Hundreds of jobs set to go at Spark after disappointing result

Friday, 23 August 2024

Spark has described its year as “tough” and “challenging“.

Spark shares have slumped nearly 7%, wiping almost $500 million off the value of the company, after it reported a much-reduced profit and signalled large-scale job losses ahead.

The company’s profit fell 72% to $316 million for the year to the end of June, or 21% to $342m after adjusting for a variety of “one-offs” this year and last.

Its revenues fell 14% to $3.9b, or by 1.2% after similar such adjustments.

Chief executive Jolie Hodson described it as a tough year and said Spark must “continue to adapt as our markets change”.

It would cut costs this year as it made more use of AI and removed duplication from the business, she said.

“It is never easy to make changes that impact our people, and we do not do so lightly.

“However, to compete and better serve our customers we must make the difficult but necessary decisions to ensure our cost base is sustainable,” she said.

Hodson did not indicate how many jobs Spark might need to cut, but a spokesperson said it aimed to cut its net labour costs by $50m in the current financial year, which implies the losses will be in the hundreds.

Spark chief executive Jolie Hodson says it has been a tough year but the business’ fundamentals remain strong.

Spark employed 5291 staff at the end of June, down by 141 from the previous year.

Spark shares were down 6.8% at $4 during lunchtime trading on the NZX, after at one point falling as low as $3.91 in the wake of the result.

Credit ratings agency S&P Global Ratings warned Spark’s weaker-than-expected earnings and higher debt levels would “further squeeze” its ratings on the company.

The nature of Spark’s business make it something of a bellwether for the broader economy, but its IT services arm also makes it particularly sensitive to changes in the volume of initiatives in the public service.

Its total IT revenues — which the company has seen as an engine for growth — declined 1.6% to $692m, driven by a 15% decline in IT services revenues.

Spark chairperson Justine Smyth said it had been a challenging year for Spark “and for many businesses across Aotearoa”, with recessionary economic conditions creating a tough operating environment.

“Public sector spending cuts and deferred private sector investment had a significant impact on IT services revenues.

“Lower household and business spending impacted mobile devices and accessories sales, and intensified competitive pricing pressure, particularly in business mobile,” she said.

One positive milestone was that Spark’s annual mobile revenues topped $1b for the first time, after rising 3.1% from the previous year.

Hodson said while its performance in the year just passed was “below our ambition”, the fundamentals of the business remained strong, and it was focussed on returning to earnings growth in the current financial year.