Spark books up to $30M in extra 2018 costs as Quantum program accelerated

Spark books up to $30M in extra 2018 costs as Quantum program accelerated

Lower EBITDA and earnings per share are now forecast due to transformation investment

Simon Moutter (Spark)

Simon Moutter (Spark)

Telco retailer Spark is accelerating its Quantum performance improvement program to realise financial benefits earlier than previously signalled.

Managing director Simon Moutter said opportunities recently identified as part of Spark’s transition to what it calls an "Agile at scale" operating model had encouraged the company to push harder on the program.

Quantum involves Spark being the industry’s lowest cost operator through simplified and digitised processes, products and services.

Moutter said Spark has been making rapid progress on its Agile journey during the 2018.

"We set up three frontrunner Agile ‘tribes in February and these tribes are already demonstrating impressive improvements in terms of deeply embedded customer centricity; dramatically increased speed to market; and empowered and engaged employees with greater productivity," he said.

"This has given us confidence to go faster in our Agile transformation."

The program originally envisaged progressive performance improvements, with associated costs of change, through until 2020.

Moutter said Spark had now decided to implement some Quantum changes in 2018 that were originally planned for 2019.

While the Quantum program will continue to implement further business improvements during 2019, the acceleration will improve customer experience and strengthen earnings in 2019 and beyond, Spark said.

Additional implementation costs of between $25 million and $30 million are now expected to be brought forward into reported 2018 earnings. These costs include external expertise, relocation and property lease costs, restructuring expenses, and programme office functions.

Spark originally envisaged incurring $25 million costs of change during 2018, meaning the acceleration of Quantum will now bring total expected 2018 costs of change to between $50 million and $55 million.

Spark continues to anticipate paying a 2018 dividend per share of 25c at least 75 per cent imputed.

However, due to the higher costs of change associated with acceleration it has lowered 2018 EBITDA and earnings per share guidance.

Current EBITDA guidance of $996 million to $1,016 million and earnings per share of 22 cents is now EBITDA of $971m to $991 and earnings per share of 21 cents.

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