Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Telecom New Zealand — H2 FY12 Earnings Presentation
27 slides from Spark New Zealand's earnings presentation, 2012
Slide 1: Telecom New Zealand H2 FY12 Result Briefing
TELECOM NEW ZEALAND H2 FY12 RESULT BRIEFING Chief Executive Officer (Acting) – Chris Quin Chief Financial Officer – Nick Olson
Slide 2: Contents
CONTENTS • Chris Quin • Key messages • Vision 2013 strategy update • Market trends • Business unit performance • Nick Olson • Group financials • Chris Quin • Outlook 2
Slide 3: H2 FY12 Key Messages
H2 FY12 KEY MESSAGES • Demerger successfully completed to create Telecom as a new fixed line and IT service provider and mobile network operator • Primary focus on customers and operational performance and strongest customer satisfaction scores to date • FY12 financials in line with guidance, but co
Slide 4: Vision 2013 Strategy Update
VISION 2013 STRATEGY UPDATE Vision 2013 Initiatives Full year performance to 30 June 2012 Improve customer satisfaction • Customer satisfaction up in all areas with highest scores to date #1 in mobile, broadband and • Fixed line competition resulting in declining market ICT share • 2% growth in mobi
Slide 5: Access & Calling
ACCESS & CALLING FIXED ACCESS CONNECTIONS Objective 1,800 1,600 • Build value in access and calling to slow declines 1,400 1,200 Connections (000) 1,000 800 600 Result 400 • Total access and calling revenues impacted by 200 - H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 H2 FY12 AAPT consumer sale, Intern
Slide 6: Broadband
BROADBAND NZ BROADBAND CONNECTIONS 630 620 Objective 610 600 • Growth with a focus on high value and margin (000)'s 590 580 570 560 Result 550 540 530 H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 H2 FY12 • Connections up 2k in H2 FY12 • Impacted by strong competitive activity Retail Gen-i NZ BROADBAND RE
Slide 7: Mobile
MOBILE NZ MOBILE CONNECTIONS 3,000 Objective 2,500 2,000 • Grow ARPU and revenue by focusing on high value Connections (000) 1,500 1,000 customers and increasing data usage 500 Result - Market share of connections ~37%* H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 H2 FY12 Telecom Vodafone 2 Degrees* • NZ
Slide 8: Mobile – CDMA Closure
MOBILE – CDMA CLOSURE • 10+ year old CDMA network successfully shut down as planned • High level of revenue migrated to XT • XT mobile base at 31 July ~1.6m connections, with ARPU of ~$35 • Primarily low usage connections that did not migrate • Low value connections generating ~$600k revenue p/mth •
Slide 9: IT Services
IT SERVICES GEN-i IT SERVICES Objective 300 12% 250 10% • Increase value of fixed and mobile services Revenue $M with Hosted ICT Services EBITDA Margin 200 8% Grow IT Services quality and margin 150 6% • 100 4% 50 2% 0 0% Result H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 H2 FY12 Revenue EBITDA margin L
Slide 10: Business Unit Performance
BUSINESS UNIT PERFORMANCE Retail Gen-i • FY12 EBITDA up 2.6%* • FY12 EBITDA up 11%* • Smartphone strategy delivering • Mobile contribution margin up 22% in strong postpaid and ARPU growth H2 • IT Services margin up to 8.8% with • Skinny brand established for prepaid growth in Cloud based services •
Slide 11: Group Financials
Group Financials
Slide 12: CFO Overview
CFO OVERVIEW KPIs Full year performance to 30 June 2012 Adjusted Revenue Declines driven by AAPT and termination rates Adjusted Cost Headcount down 5% vs H2 FY11 EBITDA - continuing Complicated by demerger, flat on a pro-forma basis D&A – continuing Down 19% Total Adjusted Net Up 9% Earnings Capex –
Slide 13: Financial Summary
FINANCIAL SUMMARY REPORTED ADJUSTED ADJUSTED FY12 FY12 H2 FY12 $M $M $M EBITDA - continuing 1,079 1,048 560 EBITDA - discontinued 1,103 321 0 Total EBITDA 2,182 1,369 560 Net Earnings 1,157 422 182 Total Capex 528 528 203 • Comparison of results with prior periods is complex following changes to the
