Telecom's first profit result following its structural separation from Chorus has pleased market commentators and investors alike with the announcement of a $300 million buy-back of shares this year.
The company reported an adjusted profit from continuing operations of $488 million for the six months to December, plus there were operating earnings of $321 million from discontinued operations, which makes for a total operating profit of $809 million.
The profit after tax was $240 million.
The results included five months of trading before the demerger of Chorus plus another month of trading that occurred after the Chorus demerger.
Capital expenditure in the period was down by 32.3% to $325 million.
A fully tax-paid dividend of 9c per share was declared.
The adjusted results removed the impact of several one-off items, the most significant of which related to the demerger.
The demerger-related adjusted items were: an $863 million non-cash gain upon demerger of Chorus; a $28 million non-cash reclassification following the simplification of the corporate structure; $110 million debt restructuring costs; and $47 million demerger costs.
Craigs Investment Partners broker Chris Timms said the result reinforced his positive view and investment thesis.
"We see a similar 24-month period to 2004-06 for Telecom where shareholders enjoy stronger cash returns due to the cyclical decline in capex."
Telecom chief executive Paul Reynolds said the momentum built up last year had been maintained and Telecom had delivered improvements in customer satisfaction and operating efficiency as well as making progress towards its strategic growth goals in broadband, mobile and ICT.
The demerger was probably the most complex corporate transaction in recent New Zealand history and a world first for a telecommunications company.
"I am pleased it has helped deliver real value for customers and shareholders."
The company could not compete on a similar footing to its competitors due to the reduced impact of regulation in the new industry structure, Dr Reynolds, who earlier indicated he would leave the company soon, said.
Telecom chief financial officer Nick Olson said Telecom remained committed to maintaining A-band credit ratings with Moody's and Standard and Poor's.
It was possible to return up to $300 million of surplus capital to shareholders during the calendar year while maintaining a net debt to operating profit ratio of less than 1x1.
Telecom announced forecast guidance of adjusted operating earnings of about $560 million, adjusted after-tax profit of $160 million to $190 million and capex of $190 million to $220 million.
