Net profit was down 8.6 per cent to $384 million, with the fall pinned on higher depreciation and tax expenses.
A 12.5 cent per share dividend was declared for the second-half, taking the full-year dividend to 25cps in line with expectations.
Fixed-wireless miss
Forsyth Barr, which had an outperform rating and $5 12-month price target going into today's report, said fixed-wireless would be a key point of focus.
Spark set the ambitious target of adding 40,000 fixed-wireless customers during FY2021. The segment is prized by Spark, Vodafone and 2degrees because using mobile technology to deliver home or small business broadband cuts Chorus - and its clip of the ticket - out of the loop.
But the telco reported today that it achieved less than half its target, with net additions of just 19,000 fixed-wireless customers for the year - representing a three-point gain that means 25 per cent of its fixed-broadband customer base is now on the technology.
But it said it remained committed to its aggressive schedule of shifting 30 to 40 per cent of its broadband customer base to fixed-wireless by FY2023 (Vodafone NZ says it wants to get 25 per cent of its base onto fixed-wiress within two to three years, while 2degrees recently set a 20 per cent target).
Chief executive Jolie Hodson said the fixed-wireless miss was tied, in part to a slowing broadband market overall - which, in turn, could be pinned, in part, by immigration being choked off during the pandemic. Spark could still hit its 30 to 40 per cent target fixed-wireless target by FY2023, she said, as its 5G rollout accelerated, but she now anticipated the telco would be at the lower end of that range.
The fixed-wireless target for FY2022 has been set at a more modest 15,000 to 20,000
Chorus recently complained to the Commerce Commission about what it sees as the retail telco's overly aggressive marketing of fixed-wireless - which resulted in the regulator sending a warning letter to all market participants.
There was also a missed target at the philanthropic end of the spectrum, where Spark under-achieved its goal of getting its $5 per month Skinny Jump broadband service into 20,000 low-income homes via a partnership with the non-profit The Digital Inclusion Alliance Aotearoa. But the service still got to just over 15,000.
Broadband squeezed, mobile, security and cloud grow
Broadband revenue fell 1.5 per cent to $670m as the total number of connections fell from 709,000 to 701,000, but mobile revenue increased 0.5 per cent to $852 million as Spark added a net 56,000 pay-monthly customers, and cloud and security revenue was up 5.5 per cent to $443m.
Although it added more customers in the higher-yielding on-contract segment, Spark's total number of mobile connections slipped from 2.52m to 2.42m (Vodafone NZ has around 2.5m and 2degrees 1.6m).
Spark Sport was included in an "Other" category where revenue increased to $137m from FY2021's $130m, and gross margin improved from the year-ago $48m to $70m (the "Other" category also included Spark's nascent Internet of Things (IoT) business and its Qrious big data unit).
As flagged, Spark received no profit-share payout from Southern Cross Cables. The Kiwi telco's stake in the trans-Pacific submarine cable operator fall from 50 per cent to 38 per cent as Telstra took a minority stake. The Aussie telco's buy-in has been one of the major funding mechanisms for the new US$300m Southern Cross Next cable, due to go online next year. Southern Cross dividends - which have historically run to up $60m per year - are set to resume in FY2023.
Guidance
Spark also said today that it had committed an extra $35m to accelerate its 5G rollout. The telco said that would take its mobile network upgrade spend to $125m. Total capital expenditure for FY2022 was forecast to rise from FY2021's $354m to $400m.
Ebitdai (reported at $1.124b for FY2021) was projected to come in between $1.130b and $1.160b.
The dividend was forecast to stay at 25cps.
Hodson said half of Spark's mobile sites will have been upgraded to 5G by the end of the financial year - which she sees as one of the keys to the telco hitting its fixed-wireless target.
The CEO said Spark would also undertake a major upgrade of its Takanini data centre in a bid to further boost its cloud business. Spark has not put a dollar-figure on the upgrade, but Hodson said it would turn the Takanini server farm into a 10 megawatt facility "Which will make it the largest in New Zealand".
This is, if it's completed ahead of a clutch of new "hyperscale" or giant data cetnres being constructed around northwest Auckland by half Infratil-owned CDC (which is building two, each rated at 10MW, CDI (ditto) and Microsoft, which has yet to disclose detailed specs. (Hyperscale data centres are typically classed by their peak power load, in megawatts.)
Jarden institutional research head Arie Dekker called Spark's full-year numbers "a very solid result in the Covid environment".
On a conference call, Dekker asked about growth plans for Spark Sport, given the last major code up for grabs for several years - rugby league - had gone to Sky.
CFO Stefan Knight said Spark Sport would seek to expand its content via partnerships, which could involve an existing rights holder using Spark's streaming platform and the telco taking a clip of the ticket.
Spark gives its phone and broadband subscribers a $5 discount on the $25 a month Spark Sport. Dekker saw more head-room for a larger discount to keep its customers loyal or attract new ones.
Sky TV, which recently entered the broadband market in partnership with Vocus (owner of Orocon and Slingshot) is offering a heavy a Sky Broadband discount to those who stay loyal to its pay-TV service.
Hodson said at this early stage in the delta outbreak, there was no material effect on FY22 earnings.
Hodson said although Spark had missed its fixed-wireless target, there had been upward momentum in the final quarter. Analysts expect Spark, Vodafone and soon 2degrees' 5G rollouts to make the broadband technology more appealing.
Spark shares were up 0.5 per cent to $4.75 in early trading, for a market cap of $8.83 billion. The stock is down 5.4 per cent for the year.
