Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Telecom New Zealand — H1 2012 Earnings Presentation
27 slides from Spark New Zealand's earnings presentation, 2012
Slide 1: Telecom New Zealand H1 FY12 Result Briefing
TELECOM NEW ZEALAND H1 FY12 RESULT BRIEFING Chief Executive Officer – Paul Reynolds Chief Financial Officer – Nick Olson
Slide 2: Contents
CONTENTS • Paul Reynolds y • Key messages • Demerger • Product trends • Business unit performance • Nick Olson • Group financials • Paul Reynolds • Strategy gy & outlook • Guidance 2
Slide 3: H1 FY12 Key Messages
H1 FY12 KEY MESSAGES • Demerger successfully completed • YoY financial f l comparisons complicated l dbby separation off Chorus Ch network business • Reported Net Earnings $1,006m • Continued YoY operational improvement • EBITDA from continuing g operations p * Flat • Costs* -11% • Headcount (excl C
Slide 4: H1 FY12 Key Messages cont.
H1 FY12 KEY MESSAGES cont. • H1 FY12 dividend of 9.0c, with full imputation • On-market buyback of up to $300m during 2012 calendar year • H2 FY12 Guidance • H2 FY12 Adjusted EBITDA of around $560m • H2 FY12 Adjusted Net Earnings of $160m to $190m • H2 FY12 Capex of approximately $190m to $220m 4
Slide 5: Successful Completion of Demerger
SUCCESSFUL COMPLETION OF DEMERGER • Demerger successfully executed on 30 November 2011 • 99.8% of shareholder votes cast were in favour • Chorus now separately listed on NZX and ASX • Strong Telecom shareholder returns, 12 mth TSR 37%* • New Telecom successfully established • Supplier agreements in
Slide 6: Access & Calling
ACCESS & CALLING FIXED ACCESS CONNECTIONS Objective 1,800 1,600 • Retain R i value l b by slowing l i d declines li iin access and d 1,400 1,200 calling ections (000) 1,000 800 Result Conne 600 • Total access and calling revenues impacted by 400 200 - H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 AAPT, In
Slide 7: Broadband
BROADBAND NZ BROADBAND CONNECTIONS 630 Objective 620 • Growth with a focus on high value and margin 610 600 (000)'s 590 580 570 560 550 540 Res lt Result 530 • Connection growth of 7k in H1 H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 • 5% NZ revenue g growth driven by y connection Retail Gen-i NZ BROADB
Slide 8: Mobile
MOBILE NZ MOBILE REVENUES 500 Objective 450 400 350 • Grow ARPU and G d revenue b by ffocusing i on hi high h value l customers t $M 300 250 200 and increasing data usage 150 100 50 Result - H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 Voice revenue Data/SMS revenue Handset revenue • NZ revenue up 12% •
Slide 9: IT Services
IT SERVICES GEN-i IT SERVICES Objective 300 12% 250 10% • Drive retention of fixed and mobile services Revenue $M with Hosted ICT Services BITDA Margin 200 8% Grow IT Services quality and margin 150 6% • EB 100 4% Result 50 2% 0 0% H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 Revenue EBITDA margin Linear
Slide 10: Business Unit Highlights
BUSINESS UNIT HIGHLIGHTS Retail Gen-i • EBITDA down 3% as mobile cost of • EBITDA upp 17% through g g growth in sales increases 30% mobile and focus on cost out • Labour costs down 12% • Mobile market share grown to 71% • Smartphone strategy delivering • Transformation improved service and • “Skinny
Slide 11: Business Unit Adjusted EBITDA
BUSINESS UNIT ADJUSTED EBITDA H1 FY12 Change % NZ $M Wholesale & International 79 5.3% Retail 233 -2.9% Gen-i 123 17.1% AAPT 40 -13.0% T&SS 1 NM Corporate 12 -42.9% Total EBITDA from Continuing Ops 488 0.2% • EBITDA from continuing operations was up $1m despite lower Southern Cross dividends and hig
Slide 12: Group Financials
Group Financials
Slide 13: CFO Overview
CFO OVERVIEW • Organisation focused on successful execution of complex demerger • Against that backdrop strong financial performance KPIs Performance to December 2011 R Revenue* * Impacted by SX, SX AAPT AAPT, MTR MTR, International Cost* Headcount down, Mobile COS up EBITDA - continuing* Flat, Fl t
