Spark New Zealand Limited · NZX:SPK
Spark New Zealand — H1 FY17 Earnings Presentation
21 slides from Spark New Zealand's earnings presentation, February 2017
Slide 1: Spark New Zealand H1 FY17 Results
Spark New Zealand H1 FY17 Results Simon Moutter, Managing Director David Chalmers, Chief Financial Officer 1
Slide 2: H1 FY17 Highlights
H1 FY17 Highlights EBITDA result underpinned by ongoing momentum across IT Services and Mobile • Mobile connections growth of 141k (6.4%) driven by multi-brand offerings and digital service inclusions Spotify and Lightbox • Upgrade of customers to Fibre and Wireless Broadband progressing well; secur
Slide 3: Results Scorecard
Results Scorecard Key Group Financials Product Revenue H1 FY17 H1 FY17 Total Revenue Growth 4.1% Mobile Revenue Growth 4.4% Broadband Revenue EBITDA Growth 3.5% 1.5% Growth Dividend per Share (ord + 11.0 cps + IT Services Revenue special) 1.5 cps 19.3% Growth Market Share & Connections Mobile Share
Slide 4: Reported Financials
Reported Financials H1 FY17 H1 FY16 CHANGE $M $M % Revenues 1,793 1,723 4.1% Operating expenses (1) (1,322) (1,268) (4.3%) EBITDA 471 455 3.5% Depreciation & amortisation (215) (224) 4.0% Net finance expenses (13) (13) - Net earnings before income tax 243 218 11.5% Income tax expense (65) (60) (8.3%
Slide 5: Revenue Waterfall
Revenue Waterfall Revenue growth driven by continued IT Services, Mobile and Broadband performance • IT services growth driven by bolt-on business acquisitions and continued shift to Cloud 4.1% services • Ongoing Mobile growth through upsell, value inclusions and shift away from handset subsidies •
Slide 6: Operating Expenses Waterfall
Operating Expenses(1) Waterfall Cost growth in support of IT Services revenue and improved mass market service experience • IT Services Cost of Sale (CoS) consistent with strong revenue growth 4.3% • Temporary labour cost increase in support of service experience and IT service revenue growth • High
Slide 7: EBITDA Waterfall
EBITDA Waterfall Continued EBITDA growth built on revenue uplift • Revenue uplift driven by continued IT services and Mobile growth, including 3.5% revenue from CCL Group (acquired December 2015) • Expenses increased in support of revenue growth and service experience improvement; partially offset b
Slide 8: Spark Home, Mobile & Business
Spark Home, Mobile & Business Revenue growth continues with investments in systems, processes and staff driving improvements in service experience H1 FY17 H1 FY16 CHANGE • Continued growth in Mobile revenue through $M $M % increased customer base Revenues 985 971 1.4% • Broadband revenue growth fuel
Slide 9: IT Services
Spark Digital Platform IT revenue growth continues to outperform the market, however margin pressure remains a challenge across the portfolio H1 FY17 H1 FY16 CHANGE • Platform IT and Cloud revenue growth reflects $M $M % CCL acquisition and new customer wins Revenues 658 607 8.4% • Telecommunication
Slide 10: Customer Experience
Customer Experience Sustained improvement being driven by migration off Copper inputs and investments in digitisation and service resource • Investment in call-centre resource has delivered results. Resource is now reducing as underlying 33pp pain points are addressed and resolved. increase in calls
Slide 11: Broadband
Broadband Performing well in core segments but struggling to maintain overall share in a commoditising market • Continued price competition, particularly at lower end of the market • Reinforces value of multi-brand strategy to meet all 43% preferences share of Fibre growth - Skinny for low priced ‘b
Slide 12: Mobile
Mobile Revenue and base growth continues despite increased pricing pressure • Migration away from subsidised contracts 10pp continues to deliver margin upside; more increase in HMB pay- than 80% of HMB pay-monthly now on monthly customers on open term plans open term since December 2015 • Lightbox a
Slide 13: Platform IT
Platform IT Focus on Platform IT delivering very strong returns and differentiation • Revenue growth continues to outpace the market with a number of substantial customer wins 26% Platform IT 2 year revenue CAGR • Acquisition of CCL has successfully complemented existing services • Some margin press
Slide 14: Investing In Our Future
Investing In Our Future • Strategic intent to ‘own’ CBD fibre progressing towards improving: • Customer experience • Network economics • Speed to market • Connect 8 acquired to expand in-house fibre skill set • Notice of Intention filed for proposed acquisition of TeamTalk • Digitisation of service
Slide 15: Capex Update
Capex Update Capex remains within 11-12% of revenue in support of network superiority, digitisation and ongoing operational improvements • FY17 Capex guidance increased by approximately $15m in support of Kaikoura earthquake remediation and resiliency enhancements including: • remedying the damaged
Slide 16: Capital Structure and Shareholder Returns
Capital Structure and Shareholder Returns Principles • Remain committed to conservative capital structure and S&P single ‘A Band’ Credit Rating • Preferred method of shareholder distribution is to sustainably grow ordinary dividends over time in line with earnings growth as articulated in our long-t
Slide 17: FY17 Guidance
FY17 Guidance(1) FY16 Actuals FY17 Guidance Change to Previous FY17 Guidance Total $3,497m 0-3% growth - Revenues Reported $986m 0-2% growth - EBITDA (2) Capex $390m ~$415m +$15m EPS 20c 21c - Ordinary Div 22 cps fully Ordinary Div 22 cps imputed DPS +Special Div 3 cps fully - +Special Div 3 cps at
Slide 18: FY17 Indicators of Success
FY17 Indicators of Success Outcome Proposed Measures Target 30 June 2017 Status Restore call centre Answer Time 90% in 180 seconds Tracking up to Target service levels to world class First call resolution 75% Improvement Needed Market NPS 5 point lift On Track Reduction in call volumes 7.5% reductio
Slide 19: Working on Refreshed Strategic Plan
Working on Refreshed Strategic Plan • Solid results but market changes and learnings from last three years of execution require a strategic response • Customers strongly preferring wireless connectivity and digital self service • Growing portion of the market is buying primarily on price • If approv
Slide 20: Appendix 1: Focused on sustainable long-term growth
Appendix 1: Focused on sustainable long-term growth 20
Slide 21: 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 management as well as on assumptions made by and information currently available at the t