to the
judgement involved in determining the carrying value of the
assets, principally:
— decision to capitalise or expense costs relating to the
network. This depends on whether the expenditure is to
enhance the network (capitalise) or to maintain the current
operating capability of the network (expense);
— estimation of the stage of completion of assets under
construction;
— estimation of the useful life of the asset once the costs are
capitalised;
— obsolescence and impairment risk; and
— uncertainty of the impact of ongoing technological
change, transitioning to a new regulated model,
movement towards a fibre future and RSP/LFC behaviour.
Chorus funding
Refer to Notes 4, 6, 7 and 19 to the Financial Statements.
At 30 June 2022, Chorus had external borrowings of $2,322
million (30 June 2021: $2,373 million), Crown funding of
$936 million (30 June 2021: $906 million), CIP securities of
$613 million (30 June 2021: $545 million) and net derivative
financial assets of $19 million (30 June 2021: net derivative
financial liabilities of $32 million). The CIP securities,
cross-currency and interest rate derivatives are a key audit
matter due to their significance to the Group’s consolidated
statement of financial position and the complexity and
judgement involved in determining the appropriate valuation
and accounting treatment for the CIP securities and cross-
currency and interest rate derivatives.
How the matter was addressed in our audit
Our audit procedures included:
— examining that the controls to recognise capital projects in the fixed asset
register and the approval of the asset life annual review are effective.
— assessing the nature of costs incurred in capital projects by checking a
sample of costs to invoice to determine whether the description of the
expenditure met the capitalisation criteria.
— evaluating a sample of assets under construction in which no costs had
been incurred in the final six months of the financial reporting period.
We challenged the status of those assets under construction to determine
whether they remained appropriately capitalised.
— assessing, on a sample basis, whether the accruals recorded for assets
under construction were calculated in accordance with the progress of
construction and the arrangements with external suppliers.
— assessing the useful economic lives of the assets, by comparing to our
knowledge of the business and its operations and industry benchmarks.
Our audit procedures to assess the valuation and accounting treatment for
the Group’s interest rate derivatives and CIP securities included:
— our financial instrument specialists re-valuing all interest rate derivatives
using valuation models and inputs independent from those utilised by
management.
— evaluating the hedge effectiveness of the interest rate derivatives hedging
the EUR denominated Euro Medium Term Notes, the NZD Bond 2028 and
the NZD Bond 2030. In all instances, our financial instrument specialists
assessed the effectiveness of these hedges by independently modelling
the future changes in the value of these instruments to assess whether
the underlying derivatives were effective.
— assessing the accounting treatment of the CIP securities. We read the
underlying loan agreement and analysed the various features of the loan
agreement to determine whether the CIP securities were a debt or equity
instrument.
— evaluating the valuation of the CIP securities. Our valuation specialists
assessed the methodology used by management for determining the
amounts allocated to debt and government grant.
— assessing the inputs used in the valuation of the CIP securities. On
a sample basis we compared interest rates and credit spreads to
independent sources of information to determine an acceptable range of
valuation inputs.
Revenue recognition
Refer to Note 9 to the Financial Statements.
Our audit procedures included:
Revenue recognition and collectability is considered to be
a key audit matter due to the complexity of the revenue
recognition accounting standards, involving key judgements
and estimates, particularly surrounding;
— customer incentives and retention assets;
— unearned revenue; and
— assessment of performance obligations around non-
connection based revenues.
— testing of revenue related key financial controls.
— performing cut-off testing over revenue by reconciling cash payments
received after balance date against the accounts receivable balances at
year-end to ensure these receipts have been recognised in the correct
financial period.
— independently confirming the accuracy of a sample of outstanding debtor
balances with Chorus customers.
— agreeing a sample of revenue adjustments recorded during the year to
authorised credit notes.
— assessing whether customer contract costs are appropriately capitalised
and subsequently amortised over the expected life of the relationship
with the customer.
— agreeing a sample of unearned revenue balances recorded at year-end
to invoices
27
Annual Report 2022 Auditor’s responsibilities for the audit of the
consolidated financial statements
Our objective is:
— to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error; and
— to issue an independent auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs
NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
A further description of our responsibilities for the audit of
these consolidated financial statements is located at the
External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this
independent auditor’s report is David Gates.
For and on behalf of
KPMG
Wellington
22 August 2022
Other information
The Directors, on behalf of the Group, are responsible for
the other information included in the Annual Report.
Other information includes the Chorus’s operating,
marketing and regulatory overviews, management
commentary and disclosures relating to corporate
governance and statutory information. Our opinion on the
company and Group financial statements does not cover
any other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the company and group
financial statements our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the company and
group financial statements or our knowledge obtained in
the audit or otherwise appears materially misstated. If, based
on the work we have performed, we conclude that there is
a material misstatement of this other information, we are
required to report that fact. We have nothing to report in
this regard.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the
shareholders as a body. Our audit work has been undertaken
so that we might state to the shareholders those matters we
are required to state to them in the independent auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the shareholders as a body for our
audit work, this independent auditor’s report, or any of the
opinions we have formed.
Responsibilities of the Directors for the
consolidated financial statements
The Directors, on behalf of the Group, are responsible for:
— the preparation and fair presentation of the consolidated
financial statements in accordance with generally
accepted accounting practice in New Zealand (being
New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting
Standards;
— implementing necessary internal control to enable
the preparation of a consolidated set of financial
statements that is fairly presented and free from material
misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This
includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting
unless they either intend to liquidate or to cease
operations, or have no realistic alternative but to do so.
28
Annual Report 2022 Consolidated income statement
For the year ended 30 June 2022
Operating revenue
Operating expenses
Earnings before interest, income tax, depreciation and amortisation
Depreciation
Amortisation
Earnings before interest and income tax
Finance income
Finance expense
Net earnings before income tax
Income tax expense
Net earnings for the year
Earnings per share
Basic earnings per share (dollars)
Diluted earnings per share (dollars)
Notes
9
10
1,7
2,3
4
14
17
17
2022
$M
965
(290)
675
(335)
(92)
248
–
(142)
106
(42)
64
0.14
0.11
2021
RESTATED
$M
955
(298)
657
(333)
(94)
230
1
(153)
78
(27)
51
0.11
0.09
Consolidated statement of comprehensive income
For the year ended 30 June 2022
Net earnings for the year
Other comprehensive income
Items that will be reclassified subsequently to Income statement when specific conditions
are met net of tax
Movements in effective cash flow hedges
Amortisation of de-designated cash flow hedges transferred to Income statement
Movement in cost of hedging reserve
Other comprehensive income net of tax
Total comprehensive income for the year net of tax
The accompanying notes are an integral part of these consolidated financial statements.
Note
19
19
19
2022
$M
64
96
5
10
111
175
2021
RESTATED
$M
51
62
5
(7)
60
111
29
Annual Report 2022 Consolidated statement of financial position
As at 30 June 2022
Current assets
Cash and call deposits
Trade and other receivables
Income tax receivable
Derivative financial instruments
Total current assets
Non-current assets
Derivative financial instruments
Trade and other receivables
Deferred tax asset
Customer retention assets
Software and other intangible assets
Network assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Lease payable
Derivative financial instruments
Debt
Total current liabilities excluding Crown funding
Crown funding
Total current liabilities
Non-current liabilities
Trade and other payables
Deferred tax liability
Derivative financial instruments
Lease payable
Debt
Total non-current liabilities excluding CIP and Crown funding
Crown Infrastructure Partners (CIP) securities
Crown funding
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Total equity
Total liabilities and equity
Notes
15
11
19
19
11
14
3
2
1
12
5
19
4
7
12
14
19
5
4
6
7
16
19
2022
$M
88
125
27
9
249
120
1
–
59
152
5,265
5,597
5,846
264
–
13
–
190
467
27
494
16
369
110
174
2,132
2,801
613
909
4,323
4,817
682
60
287
1,029
5,846
2021
RESTATED
$M
53
122
23
4
202
71
2
93
59
164
5,269
5,658
5,860
278
13
10
1
140
442
25
467
11
374
106
254
2,233
2,978
545
881
4,404
4,871
689
(51)
351
989
5,860
The accompanying notes are an integral part of these consolidated financial statements.
The consolidated financial statements are approved and signed on behalf of the Board.
Patrick Strange
Chair
Authorised for issue on 22 August 2022
30
Mark Cross
Chair, Audit and Risk Management Committee
Annual Report 2022 Consolidated statement of changes in equity
For the year ended 30 June 2022
Balance at 1 July 2020 (RESTATED)
666
409
(111)
Notes
Share capital
$M
Retained
earnings
$M
Hedging-related
reserves
$M
Comprehensive income
Net earnings for the year
Other comprehensive income
Movement in cash flow hedge reserve
Amortisation of de-designated cash flow hedges transferred to
Income statement
Movement in cost of hedging reserve
Total comprehensive income
Contributions by and (distributions to) owners:
Dividends
Supplementary dividends
Tax credit on supplementary dividends
Dividend reinvestment plan
Total transactions with owners
Balance at 30 June 2021 (RESTATED)
Comprehensive income
Net earnings for the year
Other comprehensive income
Movement in cash flow hedge reserve
Amortisation of de-designated cash flow hedges transferred to
Income statement
Movement in cost of hedging reserve
Total comprehensive income
Contributions by and (distributions to) owners:
Dividends
Supplementary dividends
Tax credit on supplementary dividends
Dividend reinvestment plan
Share buy-back
Total transactions with owners
Balance at 30 June 2022
19
19
19
16
16
19
19
19
16
16
16
The accompanying notes are an integral part of these consolidated financial statements.
–
–
–
–
–
–
–
–
23
23
689
–
–
–
–
–
–
–
–
31
(38)
(7)
682
51
–
–
–
51
(109)
(12)
12
–
(109)
351
64
–
–
–
64
(128)
(14)
14
–
–
(128)
287
–
62
5
(7)
60
–
–
–
–
–
(51)
–
96
5
10
111
–
–
–
–
–
–
60
Total
$M
964
51
62
5
(7)
111
(109)
(12)
12
23
(86)
989
64
96
5
10
175
(128)
(14)
14
31
(38)
(135)
1,029
31
Annual Report 2022 Consolidated statement of cash flows
For the year ended 30 June 2022
Cash flows from operating activities
Cash was provided from/(applied to):
Receipts from customers
Interest received
Payment to suppliers and employees
Taxation paid
Interest paid
Net cash flows provided from operating activities
Cash flows applied to investing activities
Cash was provided from/(applied to):
Purchase of network and intangible assets
Disposal of network and intangible assets
Capitalised interest paid
Net cash flows applied to investing activities
Cash flows from financing activities
Cash was provided from/(applied to):
Payment of lease liabilities
Crown funding (including CIP securities)
Proceeds from debt
Repayment of debt
Repurchase of shares
Dividends paid
Net cash flows provided from/(applied to) financing activities
Net cash flows
Cash at the beginning of the year
Cash at the end of the year
Reconciliation of net earnings to net cash flows from operating activities
Net earnings for the year
Adjustment for:
Depreciation of network assets
Amortisation of Crown funding
Amortisation of software and other intangible assets
Amortisation of customer retention assets
Deferred income tax
Ineffective portion of changes in fair value of cash flow hedges
Amortisation of non-cash finance expenses
CIP securities (notional) interest
Other
Change in current assets and liabilities:
(Increase) / decrease in trade and other receivables
Increase / (decrease) in operating trade payables
Increase in income tax receivable
Increase / (decrease) in income tax payable
Net cash flows from operating activities
The accompanying notes are an integral part of these consolidated financial statements.
32
Notes
15
Notes
1
7
2
3
14
4
4
11
12
2022
$M
977
–
(295)
(14)
(98)
570
(518)
3
(2)
(517)
(14)
81
50
–
(38)
(97)
(18)
35
53
88
2022
$M
64
362
(27)
62
34
45
(7)
10
39
5
579
(2)
10
(4)
(13)
(9)
570
2021
RESTATED
$M
982
1
(322)
(1)
(116)
544
(647)
–
(2)
(649)
(8)
147
510
(400)
–
(86)
163
58
(5)
53
2021
RESTATED
$M
51
360
(27)
60
38
24
(4)
11
34
(18)
529
17
(6)
(3)
7
15
544
Annual Report 2022 Reconciliation of movements of liabilities and equity to net cash flows from financing activities
Balance at 1 July 2020 (RESTATED)
2,322
836
461
263
666
409
Debt
$M
Crown funding
$M
CIP securities
$M
Lease payable
$M
Share capital
$M
Retained earnings
$M
Movements from financing cash flows
Payment of lease liabilities
Proceeds from debt
Repayment of debt
Dividends paid
Total changes from financing cash flows
Other cash flows
Interest paid on leases
Non-cash movements
Movements in fair value (including foreign
exchange rates)
Transaction costs and amortisation related to
financing
Dividend reinvestment plan
Lease movements
Net earnings for the year ended 30 June 2021
–
510
(400)
–
110
–
(59)
–
–
–
–
–
97
–
–
97
–
–
(27)
–
–
–
–
50
–
–
50
–
–
34
–
–
–
Balance at 30 June 2021 (RESTATED)
2,373
906
545
Movements from cash flows
Payment of lease liabilities
Proceeds from debt
Repurchase of shares
Dividends paid
Total changes from financing cash flows
Other cash flows
Interest paid on leases
Non-cash movements
Movements in fair value (including foreign
exchange rates)
Transaction costs and amortisation related
to financing
Accruals
Dividend reinvestment plan
Lease movements
Net earnings for the year ended 30 June 2022
–
50
–
–
50
–
(105)
4
–
–
–
–
–
54
–
–
54
–
–
(27)
3
–
–
–
27
–
–
27
–
–
39
2
–
–
Balance at 30 June 2022
2,322
936
613
The accompanying notes are an integral part of these consolidated financial statements.
(8)
–
–
–
(8)
(20)
–
–
–
29
–
264
(14)
–
–
–
(14)
(15)
–
–
–
–
(48)
–
187
–
–
–
–
–
–
–
–
23
–
–
689
–
–
(38)
–
(38)
–
–
–
–
31
–
–
682
–
–
–
(86)
(86)
–
–
–
(23)
–
51
351
–
–
–
(97)
(97)
–
–
–
–
(31)
–
64
287
33
Annual Report 2022 Notes to the consolidated financial statements
Reporting entity and statutory base
Reclassification and re-statement of comparatives
Chorus includes Chorus Limited together with its subsidiaries.
Where management have reclassified items in the financial
Chorus is New Zealand’s largest fixed line communications
infrastructure business. It maintains and builds a network
predominantly made up of fibre and copper cables, local
telephone exchanges and cabinets.
Chorus Limited is a profit-oriented company registered in
New Zealand under the Companies Act 1993 and is a FMC
Reporting Entity for the purposes of the Financial Markets
Conduct Act 2013. Chorus Limited was established as a
statements, the related comparative disclosures have been
adjusted to provide a like-for-like comparison.
Prior period restatement – Crown funding
Adjustments have been made to the financial statements
in relation to funding towards the cost of relocation of
communications equipment. This funding has historically
been recognised as a liability within Crown funding and then
recognised in earnings as a reduction to depreciation expense
standalone, publicly listed entity on 1 December 2011, upon its
on a systematic basis over the useful life of the asset the funding
demerger from Spark New Zealand Limited (Spark, previously
was used to construct, which is consistent with the treatment
Telecom Corporation of New Zealand Limited). The demerger
of other Crown funding such as RBI. Upon review of funding
was a condition of an agreement with Crown Infrastructure
streams and the accounting treatment of these streams during
Partners Limited (previously Crown Fibre Holdings) to enable
Chorus Limited to provide the majority of the Crown’s Ultra-Fast
the period, Chorus have identified that the purpose of the
funding is not for the construction of an asset, and therefore
Broadband (UFB). Chorus Limited is listed and its ordinary shares
should be recognised upon completion of relocation.
are quoted on the NZX main board equity security market (NZX
Main Board) and on the Australian Stock Exchange (ASX) and
has bonds quoted on the NZX and ASX debt markets. American
Depositary Shares, each representing five ordinary shares (and
evidenced by American Depositary Receipts), are not listed but
are traded on the over-the-counter market in the United States.
These consolidated financial statements (“financial statements”)
have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (NZ GAAP) and Part 7 of
the Financial Markets Conduct Act 2013. They comply with
New Zealand equivalents to International Financial Reporting
Standards (NZ IFRS) as appropriate for profit-oriented entities,
While there has not been a material error in net earnings in
any one year, the prior period has been restated to reflect the
appropriate accounting treatment.
Classification of interest paid on leases and revenue in
advance within the statement of cash flows
During the period interest paid on leases and revenue in advance
charged were reclassified within the statement of cash flows.
The changes provide more reliable and relevant information and
better reflect the nature of the cash flows. There has been no
impact on net cash flows.
The impact of the restatement and reclassifications the prior
and with International Financial Reporting Standards.
periods is as follows:
These financial statements are expressed in New Zealand dollars.
All financial information has been rounded to the nearest million,
unless otherwise stated.
The measurement basis adopted in the preparation of
these financial statements is historical cost, modified by the
revaluation of financial instruments as identified in the specific
accounting policies below and the accompanying notes.
The Directors have considered the impact of the COVID-19
pandemic on these financial statements and note no material
impact to the going concern basis on which they are prepared.
Accounting policies and standards
Accounting policies that summarise the measurement basis
used which are relevant to the understanding of the financial
statements are provided throughout the accompanying notes.
The accounting policies adopted and methods of computation
have been applied consistently throughout the periods
presented in these consolidated financial statements.
34
Annual Report 2022 Year ended 30 June 2021
Consolidated income statement
Operating revenue
Earnings before interest, income tax, depreciation and amortisation
Depreciation
Income tax expense
Net earnings for the year
Basic earnings per share
Diluted earnings per share
Consolidated statement of financial position
Crown funding
Income tax payable
Retained earnings
Consolidated statement of cash flows
Cash received from customers
Payments to suppliers and employees
Interest paid
Payment of lease liabilities
Crown funding (including CIP securities)
YEAR ENDED
30 JUNE 2021
$M
RESTATEMENT
INCREASE/
(DECREASE)
$M
RECLASSIFICATION
INCREASE/
(DECREASE)
$M
YEAR ENDED
30 JUNE 2021
RESTATED
$M
947
649
(331)
(25)
47
0.11
0.08
955
5
310
954
(302)
(96)
(28)
155
8
8
(2)
(2)
4
(49)
8
41
8
–
–
–
(8)
–
–
–
–
–
–
–
–
20
(20)
(20)
20
–
955
657
(333)
(27)
51
0.11
0.09
906
13
351
982
(322)
(116)
(8)
147
Interest Rate Benchmark Reform
Network assets (note 1)
Interbank offered rates (“IBORs”) play an important role in global
financial markets. Market developments relating to the reliability
and robustness of some interest rate benchmarks has resulted in
the global regulatory community initiating various programmes
to develop alternative benchmarks (risk free rates) within certain
jurisdictions. These reforms have led to uncertainty about the
long-term viability of some interest rate benchmarks beyond
1 January 2022 under Interest Rate Benchmark Reform – Phase 2.
Chorus’ hedging activities expose it to EURIBOR. EURIBOR is not
subject to cessation following reform in 2019, however industry
guidance suggests it will remain appropriate only in the medium
term. As such, although there is no immediate impact of the
reform to Chorus, developments will continue to be monitored
to ensure any changes to EURIBOR are appropriately considered.
Accounting estimates and judgements
In preparing the financial statements, management has made
estimates and assumptions about the future that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the period. Actual results could differ from those estimates.
Estimates and assumptions are continually evaluated and are based
on experience and other factors, including macro-economic and
market factors, and expectations of future events that may have
an impact on Chorus. All judgements, estimates, and assumptions
are believed to be reasonable based on the most current set of
circumstances available to Chorus. The principal areas of judgement
in preparing these financial statements are set out below.
Assessing the carrying value of network assets for impairment
considerations which includes assessing the appropriateness
of useful life and residual value estimates of network assets, the
physical condition of the asset, technological advances, regulation
and expected disposal proceeds from the future sale of the asset.
Customer retention assets (note 3)
Assessing the carrying value of customer retention assets
for impairment considerations which includes assessing the
appropriateness of useful life, contract terms, revenue and
customer connections data.
Leases (note 5)
A significant portion of lease contracts contain options for
extension, which in turn require management to apply judgement
in assessing if these extensions are likely to be exercised.
Crown Infrastructure Partners (CIP) securities (note 6)
Determining the fair value of the CIP securities requires
assumptions on expected future cash flows and discount rates
based on future long dated swap curves.
Financial risk management (note 19 and 20)
Accounting judgements have been made in determining hedge
designation and the fair value of derivatives and borrowings.
The fair value of derivatives and borrowing are determined based
on valuation models that use forward-looking estimates and
market observable data, to the extent that it is available.
