SPK - Spark NZ

[Left Field]

I don't hold SPK and simply note that TA confirms weakness after the recent announcement.

I've circled the $2.50 - $2.90 gap that needs to be filled for TA confidence to return.

JMHO. GLH.

[Red Baron]

I don't hold SPK and simply note that TA confirms weakness after the recent announcement.

I've circled the $2.50 - $2.90 gap that needs to be filled for TA confidence to return.

JMHO. GLH.

Zhere eez a zimple explanation vor zuch zhare price behaviour:
"Buy ze rumour, zell ze vact."

Ze data zentre zale vas zo vell zignalled, you vould have to be blind, deaf and dumb and living under a rock not to know eet vas coming up.

Let us zee vhat happens vith ze full year announcement next veek.....

RB

[LoungeLizard]

Yep, too soon to tell how the datacenter sale is going to play out with the market. More important is the full year result and final dividend announced on weds 20/8. 

[seaweed]

Zhere eez a zimple explanation vor zuch zhare price behaviour:
"Buy ze rumour, zell ze vact."

Ze data zentre zale vas zo vell zignalled, you vould have to be blind, deaf and dumb and living under a rock not to know eet vas coming up.

Let us zee vhat happens vith ze full year announcement next veek.....

RB

Deleted

[777]

From the Herald 16/8/25.

Passing interest.

Lanes on the Auckland Harbour Bridge will be closed for six hours on Sunday while Spark films a commercial.

Two middle northbound lanes will be closed between 3am and 9am on Sunday for "filming", NZ Transport Agency Waka Kotahi said in a traffic bulletin.

"All other lanes will be open and impact should be minimal, with traffic expected to be light at this time of day."

Asked what was being filmed on the bridge, a NZTA spokesperson said telecommunications provider Spark was filming a commercial.

[seaweed]

Yep, too soon to tell how the datacenter sale is going to play out with the market. More important is the full year result and final dividend announced on weds 20/8. 

A few nervous holders out there today. Not to worry, prayed for a 8c  div in September which will bring the year div to 20.5c and save the company about $113m dollars . Correct me if I am wrong    

[LoungeLizard]

Sounds right. I think everyone expects some sort of cut and I think it should be acceptable to the market. The yield is still very good even at 20.5c.  I'm hoping for a 10c final divvy myself. Some might say that is a sign of a company in decline, but I'm a long term investor and I'd rather they used the proceeds of the sales to get debt down. Worst thing in my view would be to try and maintain the too high dividend and be accused of papering over the cracks. Get the balance sheet in order then make those cuts to OPEX to pay a sustainable divided. 

[Left Field]

Results out......I'll leave it to holders to comment further, but suspect they will like the dividend!

https://api.nzx.com/public/announcement/457063/attachment/449908/457063-449908.pdf

[LoungeLizard]

Not sure about maintaining the 25c dividend - missed opportunity in my view to draw down debt further.

 Nice bonus for shareholders I guess, but won't be able to be maintained at 100% of re-defined FCF. Even at the top of guidance of 330m FCF that's about 17.5c payout for 2026, if the data centre proceeds all go to pay down debt, as it should.

On the whole, the result is ok in that it was expected. Everything appears to be stabilising. The next year or two will be interesting. I liked the comment :

"Our focus is returning Spark to its history of stable annuity-like returns, with predictable free cash flow and growing dividends over time for our shareholders."

[Ferg]

Nice bonus for shareholders I guess, but won't be able to be maintained at 100% of re-defined FCF. Even at the top of guidance of 330m FCF that's about 17.5c payout for 2026, if the data centre proceeds all go to pay down debt, as it should.

If SPK pay out 100% of FCF as dividends, then how and when do debts ever get repaid?  There are asset sales but that would reduce top line sales and NPAT too.

[seaweed]

If SPK pay out 100% of FCF as dividends, then how and when do debts ever get repaid?  There are asset sales but that would reduce top line sales and NPAT too.

Maybe it is similar to property loans mentality. Have been told in the past, don't worry about your mortgage on the house borrow more and inflation over time will deal to that.

[LoungeLizard]

If SPK pay out 100% of FCF as dividends, then how and when do debts ever get repaid?  There are asset sales but that would reduce top line sales and NPAT too.

