Spark’s first half profit dips by 4.8 per cent to $157m
Telco reaffirms full-year earnings guidance
Spark’s adjusted net profit fell 4.8 per cent to $157 million for the first half of its FY2024 financial year, but adjusted ebitdai was up and the telco reaffirmed its full-year earnings and dividend guidance.
Numbers for the first half of FY2023 were inflated by the sale of 70 per cent of Spark’s cell tower network to a Canadian investment fund for $911m.
Without adjusting for that windfall, net profit was down 81.8 per cent.
“NPAT [net profit] is further adjusted for the tax effect of the net gain on sale of the Towerco transaction and the Spark Sport provision [a previously flagged $52m] totalling $168m,” Spark said.
In July last year, Spark offloaded the bulk of its sports streaming operation to TVNZ, with the telco pledging to pay the tab for rights through to 2028.
Similarly, ebitdai (earnings before interest, tax, depreciation, amortisation and impairment) fell 49.1 per cent to $530m, but was up 3.9 per cent on an adjusted basis.
And while revenue fell 22 per cent to $530m, it was up 3.9 per cent after stripping out last year’s tower proceeds.
A first-half dividend of 13.5 cents per share was declared and Spark reaffirmed its full-year dividend target of 27.5cps.
As analysts expected, mobile was the strong point, with mobile services revenue up 6.3 per cent to $510m.
Average revenue per customer per month (arpu) increased by 55c, ahead of the analysts’ pick of 22c. On a conference call, CFO Stefan Knight put the increase down to “strong demand for data and the impact of price increases”.
Broadband revenue was down 1.3 per cent to $309m.
Spark said the number of its broadband customers on fixedwireless plans, which are higher margin because they cut Chorus out of the loop, increased from the year-ago 29 per cent to 31 per cent.
Spark said cloud had returned to growth but that total IT services revenue was flat at $345m.
Under that headline number, number, data centre revenue was up 38.5 per cent to $18m, while “high-tech”, including the telco’s internet of things (IOT) and AI operations, was up 12.9 per cent to $35m while digital health — a standout performer last year — was down 8.7 per cent to $42m “primarily due to lower public sector demand”.
On the conference call, chief executive Jolie Hodson said Spark’s upgraded Takanini data centre was now online and generating revenue.
The telco was also lining up a North Shore property for a 10MW facility, with potential to add up to 70MW — which would put it on a roughly equal footing to the local operations of CDC, the fast-growing data centre operator in which One NZ owner Infratil has a half-share.
Net debt increased from $798m in H12023 to $1.56b as tower sale proceeds were returned to shareholders and Spark invested in data centres and standalone 5G.
Spark shares closed on Tuesday at $5.08.
The stock is it up 1.6 per cent over the past 12 months.
Ahead of yesterday’s results, Morningstar had a three-star rating and a $4.90 fair valuation estimate.
Jarden had a neutral rating and a 12-month target of $4.95.
And Forsyth Barr had a neutral rating and a target price of $5.30.