Full-year earnings at Eircom came in slightly better than expectations, but down over 12 per cent last year. The company released its results yesterday for the year to the end of March as the board considered the rival bids from eIsland and Valentia.
The results were ahead of the headline figures given in last March's trading statement. EBITDA - earnings before interest, tax, depreciation and amortisation - was €656 million (£516 million)compared to the figure of €640 million announced in March. However, the out-turn was down 12.1 per cent on the previous year. The market pays more attention to the underlying EBITDA figure than profits before tax, which were €66 million, a decline of 76 per cent on last year.
Turnover was up 10.4 per cent to €2.16 billion, again ahead of last March's estimate of €2.1 billion. Mr Alfie Kane, the Eircom chief executive, told an analysts' conference that the main factor behind the decline in profit was the decision to cut prices in the fixed-line business by €150 million. A 44 per cent increase in the costs of sales also hit EBITDA, primarily due to increased payments to other telecommunications operators and the costs associated with the significant growth in mobile subscribers who get subsidised handsets.
EBITDA was also affected by losses of €113 million incurred on its multimedia and international businesses. Following the sale of Eircell, the company used a cash payment of €250 million from Vodafone to eliminate its debts of €190 million. The company has also revalued its property portfolio upwards by €170 million. The company sold a number of properties over the year at a gain of €24 million.
A final dividend has been declared of 2.46 cents, making the total dividend for the year 4.06 cents. Earnings per share were 8.4 cents compared to 12 cents last year.
The figures include a full-year contribution from Eircell, the mobile division which was sold to Vodafone last month. When the Eircell contribution is stripped out, turnover was €1.743 million, despite the introduction of the tariff reductions. The price cuts did have an impact on EBITDA; revenues at the non-mobile business were €473 million, a fall of 23.3 per cent.
Revenues at the fixed-line business - the real target of both eIsland and Valentia - grew by only 1 per cent to €1.67 billion, while traffic grew by 3 per cent to a record 10.6 billion minutes.
Internet access now accounts for 40 per cent of all local call minutes. A restructuring programme saw 1,350 people leave the fixed-line business but the net reduction was only 750 as there was recruitment in a number of areas.
Mr Kane said yesterday that competitive pressures anticipated from cable companies had failed to materialise this year. He singled out NTL, the former Eircom cable subsidiary, saying it had refocused on providing cable television rather than competing in the residential phone market. "They have found that they are not going to be able to take business from us that easily," he said.
