Spark New Zealand (SPK) H2 2024 earnings summary

Executive summary

• FY24 performance was below aspiration, with revenue, EBITDAI, and NPAT declining due to recessionary conditions and intensified competition, but mobile service revenues surpassed $1 billion and IT products, data centres, and high-tech segments grew.

• Customer satisfaction improved by 7 points, employee engagement remained strong, and sustainability benchmarking stayed in the top quartile.

• Economic conditions impacted IT services demand, intensified competition in business mobile, and led to lower device sales.

• Cost base could not be adapted quickly enough to changing demand, with benefits from cost reduction programs expected in FY25.

• The board approved a total FY24 dividend of 27.5 cents per share, 100% imputed, with the Dividend Reinvestment Plan reinstated for H2 FY24.

Financial highlights

• Adjusted revenue declined 1.2% year-over-year to $3,861 million; reported revenue fell 14.0%.

• Adjusted EBITDAI decreased 2.5% to $1,163 million; adjusted NPAT fell 21% to $342 million; reported NPAT declined 72.2% to $316 million, impacted by prior year one-offs and a $26 million non-cash tax adjustment.

• Free cash flow dropped 32.5% to $330 million, mainly due to lower EBITDAI and higher interest, lease, and non-cash costs.

• CapEx was $518 million, flat year-over-year, with over two-thirds invested in network and digital infrastructure.

• Net debt to EBITDAI ratio increased to 2.1x, above the A- credit rating guideline of 1.7x; gearing at 60%.

Outlook and guidance

• FY25 guidance: EBITDAI of $1,165–$1,220 million, CapEx of $460–$480 million, and dividend of 27.5 cents per share (75% imputed).

• Targeting ~3% mobile service revenue growth, ~15% data centre revenue growth, and ~20–25% high-tech revenue growth in FY25.

• Cost reduction targets: $50 million net labour and $30 million net OpEx reduction.

• Free cash flow expected to grow to $400–$440 million in FY25, with a plan to return net debt to EBITDAI to ~1.7x.

• Focus on digital infrastructure investment and capturing data centre market growth.