After an unusual miss for its full-year earnings, delivered last August, Spark surprised again – and again in a bad way – by lowering its FY2025 guidance in October.

Craigs says there is “some chance of a further downgrade” but that this possibility is already built into the telco’s price.

“A key focus will be on FCF [free cashflow] cover for dividends and the extent to which the current weakness is macro-driven or due to increased competition.”

In other words, how much of a poor result could be pinned on the crummy economy and Government IT departments shelving their chequebooks, and how much can down to post-merger 2degrees being on a roll?

Morningstar’s Brian Han says investors have over-sold, and Spark represents good buying as long as it sees through cost-cutting.

Forsyth Barr analysts Aaron Ibbotson and Benjamin Crozier, who downgraded Spark to “underperform” on February 14, with a $2.80 12-month target (shares closed Friday at $2.90), said there is “potential for a restructuring charge to be pulled out of its ebitda [earnings before interest, taxes, depreciation and amortisation] guidance”.

The pair also want an update on the capital-raising push announced at Spark’s full-year result in August, when chair Justine Smyth said the telco would explore various options to raise $1 billion for data-centre expansion over the next five years. They want to see a construction timeline, too.

Morningstar’s Brian Han says investors have over-sold, and Spark represents good buying as long as it sees through cost-cutting.

Forsyth Barr analysts Aaron Ibbotson and Benjamin Crozier, who downgraded Spark to “underperform” on February 14, with $2.80 12-month target (shares closed Friday at $2.90) said there is “potential for a restructuring charge to be pulled out of its ebitda guidance”.

The pair also want an update on the capital-raising push announced at Spark’s full-year result in August, when chair Justine Smyth said the telco would explore various options to raise $1b for data-centre expansion over the next five years. They want to see a construction timeline, too.

More Callaghan ‘chaos’

Some 350 Callaghan Innovation staff already know their agency is going to lose its funding on June 30 – with some jobs going to other agencies, if on a lag of up to six months, with enabling legislation for science sector changes not due before Parliament before the fourth quarter and not coming into effect until next year.

Callaghan offers research services for early-stage firms and developers of new technologies, and administers growth grants and the Government’s tax rebate for R&D.

Earlier this month, the Public Service Association said Callaghan staff did not know who would get a role with another agency under a sweeping science sector restructure or when – leading some to look offshore for work in what the union says is a “brain-drain of the Government’s own making”.

Late last week, a Callaghan staffer – whose name has been withheld – wrote to the Herald about what they saw as “the chaos and widespread damage caused by the Government’s decision to disestablish this vital department. Most of us were told of the closure only on the morning the press release went out, leaving staff completely stunned and unprepared”.

“I would like to particularly highlight the significant losses and the catastrophic consequences of the lack of planning surrounding this enormous decision. The situation at Callaghan is an utter shambles and it’s clear that nothing has been properly thought-out. From the perspective of both staff and many established customers, it feels as though the Government is attempting to fly a plane while it is still being built,” the staffer wrote.

“For example, no one at Callaghan knows when their final paycheque will come. Only the 80 staff members who were given four weeks’ notice on February 12 – mostly from the research & development team, business innovation advisors and some internal functions like marketing – have any certainty. For everyone else, there is no clarity on when we will be let go, except that it will happen in ‘waves’.

“This lack of detailed information has serious consequences for employees’ ability to plan for the future and, more importantly, their mental health.”

They continued: “The Gracefield [research] site has received no direction on what will happen next. Staff are being forced to figure out not only how to manage the loss of staff but also how to dispose of chemicals and other scientific materials safely. The risk of legal and compliance issues resulting from this poor planning is substantial and the administrative cost of unwinding this hasty and poorly managed shutdown will only increase over time.”

Last year, a leaked memo said hazardous goods storage is not up to scratch in some of Callaghan’s laboratories, with $120m in remediatory work required over the next five years. In a letter of expectations leaked to the Herald earlier this month, new Science, Innovation and Technology Minister Shane Reti instructed Callaghan to “explore commercial opportunities to retain the Gracefield site as a centre for science and innovation” – presumably for the yet-to-be-detailed public research organisation envisioned by the Government.

The staffer continued: “Callaghan scientists also undertake critical scientific research under contract for numerous businesses.

“These contracts often extend well beyond the June disestablishment date, leaving customers in limbo, unsure of who, if anyone, will be able to carry on their commercial work.

“Many of these businesses are now facing serious challenges, with expensive and time-sensitive R&D work halted with no plan for how to proceed. The scientists working on these projects are highly specialised and their expertise cannot be easily replaced.”

Callaghan responds

Tech Insider put the staffer’s comments to Callaghan chief executive Stefan Korn.

