Table of Contents
What changed
The headline numbers are distorted almost entirely by base effects. In HY23, Spark booked significant one-off proceeds from the TowerCo tower sale and the Spark Sport disposal, which inflated reported revenue by $558m (-22.0%) and EBITDAI by $512m (-49.1%). On an adjusted basis — which strips these out — the company says revenue and EBITDAI grew, led by mobile.
- Revenue fell to NZ$1,976m from NZ$2,534m, with mobile (NZ$749m, +2.3%) and procurement and partners (NZ$339m, +6.3%) the only segments with clean year-on-year comparators showing growth. Voice continued its structural decline to NZ$94m from NZ$122m.
- EBITDAI dropped to NZ$530m from NZ$1,042m. Because the prior period gain inflated the tax base, the effective tax rate in HY24 normalised to 30.8% versus an anomalously low 9.3% in HY23, making NPAT the worst headline read. PBT is the cleaner measure: it fell 70.4% to NZ$227m.
- Operating cash flow declined more modestly to NZ$307m from NZ$369m, but capex jumped to NZ$347m from NZ$250m, pushing pre-lease free cash flow to a negative NZ$40m versus a positive NZ$119m in HY23.
- Gross borrowings rose to NZ$1,587m from NZ$1,000m, while cash fell to NZ$99m from NZ$286m, taking implied net debt to approximately NZ$1.5bn and net debt/EBITDAI to about 2.8x on the half-year EBITDAI run-rate — up from approximately 0.7x.
- The interim dividend was held flat at 13.5 cents per share, fully imputed.
What matters
1. The base-effect distortion is total, not partial. Both HY23 revenue and EBITDAI were heavily inflated by asset-disposal proceeds. Investors reading the adjusted figures — which the company says show growth — need a full reported-to-adjusted reconciliation that is not provided in the release excerpts. Without it, the magnitude of underlying operating improvement cannot be independently verified.
2. Leverage and capex have moved together sharply. The data centre and high-tech build-out has lifted capex to 17.6% of revenue from 9.9%, and borrowings are up NZ$587m period-on-period. Net debt/EBITDAI at approximately 2.8x on a half-year run-rate is materially higher than the prior period and will constrain flexibility. Total equity fell 19.1% to NZ$1,668m.
3. The dividend is not covered by free cash flow. With pre-lease FCF negative at -NZ$40m and the interim dividend absorbing more than 100% of NPAT, the payout is being funded by the balance sheet in this half. That is defensible during an investment phase but is not self-funding at current EBITDAI and capex levels.
Expectations
No quantified earnings targets or FY24 guidance figures were disclosed in the supplied material. The only external anchor is FY23.
The FY23 year was itself first-half weighted: HY23 accounted for 56.4% of full-year revenue and 60.5% of full-year EBITDAI, largely because the disposal proceeds landed in that half. On an annualised basis, HY24 revenue of NZ$1,976m implies a NZ$3,952m run-rate, which is approximately 88% of the FY23 reported revenue of NZ$4,491m — but that gap is also substantially a disposal artefact.
The more relevant question is whether adjusted second-half EBITDAI can recover toward the FY23 implied second-half EBITDAI of NZ$680m, which was itself lower than H1's adjusted level. The company's own characterisation of H1 as delivering adjusted growth is directionally positive, but without a number, the claim cannot be stress-tested.
Seasonality from FY23 does not reliably apply to FY24 because the composition of revenue has changed. Data centre and high-tech revenues are early-stage and growing; their second-half trajectory is a swing factor.
Quality of result
Underlying quality is mixed but not alarming once the base distortion is removed.
- Mobile is the anchor, generating approximately NZ$496m in product margin at a 66% rate on NZ$749m of revenue. That margin is durable and structurally supported by NZ's mobile oligopoly.
- Broadband margin held broadly flat in absolute terms (NZ$148m versus NZ$149m) despite prior-period commentary noting pricing competition, suggesting the margin floor has stabilised.
- IT services (83% implied product margin) and data centres (94% implied product margin) are very high-margin but small (NZ$84m and NZ$18m of revenue respectively) and will take several years to be EBITDAI-material at current scale.