35
Annual Report 2022 Non-GAAP measures
Chorus use non-GAAP measures that are not prepared in
accordance with NZ IFRS. Chorus believes these non-GAAP
Earnings before interest and income tax (EBIT) and
earnings before interest, income tax, depreciation
and amortisation (EBITDA)
measures provide useful information to users of the financial
Chorus calculate EBIT by adding back finance expense and
statements to assist in understanding the financial performance
income tax to, and subtracting finance income from, net
of Chorus. These measures are also used internally to evaluate
earnings. EBITDA adds back depreciation and amortisation
the performance of Chorus and monitored for compliance
expense to EBIT. A reconciliation of EBIT and EBITDA is provided
against debt covenants.
below and based on amounts taken from, and consistent with,
These measures should not be viewed in isolation or as a
substitute for measures reported in accordance with NZ IFRS
as they are not uniformly defined or utilised by all companies in
New Zealand or the telecommunications industry.
those presented in the financial statements.
Year ended 30 June
Net earnings for the year reported under NZ IFRS
Add back: income tax expense
Add back: finance expense
Subtract: finance income
EBIT
Add back: depreciation
Add back: amortisation
EBITDA
Note 1 – Network assets
In the Consolidated statement of financial position, network
assets are stated at cost less accumulated depreciation and
any accumulated impairment losses. The cost of additions to
network assets and work in progress constructed by Chorus
Estimated useful lives are as follows:
Fibre cables
Ducts, manholes, and poles
includes the cost of all materials used in construction, direct
Copper cables
labour costs specifically associated with construction, interest
costs that are attributable to the asset, resource management
consent costs and attributable overheads.
Repairs and maintenance costs are recognised in the
Consolidated income statement as incurred. If the useful life
of the asset is extended or the asset is enhanced then the
associated costs are capitalised.
Cabinets
Property
Network electronics
Right of use assets
Other
2022
$M
64
42
142
–
248
335
92
675
2021
(RESTATED)
$M
51
27
153
(1)
230
333
94
657
20-30 years
20-50 years
10-30 years
5-20 years
5-50 years
2-25 years
10-50 years
2-10 years
Estimating useful lives and residual values of network assets
The determination of the appropriate useful life for a particular
asset requires management to make judgements about,
amongst other factors, the expected period of service potential
Other network assets include motor vehicles, test instruments
and tools and plant.
An item of network assets and any significant part is
derecognised upon disposal or when no future economic
of the asset, the likelihood of the asset becoming obsolete as a
benefits are expected from its use. Where network assets are
result of technological advances, and the likelihood of Chorus
disposed of, the profit or loss recognised in the Consolidated
ceasing to use the asset in business operations.
income statement is calculated as the difference between the
Where an item of network assets comprises major components
sale price and the carrying value of the asset.
having different useful lives, the components are accounted for
Non-monetary items that are measured in terms of historical
as separate items of network assets.
Where the remaining useful lives or recoverable values have
cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions.
diminished due to technological, regulatory or market condition
Land and work in progress are not depreciated. Work in progress
changes, depreciation is accelerated. The assets’ residual values,
is reviewed on a regular basis to ensure that costs represent
useful lives, and methods of depreciation are reviewed annually
future assets.
and adjusted prospectively, if appropriate.
Depreciation is charged on a straight-line basis to write down
the cost of network assets to their estimated residual value over
their estimated useful life.
36
Annual Report 2022 30 June 2022
Cost
Fibre
cables
$M
Ducts,
manholes,
and poles
$M
Copper
cables
$M
Cabinets
$M
Property
$M
Network
electronics
$M
Right of
use assets
$M
Other
$M
Work in
progress
$M
Total
$M
Balance at 1 July 2021
2,497
2,965
2,415
Additions
Disposals
Transfers from work in progress
Relinquishments and
modifications
166
195
–
–
–
–
–
–
9
–
–
–
715
16
–
–
–
458
1,872
17
(1)
–
–
50
(160)
–
–
301
7
(10)
–
(64)
Balance at 30 June 2022
2,663
3,160
2,424
731
474
1,762
234
Accumulated depreciation
Balance at 1 July 2021
Depreciation
Disposals
(842)
(122)
–
Balance at 30 June 2022
(964)
(778)
(2,172)
Net carrying amount
1,699
2,382
252
(717)
(2,111)
(503)
(289)
(1,593)
(61)
–
(61)
–
(22)
–
(525)
206
(19)
1
(62)
160
(307)
(1,495)
167
267
(79)
(15)
10
(84)
150
5
–
–
–
–
5
(4)
–
–
(4)
1
179
181
–
(219)
11,407
641
(171)
(219)
–
(64)
141
11,594
–
–
–
–
(6,138)
(362)
171
(6,329)
141
5,265
30 June 2021
Cost
Fibre
cables
$M
Ducts,
manholes,
and poles
$M
Copper
cables
$M
Cabinets
$M
Property
$M
Network
electronics
$M
Right of
use assets
$M
Other
$M
Work in
progress
$M
Total
$M
Balance at 1 July 2020
2,276
2,754
2,409
Additions
Disposals
Transfers from work in progress
222
211
(1)
–
–
–
6
–
–
693
22
–
–
435
28
(5)
–
1,811
292
67
(6)
–
11
(2)
–
Balance at 30 June 2021
2,497
2,965
2,415
715
458
1,872
301
Accumulated depreciation
Balance at 1 July 2020
Depreciation
Disposals
(729)
(114)
1
(659)
(2,048)
(58)
–
(63)
–
(473)
(30)
–
(275)
(1,537)
(18)
4
(62)
6
Balance at 30 June 2021
(842)
(717)
(2,111)
(503)
(289)
(1,593)
Net carrying amount
1,655
2,248
304
212
169
279
(64)
(15)
–
(79)
222
5
1
(1)
–
5
(4)
–
–
(4)
1
166
265
–
10,841
833
(15)
(252)
(252)
179
11,407
–
–
–
–
(5,789)
(360)
11
(6,138)
179
5,269
There are no restrictions on Chorus’ network assets or any
At 30 June 2022 the contractual commitments for acquisition
network assets pledged as securities for liabilities.
and construction of the network assets was $79 million
(30 June 2021: $119 million).
37
Annual Report 2022 Note 1 – Network assets (cont.)
Crown funding
Capitalised interest
Chorus receives funding from the Crown to finance the capital
Finance costs are capitalised on qualifying items of network
expenditure associated with the development of the UFB network
assets and software assets at an annualised rate of 4.00%
and other services. Where funding is used to construct assets, it is
(30 June 2021: 4.25%). Interest is capitalised over the period
offset against depreciation over the life of the assets constructed.
required to complete the assets and prepare them for their
Refer to note 7 for information on Crown funding.
Impairment
The carrying amounts of non-financial assets including network
assets, software and other intangibles and customer retention
assets are reviewed at the end of each reporting period for any
indicators of impairment.
intended use. In the current year finance costs totalling
$2 million (30 June 2021: $2 million) have been capitalised
against network assets and software assets.
Right of use assets
A right of use asset is recognised on commencement of a lease.
The right of use asset is initially measured at cost, which is made
up of the initial lease liability amount adjusted for any lease
If any such indication exists, the recoverable amount of the
payments made at or before the commencement date, plus any
asset is estimated. An impairment loss is recognised in earnings
initial direct costs incurred and an estimate of costs to remove
whenever the carrying amount of an asset exceeds its estimated
the underlying asset or to restore the underlying asset or the site
recoverable amount. Should the conditions that gave rise to the
on which it is located, less any lease incentives received.
impairment loss no longer exist, and the assets are no longer
considered to be impaired, a reversal of an impairment loss
would be recognised immediately in earnings. In the period to
30 June 2022, there was no impairment in relation to the costs
capitalised (30 June 2021: no impairment).
The recoverable amount is the greater of an asset’s value in use
and fair value less costs to sell. Chorus’ assets do not generate
independent cash flows and are therefore assessed from a single
cash-generating unit perspective. In assessing the recoverable
amount, the estimates of future cash flows are discounted to
their net present value using a discount rate that reflects current
market assessments of the time value of money and the risks
The right of use asset is subsequently depreciated using the
straight-line method until the assumed end of the lease term.
The right of use asset is periodically adjusted for certain
remeasurements of the lease liability.
Movements in right of use assets for the period are
presented below:
specific to the business.
Right of use assets
Balance 1 July 2020
Additions
Relinquishments
Depreciation
Balance at 30 June 2021
Additions
Relinquishments and modifications
Depreciation
Balance at 30 June 2022
Property exchanges
Fibre cables
$M
Ducts, manholes,
and poles
$M
Property
$M
9
–
–
(1)
8
–
–
(1)
7
42
9
–
(4)
47
5
–
(4)
48
177
2
(2)
(10)
167
2
(64)
(10)
95
Total
$M
228
11
(2)
(15)
222
7
(64)
(15)
150
Chorus has leased exchange space and commercial co-location
During the period modifications were recognised to the
space owned by Spark which is subject to lease arrangements
arrangement where Chorus is the lessee which resulted in a
(included within right of use assets). Chorus in turn leases
reduction in the right of use asset associated with the lease.
exchange space and commercial co-location space owned by
Refer to note 5 for further information.
Chorus to Spark under an operating lease arrangement.
38
Annual Report 2022 Note 2 – Software and other intangible assets
Software and other intangible assets are initially measured
at cost. The direct costs associated with the development of
network and business software for internal use are capitalised
where project success is probable and the capitalisation
criteria is met. Following initial recognition, software and
other intangible assets are stated at cost less accumulated
amortisation and impairment losses. Software and other
Software
Other intangibles
2-10 years
6-35 years
Other intangibles mainly consist of land easements.
Where estimated useful lives or recoverable values have
diminished due to technological change or market conditions,
intangible assets with a finite life are amortised from the date the
amortisation is accelerated.
asset is ready for use on a straight-line basis over its estimated
useful life which is as follows:
30 June 2022
Cost
Balance at 1 July 2021
Additions
Disposals
Transfers from work in progress
Balance at 30 June 2022
Accumulated amortisation
Balance at 1 July 2021
Amortisation
Disposals
Balance at 30 June 2022
Net carrying amount
30 June 2021
Cost
Balance at 1 July 2020
Additions
Transfers from work in progress
Balance at 30 June 2021
Accumulated amortisation
Balance at 1 July 2020
Amortisation
Balance at 30 June 2021
Net carrying amount
Software
$M
Other intangibles
$M
Work in progress
$M
873
55
(10)
–
918
(736)
(62)
10
(788)
130
6
–
–
–
6
(1)
–
–
(1)
5
22
50
–
(55)
17
–
–
–
–
17
Software
$M
Other intangibles
$M
Work in progress
$M
788
85
–
873
(676)
(60)
(736)
137
6
–
–
6
(1)
–
(1)
5
42
65
(85)
22
–
–
–
22
Total
$M
901
105
(10)
(55)
941
(737)
(62)
10
(789)
152
Total
$M
836
150
(85)
901
(677)
(60)
(737)
164
There are no restrictions on software and other intangible assets,
At 30 June 2022 the contractual commitment for acquisition
or any intangible assets pledged as securities for liabilities.
of software and other intangible assets was $2 million
(30 June 2021: $4 million).
39
Annual Report 2022 Note 3 – Customer retention assets
Customer retention costs are incremental costs incurred in
acquiring new contracts with new and existing customers that
Chorus expects are recoverable and are capitalised as customer
retention assets. These represent various costs including
New connections and migrations
Customer incentives
1-4 years
1 year
commissions and incentives for customers to connect to the fibre
Customer retention assets are amortised to the Consolidated
network. Following initial recognition, customer retention assets
income statement, either as amortisation expense or against
are stated at cost less accumulated amortisation and impairment
operating revenue, based on the nature of the specific
losses. Customer retention assets have a finite life and are
costs capitalised.
amortised from the month that costs are capitalised on a straight-
line basis over the average connection life which is as follows:
Balance at 1 July 2020 (net carrying amount)
Additions
Amortisation to amortisation expense
Amortisation to operating revenue
Balance at 30 June 2021 (net carrying amount)
Additions
Amortisation to amortisation expense
Amortisation to operating revenue
Balance at 30 June 2022 (net carrying amount)
New connections
and migrations
$M
Customer
incentives
$M
54
37
(34)
–
57
31
(30)
–
58
2
4
–
(4)
2
3
–
(4)
1
Total
$M
56
41
(34)
(4)
59
34
(30)
(4)
59
Note 4 – Debt
Debt is classified as non-current liabilities except for those with
fair value hedge relationships, which means that any change in
maturities less than 12 months from the reporting date, which
market interest and foreign exchange rates result in a change in
are classified as current liabilities.
the fair value adjustment on that debt.
Debt is initially measured at fair value, less any transaction costs
The weighted effective interest rate on debt including the effect
that are directly attributable to the issue of the instruments.
of derivative financial instruments and facility fees was 3.77%
Debt is subsequently measured at amortised cost using the
(30 June 2021: 4.16%).
effective interest method. Some borrowings are designated in
Syndicated bank facilities
Euro medium term notes EUR
Euro medium term notes EUR
Fixed rate NZD Bonds
Fixed rate NZD Bonds
Fixed rate NZD Bonds
Less: facility fees
Total Debt
Current
Non-current
Syndicated bank facilities
Due date
Jul 2022
Oct 2023
Dec 2026
Dec 2027
Dec 2028
Dec 2030
2022
$M
190
828
464
200
500
154
(14)
2,322
190
2,132
2021
$M
140
858
511
200
500
182
(18)
2,373
140
2,233
As at 30 June 2022 Chorus had a $350 million committed syndicated facility on market standard terms and conditions (30 June 2021:
$350 million). The facility is held with banks that are rated A to AA-, based on Standard & Poor’s ratings. As at 30 June 2022, $190 million
of this facility was drawn down (30 June 2021: $140 million).
40
Annual Report 2022 Note 4 – Debt (cont.)
Euro Medium Term Note (EMTN)
EUR 500 million
EUR 300 million
Face value
Interest rate
1.13%
0.88%
2022
$M
828
464
2021
$M
858
511
Chorus holds cross currency interest rate swaps to hedge the
The EUR 500 EMTN cross currency interest rate swaps (notional
foreign currency exposure to the EMTN. The cross currency
amount EUR 500 million) are partially hedged for the NZD interest
interest rate swaps entitle Chorus to receive EUR principal and
payments using interest rate swaps. The EUR 300 cross currency
EUR fixed coupon payments for NZD principal and NZD floating
interest rate swaps (notional amount EUR 300 million) are fully
interest payments. The EUR cross currency interest rate swaps
hedged for the NZD interest payments using interest rates swaps.
(notional amount EUR 800 million) are partially hedged for the
NZD interest payments using interest rate swaps.
EMTN (at carrying value)
Impact of fair value hedge
Impact of hedged rates used
EMTN at hedged rates (non-GAAP measure)
The following table reconciles EMTN at hedged rates to EMTN
carrying value based on spot rates as reported under NZ IFRS.
EMTN at hedged rates is a non-GAAP measure and is not defined
by NZ IFRS:
2022
EUR 300
$M
2021
EUR 300
$M
2022
EUR 500
$M
2021
EUR 500
$M
464
40
10
514
511
(2)
5
514
828
11
(54)
785
858
(9)
(64)
785
The fair value of EMTNs is calculated based on the present value
(30 June 2021: $878 million) compared to a carrying value of
of future principal and interest cash flows, discounted at market
$828 million (30 June 2021: $858 million) and the fair value
interest rates at balance date and is determined using Level 2 of
of the EUR 300 million EMTN is $461 million (30 June 2021:
the fair value hierarchy as described in Note 20. At balance date
$526 million) compared to a carrying value of $464 million
the fair value of the EURO 500 million EMTN was $837 million
(30 June 2021: $511 million).
Fixed rate NZD bonds
Fixed rate NZD Bonds
Fixed rate NZD Bonds
Fixed rate NZD Bonds
Total fixed rate NZD Bonds
Due date
Interest rate
Dec 2027
Dec 2028
Dec 2030
1.98%
4.35%
2.51%
2022
$M
200
500
154
854
2021
$M
200
500
182
882
The fixed rate on the 2030 NZD Bonds has been swapped to a
At 30 June 2022, Chorus had $900 million of unsecured,
floating rate using interest rate swaps, creating a fair value hedge
unsubordinated debt securities (30 June 2021: $900 million).
which has a fair value of $154 million at balance date (notional
amount $200 million). This hedging relationship was entered to
comply with the Chorus Treasury Policy which does not allow
for greater than 70% of term debt to be subject to fixed interest
rates beyond a three year time period.
41
Annual Report 2022 Note 4 – Debt (cont.)
Schedule of maturities
Current
Due one to two years
Due two to three years
Due three to four years
Due four to five years
Due over five years
Total due
Less: facility fees
2022
$M
190
828
–
–
464
854
2,336
(14)
2,322
2021
$M
140
–
858
–
–
1,393
2,391
(18)
2,373
No debt has been secured against assets, however there are
Refer to note 20 for information on financial risk management.
financial covenants and event of default triggers as defined
in the various debt agreements. During the current year
Chorus complied with the requirements set out in its financing
agreements (30 June 2021: complied).
Finance expense
Interest on syndicated bank facility
Interest on EMTN
Interest on fixed rate NZD bonds
Ineffective portion of changes in fair value of cash flow hedges
Other interest expense
Capitalised interest
Total finance expense excluding CIP securities (notional) interest
CIP securities (notional) interest
Total finance expense
2022
$M
6
51
32
(7)
23
(2)
103
39
142
2021
$M
5
47
43
(4)
30
(2)
119
34
153
Other interest expense includes $15 million lease interest expense (30 June 2021: $20 million) and $7 million of amortisation arising
from the difference between fair value and proceeds realised from the swaps reset (30 June 2021: $7 million).
42
Annual Report 2022 Note 5 – Leases
Chorus is a lessee of certain network assets under lease
the present value of the remaining lease payments, discounted at
arrangements. For all leases Chorus recognises assets and
Chorus’ incremental borrowing rate at that date. Lease costs are
liabilities in the Consolidated statement of financial position,
recognised through interest expense over the life of the lease.
except those determined to be short-term or low value.
The corresponding right of use asset incurs depreciation over
On inception of a new lease, the lease payable is measured at
the estimated useful life of the asset.
Chorus’ discounted cash flows by category are summarised below:
Fibre cables
Ducts, manholes and poles
Property
Total lease payable
Current
Non-current
Extension options
2022
$M
11
51
125
187
13
174
2021
$M
14
49
201
264
10
254
Most leases contain extension options exercisable by Chorus up to
Chorus has a lease arrangement with Spark for exchange and
one year before the end of the non-cancellable contract period.
Where practicable, Chorus seeks to include extension options in
commercial co-location spaces which was renewed during the
period. As part of the renewal, a number of co-location spaces
new leases to provide operational flexibility. The extension options
have been identified which Chorus intend to exit over a 10-year
held are exercisable only by Chorus and not by the lessors. Chorus
period. Judgement has been applied by Chorus in determining the
assesses at lease commencement whether it is reasonably certain
likely timing of exit of these spaces which is subsequently reflected
the extension options will be exercised, and where it is reasonably
in the lease liability and corresponding right of use assets.
certain, the extension period has been included in the lease
liability calculation. Chorus reassesses whether it is reasonably
certain to exercise the options if there is a significant event or
significant change in circumstances within its control.
The amounts recognised in the Consolidated income statement
and the Consolidated statement of cash flows relating to leases
are summarised below:
Amounts recognised in Consolidated income statement:
Interest on lease payable
Amounts recognised in Consolidated statement of cash flows:
Principal payments
Lease interest
2022
$M
15
(14)
(15)
2021
$M
20
(8)
(20)
43
Annual Report 2022 Note 6 – Crown Infrastructure Partners (CIP) securities
Chorus receives Crown funding to finance construction costs
CIP equity securities
associated with the development of the UFB network. Funding is
CIP equity securities are a class of non-interest bearing security
received for every premises passed and certified by CIP.
Funding has been received over two phases. Phase one of the
build (UFB1) was completed in December 2019 with a total of
$924 million of funding received. Phase two (UFB2 and UFB2+) is
that carry no right to vote at meetings of holders of Chorus
ordinary shares but entitle the holder to a preferential right to
repayment on liquidation and additional rights that relate to
Chorus’ performance under its construction contract with CIP.
ongoing, with total committed funding available expected to be
For UFB1 equity securities, dividends will become payable on a
$411 million, and is expected to be completed in December 2022.
portion of the CIP equity securities from 2025 onwards, with the
In return for funding under both phases, CIP debt securities and
CIP equity securities are issued. Under UFB1 CIP warrants were
also issued. Under the UFB2 and UFB2+ arrangement, Chorus
portion of CIP equity securities that attract dividends increasing
over time. For UFB2 and UFB2+ equity securities, dividends will
become payable from 2030.
can elect the mix of securities to be issued up to a maximum of
CIP equity securities can be redeemed by Chorus at any time by
$306 million of equity securities. This maximum was reached
payment of the issue price or issue of new ordinary shares (at a
during the year ended 30 June 2022.
