Spark New Zealand Limited · NZX:SPK
Spark New Zealand — H1 FY16 Earnings Presentation
21 slides from Spark New Zealand's earnings presentation, 2016
Slide 1: H1 FY16 Financial Results
H1 FY16 Financial Results Simon Moutter Managing Director Jolie Hodson Chief Financial Officer
Slide 2: H1 FY16 Summary
Spark New Zealand 2016 H1 FY16 Summary • FY15 return to EBITDA growth reinforced again in H1 FY16 • Good sales momentum with more customers choosing Spark • Underlying revenue growth achieved for the first time in many years • Mobile and IT Services revenue growth exceeds decline in fixed legacy • C
Slide 3: Results scorecard
Spark New Zealand 2016 Results scorecard Key Financials Product Revenue Market Share and Connections H1 FY16 H1 FY16 31 Dec 2015 Change Mobile Share (Revenue) 42% (1) 2%(2) Total Mobile Revenue Revenue -4.1% 11.7% Growth Mobile Customers Growth 2,212k 4.6% Broadband Share (Connections) 44% (1) -2%(2
Slide 4: Closing in on leadership in mobile
Spark New Zealand 2016 Closing in on leadership in mobile • Mobile market revenue growing again • Nearing #1 in Mobile revenue share, driven by 12% revenue growth • Value-add and multi-brand strategies helping differentiate, with Skinny now top-rated brand in pre-paid • Future focus: • pulling back
Slide 5: Platform IT strategy working
Spark New Zealand 2016 Platform IT strategy working • Spark Digital focus on repeatable Platform IT generating operational and financial benefits • Acquisition of CCL Group reinforces market position • Spark Digital deal flow healthy as market embraces proposition • Platform IT revenue up 27% Page 5
Slide 6: Broadband market strategy evolving
Spark New Zealand 2016 Broadband market strategy evolving • Fibre demand increasing rapidly • Market consolidation continuing • Price competition driving customer loss in some segments • Responding with: • Tactical offers built around Value Added Services • Investment in alternative brands (e.g. Big
Slide 7: Spark Ventures reset underway
Spark New Zealand 2016 Spark Ventures reset underway • Focus still on innovation, with increased emphasis on leveraging our core business • Skinny, Bigpipe and WiFi very successful and moved from Spark Ventures to core • Spark Ventures now providing digital capability across the whole company • Qrio
Slide 8: Continuing to invest in media
Spark New Zealand 2016 Continuing to invest in media • Spark committed to internet delivered video entertainment (video around 70% of our network traffic and growing) • Lightbox has built a credible position, good market awareness, quality content and good relationships with content owners • Origina
Slide 9: Operational model shifting to Digital First focus
Spark New Zealand 2016 Operational model shifting to Digital First focus • Significantly increased network capacity, resilience and performance • Re-engineered IT stack now a key enabler, with API strategy initiated • Improved operational delivery models with further changes underway • Digital First
Slide 10: Copper pricing certainty achieved (finally!)
Spark New Zealand 2016 Copper pricing certainty achieved (finally!) • Rising copper and fibre input cost pathway now certain following Commerce Commission decision and Crown Fibre Holdings contracts with Local Fibre Companies • Naked and clothed broadband input costs identical • Places upward pressu
Slide 11: Reported Profit & Loss
Spark New Zealand 2016 Reported Profit & Loss H1 FY16 H1 FY15 CHANGE Reported Results $M $M % Revenues 1,723 1,797 (4.1%) Operating expenses (1) 1,268 1,361 (6.8%) EBITDA 455 436 4.4% Depreciation & amortisation 224 224 - Net finance expenses 13 12 8.3% Income tax expense 60 53 13.2% Net earnings 15
Slide 12: EBITDA waterfall
Spark New Zealand 2016 EBITDA waterfall Underlying operating EBITDA uplift from growth in re-based revenues, input cost reduction and tight cost control • Underlying operating EBITDA growth driven by Investing Operating Non-Operating in growth Mobile, IT Services and options reduced UBA costs • Impa
Slide 13: Revenue waterfall
Spark New Zealand 2016 Revenue waterfall Re-based revenue growth achieved with strong Mobile and IT Services growth • $100m+ revenue impact from divestments and primary service regulatory change • Re-based revenue growth achieved with Mobile and IT +1.6% Services growth exceeding decline in Fixed le
Slide 14: Operating Expenses waterfall
Spark New Zealand 2016 Operating Expenses waterfall Underlying costs increase to support Mobile and IT Services growth and build of Spark Ventures • Net cost of sales increase 2%, • 12% higher Mobile and IT Services cost of sales to support strong growth 1.0% in Mobile connections and IT Services co
Slide 15: Home, Mobile & Business
Spark New Zealand 2016 Spark Home, Mobile & Business Customer focus driving excellent commercial outcomes • Excellent revenue and EBITDA growth achieved H1 FY16 H1 FY15 CHANGE $M $M % • Brand preference continuing to rise • Mobile revenues up 18%, service revenues up Revenues 981 917 7.0% an outstan
Slide 16: Digital
Spark New Zealand 2016 Spark Digital Transition to Platform IT provider continues H1 FY16 H1 FY15 CHANGE $M $M % • EBITDA stabilised through focus on high- quality deal-flow and greater operational Revenues 601 622 (3.4%) effectiveness Voice 99 112 (11.6%) • New business wins up significantly versus
Slide 17: Capital Expenditure maintained at target levels
Spark New Zealand 2016 Capital Expenditure maintained at target levels Investment driving operating efficiency, improved network performance, and enhancing customer experiences • Continue to target long term capex below $400m and at approx. 11% of revenue • Capex guidance for FY16 lifted by $10m to
Slide 18: Materially increasing shareholder returns
Spark New Zealand 2016 Materially increasing shareholder returns Principles • Remain committed to conservative capital structure and single ‘A Band’ Credit Rating from S&P • Preferred method of shareholder distributions is to sustainably grow ordinary dividends over time in line with earnings growth
Slide 19: FY16 Guidance
Spark New Zealand 2016 FY16 Guidance FY15 Actuals FY16 Guidance Reported EBITDA (1) $962m 0-3% growth Capex (excl spectrum) $418m around $380m Spectrum $158m $9m Total Capex $576m around $390m DPS (2) 20 cps fully imputed Ordinary Div 22 cps (2) +Special Div 3 cps Fully imputed (1) EBITDA guidance i
Slide 20: Business in good shape
Spark New Zealand 2016 Business in good shape • Strong performance in Mobile and Platform IT creating revenue growth, which is more than offsetting fixed decline • Mobile market returning to overall revenue growth led by Spark Group shift to focus on differentiated value, not connections • Investmen
Slide 21: Disclaimer
Spark New Zealand 2016 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 management as well as on assumptions made by and information curre