SPARK NEW ZEALAND LIMITED (ASX: SPK)

Down 4.5% on March 15, 2018, Spark New Zealand Limited traded ex-dividend and the group will pay an interim dividend of 11.229 cents on April 06, 2018.

For H1 FY 2018, the group’s net debt rose by $123 million at the back of business acquisitions, continued growth in handset receivable, capital expenditure and payment of H2 FY17 dividend. On the other hand, the group’s current gearing provides a debt headroom of $150 million within its S&P A-credit rating. The cash conversion ratio has improved to 104% from 83% in H1 FY17. This came at the back of favourable timing of payment due dates and amortisation of content rights.

The H2 FY18 EBITDA outlook has been indicated to be driven by revenue momentum and Quantum programme outcomes, which has delivered an annualised gross reduction in operating expenses of $74 million till date and gross benefits are weighted towards H2 FY18 and beyond.

The group’s strategy of ‘Agile way of working’ across the organisation is tracking well with ‘at scale’ implementation scheduled for Q1FY19. However, the company might have to reduce the FY18 guidance at the back of costs linked to acceleration of transformation programme. Further, under the changed scenario, Ed Hyde (CEO of Spark Ventures) will leave Spark by June 2018. The organisation structure is expected to change now, and the market will be updated soon about the changes.
As of now, we have a ‘Hold’ recommendation on SPK.

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