Loved Craig's posts.Chain saws and making his own grog.
His SPK trading was a joy to hear about.
Another poster I miss is Janner.
Wonder if both are now in the big market up in the sky.?
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Loved Craig's posts.Chain saws and making his own grog.
His SPK trading was a joy to hear about.
Another poster I miss is Janner.
Wonder if both are now in the big market up in the sky.?
Another little look at the 'other revenue' growth engine which carries the hopes of reigniting Spark. The following table is summarised information from:
FY2021 Summary Presentation: https://investors.sparknz.co.nz/Form...mary_FINAL.pdf
FY2022 Summary Presentation: https://investors.sparknz.co.nz/Form...FINAL%20V2.pdf
HY2023 Summary Presentation: https://investors.sparknz.co.nz/Form...mary_FINAL.pdf.
Spark Segment FY2020 FY2021 FY2022 FY2023 (FY2020 forecast) Other Revenue $130m $137m $152m $210m-$220m
Notes
1/ 'Other Revenue' includes: Qrious (Artifical intelligence and data processing), Internet of Things (remote monitoring of location and information), Spark Sport (wound up during FY2023), Connect 8 (infrastructure construction and repairs, brought back in house in FY2022) and rental of space to third parties in exchange buildings.
2/ Internet of Things (IoT) networks cover 99% of the population by EOFY2021 (c.f. 82% at EOFY2020). 450k devices are now connected across a range of industries including utilities health and logistics.
'Summer of Cricket' sees Spark Sport viewers top 240k over FY2021 (no dollars mentioned).
3/ Over FY2022 IoT connections increased by 75% to 832k. However corresponding revenue increased by only 22%. Meanwhile, a second 'successful' season of cricket was delivered with no numbers quoted. Improved returns were sought with 'strategic partnership opportunities'.
4/ The picture at 'Spark Health' is a little confusing. We are told that over FY2021 revenue increased by 10.6% on a revenue base of $200m ( 0.106 x $200m = $21.2m). However, this does not tie in with the 'total of other revenue' for FY2021 being only $137m. The only way I can make sense of this would be for Spark to have their regular phone and broadband arrangements for hospitals and health centres under the 'voice' and 'broadband' product segments, with 'specialist health centre add ons' recorded under 'other revenues'. This is just my speculation, trying to make sense of the figures. A specialist 'digital health platform' (whatever that means) was set to launch in Q1 FY2022. Given most medical facilities would have been well set up for broadband and other standard telecommunications before FY2021, I am going to assume that the revenue increase of $21.2m over FY2021 was for 'specialist health centre add ons'.
'Spark Health' revenue grew 46% over FY2022, driven by continued growth in telco, IT services (presumably these two are not part of 'other revenue'}, and health products (whatever those are, which are part of other revenue.) 1.46 x $21.2m = $31m. The HY2023 update simply suggested that 'continued growth' was expected.
The HY2023 update merely said that Digital Health Revenues were maintained (implying zero growth). The best forecast target for FY2023 is now a 10-15% growth in Digital Health Revenue for the full year (but that revised figure is below the annual 2023 budget.)
5/ Shock update on Spark Sport for HY2023, where the anticipated 'strategic partner opportunities' saw Spark Sport unload their whole operation!. Spark provisioned for a $52m hit on this news (even though Spark Sport revenues increased in the HY2023 period, albeit offset by higher content costs)!
6/ Connections continue to grow on the IoT networks, with 1,200k connections at HY2023 (+44% in just six months). That means that Spark are on track to well exceed their connection goals of 1m for FY2023 (see first quoted post).
-----------------
Summary
For the three growth engines:
a/ Spark Sport has been shut down (estimated revenue $30m @EOFY2022).
b/ Spark Health growth has stalled - zero growth so far in 2023. Some of this stalling might be due to the difficult transition to Te Whatu Ora (Health New Zealand), as all of the disparate health boards merge into one. That could be stalling the adopting of new technology (estimated revenue $31m, or $30m in round figures @EOFY2022).
c/ The Internet of Things is going better than expected, in terms of connections. But profit growth is only one third of connections growth. I would expect profit growth to be less than connections growth. But is that connections/profit growth ratio what was was expected? There may have been some front loading of costs as IoT systems are set up (the profit margins on devices -one offs- may be less than the profit margins of running those devices - continuing revenues). By subtraction the IoT revenue at EOFY2022 was:
$150m - $30m - $30m - $10m (*) = $80m
(*) The $10m here I am assuming to be income from renting out Spark cabinet space to other providers (a pure guess on the amount).
This means my estimate for 'other revenue' for FY2023, assuming Spark Sport is reclassified as a discontinued business unit, is:
$0m + $30m + $80m x (1.22x1.22) = $150m
(I am assuming here that the 6 month revenue growth rate for 1HY2023 continues into 2HY2023). That is well below the $210m to $220m target set in FY2020, even if you allow for the exit from Spark Sport
SNOOPY
From HYR2023
“In cloud we saw an ongoing mix-shift towards public cloud, which has impacted private cloud revenue and margins, while the uncertain economic environment has contributed to lower managed service project activity. We are focused on accelerating simplification across our business portfolio and maximising our competitiveness in hybrid cloud, which is showing strong demand as customers seek diversification and a transition path to public cloud services.”
I went to 'google translate', but I couldn't find an option to translate from 'telespeak' to 'english'. I am concerned about reduced profitability for Spark in the cloud'. But I cannot for the life of me figure out what the above paragraph means. A 'private cloud' is a Spark customer paying to have their data stored in a remote location. But what is a 'public cloud'? And what is a 'hybrid cloud'? And where is this 'path to public cloud services' that Spark expect some of their customers to follow?
