Spark lifts half year result, predicts flat full year

Revenue for the half year was up 4.1 percent to $1,793m

Spark has reported increases in revenue, EBITDA and NPAT for the six months to 32 December but says full year revenue and EBITDA are likely to show zero or minimal growth as a result, in part, of an unexpected estimated $15m increase in full year capex necessitated by the recent Kaikoura earthquake.

Spark said capex in the second half would go into remedying the damaged South Island eastern fibre route, adding a third South Island fibre route and into increasing backhaul resilience, capacity and routing in Wellington and the South Island.

Revenue for the half year was up 4.1 percent to $1,793m. EBITDA was up 3.5 percent to $471m and NPAT up 12.7 percent to $178m. Spark said the uplift was largely due to a $9m dividend from its stake in Southern Cross Cable being paid in the first half rather than the second and the inclusion of a full six months earnings from the CCL Group, acquired in December 2015. (All comparisons are with December 2015 figures)

During the half year the company boosted mobile customer numbers by 6.4 percent to 2.353m. Mobile revenue grew 4.4 percent, broadband service revenue grew 1.5 percent as a result of customers migrating to more expensive plans and IT services revenue was up 19.3 percent. However Spark’s share of mobile service revenues fell 1.0 percentage points to 38.3 percent and its share of broadband connections fell 2.0 percent to 42.3 percent.

Spark chairman, Mark Verbiest, said the results were in line with the company’s plan and reflected the continuing execution of its long-term strategy.

“Customer service levels have recovered markedly and several new market-leading offers have been launched,” he said. “However, some of the key indicators in the results also highlight the challenging market and operating environment and the need for us to maintain a fast pace of change and keep delivering for our customers.”

Verbiest said the top line revenue growth had been achieved “despite vigorous price competition”, adding “While the revenue performance across mobile, broadband and IT services was good, it is clear the intense ongoing price competition, particularly at the lower end of the market, is driving margin pressure and reinforcing the need to increase our focus on our brand assets, as well as continuing to tightly manage operating and capital expenditure.”

Managing director, Simon Moutter, said the company had focussed on a programme called ‘Upgrade New Zealand’ “designed to move as many of our customers as possible off older copper broadband onto newer and less fault-prone fibre or wireless broadband technologies.”

Operating expenses grew 4.3 percent to $1,320m. Verbiest attributed this largely to “an increase in the cost of supporting IT services growth and bringing on new big business customers, as well as the additional resources deployed to improve the service experience for our customers and reduce call centre wait times.”

The company said investment in call-centre resource had delivered results, claiming a 33 percentage point increase in the number calls answered within three minutes since June 2016 and a five point improvement in “market net promoter score” since June 2016.

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