What led to Spark’s (NZX:SPK) sparkling show in first half?

Highlights

• Spark delivered a 5.2% rise in revenue on pcp in the first half of FY22.
• The Group plans to establish a subsidiary company Spark TowerCo to enhance the performance, utilisation, and capital efficiency of its mobile tower network.
• Spark expects its EBITDA to be between $1.13 billion and $1.16 billion for FY22.

NZ-based telecom services provider Spark New Zealand Limited (NZX:SPK; ASX:SPK) delivered a strong performance in H1 FY22, registering a 5.2% growth in revenue to $1890 million for the period. Increased revenue was driven by a 5% growth in mobile services revenue. SPK’s cloud, security, and service management revenues also witnessed a growth of 3.2%.

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While EBITDAI saw a growth of 7.6% to $538 million, NPAT rose 21.8% to $179 million due to growth in EBITDAI, reduced financial expenses and lower depreciation.

However, the Group’s broadband revenue declined by 3.9% while the gross margin was maintained. The introduction of simplified broadband plans steadied Spark’s base at 702K connections.

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The Group declared a dividend of 12.5cps in H1 FY22.

Announced plans to establish Spark TowerCo

Spark declared plans to establish a subsidiary company Spark TowerCo to enhance the performance, deployment, and capital effectiveness of its passive mobile assets.

The Group also plans to explore third-party capital in the second half of FY22 and retain a stake in TowerCo if a deal occurs.

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The move comes after Spark evaluated its infrastructure portfolio in FY21 to focus effort and investment on its strategically significant assets. The Company has made many announcements since then, including accelerated 5G rollout covering 90% population by 2023 end, increasing capacity at its Takanini Datacentre and a significant upgrade of its Mayoral Drive Exchange.

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Spark’s Chief Jolie Hodson stated that Spark would retain a shareholding and stay as the anchor tenant with appropriate agreements on terms and operations if the Company goes for introducing third-party capital.

Road ahead

Spark’s pipeline for the second half of the year remains strong.

Spark remains on track to deliver future market revenue aspirations for FY23. The Group expects Spark Sport’s contribution to be at the lower end but it would be compensated by strong growth in Spark Health and Spark IoT.

Spark expects its EBITDA to be between $1.13 billion and $1.16 billion for FY22 and confirmed total dividend guidance of 25cps.

On 23 February, at the time of writing, SPK was trading at $4.585, up 0.66%.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)