Table of Contents
What changed
Revenue fell 14.0% to NZ$3,861m and EBITDAI dropped 32.5% to NZ$1,163m, both substantially below FY23 levels. The critical context is that FY23 included meaningful one-off proceeds from the TowerCo and Spark Sport transactions, which inflated both the revenue and earnings base. Adjusting for that, the organic deterioration still reflects genuine pressure: IT services demand softened under weak economic conditions, competition intensified, and the SPK-26 cost restructuring programme accelerated in H2 but delivered insufficient savings in time to offset the revenue miss.
PBT is the cleaner earnings measure this year. The effective tax rate jumped to approximately 38.5% from just 1.5% in FY23 — tax expense rising from NZ$17m to NZ$198m — which is the primary reason NPAT fell 72.2% to NZ$316m while PBT fell a still-severe 55.4% to NZ$514m. The FY23 tax line was unusually low due to the TowerCo transaction treatment.
On the balance sheet, gross borrowings rose 53.9% to NZ$1,619m, cash fell to NZ$59m, and net debt reached approximately NZ$1,560m. Net debt-to-EBITDAI increased sharply to 1.34x from 0.55x. Total equity declined 18% to NZ$1,590m.
Free cash flow fell to NZ$330m from NZ$489m. Capex was broadly flat at NZ$518m, so the compression came from weaker operating cash generation and additional cash outflows not separately itemised in the release. The full-year total dividend was maintained at 27.5 cents per share, fractionally above the FY23 27.0 cents.
What matters
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Free cash flow no longer covers the dividend. At NZ$330m of company-defined free cash flow against a dividend that consumed approximately NZ$503m on a full-year basis (implied by the 152% payout ratio), Spark is funding distributions through a combination of borrowings and balance sheet draw-down rather than operating earnings. Gross debt rose by NZ$567m in the year — a direct read-through. This is the most consequential capital allocation issue in the result.
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The EBITDAI margin compression signals a structural cost problem, not just a revenue one. EBITDAI fell 32.5% on a 14.0% revenue decline, implying that fixed costs could not be removed fast enough when demand softened. Management's own framing — that SPK-26 programme benefits were accelerated in H2 but will be "largely realised in FY25" — confirms the lag. Until the FY25 cost savings are visible in the numbers, the EBITDAI margin run-rate is unreliable.
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Mobile remains the sole clear growth anchor. Mobile service revenue exceeded NZ$1 billion for the first time, with segment revenue of NZ$1,474m and a segment result margin of approximately 67%. This is the dominant profit engine at roughly 38% of group revenue. The performance of adjacent growth segments — data centres (NZ$37m revenue, ~95% margin) and high-tech (NZ$79m, ~57% margin) — is directionally positive but currently too small in absolute terms to offset weakness elsewhere.
Expectations
No quantified FY25 guidance or forward-work target was disclosed in the extracted materials, so this section cannot be benchmarked against stated targets.
What the release does support: the second-half EBITDAI of NZ$633m was meaningfully stronger than the first half's NZ$530m, consistent with the SPK-26 programme beginning to take hold. That H2 improvement — EBITDAI up approximately 19% half-on-half — is the principal basis for management's optimism about FY25.
What the release does not resolve: whether the IT services demand weakness is cyclical (and therefore recoverable in FY25 as macro conditions improve) or whether it reflects more durable share loss to competitors or budget compression among enterprise customers. Without forward-work pipeline disclosure or a specific FY25 earnings aspiration, there is no independent check on the H2 momentum read.
The seasonality pattern for FY24 showed revenue split roughly evenly (51%/49% H1/H2) but EBITDAI more H2-weighted (46%/54%), which is consistent with a cost programme that back-loaded its benefit delivery.
Quality of result
The underlying earnings quality is mixed-to-weak for FY24.
Operating cash flow of NZ$764m held up reasonably relative to the EBITDAI fall, with OCF-to-EBITDAI actually improving to 65.7% from 46.5%. That ratio improvement, however, reflects the lower EBITDAI base rather than a genuine working capital inflow — trade debtor days increased from 33.3 to 40.7 days and inventory days edged up, so working capital was a modest drag, not a tailwind.
The earnings result is substantially base-effect distorted by the FY23 TowerCo transaction. Stripping that out, the adjusted EBITDAI trend is less catastrophic but still down in a year when mobile grew. The persistent gap between EBITDAI and free cash flow (NZ$1,163m vs NZ$330m) reflects the weight of capex (NZ$518m) and lease/finance obligations within a telco capital structure, which is structurally recurring rather than one-off.
The dividend is not covered by free cash flow and is being partly funded by incremental debt. That is a durable red flag on capital allocation quality unless FY25 cost savings restore free cash flow materially.
