(Bloomberg) -- Spark New Zealand lowered earnings guidance and said it plans to sell assets as a weak economy curbs demand for mobile and information technology services.
Operating earnings could be as much as NZ$45 million ($27 million) lower than previously forecast in the year to June, the Auckland-based phone company said Wednesday. The projected full-year dividend is now 25 cents a share, down from 27.5 cents previously, and capital spending will also be reduced.
New Zealand’s economic growth has stalled under the weight of high interest rates, curbing consumer spending and business investment. Spark has been the worst performing stock on New Zealand’s benchmark NZX50 index the past six months, slumping 37%.
“The Board and Management acknowledge that our current financial performance falls short of what is acceptable,” Chair Justine Smyth said. “We understand the disappointment our shareholders will be feeling.”
Spark is reviewing non-core assets for possible sale to strengthen its balance sheet and has made the decision to divest its 17% shareholding in mobile towers business Connexa.
“While a transaction is not yet certain, the strong levels of interest we have received is reflective of the high quality of the Connexa business,” Smyth said.
Spark now forecasts earnings before interest, tax, depreciation and amortization in a range of NZ$1.12 billion to NZ$1.18 billion, down from an earlier projection of as much as NZ$1.22 billion. Capital spending is now projected to be NZ$415 million to NZ$435 million, some NZ$45 million less than previously estimated.
“The challenges we are facing are both cyclical and structural,” Smyth said. “Weak business investment and consumer spending continue to curtail growth and squeeze margins. At the same time, we are undertaking a significant transformation of our Enterprise and Government division to address structural segment challenges.”
The company will expand an existing program to deliver “materially higher” cost reductions in coming years, she said. That program will achieve a net labor cost reduction of NZ$50 million this year.
“We are resolutely focused on resetting performance in our core, expanding the SPK-26 Operate Programme to significantly reduce our cost base and offset market headwinds, and simplifying our portfolio,” Smyth said.
©2024 Bloomberg L.P.
