SPK- Spark NZ (TELCO)

[Snoopy]

I am looking at this from another angle, starting with 'the facts we know'.

"Spark had an imputation credit balance of nil as at 30-06-2020" (AR2020 p94, confirmed in AR2021 p100)

A Nil imputation credit balance means that all of the imputation credits paid out after 30-06-2020, must have also been paid up after 30-06-2020. So in the two year period following EOFY2020, what fully imputed dividends were paid out?

Dividends Paid FY2021 & FY2022	Gross Dividend	Net Dividend	Imputation Credits
Second HY dividend FY2020	$319.4m	$230m	$89.4m
First HY dividend FY2021	$320.8m	$231m	$89.8m
Second HY dividend FY2021	$323.6m	$233m	$90.6m
First HY dividend FY2022	$325.0m	$234m	$91.0m
Total			$360.8m

Calculation Notes

1/ Gross dividend = (Dividend Paid)/0.72, Imputation Credits = Gross Dividend - Net Dividend



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Now, how does that $360.8m imputation credit total paid out line up with the amount of tax paid up by the company over that same period? From the respective cashflow statements:

Income Tax paid over FY2021	$188m
Income Tax paid over FY2022	$160m
Imputation Credit Balance Owing EOFY2022	$16m	(See AR2022 p120)
Total	$364m

This means enough tax has been paid to cover those fully imputed dividends. Or perhaps more correctly, enough tax would have been paid, if Spark had got around to paying that outstanding tax debt of $16m of imputation credits owing! But as nztx pointed out in post 2004, the imputation credit balance isn't really owing (yet), because of the mismatch of the ending of the Spark reporting financial year, and the Spark tax financial year that ends 9 months later. That means the unpaid imputation credit balance of $16m is actually an accounting construct, caused by Spark choosing to put a line under their year at 30th June, while the same $16m is a bill 'not yet due' from an IRD perspective.

A summary of 'the facts we know'.

"Spark had an imputation credit balance of nil as at 30-06-2020" (AR2020 p94, confirmed in AR2021 p100)

A Nil imputation credit balance means that all of the imputation credits paid out after 30-06-2020, must have also been paid up after 30-06-2020. So in the three year period following EOFY2020, what fully imputed dividends were paid out?

Dividends Paid FY2021 & FY2022	Gross Dividend	Net Dividend	Imputation Credits
Second HY dividend FY2020	$319.4m	$230m	$89.4m
First HY dividend FY2021	$320.8m	$231m	$89.8m
Second HY dividend FY2021	$323.6m	$233m	$90.6m
First HY dividend FY2022	$325.0m	$234m	$91.0m
Second HY dividend FY2022	$325.0m	$234m	$91.0m
First HY dividend FY2023	$325.0m	$234m	$91.0m
Total			$542.8m

Calculation Notes

1/ Gross dividend = (Dividend Paid)/0.72, Imputation Credits = Gross Dividend - Net Dividend



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

Now, how does that $542.8m imputation credit total paid out line up with the amount of tax paid up by the company over that same period? From the respective cashflow statements:

Income Tax paid over FY2021	$188m
Income Tax paid over FY2022	$160m
Income Tax paid over FY2023	$190m
Imputation Credit Balance Owing EOFY2023	$32m	(See AR2023, p131)
Total	$570m

This means enough tax has been paid to cover those fully imputed dividends. Or perhaps more correctly, enough tax would have been paid, if Spark had got around to paying that outstanding tax debt of $32m of imputation credits owing! But the imputation credit balance isn't really owing (yet), because of the mismatch of the ending of the Spark reporting financial year (30th June) , and the Spark tax financial year that ends 9 months later (31st of March of the following year). That means the unpaid imputation credit balance of $32m is actually an accounting construct, caused by Spark choosing to put a line under their year at the end of 30th June, while the same $32m is a bill 'not yet due' from an IRD perspective.

There is a reported deficit on income tax credits, - which is odd in itself as I was under the impression that income tax credits could not be issued to shareholders until the underlying tax bill was paid (does this mean that the negative imputation credit balance as at 30th June was brought up to zero 'and then some' ($32m+$91m= $123m) before the payment of the final dividend in October, despite the negative imputation credit balance payment not being required to be paid by the IRD until 31st March the following year? - I guess it does!) So does all of this line up with the income tax payments expected to the IRD as reported to the half year ended 31st December 2022 (EOHY2023)? 'Kind of' - the half year cashflow statement shows income tax payments to the IRD of $120m over that period. That means the income tax payment by the final dividend payment date looks to have been $3m shy.

SNOOPY