Spark New Zealand Limited · NZX:SPK
Spark New Zealand — FY2014 Earnings Presentation
30 slides from Spark New Zealand's earnings presentation, 2014
Slide 1: Spark starts here. Annual Results 2014
Spark starts here. Spark New Zealand Annual Results 2014 Investor Presentation
Slide 2: Spark is more than a name change
Spark is more than a name change. It reflects fl t enormous change h f our customers for t and our business. Our ambition is to be a winning business, inspired p byy customers to unleash the p potential in all New Zealanders. Join our journey.
Slide 3: Greater focus on customers and continued growth
Spark New Zealand 2014 Page 3 A greater focus on customers and continued growth in mobile, data and IT services is creating stronger momentum and the potential to return to earnings growth th in i FY15. FY15
Slide 4: 2014 Highlights
Spark New Zealand 2014 Page 4 2014 Highlights g g Delivering for customers, delivered earnings guidance, momentum gathering • A stronger performance in H2 indicates potential to return to earnings growth, growth driven by improving customer preference leading to continued growth in mobile, data and
Slide 5: Results Scorecard
Spark New Zealand 2014 Page 5 Results Scorecard Improving key Improving product Growing market share and financials revenue connections FY14 H2 FY14 H2 30 JUNE CHANGE 2014 Revenue (2 6%) (2.6%) (2 1%) (2.1%) Mobile 6 0% 6.0% 6 1% 6.1% Mobile share 39% (1) 2% Growth Revenue (revenue) (approx) Growth
Slide 6: At the start of FY14, we set big targets
Spark New Zealand 2014 Page 6 At the start of FY14,, we set big g targets g A more competitive organisation: • A new winning culture which is performance driven, more agile and competitive Achieved • On track to crystallising an additional $100-$200m of annualised benefits from re- Over Achieved eng
Slide 7: We've been following a clear strategy
Spark New Zealand 2014 Page 7 We’ve been following g a clear strategy gy
Slide 8: Since then, we've executed relentlessly
Spark New Zealand 2014 Page 8 Since then,, we’ve executed relentlessly y Revolutionise customer experiences Simplify the business • Expanded digital self-service: • R1 of re-engineered IT stack • Spark smartphone App • Turnaround Programme delivering at top end of • Increased e-Bill use expectations
Slide 9: We invested in Spark as a new core brand
Spark New Zealand 2014 Page 9 We invested in Spark p as a new core brand • To be relevant to more customers • To accelerate the process of reinvention • To provide the flexibility needed d d for f a digital di it l future f t • To drive increased brand preference and customer consideration • Early i
Slide 10: And we've honed our strategy
Spark New Zealand 2014 Page 10 And we’ve honed our strategy gy
Slide 11: Spark Ventures portfolio
Spark New Zealand 2014 Page 11 Spark p Ventures portfolio p • Spark Ventures is focused on building a portfolio of ventures across key y areas • Value is delivered both through the creation of new businesses and revenues as well as through portfolio effect for the Spark p p g group p (e.g. WiFi) Sta
Slide 12: Financial Results
Financial Results.
Slide 13: Group Profit & Loss
Spark New Zealand 2014 Page 13 Group p Profit & Loss Reported Results FY14 FY13 CHANGE $M $M % Total Revenues 3,638 3,735 (2.6%) Operating Costs 2 702 2,702 2 861 2,861 (5 6%) (5.6%) EBITDA 936 874 7.1% Depreciation & Amortisation 451 459 (1.7%) Net financing costs 31 42 (26.2%) Tax expense 131 103
Slide 14: Group Profit & Loss (adjusted)
Spark New Zealand 2014 Page 14 Group p Profit & Loss (adjusted) ( j ) Adjusted FY14 CHANGE H2 FY14 CHANGE $M % $M % Total Revenues 3,638 (2.6%) 1,791 (2.1%) Operating Costs 2 702 2,702 (2 1%) (2.1%) 1 307 1,307 (2 1%) (2.1%) EBITDA 936 (4.0%) 484 (2.2%) Depreciation & Amortisation 451 (1.7%) 224 (3.
