Spark New Zealand Ltd Ord

Thank you. Kia ora koutou katoa. Good morning and thank you for joining us today for SPARC's half year results for the period ending 31 December 2025. This morning I'll provide an overview of our performance and progress we've made under our new SPARC 30 strategy. I'll then hand over to our CFO, Stewart Taylor, who will take you through the financials in more detail before we open for questions. Before turning to the results, a brief word on the broader operating environment. For the first half, the New Zealand economy showed signs of finding its footings. While conditions were still mixed, consumer activity improved and there was a growing sense of stability as the period progressed. That backdrop supports the progress we're seeing in our business, particularly in consumer, and gives us confidence as we move into the second half. With that context, I'll now turn to slides three and four to summarise our financial performance. Thank you very much. Thank you very much. I'm now going to speak to our adjusted numbers as these provide the best like-for-like year-on-year performance comparison. In a mixed demand environment, Spark delivered a clear step up in profitability in the first half. Adjusted Revenue of $1.917 billion was down 1.1% or $22 million. Around half or 10 million of this decline was driven by the divestment of Digital Island and FY25. The remaining decline driven by muted business project spending and service management and Legacy Voice. This was more than offset by improving mobile service revenue and discipline execution of our Cost Out programme, delivering a 5.1% increase in adjusted EBITDA to $471 million Adjusted MPAT of $73 million was up 30.4%, driven mainly by higher EBITDAI. Free cash flow strengthened to $107 million, up 84%, reflecting the operating leverage in the business as performance improved, driven by higher EBITDAI and the reduction of cash tax payments. Stewart will provide more detail on the free cash flow for the half and full year shortly. Capital expenditure for the half was $271 million, including $54 million of strategic capex used to secure the data centre land, in line with guidance. BAU capex of $217 million was down 8.8% in the prior year as our 5G rollout matured. The boards declared an interim dividend of $0.08 per share, 50% imputed. Turning now to mobile on slides 5 to 7, Spark's total mobile service revenue grew 1.6% as performance continued to improve and we saw positive momentum across the key underlying drivers of value. In consumer and SME pay monthly connections were broadly flat, while ARPU grew 5% driven by product innovation, plan refreshes and increased competitiveness of high value brands and improved mix. We also saw a 15% uplift in pay monthly mobile acquisitions with interest-free payments, consistent with attracting high-value customers and supporting stronger retention. In consumer prepaid, connections stabilised in our highest-value segment of New Zealand PACs, which accounts for around 90% of our revenue, following recent plan refreshes and targeted promotional activity. Prepaid ARPU was down slightly, reflecting the competitive dynamics of this segment. However, with a stabilising base, we have a strong platform to grow ARPU over time, both through cross and upsell, as further products and offers are launched. The skinny prepaid New Zealand base grew 2%, driven by strong uptake of long-term plans launched during the half. In enterprise and government, connections in ARPU further stabilised since the close of FY25. Thank you very much. The highest growth during the six months was in the MVNO segment of which Spark accounts for around 40% of connections. Our revenue growth in this segment was consistent with the MVNO market growth. Overall we remain market leader by some distance and our focus is on growing this leadership ahead. On that note as we look ahead to the second half we have a strong pipeline of activity that will support continued momentum in mobile. and that's outlined on slide 8. A few notable examples include the rollout of text and data satellite to mobile capability in H2 including calling over satellite enabled apps like WhatsApp. A refreshed international roaming product set designed to compete more effectively in an increasingly competitive ISA market and deliver better experiences for our customers. and a new MySpark app experience to further cement our CX leadership with clearer usage information, easier self-service and enhanced support. If I move now to slide 9, across our broader connectivity and IT portfolio, performance reflected a tough market alongside areas of resilience and progress. While broadband connections were down in a competitive market, revenues remained stable at $303 million as increasing fibre costs were passed through. Wireless broadband remains a clear opportunity as 5G continues to mature and we explore bundling with mobile. Voice revenue was down 16.7% and that's consistent with the long-term decline of this legacy product. Other connectivity products was down 10.4%. About a third of this reduction was driven by the divestment of Digital Island and the balance primarily driven by managed data and networks as customers continue to transition away from legacy products to lower ARPU alternatives. In IT, cloud revenue grew 1.7%, reflecting the continued customer migration from private cloud and expansion by existing public cloud customers. Service management remained challenging, with revenue declining 19.7% as businesses continued to defer or scale back larger projects. Thank you very much. and Mark Beder. Thank you very much. As outlined on slide 7, our network and customer experiences are a strategic priority in line with the SPARC 30 strategy. During the half, we extended our 4G coverage leadership position to also include 5G as independently rated by OpenSignal. This was supported by more than 100 site builds and upgrades and the transition of network traffic to our 5G standalone core, delivering improvements and peak speeds of around 75%. We also introduced new network safety features including automated blocking of malicious websites while working with Aduna to explore further use cases in this space for the future. Our measure of customer satisfaction, IMPS, rose five points year on year driven by simplified journeys, faster support and improved digital experiences within our app. Our AI program Thank you very much. Scope 1 and 2 emissions are 32% lower than the path required in H1 to meet our 2030 emissions reduction target and that reflects the benefits of our solar energy partnership and the improved grid mix. Our focus on ethical supply chain management continued to mature and digital inclusion remains a priority with Skinny Jump now supporting more than 34,500 households nationwide. and Mark Beder. Thank you very much. Slide 14 will provide an update on how we're tracking against our FY30 ambitions. at the half year our Spark 30 ambitions remain on track. Financially we deliver growth in EBITDA, MPAT and free cash flow supported by cost discipline and improving mobile performance. Looking at non-financial ambitions we strengthen the foundations of long term value including network coverage leadership, a five point lift in IMPS, rising employee engagement and continued progress on our sustainability commitments. I'm now going to hand over to Stewart to speak to the financial results in more detail.

