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Hamish Fletcher

Business reporter for the NZ Herald

Spark boss sees brighter future

Moutter says telco expects earnings to grow this year

Spark chief executive Simon Moutter says plans to transform the business are ahead of schedule. Photo / Dean Purcell
Spark chief executive Simon Moutter says plans to transform the business are ahead of schedule. Photo / Dean Purcell

Spark expects its operating earnings and profit will return to growth this financial year and managing director Simon Moutter said the company's plan to transform its business is ahead of schedule.

Moutter last year unveiled a plan to transform the company formerly known as Telecom from a traditional telco to a "digital services" business.

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This involved stabilising revenue while reducing costs in the 2014 and 2015 financial years and driving revenue growth from the 2016 financial year.

"We're a little ahead of that plan ... and we're aiming to deliver improving results from here forward," Moutter said when delivering Spark's full-year results for the 12 months to June 30.

Spark reported that its full-year profit from ordinary activities, excluding discontinued operations, was up 19.8 per cent to $321 million.

But when a one-off restructuring charge is removed from 2013 numbers, this year's net earnings from ongoing operations were down 7.7 per cent, the company said.

Spark reported a statutory net profit of $458 million, up 94.1 per cent for the 12 months to June 30, when taking into account AAPT, the telco business it sold across the Tasman this year.

Spark's operating revenue, from continuing operations, was down 2.6 per cent to $3.64 billion for the year.

Operating earnings (ebitda) were $936 million, up 7.1 per cent. Adjusted operating earnings were down 4 per cent.

Investors gave a muted response to the result, with Spark's shares trading at $2.86, down 5c, or 1.72 per cent.

Revenue is predicted to continue to slowly decline in the present financial year.

Spark, however, expected to record "low single digit growth" in operating earnings and also hoped to grow net earnings, Moutter said.

First NZ Capital analyst Greg Main said the company appeared to be hitting its targets, which management could take some credit for.

"The jury's still out on how long it takes for them to turn around the top-line.

"They've still got quite a bit of work to do," Main said.

Forsyth Barr's Blair Galpin saw no big surprises in yesterday's full-year result.

He said there were some questions over Spark relying on wholesale copper broadband prices coming down for its earnings forecast.

These Commerce Commission-imposed cuts are due to come into force in December but could be changed again next year following a wider review.

Galpin accepted the view that the commission was unlikely to backdate its decision - and make telcos return any of the price drop - but he said it was unclear whether the wholesale charge would bounce back up.

Spark's mobile connections jumped by 191,000 over the year to June and the company now has more than two million mobile customers.

Mobile revenue was "strongly up" with 6 per cent growth for the year.

Spark estimates it holds around 39 per cent of the mobile market by revenue, up 2 per cent in this over the 12 months to June 30. The company wants to grow its share by 1 to 1.5 per cent in the current financial year.

Broadband revenue growth was down 3.5 per cent and Spark was "hanging on" to its market share, holding around 47 per cent as at June 30.

Spark gained 20,000 broadband customers over the period, with 669,000 at the middle of this year.

IT services revenue grew by 5.8 per cent and Spark's share of this market segment grew slightly in the year, by the company's own estimates.

Moutter said the early impact of this month's name change had been "very positive".

"There are positive signs that customers are receiving the new brand well," Moutter said.

Spark raised its dividend per share by 1c for the six months to June 30 and anticipates delivering 18c a share in the present financial period.

See the Spark financial results presentation here:

- NZ Herald

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