SPK FY23: Reported revenue up 20.7% but cash conversion collapsed to 46.5%

Adjusted for that disposal gain of NZ$583m and a NZ$54m Spark Sport provision, underlying revenue and EBITDAI were also in growth, with mobile the standout contributor. The headline numbers are therefore not a clean like-for-like read on operating momentum.

Cash conversion deteriorated sharply: OCF/EBITDAI fell to 46.5% in FY23, from 73.1% in FY22. Annolyse's historical baseline puts the normal range at 65.7%–76.3%, making the FY23 conversion level materially below that range. OCF was NZ$800m against EBITDAI of NZ$1.7b, so the gap is significant in absolute terms.

Net debt fell to 0.55x EBITDAI from 1.27x in FY22, well below the company's historical range of 1.18x–1.34x, reflecting cash proceeds from the tower disposal rather than organic deleveraging. The total FY23 dividend was 27.0 cents per share versus 25.0 cents per share in FY22; FY24 guidance is 27.5 cents per share.

OCF/EBITDAI of 46.5% sits 25.2 percentage points below the historical mean of 71.7% and outside the prior range entirely. Working-capital movement of NZ$-479.5m was at the lower edge of Annolyse's historical range (mean NZ$-131.8m), suggesting an unusually large release of working capital this period. The practical implication is that reported OCF was partially supported by a working-capital tailwind that may not repeat, which means the true run-rate conversion could be even weaker than 46.5% suggests.

Reported PBT and NPAT margins have collapsed versus historical norms. The PBT margin registered at 0.0% against a historical mean of 14.7%, and NPAT margin was similarly at 0.0% versus a historical mean of 9.8%. The PBT and NPAT growth rates are not analytically meaningful on a reported basis given the non-comparable denominator created by the disposal gain—this is a basis discontinuity, not an operating collapse. The effective tax rate of 1.5% versus a prior year rate of 29.4% and a historical mean of 32.8% further complicates the NPAT read and likely reflects tax credits associated with the disposal. The adjusted earnings picture is more informative for assessing underlying performance.

Segment economics show mobile strength offset by broadband pressure. Mobile revenue grew to NZ$1.5b with a gross margin holding steady near 66.9%, while broadband revenue fell to NZ$626m and margin contracted from 49.8% to 47.6%. Cloud, security and service management remained the highest-margin segment at 75.2% gross margin, though revenue eased slightly. Voice revenue continued its structural decline, falling to NZ$231m from NZ$285m.

Spark noted this result closes the final year of a three-year strategy with all guidance metrics—revenue, EBITDAI, free cash flow, and NPAT—in growth. Free cash flow of NZ$489m reached the top end of the NZ$460m–NZ$500m aspiration flagged at FY22. The FY24 dividend guidance of 27.5 cents per share implies confidence in sustaining FCF, though no explicit FY24 earnings guidance range is provided in the available material.

The H1 FY23 result contributed NZ$2.5b of revenue and NZ$1b of EBITDAI, with the implied second half contributing NZ$2b and NZ$680m respectively. The first-half weighting of EBITDAI (approximately 60.5% of the full year) and NPAT (approximately 73.7%) is unusually pronounced and likely reflects the timing of disposal recognition in the first half rather than an underlying seasonal pattern. Forward visibility on adjusted run-rate earnings normalisation is the key open question.

Connexa and TowerCo sales add statutory-profit context, with NZ$911m disclosed value, but recurring earnings and cash metrics carry the cleaner signal.

Connexa and TowerCo sales are explicitly linked in the filing to cash-flow profile, with NZ$917m capital raised.

The quality of the reported result is substantially dependent on the one-off disposal gain, making reported EBITDAI, PBT, and NPAT unreliable as recurring proxies. Adjusted metrics—which strip the NZ$583m disposal gain and the NZ$54m Spark Sport provision—better represent operating quality, but full adjusted financial statements are not available in this filing to independently verify the adjusted numbers.

On cash quality, the FCF of NZ$489m is real and management-disclosed, and the payout ratio against NPAT at 44.5% is well below the historical mean of 131.3%, reflecting inflated NPAT from the disposal rather than a structural improvement in dividend coverage. The more meaningful coverage anchor is FCF, and at NZ$489m versus a 27.0 cents per share dividend, coverage appears adequate. However, the working-capital release of NZ$479.5m at the lower edge of the historical range introduces reversibility risk; if working capital normalises in FY24, OCF could face headwinds even if EBITDAI holds.

This briefing cannot assess the full adjusted income statement, including normalised capex and depreciation charges following the tower infrastructure divestment, because complete adjusted financial statements were not available in the extracted material.