Morningstar | Spark Shows Agility Even in CEO Succession. See Updated Analyst Note from 02 Apr 2019
We are surprised by the planned June 30, 2019 resignation of current CEO, Simon Moutter, especially given the fluid situation facing Spark New Zealand on key fronts. While he has admirably executed the group-wide transformation and Agile program, retaining the NZD 110 million annualised net labour cost savings (down 19% from fiscal 2017) longer term remains uncertain. Transition to 5G wireless is also in its early days, with planning still fluid in the absence of spectrum allocation and the business case unclear with respect to 5G's capability to provide meaningful bypass of fixed-line fibre.These issues will now preoccupy the mind of new CEO-elect, Jolie Hodson. Her qualifications to lead the group are undisputed, having been at the narrow-moat-rated group since 2013. Hodson has served time as the CFO and at the operating coal face across digital, consumer/retail, cloud and IT, as well as group-wide transformation projects.
The CEO change has no impact on our forecasts or the NZD 3.80 fair value estimate (AUD 3.60 at current exchange rate). However, markets detest surprises and shares in Spark are now trading at a 4% discount to our intrinsic assessment.
Finally, Moutter's achievement during his seven-year tenure as the CEO deserves acknowledgement. The cold, hard numbers may show group earnings have barely moved since fiscal 2012, the reported year before his CEO appointment. However, post the demerger from Chorus, Moutter has overseen Spark’s transformation from a legacy, infrastructure-focused incumbent to a modern, service-focused company. Under his watch, Spark's earnings have moved beyond stabilisation, with initiatives implemented to digitise and simplify operations, while pursuing new revenue streams, all with an aim to lift margins longer term. Rather than rest on his laurels, Moutter boldly undertook an all-encompassing Agile program over the past two years. It is one that has been well-executed, leaving Spark in good shape for Hodson to take over.
Spark New Zealand of New Zealand is the supplier of telecommunications and information, communication and technology (ICT) services in New Zealand and Australia. Co. provides telecommunications and ICT products and services, including local, national, international and telephone services; mobile services, data, broadband and internet services; information technology (IT) consulting, implementation and procurement, equipment sales; and installation services. The Co.'s portfolio of IT services include Cloud computing services, managed IT services, IT outsourcing, IT software and hardware procurement, and professional services to assist organizations with business and technology investments.
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