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

Spark (SPK) FY21 Result – Initial Impressions
Spark (SPK) has delivered a solid result and stable EBITDAI of NZ$1,124m at the upper end of guidance, in-line with consensus, 2% ahead of Forbar estimates and up 1% vs FY20. Key positive was cost savings and a strong mobile market offsetting impacts from COVID border closures and competitive pressures on broadband ARPU and slightly weaker cloud and security gross margins.
The performance of the key mobile business is best highlighted by mobile services revenues +4.3% (excluding the NZ$31m impact from the incremental loss of roaming in FY21).
Reported NPAT is below consensus forecast due to higher depreciation, but 3% ahead of Forbar due to higher EBITDAI drop through.
SPK introduced an FY22 EBITDAI guidance of NZ$1,130-1,160m, Consensus is at top end of guidance and Forbar is at just below bottom end NZ$1,124m and more importantly SPK has affirmed its dividend will be retained at NZ25cps.
FCF was NZ$5m down on FY21, slightly below our estimates due to timing on tax payments, excluding that, FCF was slightly ahead.
There has been some minor intra divisional re-statements (e.g. managed data)
Investor briefing
Conference call: 10:00am (NZ time), NZ 0800 660 222, AU 1800 007 094, HK 800 966 885, Singapore 800 641 1152, US 1800 651 8618, int’l +61 2 8038 5358. Passcode: 1139515.
Key points of interest

Free cash flow: Down NZ$5m from FY20, slightly below our estimates due to timing on tax payments, excluding that, FCF was slightly ahead
Fixed Wireless and broadband: SPK reported a 19k increase in FW connections, -10k below our expectations and -21k below target. Total broadband connections declined by 2k vs the half year results.
EBITDA: &nbsp;$1124m, in-line with consensus, upper end of guidance.
FY22 guidance: SPK have guided for EBITDAI of NZ$1,130m to NZ$1,160m, ahead of our forecasts (NZ$1,127m) and at the mid-point -1% below consensus (NZ$1,156m). FY22 dividend guidance is NZ 25cps (in-line with our expectations).&nbsp; &nbsp;

FY21 result summary




NZ$m


FY20


FY21E


% chg


FY21E FB


% diff


Consensus


% diff




Revenue


3,623


3,593


-0.8%


3,629


-1.0%


3,617


-0.7%




Underlying EBITDA


1,113


1,124


1.0%


1,103


1.9%


1,122


0.2%




Underlying EBIT


625


601


-3.8%


577


4.2%


606


-0.8%




Reported NPAT


420


384


-8.6%


374


2.7%


396


-2.9%




Dividend (cps)


25.0


25.0


0.0%


25.0


0.0%


25.0


0.0%









NZ$m


FY20


FY21


% chg


Forbar


% diff


2H20


2H21


% chg


Forbar


% diff




Revenue


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&nbsp;&nbsp; Fixed


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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Voice


386


308


-20.2%


325


-5.3%


187


154


-17.6%


171


-10.0%




&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Broadband


680


670


-1.5%


675


-0.8%


335


333


-0.6%


338


-1.5%




&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Managed data


277


282


1.8%


253


11.5%


156


159


1.9%


130


22.3%




&nbsp;&nbsp; Total fixed


1,343


1,260


-6.2%


1,253


0.5%


678


646


-4.7%


639


1.1%




&nbsp;&nbsp; Mobile


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Prepaid


191


190


-0.7%


189


0.7%


95


95


-0.3%


94


1.4%




Postpaid


650


653


0.4%


655


-0.3%


324


331


2.0%


333


-0.5%




Other mobile


446


468


4.9%


470


-0.4%


215


234


8.7%


236


-0.8%




&nbsp;&nbsp; Total mobile


1,288


1,311


1.8%


1,313


-0.2%


635


660


3.9%


662


-0.3%




&nbsp;&nbsp; Cloud, security and service mgmt


420


443


5.5%


474


-6.5%


201


214


6.5%


245


-12.7%




&nbsp;&nbsp; Procurement and partners


407


414


1.7%


449


-7.8%


199


177


-11.1%


212


-16.4%




&nbsp;&nbsp; Other


130


137


5.4%


124


10.9%


55


80


45.5%


67


20.3%




&nbsp;&nbsp; Other gains


35


28


-20.0%


16


75.0%


31


24


n.m.


