Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Investor Day (October 2015)
33 slides from Spark New Zealand's investor day presentation, Oct 20, 2015
Slide 1: Spark New Zealand Business Strategy Update
For personal use only Spark New Zealand Business Strategy Update 20 October 2015 sparknz.co.nz
Slide 2: Agenda
Spark New Zealand 2015 Agenda For personal use only 13:00 Strategy update – Simon Moutter 13:25 Three year aspiration – Jolie Hodson 13:40 Q&A 14:00 Spark Digital – Tim Miles 14:20 Spark Connect – David Havercroft 14:40 Q&A 15:00 Break 15:20 Spark Home, Mobile & Business – Jason Paris 15:40 Spark Ve
Slide 3: Strategy Update
Spark New Zealand 2015 For personal use only Strategy Update Managing Director Simon Moutter 3 | sparknz.co.nz
Slide 4: Strategy shared at May 2013 Investor Day: four strategic priorities
Spark New Zealand 2015 At our last Investor Day in May 2013, we shared our strategy for transforming the business For personal use only Four clear strategic priorities 1. Revolutionise Customer Experiences 2. Simplify the Business 3. Win Key Markets 4. Win the Future 21 • Phase 1 now completed: Stab
Slide 5: NZ today is very different from the Telecom NZ of two years ago
Spark New Zealand 2015 Spark NZ today is very different from the Telecom NZ of two years ago For personal use only 2013 Today Traditional fixed and mobile telco Customer oriented digital services infrastructure focus and mind-set provider with retailer’s mind-set Defending legacy product revenue, Em
Slide 6: NZ's delivery capability is now proven
Spark New Zealand 2015 Spark NZ’s delivery capability is now proven For personal use only Track-record demonstrates Spark NZ can and will continue to deliver on its promises We said we would… We delivered… Online chat available 24/7 Revolutionise customer experiences Online portal for Spark Digi
Slide 7: Risks exist but these are being tightly managed
Spark New Zealand 2015 Risks exist but these are being tightly managed For personal use only Commentators’ views focus mainly on downside risks with underweighted recognition of systemically improved market and operational capability and upside opportunities Commentators views Spark NZ perspective •
Slide 8: We see opportunities in an attractive fast growing market
Spark New Zealand 2015 We see opportunities in an attractive fast growing market For personal use only Demand for connectivity and Moving from connecting Playing a vital role in data increasing people to things New Zealand’s economy Broadband OTT Mobile usage video data • 70% CAGR in global mobile •
Slide 9: We see opportunities in an attractive fast growing market (ctd)
Spark New Zealand 2015 We see opportunities in an attractive fast growing market (ctd) For personal use only Disruption across Scale creates Cost & efficiency multiple industries opportunities opportunities remain Media Health Smart Spark Spark Digital first Continued living relationships channels c
Slide 10: Technology driving change in the New Zealand market
Spark New Zealand 2015 Technology driving change in the New Zealand market For personal use only • Consolidation occurring naturally to achieve scale benefits as broadband resale margins are Key Changes squeezed, creating more full-service players • Focus is shifting outside of the telco market with
Slide 11: NZ well positioned in key markets
Spark New Zealand 2015 Spark NZ well positioned in key markets For personal use only Revenue is stable and/or growing in key and future markets, while we are managing declines in PSTN voice markets 58% 42% 53% 47% Mobile Broadband revenue service $2.4bn(1) revenue 1.2%(2) $700m(1) 2.7%(2) 14% 76% 38
Slide 12: Shifting strategic focus to next phase
Spark New Zealand 2015 Shifting strategic focus to next phase For personal use only We’re now shifting to the next phase of our strategy: to drive market revenue / margin growth, with continuing improvement in unit costs • We’ve executed the first phase of our strategy exactly to plan, and the FY16
Slide 13: FY16 strategy adjusted to suit phase growth agenda
Spark New Zealand 2015 FY16 strategy adjusted to suit phase 2 growth agenda For personal use only Ambition At Spark New Zealand, our ambition is to be a winning business, inspired by customers to unleash the potential in all New Zealanders To be New Zealand’s: Goals • Benchmark for amazing customer
Slide 14: Three potential key sources of revenue growth being pursued
Spark New Zealand 2015 Three potential key sources of revenue growth being pursued For personal use only Mobile Broadband & data Existing market growth ICT Revenue platform Cloud growth services Entering Selective high growth M&A markets Established Smart revenue streams living Big data New capabili
Slide 15: Revenue growth: existing key markets
Spark New Zealand 2015 Revenue growth: existing key markets For personal use only Focus areas – Broadband & data Why we’re well placed to win Product • Accelerate fibre uptake, leveraging voice over Brand and reputation fibre capability Multi-brand with • Target business customers with cloud rea
Slide 16: Revenue growth: existing key markets (ctd)
Spark New Zealand 2015 Revenue growth: existing key markets (ctd) For personal use only Broadband and–data Focus areas Mobile Why we’re well placed to win Product • Invest in superior network and mobile platforms Value add strategy • Lead in growing connected mobility market (i.e. M2M and IOT) B
