New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Spark FY20 – First Impressions</h2>
Spark’s (SPK) FY20 result and FY21 guidance were both largely in line with our and consensus expectation.
EBITDA NZ$1113m vs. Forbar NZ$1100m / consensus NZ$1103m. NPAT was ahead principally due to a one-off benefit from the reintroduction of depreciation on buildings. &nbsp;
There was no change in key operating trends, with a sharp decline in legacy voice (revenue -11% yoy) offset by continued growth in mobile services (+4%) and cloud/security (+11%). SPK estimates COVID-19 had a NZ$25m EBITDA impact on FY20, which it expects will increase to NZ$75m in FY21 with borders remaining shut and economic conditions softening.
Guidance
FY21 EBITDA guidance was robust despite the expectation of a greater impact from COVID-19, but with some latitude to flex the dividend from current NZ25cps levels.
<ul>
<li>EBITDA NZ$1090-1130m vs. Forbar $1092m/consensus $1127m (including an expected NZ$75m impact from COVID).</li>
<li>Capex c.NZ$350m + spectrum renewals NZ$50m vs. Forbar NZ$378m + NZ$125m spectrum (our spectrum forecast included 5G auctions which have been deferred) / consensus NZ$412m total.</li>
<li>Dividend NZ23-25cps (fully imputed) vs. Forbar NZ25cps (95% imputed) / consensus NZ25cps.</li>
</ul>
Investor briefing
Conference call: 10:00am (NZ time), NZ 083035, AU 1800 007 094, HK 800 966 885, Singapore 800 6411 152, US 1800 6518 618, int’l +61 2 8038 5358. Conference ID: 7389556.
FY20 result summary
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1676035766586803891&amp;th=174279a6524186b3&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9sehsHQnOAaMb9kGPMm425lA6yuUrkubhMfxWrZNbBA3hhkkqrtD_hbgjZpqgwAISmPbOX9oRO8zAdeexd8qrePfUi_3ZNCCF_bjvkdVAhRv-KLb_KcyK0cBQ&amp;disp=emb" width="492" height="129" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Company reports, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1676035766586803891&amp;th=174279a6524186b3&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9_WZ271KAszNrmUVMp1InycLe7w51aoJqiaQdWGatmPlhzW_Kl6EoUen36xqNahqDurYafTsrhMqQplKYgri-IbVbMgDRWXEimvPtEfLKxjHmkW1NqbJ689Po&amp;disp=emb" class="editor-image img-responsive"></figure>
M: +64 21 329 291 |P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Spark FY20 – First Impressions
Spark’s (SPK) FY20 result and FY21 guidance were both largely in line with our and consensus expectation.
EBITDA NZ$1113m vs. Forbar NZ$1100m / consensus NZ$1103m. NPAT was ahead principally due to a one-off benefit from the reintroduction of depreciation on buildings. &nbsp;
There was no change in key operating trends, with a sharp decline in legacy voice (revenue -11% yoy) offset by continued growth in mobile services (+4%) and cloud/security (+11%). SPK estimates COVID-19 had a NZ$25m EBITDA impact on FY20, which it expects will increase to NZ$75m in FY21 with borders remaining shut and economic conditions softening.
Guidance
FY21 EBITDA guidance was robust despite the expectation of a greater impact from COVID-19, but with some latitude to flex the dividend from current NZ25cps levels.

EBITDA NZ$1090-1130m vs. Forbar $1092m/consensus $1127m (including an expected NZ$75m impact from COVID).
Capex c.NZ$350m + spectrum renewals NZ$50m vs. Forbar NZ$378m + NZ$125m spectrum (our spectrum forecast included 5G auctions which have been deferred) / consensus NZ$412m total.
Dividend NZ23-25cps (fully imputed) vs. Forbar NZ25cps (95% imputed) / consensus NZ25cps.

Investor briefing
Conference call: 10:00am (NZ time), NZ 083035, AU 1800 007 094, HK 800 966 885, Singapore 800 6411 152, US 1800 6518 618, int’l +61 2 8038 5358. Conference ID: 7389556.
FY20 result summary

Source: Company reports, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research

M: +64 21 329 291 |P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Spark New Zealand

Spark: FY20 – First Impressions