Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Investor Presentation (March 2021)
53 slides from Spark New Zealand's investor presentation, Mar 24, 2021
Slide 1: Market Release: IT & Managed Services Presentation
MARKET RELEASE 24 March 2021 For personal use only IT & Managed Services Presentation Spark has today released a presentation on IT and Managed Services along with expanded financial disclosures to provide additional detail on cloud, security and service management. Investors and analysts are invite
Slide 2: Media and investor relations contacts
For media queries: For investor relations queries: For personal use only Lucy Fullarton Alastair White Corporate Relations Partner GM Capital Markets +64 (0) 21 070 6197 +64 (0) 21 228 3855 Spark Finance Limited Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
Slide 3: IT & Managed Services Presentation
For personal use only IT & MANAGED SERVICES PRESENTATION GRANT MCBEATH | CUSTOMER DIRECTOR TESSA TIERNEY | PRODUCT DIRECTOR STEFAN KNIGHT | FINANCE DIRECTOR WEDNESDAY 24 MARCH 2021
Slide 4: Executive Summary: Diversified Business, Sustainable Growth
EXECUTIVE SUMMARY: For personal use only DIVERSIFIED BUSINESS, SUSTAINABLE GROWTH With a long history as Telecom New Zealand, Spark is • Spark’s growing IT & Managed Services offering synonymous with telecommunications – and the vast majority is supported by a highly-valuable infrastructure asset po
Slide 5: Sector Overview & Strategy
For personal use only SECTOR OVERVIEW & 3 YEAR STRATEGY
Slide 6: What is IT & Managed Services?
WHAT IS IT & MANAGED SERVICES? For personal use only CUSTOMER NEEDS Cost High-quality, Trusted Cost- Digital trust, Local / effective and Remote and nationwide Access to advice and effective Seamless data privacy regional compliant digital managed global cloud managed technology ‘always on’ and secu
Slide 7: What is IT & Managed Services?
WHAT IS IT & MANAGED SERVICES? For personal use only CUSTOMER NEEDS Cost High-quality, Trusted Cost- Digital trust, Local / effective and Remote and nationwide Access to advice and effective Seamless data privacy regional compliant digital managed global cloud managed technology ‘always on’ and secu
Slide 8: IT & Managed Services represent around 1/3 of group revenues
IT & MANAGED SERVICES REPRESENT AROUND 1/3 OF GROUP REVENUES For personal use only IT & Managed Services, Cloud, $225m ~$1,104m 31% Security, $37m Service Management, $158m Other Business Revenues, 25% Procurement & Partners, $407m Consumer Collaboration, Revenues, 44% $65m Managed Data and Networks
Slide 9: Our IT & Managed Services 3-year strategy
OUR IT & MANAGED SERVICES 3-YEAR STRATEGY For personal use only To be New Zealand’s leading agnostic cloud custodian, bringing the best of private and public cloud together with our service expertise, supported by ‘always-on’ connectivity. HOW WE WILL DELIVER Foundations provided by an infrastructur
Slide 10: The Growth Opportunity
For personal use only THE GROWTH OPPORTUNITY
Slide 11: The market is growing at pace presenting opportunities & challenges
THE MARKET IS GROWING AT PACE PRESENTING OPPORTUNITIES & CHALLENGES For personal use only Businesses were digitising at pace before COVID-19 – this trend has now accelerated. By 2025, 80% of enterprises globally will migrate entirely away from on-premise digital storage, moving to colocation or clou
Slide 12: Spark is well positioned to secure our share of this growth
SPARK IS WELL POSITIONED TO SECURE OUR SHARE OF THIS GROWTH For personal use only • Spark is the only domestic operator who can provide end-to-end IT & Managed Services that incorporates connectivity and mobility. We are best placed to help businesses manage this transformation to the cloud and to c
Slide 13: Growth underpinned by highly valuable infrastructure asset portfolio
OUR GROWTH IS UNDERPINNED BY A HIGHLY VALUABLE INFRASTRUCTURE For personal use only ASSET PORTFOLIO • Increased interest in quality infrastructure assets. • Spark has NZ’s largest and fastest growing set of IoT networks. • Spark has a significant infrastructure asset portfolio. • Our aim is to drive
