Focus on mobile drives Spark profit boost

Spark half year profits rose to $158 million from $145 million last year. Photo: Dean Purcell.

Six months ended December 31
$158 million net profit, up from $145 million.
$1.72 billion revenue, down 4.1%.
22c a share annual and 3c special dividend planned.

A focus on growth in mobile has paid off for Spark, lifting the listed telco's first-half profit by 9 per cent.

Managing director Simon Moutter said the mobile growth had offset the declining sales of the fixed-line business.

"The business is in the best shape it has been in in many years," Moutter said.
Net profit rose to $158 million, or 9c per share, in the six months ended December 31, from $145 million, or 8c, a year earlier, the Auckland-based company said.

Earnings before interest tax, depreciation and amortisation (ebitda) gained 4.3 per cent to $455 million, as revenue fell 4.1 per cent to $1.72 billion. Forsyth Barr analyst Blair Galpin expected ebitda of $490 million on sales of $1.71 billion.

While interest in customers connecting to fibre was "booming", Moutter said he remained "cautious about what is still a very clumsy customer experience".

The broadband market was difficult and competitive, Moutter said, with 80 active players.
Moutter discussed an evolution of digital television medium Lightbox, which could include a partnership with content providers, instead of buying all its content.

"The market is already very different to when we launched Lightbox 18 months ago, and we expect that pace of change to continue," he said.

Prepay sim cards will be less of a focus for Spark in the future.

The prepay business involved a "churn" of customers who swapped through different prepay providers and the company could pull out of the market, Moutter said.

Mobile revenue climbed 12 per cent to $563 million, while IT services was up 9.2 per cent to $322 million.
Voice calling revenue dropped 30 per cent to $337 million in the half, the first time it's dropped below broadband revenue, which was up 4.6 per cent to $339 million.

Moutter said the board's intention was still to pay annual dividends of 22c per share and special dividends of 3c per share.

The company affirmed guidance for ebitda to rise up to 3 per cent in the 2016 financial year.

The company's shares closed up 6.5c yesterday at $3.27.

The stock is rated an average 'hold' by eight analyst recommendations compiled by Reuters, with a median target price of $3.18.

- additional reporting BusinessDesk