New Zealand’s Spark has reported flat revenue and profit growth in the first year of its transformation program. But CEO Jolie Hodson hailed its progress in cutting debt and improving the performance of its core connectivity business.
She said Spark’s focus had been on turning its SPK-30 cost-cutting and revitalization strategy “into better outcomes for our customers and measurable performance improvements for our shareholders.”
Underlying net income fell 1% to 225 million New Zealand dollars (US$134 million), with revenue flat and EBIDTAI (earnings before interest, taxes, depreciation, amortization and impairment) down 2.4%.
In a stock exchange filing, it said unadjusted revenue rose 6% to NZ$3.9 billion ($2.3 billion), with net profit up 92% to NZ$499 million ($297 million) – a result of the sale of 75% of its data center business to Pacific Equity Partners in January. The transaction generated NZ$462 million in net proceeds this year that helped pay down debt, the company said.
It cut core debt by 35% to NZ$898 million ($535 million) while shaving a percentage point off borrowing costs. It also reduced its debt to EBITDAI gearing to 1.7x, down from 2.2x a year ago.
Strategic review of digital business
The telco is now weighing a possible sale of its digital business, which includes its cloud and IT services operations. It has appointed an external adviser to carry out a strategic review into its non-core businesses.
Under the SPK-30 plan, unveiled a year ago, Spark has set mobile and broadband connectivity as its primary businesses. Hodson pointed to the stronger performance of the mobile segment, which grew 4.4%, with service revenue returning to growth and postpaid ARPU rising 3.6%.
But enterprise mobile business further declined, and service revenue sank 7% under heavy competitive pressure, the company said.
Broadband sales dropped 2%, also due to price competition, although gross margin grew. Total broadband connections contracted 4.9%, but Hodson said the fixed-line business could expect a boost this year from a fixed-wireless refresh.
She said Spark had made progress in strengthening its fundamentals and was focusing investment on the areas that matter most to customers, in particular network leadership and the customer experience. “We’re delivering structural productivity improvements, growing free cash flow, building employee engagement, and maintaining a strong license to operate,” Hodson stated.
Spark’s NZX stock closed 6.4% higher in Thursday trading.
