Spark boosts FY19 profit on flat revenues

Spark has managed to boost full year profit and EBITDA for the year to 30 June, despite reporting flat revenues, with growth in mobile, broadband, cloud and security offset by declines in legacy voice and managed data and networks products.

Earnings before finance income and expense, income tax, depreciation, amortisation and net investment income (EBITDAI) were $1.090 b billion, an 11.1 per cent increase.

Overall reported net earnings were $409m, up 12.1 per cent, or 2.2 per cent compared with the adjusted prior year performance.

Operating expenses fell by 4.3 per cent ($109m), or 2.4 per cent when the FY18 result was adjusted to exclude $49m of implementation costs associated with Quantum, Spark's program designed to make it the country’s lowest cost operator through radically simplified and digitised processes, products and services.

In May 2018 then CEO Simon Moutter said Spark had decided to implement, prior to the end of FY18, some Quantum changes that were originally envisaged to occur during FY19.

Spark said the expenses reduction had been driven largely by lower direct product costs ($28m) and lower labour costs ($38m).

Spark chair Justine Smyth said the results showed Spark to be on track to deliver on key financial aspirations communicated in June 2017 as part of its three-year strategy.

“We’ve grown our business in the highly competitive mobile and cloud services categories, held our broadband position, entered new markets like sports streaming, led on cost management and transformed our company culture,” she said.

“It’s very pleasing to achieve these positive outcomes in a year during which we implemented and embedded massive organisational change with the move to Agile ways of working.”

Spark said it had maintained growth in mobile connections, revenue and average revenue per user (ARPU) over the year, driven by the addition of higher-value customer propositions such as the new shareable Unlimited plan.

“Spark significantly outperformed its mobile market competitors, securing over 60 per cent of total FY19 market growth in service revenue and connections,” the company said.

Chief executive Jolie Hodson said a commitment to create a wireless future for New Zealanders (announced in November 2017) was central to Spark’s strategy.

“As customers use their mobile phones to do more, many of them are seeking larger data allowances and price certainty – which provides an opportunity for Spark to improve ARPU with the right products and plans.”

She said Spark had led the transition to a wireless future with the number of customers on fixed wireless broadband and fixed wireless voice products growing by 36,000 over the year to 166,000.

During FY19 Spark said it had advanced its programme of simplification, digitisation and automation – with more than 100 ‘bots’ now performing a range of tasks from running back-end checks and processes to serving customers on the front line and freeing up Spark people.

“High-quality self-service options were experiencing strong usage growth and reducing demand on traditional service channels such as customer care centres,” it said. “Spark App usage increased by 18 per cent, while voice interactions reduced by 34 per cent.”

In April Spark executives told a conference in Sydney that since mid 2017 Spark had reduced its customer service costs by 25 per cent and call volumes to its contact centre by 33 per cent through the use of human online chat and virtual assistants.

Copyright © 2019 IDG Communications, Inc.

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