In an increasing trend for reporting companies this season, Telecom yesterday adjusted its profit to make it seem better than it was in the year ended June.
Telecom removed one-off items from its operating balance sheet, which the company said distorted the underlying performance of the business.
The adjusting items included an $18 million gain on the sale of AAPT consumer, $29 million of ultra-fast broadband (UFB) and demerger costs, $42 million of earthquake-related costs and asset impairments of $257 million. There was also an $88 million tax effect relating to the adjusting items.
In total, Telecom had write-downs or losses of $328 million in the reporting period, offset by an $18 million gain. The $88 million is tax Telecom will not have to pay.
Therefore, adjusted earnings before interest, tax, depreciation and amortisation for the period came in at $1.8 billion, a 2.1% improvement on the previous corresponding period (pcp).
Craigs Investment Partners broker Chris Timms said he agreed with the Otago Daily Times that reading the accounts could be confusing for shareholders, but he understood what Telecom was trying to achieve.
"Telecom is comparing the underlying business from this year with the same business of last year. The results reflect the profit being achieved from the ongoing businesses rather than having the adjustments pushed down on to the bottom-line," he said.
Earnings before interest and tax were up 5.7% at $774 million and net earnings were $388 million, up 1.6%. Earnings per share were unchanged at 20c.
A fourth-quarter dividend of 7.5c per share was declared, along with an additional 2 cps special dividend. The total dividend was 20c, down nearly 17% from last year's 24c.
However, this year's dividend is fully tax-paid and will return more cash to the shareholder than last year's 24c, on which the shareholder paid tax. Telecom did not make that clear in its presentation.
Chief executive Paul Reynolds said the results represented a strong operating performance in an increasingly competitive environment.
At the start of the year, Telecom updated its strategy to reflect New Zealand's challenging and competitive operating environment, create a leaner and more effective operating model, and prepare for a fibre future.
The result of the strategy, underpinned by the simplified and more effective operating model, achieved positive results.
"Customers have benefited from lower prices overall and better performing products."
The second half of the year saw Chorus win 70% of the UFB regions, along with being selected in partnership with Vodafone, as the Crown's partner for the rural broadband initiative.
The work to demerge Chorus by the end of the calendar year continued apace, Dr Reynolds said. More information would be made available soon to shareholders.
In the divisional reports, Telecom said mobile revenue grew by 5% in the second half, when compared to the pcp, and mobile data revenue grew by 8% compared with the pcp. That reflected the growth in smartphone and mobile broadband usage.
Dr Reynolds said Telecom had been successful in attracting new high-value customers who had average revenue per month of greater than $75 across the consumer, SME and corporate markets.
Total mobile subscribers decreased by 95,000 with the fall predominantly made up of low value pre-paid CDMA customers going inactive.
Chorus reported increased ebitda of $415 million for the six months ended June, up 8.6%.
Wholesale and international reported second-half ebitda of $73 million, a fall of 24.7%.
Gen-i reported second-half ebitda of $132 million, up 6.5%.