I suppose their aim is to get group debt back to levels which will regain their S&P AA rating. Current and proposed asset sales will probably do that. They will then be able to pay 100% of FCF without necessarily having to pay down further debt. FCF will include changes all core business expenditure including changes to working capital and capital expenditure. What else to use the money on other than to maintain a good yield, which is crucial for long term investors like myself who regard SPK as income stock.

[Red Baron]

I suppose their aim is to get group debt back to levels which will regain their S&P AA rating. Current and proposed asset sales will probably do that.

Convirmed:   Vrom ze 2024 December trading update:

https://investors.sparknz.co.nz/FormBuilder/_Resource/_module/gXbeer80tkeL4nEaF-kwFA/audio/Spark_FY25_Trading_Update_301024.mp3

-----------------------

Entro Rankovsky (ENP):  Does the potential to sell non-core assets mean the chances of a hybrid note issue is now reduced?
Stefan Knight (CFO):  The overarching goal is to get back to a normalised debt level (1.7x Net Debt to EBITDA).  At FY result time a hybrid note seemed the most likely option.  The announcement of the sale of the residual Connexa holding is additional information.  All factors will be put together in continuing to assess the options.  We will give an update as things progress in that space.

---------------------------

And next vrom ze FY2025 profit announcement

--------------------------

"We have made good progress since that time. We undertook a strategic review of non-core assets to recycle capital into our core business and reduce net debt. This culminated in the sale of our remaining stakes in Connexa and HTAL (Hutcheson Telecommunications), delivering combined proceeds of $356 million.

"To support the growth of our data centre business, we were pleased to announce we had entered into an agreement to sell a 75% interest to Pacific Equity Partners (PEP) in August. The agreement values the business at up to $705 million, which represents a FY25 pro-forma EBITDA multiple of 30.8x and
compares favourably to similar transactions.
"The combined $533 million that will be received in FY26 from the HTAL divestment and initial cash proceeds from the data centre transaction are expected to reduce our net debt/EBITDAI ratio by 0.5x to~1.7x."


------------------------------------

Zo new CFO Stewart and old CFO Stefan zeem to now agree on ze 'Spark' company debt target (ze S&P A- target).    Asset zales have put eet vitheen reach!

But zhere eez no need to pay back more debt zhan zhis - ever.    Running vith a certain debt ratio enhances capital efficiency

RB

[LoungeLizard]

Market seems to like the result and the higher than expected dividend. Going forward I am optimistic that SPK are over the worst. Even if the yearly dividend is cut to 17.5c that's still nearly 7% yield on current prices. If the SP goes up, as many expect, to $3 in the short term, then the yield of course drops but investors going in now, get a tax free capital gain. Not a bad scenario either way.

[Basil]

Spark are not for me but a rising tide lifts all boats in terms of lowering the bar with lower interest rates.  Further cuts in the near term, (see extract of N.Z. Herald article below) perhaps as early as October and then again in November should give all dividend hound type stocks a lift.  Best wishes to holders.

The Reserve Bank cut the Official Cash Rate by 25 basis points to 3%, acknowledging stalled economic recovery.  Two more rate cuts are expected by March, potentially lowering mortgage rates, but the housing market outlook remains subdued.
The decision caused the Kiwi dollar to fall and the NZX50 stock market to rally.
The Reserve Bank appears to have heard the cries of the struggling business sector, not just cutting the Official Cash Rate by 25 basis points as expected, but shifting its outlook to recognise that the economic recovery has stalled.
Based on the new Official Cash Rate (OCR) track published today, two more rate cuts are expected by March next year, taking it to 2.5%.
That's in line with the outlook of some of the gloomiest economists at ANZ and KiwiBank.
"That's a much bigger drop than we had expected, with the RBNZ's [Reserve Bank] OCR track now very similar to our own forecast," ANZ chief economist Sharon Zollner said.
"We thought lingering concerns about near-term upside inflation risks would prevent such a large change in view from the RBNZ today. But while both upside and downside risks were mentioned in the press release, the focus is clearly very much on the latter."
ANZ is now forecasting the next two 25-basis-point (bps) cuts to come in October and November(previously it had predicted November and February).