FULL YEAR HIGHLIGHTS

• Adjusted EBITDA [1] up 9% to €602 million due to improved gross margins and lower operating costs, giving an increased Adjusted EBITDA margin of 37%.
  

• Operating profit up 39% to €118 million, an operating margin of 7.2%, up from 5%.
  

• Operating costs [2] down 2% due primarily to reduced pay costs, increased capitalised labour costs and an ongoing policy of improved cost control across all other operating costs.
  

• DSL customers exceed 38,000 at March 2004, up from 3,400 at March 2003. DSL customers exceeded 50,000 at the end of May 2004, and the pace is accelerating.
  

• Turnover down 3% due primarily to loss of low margin transit traffic and discontinued businesses.
  

• Capital expenditure increased as planned by 6% from €197 million to €208 million. 
  

• Year-end headcount 7,943 at March 2004, down from 8,547 at March 2003.

 

 

 

Financial Highlights

 

	2004	2003	Percentage Change
	€m	€m
Turnover	1,628	1,682	(3)%
Gross profit	1,218	1,183	3%
Operating costs before exceptional operating costs, depreciation and goodwill amortised	632	648	(2)%
EBITDA before exceptional operating costs	586	535	9%
Adjusted EBITDA before exceptional operating costs and pension amortisation	602	551	9%
Operating profit	118	85	39%
Capital expenditure cash outflow	208	197	6%
Net debt excluding capitalised fees	1,959	1,791	9%

 

 

Operational Highlights

 

	2004	2003	Percentage Change
Total access channels ('000)	1,997	1,950	2%
Traffic minutes (millions)	13,155	13,093	-
Wholesale minutes (millions)	7,050	6,837	3%
Average headcount	8,306	9,129	(9)%
Year-end headcount	7,943	8,547	(7)%

 

 

Key ratios

 

	2004	2003
Gross margin	75%	70%
EBITDA margin	36%	32%
Adjusted EBITDA margin	37%	33%
Operating margin	7%	5%

 

 

 

Chief Executive's statement  

 

Dr Philip Nolan said:

 

"This has been a defining year for the company. Following the successful transformation of eircom we returned to the stock market in March 2004.

 

The results for the full year are in line with our expectations. Despite the industry-wide trend of reducing voice revenues, Management’s continued focus on cost control, initiatives in new revenue areas and focus on margin has produced EBITDA growth of 9% and Operating Profit growth of 39%. This has allowed the business to continue to invest at a level in line with our European peers.

 

We have successfully grown the DSL customer base from below 3,400 DSL lines at the start of the year to 38,426 at year-end.  At the end of May 2004, the company had exceeded 50,000 DSL customers. We are confident that we will meet the industry target of 100,000 broadband users by December 2004.

 

We have recently announced further initiatives in broadband with promotional programmes through to December 2004 and in voice traffic with the launch of the Talktime bundled voice packages. These initiatives allow eircom to compete more effectively in the market by offering customers value and innovation in telecoms’ services. "

 

End.

 

The unaudited profit and loss account, balance sheet, cash flow statement and related notes, are provided on pages 12 to 47.  The financial information contained in this preliminary announcement does not constitute the company's statutory financial statements and is unaudited.  The statutory financial statements for the financial year ended 31 March 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

 

 

Financial performance

 

Overall performance in eircom for the year was very strong with operating profit growing by 39% to €118 million due to improved gross margins and lower operating costs.

 

Gross profit improved by 3% to €1,218 million, due to a change in revenue mix leading to improved gross profit margins of 75% in the year ending March 2004 compared to 70% the previous year.  This was due to access price increases and a reduction in lower margin transit interconnect turnover.

 

Adjusted EBITDA, before exceptional operating costs and pension amortisation, improved by 9% to €602 million due to improved gross margins and lower operating costs.  A reconciliation of EBITDA to operating profit is shown on page 47.

