Spark New Zealand tumbled 18.8% on the ASX 200 during Friday's trade, down 18.9% on the NZX 50 after reporting a steep decline in net profit amid ongoing challenges in its enterprise and government divisions.
Net profit after tax (NPAT) plunged 77.7% to $35 million, primarily due to lower EBITDAI (earnings before interest, tax, depreciation, ammortisation, and net interest income) and increased depreciation and amortisation costs.
Excluding non-recurring operating model transformation costs of $29 million, adjusted EBITDAI fell 15.5% to $448 million, while adjusted NPAT declined 64.3% to $56 million.
The company’s revenue fell 1.9% to $1.94 billion, impacted by declining IT services, mobile performance, and the continued erosion of legacy voice revenue. Growth in mobile devices, cloud, data centres, and IoT provided some offset.
The decline was largely attributed to Spark’s Enterprise and Government division, which faced spending cuts, mobile fleet reductions, a shifting product mix, and intensified price competition.
Spark Chair Justine Smyth acknowledged the difficult conditions, stating, “When we updated the market in October, we outlined that we were experiencing one of the longest and deepest recessionary periods in recent history. Since that time, we have seen no improvement in these conditions, and while there has been movement on monetary policy, this is yet to flow through to any meaningful change in consumer or business spending.”
“We know our shareholders will be rightly concerned by the ongoing headwinds we are facing, and Board and Management are taking decisive action to improve performance in the short-term and deliver sustainable competitive advantage in future years.”
CEO Jolie Hodson echoed these sentiments, adding, “Conditions in the New Zealand economy have been incredibly tough, but we are taking action on the things we can control to transform our business. We have four key priorities - driving momentum in our telco core, with a particular focus on mobile, simplifying our portfolio, transforming our cost base, and creating long-term shareholder value through our data centre strategy.”
In response to ongoing market pressures, Spark updated its FY25 guidance, lowering its EBITDAI forecast to between $1.04 billion and $1.1 billion, down from its prior estimate of $1.12 billion to $1.18 billion.
Capital expenditure guidance remained unchanged at $415 million to $435 million, while the total dividend per share was maintained at 25 cents, 75% imputed.
At the time of writing, Spark New Zealand (ASX: SPK) stock was trading at A$2.15, easing 18.8% from Thursday's close of $2.64. The stock reached a day low of $2.06 and a day high of $2.23. Spark New Zealand's market cap stands at $4.9 billion.
