Spark New Zealand (NZX:SPK) shows resilient growth despite challenges

Highlights

  • Spark New Zealand expects resilient growth despite challenges.
  • Sudden travel bubble closures could bring uncertainties to the business.
  • Total Dividend of 25 cents per share given out by the Company in FY21.

In its recent results for 2HFY21,  Spark New Zealand (NZX:SPK) indicated strong performance in areas like security, cloud, mobile as well as service management revenues. Substantial EBITDA growth was recorded by the Company at NZ$1,124 million, as a result of cost management. It was further added that the depreciation in the NPAT has been the result of the amortisation and depreciation costs as well as tax expense increase.

Image Source: © 2021 Kalkine Media

The revenue declined to NZ$3,593 million due to several factors. The revenues earned from Mobile service witnessed a growth of 4.3%, while its market share grew to become 41.5%. There was a growth of 5.5% witnessed in service management and cloud security, with influence from the continued digitisation of businesses lately.

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While there were challenges witnessed in the broadband market, the pressure of competition was a factor in a 1.5% revenue decline. The growth in wireless broadband was witnessed to be below the target, nevertheless, in the final quarter things picked up the pace and the connection growth was valued at 19,000.

What the Chair Thinks

Justine Smyth, the Chair for Spark New Zealand, was of the view that the economic recovery of the country had been better than expected. However, with new alert levels due to COVID-19 cases, economic recovery has given rise to economic uncertainty.

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Restrictions on international borders continue to have an impact on the company’s revenues, with talent scarcity being witnessed as an impact on the overall growth of the company in specific markets. Having said that, core markets are witnessing growth and the company’s ability to adapt to dynamic situations has been a major reason for the EBITDAI growth.

Image source: © 2021 Kalkine Media New Zealand Ltd

Image Description: Spark New Zealand offers resilience

Resilient Growth

Resilience witnessed in the demand for the core services has enabled the maintenance of cash flow as well as a dividend payout of 12.5 cents per share, taking the full-year dividend to 25 cents per share in FY21. While a decline in demand for roaming meant a drop in free cash flow, most of the impact was managed with the cash flow management skills displayed by the company, with the Company finally putting out NZ$433 million free cash this year.

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Bottom Line

Spark New Zealand shows how businesses have had mixed responses to digitisation over the past year and how the pertaining uncertainties could mark a difference in their current situations.

On 6 September 2021, the Company traded at NZ$4.865, up by 0.72% at the time of writing.

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