- Cash conversion against EBITDAI improved to 57.9% from 35.4%, but this is partly a denominator effect — EBITDAI fell further than OCF. The capex surge is the real cash quality concern: it is not yet clear whether the data centre build will generate returns inside the investment horizon implied by current leverage.
- The flat dividend while FCF is negative is a capital allocation signal that management expects the investment phase to be temporary, but the balance sheet is doing real work to sustain it.
Unresolved
- What is the adjusted EBITDAI figure? The company says adjusted EBITDAI grew but does not provide the reconciliation in the release excerpts. The exact quantum of the TowerCo and Spark Sport base-year contribution — and what the like-for-like comparison actually shows — remains opaque.
- What is the data centre and high-tech revenue ramp? These segments collectively generate only NZ$53m in revenue. The size and timing of committed third-party capacity agreements and the capex payback period are not disclosed.
- Can net debt/EBITDAI be reduced while maintaining the dividend? At approximately 2.8x on a half-year EBITDAI run-rate and with FCF negative, the path to deleveraging depends on both EBITDAI recovery and capex moderation — neither of which is quantified in the release.
- What is the FY24 capex envelope? HY24 capex of NZ$347m annualises to NZ$694m; if second-half capex is similar, leverage could deteriorate further before it improves.
This briefing cannot assess the adjusted EBITDAI trend or the returns profile of the data centre build without a full reconciliation table and committed-capacity disclosure.
Key metrics
| Metric | HY24 | HY23 | Change |
|---|---|---|---|
| Revenue | $1976m | $2534m | -22.0% ↓ |
| Net profit after tax | $157m | $837m | -81.2% ↓ |
| Net cash inflow from operating activities | $307m | $369m | -16.8% ↓ |
| Interim dividend per share | 13.5c | 13.5c | flat |
| EBITDAI | $530m | $1042m | -49.1% ↓ |
| Profit before tax | $227m | $766m | -70.4% ↓ |
| Cash and cash equivalents | $99m | $286m | -65.4% ↓ |
| Total assets | $4699m | $4566m | +2.9% ↑ |
Source: annolyse.ai/briefings/spk-hy24
Segment breakdown
| Segment | Current revenue | Prior revenue | Current result | Mix shift |
|---|---|---|---|---|
| Mobile | $749m | $732m | $496m | +9.0pp |
| Procurement and partners | $339m | $319m | $24m | +4.6pp |
| Broadband | $309m | $313m | $148m | +3.2pp |
| IT products | $261m | — | $139m | n/a |
| Voice | $94m | $122m | $51m | +0.0pp |
| IT services | $84m | — | $70m | n/a |
| High-tech (excl. health) | $35m | — | $22m | n/a |
| Data centres | $18m | — | $17m | n/a |
| Other products | $68m | $104m | $46m | -0.7pp |
Source: annolyse.ai/briefings/spk-hy24
Analytical metrics
| Metric | HY24 | HY23 | Context |
|---|---|---|---|
| PBT growth | -70.4% | — | cleaner earnings measure |
| Effective tax rate | 30.8% | 9.3% | — |
| OCF / EBITDAI (cash conversion) | 57.9% | 35.4% | stable |
| FCF pre-lease | −$40.0m | $119.0m | −$159.0m |
| FCF / NPAT | -25.5% | 14.2% | complementary conversion metric |
| Capex % revenue | 17.6% | 9.9% | — |
| Capex | $347.0m | $250.0m | +$97.0m |
| Net debt | $1488.0m | $714.0m | +$774.0m |
| Net debt / EBITDAI | 2.80x | 0.70x | Weakening |
| Gross borrowings | $1587.0m | $1000.0m | +$587.0m |
| Payout ratio vs NPAT | 157.0% | — | — |
| Payout ratio vs FCF pre-lease | -616.1% | — | not covered |
| ROE (annualised) | 9.4% | 40.6% | Weakening |
| HY23 share of FY23 revenue | 56.4% | — | Other half was 43.6% |
| HY23 share of FY23 EBITDAI | 60.5% | — | Other half was 39.5% |
| HY23 share of FY23 NPAT | 73.7% | — | Other half was 26.3% |
| Profit from continuing operations | $157.0m | $837.0m | −$680.0m |
Source: annolyse.ai/briefings/spk-hy24
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.