Unresolved
- The SPK-26 programme is central to the FY25 earnings recovery thesis, but no quantified savings target or timeline has been disclosed in the extracted materials. The degree to which cost savings offset any further revenue softness in IT services is unquantifiable from current disclosures.
- The FY23 segment reporting included "cloud, security and service management" (NZ$436m revenue) and "managed data, networks and services" (NZ$287m revenue) as separate lines; these do not appear as discrete segments in FY24. Whether this reflects portfolio rationalisation, a change in reporting granularity, or underlying revenue attrition in those lines cannot be determined from the released data.
- Gross borrowings rose by NZ$567m while the dividend required approximately NZ$503m — the overlap is striking, but the exact use of incremental debt beyond the dividend is not disclosed.
- The adjusted versus reported gap is explicitly referenced by management but no reconciliation bridge is provided in the extracted materials, leaving the magnitude of the one-off cycling effect uncertain.
This briefing cannot assess whether the IT services demand softness is cyclical or a durable structural shift in Spark's competitive position within enterprise technology.
Key metrics
| Metric | FY24 | FY23 | Change |
|---|---|---|---|
| Revenue | $3861m | $4491m | -14.0% ↓ |
| Net profit after tax | $316m | $1135m | -72.2% ↓ |
| Net cash inflow from operating activities | $764m | $800m | -4.5% ↓ |
| Final dividend per share | 14.0c | 13.5c | +3.7% ↑ |
| EBITDAI | $1163m | $1722m | -32.5% ↓ |
| Profit before tax | $514m | $1152m | -55.4% ↓ |
| Cash and cash equivalents | $59m | $100m | -41.0% ↓ |
| Total assets | $4635m | $4482m | +3.4% ↑ |
Source: annolyse.ai/briefings/spk-fy24
Segment breakdown
| Segment | Current revenue | Prior revenue | Current result | Mix shift |
|---|---|---|---|---|
| Mobile | $1474m | $1470m | $990m | +5.5pp |
| Procurement and partners | $548m | $584m | $65m | +1.2pp |
| Broadband | $613m | $626m | $288m | +1.9pp |
| IT products | $527m | — | $275m | n/a |
| Voice | $180m | $231m | $99m | -0.5pp |
| IT services | $165m | — | $122m | n/a |
| High-tech | $79m | — | $45m | n/a |
| Data centres | $37m | — | $35m | n/a |
| Other products | $136m | $241m | $91m | -1.8pp |
| Cloud, security and service management | — | $436m | — | n/a |
| Managed data, networks and services | — | $287m | — | n/a |
Source: annolyse.ai/briefings/spk-fy24
Analytical metrics
| Metric | FY24 | FY23 | Context |
|---|---|---|---|
| PBT growth | -55.4% | — | cleaner earnings measure |
| Effective tax rate | 38.5% | 1.5% | — |
| OCF / EBITDAI (cash conversion) | 65.7% | 46.5% | stable |
| FCF pre-lease | $330.0m | $489.0m | −$159.0m |
| FCF / NPAT | 104.4% | 43.1% | complementary conversion metric |
| Capex % revenue | 13.4% | 11.5% | — |
| Capex | $518.0m | $515.0m | +$3.0m |
| Free cash flow | $330.0m | $489.0m | −$159.0m |
| Debtor days | 40.7 | 33.3 | +7.4 days |
| Inventory days | 8.4 | 6.4 | +2.0 days |
| Operating working capital | $520.0m | $489.0m | +$31.0m absorbed |
| Trade debtors | $431.0m | $410.0m | +$21.0m |
| Net debt | $1560.0m | $952.0m | +$608.0m |
| Net debt / EBITDAI | 1.34x | 0.55x | Weakening |
| Gross borrowings | $1619.0m | $1052.0m | +$567.0m |
| Payout ratio vs NPAT | 159.0% | — | — |
| Payout ratio vs FCF pre-lease | 152.2% | — | not covered |
| ROE (annualised) | 19.9% | 58.5% | Weakening |
| HY24 share of FY24 revenue | 51.2% | — | Other half was 48.8% |
| HY24 share of FY24 EBITDAI | 45.6% | — | Other half was 54.4% |
| HY24 share of FY24 NPAT | 49.7% | — | Other half was 50.3% |
| Profit from continuing operations | $316.0m | $1135.0m | −$819.0m |
Source: annolyse.ai/briefings/spk-fy24
This analysis was generated using Annolyse, an AI-powered tool that extracts and analyses NZX/ASX company announcements. The underlying data is extracted from official company filings and verified against source documents. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.