Earnings before interest, tax, depreciation and amortisation rose 3% to $1.016 billion from $986 million in the previous corresponding period. The profit was helped by the $20millon sale gain from the sale of surplus land at Mayoral Dr, in Auckland.
The reported profit of $418million was up 13% on the $370 million reported in the pcp, helped by lower depreciation, amortisation (down 3.6%) and finance expenses (down 7.1%). The company paid the same tax amount of $142 million in both years.
Capital expenditure rose 6.4% in the period under review to $415 million and the notional free cash flow rose slightly to $601 million.
The total dividend remained steady at 25c per share.
Mr Verbiest, who announced he was retiring as chairman, said it had been another year of relentless focus on delivering to customers in very competitive retail markets and on positioning Spark well for the digital future.
Revenue was up 3.3% to $3.6billion on the back of continued strong performances in IT services (up 19%) and mobile (up 5.6%).
Craigs Investment Partners broker Chris Timms said in an interview the quality of the second-half operating result looked reasonable, with a solid performance in mobile.
The key variance relative to Craigs’ estimates was the higher operating expenditure and a lower second-half dividend.
Mobile numbers grew to nearly 2.4 million connections with pay monthly remaining stable at 48%.
"Critically, this has translated into mobile service revenue growth of 4% on the pcp. Overall, this looks like a solid to strong mobile result for Spark as management noted its share of mobile service revenue remained stable at 37.8%."
Mr Timms noted costs were up on last year, reflecting higher short-term costs needed to address customer service challenges experienced last winter and to manage the workload arising from strong growth in telecommunications-as-a-service and IT service contract wins.
Also, there were costs related to the large-scale migration of customers off copper to wireless or fibre, and from Yahoo to SMX email.Mr Verbiest said Spark was pleased with what it had achieved so far.
"We’ve continued to execute our long-term strategy well and deliver good financial results. There are signs fresh impetus is needed for the next phase of our transformation."
Managing director Simon Moutter said the successful launch of Spark’s "Upgrade New Zealand" programme meant wireless broadband connections grew to 84,000, up 72,000, and fibre connections grew to 172,000, up 73,000. That meant about 37% of Spark’s broadband base was now off copper.
The company successfully migrated 800,000 customer email accounts safely to New Zealand-based SMX and entered new partnerships with Netflix and Spark arena to complement its Lightbox and Spotify add-ons, he said.
"But we still have a long way to go. In an exponentially evolving digital world, where change is the new normal, the complexity of fast-changing technology has customers grappling with the pace of change."
Meanwhile, customer preference was shifting rapidly to wireless, enabled by high-speed mobile coverage. In mobile and broadband particularly, commoditisation pressures meant more New Zealanders were buying their mobile or broadband services based primarily on price, Mr Moutter said. The companies most likely to win were those cutting through complexity to deliver a highly automated and slick digital self-service customer experience and who had a simpler proposition to sell, maintain and support than their competitors.
Spark shares last traded at $3.91, down 1c.
At a glance
• Operating profit up 3% to more than $1 billion, including $20million sale proceeds.
• Reported profit up 13% after lower depreciation, amortisation and finance costs.
• Operating costs were up due to increased service provision and migrating email customers to SMX.
• Wireless use is increasing.
