Spark New Zealand Limited · NZX:SPK
Spark New Zealand — FY2022 Earnings Presentation
31 slides from Spark New Zealand's earnings presentation, August 2022
Slide 1: FY22 Result
Spark= Sp Spark New Zealand wow “FY22 Result ee * ‘Jolie! Hodson) Chief Executive Officer ‘Stefan Knight, Finance Director
Slide 2: Results overview
Results overview PAGE 2 SPARK
Slide 3: Results summary
Results summary Creating value for shareholders – delivering on our strategy and maximising returns STRONG FINANCIAL • Return to revenue growth through market-leading mobile performance and Spark Health contract wins PERFORMANCE – ALL • Market momentum combined with cost-discipline delivered EBITDAI
Slide 4: FY22 financial snapshot
FY22 financial snapshot Focussed strategy execution resulting in strong financial performance with all guidance metrics achieved $3,720m $1,150m $410m 3.5% increase vs. FY21 2.8% increase vs. FY21(3) 7.6% increase vs. FY21(3) REVENUE(1) EBITDAI(2) NPAT $410m $296m 25.0c H2 FY22 Dividend 12.5cps, 100
Slide 5: Established market performance
Established market performance Market leading mobile performance and continued growth in wireless and cloud $899m $639m $446m 5.5% vs. FY21 (4.6)% vs. FY21 0.7% vs. FY21 #1 Mobile Service Revenue(1) #1 Broadband revenue and connections(1) #1 Hybrid Cloud(2) MOBILE SERVICE BROADBAND CLOUD, SECURITY,
Slide 6: FY22 future market performance
FY22 future market performance Spark IoT and Spark Health are now material contributors to revenue and drivers of growth • Revenue grew 22%, driven by uptake across metering, transport, emergency services, smart environments, and asset management SPARK IoT • IoT connections increased 75% to 832,000
Slide 7: Core capabilities continue to mature
Core capabilities continue to mature Supporting growth in Spark’s established and future markets as capabilities embedded across the business • Customer experience improved through simplification and digitisation, with iNPS +9 points SIMPLE, INTUITIVE • 102 legacy mobile and broadband plans retired,
Slide 8: Strong sustainability progress
Strong sustainability progress Spark sustainability practices continue to mature, while we support a just transition to a low-carbon economy CREATE A ECONOMIC RECOVERY AND CHAMPION SUSTAINABLE SPARK TRANSFORMATION DIGITAL EQUITY Science-based target progress Supporting decarbonisation through techno
Slide 9: FY22 indicators of success
FY22 indicators of success Delivering the results we committed to our shareholders Strategic Pillar Focus Area Measure Target 30 June 2022 Status Customer experience Consumer and small business iNPS +6 point lift Exceeded Data driven insights Uplift in data driven marketing campaign conversion(1) 15
Slide 10: Well positioned within the macro trends impacting our business
Well positioned within the macro trends impacting our business Resilient revenues and investments for the future will support adaptation and growth GLOBAL ECONOMIC CLIMATE CHANGE ACTION TECHNOLOGY DISRUPTION AND ADAPTATION CONVERGENCE High inflation and cost-of-living crisis, Window for action to av
Slide 11: Tech convergence creating new commercialisation opportunities
Tech convergence creating new commercialisation opportunities We are already seeing the benefits of technology convergence solving real-world problems for our customers MPI sustainable fishing solution Improving patient care for AKL DHB Improving safety for EnviroWaste Micro credentials for ARUCC •
Slide 12: Capital management and growth
Capital management and growth PAGE 12 SPARK
Slide 13: Capital Management Policy
Capital Management Policy The Board reviewed Spark’s Capital Management Policy and has released a new Capital Management Framework Capital Management Framework • Growing dividends via growth in earnings and sustainable free cash flow Maximising • Dividend Policy: pay-out ratio of ~80%-100% of free c
Slide 14: How the Framework will be applied in FY23
How the Framework will be applied in FY23 Spark’s forecast free cash flow growth and TowerCo transaction proceeds will be used in line with Framework principles • FY23 dividend of 27cps (100% imputed) funded through earnings and free cash flow growth Maximising shareholder • Up to $350m of proceeds
Slide 15: Financials
SPARK PAGE 15 Financials
Slide 16: FY22 financial performance summary
FY22 financial performance summary Delivering strong financial results with Revenue, EBITDAI and NPAT all in growth $3,720m $1,150m $2,570m Up $127m or 3.5% vs. FY21 Up $31m or 2.8% vs. FY21(1) Up $96m or 3.9% vs. FY21(1) REVENUE GROWTH EBITDAI GROWTH OPEX GROWTH Revenue growth driven by: Top line m
