Article – BusinessDesk

Feb. 16 (BusinessDesk) – Spark New Zealand lifted first-half earnings 3.5 percent as the acquisition of Computer Concepts Ltd bolstered revenue from its IT services unit and got an early dividend from its stake in the Southern Cross trans-Pacific …Thursday 16 February 2017 09:43 AM

UPDATE: Spark 1H earnings rise 3.5%, bolstered by CCL acquisition, Southern Cross dividends

(Adds detail, fixes reference to earlier guidance in 1st and 3rd paragraphs)

By Paul McBeth

Feb. 16 (BusinessDesk) – Spark New Zealand lifted first-half earnings 3.5 percent as the acquisition of Computer Concepts Ltd bolstered revenue from its IT services unit and got an early dividend from its stake in the Southern Cross trans-Pacific cable, and affirmed its annual earnings outlook.

Earnings before interest, tax, depreciation and amortisation rose to $471 million in the six months ended Dec. 31, from $455 million a year earlier, with revenue up 4.1 percent to $1.79 billion, the Auckland-based company said in a statement. Net profit increased to $178 million, or 9.7 cents per share, from $158 million, or 8.6 cents. Forsyth Barr analyst Blair Galpin was picking ebitda of $470 million on a 1.6 percent increase in revenue to $1.75 billion.

Spark affirmed guidance for annual ebitda to rise by up to 2 percent in 2017 on a revenue increase of up to 3 percent. It also lifted its annual capital expenditure guidance to $415 million due to unplanned work around Kaikoura after last November’s earthquake, from a previous forecast of $400 million.

“Despite vigorous price competition, top-line revenue growth has been pleasing,” chairman Mark Verbiest said. “While the revenue performance across mobile, broadband and IT services was good, it is clear the intense ongoing price competition, particularly at the lower end of the market, is driving margin pressure and reinforcing the need to increase our focus on our brand assets, as well as continuing to tightly manage operating and capital expenditure.”

This month Spark embarked on a hostile takeover of network minnow TeamTalk, which would hand the country’s biggest telecommunications company fibre lines in the capital city of Wellington, a wireless rural internet service provider, and a mobile radio business. Spark has previously signalled plans to cut its reliance on network operator Chorus’s regulated copper lines and last year talked up the opportunities wireless broadband offers to grow the budget end of the market.

Spark’s operating costs rose 4.3 percent to $1.32 billion to support its expanding IT services and as it took on more call centre staff to improve customer service levels, which became an issue when weather-related problems increased the number of faults on copper-based services last winter. The company’s staff numbers were up 12 percent to 5,943 as at Dec. 31 from a year earlier, and labour costs rose 10 percent to $278 million.

Chief executive Simon Moutter said the investment in call centre resources had cut call waiting times, but that “there is much work still to be done”, with the introduction of new digital services seen as “pivotal to future service measures” and a new Spark app about to be launched.

Spark has also launched a programme to shift as many customers as possible off copper lines and onto fibre or wireless technologies and is working with local fibre companies to boost fibre uptake. As at Dec. 31, Spark had 138,000 ultrafast broadband fibre connections and more than 40,000 wireless broadband connections.

The board declared an interim dividend of 11 cents per share, payable on March 31 with a March 17 record date, and a special dividend of 1.5 cents per share. It still plans to pay shareholders 22 cents a share in ordinary dividends and a 3 cent special dividend for the 2017 financial year.

The shares last traded at $3.71 and have gained 22 percent over the past 12 months.

Spark’s home, mobile & business division, which services households and small businesses, posted a 1.3 percent decline in earnings to $391 million due to the increase in call centre staff numbers, which the company expects to drop off in the future. Revenue rose 1.4 percent to $985 million on increased mobile customer numbers and as broadband customers migrated to higher-value plans.

The digital division, which deals with large business, enterprise and government customers, posted a 1 percent fall in ebtida to $191 million to support the growth in IT services, which helped drive an 8.4 percent gain in revenue to $658 million.

The ventures and wholesale unit posted a 9.5 percent decline in earnings to $57 million on a 7.4 percent fall in revenue to $112 million. The earnings decline was due to the rationalisation of wholesale legacy services, and was offset by gains in the Qrious big data and Morepork sercurity services.

Spark Connect & Platforms, which covers the company’s network performance and investment programmes, posted a smaller ebtida loss of $166 million due to a reduction in costs

(BusinessDesk)

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Content Sourced from scoop.co.nz
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