Spark New Zealand Limited · NZX:SPK
Spark New Zealand — Debt Investor Presentation (August 2018)
38 slides from Spark New Zealand's debt investor presentation, Aug 27, 2018
Slide 1: Market release: investor presentation for intended retail bond offer
MARKET RELEASE For personal use only 27 August 2018 Investor presentation in relation to intended retail bond offer As announced on 22 August 2018, Spark Finance Limited (SFL) is considering making an offer of unsubordinated, unsecured fixed rate bonds (Bonds) to institutional and New Zealand retail
Slide 2: Media and investor relations contacts
For media queries, please contact: Lucy Fullarton For personal use only Communications Partner +64 (0) 21 070 6197 For investor relations queries, please contact: Dean Werder General Manager Finance and Business Performance +64 (0) 27 259 7176 Spark Finance Limited Spark City, 167 Victoria Street We
Slide 3: Spark Finance Limited Intended Offer of Bonds
For personal use only 27 August 2018 Spark Finance Limited Intended Offer of Bonds Arranger & Joint Lead Manager Joint Lead Manager
Slide 4: Important notice on the proposed bond offer
This presentation contains the key terms of a proposed offer by Spark Finance Limited (“SFL”) for up to $100,000,000 (with the ability to accept oversubscriptions of up to $25,000,000 at SFL’s discretion) bonds ("Bonds"). No money is currently being sought and applications for the Bonds cannot curre
Slide 5: Forward-looking statements
This presentation 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 such state
Slide 6: Agenda
Introduction For personal use only Spark Overview FY18 Results Capital Structure Key Terms of the Intended Offer Agenda
Slide 7: Spark Overview
For personal use only Spark Overview
Slide 8: Background
Background Spark Overview For personal use only Spark New Zealand Limited (“Spark”) is New Zealand’s largest telecommunications and IT services provider: • #1 in mobile (1) driven by value added services, network investment and multi-brand strategy • #1 in data (including broadband) underpinned by s
Slide 9: Background
Background Spark Overview For personal use only • Spark owns and operates key infrastructure assets that support mobile and data networks across New Zealand • Focussed on New Zealand operations, with no current plans for material offshore investment • Customer connections at 30 June 2018: • Mobile c
Slide 10: FY18 Overall Performance
For personal use only FY18 Overall Performance
Slide 11: Financials and Ratios
Overall Performance Financials and Ratios For personal use only Spark Group Selected financial information and ratios As Reported As Reported As Reported As Reported $m FY 2015 FY 2016 FY 2017 FY 2018 Operating revenues and other gains 3,531 3,497 3,614 3,649 EBITDA 962 986 1,016 989 Net earnings af
Slide 12: Financial Summary
Overall Performance Financial Summary Financial performance on plan with ongoing implementation of Quantum programme driving significant underlying benefits For personal use only $35m • Reported EBITDA of $989m was at the upper end of guidance albeit down $27m (2.7%) on prior year due to Quantum +1.
Slide 13: Key Areas of Focus
Overall Performance Key Areas of Focus $51m Material progress made against our three key areas of focus; remain on track to achieve aspirations outlined at June 2017 Investor Day For personal use only Emphasis on Wireless Wireless Broadband Migration annualised gross reduction in • Total mobile ARPU
Slide 14: FY18 Product Performance
For personal use only FY18 Product Performance
Slide 15: Mobile
Product Performance Mobile Only New Zealand mobile provider to grow revenue market share, connections and ARPU during FY18 For personal use only Net connection movement 80k Total mobile revenue, up $83m (6.9%), accounting for 35.1% of total operating revenues; up 2.7pp on prior year. Growth driven b
Slide 16: Broadband
Product Performance Broadband Market approaching saturation(1). Benefits of wireless broadband adoption driving 6.7% growth in broadband gross margin(2). However revenue and margin continue to be squeezed by For personal use only aggressive acquisition pricing and increases in input costs which are
Slide 17: Cloud, security and service management
Product Performance Cloud, security and service management Growth in higher-margin products and improvement in service management continues to drive For personal use only increased gross margin Topline revenue growth of $49m (15.1%) driven by: • Customer demand for the benefits and flexibility that
Slide 18: Voice, Managed Data and Networks
Product Performance Voice, Managed Data and Networks Acceleration in rate of revenue and margin decline due to ongoing substitution of landline voice to other technologies and proactive migration away from traditional managed data products in For personal use only support of simplification Total voi
Slide 19: FY18 Strategy Update
For personal use only FY18 Strategy Update
Slide 20: Strategy: Progress Update - Quantum
Strategy: Progress Update Quantum Bold programme of simplification, automation and digitisation delivering material improvement in service experience, employee engagement and cost to serve For personal use only NPS Simplification 178,000 100’s 1 +9pts Customers migrated onto new Successfully removed