Slide 17: Financials
Financials FY21(1) FY22 CHANGE $m $m Operating revenues and other gains 3,593 3,720 3.5% Operating expenses (2,474) (2,570) (3.9%) EBITDAI 1,119 1,150 2.8% Finance income 34 26 (23.5%) Finance expense (81) (74) 8.6% Depreciation and amortisation (521) (520) 0.2% Net investment income (1) (1) -% Net
Slide 18: FY22 operational performance summary
FY22 operational performance summary Revenue growth in established and future markets driving consistent earnings growth $3,720m $2,570m $1,150m 3.5% increase vs. FY21 3.9% increase vs. FY21(1) 2.8% increase vs. FY21(1) REVENUE OPERATING EXPENSES EBITDAI • Outperformance in mobile with highest reven
Slide 19: Established and future market outlook
Established and future market outlook Delivering on three-year revenue and costs aspirations with core capabilities supporting strong operational performance and execution in established and future markets • Total market mobile service revenue growth estimated to be ~2%-3% CAGR over the next 3-years
Slide 20: FY22 capital investment
FY22 capital investment Capital investment of $410m(1) in line with guidance and target envelope of ~10%-11% of revenue Capital expenditure ($m) FY21(2) FY22 • Investment in mobile core and Radio Access Network (RAN) IT Systems 117 150 delivering greater network capacity and coverage Mobile network
Slide 21: FY22 free cash flow
FY22 free cash flow Free cash flow impacted by timing of payables and receivables and management of supply chain disruption FY22 Free Cash Flow Summary ($m) • Free cash flow of $296m down $137m YoY and lower than aspiration of ~$420m-$460m $129m supply chain and • Free cash flow negative impacts of
Slide 22: Net debt
Net debt Reported net debt up $219m, reflecting temporary working capital impacts and investments in long-term growth • Reported net debt to EBITDAI ratio of 1.32x(1) consistent with S&P A- credit rating Movement in net debt during FY22 ($m) • Net debt position temporarily higher due to timing of 1,
Slide 23: FY23 indicators of success
FY23 indicators of success Strategic Pillar Focus Area Measure Target 30 June 2023 Customer experience Consumer and small business iNPS +6 point lift Data driven insights Uplift in data driven marketing campaign conversion 15%(1) World class capability Smart automated networks 5G roll out 40-50 loca
Slide 24: Guidance
Guidance(1) FY22 Actual FY23 Guidance EBITDAI $1,150m $1,185-$1,225 (excludes any gain on sale for TowerCo transaction) Capital expenditure(2) $410m ~$410m Total 27.0cps Total 25.0cps Dividend per share (100% imputed) (100% imputed)(3) PAGE 24 (1)Subject to no adverse change in operating outlook SPA
Slide 25: Now in final year of 2023 strategy
Now in final year of 2023 strategy Delivered strong financial returns and maximised shareholder value over last two years Core capabilities and high performance culture underpinning consistent delivery and strategic execution Strong momentum in future markets and new commercialisation opportunities
Slide 26: Appendix
SPARK PAGE 26 Appendix
Slide 27: TSR vs. International Peers
TSR(1) vs. International Peers(2) Ranked #2 against international peers for three-year Total Shareholder Returns 3-Year TSR CAGR 14.7% 11.7% 11.6% 11.2% 7.9% 7.0% 5.8% 4.8% 1.7% 0.7% (0.1%) (0.6%) (6.4%) KT Spark Deutsche Telecom BCE Swisscom Vodafone Telstra BT Group Verizon AT&T Orange SingTel Cor
Slide 28: TowerCo transaction summary
TowerCo transaction summary Creating significant shareholder value by enabling direct returns and investment in future growth • As announced in July, Spark has reached agreement to sell a 70% stake in its TowerCo business to the Ontario Teachers’ Pension $1.175 billion Plan (OTPP) Implied enterprise
Slide 29: Defining free cash flow for Spark's future dividend policy
Defining free cash flow for Spark’s future dividend policy The Capital Management Framework introduces a dividend policy to provide investors greater certainty on how the Board will consider dividends over the long-run. Dividend Policy: pay-out ratio of ~80%-100% of free cash flow on a long run basi
Slide 30: Indicative TowerCo financial summary
Indicative TowerCo financial summary Following the completion of the TowerCo transaction, the anticipated impacts on Spark’s earnings are outlined below EBITDAI impacts include: Operating revenue: • Reduction in co-location income • FY23 impact offset by: • Transitionary services charges to support
Slide 31: 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