Spark blames Southern Cross Cable for drop in profits

Spark’s half-year profit fell 5.6 per cent to $153m in the six months to December 31 as it went without its usual profit-share dividend from the Southern Cross Cable.

That was short of the $162m picked by Forsyth Barr, which rates the telco neutral.

Shares were down 2.48 per cent to $3.92 in afternoon trading. The stock is still up 17 per cent for the year.

Ebitdai (ebitda plus investment income) increased 7.2 per cent or $33m to $489m. Revenue slipped $7m or 0.4 per cent to $1.75b.

For the same period last year, Spark booked a Southern Cross Cable dividend of $28m, which itself was well down on the profit Spark has usually pulled from the joint venture.

CFO David Chalmers said it was possible no full-year Southern Cross dividend could be paid either.

Spark had forecast a $10m-$20m Southern Cross dividend for 2019 against $50m, $61m and $66m in the three prior years.

The Southern Cross Cable, in which Spark is the major shareholder, has faced its first trans-Pacific competition this financial year with the launch of the Hawaiki Cable, backed by rich-listers Sir Eion Edgar and Malcolm Dick.

Southern Cross, which joins Australia, New Zealand and the US, has also faced competition from the new Tasman Global Access cable linking Auckland and Sydney, co-owned by Spark, Vodafone and Telstra.

Spark and fellow Southern Cross shareholders Verizon and Optus are in the process of raising funds for a new trans-Pacific cable, dubbed Southern Cross Next.

Spark did not reveal any content rights costs or other expenses associated with its 2019 Rugby World Cup bid and broader foray into sports as it takes on Sky TV.

“We are well on track with our planning for the Rugby World Cup in September,” managing director Simon Moutter said.

However, Spark Sport costs will not be detailed until the company’s full-year earnings report, expected in February. The board declared an interim dividend of 12.5 cents per share, comprised of an 11 cent ordinary dividend and a 1.5 cent special dividend.

Spark’s agile restructure saw a flatter management approach adopted as the company was reorganised into small, crossfunctional teams.

Along with layoffs and more automation, the company says its restructure will add to earnings from next year.