Profit Spark-ling as it doubles to $460m

Spark may be experiencing the first rays of light after years of seeing its earnings chipped away by falling revenues from fixed-line telecommunications.

Chief executive Simon Moutter said it seemed like "a significant moment" for the company, formerly known as Telecom.

Spark almost doubled its annual net profit to $460 million. Its result the previous year had been impacted by restructuring charges as the company slashed more than 1000 jobs.

Bank of America analyst Sameer Chopra described the annual result as a strong one.

Speculation that Spark might signal some form of share buyback funded by the proceeds of AAPT's sale proved unfounded.

Analyst J P Morgan has forecast the sale of AAPT for $506m in February could leave scope for a $250m share buy-back this financial year, but Moutter was non-committal on the possibility.

Afternoon profit-taking saw the company's shares close down 1.7 per cent at $2.86, still well up on their 12-month low of $2.05.

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

But 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.

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, and forecast a fully imputed dividend of 18c next year. "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 further 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 Sparks' 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.

Moutter indicated Spark remained committed to laying a new fibre-optic trans-Tasman communications cable even if its two partners on the scheme pulled out. There has been speculation Australia's Telstra has decided not to become an equity partner in the venture and Spark's other cable partner, Vodafone, has yet to commit after nearly 18 months of deliberation.

Excluding the contribution of AAPT, 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.

The Press