Acceleration of Quantum programme, updated FY18 guidance

Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
 
MARKET RELEASE
25 May 2018
Spark  confirms  acceleration  of  Quantum  programme,  updates  FY18  guidance  due  to  associated  
costs  of  change  
Spark  New  Zealand  Limited  (“Spark”)  announced  today  it  will  be  accelerating  its  Quantum  
performance  improvement  programme  to  realise  financial  benefits  earlier  than  previously  
envisaged.  
Spark  Managing  Director  Simon  Moutter  said  that  while  FY18  operating  performance  remains  in  line  
with  plan,  opportunities  recently  identified  as  part  of  Spark’s  transition  to  an  ‘Agile  at  scale’  
operating  model  had  encouraged  the  company  to  move  faster  with  the  programme.      
“As  highlighted  at  our  interim  results  announcement,  we  have  been  making  rapid  progress  on  our  
Agile  journey  during  the  2018  calendar  year.    We  set  up  three  frontrunner  Agile  ‘tribes’  in  February  
and  these  tribes  are  already  demonstrating  impressive  improvements  in  terms  of  deeply  embedded  
customer  centricity;  dramatically  increased  speed  to  market;  and  empowered  and  engaged  
employees  with  greater  productivity.  This  has  given  us  confidence  to  go  faster  in  our  Agile  
transformation.”  
As  outlined  at  Spark’s  Investor  Day  on  30  June  2017,  Quantum  involves  Spark  being  the  industry’s  
lowest  cost  operator  through  radically  simplified  and  digitised  processes,  products  and  services.    The  
programme  originally  envisaged  progressive  performance  improvements,  with  associated  costs  of  
change,  through  until  2020.    
Mr  Moutter  said  Spark  had  now  decided  to  implement,  prior  to  the  end  of  FY18,  some  Quantum  
changes  that  were  originally  envisaged  to  occur  during  FY19.  The  potential  to  accelerate  these  
changes  was  communicated  in  Spark’s  H1  FY18  results.  While  the  Quantum  programme  will  continue  
to  implement  further  business  improvements  during  FY19,  the  acceleration  in  FY18  will  further  
improve  customer  experience  and  strengthen  earnings  in  FY19  and  beyond.    
Additional  implementation  costs  of  between  $25  million  and  $30  million  are  now  expected  to  be  
brought  forward  into  reported  FY18  earnings.      These  costs  of  change  will  include  external  subject  
matter  expertise,  relocation  and  property  lease  costs,  restructuring  expenses,  and  programme  office  
functions.    Spark  originally  envisaged  incurring  $25  million  costs  of  change  during  FY18,  meaning  the  
acceleration  of  the  Quantum  programme  will  now  bring  total  expected  FY18  costs  of  change  to  
between  $50  million  and  $55  million.        
Spark  continues  to  anticipate  paying  a  total  FY18  dividend  per  share  of  25.0c  that  is  at  least  75%  
imputed.    However  due  to  the  bring-­‐forward  of  costs  of  change  associated  with  acceleration  of  the  
Quantum  programme,  Spark  is  today  updating  FY18  EBITDA  and  earnings  per  share  guidance.    For  
completeness,  updated  guidance  is  provided  for  both  reported  FY18  EBITDA  and  adjusted  FY18  
EBITDA;  with  adjusted  EBITDA  excluding  FY18  costs  of  change  of  between  $50  million  to  $55  million.    
The  inclusion  of  adjusted  FY18  EBITDA  is  consistent  with  Spark’s  established  policy  of  presenting  
adjusted  EBITDA  and  adjusted  net  earnings  when  a  financial  year  includes  significant  items  of  greater  
than  $25  million.  
 
 
 
 
 

 
Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
 
 FY17    
Actual  
 FY18    
Current  Guidance  
 FY18  
New  Guidance    
 excluding  $20m  net  
gain  from  sale  of  
Mayoral  Drive  carpark  
 Reported    
 
 Adjusted    
excluding  expected  FY18  
costs  of  change  of  
between  $50  million  and  
$55  million  
Reported    
 
EBITDA  $996m    0%  to  2%  growth  
equivalent  to  
$996m  to  $1,016m  
 3.0%  to  4.5%  growth  
equivalent  to  
$1,026m  to  $1,041m    
(2.5%)  to  (0.5%)  decline  
equivalent  to  
$971m  to  $991m  
Earnings  per  Share  22c    ~22c    ~23c  ~21c  
 
As  indicated  at  Spark’s  Interim  FY18  results  announcement,  annualised  net  labour  costs  are  
expected  to  decline  to  ~$500  million  by  the  end  of  FY18,  with  the  acceleration  of  Quantum  projected  
to  further  reduce  annualised  net  labour  costs  to  ~$470  million  during  H1  FY19.      This  additional  ~$30  
million  labour  cost  benefit,  coupled  with  benefits  delivered  as  part  of  Quantum  changes  that  have  
already  been  implemented  during  FY18,  will  result  in  a  combined  ~$90  million  reduction  in  
annualised  net  labour  costs  between  the  start  of  FY18  and  the  end  of  H1  FY19.  
Spark’s  overall  financial  performance  will  continue  to  be  influenced  by  competitive  market  dynamics  
and  decisions  to  reinvest  in  the  business  to  pursue  longer  term  sustainable  earnings.    As  a  result  
FY19  guidance,  to  be  provided  as  part  of  Spark’s  FY18  Full  Year  results  announcement  on  22  August  
2018,  will  involve  many  more  factors  than  the  expected  reduction  in  annualised  net  labour  costs.  
Mr  Moutter  said  the  decision  to  accelerate  the  Quantum  programme  was  due  to  Spark’s  increasing  
confidence  in  its  ability  to  both  improve  customer  experience  and  operate  under  a  lower  cost  
structure  as  key  parts  of  the  company  –  especially  the  ‘engine  room’  core  functions  such  as  network,  
IT,  product  development  and  segment  marketing  –  adopted  Agile  ways  of  working.      
Investors  and  analysts  are  invited  to  attend  a  teleconference  with  Spark  Management  to  present  any  
clarifying  questions  in  relation  to  this  announcement.      
DATE: Friday 25 May 2018
TIME: 11.00 am (AEST)
1.00 pm (NZST)
If you would like to join via teleconference, please use the following dial-in numbers:

 
Spark New Zealand Limited ARBN 050 611 277
Spark City, 167 Victoria Street West, Private Bag 92028, Auckland, New Zealand
 
AUDIO CONFERENCE ID: 9079984
Country Date Time Dial In
New Zealand 25/05/18 1.00 pm NZST 083035
Australia 25/05/18 11.00 am AEST 1800 007 094
USA 24/05/18 9.00 pm EDT 1800 651 8618
Hong Kong 25/05/18 09.00 am HKT 800 966 885
Singapore 25/05/18 09.00 am SGT 800 641 1152
Japan 25/05/18 10.00 am JST 0053 164 0081
UK 25/05/18 2.00 am BST 0800 032 3241

Please dial into the teleconference 10 minutes before the start of the the call.
-­‐ENDS-­‐  
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