Spark New Zealand Limited · NZX:SPK
Spark New Zealand — FY2020 Earnings Presentation
34 slides from Spark New Zealand's earnings presentation, 2020
Slide 1: Spark New Zealand FY20 Results Summary
Spark New Zealand FY20 Results Summary Jolie Hodson, Chief Executive Officer Stefan Knight, Finance Director
Slide 2: Results overview
Results overview
Slide 3: How we adapted and delivered in FY20
How we adapted and delivered in FY20 Delivered what we said Adapted at pace to COVID-19, we would – FY20 results supporting our people, within guidance customers and New Zealand Successfully delivered our Dividend of 25.0c and 3-year plan, and developed a total shareholder return new path to FY23 th
Slide 4: FY20 snapshot
FY20 snapshot $1,113m $3,623m 40.2% +33 MOBILE SERVICE CONSUMER & SMALL EBITDAI(1) REVENUE(2) REVENUE MARKET SHARE(3) BUSINESS iNPS 2.1% increase from FY19 2.5% increase from FY19 1.0pp increase from FY19 iNPS score up 10 points from FY19 30.7% $443m 9,559 +66 EBITDAI MARGIN CLOUD REVENUE(4) DIGITAL
Slide 5: FY20 guidance delivered
FY20 guidance delivered FY19 Actual FY20 Guidance FY20 Actual EBITDAI $1,090m $1,100m-$1,120m $1,113m Capital expenditure $417m ~$370m $374m Ordinary 25.0c Ordinary 22.0c H1 FY20 (75% imputed) Ordinary 25.0c Dividend per share Special 3.0c (at least 75% imputed) (75% imputed) H2 FY20(1) (75% imputed
Slide 6: FY20 highlights
FY20 highlights WIRELESS DIGITAL SERVICES MOBILE BROADBAND CLOUD, SECURITY AND SERVICE MANAGEMENT Only NZ mobile provider to grow Cloud, security and service service revenues, connections ~$74m(4) annualised gross management revenue up $43m and total ARPU in FY20(1) cost reduction in access costs or
Slide 7: FY20 indicators of success
FY20 indicators of success Measures Target Actual 30 June 2020 30 June 2020 Consumer and small business iNPS 8 point lift Achieved Build customer intimacy Growth in mobile and broadband change transactions completed online 30% Exceeded Go-live of 5G for America’s Cup (subject to spectrum) Ready for
Slide 8: Current 3-year plan successfully delivered
Current 3-year plan successfully delivered With strong market outcomes and industry leading returns Outstanding customer Significant improvements across most key NPS(1) measures – with many above Solid progress experience +30. Winning in mobile, growing connections and outpacing the market in mobile
Slide 9: New Sustainability Framework introduced
New Sustainability Framework introduced Create a • Invest in the capabilities of our people, equipping them to thrive in a Sustainable Spark digital future • Reduce our footprint and meet our emissions target of -25% by 2025, Be bold in our business to have a positive investing in our fleet and infr
Slide 10: FY20 – a year characterised by its final quarter
FY20 – a year characterised by its final quarter The impact of COVID-19 was moderated by the fact it only materialised in New Zealand in the final quarter. Total negative EBITDAI impact of approximately $25m in FY20(1) COVID-19 Impacts COVID-19 Opportunities o Loss of higher-margin roaming revenue o
Slide 11: Our new context
Our new context
Slide 12: COVID-19 impacts will materialise further in FY21
COVID-19 impacts will materialise further in FY21 • IMF has predicted the largest global economic downturn since the Great Depression of the 1930s, this will have flow on impacts for New Zealand given our dependence on global trade and tourism. • Tourism unlikely to return to historical levels for s
Slide 13: Macro trends are accelerating
Macro trends are accelerating A seismic shift of business and Increasing pace of technology society from physical to digital. disruption and business transformation. Exponential growth in data – Explosion of connected data is the future currency. devices. An unprecedented recessionary event requirin
Slide 14: The next three years
The next three years
Slide 15: We are not immune to COVID-19 impacts, but well positioned
We are not immune to COVID-19 impacts, but well positioned Strong • Spark remains committed to its S&P A- credit rating and continues to have sufficient access to funding. balance sheet A leading • We have re-engineered our IT stack and invested in network capacity over a sustained period, while com
Slide 16: The next three years
The next three years • Spark will share its next three year strategy at an Investor Briefing on 16 September 2020. • The new strategy is an evolution – building on the momentum of the prior three years. • It will be focussed on a set of core capabilities that will underpin growth in our key markets
Slide 17: A strategic focus on unconstrained capacity will underpin growth in wireless
A strategic focus on unconstrained capacity will underpin growth in wireless Simplification and moving off legacy technology will pave the way for 1. technology evolution, new revenue streams, and improved cost base and environmental performance. 2. 5G rollout will cater to customers with high data
Slide 18: Financials
Financials
Slide 19: Financial summary