SNOOPY
Public cloud is public providers like Azure or Amazon. Both of which are actively building out their offerings here. Private cloud is where the data center is not shared with anyone else, so it's private to the user. But Spark often operated private cloud data centers on behalf of others. Hybrid is as the name suggests, a mix of the two. In other words, they are seeing a lot of people wanting to go to Azure or AWS, and think they can make some money helping them transition.
Appreciate your reply Mondograss. So 'public' is being used in the English sense as in 'English public schools' which are 'private schools' in NZ speak. IOW schools you have to pay money to attend. This is what confused me. When I read about the 'public cloud', I got excited and was all set to ring my local council about getting free access to some 'community cloud' they were running for their residents and ratepayers!
Using my new understanding of the lingo, I was under the impression that Spark already offered 'public cloud'. So I see the likes of Amazon and Azure are direct competitors for Spark in that space.
That leaves me a little confused on what a Spark 'private cloud' service might be. Could it be Spark getting a hard drive from a customer, and then installing that hard drive in a remote data centre owned by Spark for exclusive use of that customer? Surely not! So any privacy from 'private cloud space' must surely be in the form of a firewall that excludes other customers from part of a larger Spark owned storage device. But if that is what happens, it sounds suspiciously like how a 'public provider' might operate. That means I have not solved the answer to the question:
"What is the difference between a 'public cloud space' and a 'private cloud space'?"
Spark want to make money from customers moving from one of their data-centres to the data-centre of someone else? How could that work?
SNOOPY
Public cloud = customers, business rent their own servers and services from providers like Amazon AWS, Microsoft Azure
Private cloud = Spark run their own data center and rent out physical or virtual servers and services to customers - basically the same thing at AWS/Azure offer, however "private" as you typically have a private, secure connection from your office to the provider, rather than being accessible via the public internet. Caveat, you can have the same thing from a public provider too by adding a "private secure connection" component for an extra fee.
Generally hard to compete with the big boys on price, so unless customers have high security/data sovereignty requirements (e.g. must be held/hosted within new zealand) you're fighting a losing battle.
The way I read it is that spark are losing customers to Azure/AWS because they will be cheaper, and both are also opening data centers within NZ in the next wee while (Microsoft are saying they will be open in NZ by 2024).
"We are focused on accelerating simplification across our business portfolio and maximising our competitiveness in hybrid cloud, which is showing strong demand as customers seek diversification and a transition path to public cloud services.”"
This part sounds a bit optimistic to me, trying to offset the bad news they are losing share to public cloud providers. However, some customers like to have less-critical stuff in public cloud, and more critical stuff in private cloud - if something goes wrong with your critical server, you can drive over to the spark datacenter, access your server, replace a part etc, or at least phone spark and get them onto it. This is "hyrid cloud" when you have a mixture of stuff either in public/private, or public/on-premise (in your office), or all three etc.
Right, so the essential difference with 'private' storage is that you have your own private line linking your work premises to the remote storage site. Got it.
Caveat noted. It does look like, in practice, the dividing line between 'private cloud storage' and 'public cloud storage' is pretty thin.
SNOOPY
Yes it is a pretty thin line. Sparks (private cloud) data centers did allow you to install your own equipment (one client of mine had to do just that to get what they wanted) whereas for the Public cloud providers that's not an option, you get the same public offerings as everyone else. That doesn't alway suit people, particularly if they have a lot of legacy systems that have very specific requirements. So private cloud is a decent middle ground. On the private cloud front, Sparks competitors are the likes of CDC (i.e. IFT).
I suspect that Spark are being overly optimistic about how much they can make migrating people from one to another, but no doubt that it is not an easy thing to do so if they run a decent consulting shop they should do OK from the general progression away from companies hosting their own physical data center and putting it all in the cloud instead.
Confirmed. From slide 5 of 1HYP2023
"Cloud mix-shift trend continues, with volume growth in lower-margin public cloud and co-location being offset by lower private cloud volumes and repricing."
I understand the drive to send production of goods offshore to save labour costs. But I fail to see why putting your data into large overseas data-banks should be cheaper than putting that data into the same electronic hardware run from a data-centre in New Zealand. You don't need to look far to see that there is not a strong economic argument to run datacentres offshore. If it was cheaper to do this overseas, why are Azure/AWS and Microsoft planning to set up data-centres of their own here in New Zealand?
Why do Spark consider they 'cannot match' these overseas providers? Their 1HY2023 report indicates, without spelling it out in those words, that they are suffering from corporate cost bloat in their data-centre business. If they can fix that, why can't they go toe to toe with the overseas players?
This 'private wire' argument rings a bit hollow to me. I understand you can have a private connection at both your end and the data-centre end. But what about in between? Does each private connection have their own private wire that they hang themselves from telegraph pole to telegraph pole? Wouldn't the 'private wires' go into a common all enveloping common plastic conduit?
Furthermore, if you are truly worried about privacy, why would you entrust your data to a US controlled corporate that operates outside the envelope of New Zealand law? I guess many NZ businesses are not worried about that, which is why they are moving to 'Microsoft Azure'/'Amazon AWS'. But it seems to me such businesses are giving away a lot, to save very few -if any- dollars. At least if you have a problem with Spark, you can phone them in New Zealand and speak to a New Zealand operator and they can send a New Zealand technician down to sort out a New Zealand domiciled electronic box. I think Spark has a real trump card to play here in the service aspect of what they do.
I am not fully on board with your definition of a 'hybrid cloud' Clip either. The whole idea of splitting private company held information information into two baskets. one where it doesn't matter too much if it is hacked, and another where it does, sounds problematic.
SNOOPY