Spark New Zealand (SPK) H2 2024 earnings summary

Executive summary

• FY24 was challenging with declines in adjusted and reported revenue, EBITDAI, and NPAT due to recessionary conditions and intensified competition, but mobile service revenues surpassed $1 billion for the first time, and IT products, data centres, and high-tech segments grew.

• Economic headwinds, public sector spending cuts, and lower consumer demand impacted IT services and device sales, with cost reduction benefits expected mainly in FY25.

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

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

• FY24 performance was below aspiration, with growth targeted in FY25 as the SPK-26 Operate Programme accelerates.

Financial highlights

• Adjusted revenue declined 1.2% year-over-year to $3,861 million; reported revenue fell 14%.

• Adjusted EBITDAI decreased 2.5% to $1,163 million; reported EBITDAI dropped 32.5%.

• 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.

• FY24 capex was $518 million, flat year-over-year, with over two-thirds invested in network and digital infrastructure.

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, 20–25% high-tech revenue growth, 15% data centre revenue growth, and stabilization in IT services.

• 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.