 

Turnover

 

The following table shows our turnover from operations, analysed by major products and services, and the percentage change for each category, for the periods indicated:

 

	In the financial year ended		Percentage Change[3]
	31 Mar 2004	31 Mar 2003	2003/2004
	€ ‘m		%
Access (rental and connections)	€489	€423	16%
Voice traffic	509	564	(10)
Advanced voice services	87	87	1
Total voice traffic	596	651	(8)
Data traffic	112	104	9
Total voice and data traffic	708	755	(6)
Data communications	195	204	(5)
Interconnect services	159	210	(24)
Other services	159	187	(15)
Gross income	1,710	1,779	(4)
Discounts[4]	(82)	(97)	(15)
Total turnover	€1,628	€1,682	(3)%

 

 

Overall turnover decreased by 3% in the financial year ended 31 March 2004, compared to the financial year ended 31 March 2003. 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.  This was partially offset by price increases on access products, in particular higher PSTN line charges and increased data traffic volumes.  Part of the reduction in turnover in the financial year is also due to the exit of certain businesses including eircom Retail stores.

 

Access (rental and connections)

 

Turnover from line rental, connection and other charges consists principally of turnover from monthly subscription fees for PSTN, ISDN, initial connection fees and fees for call management services and ADSL and Bitstream turnover.

 

The following table shows rental, connection and other charges and the number of access channels in service, including public payphones, and the percentage changes for the periods indicated:

 

	In the financial year ended		Percentage Change[5]
	31 Mar 2004	31 Mar 2003	2003/2004
Total access (in millions, except percentages)
Line and equipment rental	€449	€398	13%
Connection and other charges	23	23	1
ADSL and Bitstream[6]	17	2	-
Total access turnover	€489	€423	16%
Access channels (in thousands at period end, except percentages)
PSTN	1,587	1,596	(1)%
ISDN	372	351	6
ADSL and Bitstream	38	3	-
Total access channels	1,997	1,950	2%

 

The increase in turnover from access was 16% in the financial year ended 31 March 2004, due primarily to increases in PSTN line rental charges, growth in the number of ISDN channels, and an increase in ADSL and Bitstream turnover as a result of increased customer demand for the new low-cost ADSL service. 

 

Total number of ISDN channels increased by 6% at the financial year ended 31 March 2004, principally due to increased demand for data, multimedia and interactive services.

 

ADSL and Bitstream turnover also increased in the financial year ended 31 March 2004 as a result of increased customer demand following launch of a new low-cost ADSL service in April 2003.  By 31 March 2004, the number of ADSL and Bitstream lines had increased to approximately 38,426 lines.

Traffic

 

The following table shows information relating to our total traffic turnover and our traffic volumes and the percentage change for the periods indicated:

 

	In the financial year ended		Percentage Change[7]
	31 Mar 2004	31 Mar 2003	2003/2004
Turnover (in millions, except percentages)
Basic voice traffic turnover
Local	€121	€133	(10)%
National	56	72	(21)
Fixed to mobile	220	229	(4)
International	112	130	(14)
Total basic voice turnover	509	564	(10)
Freefone	25	24	5
Virtual private network	22	19	19
Premium rate services	25	30	(18)
Other advanced voice services	15	14	10
Total advanced voice turnover	87	87	1
Total voice traffic turnover	596	651	(8)
Data traffic turnover
PSTN data	70	61	15
ISDN data	42	43	-
Total data traffic turnover	112	104	9
Total traffic turnover	€708	€755	(6)%
Traffic (in millions of minutes, except percentages)
Local	3,682	4,013	(8)%
National	1,136	1,297	(12)
Fixed to mobile	1,241	1,226	1
International	533	593	(10)
Total basic voice traffic volume	6,592	7,129	(8)
Freefone	323	288	12
Virtual private network	288	239	20
Premium rate services	23	28	(17)
Other advanced voice services	79	98	(20)
Total advanced voice services	713	653	9
Total voice minutes	7,305	7,782	(6)
Data traffic volume
PSTN data	3,980	3,559	12
ISDN data	1,870	1,752	7
Total traffic data minutes	5,850