Slide 14: Financial Summary
FINANCIAL SUMMARY REPORTED ADJUSTED H1 FY12 Change H1 FY12 Change % % EBITDA - continuing 519 3.6% 488 0.2% EBITDA - discontinued 1,137 NM 321 NM T l EBITDA Total 1 656 1,656 90% 809 -6.8% 6 8% Net Earnings 1,006 NM 240 52% Capex 325 -32% 32% 325 -32% 32% 14
Slide 15: H1 FY12 Reported vs Adjusted Results
H1 FY12 REPORTED VS ADJUSTED RESULTS REPORTED EBITDA VS ADJUSTED EBITDA REPORTED NET EARNINGS VS ADJUSTED NET (from continuing operations) EARNINGS 600 1200 519 28 3 488 1006 863 500 1000 400 800 $M M $M M 300 600 200 400 47 240 100 110 200 29 28 3 0 0 Simplified Earthquake Reported EBITDA Simplifie
Slide 16: Demerger Adjustments & Costs
DEMERGER ADJUSTMENTS & COSTS • $863m gain on demerger of Chorus • N Non-cash, h one-off ff accounting i entries i • $775m relates to difference between fair value and book value of the net assets demerged to Chorus • Chorus assets carried at historic cost which is significantly below fair value • Hi
Slide 17: Pro-forma EBITDA
PRO FORMA EBITDA PRO-FORMA EBITDA 1200 1000 560 800 $M 600 45 1093 400 488 200 0 djustments 12 EBITDA H1 FY12 EBITDA H2 FY12 EBITDA Y12 pro- midpoint (Adj) ((Adj) forma ad H1 FY FY1 • H1 FY12 Adjusted j EBITDA of $ $488m based on • 5 mths of internal trading with Chorus; and • one month of external
Slide 18: Revenue Trends
REVENUE TRENDS REVENUE COMPARISON - H1 FY11 v H1 FY12 2600 2537 49 2500 44 29 22 2424 102 13 2400 2322 $M 2300 2200 2100 2000 et ng er al Southern Crosss ue ue MTR pricce Rebased H1 FY1 1 Mobile handse Internationa AAPT Consume changess Underlyin H1 FY11 Revenu H1 FY12 Revenu Decline Revenue (Adj) a
Slide 19: Capital Expenditure
CAPITAL EXPENDITURE CAPEX 1400 1200 1000 $M $ 800 600 400 200 0 FY08 FY09 FY10 FY11 FY12 H1 H2 • Capex of $325m for H1 FY12, down 32% • Includes Chorus related capex of ~$150m • Expect to spend $190m to $220m in H2 FY12 19
Slide 20: Capital Management
CAPITAL MANAGEMENT • Telecom remains committed to maintaining an ‘A band’ credit rating • Net interest bearing debt to EBITDA not greater than 1.1 1 1 times on a long run basis (equates to 1.5 times on a rating agency basis) • Credit Ratings post-demerger • S&P A- (Outlook Stable) • Moody’s A3 (Outl
Slide 21: Strategy & Outlook
Strategy & Outlook
Slide 22: Strategy & Outlook
STRATEGY & OUTLOOK • Drive Vision 2013 initiatives • Improve customer satisfaction • Focus on being #1 in Mobile, Broadband & ICT • Mobile smartphone strategy • Broadband strategy to bundle and upgrade customers • ICT margin growth • Cost reduction • Further reductions in headcount • Transform busin
Slide 23: Guidance
GUIDANCE • H2 FY12 Adjusted EBITDA of around $560m • H2 FY12 Adjusted Net Earnings of $160m to $190m • H2 FY12 Capex of approximately $190m to $220m 23
Slide 24: Disclaimer
DISCLAIMER Forward-looking statements and disclaimer This announcement includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding future events and the future financial p performance of Telecom. Such forward-looking g statements are
Slide 25: Appendix 1: Half Year Income Statement - Reported
APPENDIX 1: HALF YEAR INCOME STATEMENT - REPORTED Six months ended 31 December 2011 2011 2010 Change $M $M % Revenue 2,358 2,555 -7.7% Expenses (1,839) (2,054) -10.5% EBITDA 519 501 3.6% Depreciation & amortisation (284) (377) -24.7% EBIT 235 124 89.5% Net finance expense (59) (63) -6.3% Share of as
Slide 26: Appendix 1: Half Year Income Statement - Adjusted
APPENDIX 1: HALF YEAR INCOME STATEMENT - ADJUSTED Six months ended 31 December 2011 2011 2010 Change $M $M % Revenue 2,322 2,537 -8.5% Expenses (1,834) (2,050) -10.5% EBITDA 488 487 0.2% Depreciation & amortisation (284) (377) -24.7% EBIT 204 110 85.5% Net finance expense (59) (63) -6.3% Share of as
Slide 27: Telecom New Zealand H1 FY12 Result Briefing
TELECOM NEW ZEALAND H1 FY12 RESULT BRIEFING Chief Executive Officer – Paul Reynolds Chief Financial Officer – Nick Olson