Spark New Zealand Limited (SPKKY) H1 2025 Earnings Call Transcript

2025-02-20 23:54:13 ET

Spark New Zealand Limited (SPKKY)

H1 2025 Earnings Conference Call

February 20, 2025, 5:00 PM ET

Company Participants

Jolie Hodson - Chief Executive Officer

Stewart Taylor - Chief Financial Officer

Conference Call Participants

Entcho Raykovski - Evans & Partners

Arie Dekker - Jarden

Kane Hannan - Goldman Sachs

Aaron Ibbotson - Forsyth Barr

Wade Gardiner - Craigs Investment Partners

Phil Campbell - UBS

Brian Han - Morningstar

Lance Reynolds - Aspiring

Presentation

Operator

Thank you for standing by. And welcome to the Spark New Zealand HY 2025 Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to Jolie Hodson, CEO of Spark. Please go ahead.

Jolie Hodson

Thank you. Kia ora koutou katoa. Good morning, everyone. Thank you for joining us today for Spark’s Half Year Results for the period ended 31 December, 2024. This morning I’ll provide an overview of our results and I’ll then hand over to our CFO, Stewart Taylor, who’s recently joined the business, to speak to our financial performance in more detail before we move to Q&A.

So before we turn to the first half results, as you would have seen from our market disclosures this morning, we’ve updated FY 2025 EBITDA guidance. So I’ll start by providing some context regarding this change. So when we updated the market in October we outlined that we’re experiencing one of the longest and deepest recessionary periods in recent history. Since that time we’ve seen no improvement in these conditions and while there has been movement on monetary policy, this has yet to flow through to any meaningful change in consumer or business spending.

As a result there’s been further deterioration in the performance of our Enterprise and Government division, which has been impacted by spending cuts, Mobile fleet reductions across government and businesses, changes in product mix and aggressive price competition in Mobile. This has resulted in us reducing FY 2025 adjusted EBITDA guidance to $1.04 billion to $1.1 billion. This excludes the anticipated benefit from the gain on the sale of Connexa of $66 million and the FY 2025 non-recurring transformation costs of approximately $45 million to $50 million. We know our shareholders will be rightly concerned about the ongoing headwinds we are facing. We’re taking decisive action to improve that performance and I’ll spend time this morning outlining these plans and our progress to-date in some more detail.

Before I do that I will first focus on Slides 3 and 4 to summarize our H1 performance. Reported revenue declined 1.9% to $1.93 billion driven by Mobile, IT services and the continued decline of legacy Voice and partially offset by growth in Mobile devices, cloud, data centers and IoT.

Reported EBITDA declined 20.9% to $419 million driven by lower IT services project activity, the mixed shift from private to public cloud and the supply cost inflation. Reported NPAT declined 77.7% to $35 million due to lower EBITDA and the high depreciation and amortization costs.

In FY 2025 we will recognize the non-recurring cost transformation of $45 million to $50 million with $29 million reported in this half one result related to the net labor and OpEx benefits we will deliver in FY 2025 to 2026. Normalizing for this non-recurring cost, adjusted EBITDA declined 15.5% to $448 million and adjusted NPAT declined 54.3% to $56 million.

Free cash flow increased 67.4% to $77 million when including working capital and growth CapEx free cash flow improved further against the prior year by $163 million as we disciplined on that capital expenditure which was down 12% year-on-year and we saw a working capital benefit.

The Board declared an H1 2025 dividend of $0.125 per share consistent with FY 2025 total dividend guidance of $0.25 per share and in recognition of the receipt of the proceeds due in Q3 FY 2025....

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