The CIP debt and equity securities are recognised initially
at fair value plus any directly attributable transaction costs.
5% discount to the 20-day volume weighted average price) to
the holder. In limited circumstances CIP equity securities may be
converted by the holder into voting preference or ordinary shares.
Subsequently, they are measured at amortised cost using the
The CIP equity securities are required to be disclosed as a liability
effective interest method. The fair value is derived by discounting
until the liability component of the compound instrument expires.
the equity securities and debt securities per premises passed by
the effective rate based on market rates. The difference between
funding received and the fair value of the securities is recognised
CIP warrants
Under UFB1 Chorus issued warrants to CIP for nil consideration
as Crown funding. Over time, the CIP debt and equity securities
along with each tranche of CIP equity securities. Each CIP
increase to face value and the Crown funding is released against
warrant gives CIP the right, on a specified exercise date, to
depreciation and reduces to nil.
CIP debt securities
purchase at a set strike price a Chorus share to be issued by
Chorus. The strike price for a CIP warrant is based on a total
shareholder return of 16% per annum on Chorus shares over the
CIP debt securities are unsecured, non-interest bearing and
period December 2011 to June 2036.
carry no voting rights at meetings of holders of Chorus ordinary
shares. Chorus is required to redeem the CIP debt securities in
tranches from 2025 by repaying the face value to the holder.
At 30 June 2022, Chorus had issued a total 15,138,187 warrants
which had a fair value and carrying value that approximated
zero (30 June 2021: 14,678,063 warrants issued). The number of
The principal amount of CIP debt securities consists of a senior
fibre connections made by 30 June 2022 impacts the number of
portion and a subordinated portion. The senior portion ranks
warrants that could be exercised.
equally with all other unsecured, unsubordinated creditors of
Chorus, and has the benefit of any negative pledge covenant
that may be contained in any of Chorus’ debt arrangements.
The subordinated portion ranks below all other Chorus
indebtedness but above ordinary shares of Chorus. The initial
value of the senior portion is the present value of the sum
repayable on the CIP debt securities, and the initial subordinated
portion will be the difference between the issue price of the CIP
debt security and the value of the senior portion.
At 30 June 2022, the component parts of CIP debt and equity
instruments, including notional interest, were:
2022
2021
CIP debt
securities
$M
CIP equity
securities
$M
Total CIP
securities
$M
CIP debt
securities
$M
CIP equity
securities
$M
Total CIP
securities
$M
176
13
189
63
15
78
267
234
16
250
72
24
96
346
410
29
439
135
39
174
613
176
–
176
49
14
63
239
184
50
234
52
20
72
306
360
50
410
101
34
135
545
Fair value on initial recognition
Balance at 1 July
Additional securities recognised at fair value
Balance at 30 June
Accumulated notional interest
Balance at 1 July
Notional interest
Balance at 30 June
Total CIP securities
44
Annual Report 2022 Note 6 – Crown Infrastructure Partners (CIP) securities (cont.)
The fair value of CIP debt securities at balance date was
Key assumptions in calculations on initial recognition
$260 million (30 June 2021: $296 million) compared to a
carrying value of $267 million (30 June 2021: $239 million).
The fair value of CIP equity securities at balance date was
On initial recognition, discount rates between 5.71% and 7.31%
were used for the CIP debt securities (30 June 2021: no debt
securities issued), while discount rates between 6.26% and 7.80%
$333 million (30 June 2021: $357 million) compared to a carrying
were used for the CIP equity securities (30 June 2021: 5.18% to
value of $346 million (30 June 2021: $306 million). The fair value
has been calculated using discount rates from market rates at
6.67%) to discount the expected cash flows, based on the NZ
swap curve. The swap rates were adjusted for Chorus specific
balance date and is a level 2 valuation of the fair value hierarchy
credit spreads (based on market observed credit spreads for debt
as described in note 20.
issued with similar credit ratings and tenure). The discount rate
on the CIP equity securities is capped at Chorus’ estimated cost
of (ordinary) equity.
Note 7 – Crown funding
Crown funding is recognised at fair value where there is reasonable assurance that the funding is receivable and all attached
conditions will be complied with. Crown funding is then recognised in earnings as a reduction to depreciation expense on a
systematic basis over the useful life of the asset the funding was used to construct.
2022
2021
RESTATED
UFB
$M
WCSNB
$M
RBI
$M
Other
$M
Total
$M
UFB
$M
WCSNB
$M
RBI
$M
Other
$M
Total
$M
Fair value on initial recognition
Balance at 1 July
Additional funding recognised at fair value
Balance at 30 June
Accumulated amortisation of funding
Balance at 1 July
Amortisation
Balance at 30 June
Total Crown funding
Current
Non-current
780
41
821
(92)
(20)
(112)
709
24
16
40
–
–
–
40
242
–
242
(54)
(7)
(61)
181
16
–
16
1,062
57
1,119
(10)
(156)
–
(27)
(10)
(183)
6
936
27
909
707
73
780
(74)
(18)
(92)
–
24
24
–
–
–
242
–
242
(46)
(8)
(54)
16
–
16
(9)
(1)
965
97
1,062
(129)
(27)
(10)
(156)
688
24
188
6
906
25
881
Prior period restatement
West Coast Southland Network Build (WCSNB)
Refer to page 34 for further understanding of the prior period
Chorus receives Crown funding to finance capital expenditure
restatement of Crown funding. The total restatement of $49m
associated with the development of the West Coast Southland
reduced the current Crown funding balance by $2 million and
Network. One dollar of funding can be claimed for each dollar
the non-current balance by $47 million.
of allowable costs incurred by Chorus, up to a maximum funding
Ultra-Fast Broadband (UFB)
limit agreed with CIP. Under phases 1 and 2 of the agreement,
approximately $46 million of funding is expected to be received.
Chorus receives Crown funding to finance construction costs
associated with the development of the UFB network. During
Other
the period Chorus has recognised funding for 37,000 premises
Chorus has received funding in the past towards school lead-ins
where the premises were passed and tested by CIP under UFB
and extending the network coverage to rural areas.
2 and UFB 2+ (30 June 2021: 67,000). This brings the total
number of premises passed and tested by CIP at 30 June 2022 to
approximately 1,014,000 (30 June 2021: 977,000).
Continued recognition of the full amount of the Crown funding
is contingent on certain material performance targets being met
by Chorus. The most significant of these material performance
targets relate to compliance with certain specifications under
user acceptance testing by CIP. Performance targets to date have
been met.
45
Annual Report 2022 Note 8 – Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur
expenses and for which operating results are regularly reviewed by the entity’s chief operating decision maker and for which discrete
financial information is available.
Chorus’ Chief Executive Officer (CEO) has been identified as the chief operating decision maker for the purpose of
segmental reporting.
Chorus has determined that it operates in one segment providing nationwide fixed line communications infrastructure.
The determination is based on the reports reviewed by the CEO in assessing performance, allocating resources and making strategic
decisions.
All of Chorus’ operations are provided in New Zealand, therefore no geographic information is provided.
Three Chorus customers met the reporting threshold of 10 percent of Chorus’ operating revenue in the year to 30 June 2022.
The total revenue for the year ended 30 June 2022 from these customers was $354 million (30 June 2021: $372 million), $171 million
(30 June 2021: $178 million) and $116 million (30 June 2021: $120 million).
Note 9 – Operating revenue
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf
of third parties. Chorus recognises revenue when it transfers control of a product or service to a customer and cash collection is
considered probable. Revenue is presented net of rebates and incentives.
Chorus services provided to customers Nature, performance obligation and timing of revenue
Fibre and copper connections
Providing access to the Chorus fixed lines network to enable connections to the internet.
Chorus recognises revenue as it provides this service to its customers at a point in time.
Unbilled revenues from the billing cycle date to the end of each month are recognised as
revenue during the month the service is provided. Revenue is deferred in respect of the
portion of fixed monthly charges that have been billed in advance.
Value added network services
Providing enhanced access to the Chorus fixed line network to enable internet access,
through backhaul and handover link services to connect across wider areas and to higher
quality levels. Recognition is the same as described for fibre and copper connections above.
Infrastructure
Providing physical storage and site-sharing rental services for co-location of third party or
shared assets. This is billed and recognised on a monthly basis, based on a point in time.
Field services products
Providing services in the field to protect, strengthen, and increase the available network
– for example, installation services, wiring and consultation services. This is billed and
recognised as the service is provided over time. Revenue from installation of connections
is recognised upon completion of the connection.
Revenue by service
Fibre broadband (GPON)
Copper based broadband
Field services products
Fibre premium (P2P)
Copper based voice
Infrastructure
Value added network services
Data services over copper
Other
Total operating revenue
46
2022
$M
548
153
71
66
52
30
27
6
12
2021
RESTATED
$M
477
203
70
68
68
27
30
9
3
965
955
Annual Report 2022 Note 9 – Operating revenue (cont.)
Amounts collected on behalf of third parties
Revenue is exclusive of amounts collected on behalf of third parties, which totaled $26 million in the year ($30 June 2021: $41 million).
Any amounts collected but not yet passed to the third party are recognised within trade and other payables.
Note 10 – Operating expenses
Labour
Network maintenance
Information technology
Other network costs
Electricity
Rent and rates
Property maintenance
Advertising
Regulatory levies
Consultants
Insurance
Provisioning
Other
Total operating expenses
2022
$M
2021
$M
64
59
50
29
17
14
14
11
9
8
4
1
10
290
74
63
48
29
18
12
12
13
8
7
4
2
8
298
Labour
Charitable and political donations
Labour of $64 million (30 June 2021: $74 million) represents
Other costs include charitable donations of $138,000 towards
employee costs which are not capitalised. Additionally, a one-off
digital inclusion, environmental, health and social initiatives
benefit of $9 million was released to labour following a judicial
(30 June 2021: $223,000 towards digital inclusion and health
ruling on an interpretation of the Holidays Act in the period.
initiatives). Chorus does not make any political donations
Pension contributions
(30 June 2021: nil).
Included in labour costs are payments to the New Zealand
Auditor remuneration
Government Superannuation Fund of $275,000 (30 June 2021:
Fees paid to auditors are included within other expenses.
$299,000) and contributions to KiwiSaver of $2.9 million
Fees paid in relation to the audit as well as other services
(30 June 2021: $3.0 million). At 30 June 2022 there were 11
provided during the period were:
employees in New Zealand Government Superannuation Fund
(30 June 2021: 11 employees) and 724 employees in KiwiSaver
(30 June 2021: 740 employees). Chorus has no other obligations
to provide pension benefits in respect of employees.
Audit and review of statutory financial statements
Regulatory audit and assurance work
Other assurance services1
Other services2
Total other services
Total fees paid to the auditor
2022
$000s
589
209
30
–
239
828
1 Other assurance services relate to EMTN refresh comfort letters (30 June 2021: no other assurance services provided).
2 No other services were provided were in the current period (30 June 2021: preparation and presentation of hedge accounting training).
2021
$000s
552
459
–
10
469
1,021
47
Annual Report 2022 Note 11 – Trade and other receivables
Trade and other receivables are initially recognised at the fair value of the amounts to be received, plus transaction costs (if any).
They are subsequently measured at amortised cost (using the effective interest method) less impairment losses.
Trade receivables
Other receivables
Prepayments
Trade and other receivables
Current
Non-current
2022
$M
97
17
12
126
125
1
2021
$M
92
11
21
124
122
2
Included within other receivables is $0.8 million of unbilled
experience and incorporate forward looking information and
revenue (30 June 2021: $0.8 million).
relevant macroeconomic factors.
Trade receivables are non-interest bearing and are generally on
Chorus maintains a provision for impairment losses when
terms of 20 working days or less.
Chorus applies the simplified approach in providing for
expected credit losses prescribed by NZ IFRS 9, which permits
the use of the lifetime expected credit loss provision for all
trade receivables. The provision for impairment losses are
either individually or collective assessed based on number of
there is objective evidence of its customers being unable to
make required payments and makes provision for doubtful
debt where debt is more than 60 days overdue. There have
been no significant individual impairment amounts recognised
as an expense during the period. Trade receivables are net of
allowances for disputed balances with customers.
days overdue. Chorus takes into account the historical loss
The ageing profile of trade receivables is as follows:
Not past due
Past due 1-30 days
2022
$M
92
5
97
2021
$M
86
6
92
Chorus has a concentrated customer base consisting
Any disputes arising that may affect the relationship between
predominantly of a small number of retail service providers.
the parties will be raised by relationship managers and follow a
The concentrated customer base heightens the risk that a dispute
dispute resolution process. Chorus has $5 million of accounts
with a customer, or a customer’s failure to pay for services, will
receivable that are past due but not impaired (30 June 2021:
have a material adverse effect on the collectability of receivables.
$6 million). The carrying value of trade and other receivables
approximates the fair value. The maximum credit exposure is
limited to the carrying value of trade and other receivables.
Note 12 – Trade and other payables
Trade and other payables are initially recognised at fair value less transaction costs (if any). They are subsequently measured at
amortised cost using the effective interest method. Trade and other payables are non-interest bearing and are normally settled within
30 day terms. The carrying value of trade and other payables approximates their fair values.
Trade payables
Operating expense accruals
Capital expenditure accruals
Personnel accruals
Revenue billed in advance
Trade and other payables
Current
Non-current
48
2022
$M
61
54
49
17
99
280
264
16
2021
$M
68
58
68
14
81
289
278
11
Annual Report 2022 Note 13 – Commitments
Network infrastructure project agreement
West Coast Southland Network Build (WCSNB) agreement
Chorus is committed to deploying infrastructure for premises in
Chorus has signed a contract with CIP to deploy fibre in Milford
the UFB2 and UFB2+ candidate areas awarded to Chorus, to be
Sound and on the West Coast of the South Island. Chorus will
built according to annual build milestones and to be completed
receive funding from CIP of up to $46 million in relation the build.
no later than December 2022. In total it is expected that the
Refer to note 7 for further information.
communal infrastructure for UFB2 and UFB2+ will pass an
estimated 223,000 premises. Chorus has estimated it will cost
$548 to $568 million to build the communal UFB2 and UFB2+
network by the end of 2022.
Capital expenditure
Refer to note 1 and note 2 for details of capital expenditure
commitments.
Lease commitments
Refer to note 5 for details of lease commitments.
Note 14 – Taxation
Income tax expense
Income tax expense for the current year comprises current and deferred tax, and is recognised in the Consolidated income statement,
except to the extent it relates to items recognised in the Consolidated statement of other comprehensive income or directly in equity.
In these cases, income tax expense is recognised in the Consolidated statement of other comprehensive income or directly in equity.
Recognised in Consolidated income statement
Net earnings before tax
Tax at 28%
Tax effect of adjustments
Other non-taxable items
Adjustments in respect of prior periods
Tax expense recognised in Consolidated income statement
Comprising:
Current tax expense/(benefit)
– Current year
– Adjustments in respect of prior periods
Deferred tax expense
– Adjustments in respect of prior periods
– Depreciation, provisions, accruals, leases & other
Recognised in other comprehensive income
Net movement in hedging related reserves
Tax at 28%
Tax expense recognised in other comprehensive income
Comprising:
Deferred tax expense/(benefit)
2022
$M
106
30
6
6
42
5
(8)
14
31
42
154
43
43
43
43
In addition, Chorus recognised income tax amounts directly in retained earnings as a result of the restatement of the roadworks
recognition adjustment. Refer to page 34 for further information.
2021
RESTATED
$M
78
22
5
–
27
3
–
–
24
27
83
23
23
23
23
49
Annual Report 2022 Note 14 – Taxation (cont.)
Deferred tax
Deferred tax is recognised in respect of temporary differences
Chorus Limited and Chorus New Zealand Limited were
between the carrying amounts of assets and liabilities for
consolidated on 1 July 2021 for tax purposes, resulting in the
financial reporting purposes and the amount used for taxation
consolidation of deferred tax balances and income tax receivable
purposes. The amount of the deferred tax is based on the
and payable balances within the consolidated balance sheet as at
expected manner of realisation of the carrying amount of
30 June 2022. This, alongside the movement in the deferred tax
assets and liabilities, using the tax rates enacted or substantially
assets and liabilities for the period, is presented below.
enacted at reporting year end. A deferred tax asset is recognised
only to the extent it is probable it will be utilised.
Deferred tax liability/(asset)
Changes in fair
value of hedging
reserves
$M
Finance leases
$M
Total deferred
tax asset
$M
Network, software,
customer retention and
other intangible assets
$M
Other
$M
Total deferred
tax liability
$M
Balance at 1 July 2020
Recognised in Income statement
Recognised in other comprehensive income
Balance at 30 June 2021
(44)
–
23
(21)
(72)
–
–
(72)
(116)
–
23
(93)
338
18
–
356
12
6
–
18
350
24
–
374
Balance at 1 July 2021
Prior period adjustment
Recognised in the Income statement
Recognised in other comprehensive income
Balance at 30 June 2022
Imputation credits
Changes in fair
value of hedging
reserves
$M
Finance leases
$M
Network, software,
customer retention and
other intangible assets
$M
Other
$M
Total deferred
tax liability
$M
(21)
–
–
43
22
(72)
–
22
–
(50)
356
–
(1)
–
355
18
14
10
–
42
281
14
31
43
369
Chorus has a negative imputation credit account balance of $4 million as at 30 June 2022 (30 June 2021: positive $33 million).
The account balance was positive as at 31 March 2022 and 31 March 2021.
Note 15 – Cash, call deposits, and cash overdraft
Cash and call deposits are held with bank and financial
Cash flow
institution counterparties rated at a minimum of A, based on
Cash flows from derivatives in cash flow and fair value hedge
rating agency Standard & Poor’s ratings.
There are no cash or call deposit balances held that are not
available for use. Chorus has a $10 million overdraft facility
which is used in normal course of operations.
The carrying values of cash and call deposits approximate
their fair values. The maximum credit exposure is limited to the
carrying value of cash and call deposits.
Cash and call deposits denominated in foreign currencies
are retranslated into New Zealand dollars at the spot rate
of exchange at the reporting date. All differences arising on
settlement or translation of monetary items are taken to the
Consolidated income statement.
relationships are recognised in the Consolidated statement of
cash flows in the same category as the hedged item.
For the purposes of the Consolidated statement of cash
flows, cash is considered to be cash on hand, in banks and
cash equivalents, including bank overdrafts and highly liquid
investments that are readily convertible to known amounts of
cash which are subject to an insignificant risk of changes in
values.
50
Annual Report 2022 Note 16 – Equity
Share capital
Movements in Chorus Limited’s issued ordinary shares were as follows:
Balance 1 July
Dividend reinvestment plan
Share buyback
Balance at 30 June
2022
Number of shares
(millions)
2021
Number of shares
(millions)
447
5
(5)
447
444
3
–
447
Chorus Limited has 446,512,440 fully paid ordinary shares
The new scheme is equity settled and treated as an option plan
(30 June 2021: 447,024,884). The issued shares have no par
for accounting purposes. Each tranche of each grant is valued
value. The holders of ordinary shares are entitled to receive
separately. The absolute performance hurdle is valued using
dividends as declared and are entitled to one vote per share
Monte Carlo simulations.
at meetings of Chorus Limited. Under Chorus Limited’s
constitution, Crown approval is required if a shareholder wishes
to have a holding of 10% or more of Chorus Limited’s ordinary
shares, or if a shareholder who is not a New Zealand national
wishes to have a holding of 49.9% or more of ordinary shares.
Chorus Limited issues securities to CIP based on the number
of premises passed. CIP securities are a class of security that
carry no right to vote at meetings of holders of Chorus Limited
ordinary shares but carry a preference on liquidation. Refer to
note 6 for additional information on CIP securities.
The final grant issued under the legacy share scheme vested
on 27 August 2021, with the absolute performance hurdle of
actual total shareholder return equalling or being greater than
10.35% per annum compounding met.
In August 2021, Chorus issued a tranche of share rights
under the new scheme. The shares have a vesting date of
27 August 2024 and an expiry date of 27 August 2025. The grant
has an absolute performance hurdle (Chorus’ actual total
shareholder return equalling or being greater than 6.2% per
annum compounding) ending on the vesting date, with provision
Should Chorus Limited return capital to shareholders, any return
for monthly retesting in the following twelve-month period.
of capital that arose on demerger may be taxable as Chorus
A total of 168,727 share rights were issued in the tranche.
The combined option cost for the year ended 30 June 2022
of $546,000 has been recognised in the Consolidated income
statement (30 June 2021: $399,000).
Reserves
Refer to note 19 for information on the cash flow hedge reserve
and cost of hedging reserve.
Limited had zero available subscribed capital on demerger.
Dividends
On 12 October 2021 and 12 April 2022, fully imputed dividends
of 14.5 cents per share and 14 cents per share respectively were
paid to shareholders. These two dividend payments totalled
$128 million (30 June 2021: 24.5 cents, $109 million).