“I know this is a difficult and distressing time for our people. We’re working at pace to give staff and customers certainty about how the disestablishment of the organisation will affect them,” Korn replied.

“However, winding up an organisation as complicated as Callaghan Innovation is not straightforward. We have multiple challenges to work through, including the transfer of some functions to other entities, the shutdown of other parts of the organisation and the safe and effective management of the Gracefield Innovation Quarter [GIQ].

“For example, planning work is now under way to safely deal with the disposal of a large range of chemicals and hazardous substances that have been used by the scientists at GIQ over the years.”

Korn added: “As much as we would’ve liked to give people answers on day one, it’s important to work through the detail and get things right.

“We’re doing everything we can to support our people and customers in this transition.”

Minister responds

“The science sector reforms aim to ensure we focus our investment that will generate greatest value for our economy and our people,” Reti said.

“Callaghan Innovation was spread too thin across many conflicting functions – it’s struggled to work to a clear focused purpose.

“To better support and incentivise innovation for economic growth, we have decided to disestablish Callaghan Innovation and establish a new Public Research Organisation [PRO] to focus on delivering research in AI [artificial intelligence], synthetic biology, aerospace, medical and quantum technologies.

“Some of Callaghan’s functions will be transferred to MBIE [the Ministry of Business, Innovation and Employment] or the new PRO.

“Some functions will not be transferred, so an in-principle decision has been made for the funding to be reallocated.

“I understand that in this round of change, the board of Callaghan Innovation has considered roles that aren’t currently working on customer contracts.

“I acknowledge that these changes will be challenging for staff involved. I am confident that the science reforms … will strengthen our science system and create more opportunities for economic growth over time.”

Earlier this month, Callaghan senior research scientist Ben Wylie-van Eerd told the Herald that while the Government had outlined plans for a new advanced technology research organisation, the lack of a firm timeline – other than a legislative timetable indicating it was at least six months away, and probably more – meant a lot of his colleagues were already job-hunting for offshore roles.

Extended hours trading on the Magnificent Seven

Trump’s talking up more tariffs. Ukraine is offering the US priority access to lithium as it bargains for its life. Think Tesla’s going to have a good day? Now you place a punt before the Nasdaq’s opening bell.

Trading platform CMC recently launched extended-hours trading on the “Magnificent Seven” stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla).

The move proved so popular that CMC has now increased the breadth of extended hours trading to 80 popular US stocks, CMC’s Markets New Zealand general manager Chris Smith says.

Kiwis can start pre-market trading from 10pm NZT, well before the US stock exchanges open at 3.30am NZT.

“We’ve seen recently that international news can have a major impact on markets and we want to give our investors the best opportunity to react as fast as they can,” Smith told Tech Insider.

Straight outta Southland

Invercargill-raised Derek Troy-West has raised A$5m at a $A25m valuation for the software start-up he founded with his wife.

Troy-West did a computer science degree at Auckland University then worked as a software developer for Spark before heading to the UK for a few years, where he met his wife Kylie Forge (now Kylie Troy-West), an Australian also on her OE after graduating from La Trobe.

The pair settled back in Melbourne in 2012 and founded Factor House in 2019.

The start-up builds developer tools that allow engineers to manage the processing of massive amounts of real-time data. Its first product, Kpow, is an engineering toolkit designed to enhance and simplify the management of Kafka – an open-source distributed-event-streaming platform developed by LinkedIn that allows data to be transported efficiently and accurately between different systems and applications.

Customers include Hewlett Packard Enterprise, Block, Pepperstone and Afterpay.

The A$5m seed raise was led by Australasia’s largest venture capital (VC) firm, Blackbird.

Factor House said the round was supported by others including Auckland-based angel investor Steven Holmes – who made his investment in a personal capacity but is perhaps best-known in the VC community as the director of rich-lister Murray Bolton’s family office, Bolton Equities.

NZ’s DOGEmaster?

Sorry, I had to ask. Half of my self-selecting sample of my followers on LinkedIn hated the idea of Prime Minister Christopher Luxon replicating Elon Musk’s DOGE rampage in the US with a local tech figure in charge.

I would have added recent policy enthusiast Rod Drury, too, but LinkedIn only allows four choices (and doesn’t support embedding, so I had to recreate it above but see the original here).

You could say former Telecom and Spark executive Simon Moutter is now in the frame, too, given he was recently made chair of Kāinga Ora (with former Spark “chief turnaround officer” Matt Crockett appointed Kāinga Ora’s chief executive around the same time).

Comments ranged from “the constitutional equivalent of arson” to “I don’t think anyone in NZ has the stomach for it” to various proposals to streamline a spending purger with AI. Steven Joyce and Richie McCaw got write-ins. Feel free to leave your take in Comments below (once Comments are open).

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.