Slide 14: The growth opportunity
THE GROWTH OPPORTUNITY We are well positioned to capture growth within the IT & Managed Services market For personal use only Spark FY20 Spark FY20 Spark FY20 FY20 Market Spark FY21 to FY23 Revenue Revenue Revenue Revenue ($m) Aspiration - CAGR ($m) Share Growth Cloud Similar rate of growth (but ~ $
Slide 15: Our margins will change as the market evolves
OUR MARGINS WILL CHANGE AS THE MARKET EVOLVES OPPORTUNITIES EXIST TO IMPROVE MARGINS TO OFFSET COMPETITIVE PRESSURE For personal use only Managed data, Cloud, security and service management Procurement and partners networks and services Service management Cloud (including (including Managed data Se
Slide 16: Responding to the hyperscale opportunity
RESPONDING TO THE HYPERSCALE OPPORTUNITY For personal use only The organic growth pipeline and demand for cloud services is attracting hyperscalers to the New Zealand market. We are managing this risk through the following activities: • Focus on end-to-end product and service portfolio beyond cloud
Slide 17: Why Spark?
For personal use only WHY SPARK?
Slide 18: Pursued opportunities and scaled IT & Managed Services over 16 years
WE HAVE ACTIVELY PURSUED OPPORTUNITIES & SUCCESSFULLY SCALED OUR IT & MANAGED SERVICES OFFERING For personal use only OVER THE PAST 16 YEARS Purchase of Divestment of Takanini Data Computer Concepts Ltd MATTR launched Spark Health CCL’s networking Gen-i Davanti consulting Centre Completed (CCL) acqu
Slide 19: A diverse multi-brand portfolio
WE NOW HAVE A DIVERSE MULTI-BRAND PORTFOLIO… For personal use only 1 New Zealand’s most reliable and secure technology backbone for business; network, connectivity, Solutions for verifiable security and ICT services data and digital trust The Spark Group brings together best in class expertise Io
Slide 20: Capability to serve all business segments
WE HAVE THE CAPABILITY TO SERVE ALL BUSINESS SEGMENTS For personal use only PROPOSITION IDEAL CUSTOMER SIZE CHANNEL Spark Direct Reliable and secure technology backbone for Corporate, Enterprise and Higher-touch national channel with account leads business; network, connectivity, security and ICT
Slide 21: Investment with significant differentiation and competitive advantages
For personal use only INVESTMENT • Significant network investment – over $200m WITH SIGNIFICANT in FY20 with approximately one third of this DIFFERENTIATION AND invested in IT & Managed Services and the COMPETITIVE ADVANTAGES remainder in telco networks. • IT & Managed Services investment is a key c
Slide 22: Capability with significant differentiation and competitive advantages
For personal use only CAPABILITY • ‘One stop shop’ for customers – can provide a more WITH SIGNIFICANT integrated experience across products and services. DIFFERENTIATION AND • Extensive telco capability – Managed Data and COMPETITIVE ADVANTAGES Networks, Mobile, Voice, IoT, and leading IaaS and Hyb
Slide 23: Local advantage with significant differentiation
For personal use only LOCAL ADVANTAGE • A market-leading IT service provider brand in NZ and WITH SIGNIFICANT leading player across all major customer segments. DIFFERENTIATION AND • Presence in more than 25 cities and towns with hundreds COMPETITIVE ADVANTAGES of professional service and engineerin
Slide 24: Case Study: Fidelity Life
Financial Services CASE STUDY: FIDELITY LIFE For personal use only When Fidelity Life approached Spark looking to strengthen security as part of it’s cloud transformation, we saw an opportunity to use our multi-brands to deliver a truly innovative solution. CHALLENGE SOLUTION RESULTS • Fidelity Life
Slide 25: Products and Services
For personal use only AND SERVICES PRODUCTS
Slide 26: IT & Managed Services – Product & Services