Eligible shareholders (those resident in New Zealand or Australia)
can choose to have Chorus Limited reinvest all or part of their
dividends in additional Chorus Limited shares. 4,687,851 shares
with a total value of $31 million (30 June 2021: 2,533,324 shares,
$23 million) were issued in lieu of dividends.
Share buyback
In February 2022, Chorus commenced an on-market share
buyback programme. The programme will purchase up to
$150 million of shares and may run up to 12 months with shares
being acquired through the NZX and ASX. As at 30 June 2022,
5,200,295 shares had been repurchased from the market
or a total of $38 million. The buyback does not give rise to a
tax liability.
Long-term performance share scheme
Chorus operates a long-term performance share scheme for
selected key management personnel. Under the legacy option
plan, selected key management personnel were issued shares.
This was superseded by a new long-term performance share
scheme in July 2019 under which key senior management are
issued share-rights instead of issuing shares.
51
Annual Report 2022 Note 17 – Earnings per share
The calculation of basic earnings per share at 30 June 2022 is based on the net earnings for the year of $64 million (30 June 2021:
$51 million), and a weighted average number of ordinary shares outstanding during the period of 448 million (30 June 2021:
446 million), calculated as follows:
Basic earnings per share
Net earnings attributable to ordinary shareholders ($ millions)
Denominator – weighted average number of ordinary shares (millions)
Basic earnings per share (dollars)
Diluted earnings per share
Net earnings attributable to ordinary shareholders ($ millions)
Weighted average number of ordinary shares (millions)
Ordinary shares required to settle CIP equity securities (millions)
Ordinary shares required to settle CIP warrants (millions)
Denominator – diluted weighted average number of shares (millions)
Diluted earnings per share (dollars)
2022
64
448
0.14
64
448
114
15
577
0.11
2021
RESTATED
51
446
0.11
51
446
121
15
582
0.09
The number of ordinary shares that would have been required to settle all CIP equity securities and CIP warrants on issue at 30 June
has been used for the purposes of the diluted earnings per share calculation.
Note 18 – Related parties
Subsidiaries
The financial statements include Chorus Limited and its subsidiaries as listed below:
Name of entity
Chorus New Zealand Limited
Chorus LTI Trustee Limited
Location
2022 ownership
2021 ownership
New Zealand
New Zealand
100%
100%
100%
100%
All day-to-day operations of the business occur within Chorus
Transactions with related parties
New Zealand Limited including the building and maintenance of
Key management personnel are defined as those persons having
the network, sales and marketing, and the supporting corporate
authority and responsibility for planning, directing, and controlling
function. Chorus LTI Trustee Limited is the trustee entity for
the activities of the Group, directly or indirectly, and include the
the legacy LTI scheme and is expected to be wound up in the
Directors, the Chief Executive, and his direct reports. Certain key
coming financial period following the vesting of the final grant
management personnel have interests in a number of companies
issue under the scheme.
that Chorus has transactions within the normal course of business.
Key management personnel compensation
Short term employee benefits
Termination benefits
Share based payments
2022
$000s
6,738
–
527
7,265
2021
$000s
7,785
595
468
8,848
This table includes gross remuneration of $1.1 million paid to Directors (30 June 2021: $1.1 million) and $6.2 million paid to key
management personnel for the year (30 June 2021: $7.7 million).
Refer to note 16 for details of long-term incentives.
52
Annual Report 2022 Note 19 – Derivatives and hedge accounting
Chorus uses derivative financial instruments to reduce its
Hedge accounting is discontinued when the hedge instrument
exposure to fluctuations in foreign currency exchange rates,
expires or is sold, terminated, exercised, or no longer qualifies
interest rates and the spot price of electricity. The use of hedging
for hedge accounting. On discontinuation, any cumulative gain
instruments is governed by the Treasury Policy approved by
or loss previously recognised in Other comprehensive income
the Board. Derivatives are held at fair value with an adjustment
is recognised in the Consolidated income statement either at
made for credit risk in accordance with NZ IFRS 9: Financial
the same time as the forecast transaction, or immediately if the
Instruments. The derivatives are considered Level 2 investments
transaction is no longer expected to occur.
as defined in Note 20.
Treatment of any fair value gains or losses depends on whether
the derivative is designated as a hedging instrument. If the
derivative is not designated as a hedging instrument, the
remeasurement gain or loss is recognised immediately in the
Consolidated income statement.
Hedge accounting
Chorus designates derivatives held for hedging as either:
— Cash flow hedges (of highly probable forecast
transactions); or
Cash flow hedges
Under a cash flow hedge, the effective portion of gains or losses
from remeasuring the fair value of the hedging instrument is
recognised in Other comprehensive income and accumulated
in the cash flow hedge reserve. Accumulated gains or losses are
subsequently transferred to the Consolidated income statement
when the hedged item affects the Income statement, or when
the hedged item is a forecast transaction that is no longer
expected to occur. Alternatively, when the hedged item results
in a non-financial asset or liability, the accumulated gains and
losses are included in the initial measurement of the cost of the
— Fair value hedges (of the fair value of recognised assets or
asset or liability.
liabilities or firm commitments).
Differences in the hedged values will flow to finance expense
At inception each hedge relationship is formalised in hedge
in the Consolidated income statement over the life of the
documentation.
Derivatives in hedge relationships are designated based on a
1:1 hedge ratio. In these hedge relationships ineffectiveness is
generally driven by the effect of the credit risk on the fair value
of the derivatives, which is not reflected in the change in the
derivatives as ineffectiveness. Neither the magnitude or direction
of these differences can be predicted as they are influenced
by external market factors. In the current year, ineffectiveness
was $7 million across the hedge relationships (30 June 2021:
$4 million) Refer to note 4.
fair value of the hedged item attributable to changes in foreign
As long as the existing cash flow hedge relationships remain
exchange and interest rates. Ineffectiveness is also recognised in
effective, any future gains or losses will be processed through
relation to the restructured interest rate swaps – refer below for
the hedge equity reserves.
A reconciliation of movements in the cash flow hedge reserve is
outlined below:
2022
$M
38
(133)
(7)
39
(63)
2021
$M
105
(86)
(7)
26
38
Amortisation of de-designated cash flow hedges transferred to Income statement
Tax expense/(benefit)
Closing balance at 30 June
Fair value hedges
Under a fair value hedge, the hedged item is revalued at fair
To hedge the interest rate risk and foreign currency risk on the
value in respect of the hedged risk. This revaluation is recognised
EUR EMTNs, Chorus uses cross currency interest rate swaps.
in the Consolidated income statement to offset the mark-to-
For hedge accounting purposes, these swaps were aggregated
market revaluation of the hedging derivative, except for any
and designated as two cash flow hedges and a fair value hedge.
adjustment on the hedging derivative relating to credit risk.
Chorus hedges a portion of the EUR EMTNs for Euro fixed rate
Once hedging is discontinued, the fair value adjustment to the
carrying amount of the hedged item arising from the hedged
risk is amortised through the Income statement from that date
through to maturity of the hedged item. If the hedged item is
derecognised any corresponding fair value hedge adjustment is
immediately recognised in the Consolidated income statement.
interest to Euro floating rate interest via a fair value hedge. In this
case, the change in the fair value of the hedged risk is also
attributed to the carrying value of the EMTNs (refer to note 4).
53
further information.
Balance at 1 July
Changes in cash flow hedges
Annual Report 2022 Note 19 – Derivatives and hedge accounting (cont.)
Cost of hedging
The cost of hedging reserve captures changes in the fair value
A reconciliation of movements in the cost of hedging reserve is
of the cost to convert foreign currency to NZD of Chorus’ cross
outlined below:
currency interest rate swaps on the EUR EMTNs.
Balance at 1 July
Change in currency basis spreads (when excluded from the designation)
Tax (benefit)/expense
Closing balance at 30 June
Derivatives
Interest rate swaps
As at 30 June 2022 Chorus holds all interest rate swaps in
designated hedging relationships.
All interest rate swaps which are designated as cash flow hedges
are held in effective hedging relationships and their unrealised
gains or losses are recognised in the cash flow hedge reserve.
The interest rate swap restructured in February 2020 had a
face value of $200 million and was reset to be in conjunction
with the EUR 300 million EMTN issued in December 2019 to
hedge interest rate exposure from April 2020. The original
hedge relationship was discontinued and on termination had
a net present value of $27 million. This amount was held in the
cash flow hedge reserve as the hedged item still exists and will
2022
$M
13
(14)
4
3
2021
$M
6
10
(3)
13
Chorus has also entered into two interest rate swaps which are
be amortised over the original hedge period. The unamortised
designated as fair value hedges. They have a combined face
balance of the original fair values at 30 June 2022 was
value of $200 million and were entered in conjunction with
$17 million (30 June 2021: $21 million).
the 10 year NZD bonds issued on 2 December 2020, with the
intention of swapping the interest exposure from a fixed to a
Cross-currency interest rate swaps
floating rate.
Restructured interest rate swaps
In conjunction with the EMTN EUR 500 million issued in October
2016 and the EMTN EUR 300 million issued in December 2019,
Chorus entered into cross-currency interest rate swaps to
Three interest rate swaps have been restructured: two in
hedge the foreign currency and foreign interest rate risks on
December 2018 and one in February 2020.
The two December 2018 restructured interest rate swaps
have a combined face value of $500 million and were reset in
conjunction with the resettable NZD fixed rate bond issued in
December 2018 to hedge interest rate exposure from December
2023. As part of the restructure the original hedge relationship
was discontinued and on termination there was a net present
value of $14 million recognised in the cash flow hedge reserve.
This amount was held in the cash flow hedge reserve as the
hedged item still exists and is amortised over the original hedge
the EUR EMTNs. Using the cross-currency interest rate swaps,
Chorus will pay New Zealand Dollar floating interest rates and
receive EUR nominated fixed interest with coupon payments
matching the underlying notes. Chorus designated the EMTN
and cross-currency interest rate swaps into three-part hedging
relationships for each issue:
— a fair value hedge of EUR benchmark interest rates,
— a cash flow hedge of margin, and
— a cash flow hedge of the principal exchange.
period. The unamortised balance of the original fair values at
Under the cross-currency swaps Chorus will pay and receive the
30 June 2022 is $8 million (30 June 2021: $11 million).
following on maturity:
Maturity
Oct 2023
Dec 2026
Principal –
receive leg
(EUR M)
Principal –
pay leg
($M)
500
300
785
514
EUR EMTN 500
EUR EMTN 300
.
54
Annual Report 2022
Note 19 – Derivatives and hedge accounting (cont.)
Hedging instruments used (pre-tax):
Life to date values as at
30 June 2022
Year to date values recognised during the year ended
30 June 2022
Carrying amount
of the hedging
instrument
Hedge effectiveness in
reserves
Hedge
effectiveness
Hedge
ineffectiveness
Currency
Maturity
years
Average
rate
Nominal
amount of
the hedging
instrument
$M
Assets
$M
Liabilities
$M
Change in
value used for
calculating
hedge
ineffectiveness
$M
Cost of
hedging
reserve
$M
Cash flow
hedge
(OCI)
$M
Cash flow
hedge
reclassified to
the Income
statement
$M
Fair value
hedge
recognised in
the Income
statement
$M
Recognised
in the Income
statement
$M
Cash flow hedges
Interest rate swaps
(including -forward
NZD
2-7
1.50%
864
77
–
77
–
65
starting)
Restructured
interest rate swaps
2018 (forward
starting)
Restructured
interest rate
swap 2020
Fair value and
cash flow hedges
Cross currency
interest rate swaps
Cross currency
interest rate swaps
Total hedged
derivatives
Current
Non-current
NZD
7
4.41%
500
–
(9)
7
–
42
NZD
5
3.35%
200
Forward exchange
rate contracts
NZD:USD
1-2 0.7065
Electricity futures
NZD
1-3
NA
6
NA
Fair value hedges
5
6
4
–
–
–
33
6
4
Interest rate swaps
NZD
9 Floating
200
–
(45)
(45)
–
–
–
–
NZD:EUR
2 Floating
785
37
–
42
(5)
NZD:EUR
5 Floating
514
–
(56)
(56)
–
3,069 129
(110)
68
(5)
122
18
9
–
120
(110)
–
2
5
–
(4)
–
9
6
20
6
2
–
(9)
(4)
–
–
–
–
–
(27)
(20)
(42)
(89)
–
2
5
–
–
–
–
–
7
55
Annual Report 2022 Note 19 – Derivatives and hedge accounting (cont.)
Life to date values as at
30 June 2021
Year to date values recognised during the year ended
30 June 2021
Carrying amount
of the hedging
instrument
Hedge effectiveness in
reserves
Hedge
effectiveness
Hedge
ineffectiveness
Currency
Maturity
years
Average
rate
Nominal
amount of
the hedging
instrument
$M
Assets
$M
Liabilities
$M
Change in
value used for
calculating
hedge
ineffectiveness
$M
Cost of
hedging
reserve
$M
Cash flow
hedge
(OCI)
$M
Cash flow
hedge
reclassified to
the Income
statement
$M
Fair value
hedge
recognised in
the Income
statement
$M
Recognised
in the Income
statement
$M
Cash flow hedges
Interest rate swaps
(including forward
NZD
3-8
1.50%
864
12
–
12
–
41
starting)
Restructured
interest rate swaps
2018 (forward
starting)
Restructured
NZD
8
4.41%
500
–
(53)
(37)
–
32
interest rate swap
NZD
6
3.35%
200
–
(20)
2020
Forward exchange
rate contracts
Forward exchange
rate contracts
NZD:USD
1-2 0.6903
NZD:SEK
1-2 5.9298
52
43
–
–
Electricity futures
NZD
1-3
NA
NA
5
Fair value hedges
(1)
–
–
8
(1)
–
6
Interest rate swaps
NZD
10 Floating
200
–
(18)
(18)
–
–
–
–
–
15
(1)
–
6
–
Fair value and cash
flow hedges
Cross currency
interest rate swaps
Cross currency
interest rate swaps
Total hedged
derivatives
Current
Non-current
NZD:EUR
3 Floating
785
58
–
71
(13)
(20)
NZD:EUR
6 Floating
514
–
(15)
(10)
(6)
(12)
3,158
75
(107)
31
(19)
61
4
71
(1)
(106)
–
–
–
(1)
–
(1)
–
21
13
32
–
–
–
–
–
–
(18)
4
4
(10)
–
(2)
5
–
–
–
1
–
–
4
All hedging instruments can be found in the derivative finance assets and liabilities within the Consolidated statement of financial
position. Items taken to the Consolidated income statement have been recognised in finance expenses (refer note 4).
Credit risk associated with derivative financial instruments is managed by ensuring that transactions are executed with counterparties
with high quality credit ratings along with credit exposure limits for different credit classes. The counterparty credit risk is monitored
and reviewed by the Board on a regular basis.
56
Annual Report 2022 Note 20 – Financial risk management
Chorus’ activities expose it to a variety of financial risks, including market risk (currency risk, electricity price risk and interest rate risk) credit
risk and liquidity risk. Financial risk management for currency and interest rate risk is carried out by the treasury function under policies
approved by the Board. Chorus’ risk management policy, approved by the Board, provides the basis for overall financial risk management.
Chorus uses derivatives to hedge its financial risk exposures and does not hold or issue derivative financial instruments for trading
purposes. The risk associated with these transactions is the cost of replacing these agreements at the current market rates in the
event of default by a counterparty.
A summary of the financial risks that impact Chorus, how they arise and how they are managed is presented below:
Nature and exposure to Chorus
How the risk is managed
Market risk
Electricity price risk
Chorus is exposed to electricity price volatility
through the purchase of electricity at spot prices.
Currency risk
Chorus’ exposure to foreign currency fluctuations
predominantly arises from foreign currency debt
and future commitments to purchase foreign
currency denominated assets. The primary
objective in managing foreign currency risk is to
protect against the risk that Chorus’ assets, liabilities
and financial performance will fluctuate due to
changes in foreign currency exchange rates.
Chorus has EUR 800 million foreign currency debt
in the form of EMTN.
Interest rate risk
Chorus is exposed to interest rate risk arising from
the cross-currency interest rate swaps converting
the foreign debt into a floating rate NZD obligation
as well as loans under the syndicated bank facility
which are subject to floating interest rates and the
fixed to floating interest rate swaps which hedge the
2030 NZD Bond. Chorus is also exposed to changes
in the fair value of the fixed interest 2030 NZD Bond
due to fluctuations in the benchmark interest rate.
Other risks
Credit risk
In the normal course of business, Chorus incurs
counterparty credit risk from financial instruments,
including cash, trade and other receivables, and
derivatives.
Liquidity risk
Liquidity risk is the risk that Chorus will encounter
difficulty raising liquid funds to meet commitments
as they fall due or foregoing investment
opportunities, resulting in defaults or excessive
debt costs. Prudent liquidity risk management
implies maintaining sufficient cash and the ability to
meet its financial obligations.
Chorus has entered into fixed electricity futures contracts to reduce the
exposure to electricity spot price movements. These contracts are designated
as cash flow hedge relationships. A 10% increase or decrease in the spot
price of electricity, with all other variables held constant, would have minimal
impact on profit and equity reserves of Chorus.
Chorus enters into forward foreign exchange contracts and cross currency
interest rate swaps to manage the foreign exchange exposure.
The EUR EMTN has in place cross currency interest rate swaps under which
Chorus receives principal and fixed coupon payments in EUR for principal and
floating NZD interest payments. The exchange gain or loss resulting from the
translation of EMTN denominated in foreign currency to NZD is recognised in
the Consolidated income statement. The movement is offset by the translation
of the principal value of the related cross-currency interest rate swap.
As at 30 June 2022, Chorus did not have any significant unhedged exposure to
currency risk (30 June 2021: no significant unhedged exposure to currency risk).
A 10% increase or decrease in the exchange rate, with all other variables held
constant, would have minimal impact on profit and equity reserves of Chorus.
Where appropriate, Chorus aims to reduce the uncertainty of changes in
interest rates by entering into interest rate swaps to fix the effective interest
rate to minimise the cost of net debt and manage the impact of interest rate
volatility on earnings. The interest rate risk on a portion of the EUR cross
currency interest rate swaps has been hedged using interest rate swaps. Refer
to note 19 for further information.
Credit risk is managed by entering into contracts with creditworthy financial
institutions.
Refer to individual notes for additional information on credit risk.
Chorus has certain derivative transactions that are subject to bilateral credit
support agreements that require Chorus or the counterparty to post collateral
to support the value of certain derivatives. As at 30 June 2022 no collateral
was posted.
Chorus manages liquidity risk by ensuring sufficient access to committed
facilities, continuous cash flow monitoring and maintaining prudent levels
of short-term debt maturities.
57
Annual Report 2022 Interest rate risk
Analysis of Chorus’ interest rate repricing is outlined below:
30 June 2022
Floating rate
Debt (after hedging)
Fixed rate
Debt (after hedging)
CIP securities
30 June 2021
Floating rate
Debt (after hedging)
Fixed rate
Debt (after hedging)
CIP securities
Within 1 Year
$M
1-2 Years
$M
2-3 Years
$M
3-4 Years
$M
4-5 Years
$M
635
190
–
825
635
140
–
775
–
350
–
350
–
–
–
–
–
–
–
–
–
350
–
350
–
–
140
140
–
–
–
–
–
514
–
514
–
–
132
132
Greater than
5 years
$M
–
700
473
1,173
Total
$M
635
1,754
613
3,002
–
635
1,214
413
1,627
1,704
545
2,884
Interest rate sensitivity analysis
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and
profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange
rates, remain constant.
100 basis point increase
100 basis point decrease
Credit risk
2022
$M
Profit / (loss)
2022
$M
Equity (increase)
/ decrease
2021
$M
Profit / (loss)
2021
$M
Equity (increase)
/ decrease
1
(1)
(6)
7
1
(1)
(4)
5
The maximum exposure to credit risk at the reporting date was as follows:
Cash and call deposits
Trade and other receivables
Derivative financial instruments
Maximum exposure to credit risk
Refer to individual notes for additional information on credit risk.
Notes
15
11
19
2022
$M
88
126
129
343
2021
$M
53
103
75
231
58
Annual Report 2022 Note 20 – Financial risk management (cont.)
Liquidity risk
Chorus manages liquidity risk by ensuring sufficient access
The gross (inflows)/outflows of derivative financial liabilities
to committed facilities, continuous cash flow monitoring and
disclosed in the table below represent the contractual
maintaining prudent levels of short-term debt maturities.
undiscounted cash flows relating to derivative financial liabilities
At balance date, Chorus had available $350 million under
held for risk management purposes and which are usually not
the syndicated bank facilities (30 June 2021: $350 million).
closed out prior to contractual maturity. The disclosure shows
$190 million of the facilities have been drawn down as at
net cash flow amounts for derivatives that are net cash settled
30 June 2022 (30 June 2021: $140 million).
and gross cash inflow and outflow amounts for derivatives that
have simultaneous gross cash settlement (for example forward
exchange contracts).
