Stock Takes: The cost of Spark going agile

Spark team members talk with colleagues during a stand-up meeting where post-it notes are being used to show the progress of projects. Photo / Greg Bowker

The cost of Spark's decision to convert its business to an "agile" model has been revealed this week with its annual result.

The telco's net profit rose 13 per cent to $418 million but it also took a $49m hit from its move to the business improvement strategy.

Spark claims to be the first business in New Zealand to fully convert to the tech-inspired agile model which is designed to get people working closely together to prioritise what customers want through delivering a constant stream of new software.

It says around 40 per cent of its business has now moved to the new model with 98 per cent of employees accepting the new agile contracts.

However, that didn't stop the largest part of its expense coming from restructuring at $26m.

A further $12m was spent on getting in outside experts to tell the company what to do.

But the good news was that the cost came in under what the company was expecting to spend — a range of $50m to $55m.

Sparks says moving to the new model has already saved money by reducing its labour costs by $82m to $499m and will save it another $30m in the first half of its 2019 financial year.

Spark shares have fallen since its result was released on Tuesday and closed on $3.90 yesterday.

Lapping it up

Global investor Goldman Sachs has upped its investment in a2 Milk 6.06 per cent to over 7.4 per cent and remains the largest holder in the alternative milk company.

A substantial product holder notice released to the market yesterday shows Goldmans was buying up the company ahead of its annual result this week.

A2 Milk delivered another record profit of $195.7m for the June 30 year — driven by sharp increase in infant formula sales in Australia and China.

The result was up 166 per cent on the previous year's profit of $90.6m, which in turn was triple the year before that.

Outside of Goldmans, Commonwealth Bank of Australia is the second largest shareholder with 5.11 per cent followed by local fund manager Harbour Asset Management at 5.04 per cent.

The largest individual shareholder remains former chief executive Geoff Babidge at 0.34 per cent.

While the stake seems small, it is nothing to sneeze at. At more than $11 a pop his shares could be worth more than $29m.

The result sent the share price higher although the company has yet to regain the heights reached in March of $14.10. Yesterday the shares closed on $11.64.

Taking a share

Online auction giant Trade Me has bought into share investment start-up Sharesies.

Sharesies was launched in May last year with the bid to make share investing accessible to all with a minimum investment of $5.

Since then it has grown to have more than 22,000 investors with over $23 million invested.

Out-going Trade Me boss Jon MacDonald, who delivered a record result of $96.6m this week, said it was always looking out for opportunities to invest in line with its vision to make life better for Kiwis through online experiences they love.

In that spirit, it was making a small investment in Sharesies.

MacDonald said it had got to know the team at Sharesies over the last few months, and thought they had enormous potential.

"We like their ambition of giving someone with $5 the same investment opportunities as someone with $500,000, and we think that making investing more consumer-friendly can do great things for New Zealand while opening up big revenue pools," MacDonald said.

"This is also another step in us building out a vibrant New Zealand online ecosystem that ensures our growth in the long term."

Neither Trade Me or Sharesies would comment on how much of a stake it was.

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