Slide 14: Pro Forma EBITDA
PRO FORMA EBITDA ADJUSTED EBITDA FROM CONTINUING PRO FORMA ADJUSTED EBITDA OPERATIONS 1200 1200 1086 1093 1048 1000 1000 1000 $M $M 800 800 600 600 400 400 200 200 0 0 FY11 FY12 FY11 FY12 • FY12 Adjusted EBITDA from continuing operations up 4.8% • 5 months of internal trading with Chorus; and • 7 mo
Slide 15: Revenue Trends
REVENUE TRENDS REVENUE COMPARISON - FY11 v FY12 5500 4986 26 194 5000 167 98 4540 13 4500 $M 4000 3500 3000 Mobile Handset (excl Consumer) Consumer, MTR Southern Cross NZ Decline FY11 Revenue FY12 Revenue transits, AAPT AAPT decline International accounting (Adj) (Adj) • Revenue decline impacted by
Slide 16: Cost Trends
COST TRENDS COST COMPARISON - FY11 v FY12 4500 92 217 3986 4000 179 190 3492 3500 $M 3000 2500 2000 Consumer, MTR Mobile COS FY11 Cost (Adj) FY12 Cost (Adj) AAPT decline (excl NZ decline, change transits, AAPT International Consumer) in trades • Cost base impacted by • $92m increase in mobile cost o
Slide 17: Capital Expenditure
CAPITAL EXPENDITURE CAPEX FROM CONTINUING OPERATIONS 500 450 400 350 $M 300 250 200 150 100 50 0 FY12 Actual FY13 Outlook • Capex from continuing operations of $392m for FY12, which equates to 8.6% capex to sales ratio • Total capex of $528m for FY12, down 42% • Includes Chorus related capex of ~$13
Slide 18: 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 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 (Outlook
Slide 19: Outlook
Outlook
Slide 20: Outlook
OUTLOOK • Market trends • New industry model post demerger to create Telecom as a new fixed line and IT Services provider and mobile network operator • Strong competition to continue with industry consolidation • Telecom focused on winning in key markets to drive long term value • Create effortless
Slide 21: FY13 Financial Outlook
FY13 FINANCIAL OUTLOOK • FY13 financial outlook remains subject to strategy review • FY13 EBITDA – flat to low single digit percentage decline • Investing to hold broadband market share • FY13 Capex of approximately $460m (includes spectrum and allowance for new data centres) • FY13 dividend policy
Slide 22: 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 performance of Telecom. Such forward-looking statements are base
Slide 23: Appendix: Full Year Income Statement - Reported
APPENDIX: FULL YEAR INCOME STATEMENT - REPORTED Year ended 30 June 2012 2011 Change $M $M % Revenue 4,576 5,004 -8.6% Expenses (3,497) (4,243) -17.6% EBITDA 1,079 761 41.8% Depreciation & amortisation (576) (708) -18.6% EBIT 503 53 NM Net finance expense (80) (137) -41.6% Share of associates’ profit
Slide 24: Appendix: Full Year Income Statement - Adjusted
APPENDIX: FULL YEAR INCOME STATEMENT - ADJUSTED Year ended 30 June 2012 2011 Change $M $M % Revenue 4,540 4,986 -8.9% Expenses (3,492) (3,986) -12.4% EBITDA 1,048 1,000 4.8% Depreciation & amortisation (576) (708) -18.6% EBIT 472 292 61.6% Net finance expense (80) (137) -41.6% Share of associates’ p
Slide 25: Appendix: Half Year Income Statement - Adjusted
APPENDIX: HALF YEAR INCOME STATEMENT - ADJUSTED Half year ended 30 June 2012 2011 Change $M $M % Revenue 2,218 2,449 -9.4% Expenses (1,658) (1,936) -14.4% EBITDA 560 513 9.2% Depreciation & amortisation (292) (331) -11.8% EBIT 268 182 47.3% Net finance expense (21) (74) -71.6% Share of associates’ p
Slide 26: Appendix: Adjusting Items
APPENDIX: ADJUSTING ITEMS Year ended 30 June 2012 2011 H2 FY12 H2 FY11 $M $M $M $M Reported Net Earnings 1,157 166 151 1 Add/(Subtract) adjusting items Gain on demerger of Chorus (832) 31 Debt restructuring costs 110 Simplified corporate structure (28) Demerger/UFB related costs 50 29 3 17 Earthquak
Slide 27: Telecom New Zealand H2 FY12 Result Briefing
TELECOM NEW ZEALAND H2 FY12 RESULT BRIEFING Chief Executive Officer (Acting) – Chris Quin Chief Financial Officer – Nick Olson