30 June 2022
Non-derivative financial liabilities
Trade and other payables
Leases (net settled)
Debt
CIP securities
Derivative financial liabilities
Interest rate swaps
Outflows
Cross currency interest rate swaps:
Inflows
Outflows
Forward exchange contracts:
Inflows
Outflows
30 June 2021
Non derivative financial liabilities
Trade and other payables
Leases (net settled)
Debt
CIP securities
Derivative financial liabilities
Interest rate swaps
Cross currency interest rate swaps:
Inflows
Outflows
Forward exchange contracts:
Inflows
Outflows
Carrying
amount
$M
Contractual
cashflow
$M
Within 1 Year
$M
1-2 Years
$M
2-3 Years
$M
3-4 Years
$M
4-5 Years
$M
5+ Years
$M
280
187
2,322
613
54
–
56
–
–
280
113
2,487
1,259
65
(593)
649
(3)
21
264
11
45
–
6
(4)
28
(3)
21
16
10
1,409
–
7
(5)
31
–
–
–
10
14
171
8
(5)
31
–
–
–
10
14
–
9
(5)
30
–
–
–
9
585
–
–
62
420
1,088
9
26
(576)
529
–
–
–
–
–
–
Carrying
amount
$M
Contractual
cashflow
$M
Within 1 Year
$M
1-2 Years
$M
2-3 Years
$M
3-4 Years
$M
4-5 Years
$M
5+ Years
$M
289
264
2,373
545
289
429
2,707
545
278
17
189
–
79
58
15
1
–
89
13
(1,502)
1,450
(84)
86
(14)
33
(59)
61
11
17
47
–
10
(14)
40
(25)
25
–
17
896
–
12
(893)
815
–
–
–
17
38
–
12
(5)
18
–
–
–
17
38
132
10
(5)
20
–
–
–
344
1,499
413
32
(571)
524
–
–
59
Annual Report 2022 Note 20 – Financial risk management (cont.)
Master netting arrangements
Chorus enters into derivative transactions under the International
such as a default on the bank loans or other credit events.
Swaps and Derivatives Association (ISDA) master agreements.
The potential net impact of this offsetting is shown below.
The ISDA agreements do not meet the criteria for offsetting
Chorus does not hold, and is not required to post, collateral
in the Consolidated statement of financial position, as Chorus
against its derivative positions.
does not currently have any legally enforceable right to offset
recognised amounts. Under the ISDA agreements the right to
offset is enforceable only on the occurrence of future events
Net derivatives after applying rights of offset under ISDA
agreements are as below:
30 June 2022
Financial assets
Other investments including derivatives
Interest rates swaps
Cross currency interest rate swaps
Restructured interest rate swaps
Forward exchange contracts
Electricity futures
Financial liabilities
Interest rates swaps
Cross currency interest rate swaps
Restructured interest rate swaps
30 June 2021
Financial assets
Other investments including derivatives
Interest rate swaps
Electricity futures
Cross currency interest rate swaps
Financial liabilities
Interest rates swaps used for hedging
Cross currency interest rate swaps
Restructured interest rate swaps
Forward exchange contracts
Fair value
Gross amounts of financial
instruments in the statement
of financial position
$M
Related financial
instruments that are not
offset
$M
Net amount
$M
77
37
5
6
4
129
(45)
(56)
(9)
(110)
12
5
58
75
(18)
(15)
(73)
(1)
(107)
(45)
(37)
(5)
–
–
(87)
45
37
5
87
(12)
–
(15)
(27)
12
15
–
–
27
32
–
–
6
4
42
–
(19)
(4)
(23)
–
5
43
48
(6)
–
(73)
(1)
(80)
Financial instruments are either carried at amortised cost, less
For those instruments recognised at fair value in the statement
any provision for impairment losses, or fair value. The only
of financial position, fair values are determined as follows:
significant variances between instruments held at amortised cost
and their fair value relate to the EMTN and the 2030 NZD Bond.
Level 1
Fair value is determined using unadjusted quoted prices from an active market for identical assets and liabilities. A market
is regarded as active if quoted prices are readily and regularly available from an exchange, a dealer, a broker, an industry
group, a pricing service or a regulatory agency and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
Level 2
Fair value is determined using observable inputs – financial instruments with quoted prices for similar instruments in
active markets or quoted prices for identical or similar instruments in inactive markets. Where quoted prices are not
available, the fair value of financial instruments is valued using models where all significant inputs are observable.
Level 3
Fair value is determined using significant non-observable inputs. Financial instruments are valued using models where
one or more significant inputs are not observable.
60
Annual Report 2022 Note 20 – Financial risk management (cont.)
All financial instruments held at fair value are Level 2 instruments.
Valuation of level 2 derivatives
Relevant financial assets and financial liabilities and their fair
values are detailed in note 19.
The fair values of level 2 derivatives are determined using
discounted cash flow models. The key inputs in the valuation
models are:
Instrument
Valuation input
Cross-currency interest rate swaps
Forward curve for the relevant interest rate and foreign exchange rate
Interest rate swaps
Electricity swaps
Forward interest rate curve
ASX forward price curve
Foreign exchange contracts
Forward foreign exchange rate curves
Hedge accounting
Capital risk management
Chorus designates and documents the relationship between
Chorus manages its capital considering shareholders’ interests,
hedging instruments and hedged items, as well as the risk
the value of its assets and credit ratings. The capital Chorus
management objective and strategy for undertaking various
manages consists of cash and debt balances.
hedge transactions. At hedge inception (and on an ongoing
basis), hedges are assessed to establish if they are effective in
offsetting changes in fair values or cash flows of hedged items.
Hedges are classified into two primary types: cash flow hedges
and fair value hedges. Refer to note 19 for additional information
on cash flow and fair value hedge reserves.
The Chorus Board’s broader capital management objectives
include maintaining an investment grade credit rating with
headroom. In the longer term, the Board continues to consider a
‘BBB’ rating appropriate for a business such as Chorus.
Note 21 – Contingent liabilities
There are no contingent liabilities as at 30 June 2022.
Note 22 – Subsequent events
Dividends
On 22 August 2022 Chorus declared an unimputed dividend of
21.0 cents per share in respect of the year ended 30 June 2022.
CIP securities and Crown funding
There was one call notice issued subsequent to balance date.
61
Annual Report 2022 62
Annual Report 2022 Governance
and disclosures
64 Our Board
66 Corporate governance framework
73 Managing risk
75 Acting ethically
76 Shareholder engagement
77 Remuneration and performance
84 Disclosures
92 Glossary
63
Annual Report 2022 Our Board
Murray Jordan
MProp
Director since
1 September 2015
Independent
Murray has extensive
experience in the
management of highly
customer focussed
organisations and in
navigating extremely
complex environments,
including as managing
director of Foodstuffs
North Island, one
of New Zealand’s
largest companies.
Murray has also previously
held various general
manager positions
at Foodstuffs and
management roles in the
property investment and
development sectors. He is
a director of Metlifecare,
Metcash Limited, Southern
Cross Medical Care Society,
Southern Cross Healthcare
Limited, Stevenson Group,
and a Board trustee of
Starship Foundation.
Murray is chair of our
People, Performance and
Culture Committee.
Sue Bailey
Graduate Diploma
in Marketing
(with Distinction) from
RMIT University
Director since
31 October 2019
Independent
Sue has over 30 years
experience in
telecommunications,
across fixed telephony,
mobile and broadband.
She has worked for Telstra,
Virgin Mobile and most
recently for Optus where
she was a member of the
executive leadership team.
From 2010 to 2013, Sue
was the CEO for Virgin
Mobile Australia, a fully
owned subsidiary of Optus.
Prior to that, she was a
Senior Vice President
at Virgin Mobile USA
where her responsibilities
included product
marketing, customer
lifecycle management
and analytics. Sue’s
career began in Telstra,
where she held a range
of marketing and product
roles. Sue is a director of
CareFlight and a member
of the Australian Institute
of Company Directors.
Sue is on our People,
Performance and
Culture Committee.
64
Mark Cross
BBS (Accounting &
Finance), CA
Director since
1 November 2016
Independent
Mark is an experienced
director with more
than 20 years of
international experience
in corporate finance and
investment banking.
Mark was chair of Milford Asset
management (retiring 1 July
2022) and is currently a board
member and investment
committee chair of Accident
Compensation Corporation
(ACC) and director of Xero.
He is also a former director
of Genesis Energy, Z Energy
and Argosy Property.
Mark is a member of
Chartered Accountants
Australia and New Zealand,
a chartered member of
the Institute of Directors
NZ and a member of the
Australian Institute of
Company Directors.
Mark is chair of our Audit
and Risk Management
Committee, and on our
Nominations and Corporate
Governance Committee.
* Mark Cross has been
appointed as the new Chair
of Chorus following Patrick
Strange’s resignation.
Mark’s appointment takes
effect from the end of
the annual shareholders’
meeting in October 2022.
Miriam Dean
CNZM, QC
Director since
27 October 2021
Independent
As a Queen’s Counsel
and independent director,
Miriam has more than
38 years’ experience
in commercial dispute
resolution and 25 years’
experience in governance,
with a specialty in
competition, consumer
and regulatory law.
Miriam also has
significant experience
in the infrastructure and
regulatory sectors, most
notably as a current
director of Ōtākaro Limited
(the Crown-owned
company responsible for
the central city anchor
projects following the
Canterbury earthquakes), a
former director of Crown
Infrastructure Partners,
a former deputy chair
of Auckland Council
Investments, and a former
deputy chair of the
Commerce Commission.
Miriam is currently chair of
the Banking Ombudsman
Scheme, deputy chair of the
Real Estate Institute of New
Zealand, and a member
of a number of central
and local government-
related advisory boards.
Miriam is on our People,
Performance and
Culture Committee.
Annual Report 2022 Our Board and management are committed to
ensuring our people act ethically, with integrity
and in accordance with our policies and values.
Patrick Strange
BE (Hons), PhD
Chair*
Director since 6 April 2015
Independent
Patrick has spent 30
years working as a senior
executive and director
in both private and listed
companies, including more
than six years as Chief
Executive of Transpower
where he oversaw
Transpower’s $3.8 billion
of essential investment
in the National Grid.
Patrick is currently chair
of Auckland International
Airport, and a director of
Mercury NZ. Patrick is chair
of our Nominations and
Corporate Governance
Committee.
* Patrick has resigned as
a Director and Chair of
Chorus effective from
the end of Chorus Annual
Shareholders’ Meeting
in October 2022.
Kate Jorgensen
MTF, BBus, CA
Director since 1 July 2020
Independent
Kate has significant
governance, strategy,
commercial, financial and
audit experience and has
held a number of senior
leadership positions within
the telecommunications,
infrastructure and
construction industries
in New Zealand.
Most recently, she was CFO
of Vodafone New Zealand.
Prior to that, Kate was CFO
of KiwiRail, CFO of Fletcher
Building’s infrastructure
division and a senior audit
manager for KPMG.
Kate was a former advisory
Board member of the
New Zealand Sustainable
Business Council.
Kate is a member of
Chartered Accountants
Australia and New Zealand
and Chartered Member of
the Institute of Directors NZ.
Kate is a member of
our Audit and Risk
Management Committee.
Jack Matthews
BA Philosophy, College
of William and Mary
Director since 1 July 2017
Independent
Jack is an experienced
director who has held a
number of senior leadership
positions within the media,
telecommunications and
technology industries in
Australia and New Zealand.
Jack has extensive
telecommunications
industry experience having
been CEO of TelstraSaturn
during the period they
deployed their HFC network
in New Zealand, as well as
a former director of Crown
Fibre Holdings, the Crown
agency overseeing the
rollout of New Zealand’s
fibre infrastructure network.
Formerly, Jack was
CEO of Fairfax Media’s
Metro Division, CEO of
Fairfax Digital and Chief
Operating Officer of
Jupiter TV (Japan).
Jack is currently a
director of Plexure Group
and New Zealand Golf
Network Limited and a
former director of The
Network for Learning,
APN Outdoor Group and
Trilogy International.
Jack is on our Audit and Risk
Management Committee.
65
Annual Report 2022 Corporate governance
framework
Board membership
Our Board’s skills, experience and composition support
effective governance and decision making, positioning it
to add value.
Supported by the Nominations and Corporate Governance
Committee (NCGC) our Board regularly assesses its
composition utilising a skills matrix and annual evaluation
processes. Training is provided or recruitment undertaken
if new or additional skills or experience is required.
This ensures diversity of thought, skills and expertise and that
our Board remains aligned with our strategic direction.
Our constitution provides for a minimum of five and a
maximum of 12 directors.
As at 30 June 2022 we had seven directors all of whom are
independent directors. We have four male directors and three
female directors. Our CEO is not a director on our Board.
Directors are not appointed for specified terms. However,
the NZX listing rules compulsorily require that no director
term exceeds three years, requiring all directors to stand
again for re-election before their third anniversary. Due to
Chorus' succession planning, Chorus has at least one
director standing for re-election each year. Patrick Strange
and Murray Jordan both stood for re-election in 2021, while
Miriam Dean stood for election as a new director.
We recognise that women and ethnic minorities are still
under-represented in the leadership of New Zealand
businesses and our Board remains actively conscious of this in
its succession planning. More information on our approach to
diversity is set out on page 80 and in our Sustainability Report,
available at www.company.chorus.co.nz/sustainability.
This statement outlines the key aspects of our
corporate governance framework and was
approved by our Board on 19 August 2022.
As a New Zealand company listed on the NZX, our corporate
governance policies and practices meet or exceed the
standards of that market. We have adopted and fully
followed the recommendations set out in the NZX Corporate
Governance Code.
Although we have an ASX “foreign exempt” listing status1 we
also continue to take the ASX Corporate Governance Code
into account in our governance practices and policies.
Our Board regularly reviews and assesses our governance
policies, processes and practices to identify opportunities
for enhancement.
Chorus is, for the second year, publishing its sustainability
report (Sustainability Report), reflecting our ambition to
support New Zealand in its transition to be more sustainable.
The Sustainability Report contains information on our
sustainability strategy, including our environmental focus,
our commitment to strengthening the digital capability in
New Zealand, and our commitment to helping our
people thrive. New Zealand is also in the process of
implementing mandatory climate-related disclosures for
many large companies, including Chorus, to take effect
from next year. We continue to refine our climate-related
risk and reporting framework to help New Zealand meet its
international obligations and to provide stakeholders with
meaningful climate-related information.
Our corporate governance practices are outlined on the
following pages, in our Sustainability Report and available at
www.chorus.co.nz/governance.
Key corporate governance documents are also available
at www.chorus.co.nz/governance.
Our Board’s role
Our Board is appointed by shareholders and has overall
responsibility for strategy, culture, health and safety,
governance and performance.
1 An ASX foreign exempt listing is based on the principle of substituted compliance. This means our primary obligation is to comply with the NZX listing
rules (as our home exchange). As a result we do not need to follow or report against compliance with the ASX Corporate Governance Code.
66
Annual Report 2022 Summary1 of our Board’s roles and responsibilities:
Culture
Strategy &
performance
• Leading culture “from the top” so our culture is consistent with our values
• Engaging in ongoing strategy development in partnership with the executive team
• Overseeing capital allocation
• Overseeing the regulatory strategy as we transition to a new regulatory regime
• Overseeing investments in non-regulated businesses
Financial oversight &
reporting
• Approving, and reviewing performance against, our strategy and business plans (including capital
expenditure and operating budgets)
• Overseeing our accounting and reporting systems and, where appropriate, approving our financial and
other external reporting
• Overseeing and monitoring the performance of internal and external auditors
• Overseeing our control and accountability systems
• Overseeing long term capital management (balance sheet and dividends)
• Setting, monitoring and reviewing our internal audit plan
Risk management
• Adopting and reviewing Chorus’ risk management framework, including setting the risk appetite
• Regularly reviewing principal risk reporting and mitigations
Health & safety
• Setting the strategy, culture and expectations in relation to health and safety
Board composition &
performance
• Reviewing and evaluating Board, Board committee and individual director performance
• Appointing new directors and members to Board committees
Governance
• Overseeing corporate governance, including reviewing key governance documents
• Carrying out the functions specifically reserved to our Board and its committees under Board approved
policies and committee charters
• Monitoring compliance with our continuous disclosure obligations
People
• Reviewing and approving remuneration and people strategies, structures and policies
• Appointing and removing our CEO, CFO, Chief Corporate Officer & General Counsel
• Assessing the measurable objectives set for, and progress towards achieving, our diversity and
inclusiveness goals
Significant transactions
• Approving major capital expenditure and business activities outside the limits delegated to management
1 Summary primarily drawn from the Board Charter but also from other supporting governance documents.
67
Annual Report 2022 Figure 10:
Director tenure
Figure 11:
Board gender diversity
14%
43%
29%
43%
Director
Miriam Dean
Murray Jordan
Patrick Strange
Mark Cross
Jack Matthews
Sue Bailey
Kate Jorgensen
57%
43%
0–3 years
4–6 years
6+ years
Female
Male
Appointed
Last elected at ASM
2021
2015
2015
2016
2017
2019
2020
2021
2021
2021
2019
2020
2019
2020
Mark Cross and Sue Bailey are retiring by rotation and
standing for re-election at our 2022 Annual Shareholders’
Meeting (ASM). Patrick Strange will step down from the Board
at this year's ASM.
Our Board has determined that collectively its directors
have a broad range of managerial, financial, accounting and
industry skills and experience in the key areas set out on the
following page.
As the Chorus business evolves, so too does the Board.
Chorus’ beginnings were focussed on infrastructure build
and project management. With the success of the build,
we are increasingly focussed on connecting customers and
their experience as well as future connectivity and non-
regulated revenue opportunities. The Board considers it
is important to balance both specialist expertise and the
ongoing need for strong general commercial expertise.
A summary of current directors skills, experience
and qualifications is set out on our website at
www.chorus.co.nz/governance.
68
Annual Report 2022 The following table reflects the strengths of the current Board based on a mix of key skills and experiences that are currently
relevant for Chorus.
Skill/experience
Description
Combined Board
Capital markets
and investment
Experience in, and understanding of, capital markets, market regulation,
capital investment and the investor experience
Communications
connectivity and
technology
Governance –
financial, audit,
legal, listed company
Understanding, expertise and/or experience in communications connectivity,
adopting new technologies, leveraging and implementing technologies
Experience with, and a commitment to, high corporate governance standards
including in listed companies
Understanding financial business drivers, and/or experience implementing or
overseeing financial accounting, external reporting and internal financial controls
Physical infrastructure
Experience in leading, and/or understanding of, physical infrastructure
and operations
operations, including contracting
including contracting,
safety and risk
Commitment and experience in management of workplace safety
Experience anticipating and identifying key risks and monitoring the effectiveness
of risk management frameworks and controls
Governance –
Executive experience in leading large businesses, developing and implementing
executive experience
strategy and strategic objectives, assessing business plans and driving execution
in large businesses
Infrastructure
regulation
Understanding the current and developing regulatory environment, complexities
and actual and potential impacts
Expertise identifying and managing legal, regulatory, public policy and corporate
affairs issues
Customer
experience
Experience in customer-led transformation, customer focus (at both a retailer
and consumer level) and/or customer centric organisations
Substantial experience
Moderate experience
Some experience
69
Annual Report 2022
Visits to our operations, briefings from key management,
industry experts and key advisers, together with educational
and stakeholder visits, are also arranged for our Board.
Review and evaluation of Board performance
Our Board uses performance and evaluation processes
overseen by our NCGC. As part of this process our chair
meets with directors individually to discuss performance.
Our Board also formally engages in annual reviews of our
Board chair, and chairs of our standing Board committees.
In addition to Board performance reviews, our Board
takes a future focussed approach to future Board capability,
composition and the potential contribution of each
existing director.
Independent advice
A director may, with our chair’s prior approval, obtain
independent professional advice (including legal advice)
and request the attendance of advisers at Board and Board
committee meetings.
Independence
All our directors are independent directors.
For a director to be considered independent our Board must
affirmatively determine he or she does not have a disqualifying
relationship as set out in our Board charter. These disqualifying
relationships reflect those set out in the NZX listing rules and
NZX and ASX corporate governance codes.
Our Board has not set financial materiality thresholds for
determining independence but considers materiality in the
context of each relationship and from the perspective of the
parties to that relationship.
Delegation of authority
Our Board has overall responsibility for strategy, culture,
health and safety, governance and performance.
Implementation of our Board approved strategy, business
plan and governance frameworks, and responsibility for
developing our culture and health and safety practices, is
delegated by the Board to management through the CEO.
As such our CEO (with the support of his executive team) is
responsible for Chorus’ day-to-day management, operations
and leadership, reporting to the Board on key performance,
management and operational matters.
Our CEO sub-delegates authority to his executive team and
they sub-delegate their authority to other Chorus employees
within specified financial and non-financial limits.
Formal policies and procedures govern the parameters and
operation of these delegations.
