Spark New Zealand Limited · NZX:SPK
Spark New Zealand — H1 FY20 Earnings Presentation
19 slides from Spark New Zealand's earnings presentation, February 2020
Slide 1: H1 FY20 Results Summary
ie Odson, Chief Executive Officer Stefan Knight, Finance Director
Slide 2: Result Highlights
Result Highlights Relentless focus on delivery and execution driving strong financial performance and market momentum. Resulting in highest revenue growth in three years, up $70m or 4.0% on prior year, driven by: • Stand-out performance in mobile, securing 5.5% growth in high-margin mobile service r
Slide 3: Creating a wireless future: 5G update
Strategy Update Creating a wireless future: 5G update Investment in network innovation enabling efficient growth in data capacity and first-to-market launch of 5G wireless broadband services First-to-market with 5G in Early access 3.5GHz 5G Well positioned for November 2019 spectrum imminent – progr
Slide 4: Financial Summary
Financial Performance Financial Summary Revenue momentum – created by successful delivery of our strategy – fuelling EBITDAI and earnings growth EBITDAI of $500m, up $11m or 2.2% on prior year, benefiting from improved market momentum across all key product lines. +$70m Revenue up $70m or 4.0% on pr
Slide 5: Financials
Financial Performance Financials H1 FY19 H1 FY20 CHANGE $m $m Operating revenues 1,754 1,824 4.0% Operating expenses (1,265) (1,324) (4.7%) EBITDAI 489 500 2.2% Finance income 18 18 - Finance expense (40) (46) (15.0%) Depreciation and amortisation (245) (234) 4.5% Net investment income - (1) NM Net
Slide 6: Revenue
Overall Performance Revenue Positive revenue momentum now evident across all key products; benefiting from improved speed to market, customer experience and product performance Revenue H1 FY19 vs H1 FY20 ($m) Growth in high-margin mobile service 1,840 +4.0% revenue due to successful monetisation of
Slide 7: Operating Expenses
Overall Performance Operating Expenses Benefits of cost management being successfully reinvested in support of current and future revenue growth $29m of cost-out delivered across product costs, labour Operating Expenses H1 FY19 vs H1 FY20 ($m) and other expenses including: • Mobile product costs hel
Slide 8: Cost Management
Overall Performance Cost Management Focus on cost leadership continues to drive operational discipline and create capacity for targeted investments Proven disciplines and delivery approaches $29m of gross savings delivered in H1 FY20, are embedded into our ‘way of operating’ with further savings tar
Slide 9: EBITDAI
Overall Performance EBITDAI EBITDAI growth driven by strong revenue and margin performance across all key products EBITDAI H1 FY19 vs H1 FY20 ($m) Gross margin growth of $26m or 2.7% +2.2% attributable to: 600 • Mobile connection and ARPU growth; • Cloud revenue growth; • Ongoing benefits of wireles
Slide 10: Mobile
Product Performance Mobile Market-leading revenue growth the result of excelling across all aspects of mobile proposition Percentage growth in mobile service revenue versus Secured ~90% of total market growth(1) in high-margin prior year(1) service revenue during H1 FY20 – up $22m or 5.5% on prior 6
Slide 11: Broadband
Product Performance Broadband Continued gross margin improvement, despite connection share loss, in a highly competitive and saturated market(1) Connection mix by input type Mixed results in achieving dual focus of margin growth 10 0% and holding market share: 80 % 45% 58% 70% • Gross margin growth,
Slide 12: Cloud, security and service management
Product Performance Cloud, security and service management Ongoing penetration of cloud services continues to underpin revenue growth, with H1 FY20 also benefiting from completion of previously delayed customer transitions Revenue growth of $24m or 12.3% fuelled by: Cloud, security and service manag
Slide 13: Voice and other managed services
Product Performance Voice and other managed services Significant moderation in the rate of voice and other managed service revenue decline Total voice revenue by customer segment ($m) Absolute decline in voice and other managed 300 services revenue of $26m significantly improved on 267 prior year de
Slide 14: Capital Expenditure
Overall Performance Capital Expenditure $17m reduction in spend on prior year. Consistent with targeted reduction in full-year capital envelope of ~$47m, from $417m to ~$370m(1) H1 H1 Capital expenditure ($m) Mobile network investment in support of increased FY19 FY20 capacity and initial roll-out o
Slide 15: Free cash flow
Capital Management Free cash flow Remain confident in ability to generate sufficient H2 FY20 free cash flow to deliver full-year free cash flow of ~ $460m; reliant on three key outcomes 1 2 3 FY20 EBITDAI growth is within FY20 capital expenditure is in- Working capital grows by no guidance line with
Slide 16: Net debt
Capital Management Net debt(1) Net debt grew by $210m during H1 FY20 but is expected to reduce during H2 FY20, due to improvement in free cash flow generation as heavy H1 investment abates Movement in net debt during H1 FY20 ($m) 1,550 Expenditure on business acquisitions and 3 41 13 minority invest
Slide 17: Guidance
FY20 Outlook Guidance(1) FY20 guidance unchanged FY19 Actual FY20 Guidance(1) Change to previous FY20 Guidance EBITDAI $1,090m $1,100m to $1,120m - Capital $417m ~$370m - expenditure(2) Ordinary 22.0c Dividend per (75% imputed) Ordinary 25.0c - share Special 3.0c at least 75% imputed (75% imputed) (
Slide 18: Indicators of Success
FY20 Outlook Indicators of Success Measures Target Status Revised Target 30 June 2020 30 June 2020 Consumer and small business iNPS 8 point lift Ahead Build customer intimacy Growth in mobile and broadband change 30% Ahead transactions completed online Go-live of 5G for America’s Cup (subject to Rea
Slide 19: Disclaimer
Disclaimer This announcement may include forward-looking statements regarding future events and the future financial performance of Spark New Zealand. Such forward-looking statements are based on the beliefs of and assumptions made by management along with information currently available at the time