Slide 17: Revenue growth: existing key markets (ctd)
Spark New Zealand 2015 Revenue growth: existing key markets (ctd) For personal use only Broadband and –data Focus areas ICT Platform Services Why we’re well placed to win Product Proven experience and • Replace “traditional” bespoke IT with Platform investment in cloud Services delivered as-a-serv
Slide 18: Revenue growth: entering high growth markets
Spark New Zealand 2015 Revenue growth: entering high growth markets For personal use only Broadband Current and dataexamples Why we’re placed to win Cloud • Spark Digital Cloud (incl. Revera) • Data centre investments Utilises existing networks and platforms Big data • Qrious Leverages existing
Slide 19: Revenue growth: Mergers & Acquisitions
Spark New Zealand 2015 Revenue growth: Mergers & Acquisitions For personal use only We will continue to consider selective M&A, where appropriate, as a means to growing customer relationships, revenue and profits M&A to date has included: Revera – acquired in FY14 for $96.5m, revenue grown by 47% si
Slide 20: Margin improvement driven by efficiency and technology
Spark New Zealand 2015 Margin improvement driven by efficiency and technology For personal use only We continue to see long-term efficiency and cost-reduction opportunities Opportunity: Where it will show up: • Continuing operational and • Major shift to online and on- delivery efficiencies device c
Slide 21: Three Year Aspiration
Spark New Zealand 2015 Three Year Aspiration For personal use only Chief Financial Officer Jolie Hodson 21 | sparknz.co.nz
Slide 22: Revenue is expected to grow as we manage Voice Only declines
Spark New Zealand 2015 Revenue is expected to grow as we manage Voice Only declines and grow in mobile, ICT platform services and digital services For personal use only • Voice Only expected to be ~16% of total revenue by FY18 0-2% • Targeting moderate growth in CAGR core products of mobile, broadba
Slide 23: EBITDA margin is in the top quartile of our international peers
Spark New Zealand 2015 EBITDA margin is in the top quartile of our international peers For personal use only • Spark EBITDA margin of 27% is comparable with other resellers and mobile only telcos which typically have lower EBITDA margin than vertically integrated fixed and mobile telcos • Adding bac
Slide 24: Revenue growth ambition through market share gains in existing markets
Spark New Zealand 2015 Revenue growth ambition through market share gains in existing markets For personal use only Ambition for: Spark CAGR -1% 3-4% Hold revenue market share, with Broadband revenue growth from uptake of fibre and higher value based plans Market CAGR(1) 4% 3% Spark CAGR 5% 3-5% Mob
Slide 25: International peers shifting to adjacent markets
Spark New Zealand 2015 International peers shifting to adjacent markets For personal use only International peers have shifted from solely providing telco products to entering a number of adjacent markets Our targeted growth in adjacent markets is consistent with our international peers Adjacent mar
Slide 26: Revenue growth through M&A bolt-ons
Spark New Zealand 2015 Revenue growth through M&A bolt-ons For personal use only We will continue to assess M&A opportunities to further grow our business Example We will assess opportunities against these filters: • New capability within an existing market • Established revenue and operational
Slide 27: Productivity improvements will continue
Spark New Zealand 2015 Productivity improvements will continue For personal use only Driven by technology and digital self-service enabling fundamental business change • Re-engineering benefits Near term • Further operational efficiency across Spark Connect and Spark Digital • Cost of sales reductio
Slide 28: Capital expenditure now at target levels, driving sustainable FCF uplift
Spark New Zealand 2015 Capital expenditure now at target levels, driving sustainable FCF uplift For personal use only • Targeting sustainable long term capex envelope of below $400M per annum • This envelope equates to ~11% capex to sales ratio which is consistent with best in class peers • Over tim
Slide 29: Materially increasing shareholder returns
Spark New Zealand 2015 Materially increasing shareholder returns For personal use only 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 lin
Slide 30: Seeking to create value for shareholders
Spark New Zealand 2015 Seeking to create value for shareholders For personal use only Long term Near term aspiration Sustainable growth Ordinary dividend from operating ~$400M earnings and cash-flow Increasing Shareholder cash flow Special dividend value generation ~$55M created and return Board wil
Slide 31: Our three year aspiration
Spark New Zealand 2015 Our three year aspiration For personal use only • Aiming for modest revenue, EBITDA and EPS growth • While capital expenditure is maintained within target envelope • Generating strong free cash flows • Leading to increasing shareholder returns Customer Release Page 31
Slide 32: Disclaimer
Disclaimer For personal use only 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 curren
Slide 33: FY16 Guidance
Spark New Zealand 2015 FY16 Guidance For personal use only FY15 Actuals FY16 Guidance Reported EBITDA (1) $962m 0-3% growth Capex (excl spectrum) $418m around $380m Dividends Per Share (2) 20 cps fully imputed Ordinary Div 22 cps (2) +Special Div 3 cps At least 75% imputed Based on our Q1-FY16 perfo