Telstra's First-Half Profit Jumps 25%, Boosted by Data and Internet Services
March 8, 2001
Earnings Focus
Telstra's First-Half Profit Jumps 25%,
Boosted by Data and Internet Services
Dow Jones Newswires
MELBOURNE, Australia -- Telstra Corp. Ltd. Wednesday reported a record 25% jump in first-half net profit to 2.62 billion Australian dollars (US$1.36 billion), securing its position as Australia's most profitable company.
The result was in line with analyst expectations, but Telstra shares rose 4.4% after Chief Executive Ziggy Switkowski said the company is on track to achieve its revenue forecasts and cost reduction targets.
1Telstra Shares Stabilize as CEO Defends the Firm's Growth Plan (Sept. 4, 2000)
2Telstra Reports Profit Rose 16% in 1st-Half, Announces Job Cuts (March 8, 2000)
Its high profile Asian asset merger with Richard Li's Pacific Century Cyberworks Ltd. didn't feature in the earnings because the deal was finalized in February -- well into the second half of Telstra's fiscal year ending June 30.
The interim result was struck on a 17.1% increase in revenue to A$11.32 billion, which on a like-for-like basis was around the 5%-mark.
Telstra's margin on earnings before interest and taxes, excluding one-time items, increased 10% to A$3.54 billion. Net EBIT was boosted by $1.17 billion in gains, including $443 million from investment sales and a A$725 million write-back of a superannuation, or pension, liability.
In a statement, Telstra said 56% of its sales revenue came from New Economy businesses such as mobile phones and data & Internet services.
"Our transformation is being driven by our customers' appetite for fast, affordable access to the Internet, for the capability to conduct transactions online, for their growing use of wireless devices and in an environment where data traffic is now greater than voice traffic," said Chief Executive Ziggy Switkowski.
Australia's dominant telecommunications provider said it is on track to deliver A$550 million in cost cuts in the current fiscal year, and expects to "deliver significantly more" than the target of A$100 million in cost savings in the next fiscal year.
In a speech, Mr. Switkowski said there is "good momentum" on cost cuts. "For another year or two the profit story for Telstra will be largely underpinned by our success in managing our cost base," he added. "Our effective cost-containment efforts have produced overall margin expansion, not reduction."
Regarding the imminent government auction of third-generation spectrum, Mr. Switkowski said, "We have sufficient options to give us comfort about the eventual decisions we will make."
He noted that investors' sentiment toward telecommunications globally is subdued because of concerns about high debt levels, narrowing a profit margin, rising competition and the cost of 3G spectrum.
But in this environment, Mr. Switkowski said, "Telstra stands apart. We have strong cash flows, a healthy balance sheet and a strong A credit rating. We are not burdened by a series of costly minority equity investments with little strategic or operating influence. We are not distracted by considerations of alternative structures -- the integrated full-service model providing products across all of the communications space to all Australians is and will be our primary strategy."
He also said that Telstra's alliance with Pacific Century CyberWorks Ltd. will make Telstra a serious player in Asia. "This [deal] won't transform the identity and character of Telstra but it will make us a serious Asian-based regional player with a powerful domestic franchise," Mr. Switkoski added.
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