Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Investor Day (June 2017)
21 slides from Spark New Zealand's investor day presentation, Jun 30, 2017
Slide 1: Spark New Zealand Ltd Investor Update Session 3 of 3
SPARK NEW ZEALAND LTD INVESTOR UPDATE SESSION 3 OF 3 30 JUNE 2017
Slide 2: Intro
INTRO Simon Moutter Overview of changes in emphasis to elements of the business strategy The Spark HMB market game-plan to use our brands and partnerships to compete and win Jason Paris 1 in a rapidly digitising world The Spark Digital market game-plan to compete and win by adding value and simplify
Slide 3: Our 3 Year Financial Aspiration
OUR 3 YEAR FINANCIAL ASPIRATION DAVID CHALMERS CHIEF FINANCIAL OFFICER
Slide 4: Spark's updated strategy has the potential to deliver improved earnings growth
Spark’s updated strategy has the potential to deliver improved earnings growth Spark’s operating units have outlined an updated strategy focused on: • Up-weighting our emphasis on wireless services and investment • Better serving price sensitive customers • Becoming the lowest cost operator While no
Slide 5: Revenue growth across mobile and IT services to offset legacy voice and data declines
Spark expects to achieve revenue growth across mobile and IT services sufficient to offset declines in legacy voice and data Annualised H1 FY15 to H1 FY17 FY18 to FY20 Aspiration equals 2 X H1 FY17 Actual H1 FY17 CAGR1 Fixed voice and Moderated rate of decline due to: managed data $792m (14%) • ongo
Slide 6: Net revenue growth aspiration is modest with change in mix towards mobile and IT
Our net revenue growth aspiration is modest but will see a notable change in mix towards mobile and IT services 4% 20% Fixed 33% Mobile Broadband IT services 21% Other 21% $3.6b 0% to +2% CAGR Annualised H1 FY17 FY18 to FY20 This aspiration does not take into account the cost of change for the Quant
Slide 7: Programmes and actions have potential to realise significant net cost reductions
The programmes and actions outlined today have the potential to realise significant net cost reductions Annualised H1 FY15 to H1 FY17 FY18 to FY20 Aspiration equals 2 X H1 FY17 Actual H1 FY17 CAGR1 Fixed voice and Greater decrease: managed data cost $340m (9%) • ongoing revenue declines; and of sale
Slide 8: Labour costs expected to reduce due to automation and self-service
While recent increases in labour cost have been driven predominantly by acquisitions and alleviating call centre issues, we expect labour costs to reduce from current levels due to automation and self-service Movement in FTE between H2 FY15 and H1 FY17 6,000 increase in FTE from H2 FY15 to H1 FY17 3
Slide 9: How does this show up at the bottom line?
How does this show up at the bottom line? Management aspires to lift EBITDA margin into the low 30 percents • Cost of change one-offs will impact benefit realisation • Competitive market dynamics However, in a competitive market not will ensure customers gain a all of the value we generate will be s
Slide 10: Capital: Net Debt increased by ~$470m since H2 FY14, with debt headroom
Capital: Net Debt increased by ~$470m since H2 FY14, however current gearing provides ~$250m of debt headroom within our A- credit rating Movement in Net Debt between H2 FY14 and H1 FY17 working capital due to: 1,000 70% • changes in revenue mix; and $320m • general payables and receivables movement
Slide 11: Capital: Cash conversion ratio has averaged 84% since June 2014
Capital: Spark’s cash conversion ratio1 has averaged 84% since June 2014 Key drivers of working capital movement Mix of consumer post-paid device sales 100% $1,000 Handset receivable Penetration of ‘open term’ plans and increasing average $100m handset value 80% $800 Prepayments and accruals Includi
Slide 12: Capital: Targeted Capex at 11-12% of revenue compares favourably to peers
Capital: Targeted Capex at 11-12% of revenue compares favourably to peers but maintains sufficient capacity to execute on our strategy using current technology Capex to Revenue Percentage vs International Peers 30% 20% 25% to 35% 20% FY16 FY20 Percentage of CAPEX Percentage of CAPEX 10% (excluding S
Slide 13: Well established 'licence to operate'
Well established ‘licence to operate’ Fixed • long term certainty emerging for fixed line regulatory framework Spark’s spectrum holdings • Highly competitive, fragmented fixed line industry structure driving 80 low profitability 2030 • Emergence of wireless alternatives is changing industry economic
Slide 14: Capital: Continue to utilise divestments and targeted M&A to optimise portfolio
Capital: We will continue to utilise divestments and targeted M&A to optimise our portfolio FY14 to FY17 FY18 to FY20 Active divestment of overseas or non-core assets securing ~$100m net gains on sale: • Telecom International voice business Targeted divestment of lower margin operations or sunset Di
Slide 15: Dividend: Preferred method is to sustainably grow total dividends with earnings
Dividend: Our preferred method of shareholder distribution is to sustainably grow total dividends over time in line with earnings growth Spark aspires to deliver a sustainable total dividend that is fully funded by earnings per share of 25c or above - timing uncertain Dividend payout (cps) While ear
Slide 16: Spark's 3 year financial aspirations
Spark’s 3 year financial aspirations • continued growth in mobile and IT services to offset declines Revenue 0-2% CAGR in legacy voice and data low 30 • focus on cost reductions and selected investment in percents EBITDA EBITDA sustainable growth • subject to value capture margin • target ratio rema
Slide 17: Simon Moutter, Managing Director
SIMON MOUTTER MANAGING DIRECTOR
Slide 18: What we haven't covered today
What we haven’t covered today • Longer term aspirations for media. There is a lot going on in our market and globally. We have a good starting position and a clear roadmap to the marketplace strategy, but more work to do on the long term pathway to value. • Bolt-on M&A for core Telco and adjacent ma
Slide 19: Where we aspire to be by 2020
Where we aspire to be by 2020 • Mostly ex-copper, enabled by pervasive 4G and 5G wireless coverage and capability, together with rapid adoption of fibre access in urban areas • Taking advantage of disruptive technologies like virtual assistants and machine learning at scale, to improve our business
Slide 20: What underpins our belief
What underpins our belief This is a tough industry and not all our aspirations will prove to be achievable, but we do believe we can leverage our: • Energised and capable leadership team • Solid track-record of execution over last 4 years • Clear view of market dynamics and the opportunities, and ri
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 and assumptions made by management along with information currently available at the time