Appointment
Our Board may appoint additional directors to our Board or
to fill a casual vacancy. Any director appointed by the Board
is required to stand for election at the next ASM.
The independence, qualifications, skills and experience
needed for the future and those of existing Board members
are reviewed before appointing new directors. External
advisors are also engaged to identify potential candidates.
To be eligible for selection, candidates must demonstrate
appropriate qualities and satisfy our Board they will commit
the time needed to be fully effective in their role.
Appropriate checks are undertaken before a candidate
is appointed or recommended for election as a director,
including as to the person’s character, experience, education,
criminal record and bankruptcy history.
Shareholders may also nominate candidates for appointment
to our Board. In addition, under the agreements entered into
with CIP relating to our UFB programme, CIP is entitled to
nominate one person as an independent director, however
CIP have never exercised this entitlement. Should this occur,
our Board must consider this nomination in good faith, but the
appointment (and removal) of any such person as a director is
to be made by shareholders in the same way as other directors.
We have written agreements with each non-executive
director setting out the terms of their appointment, including
obligations and responsibilities, compliance with our policies
(including code of ethics and securities trading) and ongoing
professional development.
No person who is an 'associated person' of a
telecommunications services provider in New Zealand may
be appointed or hold office as a director.
Minimum shareholding policy
Chorus' Minimum Shareholding Policy sets the expectation
on directors to hold, at a minimum, shares equal in value to
one year's director base fee (after tax). If not held at their date
of appointment (or the commencement date of the policy),
the policy expects directors to accumulate this holding over
the first three years from the relevant date.
Director induction and professional development
Our director induction programme ensures new directors
are appropriately introduced to management and our
business, provides directors with relevant industry knowledge
and familiarises them with key governance documents and
key stakeholders.
Our directors are expected to continue ongoing professional
development to ensure they maintain appropriate expertise
to effectively perform their duties.
We hold dedicated Board education sessions covering a
range of topical matters, both technical and cultural.
70
Annual Report 2022 Three standing Board committees and one ad-hoc
sub-committee also assist our Board in carrying out its
responsibilities. Some Board responsibilities, powers and
authorities are delegated to those committees.
Board committees
Board committees assist our Board by focusing on specific
responsibilities in greater detail than is possible for the Board
as a whole. Each standing Board committee and the ad-hoc
sub-committee has a Board approved charter and chair.
Committee members are appointed by our Board.
Other committees may be established and specific
responsibilities, powers and authorities delegated to those
committees and/or to particular directors.
Our
Shareholders
Chorus
Limited Board
Audit and Risk
Management Committee
People, Performance and
Culture Committee
Nominations and Corporate
Governance Committee
Regulatory Sub-Committee
CEO
Executive
Team
Our
People
Audit and Risk Management Committee (ARMC)
Role
Our ARMC assists our Board in overseeing our risk and financial management, accounting, audit and financial
reporting
Members
Mark Cross (chair), Jack Matthews, Kate Jorgensen
Independence
All committee members are independent directors
Responsibilities
• Overseeing the quality and integrity of external financial reporting, financial management, internal controls and
accounting policy and practice
• Regularly reviewing principal risk reporting
• Recommending to our Board the appointment, and if necessary removal, of the external auditor
• Assessing the adequacy of the external audit and independence of the external auditor
• Reviewing and monitoring the internal audit plan and reporting
• Overseeing the independence and objectivity of the internal audit function
• Reviewing compliance with applicable laws, regulations and standards
People, Performance and Culture Committee (PPCC)
Role
Our PPCC assists our Board in overseeing people, culture and related policies and strategies
Members
Murray Jordan (chair), Miriam Dean, Sue Bailey
Independence
All committee members are independent directors
Responsibilities
• Reviewing people and remuneration strategies, structures and policies
• Approving annual remuneration increase guides and budgets
• Reviewing candidates for, and the performance and remuneration of, our CEO
• Approving, on the recommendation of our CEO, the appointment of our CEO’s executive direct reports (except
our CFO and Chief Corporate Officer & General Counsel whose appointment is approved by our Board)
• Reviewing our CEO’s performance and his evaluation of his executive direct reports
• Developing and annually reviewing and assessing diversity and inclusion and its reporting
• Overseeing recruitment, retention and termination policies and procedures for senior management
• Making recommendations (including proposing amendments) to our Board with respect to senior executive
(including CEO) incentive remuneration plans
• Annually reviewing non-executive director remuneration
71
Annual Report 2022 Nominations and Corporate Governance Committee (NCGC)
Role
Our NCGC assists our Board in overseeing and promoting continuous improvement of corporate governance
at Chorus
Members
Patrick Strange (chair), Kate Jorgensen, Mark Cross
Independence
All committee members are independent directors
Responsibilities
• Identifying and recommending suitable candidates for appointment to our Board and Board committees
• Reviewing the size, independence, qualifications, skills, experience and composition of our Board
• Developing, reviewing and making recommendations to our Board on corporate governance principles
• Establishing, developing and overseeing a process for the annual review and evaluation of Board, Board
committee, and individual director performance
• Developing and reviewing Board succession planning (including for the Board chair)
• Monitoring compliance with our codes of ethics and managing breaches of the Director Code of Ethics
• Reviewing and overseeing director induction and ongoing professional development
Ad-hoc Regulatory Sub-Committee
Role
Our Regulatory Sub-Committee assists the Board in overseeing Chorus’ regulatory strategies and meeting Director
certification obligations required by Chorus' regulators from time to time
Members
Patrick Strange (chair), Kate Jorgensen, Mark Cross, Miriam Dean, Jack Matthews, Sue Bailey, Murray Jordan
Independence
All committee members are independent directors
Responsibilities
• Oversee strategy for Chorus as it relates to Chorus’ general regulatory settings and environment both inside and
outside of the Price Quality and Information Disclosure (PQID) regulatory regime
• Oversee strategy for Chorus as it transitions to the PQID regulatory regime (which took effect from
1 January 2022) including the business transformation required to operate effectively under PQID
• Oversee a regulation evolution strategy to support changing commercial circumstances including regulatory
settings outside of Chorus’ PQID requirements
• Provide certifications to accompany mandatory reporting to the regulator, consider regulatory risk
management, and review any decisions or findings of the regulator regarding the regulatory regime
Board chair
Our chair is elected by the Board and must be a non-executive, independent director.
The chair’s responsibilities include:
• Leading the Board;
• Setting the agenda for Board meetings in consultation with the CEO;
• Facilitating the effective contribution of all directors; and
• Promoting constructive relationships between directors and management.
The chair’s other commitments must not hinder his or her effective performance in the role.
Board and Board committee meeting attendance in the year ended 30 June 2022
Regular Board
meetings
Other Board
meetings1
ARMC
PPCC
NCGC
Regulatory
Sub-Committee
Total number of
meetings held
Patrick Strange2
Prue Flacks
Mark Cross
Miriam Dean
Murray Jordan
Jack Matthews
Sue Bailey
Kate Jorgensen
7
7
2 3
7
5 4
7
7
7
7
4
4
4
4
4
4
4
4
4
4
4
4
4
1
3
4
4
2
2
1
2
1
3
3
3
3
3
3
3
3
JB Rousselot is not a director, but has attended 100% of all Board meetings.
Notes:
1 Includes dedicated Board education, and strategy and business planning, meetings. Directors also have health and safety site visits each year.
2 Patrick Strange, as Board chair, attends all Board committee meetings. As he is not a formal member of the ARMC or PPCC, that attendance is not
noted in the table.
3 Prue Flacks retired from the Board effective 27 October 2021.
4 Miriam Dean was eleted to the Board effective 27 October 2021.
72
Annual Report 2022 Managing risk
Like all businesses, we are exposed to a range
of risks. Our risk management activities aim
to ensure we identify, prioritise and manage
key risks so we can execute our strategies and
achieve our goals.
Risk management
No business can thrive without taking on risk. Effective risk
management is about informed risk taking and appropriate
and active management of risks.
We seek to understand and respond to our current and
future business environment, and to actively seek and
robustly evaluate opportunities and initiatives which protect
and achieve our business strategies. We strive to understand,
meet and appropriately balance stakeholders’ expectations to
deliver value to shareholders and a sustainable environment
for Chorus in the long term.
Our Board
Our Board is ultimately responsible for risk management
governance:
• Annually setting risk appetite and tolerances and
determining principal risks;
• Participating in discussions concerning elements of risk
including emerging and unforeseen risks;
• Approving and regularly reviewing our Managing Risk Policy
and supporting framework;
• Promoting a culture of proactively managing risk; and
• Through our ARMC, providing risk oversight and monitoring.
Risk appetite
Our risk appetite sets our tolerable levels of risk. It forms
a dynamic link between strategy, target setting and risk
management and sets boundaries for day-to-day decision
making and reporting.
Risk management processes
Our Managing Risk Policy sets out how we manage
our risks, including by:
• Having a single risk management framework;
• Providing the CEO and executive team with discretion to
manage risk within the guidance provided in our framework;
• Balancing the level of control implemented to mitigate
identified risks with our commitment to comply with
external regulation and governance requirements and
Chorus’ value and growth aspirations; and
• Meeting good practice standards for risk management
processes and related governance.
Principal risks
Principal risks are owned by relevant executives.
This promotes integration into operations and executives
planning and a culture of proactive risk management.
Notwithstanding individual ownership, our CEO and executive
hold collective responsibility for considering how risk and
events interrelate and for managing our overall risk profile.
Principal risks are reported to our ARMC quarterly and, if
necessary, also by exception. Principal Risk owners support
the regular reporting from the Head of Risk, Internal Audit
& Compliance by providing updates on the risks they own.
Our ARMC reports to our Board.
Principal risks are assessed with each responsible executive
and collectively with the executive team before being
reported to the ARMC. This allows for constructive challenge
and debate. Underlying risk assessment and monitoring
practices are undertaken by each principal risk owner with
assistance from our Risk, Internal Audit & Compliance team.
Our Board also receives management and other internal
and external reporting over risk positions and our risk
management operation (including from internal audit
plans approved by the ARMC) through our overall
governance framework.
The risk and
control environment
1. Risk identification and description
5. Annual risk reviews
Assurance
Management assurance
Independent assurance
(including internal audit,
external audit)
– Completeness,
accuracy and validity
of principal risks
– Effectiveness of the
risk management
process
– Risk identification and description
– Recording principal risks
2. Risk assessment and ratings
– Risk assessment (likelihood and impact)
– Risk ratings (critical, high, medium, low)
3. Risk mitigations
– Risk responses
– Action plans
– Mitigating controls
4. Regular risk reporting
– Mitigation status
– Current and potential risks
– Risk trends
– Action plan status
73
Annual Report 2022 Principal risks are our key risks to the achievement of our
strategy. These are assessed on a risk profile identifying
likelihood of occurrence and potential severity of impact.
Current principal risk categories are identified via a
comprehensive enterprise risk management framework
encompassing financial and non-financial risks.
They include anticipating and responding to:
• Health, safety and wellbeing risks: Working to keep safe the
people we owe duties to.
• Commercial and financial sustainability risks: Maintaining
appropriate capital management and credit settings.
• Core services risks: Core service availability and network
resilience.
• People and skills risks: Ensuring Chorus attains and retains
employees with the capabilities to achieve its strategic
objectives.
• Legal, regulatory and contractual risks: Working within the
regulatory and legal environment.
• Stakeholder and customer confidence / reputation risks:
Attaining and retaining a positive reputation with key
stakeholders and customers.
• Innovation risks: Identify and pursue innovation and
opportunities that will enhance Chorus.
Our risk management framework has also been applied to
our climate change risks (see our Sustainability Report).
In addition to Principal Risks, the Chorus Board or ARMC
regularly receive updates on, and discuss with the Executive:
• Unforeseen risks which are 'black swan' events which
have not been otherwise identified through normal risk
processes;
• Emerging risks which are risks that are known to some
degree but are not likely to materialise or have an impact in
the near term;
• Business unit risks which are risks to the achievement of
functional area strategies. The risks are managed at the
business unit level and reported to the ARMC if out of risk
tolerance level.
Internal audit
We operate a co-sourced internal audit model with our Head
of Risk, Internal Audit & Compliance and her team supported
by external advisors PricewaterhouseCoopers to provide
additional resource and specialist expertise as required.
• Escalating issues as appropriate (including to our ARMC
and/or Board chairs).
Our executive team and ARMC monitor key outstanding
internal audit issues and recommendations as part of regular
reporting and review, including the timeliness of resolution.
Our ARMC has direct and unrestricted access to our internal
audit function, including meeting them without management.
Our Head of Risk, Internal Audit & Compliance has a
management reporting line to our Chief Corporate Officer
& General Counsel and a direct reporting line to our ARMC,
attending every ARMC meeting.
Our ARMC reviews the remuneration and incentive
arrangements of our Head of Risk, Internal Audit &
Compliance and our Risk & Assurance Manager each year.
External auditor
Our Board and ARMC monitor the ongoing independence
and quality of our external auditor (KPMG). Our ARMC also
meets with our external auditor without management present
at least once per year.
Our ARMC charter and External Auditor Independence Policy
amongst other things:
• Prohibit the provision of certain non-audit services by our
external auditor;
• Require ARMC approval of all audit and permitted
non-audit services;
• Require our client services partner and lead/engagement
partner to be rotated every five years (with a five year
cooling off period) and other audit partners to be rotated
every seven years (with a two year cooling off period);
• Require our ARMC to review our external auditor’s fees half
yearly (including the ratio of fees for audit vs. non-audit
services); and
• Impose restrictions on the employment of former external
audit personnel.
The non-audit services undertaken by our external auditor
KPMG in the year to 30 June 2022 are set out in note 10 of
the financial statements in this report. Those services were
provided in accordance with our ARMC charter and External
Auditor Independence Policy and did not affect KPMG’s
independence, including because:
• They were approved only where we were satisfied the
services would not compromise KPMG’s independence; and
The responsibilities of our internal audit function include:
• They did not involve KPMG acting in a managerial or
• Assisting our ARMC and Board in their assessment of
internal controls and risk management;
• Developing an internal audit plan for review and approval
decision-making capacity.
KPMG confirm their independence via independence
declarations every six months.
by the ARMC each year;
Our external auditors attend our ASM each year.
• Executing the plan and reporting progress against it,
significant changes, results and issues identified; and
74
Annual Report 2022 Acting ethically
Codes of ethics
Directors and employees are expected to act honestly and
with high standards of personal integrity. Codes of ethics
for our directors and employees set the expected minimum
standards for professional conduct. These codes facilitate
behaviours and decisions that are consistent with our values,
business goals and legal and policy obligations, including in
respect of:
• Conflicts of interest;
• Gifts and personal benefits;
• Anti-bribery and corruption;
• Use of corporate property, opportunities and information;
• Confidentiality;
• Compliance with laws and policies; and
• Reporting unethical behaviour.
We have communicated our codes of ethics and provided
annual training to our directors and employees. Our people
are also encouraged to report any unethical behaviour,
including quarterly reporting of any potential conflicts.
This process is subject to internal audit. All reported breaches
are investigated.
Trading in Chorus securities
All trading in Chorus securities by directors and employees
must be in accordance with our Securities Trading Policy.
That policy prohibits trading in Chorus securities while in
possession of inside information and requires, amongst other
things:
• Directors to notify, and obtain consent from, the chair (or
in the chair’s case, the ARMC chair) before trading; and
• Employees identified as potentially coming across market
sensitive information in the course of their employment
(“restricted persons”), to obtain consent from our Chief
Corporate Officer & General Counsel (or in our Chief
Corporate Officer & General Counsel’s case, our Board
chair) before trading.
Trading in Chorus shares or NZX listed bonds by directors is
disclosed to our Board, the NZX and ASX. Trading by “senior
managers” is disclosed to the NZX.
Market disclosures
We are committed to providing timely, factual and accurate
information to the market consistent with our legal and
regulatory obligations.
We have a Board approved Disclosure Policy and a CEO
approved Market Disclosure Policy setting out our disclosure
practices and processes in more detail.
Our disclosure policies are designed to ensure:
• Roles of directors, executives and employees are clearly
set out.
• Appropriate reporting and escalation mechanisms
are established.
• There are robust and documented confidentiality protocols
in place where appropriate.
• Only authorised spokespersons comment publicly, within
the bounds of information which is either already publicly
known or non-material.
Our approach to tax
We take our tax obligations seriously and work closely with
Inland Revenue to ensure we meet our tax obligations.
We obtain external advice and Inland Revenue’s views
(through informal correspondence, determinations or rulings)
in respect of unusual or material transactions.
As we operate only in New Zealand all our tax is paid in
New Zealand at the prevailing corporate tax rate (currently
28%). We have paid all taxes we owe and all tax compliance
obligations are up to date.
75
Annual Report 2022 Shareholder
engagement
We are committed to fostering constructive and open
relationships with shareholders:
• Communicating effectively with them;
• Giving ready access to balanced and understandable
information;
• Making it easy for shareholders to participate in general
meetings; and
• Maintaining an up to date website providing information
about our business.
Our investor relations programme is designed to further
facilitate two-way communication with shareholders, provide
them and other market participants with an understanding
of our business, governance and performance and an
opportunity to express their views. As part of this programme
we enable investors and other interested parties to ask
questions and obtain information. We meet with investors
and analysts and undertake formal investor presentations.
Our annual and half year results presentations are made
available to all investors via webcast.
Until 2020 Chorus has held annual meetings in a main
centre and webcast to enable shareholders to view and hear
proceedings online.
Due to concerns about the uncertain COVID-19 environment
and the potential health risks for our shareholders, we chose
to hold the 2020 and 2021 ASMs as virtual meetings. Voting
and the asking of questions was facilitated electronically.
At the time of this Annual Report, the Board has indicated
that the 2022 ASM is likely to be a hybrid meeting.
We enable shareholders to vote by proxy ahead of meetings
without having to physically attend or participate in those
meetings and adopt the one share one vote principle,
conducting voting at shareholder meetings by poll.
We consider that shareholders should be entitled to vote on
decisions which would change the essential nature of our
business.
Shareholders are also able to ask questions of, and express
their views in respect of, our Board, management and
auditors (including via appointed proxies) at and before
annual meetings.
We encourage shareholders to communicate with us and our
share registrar electronically, including by providing email
communication channels and online contact details and
instructions on our website.
76
Annual Report 2022
Remuneration
and performance
Our remuneration model
Our remuneration model is designed to enable the
achievement of our strategy, whilst ensuring that
remuneration outcomes are aligned with employee
and shareholder interests.
Figure 14:
Remuneration is governed through the Board and assisted
by the PPCC. The PPCC supports the Board to fulfil their
remuneration obligation by overseeing our remunerating
strategy and policy.
Our remuneration policy is designed around six guiding
principles:
Our remuneration policy is designed around six guiding principles:
Remuneration principles
What does this mean?
1
2
3
4
5
6
Fair to all – employees and shareholders, sharing
in the success of Chorus.
Commitment to pay equity and alignment with our
shareholders’ expectations.
Supports a Performance focussed culture.
Rewards aligned with performance.
Valued by our people.
We have a diverse workforce and aim to provide
an appropriate suite of rewards that provide value,
now and in the future.
Simple to understand and administrate.
Simplicity promotes understanding,
clarity and perceptions of fairness.
Market — aligned with our competitors.
We ensure we are not over or underpaying our people through
robust market analysis that guides our decisions on remuneration.
Point of difference — how we know it is Chorus.
Supports Chorus’ strategy, values, purpose and employee
value proposition.
There were no material changes to Chorus’ remuneration
strategy or policy in FY22.
The CEO and members of the executive leadership team have
the potential to earn a long term incentive (LTI) and short term
incentive (STI). Both STI and LTI are deemed at risk because the
outcome is determined by performance against a combination
of pre-determined financial and non-financial objectives.
Fixed remuneration
Fixed remuneration (not at risk) consists of base salary and
other benefits including KiwiSaver. Fixed remuneration
is adjusted each year based on data from independent
remuneration specialists. Employees’ fixed remuneration is
based on a matrix of their own performance and their current
position when compared to the market.
Short term incentive
Senior employees were invited to participate in the FY22 STI
scheme. The FY22 STIs are at risk component payments, that
are set as a percentage of fixed remuneration, from 15% to
30% based on the complexity of the role (the CEO’s STI is a
higher percentage of fixed remuneration as set out later in
this report). STI payments are determined following a review
of company and individual performance and paid out at a
multiplier of between 0x and 1.25x for the CEO and
executive leadership team, and between 0x and 1.4x for all
other employees.
Company performance goals are set and reviewed annually
by our Board to align with shareholder value. A strong
emphasis on the customer experience continued to be a
feature for the FY22 STI measures.
77
Annual Report 2022 Figure 15
FY22 STI Goals
20%
20%
10% 10%
Measures
EBITDA: gateway hurdle of $618.5m EBITDA. Year end target
aligned with objective of modest EBITDA growth.
