Group Chief Executive’s Review
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Financial performance
Throughout the year we continued our strategy of focusing on our core business, driving cost efficiencies and accelerating take-up of broadband.
Operating profit was €118 million, an operating margin of 7.2%, up from 5% last year.
Gross profit was €1,218 million, giving improved gross profit margins of 75%.
Adjusted EBITDA before exceptional operating costs and pension amortisation was €602 million, giving a margin of 37%. Cost of sales decreased by 18% compared to last year. This was due substantially to reduced volumes on interconnect transit, reduced volumes and rates in foreign out-payments, and the disposal of eircom retail stores. Cost of sales as a percentage of turnover was 25% compared with 30% last year.
Operating costs fell by 2% to €632 million due primarily to reduced pay costs, increased capitalised labour costs and an ongoing policy of improved cost control. Staff costs decreased by 2% to €377 million with a year-end headcount of 7,943, down from 8,547 last year.
Overall turnover decreased by 3% to €1,628 million. This was primarily due to reduced voice traffic volumes, reductions in certain tariffs, a decline in turnover from data communications and lower interconnect turnover derived from very low margin transit traffic. The volume decline was partially offset by price increases on access products and increased data traffic volumes. Part of the reduction in turnover in the financial year was also due to the exit of non-core businesses including eircom retail stores.
The financial performance of the company is sound and the company continues to deliver on its core business objective of connecting Ireland.
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