12


100.0%




Total revenue


3,623


3,593


-0.8%


3,629


-1.0%


1,799


1,801


0.1%


1,837


-1.9%




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Gross margin


&nbsp;


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&nbsp;&nbsp; Fixed


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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Voice


242


180


-25.6%


189


-4.5%


118


93


-21.2%


102


-8.4%




&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Broadband


341


339


-0.6%


334


1.5%


166


173


4.2%


168


3.0%




&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Managed data


138


145


5.1%


121


19.4%


73


90


23.3%


66


35.5%




&nbsp;&nbsp; Total fixed


721


664


-7.9%


644


3.1%


357


356


-0.3%


336


6.0%




&nbsp;&nbsp; Mobile


829


837


1.0%


827


1.2%


424


430


1.4%


420


2.3%




&nbsp;&nbsp; Cloud, security and service mgmt


348


358


2.9%


389


-7.9%


172


167


-2.9%


198


-15.5%




&nbsp;&nbsp; Procurement and partners


45


43


-4.4%


52


-16.7%


24


22


-8.3%


31


-28.1%




&nbsp;&nbsp; Other


48


70


45.8%


62


13.4%


33


42


27.3%


34


24.4%




&nbsp;&nbsp; Other gains


35


28


-20.0%


16


75.0%


31


24


n.m.


12


100.0%




Total gross margin


2,026


2,000


-1.3%


1,989


0.5%


1,041


1,041


0.0%


1,030


1.0%




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Operating expenses


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&nbsp;&nbsp; Labour


(511)


(491)


-3.9%


(492)


-0.3%


(244)


(236)


-3.3%


(237)


-0.6%




&nbsp;&nbsp; Other


(402)


(385)


-4.2%


(394)


-2.2%


(184)


(179)


-2.7%


(188)


-4.7%




Total operating expenses


(913)


(876)


-4.1%


(886)


-1.2%


(428)


(415)


-3.0%


(425)


-2.4%




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EBITDA


1,113


1,124


1.0%


1,103


1.9%


613


626


2.1%


605


3.5%




Depreciation &amp; amortisation


(488)


(523)


7.2%


(527)


-0.7%


(254)


(260)


2.4%


(264)


-1.3%




EBIT


625


601


-3.8%


577


4.2%


359


366


1.9%


342


7.2%




Interest


(58)


(47)


-19.0%


(54)


-12.2%


(30)


(21)


-30.0%


(28)


-23.7%




Net profit before tax


567


554


-2.3%


523


5.9%


329


345


4.9%


314


9.9%




Tax


(148)


(169)


14.2%


(153)


10.4%


(78)


(104)


33.3%


(88)


18.0%




Associates/JV losses &amp; other gains


1


(1)


-200.0%


4


-125.0%


2


(1)


-150.0%


4


-125.0%




Reported NPAT


420


384


-8.6%


374


2.7%


253


240


-5.1%


230


4.4%




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Underlying EPS (cps)


22.9


20.7


-9.6%


20.2


2.3%


13.8


12.6


-8.4%


12.2


3.9%




Dividend (cps)


25.0


25.0


0.0%


25.0


0.0%


12.5


12.5


0.0%


12.5


0.0%









&nbsp;









Capex (including spectrum)


(411.0)


(405.0)


-1.5%


(408.0)


-0.7%


(106.0)


(192.0)


81.1%


(195.0)


-1.5%




Free cash flow


438.0


433.0


-1.1%


434.5


-0.3%


416.0


316.0


-24.0%


317.5


-0.5%




Source: Forsyth Barr analysis, Company reports

Spark (SPK): FY21 Result – Initial Impressions

Spark New Zealand

Spark (SPK): FY21 Result – Initial Impressions