IT services shine in Spark's 2017 results

IT services shine in Spark's 2017 results

IT services deliver 19 per cent growth compared with 3.3 per cent growth in total revenue.

Mark Verbiest, chairman of Spark, and managing director Simon Moutter.

Mark Verbiest, chairman of Spark, and managing director Simon Moutter.

Telco Spark has reported "solid" revenue growth for the year ended 30 June in what it describes as a very competitive market.

Chairman Mark Verbiest, who will retire from the board in November, said the results for the year were in line with expectations and mark positive progress in the company's long-term digital transformation.

Revenue grew to $3.614 billion, up 3.3 per cent on the back of a strong performances in IT services, up 19 per cent, and mobile, up 5.6 per cent.

“It’s been another year of relentless focus on delivering for our customers in very competitive retail markets and on positioning Spark well for the digital future,” Verbiest said.

Earnings before interest, tax and depreciation (EBITDA) grew of 3 per cent, to $1.016 billion. However, included in that was a $20 million gain from the sale of surplus land at Mayoral Drive in Auckland. 

Managing director Simon Moutter said Spark had made big operational moves during the year.

The successful launch of the company's "Upgrade New Zealand" programme saw wireless broadband connections grow to 84,000 (up 72,000), and fibre connections grow to 172,000 (up 73,000) – meaning around 37 per cent of Spark’s broadband base is now off Chorus's legacy copper network.

Verbiest said increased EBITDA, combined with a reduction in depreciation, resulted in overall net earnings increasing 13 per cent to $418 million. 

Costs, however, were up on last year, reflecting higher short-term costs needed to address customer service challenges experienced last winter and to manage the workload arising from strong growth in telecommunications-as-a-service and IT service contract wins.

In June the NZ Fire Service became Spark's 100th telecommunications-as-a-service win

In addition, there were costs related to the large-scale migration of customers off copper to wireless or fibre, and from Yahoo to SMX email.

“While we’re proud of what we have achieved so far, and we’ve continued to execute our long-term strategy well and deliver good financial results, there are signs that fresh impetus is needed for the next phase of our transformation," Verbiest said.

“Increasingly, the companies most likely to win are those that cut through complexity to deliver a highly automated and slick digital self-service customer experience, and who have a simpler proposition to sell, maintain and support than their competitors," Moutter said.

Spark will target three new focus areas in its strategy, he added

First, to put more resource into digitising and simplifying products and services to lower cost of operating and put more power into the hands of customers.

Second to better leverage brands to meet the needs of all parts of the market - from those who want services packed with extra value to the more price sensitive who want the basics done well.

Third, Spark will increase its emphasis on investment in wireless to deliver improved mobile and wireless broadband services. By 2020 Spark aims to have 85 per cent of its broadband customers migrated away from copper onto fibre or wireless.

The shareholder dividend for the full year was 25 cents per share.

Verbiest Will be replaced by current director Justine Smyth as the new chair effective on 3 November.

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