Eircom has reported a 9 per cent increase in earnings for the year to the end of March 2004 in its first results announcement since its flotation, writes Jamie Smyth, Technology Reporter
The State's biggest telecoms firm posted results in line with analysts' expectations and reiterated its intention to pay a hefty dividend to shareholders.
Eircom said it would consider paying back up to €200 million of its €1.96 billion net debt with surplus cash it has generated.
It also dampened expectations of an early return to the mobile market, suggesting it would have to rely on the regulator to do a future deal. Due to exceptional charges related to its flotation, interest payments, and a writedown on its property, Eircom reported a pre-tax loss of €89 million, up from €46 million a year earlier.
Earnings before interest, tax, depreciation and amortisation (EBITDA) - the focus of the market - increased 9 per cent to €602 million in the year.
The gross profit margin - gross profit as a percentage of turnover - increased by five percentage points to 75 per cent. Operating profits increased 39 per cent to €118 million.Further cost reductions boosted the figures, with operating costs falling 2 per cent to €632 million due to reduced pay costs as staff leave the firm.
Mr Peter Lynch, Eircom's chief financial officer, said that more than 250 staff had already applied for a new voluntary redundancy package introduced last week. The package will offer 300-400 staff an average of €140,000 each to leave the firm, a substantial increase on the €125,000 offered in a previous scheme.
Mr Lynch said that, in five to 10 years, it may be possible to run Eircom with just 4,000-5,000 employees. This would reflect new organisational and technology changes, he said. The cost of the latest scheme is likely to be between €40-50 million and should enable Eircom to reach its target of reducing staff numbers to 7,000 by 2008.
Earlier in an analyst conference call, Eircom said that it had outsourced its billing division and was continuing to look at other opportunities in this area.
Despite reporting increased broadband sales, the firm reported turnover of €1.628 million, down 3 per cent from the previous year's results.
Eircom said this dip in turnover was mainly due to the loss of low-margin transit traffic and discontinued businesses such as Eircom's retail shops and its Northern Irish business.
Revenues generated from voice traffic fell 6 per cent to €708 million but this was partially offset by a 16 per cent increase in access revenues to €489 million. This revenue increase reflects two successive hikes in line rental and the increase in broadband users.
But Mr Lynch said the firm had lost a couple of percentage points of market share in the year reflecting greater competition in the telecoms market.
Eircom has also sought to retain customers by its recent introduction of new rental and call packages, he added.The firm's shares closed down a cent at €1.43, well below its flotation price of €1.55.
