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"We're at a turning point" - Spark pleased despite profit drop

18 Aug 2016

Spark’s digital transformation strategy looks to be paying off, with the company releasing what it says is ‘pleasing’ financial results despite a slight loss in operating revenue.

The telecommunications firm says mobile and platform IT services now outweigh declining areas of the business, which Spark chairman Mark Verbiest says reflects a turning point for the company.

“We are very pleased with the progress made by Spark in the financial year ended 30 June 2016,” Verbiest says.

“We are now well into the next phase of our ongoing business transformation, shifting focus from building the solid foundation of digital capabilities needed for future growth, to delivering on the opportunity provided by that foundation,” he explains.

Verbiest says growing areas of the business such as mobile and platform IT services now outweigh declining areas such as traditional fixed line voice and legacy data services. He says this signals a successful repositioning of the business.

“We signalled our intention to increase dividends last year and we’re pleased to confirm an ordinary dividend of 22 cents per share and a special dividend of 3 cents per share for FY16,” Verbiest explains.

While total operating revenues and other gains of $3.497 billion were down, once re-based for prior year divestments, changes to regulated access charges in Wholesale and the acquisition of the Computer Concepts Limited Group (CCL Group) in the current year, the total operating revenues and other gains were up 2.5% on the previous year.

Verbiest says this increase was fuelled largely by solid growth in mobile and platform IT services.

The company has reported a net profit of $370 million, a decline of 1.3%, with revenues coming in at 3.5 billion.

Spark Managing Director Simon Moutter was pleased with progress yet upfront about areas that need to improve.

“We are clearly winning in the mobile market. Spark’s mobile revenues were up 11.3% to $1.134 billion for FY16, well ahead of Vodafone’s recently published estimate of $1.065 billion,” he says.

Despite the progress Moutter says the Sky-Vodafone merger is a key concern for the company.

“In media, while we’re generally supportive of market consolidation where it leads to better outcomes for consumers, Sky’s monopoly in premium sports content - and the lack of a viable and credible wholesale market that provides better online, on-demand choices for New Zealanders to watch their sports - is a key concern,” he says.

“We believe a merged Sky/Vodafone will be able to leverage its monopoly power in the sports content market, to the detriment of consumers.”

Spark has officially opposed the Sky-Vodafone merger and made a submission to the Commerce Commission.

Moutter says when it comes to broadband, Spark’s focus on higher-value plans and adding customer value through digital services, such as Lightbox and Morepork, has helped a 5.4% growth in revenues. He says there has also been ‘excellent’ growth in business IT services revenue, up 11.1%.

Verbiest says Spark is well positioned for long-term success.

“We’ve transformed Spark from the ground up. More customers are choosing us. We have a sound long-term strategy in place, a strong FY17 game plan and proven execution skills,” he explains.

“We’re determined to do all we can to play an even bigger role in New Zealand’s digital future and be truly useful for our customers and for New Zealand,” Verbiest says.

“The reason is simple. If we help New Zealanders and New Zealand businesses succeed, Spark will also succeed. We won’t be slowing down over the coming 12 months.

“For shareholders, we are looking forward to the 2017 financial year and to raising our game again,” he adds.

“The financial results for this past year support the Board’s view that a return to long-term, sustainable growth is realistic and achievable.”

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