IT & MANAGED SERVICES – PRODUCT & SERVICES For personal use only CUSTOMER NEEDS Cost High-quality, Trusted Cost- Digital trust, Local / effective and Remote and nationwide Access to advice and effective Seamless data privacy regional compliant digital managed global cloud managed technology ‘always
Slide 27: Cloud including datacentres
CLOUD INCLUDING DATACENTRES For personal use only OPPORTUNITY FOR SPARK TO DIFFERENTIATE BASED ON PROVIDING HYBRID CLOUD SERVICES WITH LOCAL FULL-SERVICE SUPPORT Cloud, security and services management Procurement and partners Managed data, networks and services Cloud Security Service management Pro
Slide 28: Security
SECURITY CUSTOMERS ARE LOOKING FOR SECURITY AS AN OUTCOME OF MANAGED SERVICES RATHER A STAND-ALONE SOLUTION. For personal use only THUS IT SUPPORTS CROSS-SELL FOR OTHER OPPORTUNITIES Cloud, security and services management Procurement and partners Managed data, networks and services Cloud Security S
Slide 29: Service management
SERVICE MANAGEMENT KEY DIFFERENTIATOR FOR SPARK BASED ON LOCAL SCALE AND CAPABILITY For personal use only Cloud, security and services management Procurement and partners Managed data, networks and services Cloud Security Service management Procurement IT Partners Managed data and networks Collabora
Slide 30: Case Study: Client A
CASE STUDY: CLIENT A For personal use only Client A undertook a large-scale migration of its IT to CCL’s Infrastructure-as-a-Service (IaaS) platform. This was part of a broader digital transformation programme spearheaded by Spark, to help the client redefine its customer experience and achieve its
Slide 31: Procurement and partners
PROCUREMENT AND PARTNERS AN AREA WHERE GROWTH HAS BEEN DRIVEN BY COVID-19, AND WHICH SUPPORTS SPARK’S BROADER IT & MANAGED SERVICES OFFERINGS For personal use only Cloud, security and services management Procurement and partners Managed data, networks and services Service management / Colocation Iaa
Slide 32: Managed data & networks
MANAGED DATA & NETWORKS 4.9G AND 5G ARE OPENING UP NEW OPPORTUNITIES TO REPLACE FIXED CONNECTIVITY INPUTS I.E. THE BUSINESS EQUIVALENT OF WIRELESS BROADBAND For personal use only Cloud, security and services management Procurement and partners Managed data, networks and services IaaS & Public Cloud
Slide 33: Case Study: VTNZ
Transport CASE STUDY: VTNZ For personal use only Spark collaborated with VTNZ to deliver an SD-WAN solution for their business that would enable the digital transformation they were looking for 31
Slide 34: Collaboration
COLLABORATION AN AREA OF GROWTH WITH COVID-19 DRIVING DEMAND FOR FLEXIBLE AND COLLABORATIVE WORKING SOLUTIONS For personal use only Cloud, security and services management Procurement and partners Managed data, networks and services Service management / Colocation IaaS & Public Cloud Security Procur
Slide 35: Case Study: Client B
CASE STUDY: CLIENT B For personal use only A digital workplace designed to support a radical shift in the way Client B works, enabling them to connect, create, communicate and collaborate from anywhere, anytime. CHALLENGE SOLUTION RESULTS • Client B had undergone some significant • The solution comb
Slide 36: Summary
For personal use only SUMMARY
Slide 37: Diversified business, sustainable growth
• Spark is a more diversified business than broadly recognised For personal use only • The IT & Managed Services sector is growing strongly both locally and globally, benefiting from supportive macro trends • Spark is uniquely positioned in the market to deliver end-to-end Managed Services DIVERSIFI
Slide 38: Appendix
For personal use only APPENDIX
Slide 39: End-to-end IT & Managed Services offering is locally unique
37 Spark’s end-to-end IT & Managed Services offering is locally unique and creates competitive advantage For personal use only Product Revenue profile Spark’s position Market trends Professionals Services Non-recurring • Significant capability in business transformation • Growing demand for expertis
Slide 40: Improvements to Spark's disclosures
