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FIRST CUT: Spark 1H earnings rise 3.5%, bolstered by CCL acquisition, Southern Cross dividends

Thursday 16th February 2017

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Spark New Zealand lifted first-half earnings 3.5 percent as the acquisition of Computer Concepts Ltd bolstered revenue from its IT services unit and got an earlier dividend from its stake in the Southern Cross trans-Pacific cable, but scaled back guidance for annual earnings. 

Earnings before interest, tax, depreciation and amortisation rose to $471 million in the six months ended Dec. 31, from $455 million a year earlier, with revenue up 4.1 percent to $1.79 billion, the Auckland-based company said in a statement. Net profit increased to $178 million, or 9.7 cents per share, from $158 million, or 8.6 cents. Forsyth Barr analyst Blair Galpin was picking ebitda of $470 million on a 1.6 percent increase in revenue to $1.75 billion. 

Spark had previously given guidance for annual ebitda to rise 2 percent in 2017, but today scaled that back to zero-to-2 percent growth. It also increased its annual capital expenditure guidance to $415 million due to unplanned work around Kaikoura after last November's earthquake from a previous forecast of $400 million. 

"Despite vigorous price competition, top-line revenue growth has been pleasing," chairman Mark Verbiest said. "While the revenue performance across mobile, broadband and IT services was good, it is clear the intense ongoing price competition, particularly at the lower end of the market, is driving margin pressure and reinforcing the need to increase our focus on our brand assets, as well as continuing to tightly manage operating and capital expenditure."

This month Spark embarked on a hostile takeover of network minnow TeamTalk, which would hand the country's biggest telecommunications company fibre lines in the capital city of Wellington, a wireless rural internet service provider, and a mobile radio business. Spark has previously signalled plans to cut its reliance on network operator Chorus's regulated copper lines and last year talked up the opportunities wireless broadband offers to grow the budget end of the market.

The board declared an interim dividend of 11 cents per share, payable on March 31 with a March 17 record date, and a special dividend of 1.5 cents per share. It still plans to pay shareholders 22 cents in ordinary dividends and a 3 cent special dividend for the 2017 financial year. 

The shares last traded at $3.71 and have gained 22 percent over the past 12 months. 

BusinessDesk.co.nz

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