Financial summary Strong operational and financial results with all guidance metrics met. Impact of COVID-19 occurring in final quarter moderating impact on FY20 performance Return to top line revenue growth, up $90m or 2.5% YoY driven by: $90m $67m • Increase in cloud, security and service manageme
Slide 20: Financials
Financials FY19 FY20 CHANGE $m $m Operating revenues and other gains 3,533 3,623 2.5% Operating expenses (2,443) (2,510) (2.7%) EBITDAI 1,090 1,113 2.1% Finance income 37 36 (2.7%) Finance expense (85) (94) (10.6%) Depreciation and amortisation (477) (479) (0.4%) Net investment income 14 1 (92.9%) N
Slide 21: Revenue
Revenue Strong performance in mobile and cloud resulting in a return to top line revenue growth of 2.5% • H1 FY20 revenue growth of 4.0%, H2 FY20 broadly flat on H2 FY19 due to Revenue FY19 vs FY20 ($m) impact of COVID-19. +2.5% 3,650 • High levels of recurring revenue providing strong resilience –
Slide 22: Spark's end-to-end digital services offering is locally unique
Spark’s end-to-end digital services offering is locally unique and creates competitive advantage Product Revenue profile Spark’s position Market trends Professionals Services Non-recurring • Significant capability in business transformation • Growing demand for expertise to deliver cloud solutions •
Slide 23: Operating expenses
Operating expenses Total operating expenses up 2.7% with cost efficiencies reinvested to fund growth in key markets Expenses FY19 vs FY20 ($m) 2,550 +2.7% • $99m of gross cost-out driven by: o Data insights reducing marketing spend; 14 o Reduction in customer credits due to improved billing processe
Slide 24: EBITDAI
EBITDAI EBITDAI growth of 2.1% underpinned by strong momentum across key markets and cost management • Ongoing growth in total gross margin due to strong EBITDAI FY19 vs FY20 ($m) performance in mobile and cloud markets and benefits of +3.5% cost management activities. 1,200 +2.1% • Portfolio consol
Slide 25: Capital investment
Capital investment Capital expenditure successfully delivered in support of our business priorities within targeted envelope of ~$370m(1) Capital expenditure ($m) FY19 FY20 • Sustained network investment provided critical connectivity during COVID-19, which saw dramatic increases in usage across Spa
Slide 26: Net debt
Net debt(1) Total net debt of $1,349m, up $33m YoY. Net debt to EBITDA ratio within S&P’s A- credit rating Movement in net debt during FY20 ($m) • Reported net debt to EBITDAI ratio of 1.21x(4). 46 (36) 2 1,350 1,349 • Net Debt decreased by $177m during H2 FY20 as 1,316 expected, due to improvement
Slide 27: Funding and liquidity
Funding and liquidity Remain committed to S&P A- credit rating and continue to have sufficient access to funding Gross debt maturity profile (incl. undrawn) as at 30 June 2020 450 400 25 350 200 • Established an additional $150m of committed revolving bank 300 200 facilities on 2 April 2020 to provi
Slide 28: Free cash flow
Free cash flow Free Cash Flow of $438m up $146m YoY, short of $460m aspiration due to a conscious decision to secure 5G mobile network equipment in advance of requirements FY20 free cash flow $438m $1,113m $374m $17m growth driven by: WORKING CAPITAL FREE CASH FLOW EBITDAI CAPEX 50% increase from FY
Slide 29: FY21 indicators of success
FY21 indicators of success Strategic Pillar Focus Area Measure Target 30 June 2021 Customer Experience Consumer and small business iNPS 8 point lift 15% efficiency gain in Data driven insights 80% of customer base(1) in household view(2) enabling marketing spend World Class Capability Wireless futur
Slide 30: FY21 Guidance Key Assumptions
FY21 Guidance Key Assumptions(1) New Zealand economy to remain subdued for most of the financial year with parts of New Zealand intermittently at different alert levels Area Key assumptions Post-paid service No material roaming revenue planned in FY21 Mobile margin Changes in mobile data usage as co
Slide 31: Guidance
Guidance(1) FY20 Actual FY21 Guidance FY21 Spectrum Renewals(2) EBITDAI $1,113m $1,090m to $1,130m Capital expenditure $374m ~$350m(3) $50m Ordinary 25.0c H1 FY20 Ordinary 23-25c Dividend per share (75% imputed) ( 100% imputed) H2 FY20(4) (100% imputed) (1)Subject to no adverse change in operating o
Slide 32: 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
Slide 33: 3-year TSR Spark vs International Peers
Appendix 3-year TSR(1) Spark vs International Peers(2) Ranked #1against international peers for Total Shareholder Returns. Compound annual growth rate of 13% and Total Shareholder Returns of 46% 46% 41% 23% 14% 9% (5%) (13%) (13%) (19%) (26%) (29%) (33%) (53%) Spark Verizon Swisscom BCE Deutsche AT&
Slide 34: 3-year ROIC Spark vs International Peers
Appendix 3-year ROIC(1) Spark vs International Peers(2) Spark three-year Return on Invested Capital 16% per annum. Ranked #2 against international peers 18% 16% 15% 13% 13% 11% 10% 10% 8% 7% 6% 6% BT Group 5% Telstra BCE Deutsche Telekom Spark Swisscom AT&T KT Corporation Vodafone Group Singapore Te