UPDATE: Spark full year announces special dividend on lift in post-AAPT earnings

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See also: Spark shares jump on its return to operating profit growth

UPDATED: Spark New Zealand [NZX: SPK], formerly known as Telecom Corp, posted a 19 percent decline in annual profit, reflecting one-off gains the previous year's sale of its Australian mobile business, AAPT, while underlying earnings were up as the telecommunications company reshapes its business to become focused on data and mobile services.

The board flagged a special dividend in the 2016 financial year.

Net profit fell to $375 million, or 20 cents per share, in the 12 months ended June 30, from $460 million, or 25 cents, a year earlier when the company reaped a one-off gain from the sale of its AAPT unit, the Auckland-based company said in a statement. Stripping out the year earlier gain, profit was up 19 percent, and ahead of Forsyth Barr's forecast of $356.4 million.

Earnings before interest, tax, depreciation and amortisation rose 2.8 percent to $962 million, in line with Spark's guidance for low single digit growth, while revenue fell 2.9 percent to $3.53 billion, also in line with guidance. Ebitda missed Forsyth Barr's estimate for growth of 4.6 percent, while the revenue decline was more than the 1.9 percent decline the broking and research house projected.

"We are generating positive market momentum, especially in mobile, despite a highly competitive market," chief executive Simon Moutter said. "The financial results support the board's view that a return to long-term, sustainable growth in the free cash flow, revenue and earnings over the coming years is both realistic and achievable."

Spark's board declared a final dividend of 11 cents per share, payable on Oct. 9 with a Sept. 25 record date. That takes the annual return to 20 cents per share, up from 17Cps a year earlier, and ahead of Forsyth Barr's forecast for an 18 cent dividend.

The company anticipates Ebitda to rise between 0 and 3 percent in the 2016 financial year, and flagged a bigger annual dividend of 22 cents per share, plus a special dividend of 3 cents per share as a means of returning excess capital.

Spark's home, mobile and business segment, which services households and small business, lifted Ebitda 5.4 percent to $722 million on a 3 percent gain in revenue to $1.85 billion. Mobile revenue grew 8.5 percent to $807 million, accounting for much of the gain, and the company added 172,000 mobile connections in the year, taking it to 2.18 million. Those gains came at a cost, with average revenue per user (ARPU) falling to $28.61 a month from $30.10 a year earlier.

"We have closed the connection number gap on our largest competitor, Vodafone, to just over 150,000, having been around 600,000 behind them just three years ago," said Moutter.

Fixed lined revenue slipped 2.4 percent to $998 million as local service connections shrank 4 percent to 1.32 million, while broadband connections increased 1.6 percent to 680,000.

Spark Digital, formerly known as Gen-i, posted a 6.3 percent decline in Ebitda to $374 million on a 5.7 percent decline in revenue to $1.22 billion as the company exited some of its services and faced intense competition. Privately-held IT services firm Datacom has overtaken Spark as the country's biggest IT services provider, with about 14.3 percent of the local market as at Dec. 31.

Spark Connect, which operates the wholesale divisions, widened its Ebitda loss by $3 million to $113 million on a 20 percent drop in revenue to $58 million, owing to the ongoing decline in fixed line calls.

Over the past year, Spark has been at odds with Chorus, which was spun out of Telecom in 2011, over the regulated price charged to use the network operator's copper lines and which is the subject of a review by the Commerce Commission. The regulator will make a final decision on the price Chorus can charge in December, and is currently of the view that it should be an average $38.43 per month over the next five years, but shouldn't be backdated to when an earlier ruling came into effect.

The regulator's upcoming decision is flagged as a contingency in its financial statements, which say "any increase in costs or their effective date when the final determinations are announced may have a material impact on the group." Spark's payments to telecommunications operators shrank 14 percent to $817 million in the year.

The company spent $576 million on capital expenditure, including $158 million to buy 700 megahertz radio spectrum for its 4G mobile network, and expects that will fall to about $380 million in the 2016 year.

The shares last traded at $2.76, and have declined 11 percent this year.

(BusinessDesk)