SYDNEY -- Telstra today announced a profit after tax of $3.18 billion for the financial year ended 30 June 2006, a decrease of $1.13 billion or 26.2 per cent on the prior year. Earnings before interest and tax (EBIT) declined by 20.7 per cent or $1.44 billion to $5.50 billion, at the better end of the market guidance decline of 21 to 26 per cent.
Telstra Chief Executive Officer, Mr Sol Trujillo, said the company's financial performance had been shaped by new investments required by this year's commencement of a three to five year transformation of the company and provisions made during the year for future restructuring to improve long-term shareholder value.
"This result, delivered at the better end of our earnings guidance, reflects the fact that we are on or ahead of plan on virtually all fronts of our transformation. We are still taking the tough medicine but after our strong second half sales performance our competitors are having to take some tough medicine of their own, particularly in the broadband and mobiles markets," he said.
"We are executing our transformation with a sense of urgency; we have momentum; we are showing results; and the results are promising. We are attracting the high calorie customers that every business needs."
Total income (excluding finance income) grew by 2.9 per cent or $658 million to $23.10 billion due to increases in broadband, mobiles, Sensis, IP solutions, inter-carrier services and pay TV bundling, offset by a decline in revenues from PSTN, specialised data and ISDN products. Sales revenue grew 3.9 per cent in the second half, more than double the first half growth rate, and 2.7 per cent for the year.
Total expenses (before finance costs and income tax) increased by 13.5 per cent or $2.10 billion to $17.60 billion, significantly impacted by the recognition of a redundancy and restructuring provision of $427 million, and other transformational costs including higher redundancy expense due to a significant reduction in workforce numbers, and increased depreciation and amortisation expense due to bringing forward the closure of the CDMA network and the transformation of the network and systems.
"As we have advised the market, the process of transforming the business will be costly in the short term. We are seeing the impact of this on our results for fiscal 2006 and our transformation spending will remain high over the next year. However, much of the cost increase is intended to provide long term benefits as we transform the business to provide improved operations and service, a new customer experience and enhanced shareholder value," Mr Trujillo said.
Telstra Corp. Ltd. (ASX: TLS; NZK: TLS)