Spark New Zealand Limited · NZX:SPK
Spark New Zealand — FY2023 Earnings Presentation
39 slides from Spark New Zealand's earnings presentation, 2023
Slide 1: = aon <= Z
eS —— = aon <= Z
Slide 2: Results overview
Results overview
Slide 3: FY23 financial snapshot
FY23 financial snapshot Closing the last year of 3-year strategy with revenue, EBITDAI, free cash flow, and NPAT all in growth $4,491m $1,722m $1,135m 20.7% increase vs. reported FY22 49.7% increase vs. reported FY22 NM vs. reported FY22 REPORTED REVENUE(1) REPORTED EBITDAI(3) REPORTED NPAT $3,908m
Slide 4: FY23 results summary
FY23 results summary Focussed execution delivered revenue, EBITDAI, and NPAT growth • TowerCo transaction and Spark Sport exit resulted in a net EBITDAI gain of $529 million, contributing to reported revenues of $4,491 million, EBITDAI of $1,722 million, and NPAT of $1,135m • Adjusted revenues incre
Slide 5: FY21-23 strategy summary
FY21-23 strategy summary Completed FY21-23 strategy period delivering to guidance and with a strong platform for future growth • FY21-23 strategy delivered stronger fundamentals – higher customer and people engagement, consistently growing brand strength, and top-quartile sustainability performance
Slide 6: Key market performance
Key market performance Core market of mobile a stand-out, with strong connection and service revenue growth $980m $626m $436m $122m 9.0% increase vs. FY22 2.0% decrease vs. FY22 2.2% decrease vs. FY22 1% increase vs. FY22 MOBILE SERVICE BROADBAND CLOUD, SECURITY AND FUTURE MARKET REVENUE REVENUE SER
Slide 7: Top-quartile sustainability benchmarking delivered through 3-year strategy
Top-quartile sustainability benchmarking delivered through 3-year strategy Continual improvement across environmental, social, and governance metrics CREATE A ECONOMIC RECOVERY CHAMPION SUSTAINABLE SPARK AND TRANSFORMATION DIGITAL EQUITY Ongoing progress towards gender diversity targets and Working
Slide 8: FY23 indicators of success
FY23 indicators of success Key indicators largely on track, performance lift required in Cloud and Health, iNPS growing but lower than target Strategic Pillar Focus Area Measure Target 30 June 2023 Status Customer experience Consumer and small business iNPS +6 point lift Not Achieved(1) Data-driven
Slide 9: Strategy update
Strategy update
Slide 10: We start FY24 from a position of competitive strength
We start FY24 from a position of competitive strength With strong fundamentals, differentiation, and investment that will fuel long-term, high-quality returns Strong Data and AI a Mobile Data centres Disciplined fundamentals unique advantage leading and high-tech cost control in local market the mar
Slide 11: Our purpose and FY24-26 focus
Our purpose Our FY24-26 focus We will empower the people and businesses creating Aotearoa’s tomorrow by: TO HELP ALL OF Bringing New Zealanders the best digital-first Enabling New Zealand Businesses to grow and become NEW ZEALAND experiences, curated to their needs more productive and sustainable th
Slide 12: Clear strategy to maintain leadership in key markets
Clear strategy to maintain leadership in key markets Maintain mobile momentum, continue stabilising broadband, re-align cost base and product focus in cloud MOBILE BROADBAND SME & BUSINESS Mobile Service Revenue Market Share(1) Broadband Connection Market Share #1 in SME market for telecommunication
Slide 13: Satellite portfolio expansion will create new revenue opportunities
Satellite portfolio expansion will create new revenue opportunities Satellite plays an important role in increasing resilience in Aotearoa and will help close coverage gaps over time MOBILE BROADBAND WHOLESALE Partnership with Lynk Global announced in June. Partnership with ASX-listed Netlinkz annou
Slide 14: Strategic growth investments progressing to plan
Strategic growth investments progressing to plan Investments into high-tech solutions and data centres on track and will underpin new revenue streams MOBILE AND EDGE DATA CENTRES MATTR $40-$60 million 5G Standalone investment Takanini 10MW campus expansion completed in MATTR continues to focus on gl
Slide 15: Spark Data Centres
Spark Data Centres
Slide 16: Data centre market in New Zealand
Data centre market in New Zealand New Zealand’s data centre market is in the early stage of rapid growth Auckland Data Centre Built Capacity (MW)(1) • New Zealand’s data centre market is expected to rapidly expand over the next three to five years • Amazon, Microsoft, and Google have announced plans
Slide 17: Spark's existing data centre capabilities
Spark’s existing data centre capabilities Spark is well positioned to continue to grow its share of the New Zealand data centre market Connectivity is a key differentiator Leverage existing data centre business Spark has the ability to provide international (subsea), national, and metro fibre servic
Slide 18: Spark operates the most extensive network of data centres nationwide
Spark operates the most extensive network of data centres nationwide Diversity of assets meet requirements of hyperscalers, Government, business and SME customers HYPERSCALE CLOUD CARRIER HOTEL METRO EDGE Total site MW load Up to 50MW 2-10MW 0.5-5MW <0.5MW Hyperscale and other cloud / High-value int
Slide 19: Data centre investment will continue to scale in FY24
