Telecom posts first ever year loss but share price jumps

By NZPA

Friday 9th August 2002

Shares in New Zealand's largest listed company, Telecom Corp, jumped after the company reported its first-ever annual net loss of $188 million, but better than expected core earnings.

Excluding unusual items like the AAPT writedown, the company bettered private sector forecasts with a pre-abnormal net profit of $670 million, up 9.1 percent on last year's $614 million figure.

It also wrote down $850 million on its Australian unit AAPT, as Telecom battles to make inroads into the competitive Australian market.

Last year's result included a $245 million dividend from its share in the Southern Cross cable.

Today's writedown was widely anticipated in the market and came in at the bottom end of expectations ranging between $900 million and $1 billion. Telecom originally paid $2.2 billion for the investment.

Telecom's share price quickly rose and by 11am was up 7c to $4.94 on a broadly positive market.

Analysts were still crunching numbers but said the company's ebitda (earnings before interest, tax, depreciation and amortisation) before writeoffs, was slightly better than expected.

Excluding abnormals and the cable dividend, it came in at $2.265 billion, up 9.4 percent on the previous year's $2 billion.

"On the face of it, it is slightly better than we had forecast," one analyst said.

"The writedown was a little bit less but that's not a cash issue as it is really impacts on valuations."

Chairman Roderick Deane today defended the AAPT writedown.

"This is a responsible and prudent book value adjustment," Dr Deane said.

"Many telcos have had to adjust values in the last couple of years. This is a moderate step compared to most."

He stressed that cash flow was strong and that the writedown would not have a material impact of Telecom's financial position or its ability to access debt markets.

The telco also wrote off a residual $8 million after tax charge from the canning of Telecom's CDMA rollout across the Tasman.

Net cashflows from operating activities were $1.351 billion, compared with $1.758 billion last year.

Analysts welcomed improved returns from Telecom's Australian operations, with ebitda up $56 million, nearly 44 percent.

Overall revenue growth was $134 million, up 2.5 percent, due largely to growth in the Internet and data services and interconnection fees. Operating expenses were reduced by 1.8 percent, largely due to cost cutting.

The company will pay a fully imputed fourth quarter dividend of five cents per share in September, bringing total dividends for the year to 20 cents per share, the same as last year.

Earning from Telecom's New Zealand operations were $1.54 billion while the Australian operations earned $44 million, and corporate and other services recorded a loss of $143 million, bringing the total group to $1.45 billion.

Mobile operations earned $133 million, Telecom's wireline -- its fixed line service to residential and business customers -- earned $1.2 billion, its Internet and directory services made $110 million and its international services made $99 million, bringing total earnings before interest, taxation, depreciation and amortisation (ebitda) to $1.5 billion.

In Australia Telecom's consumer business earned $61 million but its IT business and Internet services lost $17 million, giving an ebitda total of $44 million.

Fourth quarter results showed Telecom made a net loss of $688 million for the three months to June 30, compared with a loss of $38 million last year, but that result was impacted by the AAPT writedown.

Comments from our readers

No comments yet