% of target achieved
Exceeded target
40%
Customer experience – fibre fault restoration: measured by
consumers’ scores (target of 8.1 over three months to March)
Exceeded target
Customer experience – intact fibre connection: measured by
consumers’ scores (target of 7.7 over three months to 30 June)
Did not meet target
Total Fibre connections: based on total connection target of
967,000 at year end.
Did not meet target
Strategy | Regulation | Future Chorus: qualitative assessment
by Board based on long-term business initiatives including the
transition to the new regulatory regime and implementation of a
new operating model (including new field services agreement).
Exceeded target
The Board has agreed the FY23 STI scheme will have similar
focus areas and weightings as the FY22 scheme. However,
with fibre uptake now at almost 70% and installations
expected to slow, fibre connections will be replaced by a
revenue growth target.
Long term incentives
We offer an executive LTI share scheme to reward and retain
key executives. The LTIs are an at risk payment designed
to align the interests of executives and shareholders and
encourage longer term decision making.
Fundamental to the Chorus STI structure is a gateway goal.
The philosophy of the gateway goal is to provide a preliminary
threshold of financial success and affordability, before any
other measures can be considered for potential STI payments.
If the gateway goal is not achieved, then no STI is payable
Individual performance goals for all employees are tailored
to their role, with 70% of the goals based on what they
achieve and 30% based on how they perform their role.
The STI component is based on performance against both
key financial and non-financial measures and the STI bonus
is at the ultimate discretion of the Board. Some of the
non-financial measures include targets associated with health
and safety, overall team engagement scores (including both
D&I and Health and Wellbeing scores), and gender balance
and mix of teams.
As an example of how the STI is calculated, an employee with
fixed remuneration of $100,000 and an STI element of 15%
may receive between $0 and $29,400 depending on the level
of company performance (0 to 1.4x multiplier) multiplied by
their individual performance (0 to 1.4x multiplier).
The LTI is described in more detail in Note 16 of the financial
statements on page 51.
To further align executive interests with those of shareholders,
a minimum shareholding policy was introduced in 2019.
The policy prohibits executives from selling shares received
under the new LTI, unless the executive holds the equivalent
of at least 25% of their after tax base remuneration in Chorus
shares (or 33% for the CEO).
The Board commissioned an independent review to consider
Chorus’ current LTI scheme following the implementation
of the new regulatory framework. The independent review
considered the approach taken by other regulated utilities
and confirmed that the structure of the current scheme
remains fit for purpose with our remuneration policy. The
LTI scheme is an absolute rather than a relative return based
scheme. To reflect the regulated WACC set for Chorus’
fibre assets, a blended total shareholder return rate has
been adopted. This incorporates a weighted cost of equity
calculation, proportional to the regulated versus non-
regulated components of the business and based on relative
enterprise value. A 0.75% stretch percentage is added to the
weighted cost of equity calculation to determine the three-
year performance hurdle.
78
Annual Report 2022 Done
Chief Executive Officer employment agreement
and remuneration
JB Rousselot’s employment agreement reflects standard
conditions that are appropriate for a senior executive of a
listed New Zealand company. The employment agreement
may be terminated by:
— either he or Chorus giving six months' notice in writing;
— Chorus without notice in the case of serious misconduct,
serious breach (including substantial non-performance) or
other cause justifying summary dismissal; or
— Chorus immediately, if the Board forms the view that
substantial incompatibility and/or irreconcilable differences
have developed with him, or the Board otherwise wishes
to terminate his employment when he is not at fault
(including a redundancy situation or medical incapacity).
Our CEO continues to have a significant portion of his
remuneration linked to performance and at risk. Total
remuneration for our CEO continues to be determined using
a range of external factors, including advice from external
remuneration specialists and is annually reviewed by the
PPCC and Board.
CEO remuneration for FY21 and FY22 was:
CEO remuneration performance and pay
The scenario chart below demonstrates the elements of the
CEO remuneration design in the year ended 30 June 2022.
s
d
n
a
s
u
o
h
T
$
4,000
3,000
2,000
1,000
0
57%
43%
100%
57%
43%
FIXED
ON-PLAN
MAXIMUM
Base
Annual variable
The chart does not include any income from the LTI scheme.
The CEO has received three grants under the LTI scheme
($319,829 in 2019, $412,500 in 2020 and $420,750 in 2021)
that are yet to vest. Those LTI grants are subject to the
performance measures outlined overleaf. The first grant (2019)
is not due to vest until August 2022.
J B Rousselot
J B Rousselot
FY22
FY21
1,275,000
1,250,000
1,147,500
768,750
—
—
2,442,500
2,018,750
Fixed remuneration
Pay for performance
LTI
Total remuneration
Other benefits paid to JB Rousselot: FY22 Chorus KS Contrib JB Rousselot: $61,355; FY21 Chorus KS Contrib JB Rousselot: $58,845
Five year summary of CEO remuneration:
CEO
Total remuneration
% STI awarded
against maximum
% LTI awarded
against maximum
% LTI replacement
awarded against
maximum
Span of LTI performance
period
J B Rousselot
FY22
FY21
FY202
Kate McKenzie FY203
FY19
FY18
Mark Ratcliffe
FY18
$2,442,500
$2,018,750
$1,425,253
$588,325
$2,068,560
$2,219,475
—
1 Corrected from previously reported number.
2 Pro-rated from start date of 20 November 2019.
3 Pro-rated to end date of 20 December 2019.
67%
47%1
66%
—
53%
65%
—
—
—
—
—
—
—
89%
—
—
—
—
—
—
—
—
—
—
—
—
—
FY15 – FY18
79
Annual Report 2022
The table below outlines the CEO’s STI and LTI schemes for the performance period ending 30 June 20221:
Description
Performance measures
Percentage achieved
STI
Set at 75% of base remuneration. Based
on key financial and non-financial
performance measures.
• Company performance – see FY22
67%
STI Goals on page 77 for weightings.
• Individual performance – based
on business fundamentals (both
financial and non-financial),
connections, customer experience
and strategic initiatives including D&I.
LTI – 2019
LTI – 2020
LTI – 2021
Three-year grant made November
2019, equivalent to 33% of base
remuneration.
• Chorus TSR performance over grant
period must exceed 10.35% on an
annualised basis, compounding.
Assessed August 2022
with possible retesting3
up to August 2023.
Three-year grant made August
2020, equivalent to 33% of base
remuneration.
• Chorus TSR performance over grant
period must exceed 9.65% on an
annualised basis, compounding.
Assessed August 2023
with possible retesting3
up to August 2024.
Three-year grant made August
2021, equivalent to 33% of base
remuneration.
• Chorus TSR performance over grant
period must exceed 6.2%2 on an
annualised basis, compounding.
Assessed August 2024
with possible retesting3
up to August 2025.
1 The STI payments for FY22 will be paid in FY23.
2 A blended rate which incorporates a weighted cost of equity calculation proportional to the regulated versus non regulated components of the
business, based on relative Enterprise Value has been used. A 0.75% stretch percentage is added to determine the three-year performance hurdle.
3 If the performance hurdles are not met by the initial vesting date, they are assessed monthly for a period of 12 months (noting the hurdle continues
to increase).
Total Shareholder Return (TSR) performance
150.00
100.00
50.00
0.00
n
r
u
t
e
r
e
g
a
t
n
e
c
r
e
P
-50.00
30 June
2017
30 June
2018
30 June
2019
30 June
2020
30 June
2021
30 June
2022
NZX50
Chorus
The graph above shows Chorus’ TSR performance against the NZX50 between 30 June 2017 and 30 June 2022.
80
Annual Report 2022
Executive shareholding
For the year ended 30 June 2022, Chorus executives held
shares in Chorus as shown in the table below.
Executive
Andrew Carroll
David Collins
Ed Hyde
Elaine Campbell
Ewen Powell
JB Rousselot
Shaun Philp
Total
Current
Holdings1
Shares Eligible
to Vest2
90,740
–
16,137
14,930
76,914
–
26,933
225,654
29,310
26,143
23,616
21,470
20,292
67,324
19,030
207,185
1 As at 30 June 2022.
2 If the 2019 LTI hurdles are met, the share rights will be converted to
shares in Q2 FY23.
Median Pay Gap
The median pay gap represents the number of times greater
the CEO remuneration is to an employee paid at the median
of all Chorus employees. At 30 June 2022 the CEO’s base
salary at $1,275,000 (on an annualised basis ) was 11.3 times
that of the median employee at $113,000.
The CEO’s total remuneration on an annualised basis and
including STI was 19.7 times the total remuneration of the
median employee including STI at $113,000.
Diversity
Our goal of diverse leadership consists of three focus areas;
gender balance, ethnic mix and pay equity. Our overall
target is a 40:40:20 gender ratio in our people leader
community. Our progress against that target has improved
with 38% women and 62% men in people leadership roles
as at 30 June 2022, compared to 36% women and 64% men
in June 2021. Our Māori and Pasifika employee population
has increased from 5% to 8%, but continues to be under-
represented when compared to the New Zealand population.
Diverse leadership remains a priority that we continue to
work towards and a refreshed Diversity, Equity and Inclusion
Figure 16
Gender by role three year review
strategy will be implemented in August 2022. We had
four male and three female directors at 30 June 2022
(30 June 2021: four male and three female directors).
Our executive (officers or senior managers) comprising our
CEO and his leadership team had six males and one female at
30 June 2022 (30 June 2021: six males and one female).
Based on its annual review of our progress against our
measurable diversity metrics and objectives, our Board has
asked for greater progress towards achieving our Diversity,
Equity and Inclusion (DEI) goals. They acknowledge that our
new DEI strategy, due to be delivered in August 2022, with
refreshed objectives will go a long way to helping us achieve
that ambition.
Pay equity
We continue to monitor and report on remuneration
outcomes by gender to ensure pay equity at Chorus.
As a part of the annual remuneration review process, we
conducted gender pay equity analysis for like positions.
This analysis identified that there are no indications of gender
bias across similar positions.
At Chorus, the gender pay gap is calculated and reported
on via two different methods. The first is at a total company
level, comparing the median hourly rate for women to the
median hourly rate of men – irrespective of role. By this
measure, as of 30 April 2022, the median, gender pay gap
was an aggregate total of -19.1%, compared to -20.5% in
the same period last year. This gap primarily reflects women
making up a larger proportion of our junior roles. Addressing
this structural role gap requires a longer-term shift in which
roles we attract women into and a continued focus on
ensuring more women move into leadership roles.
The second method is by career level, comparing the median
hourly rate for women to the median hourly rate for men,
across each of Chorus’ nine career levels (salary bands).
By career level our target is to have a pay gap no greater than
-2%. Significant improvements have been made and Chorus
has achieved our target in eight of the nine career levels.
In six of the nine career levels, on average females are paid
higher than males.
100%
80%
60%
40%
20%
0
41
59
41
59
42
58
40
60
36
64
38
62
14
86
14
86
22
78
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81
Annual Report 2022
The remuneration paid to, and other benefits received by,
JB Rousselot in his capacity as CEO are detailed on pages
78 to 81, and are excluded from the table below.
The current Living Wage is $22.75 per hour. Chorus does not
have any permanent employee earning less than the current
living wage.
Remuneration range $ (Gross)
Number of employees in the year
ended 30 June 2022
Actual Payment
REM + LTI + insurance + concession
830,001 to 840,000
660,001 to 670,000
650,001 to 660,000
630,001 to 640,000
570,001 to 580,000
560,001 to 570,000
370,001 to 380,000
360,001 to 370,000
340,001 to 350,000
330,001 to 340,000
320,001 to 330,000
310,001 to 320,000
300,001 to 310,000
280,001 to 290,000
270,001 to 280,000
260,001 to 270,000
250,001 to 260,000
240,001 to 250,000
230,001 to 240,000
220,001 to 230,000
210,001 to 220,000
200,001 to 210,000
190,001 to 200,000
180,001 to 190,000
170,001 to 180,000
160,001 to 170,000
150,001 to 160,000
140,001 to 150,000
130,001 to 140,000
120,001 to 130,000
110,001 to 120,000
100,000 to 110,000
Grand Total
1
1
1
1
1
1
1
1
2
1
5
1
2
4
4
5
1
5
2
10
13
19
19
19
15
24
38
42
48
58
64
60
469
As part of our ongoing commitment to eradicate gender pay
gap, Chorus supported a March 2022 initiative, led by the
organisation “Mind The Gap”, calling for Aotearoa companies
to register details of public pay gap reporting. Chorus’ work
and advocacy for reducing gender pay gaps also featured in
Global Women’s gender pay gap campaign.
We’ve committed to report our ethnicity pay gap publicly
once a standard, consistent methodology is determined in
New Zealand.
Managing Performance
Our performance management approach is based on
fostering and rewarding valuable business outcomes.
Our people have performance and development plans which
are regularly reviewed with their people leaders.
Performance plans are developed to connect our people
with our strategy, their functional plans and the connection
with their individual roles. Performance plans include
outcome based objectives, behavioural measures aligned
with our values and an individual development plan.
Formal performance reviews were undertaken for all our
people during the year. As part of this, people leaders sought
feedback and participated in peer review and moderation
sessions, resulting in an overall performance rating and
remuneration recommendations determining an individual’s
total pay (fixed remuneration and variable).
A similar process is undertaken each year for our executive
team, with our CEO making recommendations to our PPCC
for executive team members, and our PPCC leading the
performance review of our CEO, making recommendations
to our Board. These processes are consistent with those
set out in our PPCC charter and allow our Board to provide
input into individual performance outcomes, total reward
approvals (fixed and variable) and development plans.
These processes were all undertaken in the year ended
30 June 2022.
Employee remuneration range during the year
ended 30 June 2022
The table below shows the number of employees and former
employees who received remuneration and other benefits
in excess of $100,000 during the year ended 30 June 2022.
This includes STI and LTI paid during FY22, as well as other
benefits such as insurance and a broadband concession.
During the year, certain employees received contributions
towards membership of the Marram Trust (a community
healthcare and holiday accommodation provider), received
contributions toward their Government Superannuation Fund
(a legacy benefit provided to a small number of employees)
and, if a member, received contributions of 3% of gross
earnings towards their KiwiSaver accounts. These amounts
are not included in these remuneration figures. Any benefits
received by employees that do not have an attributable value
are also excluded.
82
Annual Report 2022 Director remuneration
Fee structure
Total remuneration available to directors (in their capacity as such) in the year ended 30 June 2022 was fixed at our
2019 annual shareholders’ meeting at $1,169,042.
Annual fee structure
Board fees:
Board chair
Non-executive director
Board committee fees:
Audit and Risk Management Committee
Chair
Member
People, Performance and Culture Committee
Chair
Member
Nominations and Corporate Governance Committee
Chair
Member
Regulatory Sub-Committee
Chair
Member
Year ended 30 June 2022 $ Year ended 30 June 2021 $
223,650
114,000
32,600
16,300
22,900
11,750
–
8,880
–
2,400
223,650
114,000
32,600
16,300
22,900
11,750
–
8,880
–
–
Notes:
1 The Board chair receives Board chair fees only. Other directors receive committee fees in addition to their Board fees. A fee of $16,720 is available
for the chair of the NCGC as part of the fee structure, but is not currently payable as the Board chair is also NCGC chair.
2 Directors do not participate in a bonus or profit-sharing plan, do not receive compensation in share options, and do not have superannuation or any
other scheme entitlements or retirement benefits.
3 Directors are paid $2,400 per meeting of the Regulatory Sub-Committee. The Regulatory Sub-Committee meets on an ad-hoc basis.
4 Directors may be paid an additional daily rate of $2,400 for additional work as determined and approved by our chair and where the payment is
within the total fee pool available. There were no such fees paid in the year to 30 June 2022. There was also no increase in director and committee
base fees in the year to 30 June 2022.
Fees paid to Directors (in their capacity as such) in the year ended 30 June 2022
Director
Patrick Strange
Murray Jordan
Prue Flacks
Mark Cross
Jack Matthews
Sue Bailey
Kate Jorgensen
Miriam Dean
Total fees $
Board fees
ARMC
223,650
144,100
43,402
162,680
137,500
132,950
143,527
92,555
1,080,364
223,650
114,000
36,751
114,000
114,000
114,000
114,000
77,379
907,780
–
–
–
32,600
16,300
–
16,300
–
65,200
PPCC
–
22,900
3,788
–
–
11,750
–
7,976
46,414
NCGC
Regulatory
Sub-Committee
–
–
2,863
8,880
–
–
6,027
–
17,770
–
7,200
–
7,200
7,200
7,200
7,200
7,200
43,200
Notes:
1 Amounts are gross and exclude GST (where applicable).
2 Prue Flacks retired as a director effective 27 October 2021.
3 Directors did not receive any fees or other benefits for additional work during the year ended 30 June 2022.
4 Directors are entitled to be reimbursed for travel and incidental expenses incurred in performance of their duties in addition to the above fees.
5 The total fee pool available to directors is $1,169,042.
Fee structure from 1 July 2022
Our PPCC reviews non-executive director remuneration annually based on criteria developed by that committee. Based on
that committee’s recommendation the Board has determined not to change Board fees for the year from 1 July 2022.
83
Annual Report 2022 Disclosures
Group structure
As at 30 June 2022, Chorus Limited has two wholly owned
subsidiaries: Chorus New Zealand Limited (CNZL) and Chorus
LTI Trustee Limited (CLTL).
Chorus Limited
Chorus New Zealand Limited
Chorus LTI Trustee Limited
Chorus Limited is the entity listed on the NZX and ASX1. It is
also the borrowing entity under the group’s main financing
arrangements and the entity which has partnered with the
Crown for the UFB build.
CNZL undertakes (and is the contracting entity for) Chorus’
operating activities and is the guarantor of Chorus Limited’s
borrowing. CNZL also employs all Chorus people. CNZL has
its own constitution but its Board is the same as the Chorus
Limited Board.
CLTL was incorporated in December 2014 as trustee for
our long term incentive plan. The trust for that LTI scheme
was wound up during the 2022 financial year as Chorus has
transitioned to a new LTI scheme. CLTL was removed from
the Companies Office register on 21 July 2022.
Disclosures in respect of CNZL and CLTL are set out in the
“Subsidiaries” section on page 93.
Indemnities and insurance
Chorus indemnifies directors under our constitution for
liabilities and costs they may incur for their acts or omissions
as directors (including costs and expenses of defending
actions for actual or alleged liability) to the maximum
extent permitted by law. We have also entered into deeds of
indemnity with each director under which:
• Chorus indemnifies the director for liabilities incurred in
their capacity as a director and as officers of other Chorus
companies.
• Directors are permitted to access company records while
directors and after they cease to hold office (subject to
certain conditions).
Deeds of indemnity have also been entered into on similar
terms with certain senior employees for liabilities and costs
they may incur for their acts or omissions as employees,
directors of subsidiaries or as directors of non-Chorus
companies in which Chorus holds interests.
We have a directors’ and officers’ liability insurance policy in
place covering directors and senior employees for liability
arising from their acts or omissions in their capacity as
directors or employees on commercial terms. The policy
does not cover dishonest, fraudulent, malicious or wilful acts
or omissions.
Director change
Prue Flacks resigned as director effective 27 October 2021.
Miriam Dean was appointed as a director at the 2021 ASM
on 27 October 2021.
Notes:
1 Chorus Limited is no longer listed on Luxembourg stock exchange following repayments of our GBP 260 million bonds in April, 2020
84
Annual Report 2022 Director interests and trading
As at 30 June 2022, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013)
in approximately 0.059% of shares as follows:
Current Directors
Interest as at 30 June 2022
Transactions during the reporting period
Director
Shares
Interest
Number
of shares
Nature of transaction
Consideration Date
Patrick Strange 51,000
Beneficial owner as
–
–
–
–
beneficiary of Three Kings
Trust
Mark Cross
30,156
Beneficial owner as
596
Acquisition of shares on
$3,915.72
12 October 2021
beneficiary of Alpha
reinvestment of dividends
Investment Trust; power to
under Chorus’ dividend
exercise voting rights and
reinvestment plan
acquire/dispose of financial
products as director of
trustee.
