Spark customers are unlikely to recieve any compensation following a service outage yesterday. Photo / File
Spark customers are unlikely to recieve any compensation following a service outage yesterday. Photo / File
Spark managing director Simon Moutter has described today's half year financial release as a "steady as she goes" result.
Net profit fell 12.7 per cent to $147 million and revenue dipped by 2.7 per cent to $1.79 billion.
Moutter said the results were largely expected.
"The half year underlying performance is broadly in line with where we planned it to be internally and we do expect our second half earnings to grow compared with our first half earnings and relative to the second half of the last financial year," Moutter said, adding that the reduction in EBITDA, down 3.5 per cent, could be attributed to two non-recurring costs from rebranding and a significant blip in reorganisation costs in December.
Despite the decline in first half figures, Moutter said the continuing confidence in the company had enabled the directors to declare a half year dividend of nine cents per share.
Spark said it had seen continued growth in "good quality" mobile connections - up 108,000 this half, and that it was "gaining on the competition", but with mobile revenue up just 2.4 per cent, this had yet to translate into ARPU - average revenue per user.
"[We've seen a] strong performance from the spark home mobile and business division and still a work in progress in the spark digital, where we are part way through the strategic repositioning of that division," Moutter said. "There's very solid growth in mobile connections but somewhat muted in terms of revenue impact which is illustrative of the level of competition in the mobile market today."
Moutter said the company's digital strategy was "resonating strongly" with customers, but was reluctant to comment specifically on Lightbox.
"We will not be providing any indication of subscribers or ARPU's [for Lightbox]," he said. "It is a highly competitive market developing out there and at this time we are not prepared to provide those benchmarks that enable our competitors to triangulate against how were doing."
Despite this, the company said it was increasing its investment in the internet TV service, from an estimated $20 million at its full year announcement, up to $35 million, with around $5 million of this as capital expenditure. Moutter said he would update the market further at its full year result announcement.
"We do have some metrics in mind and we'll provide more colour on that at the full year when I tell you exactly where we're tracking but it's a fast changing market and it means we have to adjust quickly to what the trends are and what the consumers want and are willing to pay for," Moutter said. "[We're going to] keep our options open and follow what works here over the next two to three years."
He estimated Spark's mobile market share to be around 40 per cent by revenue, and said that continued investment in its 4G network was important if it was to eventually take over as the country's number one mobile player.
The transition from the 3G to 4G network had been faster than expected, he said.
"We're very pleased to be in a position where we are overtaking our competitors on 4G and we're reinforcing our global connectivity with the trans-tasman cable," he said.
IT services revenue was also up by 6.9 per cent, boosted by investment in cloud computing and data centres. Competition in the broadband market, which they estimated to be close to 50 per cent market share by revenue, was also highlighted as a factor in the result.
"Our performance in the broadband market also reflected the competitiveness of the market, with Spark New Zealand's share of connections declining slightly," Moutter said. "That said, gains were made in broadband revenue and profitability as we weighted our efforts toward higher-value customers through the introduction of higher-end products and the provision of valued broadband services for Spark New Zealand customers, such as Lightbox."
Simon Moutter, Spark chief executive. Photo / Chris Loufte
The results were in line with analyst predictions with Forsyth Barr's Blair Galpin forecasting a stronger second half, when strategies implemented since December began to flow through the business. He said the focus would be on the second half to buoy the full-year result.
"Effectively in the second half of the year Spark's going to have the full upside from the lower pricing that the Commerce Commission confirmed at 1 December as well as the price increase they pushed through last year which started in February," Galpin said.
A solid 2014 year saw the share price rise by almost 40 per cent. In the company's full year result for 2014 in August, chairman Mark Verbiest said the year had set a good base for 2015 and that the company had an objective to achieve modest earnings growth in the current financial year.
Moutter said the coming six months would see them focus on company growth, adding that Spark was on track to meet full year guidance.
The shares last traded at $3.31, and have gained 6.3 per cent this year.
The stock is rated an average 'hold' according to 10 analyst recommendations compiled by Reuters, with a median target price of $2.91.
- An earlier version of this story referred to the profit at $145m. This figure related to the profit attributable to security or equity holders, an additional $2m was attributable to non-controlling interests, taking the total profit to $147m.
