Spark New Zealand/SPK NZ

Spark, the large NZ telecoms company, out with a downgrade today, citing a weak(er) macro backdrop, that is causing some parts of SPK’s business, like IT and IT related services, to be cut back, across both the public and private sector.

At the time of the February result we wrote that the result wasn’t great, see link, with the key snippet shown/highlighted below.

That has come to pass, with management lowering EBITDAI guidance by ~4%. It’s not huge, but it’s not great, either, and people are usually in teleco’s because they are meant to be defensive.

In the trading update, management indicate that capex guidance remains unchanged; that means free cash flows in this current half should remain “pretty good”, given that most of the FY capex budget was pulled forward into H1.

The balance sheet remains is in good nick, and the yields/dividends remain quite robust.

So, we will simply wear it, for now. Perhaps not quite happy holders, but holders nonetheless.

NB – the stock has finished the day down 4%, not huge, suggesting the market had priced much of this in, with more or less consistently weak trading since Feb.

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