526
Reinvestment Plan
$3,859.20
12 April 2022
Murray Jordan 121,767 Registered holder and
2,408
Acquisition of shares on
$15,820.56
12 October 2021
beneficial owner of ordinary
reinvestment of dividends
shares as trustee and
under Chorus’ Dividend
beneficiary of Endeavour
Reinvestment Plan
Trust
Jack Matthews
19,521
Registered holder and
beneficial owner
2,124
7,500
386
Reinvestment Plan
$15,583.57
12 April 2022
On market acquisition
$50,850.00
27 August 2021
Acquisition of shares on
$2,536.02
12 October 2021
reinvestment of dividends
under Chorus’ Dividend
Reinvestment Plan
Sue Bailey
30,000 Registered holder and
5,000
On market acquisition
$38,190.36
23 February 2022
340
Reinvestment Plan
$2,494.54
12 April 2022
beneficial owner
Kate Jorgensen 12,975
Registered holder and
6,738
On market acquisition
$43,438.57
12 October 2021
beneficial owner
85
Annual Report 2022 As at 30 June 2022, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013)
in approximately 0.092% of Chorus’ NZX bonds maturing December 2028 as follows:
Interest as at 30 June 2022
Transactions during the reporting period
Director
Bonds
Interest
Number
of bonds
Nature of transaction
Consideration Date
Patrick Strange 340,000 Beneficial owner
as beneficiary of
Three Kings Trust
Murray Jordan
100,000
Miriam Dean
20,000
Registered holder and
beneficial owner as
trustee and beneficiary
of Endeavour Trust
Registered holder and
beneficial owner as
trustee and beneficiary
of the Miriam Dean Trust
–
–
–
–
–
–
Changes in Director interests
–
–
–
–
–
–
Mark Cross
Became a board member of ACC and Chair of the ACC Investment Committee1. Retired as director of Z Energy
Limited and Z Energy 2015 Limited.2
Prue Flacks
Retired as director of Chorus Limited, Chorus New Zealand Limited and Chorus LTI Trustee Limited.3
Murray Jordan
Retired as a director of Sky City Entertainment Group Limited4. Retired as a director of Chorus LTI Trustee Limited.5
Jack Matthews
Retired as a director of Mediaworks Finance Limited, Mediaworks Holdings Limited, Mediaworks Investments
Limited, Mediaworks Kiwi Radio Limited, Mediaworks Outdoor Limited, Mediaworks Outdoor Holdings Limited,
Mediaworks Radio Limited, Mediaworks TV Limited and MW NZ Bureau Limited.6
Sue Bailey
Retired as a director for Chorus LTI Trustee Limited.7
Miriam Dean
Director of Banking Ombudsman Scheme Limited, Ōtakaro Limited, REINZ Limited8 and appointed to
Gas Rulings Panel.9
Patrick Strange None
Kate Jorgensen None
Notes:
1 From 1 January 2022.
2 From 10 May 2022.
3 From 27 October 2021.
4 From 26 August 2021.
5 From 21 July 2022.
6 From 13 August 2021.
7 From 21 July 2022.
8 From 28 October 2021.
9 From 20 May 2022.
86
Annual Report 2022 Director restrictions
No person who is an ‘associated person’ of a
telecommunications services provider in New Zealand
may be appointed or hold office as a director. NZX has
granted a waiver to allow this restriction to be included
in our constitution.
Securities and security holders
Ordinary shares
Chorus Limited’s shares are quoted on the NZX and on
the ASX and trade under the ‘CNU’ ticker. There were
446,512,440 ordinary shares on issue at 30 June 2022.
Each share confers on its holder the right to attend and vote
at a shareholder meeting (including the right to cast one vote
on a poll on any resolution).
Constitutional ownership restrictions
As part of the establishment of Chorus we inherited an
obligation to obtain Crown approval prior to any person:
• Having a relevant interest in 10% or more of our shares; or
• Other than a New Zealand national, having a relevant
interest in more than 49.9% of our shares.
On each request the Crown has provided approval, currently:
• L1 Capital Pty Ltd can hold a relevant interest in up to
15% of our shares.
Shareholder distribution as at 30 June 2022
• AMP Capital Holdings Limited can hold a relevant interest
in up to 15% of our shares.
If our Board or the Crown determines there are reasonable
grounds for believing a person has a relevant interest in our
shares in excess of the ownership restrictions, our Board
may, after following certain procedures, prohibit the exercise
of voting rights (in which case the voting rights vest in our
chair) and may force the sale of shares. Our Board may also
decline to register a transfer of shares if it reasonably believes
the transfer would breach the ownership restrictions.
NZX has granted waivers allowing our constitution to include
the power of forfeiture, the restrictions on transferability
of shares and our Board’s power to prohibit the exercise of
voting rights relating to these ownership restrictions. ASX
has also granted a waiver in respect of the refusal to register
a transfer of shares which is or may be in breach of the
ownership restrictions.
Takeovers protocol
We have established a takeovers protocol setting out
the procedure to be followed if there is a takeover offer,
including managing communications between insiders
and the bidder and engagement of an independent
adviser. The protocol includes the option of establishing
an independent takeover committee, and the likely
composition and implementation of that committee.
Holding
1 to 999
1,000 to 4,999
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
Number of holders
% of holders
Total number of
shares held
% of shares issued
10,693
6,598
1,886
1,390
69
20,636
51.82%
31.97%
9.14%
6.74%
0.33%
100%
4,389,203
15,442,842
12,536,393
28,720,189
385,423,813
446,512,440
0.98%
3.46%
2.81%
6.43%
86.32%
100%
Substantial holders
We have received substantial product holder notices from shareholders as follows:
L1 Capital Pty Ltd
UniSuper Limited
Mitsubishi UFJ Financial Group, Inc
1. Notices received as at 30 June 2022.
Notices received as at 30 June 20221
Number of
ordinary shares held
36,464,794
28,785,874
22,331,319
% of shares on issue
8.16%
6.45%
5.00%
87
Annual Report 2022 Twenty largest shareholders as at 30 June 2022
Rank
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
JP Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Citibank Nominees (New Zealand) Limited – NZCSD *
HSBC Nominees (New Zealand) Limited – NZCSD *
HSBC Nominees (New Zealand) Limited A/C State Street – NZCSD *
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct – NZCSD *
Accident Compensation Corporation – NZCSD *
BNP Paribas Nominees (NZ) Limited – NZCSD *
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Forsyth Barr Custodians Limited <1-Custody>
ANZ Wholesale Australasian Share Fund – NZCSD *
JBWere (NZ) Nominees Limited
New Zealand Depository Nominee Limited
Custodial Services Limited
BNP Paribas Noms Pty Ltd
Generate Kiwisaver Public Trust Nominees Limited *
HSBC Custody Nominees (Australia) Limited
Holding
33,406,043
32,035,407
32,026,374
31,306,447
29,075,075
20,370,396
17,059,429
14,321,811
13,275,479
13,250,484
11,826,046
11,765,951
9,707,608
8,334,861
8,097,702
7,931,986
6,346,674
6,090,197
5,853,455
5,375,262
%
7.48
7.17
7.17
7.01
6.51
4.56
3.82
3.21
2.97
2.97
2.65
2.64
2.17
1.87
1.81
1.78
1.42
1.36
1.31
1.20
* Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities
by its members. As at 30 June 2022, 150,163,268 Chorus ordinary shares (or 33.63% of the ordinary shares on issue) were held through NZCSD.
Twenty largest bondholders (December 2027) as at 30 June 2022
Rank
Holder name
Custodial Services Limited
BNP Paribas Nominees (NZ) Limited – NZCSD *
FNZ Custodians Limited
Forsyth Barr Custodians Limited <1-CUSTODY>
Mint Nominees Limited – NZCSD *
HSBC Nominees (New Zealand) Limited – NZCSD
PIN Twenty Limited
National Nominees Limited – NZCSD *
ANZ Fixed Interest Fund – NZCSD *
NZPT Custodians (Grosvenor) Limited – NZCSD *
Citibank Nominees (New Zealand) Limited – NZCSD *
ANZ Wholesale NZ Fixed Interest Fund – NZCSD*
FNZ Custodians Limited
Risk Reinsurance Limited
Investment Custodial Services Limited
TEA Custodians Limited Client Property Trust Account – NZCSD *
JBWere (NZ) Nominees Limited
Forsyth Barr Custodians Limited
BNP Paribas Nominees (NZ) Limited – NZCSD *
Forsyth Barr Custodians Limited
1
2
3
4
5
6
7
8
9
9
11
12
13
14
15
16
17
18
19
20
88
Holding
54,429,000
30,453,000
22,869,000
18,452,000
9,500,000
8,600,000
7,000,000
5,000,000
4,500,000
4,500,000
3,150,000
2,999,000
2,903,000
2,865,000
2,255,000
2,250,000
2,232,000
1,212,000
900,000
813,000
%
27.21
15.23
11.43
9.23
4.75
4.30
3.50
2.50
2.25
2.25
1.58
1.50
1.45
1.43
1.13
1.13
1.12
0.61
0.45
0.41
Annual Report 2022 Twenty largest bondholders (December 2028) as at 30 June 2022
Rank
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Custodial Services Limited
Forsyth Barr Custodians Limited <1-CUSTODY>
JBWere (NZ) Nominees Limited
ANZ Wholesale NZ Fixed Interest Fund – NZCSD*
Hobson Wealth Custodian Limited
HSBC Nominees (New Zealand) Limited O/A Euroclear Bank – NZCSD *
FNZ Custodians Limited
BNP Paribas Nominees (NZ) Limited – NZCSD *
JBWere (NZ) Nominees Limited
Generate Kiwisaver Public Trust Nominees Limited *
Forsyth Barr Custodians Limited
TEA Custodians Limited Client Property Trust Account – NZCSD *
JBWere (NZ) Nominees Limited <44625 A/C>
HSBC Nominees (New Zealand) Limited A/C State Street – NZCSD *
JBWere (NZ) Nominees Limited <44626 A/C>
ANZ Custodial Services New Zealand Limited – NZCSD *
ANZ Fixed Interest Fund – NZCSD *
RGTKMT Investments Limited
Mint Nominees Limited – NZCSD *
Investment Custodial Services Limited
* Held through New Zealand Central Securities Depository Limited (NZCSD).
Twenty largest bondholders (December 2030) as at 30 June 2022
Rank
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Accident Compensation Corporation – NZCSD *
ANZ Fixed Interest Fund – NZCSD *
Custodial Services Limited
ANZ Bank New Zealand Limited – NZCSD *
Queen Street Nominees ACF Pie Funds – NZCSD*
BNP Paribas Nominees (NZ) Limited – NZCSD *
HSBC Nominees (New Zealand) Limited O/A Euroclear Bank – NZCSD *
HSBC Nominees (New Zealand) Limited – NZCSD *
Forsyth Barr Custodians Limited <1-CUSTODY>
FNZ Custodians Limited
ANZ Wholesale NZ Fixed Interest Fund – NZCSD*
Citibank Nominees (New Zealand) Limited – NZCSD *
Forsyth Barr Custodians Limited
Hobson Wealth Custodian Limited
Investment Custodial Services Limited
Mint Nominees Limited – NZCSD *
JBWere (NZ) Nominees Limited
Forsyth Barr Custodians Limited
Marianne Mathilde Marie Stoessel
Westpac Banking Corporate NZ Financial Markets Group – NZCSD
* Held through New Zealand Central Securities Depository Limited (NZCSD).
Holding
94,945,000
70,828,000
43,977,000
39,268,000
34,204,000
30,279,000
24,021,000
20,527,000
15,000,000
6,809,000
6,763,000
4,739,000
4,600,000
4,250,000
4,000,000
3,779,000
3,735,000
3,000,000
2,977,000
2,740,000
Holding
100,500,000
23,513,000
14,934,000
10,601,000
7,000,000
6,230,000
5,000,000
4,690,000
4,501,000
4,001,000
3,735,000
2,500,000
1,138,000
935,000
890,000
800,000
483,000
380,000
360,000
295,000
%
18.99
14.17
8.80
7.85
6.84
6.06
4.80
4.11
3.00
1.36
1.35
0.95
0.92
0.85
0.80
0.76
0.75
0.60
0.60
0.55
%
50.25
11.76
7.47
5.30
3.50
3.12
2.50
2.35
2.25
2.00
1.87
1.25
0.57
0.47
0.45
0.40
0.24
0.19
0.18
0.15
89
Annual Report 2022 Debt listings
Chorus Limited has the following bonds on issue:
• $200 million bonds traded on the NZX debt market
• EUR 500 million EMTNs traded on the ASX maturing
October 2023; and
(the NZDX) maturing December 2027;
• EUR 300 million EMTNs traded on the ASX, maturing
• $500 million bonds traded on the NZX debt market
maturing December 2028
• $200 million bonds traded on the NZX debt market
maturing December 2030;
December 2026.
American depositary receipts
American Depositary Shares, each representing five shares and evidenced by American Depositary Receipts, are not listed
but are traded on the over-the-counter market in the United States under the ticker ‘CHRYY’ with Bank of New York Mellon as
depositary bank. As at 30 June 2022 Chorus had 965,000 ADRs on issue.
NZX bondholder distribution as at 30 June 2022
December 2027 maturity
Holding
Number of holders
% of holders
Total number of bonds held
% of bonds issued
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
December 2028 maturity
15
138
45
198
7.57%
69.7%
22.73%
100%
92,000
3,775,000
196,133,000
200,000,000
0.05%
1.89%
98.06%
100%
Holding
Number of holders
% of holders
Total number of bonds held
% of bonds issued
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
December 2030 maturity
82
1058
139
1279
6.41%
82.72%
10.87%
100%
500,000
31,662,000
467,838,000
500,000,000
0.1%
6.33%
93.57%
100%
Holding
Number of holders
% of holders
Total number of bonds held
% of bonds issued
5,000 to 9,999
10,000 to 99,999
100,000 and over
Total
Unquoted securities
23
195
23
241
9.54%
80.92%
9.54%
100%
152,000
5,177,000
194,671,000
200,000,000
0.08%
2.59%
97.33%
100%
Crown Infrastructure Partners (CIP) Securities
The terms of issue for the CIP1 and CIP2 securities are set out in the subscription agreements between Chorus Limited and CIP.
These terms are summarised in note 6 of our consolidated financial statements and on our website at
www.chorus.co.nz/reports.
Security
Number issued in the
year ended 30 June 2022
Total on issue at
30 June 2022
Holder
Percentage held
CIP1 equity securities
CIP1 debt securities
CIP1 equity warrants
CIP2 equity securities
CIP2 debt securities
90
–
–
460,124
41,659,726
23,635,013
462,052,071
462,052,071
15,138,187
306,423,177
23,635,013
CIP
CIP
CIP
CIP
CIP
100%
100%
100%
100%
100%
Annual Report 2022 Revenue from ordinary activities and net profit
In the year ended 30 June 2022:
• Revenue from ordinary activities increased 1% to
$965 million (30 June 2021: $955 million); and
• Profit from ordinary activities after tax, and net profit,
attributable to shareholders increased 25% to $64 million
(30 June 2021: $51 million)
Subsidiaries
Chorus New Zealand Limited (CNZL)
Directors as at 30 June 2022: Patrick Strange, Mark Cross,
Miriam Dean, Murray Jordan, Jack Matthews, Sue Bailey,
Kate Jorgensen.
Prue Flacks resigned as a director from CNZL during the year
to 30 June 2022.
Current CNZL directors are also Chorus Limited directors
and do not receive any remuneration in their capacity as
CNZL directors.
Chorus LTI Trustee Limited (CLTL)
Directors as at 30 June 2022: Murray Jordan and Sue Bailey.
Current and former directors of CLTL did not receive any
remuneration in their capacity as directors of CLTL. CLTL
was removed (following application by Chorus) from the
Companies Office register on 21 July 2022.
Other subsidiaries
Chorus Limited has no other subsidiaries.
Other disclosures
New NZX listing rules
NZX updated its listing rules from 17 June 2022.
NZX waivers
On 28 March 2019 Chorus applied for the continuation of
existing and still required waivers and rulings. On 3 April 2020 a
waiver from NZX listing rule 2.3.2, 4.1.1, 4.1.2, 4.2.1, 4.14, 6.6.1,
8.1.5 and a ruling from NZX on listing rule 4.9.1 were granted.
A summary of all waivers relied on by Chorus in the
12 months ending 30 June 2022 is available on our website
at www.chorus.co.nz/investor-info.
Non-standard designation
NZX has attached a ‘non-standard’ designation to Chorus
Limited because of the ownership restrictions in our
constitution (described above).
ASX disclosures
Chorus Limited and its subsidiaries are incorporated in
New Zealand.
Chorus Limited is not subject to Chapters 6, 6A, 6B and 6C
of the Australian Corporations Act 2001 dealing with the
acquisition of shares (including substantial shareholdings
and takeovers).
Our constitution contains limitations on the acquisition
of securities, as described above.
For the purposes of ASX listing rule 1.15.3 Chorus Limited
continues to comply with the NZX listing rules.
Registration as a foreign company
Chorus Limited has registered with the Australian Securities
and Investments Commission as a foreign company and has
been issued an Australian Registered Body Number (ARBN)
of 152 485 848.
Net tangible assets per security
As at 30 June 2022, consolidated net tangible assets per
share was $1.54 (30 June 2021: $1.55).
Net tangible assets per share is a non-GAAP financial
measure and is not prepared in accordance with NZ IFRS.
91
Annual Report 2022 Glossary
Backbone network Fibre cabling and other shared network
Gigabit
Backhaul
Baseband
elements required either in the common
areas of multi-dwelling units to connect
individual apartments/offices, or to serve
premises located along rights of way.
The portion of the network that links
local exchanges to other exchanges
or retail service provider networks.
A technology neutral voice input
service that can be bundled with
a broadband product or provided
on a standalone basis.
Board
Chorus Limited’s Board of Directors.
Building block
model
Chorus
CIP
Commission
A methodology used for regulating
monopoly utilities. Under BBM a
regulated supplier’s allowed revenue
is equal to the sum of the underlying
components or ‘building blocks’,
consisting of the return on capital,
depreciation, operating expenditure and
various other components such as tax.
Chorus Limited and subsidiaries.
Crown Infrastructure Partners,
the Government organisation that
manages New Zealand’s rollout of
Ultra-Fast Broadband infrastructure.
Commerce Commission –
the independent Crown entity
whose responsibilities include
overseeing the regulation of the
telecommunications sector.
GPON
IT
Layer 2
Mbps
NZ IFRS
P2P
Petabyte
RAB
RBI
Share
TSO
Constitution
Chorus Limited’s Constitution.
Direct fibre access Also known as ‘dark’ fibre, a fibre service
that provides a point to point fibre
connection and can be used to deliver
backhaul connections to mobile sites.
TSR
UFB
A director of Chorus Limited.
Earnings before interest, income tax,
depreciation and amortisation.
European Medium Term Notes.
Financial year – twelve months
ended 30 June. e.g. FY22 is from
1 July 2021 to 30 June 2022.
Gigabits per second. A measure of
the average rate of data transfer.
VDSL
Director
EBITDA
EMTN
FY
Gbps
92
The equivalent of 1 billion bits. Gigabit
Ethernet provides data transfer rates
of about 1 gigabit per second.
Gigabit Passive Optical Network.
Information Technology.
The data link layer, including broadband
electronics, within the Open Systems
Interconnection model. Layer 1 is the
physical cables and co-location space.
Megabits per second – a measure of
the average rate of data transfer.
International Financial Reporting
Standards – the rules that the financial
statements have to be prepared by.
Where two parties or devices are
connected point-to-point via fibre.
One million gigabytes (GB), which
is a measure of data volume.
Regulatory Asset Base refers to
the value of total investment by a
regulated utility in the assets which
will generate revenues over time.
Rural Broadband Initiative – refers to
the Government programme to improve
and enhance broadband coverage in
rural areas between 2011 and 2016.
Means an ordinary share in Chorus.
Telecommunications Services
Obligation – a universal service
obligation under which Chorus
must maintain certain coverage and
service on the copper network.
Total shareholder return.
Ultra-Fast Broadband refers to the
Government programme to build a fibre
to the premises network. UFB1 refers to
the original phase of the rollout to 75% of
New Zealanders. UFB2 and UFB2+ were
subsequent phases announced in 2017.
Very High Speed Digital Subscriber
Line – a copper-based technology
that provides a better broadband
connection than ADSL.
Annual Report 2022 Disclaimer
This annual report:
• May contain forward looking statements. These statements
are not guarantees or predictions of future performance.
They involve known and unknown risks, uncertainties and
other factors, many of which are beyond Chorus’ control,
and which may cause actual results to differ materially
from those expressed in the statements contained in this
annual report.
• Includes statements relating to past performance.
These should not be regarded as reliable indicators of
future performance.
• Is current at its release date. Except as required by law or
the NZX and ASX listing rules, Chorus is not under any
obligation to update this annual report or the information
in it at any time, whether as a result of new information,
future events or otherwise.
• Contains non-GAAP financial measures, including EBITDA.
These measures may differ from similarly titled measures
used by other companies because they are not defined by
GAAP. Although Chorus considers those measures provide
useful information they should not be used in substitution
for, or isolation of, Chorus’ audited financial statements.
• May contain information from third parties Chorus
believes reliable. However, no representations or
warranties are made as to the accuracy or completeness
of such information.
• Should be read in the wider context of material previously
published by Chorus and released through the NZX and ASX.
• Does not constitute investment advice or an offer or
invitation to purchase Chorus securities.
Annual Report 2022
93
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Private Bag 92119, Victoria Street West
Auckland 1142, New Zealand
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investorcentre.com/nz
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United States of America
P: US domestic calls (toll free) 1 888 269 2377
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https://www-us.computershare.com/investor
ARBN 152 485 848
chorus.co.nz