Adjusted EBITDAI fell 32.5% as cost base lagged demand softness

Spark's reported revenue, EBITDAI and NPAT all declined, but the year-on-year comparison is distorted by material one-offs in the FY23 base; the cleaner reads supplied by management are adjusted revenue up 0.6% and adjusted EBITDAI down 32.5%. Mobile service revenue crossed $1bn for the first time and the data centres and IT products lines grew, but IT services demand softened and competition intensified faster than the cost base could be reshaped.

Capital intensity rose: capex of $518m (FY23: $515m) lifted capex-to-revenue to 13.4% from 11.5%, while free cash flow fell to $330m from $489m. Full-year dividend was raised modestly to 27.5 cps from 27.0 cps, with a 14.0 cps final. Net debt to EBITDAI stepped up to 1.34x from 0.55x.

Management's own framing is that the SPK-26 Operate Programme was accelerated through H2 but could not adapt the cost base quickly enough, with benefits "to be largely realised in FY25." That places the entire FY24 result in a transitional category and pushes the operating recovery thesis into next year. For investors, this is the central read: a structural cost reset has been started but not yet delivered.

The 27.5 cps dividend is not covered by FY24 earnings or cash. Full-year dividend per share rose 0.5 cps versus FY23, but the payout ratio is 159.0% of NPAT (FY23: 22.2%) and 152.3% of pre-lease free cash flow. With FY25 guidance also set at 27.5 cps, sustainability now relies on the FY25 cost-out delivering and capex moderating, neither of which the release demonstrates.

Leverage has materially weakened. Net debt to EBITDAI more than doubled to 1.34x from 0.55x, reflecting both lower earnings and higher gross borrowings. This matters because debt headroom is now the variable funding the dividend and the capex programme until cost savings show up.

Management has named SPK-26 cost benefits as an FY25 event and reiterated FY25 dividend guidance at 27.5 cps, which together imply FY25 must carry the earnings and coverage rebuild.

The H1 FY24 release flagged adjusted revenue and EBITDAI growth in the first half; the full-year adjusted EBITDAI decline of 32.5% therefore implies the second half deteriorated meaningfully versus the first half on an adjusted basis. The gap between H1 framing and the FY24 outcome is the key uncertainty heading into FY25.

The result mixes a transitional operating year with a flattering cash-conversion optic. Reported OCF/EBITDAI of 65.7% is higher than the 46.5% prior reading, but the prior ratio was depressed by non-cash one-off gains in FY23 EBITDAI; the current ratio is not evidence of underlying improvement. FCF-to-NPAT of 104.4% similarly looks strong on the surface but reflects a much lower NPAT denominator rather than stronger cash generation, with absolute FCF falling to $330m from $489m.

Working capital tightened against the company: trade receivable days extended to 40.8 from 33.3, and inventory days rose to 8.4 from 6.4. ROE fell to 19.9% from 58.5% (the prior reading was lifted by one-off gains). Capex intensity at 13.4% of revenue is the highest in the comparison and is the swing variable for FY25 free cash flow alongside cost-out delivery. The durable read is that mobile remains the earnings engine but is being asked to fund a stretched dividend, rising capex and a still-incomplete cost reset.

This briefing cannot assess the credibility of FY25 cost-out delivery or future demand trajectory because no quantified savings target, segment-level FY25 outlook, or competitive-share data is supplied in the release.