Eircom profits climb to €112 million

Eircom has laid the ground for a formal bid by Babcock & Brown and its employee share ownership trust (Esot) with pretax profits on the rise to €112 million in the year to March from €88 million, after a once-off property sale.

In results brought forward by 10 days to facilitate the expected offer, the company's bottom line was flattered by a €48 million profit on the disposal of its Westgate property in Kilmainham, Dublin, near Heuston Station.

Revenues grew 6 per cent to €1.69 billion; operating profit rose 10 per cent to €234 million; and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell back 1 per cent to €601 million.

In the year in which Eircom re-entered the mobile market with the €419 million purchase of Meteor, basic earnings per share rose to 8 cent from 7 cent in the previous period. With a bid likely this week or early next week, the telco declared a second interim dividend of 5.2 cent in place of a final dividend for the same amount that it signalled earlier.

Approved by the Eircom board on Sunday, this dividend will be paid out on June 26th. It will form part of the offer price from Babcock & Brown and the Esot, who have indicated their willingness to pay €2.20 per share to take control of the 48.5 per cent of Eircom that they do not already own.

NCB analyst Tricia McEvoy said the results were good, with revenues 0.4 per cent ahead of expectation and adjusted EBITDA 3.3 per cent ahead of expectation. "For 2006, the company reported an adjusted EBITDA margin of 35 per cent versus our expectation of 34.5 per cent," she said in a note.

"For the final quarter of 2006, Meteor contributed €4 million to adjusted EBITDA. We had expected a nil contribution. Meteor added 60,000 subscribers during the quarter and now has a subscriber base of 625,000 ahead of our expectation of 595,000."

Eircom chief executive Dr Phil Nolan said broadband was now available to some 85 per cent of Eircom's fixed-line customers, with 250,000 subscribers now signed up for the technology.

"Churn is still a feature of the market," he said, referring to customers who subscribe for broadband and who revert to dial-up services later. Dr Nolan said the fundamentals of the business remained the same, with voice revenue in decline, but that the business had stabilised and was performing well, with broadband and mobile growing well.

Fixed-line services delivered revenue of €1.62 billion while mobile delivered €87 million after the Meteor deal. Mobile revenue fell back to €76 million after inter-company eliminations. The company expects to add 18 new retail outlets to the network of Meteor stores in the current financial year.