Spark New Zealand Confirms Acceleration of Quantum Programme and Provides Updates of FY 2018 Guidance

Spark New Zealand Limited 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.


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