Telstra 2003 Annual Report Download - page 47

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discussion and analysis
statement of financial performance
Our net profit after outside equity interests for the year was
$3,429 million, representing a decrease of 6.3% on the prior year’s
net profit of $3,661 million. The decrease in net profit was largely
attributable to the write off of the investment in our 50% owned
joint venture, REACH Ltd (REACH) of $965 million in the first half of
this fiscal year.
Earnings before interest and income tax expense (EBIT) was
$5,723 million (2002: $6,216 million).
Total revenue (including interest revenue) for the year increased
3.7% to $21,700 million (2002: $20,928 million) which included
revenue of $570 million from the sale of seven office properties.
Sales revenue was $20,495 million, representing a 1.5% increase on
the prior year of $20,196 million. This increase was attributable to
the inclusion of TelstraClear revenue for a full twelve months in
fiscal 2003, whereas only 7 months were included in fiscal 2002.
Our full service telecommunications model is in place and is
working well with the majority of our Australian service lines
showing revenue growth. Basic access revenue increased, but was
offset by decreases in local call, international direct and national
long distance revenues due to price rebalancing initiatives. Mobile
handset and fixed to mobile call revenue increased, largely due to
continued growth in the number of mobiles in the Australian
market. Internet and IP solution revenue experienced significant
growth due to increased numbers of broadband and IP customers in
a highly competitive market. Sensis directory services also showed
improvement due to new print features and online initiatives.
Offsetting this growth was a decrease in ISDN and inbound calling
products.ISDN revenue was down due to the migration of customers
to other lower yield products while inbound calling products
reflected the negative impact of increased competition resulting
from Inbound Number Portability. Our various overseas entities
also showed decreases in revenue, particularly Hong Kong CSL,
as a result of the market conditions in the region. Overall, these
decreases, particularly the overseas contribution, balanced the
increases achieved in the Australian market resulting in a moderate
increase in total sales revenue.
Other revenue increased by $515 million to $1,121 million, primarily
due to the sale of assets and investments, which included the sale
of seven office properties.
We continued to focus on cost control in fiscal 2003.Overall expenses
increased by 8.3% to $16,772 million from $15,482 million in the
prior year. A significant portion of this increase was attributable to
the $965 million write off of the investment in our 50% owned joint
venture, REACH. The cost of asset and investment sales and the
inclusion of TelstraClear expenses for a full twelve months in fiscal
2003 also contributed to the overall increase in expenses.
Labour expenses were in line with the prior year at $3,204 million
(2002: $3,240 million). Goods and services purchased decreased by
8.1% to $3,615 million in fiscal 2003 (2002: $3,933 million) due to
a reduction in handset subsidies and lower network payments.
Depreciation and amortisation expense increased by 5.5% to
$3,447 million (2002: $3,267 million) due mainly to the growth in
communications plant and software development asset additions.
Other expenses increased by 13.2% to $4,602 million (2002: $4,065
million) in fiscal 2003 due mainly to the inclusion of the net book
value of the seven office properties sold during the year.
The effective tax rate for fiscal 2003 was 31.1% compared with a
rate of 33.0% in the prior year. In fiscal 2003, we benefited from a
once-off adjustment of $201 million as a result of entering tax
consolidations from 1 July 2002.
investor return and other key ratios
Our earnings per share decreased to 26.6 cents per share in fiscal
2003 from 28.5 cents per share in the prior year. The reduction in
earnings per share reflects the impact of lower net profit.
The directors have declared a final fully franked ordinary dividend of
12 cents per share ($1,544 million), bringing dividends per share for
fiscal 2003 to 27 cents per share ($3,474 million). Total dividends in
fiscal 2003 include our interim ordinary dividend of 12 cents per share
and a special interim ordinary dividend of 3 cents per share. This
represents an increase of 22.7% or 5 cents per share from fiscal 2002.
Other relevant measures of return to investors include the
following:
•Return on average assets – 2003: 16.3% (2002: 17.5%)
•Return on average equity – 2003: 23.2% (2002: 26.8%)
•Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA) – 2003: $9,170 million (2002: $9,483 million)
Return on average assets is lower in fiscal 2003 primarily due to a
reduction in EBIT reflecting the write off of the investment in REACH.
Return on average equity is lower in fiscal 2003 due to a reduction in
EBIT reflecting the write off of the investment in REACH and a change
in accounting policy on the timing of recognition of the final ordinary
dividend in our financial report. Refer to discussion and analysis on
statement of financial position for further information.