Spark Finance Limited Analysis

Overview

On 8 August 2014, TCNZ Finance Limited changed its name to Spark Finance Limited (Spark Finance).

Spark Finance Limited is a wholly owned subsidiary of Spark New Zealand Limited (formerly Telecom Corporation of New Zealand Ltd) and is the principle finance company for the Spark New Zealand Group.

Spark Finance raises debt funding in New Zealand and internationally. The majority of these funds are then advanced to other members of the Spark New Zealand group in order to assist in funding their operations. Spark Finance enters into derivative financial instruments in order to manage the foreign exchange and interest rate risk associated with its borrowings, as well as to manage the foreign exchange risk associated with the operations of the Spark New Zealand Group.

Spark Finance solely lends to other companies within the Spark New Zealand Group and accordingly, its financial performance should be considered in conjunction with the financial performance of the Spark New Zealand Group.

Performance

The following information was extracted from Spark Finance Limited's FY24 Full Year results, released on 27 August 2024:

Spark Finance recorded net earnings after tax for the year ended 30 June 2024 of $168 million compared to $188 million for the year ended 30 June 2023. Potential volatility in earnings caused by Spark Finance's exposure to movements in foreign exchange rates on financial instruments that are held on behalf of members of the Spark New Zealand Group is mitigated by back‐to‐back deals with these members. The net foreign exchange loss for the year ended 30 June 2024 was nil (30 June 2023: nil).

The net assets of Spark Finance as at 30 June 2024 were $1,072 million compared to $1,089 million as at 30 June 2023. The share capital of Spark Finance as at 30 June 2024 is $883 million (30 June 2023: $883 million) consisting of 882,872,600 issued and fully paid shares, of which 342,872,600 are ordinary shares. Spark Finance did not acquire any of its own shares during the year ended 30 June 2024 (30 June 2023: nil).

On 25 August 2023, Spark Finance paid a dividend of 20.95 cents per share or $185 million to Spark New Zealand Limited, which was paid through the intercompany current account (30 June 2023: 23.22 cents per share or $205 million).

On 27 October 2023, Spark Finance extended the term of its $200 million committed revolving Sustainability‐Linked Loan facility with Westpac New Zealand Limited by three years, to mature on 30 November 2026.

On 7 March 2024, $125 million of unsecured, unsubordinated fixed‐rate bonds with a coupon rate of 3.37% matured.

On 18 March 2024, Spark Finance issued two series of unsecured, unsubordinated fixed‐rate bonds; $125 million with a coupon rate of 5.21%, maturing on 18 September 2029, and $175 million with a coupon rate of 5.45%, maturing on 18 September 2031.

On 29 April 2024, Spark Finance extended the term of its $200 million committed standby revolving credit facility provided through participating Australasian and global banks by one year, to mature on 30 April 2027.

On 30 May 2024, Spark Finance established a $100 million committed revolving facility with Bank of New Zealand, maturing on 30 May 2025.

The Directors of Spark Finance consider the results of the Company to be satisfactory and the Company to be in a sound financial position.

Spark Finance solely lends to other companies within the Spark New Zealand Group and, accordingly, its financial performance should be considered in conjunction with the financial performance of the Spark New Zealand Group. A copy of the Spark New Zealand Group’s results for the year ended 30 June 2024 can be found at investors.sparknz.co.nz.

Based on current expectations, Spark Finance will continue to operate as the principal finance company for the Spark New Zealand Group. Spark Finance does not engage in research and development activities