Spark has cut its underlying profit outlook and dividend payment and plans to sell its stake in the Connexa towers business. Photo: RNZ / Kim Baker Wilson
Digital and telco services company Spark is selling its stake in the Connexa towers business and considering the sale of other non-core assets, as it looks to offset weak consumer spending and business investment.
The company also cut its full year underlying profit outlook and dividend payout by 9 percent, with capital spending down by up to $65 million, alongside "materially higher cost reductions over a multi-year period."
Spark chair Justine Smyth said the company was also looking to attract investment to support the expansion of its data centres.
"We recognise the need to secure alternative long-term funding options outside of free cash flow, to support our development pipeline, and we are currently exploring capital partnerships to achieve this."
Updated guidance for the 12 months ending June 2025
- Underlying profit guidance down $1.12b to $1.18 billion, from $1.165b to $1.220b
- Dividend guidance 25 cents per share from 27.5 cps
- Capex guidance updated to about $415-$435m, from $460-$480m
"The board and management acknowledge that our current financial performance falls short of what is acceptable, and we understand the disappointment our shareholders will be feeling," Smyth said.
"The challenges we are facing are both cyclical and structural. Weak business investment and consumer spending continue to curtail growth and squeeze margins.
"At the same time, we are undertaking a significant transformation of our enterprise and government division to address structural segment challenges."
Mobile service revenue was expected to be largely flat year-on-year compared to the original forecast for 3 percent growth.
Enterprise and government connections remained stable during the quarter, but average revenue fell with "increased price erosion at contract resigning" and "aggressive competitive" pricing.
While a drop in IT services had stabilised, profit margins were down.
It said net labour cost reductions of $50m a year were on track, and it was working to deliver a $30m net cuts to operations.
"Looking forward, we are resolutely focussed on resetting performance in our core, expanding the SPK-26 Operate Programme to significantly reduce our cost base and offset market headwinds, and simplifying our portfolio," Smyth said, adding that Spark was also looking for a buyer for its stake in mobile towers business Connexa.
"While a transaction is not yet certain, the strong levels of interest we have received is reflective of the high quality of the Connexa business."
An update on the review of non-core assets would be announced no later than when Spark releases its first half results, in February, or sooner if there was a material change.
Spark chief executive Jolie Hodson said the company had a lot of work to do, but demand for data had continued to grow and its brand health was strong.
"We recognise that we have a lot of work ahead of us to win back the confidence of our shareholders, and we are committed to that work," Hodson said.
She said Spark will provide more details on the benefits and associated transformation costs of the expanded SPK-26 Operate Programme at its interim results in February.