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Spark hits its numbers, announces completion of three-year transformation

Spark hits its numbers, announces completion of three-year transformation

The telco said it moved quickly to mitigate COVID-19 impacts while maintaining essential services

Justine Smyth and Jolie Hodson (Spark)

Justine Smyth and Jolie Hodson (Spark)

Credit: Supplied

Telco Spark increased revenue by 2.5 per cent for the year 30 June, to reach $3.62 billion for the year.

Spark said it maintained its momentum in the second half after a strong first half to achieve mobile service revenue growth of 3.9 per cent, and double-digit growth in cloud, security and service management revenue, which increased 10.8 per cent to $443 million.

That growth was due to increased penetration of core cloud services and the ongoing shift of customers to more flexible and future-proofed cloud-based IT models, combined with the onboarding of new contracts, Spark's annual report said.

The telco said it moved quickly to mitigate COVID-19 impacts while maintaining essential services to keep the country connected.

“It is fair to say this will be a year remembered more for the last quarter than the first three, and it is a testament to the agility and commitment of our people that we were able to adapt quickly, support our customers and deliver what we said we would in a challenging environment," Spark CEO Jolie Hodson said. 

Impacts included the loss of international roaming revenues, retail revenue reductions from store closures, the removal of data overage charges, and an increase in bad debt provisioning as a result of the economic impact of the pandemic on customers. 

Spark's revenue sources and year on year changes.Credit: Supplied
Spark's revenue sources and year on year changes.

There were, however, some benefits, mainly from increased demand for collaboration products to support remote working. 

Overall COVID-19 had a total negative earnings before interest, tax, depreciation, amortisation and investment income (EBITDAI) impact of approximately $25 million in 2020, Spark told shareholders. 

Operating expenses increased as the benefit of cost cutting were reinvested to fund growth.

EBITDAI growth of 2.1 per cent to $1.11 billion placed the result in the mid-range of guidance. 

Net profit after tax increased 4.4 per cent to $427 million, primarily driven by that growth in EBITDAI and lower tax expenses. 

Spark announced an second half dividend per share of 12.5 cents, 100 per cent imputed, bringing the total 2020 dividend to 25 cents a share. 

Chair Justine Smyth said 2020 marked the completion of Spark's three-year plan, which has transformed it from a traditional telco to an "end-to-end digital services company" and delivered compound annual growth in shareholder returns of 13 per cent.

“Agile ways-of-working have improved our speed to market and customer focus, and we have seen a significant increase in both customer and people engagement during this time," Smyth said. 

Sustained network investment underpinned Spark's ability to innovate and grow and provided secure connectivity during COVID-19. 

“It is a credit to Spark’s people that we have delivered such a strong result, with growth on nearly all key metrics, despite the impact of COVID-19 in the final quarter," she said.

“We are now faced with a more uncertain economic climate, and we will continue to be challenged as a country, as a business and as individuals to adapt to the challenges COVID-19 brings."

Spark's long-term focus was on simplifying and digitising our customer experiences, supporting digital transformation in the business community, and transitioning New Zealand off legacy systems to modern technologies.

“We are now entering a more challenging period as a country, and we expect the impact of COVID-19 to be more material in 2021," Hodson said. 

"The recent return to alert level three in Auckland and alert level two more broadly has reminded us that this challenge is not behind us, and we moved quickly to lift broadband data caps for our customers once again. 

We know it is vital for New Zealand that we continue to invest in smart infrastructure during this time, and we are focusing our 2021 capital expenditure on supporting New Zealand’s economic recovery, including through the rollout of 5G and investment in rural connectivity."

Spark confirmed 2021 EBITDAI guidance of $1.09 billion to $1.13 billion and a 2021 dividend of 23-25 cent per share, 100 per cent imputed.


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