Data centre investment will continue to scale in FY24 Generating long-term annuity revenues with inflationary pricing protections and supportive tailwinds FY24 • Takanini 10MW campus expansion completed in August 2023 and is METRIC DEFINITION FY22 FY23 85% contracted and 100% committed. 1MW of capac
Slide 20: Financials
Financials
Slide 21: Financials
Financials REPORTED REPORTED CHANGE REPORTED ADJUSTED CHANGE FY22 FY23 FY22 FY23 $m $m $m $m Operating revenues and other gains 3,720 4,491 20.7% 3,720 3,908 5.1% Operating expenses (2,570) (2,769) (7.7%) (2,570) (2,715) (5.6%) EBITDAI 1,150 1,722 49.7% 1,150 1,193 3.7% Finance income 26 32 23.1% 26
Slide 22: FY23 revenue performance
FY23 revenue(1) performance Top line revenue growth underpinned by ongoing strength in mobile • Ongoing growth in mobile service revenue, boosted by connection growth, product innovation, and return of roaming 583 4,491 • Increase in other product revenue due to Entelar Group growth, growth in MATTR
Slide 23: FY23 operating cost performance
FY23 operating cost performance Higher costs primarily in support of revenue growth coupled with inflationary environment • Increase in product costs mainly due to growth in procurement and higher mobile handset costs and volumes • Other product costs increase driven by full year impact of Connect 8
Slide 24: FY23 capital investment
FY23 capital investment(1) Capital investment of $515m in line with guidance, TowerCo proceeds funding investment in future growth Capital expenditure(1) ($m) FY22 FY23 • Significant progress in 5G rollout, now in 77 locations Maintenance capital expenditure • Increase in core sustain and resiliency
Slide 25: FY23 free cash flow
FY23 free cash flow Delivered free cash flow of $489m towards the top end of aspiration FY23 Free Cash Flow Summary ($m) • Free cash flow of $489m up $56m vs. FY22 2,000 1,722 • Favourable H2 free cash flow performance due to lower cash capex 1,600 • Growth in free cash flow supporting total FY23 di
Slide 26: Net debt
Net debt Lower net debt reflecting proceeds from the TowerCo transaction Net Debt as at 30 June FY22 FY23 • Reported net debt at hedged rates of $1,039m. Decrease in net debt reflects the receipt of TowerCo proceeds offset by: Net debt at hedged rates $1,522m $1,039m Net debt at hedge rates includin
Slide 27: FY24 indicators of success
FY24 indicators of success
Slide 28: FY24 indicators of success
FY24 indicators of success Measure Target 30 June 2024 Mobile service revenue growth ~5% Additional sites that are 5G capable +180-200 sites Wireless broadband connections +10k-15k IT and procurement revenue growth ~2% High-tech revenue growth ~$25-$35m IoT connections ~2.0 million Gross cost reduct
Slide 29: Guidance
Guidance(1) FY23 Actual FY24 Guidance EBITDAI $1,193m(2) $1,215m-$1,260m Capital expenditure(3) $515m ~$510m-$530m Total 27.0cps Total 27.5cps Dividend per share (100% imputed) (100% imputed) PAGE 29 (1)Subject to no adverse change in operating outlook (2)FY23 EBITDAI is adjusted for the impact of T
Slide 30: Appendix
Appendix
Slide 31: TSR vs. international peers
TSR(1) vs. international peers(2) Ranked #4 for total shareholder returns against international peers over the last three-years 3-year TSR CAGR 16.3% 14.5% 14.0% 9.3% 8.7% 8.3% 8.3% 7.9% 4.7% 4.5% -5.7% -7.7% -10.7% -16.2% Telstra Korea Telecom Deutsche Spark Telecom Bell Swisscom Orange British Tel
Slide 32: Mobile performance
Mobile performance Stand out revenue growth with #1 market position maintained Mobile Performance ($m) FY22 FY23 % • Continued strong growth in mobile with service revenue up 9% YoY, with roaming Mobile service revenue 899 980 9.0% and inbound travellers contributing 3.3%. Roaming averaged 86% pre-C
Slide 33: Broadband performance
Broadband performance Broadband revenue stabilised and #1 market position maintained Broadband Performance ($m) FY22 FY23 % • Spark continues to lead the market in broadband revenue and broadband connection market share(1) Broadband revenue 639 626 (2.0%) • Revenue has stabilised with the last three
Slide 34: Cloud, Security and Service Management performance
Cloud, Security and Service Management performance Signs of stablisation emerging, realigning market focus to hybrid cloud and cost base to new margin profile • Cloud revenue impacted by private cloud repricing and the continued shift in revenue mix Cloud, Security and Service Management FY22 FY23 %
Slide 35: Changes to external reporting
Changes to external reporting
Slide 36: Operating revenue disclosure changes
Operating revenue disclosure changes Current New Variance FY22 FY23 FY22 vs FY23 FY22 FY23 FY22 vs FY23 FY22 FY23 FY22 vs FY23 $m $m $m % $m $m $m % $m $m $m Note Operating revenues Operating revenues Telco Mobile Mobile Service revenue 899 980 81 9.0% Service revenue 899 980 81 9.0% Non-service rev
Slide 37: Glossary
Glossary
Slide 38: Glossary
Glossary TowerCo (Connexa) TowerCo was the interim name of the company which operated Spark's mobile towers business. As a result of the sale of a 70% stake in that company to the Ontario Teachers’ Pension Plan Board, the new independent business branded itself as Connexa during FY23. Connexa is now
Slide 39: 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