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Spark boosts profits as sales continue to slide

Declining calling and access revenue is only partially offset by growing mobile and IT services sales for New Zealand telco.
Written by Rob O'Neill, Contributor

New Zealand telco Spark is lifting its dividend and forecasting another increase in 2016 after it boosted after tax profits by 16.1 percent in 2015.

The increased profit comes off a continuing decline in top-line sales as growing mobile and IT services revenue failed to offset declines in calling and access services.

Spark's operating revenues and other gains from continuing operations were down 2.9 percent, to NZ$3.53 billion, while earnings before interest, tax, depreciation and amortisation from continuing operations were up 2.8 percent for the year ended 30 June 2015..

Earnings after tax were NZ$375 million, up 16.1 percent, however including discontinued operations that was a decline of 18.5 percent year-on-year after the sale of Australian unit AAPT delivered a one-off gain.

Spark lifted its dividend from 17 cents per share last year to 20 cents and signaled a further increase in 2016.

"The financial results support the board's view that a return to long-term, sustainable growth in free cash flow, revenue and earnings over the coming years is both realistic and achievable," said Spark chairman Mark Verbiest.

"As such, for FY16, Spark New Zealand anticipates paying an annual dividend of 22 cents per share and a special dividend of 3 cents per share as a means of returning excess capital, subject to there being no material adverse changes in operating outlook."

Tight cost management saw expenses from continuing operations fall by 5 percent to NZ$2.56 billion.

Spark said its Turnaround Programme, completed at the end of June 2015, has delivered significant improvement in sustainable free cash flow.

Mobile connections grew 172,000 in the year bringing Spark, a one-time mobile laggard, within 150,000 connections of arch-rival Vodafone. Three years ago that gap was 600,000.

Spark said its mobile revenue share grew by 2 percent to 41 percent in a highly competitive market.

Broadband revenues returned to growth during the year, driven by higher value plans and a 1.6 percent increase in connections.

IT services revenue were up 5.5 percent after investment in cloud services and datacentre infrastructure..

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