Thanks very much Jolie and good morning everyone. I'm going to start with slides 16 and 17 which summarise the result, probably focusing more on slide 16. So we've got our reported result on the left hand side of slide 16. Now this excludes our data centre business from the headline EBITDAI and top line P&L numbers. The net earnings contribution booked as a one-liner in that discontinuing operation line which you'll see there called out as a separate line just above total net earnings after tax expense. So for the adjusted results, the data centre contribution is actually included in the applicable P&L lines rather than being classified as a discontinued operation hence why you don't see any numbers in that line for the adjusted numbers. Thank you very much. Just for clarity, so the discontinued earnings of $10 million showed a significant increase on the previous comparable period. This was because the data assets held for sale were no longer being depreciated in H126. I'll now move over to slide 18 and I'll talk to capital expenditure. So you'll see in H126 on the right-hand side there, so the right-hand column there, Thank you very much. So if I exclude that strategic capex, Spark's BAU capex was 9% or $21 million lower than an H125. Now this reflects lower network spend, so our 5G rollout's matured, we've been through a period of accelerated spend there, and our spend on IT systems, fixed networks and international cable capacity has been broadly consistent with that in 1H25. and the first half of this year we've also reported $7 million spend on new spectrum. This is the net present value of 18 year rights we acquired from Tuatier for 20 MHz of 5G spectrum. Now looking forward, with the exception of $1 million spent on the data centre business in January before that transaction completed, we are not expecting any further strategic capex going into H2. So looking forward to H2, the focus of capital expenditure and beyond will be on projects that align with our SPK30 strategy and drive our core connectivity business. We'll also be taking the discipline we've employed in H1 forward and we remain on track to deliver to FY26 BAU CapEx within our guidance range of $380 million to $410 million. So this implies... that H226 BAU CapEx will be in the range of $163 million to $193 million. So moving to the free cash flow page, this is slide 19. Again, we remain focused on the conversion of earnings to free cash flow given the importance this plays in determining our dividend. Thank you very much. Just running through this note that year on year there was an increase in cash paid on leases. This is because the H125 payment was lower than we'd have expected due to a one-off cash benefit from the corporate office move to 50 Albert Street at the end of calendar 24. Now near the end of December we announced the sale of our interest-free payments or IFP receivable book for $240 million. The positive impact of this sale has been adjusted from the free cash flow number, and this has been done net of growth in the IFP book since the start of the year, which was around $27 million. And having entered into a finance agreement with Challenger on the IFP book, we will undertake regular sales of that book going forward, which means we can continue to grow this book without impacting our working capital balance. Thank you very much. Thank you very much. So if I go to slide 20, debt and dividends, what we've seen is a further reduction in the overall level of net debt in the last six months. This has been supported by the sale of the IFP book and offset in part by higher strategic capex. So if I exclude leases, net debt now sits at $1.39 billion, 5% lower than at 30 June 2025. The net debt to EBITDA ratio is steady at 2.2. This isn't materially impacted by the sale of the IFP book. Now you'll see in the chart on this slide that we've put a bar over on the far right there indicating what we consider to be our pro forma debt position as at the end of January 2026 based on the completion of the data centre transaction. As a result of that, net debt ex leases reduces by $453 million to around $940 million. But more importantly, our net debt to EBITDA ratio would be reduced to around that 1.7 level, which is consistent with that required for our targeted credit rating. The final point to note here is our interim dividend of 8 cents per share and this is based off our full year free cash flow guidance. The interim dividend has been imputed at 50% as we seek to bring that imputation credit balance back to a sustainable level and manage our balance sheet as efficiently as possible. Slide 21, we've outlined our key debt metrics. I'll note two things briefly here. Firstly, the absolute amount of debt we carry forward will lead to lower interest costs. However, some of this benefit will be moderated by our residual debt profile. And secondly, interest cover based on our EBITDA over financing costs remains very healthy at eight times. Slide 22 Reaffirming FY26 Guidance One thing we have done is we've updated the strategic capex to 55 million, having completed the sale of DCs. Again, this reflects the 54 million we spent in H1-26 and an extra million we spent in the month of January. Importantly, we retain our EBITDA guidance of 1010 to 1070 million. which if I took the midpoint at 1,040 would imply a more normal first half to second half earnings split of 45%, 55%. On that, I will hand back to Jolie to provide a final summary.

Thanks, Stewart. So to summarise, despite softer market conditions persisting in parts of the portfolio, Spark delivered a clear step up in performance during the half. A strategic focus on core connectivity is gaining traction. Mobile showed clear signs of momentum. Thank you very much. There's more work to do but this progress reinforces our confidence in the strategic direction we set under SPARC 30 strategy and SPARC is becoming a more focused, efficient and resilient business well positioned for the second half and beyond. We're now going to open the floor to questions so I'll hand back to the operator.