When the FY2022 results came out, 'Spark Sport' was very much 'still in the picture' as part of the 'exciting growth story' (at HY2023, Spark exited Spark Sport for a one off write off of $52m). So how did the total of the exciting new growth divisions -at the time- shape up?
P87 of AR2022 is where the true calculation of profitability starts:
|
Operating Revenues |
less Product Costs |
less Labour Costs (1) |
less Other Operating Expenses (1) |
equals EBITDA |
'Other Operating Revenues' |
$152m |
$72m |
$20m |
$16m |
$44m |
Notes
1/ 'Labour Costs' and 'Other Operating Expenses' are estimated in fractional proportion (f) to the percentage of revenue turned over by the 'Other Operating Revenues' business unit.
f= 152/3694 = 4.114%; Labour Cost = 0.04114 x $495m = $20m, 'Other Operating Expenses' = 0.04114 x $381m = $16m
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EBITDA is a good proxy for cashflow. But barring some trunk transmission assets, most of the equipment at Spark is not long lived. Indeed there is significant investment now replacing the old PSTN telephone system and continuing the 5G mobile roll out. In my assessment, this means EBIT is the more important measure.
Depreciation & Amortisation ('Other Revenue') = 0.04114 x $520m = $21m
EBIT= EBITDA - DA = $44m - $21m = $23m
The interest charge against 'Other Revenue' = 0.04114 x [$26m - $74m] = -$2m. So underlying Net Profit After Tax is:
NPAT = 0.72(EBIT - I)= 0.72($23m-$2m)= $15m
On page 89 of AR2022 we learn "Included in 'Other operating revenues' is revenue from Qrious (Artificial Intelligence, data and analytics), Internet of Things, Spark Sport, Connect 8 (the construction contractor, now fully brought back in house by buying out the Electra shareholding) and exchange building sharing arrangements." I had previously assumed this category included 'Spark Health' as well. But it could be the Spark Health referred to as a promising potential future revenue business unit has yet to start from a zero base.
Whatever, the NPAT estimate for all those promising future growth initiatives looks to have improved by 50%, even if the overall contribution to Spark profit remains small.