Moutter shrugs off drop

Spark chief executive Simon Moutter said the result was 'steady as she goes'. Photo / Chris Loufte

Rebranding and reorganisation costs have cut into first-half earnings at Spark but managing director Simon Moutter says the telco is on track to hit its full-year target.

Spark's net profit fell 12.7 per cent to $147 million, with revenue down 2.7 per cent to $1.79 billion.

Moutter said the half-year was a "steady as she goes" result, with underlying performance broadly in line with expectations.

"We do expect our second-half earnings to grow compared with our first-half earnings and relative to the second-half of the last financial year," Moutter said.

A 3.5 per cent fall in earnings before interest, tax, depreciation and amortisation could be attributed to non-recurring costs from rebranding and a significant blip in reorganisation costs in December, he said.

Moutter said the company would focus on growth in the coming six months and was on track to meet its full-year guidance of a modest increase in earnings.

Forsyth Barr analyst Blair Galpin said the result was slightly lower than he had expected but that a few one-off expenses had impacted figures.

"Overall sales were better than we expected but costs were higher," Galpin said. "If you strip back the one-off costs around restructuring and rebranding, the impact was around what we were expecting."

The company declared a half-year dividend of 9c per share.

Spark said it had seen continued growth in "good quality" mobile connections, which were up 108,000 this half. The company said a decline in mobile revenue of 7 per cent reflected average revenue per user pressure and a significant migration of customers on to new plans.

Moutter estimated Spark's mobile market share at about 40 per cent by revenue, and said continued investment in the company's 4G network was important if it was to become the country's number one mobile player.

IT services revenue was up by 6.9 per cent, boosted by investment in cloud computing and data centres, while the company estimated it had nearly 50 per cent share of the broadband market by revenue.

"Our performance in the broadband market also reflected the competitiveness of the market, with Spark New Zealand's share of connections declining slightly," Moutter said.

"That said, gains were made in broadband revenue and profitability as we weighted our efforts toward higher-value customers through the introduction of higher-end products and the provision of valued broadband services for Spark New Zealand customers, such as Lightbox."

Galpin said decisions made in the previous half and last year were likely to boost the company's full year figures.

Spark's shares closed down 16c, or 4.83 per cent, yesterday at $3.15.