Slide 15: FY14 Revenues
Spark New Zealand 2014 Page 15 FY14 Revenues Strong Mobile and IT Services growth close to offsetting fixed calling declines REVENUE FROM CONTINUING OPERATIONS FY13 v FY14 3900 3850 31 36 • M Mobile bil andd IT S Services i 3800 55 90 revenues up 6.0% and 5.8% respectively 3750 3735 12 14 3700 11 42
Slide 16: Mobile update
Spark New Zealand 2014 Page 16 Mobile update p Mobile momentum building as we grow back over the 2.0 million customer milestone FY14 FY13 CHANGE • Growth in Spark Home, Mobile $M $M % & Business, Business partly offset by Revenues (1) 965 910 6.0% price pressure in Spark Digital • Customers preferri
Slide 17: FY14 Costs
Spark New Zealand 2014 Page 17 FY14 Costs Disciplined approach to cost management resulting in net cost reduction of $58M GROUP OPERATING EXPENSES FY13 v FY14 2900 Growth Productivity 2850 23 32 • Growing Mobile, Broadband 16 11 and IT Services business 2800 28 16 2760 47 volumes driving increased c
Slide 18: Future revenue trends
Spark New Zealand 2014 Page 18 Future revenue trends Growth from Mobile, IT Services and new sources of revenue projected to offset fixed revenue decline by FY17 ESTIMATED REVENUE TRENDS 4,000 $M Revenue $ 2,000 0 FY14 Actual FY15 est FY16 est FY17 est Fixed (excl Wholesale, Intl & Fixed calling) Fi
Slide 19: Targeted FY15 Costs
Spark New Zealand 2014 Page 19 Targeted g FY15 Costs Turnaround programme expected to deliver significant productivity benefits in FY15 FY15 targeted net cost reductions reflect: GROUP OPERATING EXPENSES FY14 ACTUAL vs FY15 TARGETED • Forecast growth in Mobile, Broadband 2800 and IT Services cost of
Slide 20: Spark Home, Mobile & Business Update
Spark Home, Home Mobile & Business Update
Slide 21: Spark Home, Mobile & Business
Spark New Zealand 2014 Page 21 Spark Home, Mobile & Business Winning in the market saw us achieve revenue and EBITDA growth in H2 FY14 CHANGE H2 FY14 CHANGE Achieved revenue and EBITDA growth in H2 through: $M % $M % • Strong performance in mobile Revenues 1 794 1,794 0 7% 0.7% 893 1 8% 1.8% th thro
Slide 22: Spark Digital
Spark Digital
Slide 23: Spark Digital
Spark New Zealand 2014 Page 23 Spark p Digital g Leveraging our cloud and data centre investments to further grow our IT business FY14 $M CHANGE H2 FY14 CHANGE % $M % • EBITDA growth in H2, due to Revenues 1,288 (1.5%) 645 0.2% growing momentum in IT Services Fixed 451 (8.7%) 222 (7.1%) Mobile 221 (
Slide 24: Capex
Spark New Zealand 2014 Page 24 Capex p Targeted investment to drive sustainable long term growth within tightly managed Capex envelope CORE CAPEX - CONTINUING OPERATIONS • IT stack re-engineering programme is on track, track with Release 1 700 completed in May 2014 600 • 2x20 MHz of 700MHz spectrum
Slide 25: Capital management
Spark New Zealand 2014 Page 25 Capital p management g Principles Return business to sustainable growth Reposition business portfolio in line with strategy Remain committed to conservative capital structure and single ‘A Band’ Credit Rating Preferred method of shareholder distributions is to sustaina
Slide 26: Outlook for FY15
Outlook for FY15
Slide 27: FY15 Guidance
Spark New Zealand 2014 Page 27 FY15 Guidance FY14 actual FY15 guidance(1) Total Revenue $3.6bn low single digit decline Adjusted EBITDA $936m low single digit growth Capex (excl spectrum) $459m around $420m Spectrum Nil $158m DPS 17.0cps partially imputed 18.0cps (2) likely fully imputed (1) Relativ
Slide 28: In FY15 our success will be measured by
Spark New Zealand 2014 Page 28 In FY15 our success will be measured by: y 1 1. Further F th gains i iin a winning i i culture lt which hi h iis iinspired i db by customers, t performance driven and highly competitive 2. Spark brands programme driving greater brand differentiation, leadership, cut th
Slide 29: Investor day May 2013 strategy in two phases
At our investor day in May 2013 we set out a bold strategy to transform the company, in two clear phases FY14 & FY1 FY15: Stabilise S bili revenue/margin / i and d reduce costs FY16 & beyond: Drive market revenue/margin growth with continuing improvement in unit costs We are ahead of plan and confid
Slide 30: Disclaimer
Spark New Zealand 2014 Page 30 Disclaimer This announcement may include forward-looking statements within the meaning of the U.S. Securities Exchange Act of 1934 regarding future events and the future financial performance of Spark New Zealand. Such forward-looking statements are based on the belief