Financial Performance & Trend Analysis (FY21-FY24)
This analysis synthesizes information from Spark New Zealand's 2022 and 2024 Annual Reports to provide a financial perspective covering FY2021-FY2024. Spark has navigated a dynamic period marked by strategic transformation towards digital services, significant capital recycling through the Connexa divestment, and substantial investment in next-generation infrastructure (5G, data centres). This occurred against a backdrop of challenging economic conditions and ongoing shifts in the telecommunications landscape.
While the core mobile business demonstrates resilience and market leadership, overall financial performance has shown mixed results. Underlying profitability metrics (Adjusted EBITDAI, Adjusted NPAT) indicated growth up to FY23 but faced headwinds in FY24 due to market pressures and increased operating and finance costs. Reported NPAT has been highly volatile, significantly skewed by the FY23 Connexa gain. Shareholder returns remain a clear priority, evidenced by consistent dividends and share buy-backs, though leverage increased in FY24 and sits above the company's target range. The successful execution of the SPK-26 strategy, focusing on cost optimisation and growth in digital services, is paramount for future performance.
Spark's financial trajectory over the FY21-FY24 period reflects both strategic initiatives and external market factors. Underlying operational performance, viewed through adjusted metrics, showed resilience until FY24.
Adjusted EBITDAI grew from $1,119m in FY21 to a peak of $1,193m in FY23, before declining 2.5% to $1,163m in FY24. Similarly, Adjusted NPAT increased steadily from $381m in FY21 to $433m in FY23, then dropped significantly by 21% to $342m in FY24, impacted by lower EBITDAI, higher finance costs, and increased depreciation.
Reported results were heavily influenced by the $583m net gain on the Connexa sale in FY23, causing reported NPAT to spike to $1,135m that year, compared to $410m in FY22 and $316m in FY24.
Operating cash flow remained positive throughout, but Free Cash Flow showed volatility, dropping significantly in FY22 due to working capital timing, recovering in FY23, and falling again by 32.5% in FY24 to $330m due to lower earnings and higher interest payments.
Investment (Capex) has consistently increased, rising from $349m in FY21 to $518m in FY24, reflecting the focus on 5G deployment, data centre builds, and network upgrades.
Adjusted figures used where appropriate to illustrate underlying trends.
Key Financial & Operational Metrics (NZ$ Millions, except where noted)
| Metric | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|
| Operating Revenues & Other Gains (Adjusted*) | 3,593 | 3,720 | 3,908 | 3,861 |
| EBITDAI (Adjusted*) | 1,119 | 1,150 | 1,193 | 1,163 |
| Net Profit After Tax (NPAT) (Adjusted*) | 381 | 410 | 433 | 342 |
| Dividends per share (cents) | 25.0 | 25.0 | 27.0 | 27.5 |
| Free Cash Flow (FCF) | 433 | 296 | 489 | 330 |
| Capital Expenditure | 349 | 410 | 515 | 518 |
| Mobile Connections (Millions) | N/A | 2.5 | ~2.7 | >2.7 |
| Broadband Connections ('000) | N/A | 704 | 699 | 687 |
| Customer iNPS | +20 (restated) | +29 | +31 | +38 |
| Employee Engagement (eNPS/Score) | +76 | +70 | 70% | 67% |
*Adjusted figures used for Revenue, EBITDAI, and NPAT for FY23 & FY24 commentary. FY21/FY22 figures are as reported. Employee Engagement metric changed from eNPS to % score.
FY2024 presented a mixed picture for Spark. While strategic progress continued, the financial results reflected significant economic pressures and the absence of the prior year's divestment gain.
An indicative comparison with Australasian peers suggests Spark's FY24 underlying performance was weaker than Telstra and TPG but potentially more stable than Optus or One NZ in certain metrics. Its EBITDA margin (~30% adjusted) is competitive within NZ but lags the leading Australian operators. Capital intensity (~13.4%) appears relatively efficient.
| Metric | Spark NZ (FY24 Adj.) | Telstra (AU - FY24 Est.) | Optus (AU - FY24) | TPG (AU - FY23) | One NZ (NZ - FY24 Est.) |
|---|---|---|---|---|---|
| Revenue Growth (%) | -1.2% | ~1-2% | ~ -1% | ~1% | ~Flat |
| EBITDA Growth (%) | -2.5% | ~5-7% | ~ -2% | ~12% | ~Low single digit decline |
| EBITDA Margin (%) | ~30% | ~35-40% | ~20-25% | ~35% | ~30-35% |
| Capex/Sales (%) | ~13.4% | ~13-15% | ~15-18% | ~18-20% | ~15% |
Peer data is indicative, sourced from public reports/estimates around Aug 2024. Definitions may vary.
Spark's total equity decreased to $1.59 billion in FY24 (from $1.94 billion in FY23). The reduction primarily resulted from the $159m share buy-back conducted during the year, which reduced contributed capital to $810m. Dividend payments ($494m) exceeding the net profit ($316m) also contributed to the decrease in retained earnings. The company reinstated its DRP for the final FY24 dividend, potentially adding to equity in FY25.
Total debt increased significantly in FY24 to $1.62 billion (from $1.05 billion in FY23), used to fund capital investments ($518m) and the share buy-back ($159m) after the Connexa sale proceeds were deployed in FY23. Net debt reached $1.64 billion.
Debt Metrics Acceptability: Spark's Net Debt (including leases) to Adjusted EBITDAI ratio rose to 2.1x in FY24, exceeding its long-run target ceiling of 1.7x. While the stable A- credit rating suggests this is currently manageable in the view of rating agencies, it highlights the need for earnings recovery or debt reduction to return to the target range. The company has diverse funding sources, including sustainability-linked financing, and well-spread maturities.
Spark New Zealand concluded FY24 demonstrating strategic progress in key growth areas like mobile, data centres, and IoT, alongside successful customer experience initiatives. However, challenging macroeconomic conditions significantly impacted financial results, leading to declines in underlying profitability and free cash flow, and pushing leverage above target levels.
The outlook hinges on the successful execution of the SPK-26 strategy, particularly the Operate programme designed to reset the cost base for FY25. Continued investment in growth opportunities, prudent capital management (including managing leverage), and navigating the competitive and economic landscape will be key priorities. While FY24 performance was below ambitions, the company's strong market positions, strategic investments, and commitment to shareholder returns provide a foundation for potential recovery.