Spark’s growth market success offset by declines in legacy service

Spark has posted overall revenue growth of just one percent for FY18

Spark has posted overall revenue growth of just one percent for FY18 after declines in revenue from legacy voice, managed data and networks revenues largely offset growth in revenue from mobile (up 6.9 percent) and in cloud, security and service management (up 15.1 percent).

These increases added $132m to revenue, offset by a $100m decline from the legacy services. Overall revenue for the year rose $35m to $3,649m. EBITDA was down 2.7 percent to $1,038m and net profit after tax down 7.9 percent to $385m.

However Spark said that, after allowing for the impact of $49m (and $35m net of tax) costs of change associated with Quantum, its program designed to make it the country’s lowest cost operator through radically simplified and digitised processes, products and services, net profit was up 0.5 percent to $420m.

“The acceleration meant additional implementation costs of $24m were brought forward into FY18 earnings, which added to the $25m cost of change Spark had already planned for,” Spark said.

In May Spark announced plans to accelerate Quantum and downgraded guidance for its full year EBITDA in light of the expected costs of this acceleration.

Chair Justine Smyth said the decision to accelerate Quantum had been “based on our increasing confidence that the business could improve customer experience and operate under a lower cost structure in an Agile model.”

Spark said it remained on track, over time, to increase its EBITDA margin into the low 30 percent range (from high 20 percent range currently). This growth, it said would be underpinned by “sustained revenue growth and cost reductions in core business areas complemented by selectively entering new high-growth markets to unlock additional revenue streams and business models.”

Spark considering retail bond offer

Spark through Spark Finance — the company that carries out the borrowing activities for the Spark group — is considering making an offer of unsubordinated, unsecured fixed rate bonds to institutional and New Zealand retail investors.

The bonds are expected to have a term of 5.5 years and to mature in March 2024. It expects to release full details of the offer on 29 August 2018 and has appointed Westpac as arranger and ANZ Bank New Zealand, together with Westpac, as joint lead managers.

No detail was given of the amount of money it is looking to raise.


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