Spark unveils increased annual profit

TOM PULLAR-STRECKER
Last updated 11:44 22/08/2014

Telecom has rebranded and is now known as Spark.

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Spark shares have held their recent gains after the company nearly doubled its annual net profit to $460 million.

The shares were unchanged at $2.91 in late-morning trading on the NZX, well up on their 12-month low of $2.05 and up 2 per cent over the week.

Spark's result the previous year had been affected by restructuring charges as the company, then called Telecom, slashed more than 1000 jobs.

Bank of America analyst Sameer Chopra described today's annual result as a strong one.

Revenues from continuing operations fell 2.6 per cent to $3.64 billion in the year to June, and Spark's adjusted operating profit - a figure watched by many analysts - fell 4 per cent to $936m.

That decline was less than some analysts expected, and chairman Mark Verbiest told shareholders that Spark had the potential to return to net earnings growth this financial year.

Spark's performance in the second half of the financial year had improved as the company's strategy and stronger focus on customers gathered pace, he said.

Chief executive Simon Moutter said it seemed a "significant moment".

In the clearest sign of the more bullish tone of the result, Spark said it would raise its final dividend by 1 cent to 9c, taking its total dividend to 17c, partially imputed.

"Our aim is to sustainably grow dividends over time and this increase in business momentum, together with a more positive outlook, has enabled us to take a first step by increasing our second-half dividend," Moutter said.

He forecast a low single-digit percentage decline in revenues this year but low single-digit growth in Spark's adjusted operating profit.

Highlights included a 6 per cent increase in mobile revenues to $965m, aided by a near 10 per cent jump in mobile connections to more than 2 million.

Moutter estimated Spark's share of mobile market revenues had increased to 39.4 per cent.

There was a modest rise in broadband connections, up 20,000 to 669,000.

But Moutter said Spark's share of the "intensely competitive" broadband market was "stable" at 47 per cent.

The operating profit from Spark's information technology businesses increased 38.5 per cent as a result of its investments in data centres and cloud computing.

However, the 6 per cent revenue gain in mobile was not enough to offset the continuing slide in Spark's fixed-line revenues. Excluding the contribution of Australian subsidiary AAPT, which Spark sold in December, net profit rose 19.6 per cent to $323m.

But the company said that when the impact of restructuring charges was removed from the previous year's numbers, adjusted net earnings from continuing operations fell 7.7 per cent.

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