Spark plans to return $350m to shareholders through an on-market share buyback. Photo: RNZ / Nate McKinnon
Telecommunications company Spark has reported a big first-half profit, reflecting the sale of a major stake in its towers business and growth in mobile services.
It also planned to return $350 million to shareholders through an on-market share buy-back, with between $90 million and $110m to be invested in digital infrastructure and emerging technologies in the second half of the year ending in June.
Key numbers for the six months ended December compared with a year ago:
- Net profit $837m vs $179m
- Revenue $2.53b vs $1.89b
- Underlying profit $1.04b vs $538m
- Interim dividend 13.5 cents a share vs 12.5 cps
Spark made a one-time net gain of $584m from the sale of a stake in TowerCo, while the content sharing of its sport business with TVNZ cost it $52m.
Spark's adjusted revenue, which included the overall one-time net gain of $532m, increased 3.2 percent to $1.95 billion, driven largely by an 8.8 percent increase of $480m in its mobile business.
Its core products and services remained resilient, but higher product costs and increasing competition for broadband customers squeezed margins.
Jolie Hodson Photo: Spark
Chief executive Jolie Hodson said the strong growth experienced in the mobile business was in contrast to challenging broadband and cloud markets.
"Like all businesses in Aotearoa Spark has been navigating uncertain and inflationary economic conditions," she said.
Broadband revenue fell 3.4 percent to $313 million as Spark's FY22 price refresh rolled through.
Spark increased prices in response to cost increases that occurred during the half, with the benefits expected to be seen in the second half.
Cloud, security, and service management revenues also fell 4.5 percent to $214m as the shift to public cloud continued, resulting in reduced prices for private cloud, which hit margins.
"We are focused on accelerating simplification across our business portfolio and maximising our competitiveness in hybrid cloud, which is showing strong demand as customers seek diversification and a transition path to public cloud services," Hodson said.
Managed services revenue was also cut by lower project activity.
On a brighter note, future market business, Spark IoT, reached a milestone of one million connected devices during the half, with connections up 39 percent to 1.2 million and revenue up 21 percent on the year earlier.
Spark Health also maintained revenues, with digital transformation opportunities expected to grow as public sector health reforms progress.
Spark expected its FY23 guidance of $1.185b to 1.225b to come in at the lower end of the range, with a full year dividend guidance of 27 cps.
Capital spending was expected to be in a range of $410m to $520m , which was an increase of between $90m to $110m for digital services and technology to be funded from the proceeds of the sale of TowerCo.
Spark said it would issue its next three-year strategy at an investor briefing on 5 April.
Hodson acknowledged the loss of life and devastation caused by Cyclone Gabrielle, and said Spark was assisting with the recovery and committed to continuing to invest in "adaptive infrastructure."
Spark chair Justine Smyth said Spark's network infrastructure was not significantly damaged in the cyclone but there had been widespread power outages and fibre cuts.
"Looking to the future, we must work closely across sectors to set clear adaptation plans and determine the best way to direct co-investment by government and the private sector into the infrastructure we will need as we face into a more volatile climate," Smyth said.