Slide 21: Strategy: Progress Update - Quantum labour costs
Strategy: Progress Update Quantum During FY18 annualised net labour costs reduced by $82m to $499m; with benefits from acceleration of Quantum programme projected to reduce annualised net labour costs by a further ~$30m to ~$470m during H1 FY19 For personal use only Reported Net Labour Costs FY17 vs
Slide 22: Strategy: Progress Update - Media
Strategy: Progress Update Media General entertainment Emerging sports proposition(2) For personal use only Valuable differentiator as well as acquisition and retention Focused on standalone monetisation of sports content. driver for Spark broadband and mobile – customers with Targeting commercial re
Slide 23: Business Sustainability
Strategy: Progress Update Business Sustainability(1) Throughout FY18 Spark has continued to focus on environmental, social and governance matters. Spark is committed to doing the right thing by our shareholders, our people and our customers, For personal use only which means being absolutely focusse
Slide 24: Capital Structure
For personal use only Capital Structure
Slide 25: Capital Structure
Capital Structure Internal capital For personal use only Spark management policy of Net Debt(1) to EBITDA to not Preferred method of continues to exceed 1.4 x on a long run shareholder distribution be committed basis, which Spark remains to sustainably to maintaining estimates is approximately grow
Slide 26: Debt Profile
Debt Profile As at 30 June 2018 For personal use only • Reported Net Debt at hedged rates is $1,158 million (30 June 2017: $974 million) • Committed bank facilities of $425 million of which $150 million was undrawn. In addition, a committed Standby of $200 million which was undrawn • Next long term
Slide 27: Key Terms of the Intended Offer
For personal use only Key Terms of the Intended Offer
Slide 28: Key Terms of the Intended Offer
Key Terms of the Intended Offer Issuer Spark Finance Limited For personal use only Description of the Unsecured unsubordinated fixed rate bonds Debt Securities The Bonds will, if offered, be jointly and severally guaranteed by Spark New Zealand Guarantee Limited and the other Guaranteeing Group Memb
Slide 29: Timetable: Key Transaction Dates
Timetable For personal use only Key Transaction Dates Monday, 27 August 2018 – Tuesday, 28 August 2018 Roadshow Wednesday, 29 August 2018 Intended Offer launch 2pm, Friday 31 August 2018 Offer closes Friday, 31 August 2018 Allocations and rate set Friday, 7 September 2018 Issue date Monday, 10 Septe
Slide 30: Appendix
For personal use only Appendix
Slide 31: Financials FY18 vs FY17
Overall Performance Financials FY18 FY17 CHANGE $m $m Revenues 3,649 3,614 1.0% For personal use only Operating expenses(1) (2,660) (2,598) 2.4% Reported EBITDA 989 1,016 (2.7%) Depreciation and amortisation (434) (430) 0.9% Net finance expenses (30) (26) 15.4% Reported net earnings before income ta
Slide 32: Revenue
Overall Performance Revenue Mobile, cloud, security and service management revenue growth continues to more than offset ongoing declines in voice, managed data and Southern Cross dividends For personal use only Mobile, cloud, security and service management revenues now account for Revenues 45.3% of
Slide 33: Operating Expenses
Overall Performance Operating Expenses(1) Cost increases in support of revenue growth and Quantum programme partially offset by Quantum-led reductions in labour cost For personal use only Expenses $18m or 7.1% decline in voice, managed data and network FY17 vs FY18 cost of sales due to further reduc
Slide 34: EBITDA
Overall Performance EBITDA Reported EBITDA down $27m (2.7%) due to implementation costs associated with Quantum programme; partially offset by ongoing revenue growth across mobile, cloud, security and For personal use only service management and net reductions in labour costs EBITDA FY17 vs FY18 Rep
Slide 35: Capital Expenditure
Capital Management Capital Expenditure Targeted capital expenditure, of 11%-12% of revenue, continues to provide sufficient capacity to execute on our strategy For personal use only Capital Expenditure ($m) FY16 FY17 FY18 Plant, network and core sustain includes ongoing fibre build programmes to sup
Slide 36: Net Debt
Capital Management Net Debt Current net debt to EBITDA ratio continues to provide sufficient debt headroom within our S&P A- credit rating; with net debt increasing by $184m during FY18 due to business acquisitions, payment of dividends and continued For personal use only growth in mobile device rec
Slide 37: Quantum: Agile Ways of Working
Strategy: Progress Update Quantum: Agile Ways of Working First large New Zealand business to transition to Agile ways of working at scale with around 40% of our people now transitioned to a full Agile operating model For personal use only It’s early days yet as Spark’s scale Agile operating model ha
Slide 38: Further Information
For personal use only Further Information Spark New Zealand investor website http://investors.sparknz.co.nz Investor inquiries Dean Werder General Manager Finance & Performance Dean.werder@spark.co.nz Natalie Bishop Treasurer Natalie.bishop@spark.co.nz 36
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