To provide greater insight into Spark’s IT and Managed Services portfolio, we have made a number of improvements to Spark’s disclosures For personal use only Updated classification of CCL Expansion of cloud, security and Introduction of new volume and Introduction of two new power solutions and clou
Slide 41: Impact on Spark's financial disclosures
The resulting impact on Spark’s financial disclosures is summarised below and is provided in more detail in the accompanying detailed financial workbook For personal use only Previous Disclosure Updated classification Expansion of cloud, New Disclosure of CCL solutions and security and service cloud
Slide 42: Glossary
Glossary Term Definition For personal use only Co-location (co-lo) Co-location refers to providing space in datacentres for customers' equipment and servers Datacentre Datacentres are specialised, centralised facilities where computing and networking equipment is housed The tier rating for a datacen
Slide 43: For personal use only
For personal use only
Slide 44: Group result - reported
Spark New Zealand Group result - reported H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Operating revenues and other gains 1,754 1,779 1,824 1,799 1,796 1,824 1,796 (28) (2%) For personal use only Operating expenses (1,265) (1,178) (1,324) (1,186
Slide 45: Connections
Spark New Zealand Connections H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 000's 000's 000's 000's 000's 000's 000's 000's % 1 Mobile connections 2,464 2,515 2,500 2,519 2,431 2,500 2,431 (69) (3%) For personal use only 2 Voice connections by type POTS & ISDN 356 329 288
Slide 46: Group operating revenues and other gains
Spark New Zealand Group operating revenues and other gains H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Operating revenues Mobile For personal use only Service revenue 403 413 425 423 420 425 420 (5) (1%) Non-service revenue 219 236 228 212 231
Slide 47: Group operating expenses
Spark New Zealand Group operating expenses H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Product costs For personal use only Mobile 246 250 248 211 244 248 244 (4) (2%) Voice 82 77 74 70 67 74 67 (7) (9%) Broadband 176 165 170 169 171 170 171 1 1
Slide 48: Analysis & KPIs - Mobile
Spark New Zealand Analysis & KPI's - Mobile H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 Mobile revenue by type (Consumer and Business) $m $m $m $m $m $m $m $m % Mobile service revenue 398 409 421 419 415 421 415 (6) (1%) Mobile non-service revenue 1 206 224 216 197 223
Slide 49: Analysis & KPIs - Voice
Spark New Zealand Analysis & KPI's - Voice H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 Revenue by type $m $m $m $m $m $m $m $m % Access 109 104 95 85 62 95 62 (33) (35%) Calling 87 83 79 81 71 79 71 (8) (10%) For personal use only Other voice revenue 29 28 23 23 21 23 2
Slide 50: Analysis & KPIs - Cloud, Security and Service Management
Spark New Zealand Analysis & KPI's - Cloud, Security and Service Management H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Cloud revenue 102 110 111 114 113 111 113 2 2% Security revenue 20 16 18 19 19 18 19 1 6% Service management revenue 65 71 8
Slide 51: Statement of cash flows
Spark New Zealand Statement of cash flows H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Cash flows from operating activities For personal use only Cash received from customers 1,770 1,654 1,861 1,733 1,828 1,861 1,828 (33) (2%) Interest receipts
Slide 52: Analysis & KPIs - Free cash flows
Spark New Zealand Analysis & KPIs - Free cash flows H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Net cash flows from operating activities 393 384 357 546 364 357 364 7 2% For personal use only Payments for purchase of property, plant and (258) (
Slide 53: Group capital expenditure
Spark New Zealand Group capital expenditure H1 FY19 H2 FY19 H1 FY20 H2 FY20 H1 FY21 H1 FY20 H1 FY21 H1 FY20 v H1 FY21 $m $m $m $m $m $m $m $m % Cloud 26 10 16 8 9 16 9 (7) (44%) For personal use only Converged Communications Network (CCN) 20 11 11 7 15 11 15 4 36% International cable construction an
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