Spark reports modest growth, warns of challenges ahead

Spark has reported revenue growth for FY17 of 3.3 percent taking revenue to $3.614b, EBITDA growth of 3.0 percent to $1.016b and NPAT growth of $13.0 percent to $418m.

Spark has reported revenue growth for FY17 of 3.3 percent taking revenue to $3.614b, EBITDA growth of 3.0 percent to $1.016b and   NPAT growth of $13.0 percent to $418m.

The company said growth had been driven by strong performance in IT services, up 19 percent, and mobile services, up 5.6 percent.

Spark managing director Simon Moutter said the results reflected successful execution of the company’s long term strategy but warned that the company still had a long way to go. “There are signs that fresh impetus is needed for the next phase of our transformation,” he said.

“In an exponentially evolving digital world, where change is the new normal, the complexity of fast-changing technology has customers grappling with the pace of change. Meanwhile, customer preference is shifting rapidly to wireless, enabled by high-speed mobile coverage. In mobile and broadband particularly, commoditisation pressures mean more and more New Zealanders are buying their mobile or broadband services based primarily on price.”

According to Moutter, the companies most likely to win will be those that “cut through complexity to deliver a highly automated and slick digital self-service customer experience, and who have a simpler proposition to sell, maintain and support than their competitors.”

Three focus areas

He said Spark would focus its strategy in three areas: “First, over the next few years Spark will put even more resource into radically digitising and simplifying our products and services to materially lower our cost of operating and put more power into the hands of customers.

“[Secondly we will] better leverage all our brands, meeting the needs of all parts of the market - from those who want services packed with extra value, to the more price sensitive who want the basics done well with no frills.

“Our third new area of focus will be to meet the growing customer appetite for wireless technologies. We will increase our emphasis on investment in this area to deliver improved mobile and wireless broadband services.”

He said that, by 2020 Spark aimed to have 85 percent of its broadband customers migrated away from copper onto fibre or wireless technologies.

Spark said also that, by 2020 it aspired to be:

- taking advantage of disruptive technologies like virtual assistants and machine learning at scale, to improve its business and better serve customers;

- benchmarking itself against the world’s best digital companies for digital sales, self-service and customer experience;

- fully leveraging its brand portfolio to address the forces of commoditisation and lifting market share in certain segments, while encouraging market growth;

- hosted in the cloud, with best in class automated, software-defined converged network and digital service platforms enabling a marked increase in productivity;

- creating value for customers sufficient to sustain ongoing growth in returns to shareholders, with an EBITDA margin greater than 30 percent;

For FY18 Spark is forecasting minimal revenue growth (zero to two percent) and slightly reduced capex, down to $410mm from $415m.

Spark chairman Mark Verbiest stepping down

Spark has announced that Mark Verbiest, who has chaired the board since the demerger with Chorus n December 2011, is standing down at the end of the annual meeting of shareholders in November and will be succeeded by current director Justine Smyth.

Verbiest said more than half of the current board had served since the demerger and it was prudent to stagger their departures. “At some point, it will be appropriate for each of the long-serving directors to transition off the board. As a consequence, I do not believe it would be good governance to risk having several directors potentially retiring in short order, and, as the director with the longest association with Spark, I prefer to lead by example.”

Spark said Smyth had extensive governance experience, including as the chair of its audit & risk management and human resources & compensation committees.

She will replace Verbiest as chair of the nominations & corporate governance committee. Alison Gerry will take her place as chair of the audit & risk management committee, and Alison Barrass will replace her as chair of the human resources & compensation committee.

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