It's essential to look beyond.

Telstra announced their half year results yesterday, February 26. The headline numbers looked good, with most metrics up and the 14 cent dividend both maintained and apparently supported by earnings and cash flow. The CEO, Sol Trujillo, announced his departure and will receive another $3 million as a “termination” payment. Sol commented he had put on 8 kgs. He neglected to mention that weight is actually just his money belt, which is stuffed with the $33 million in pay and $5.6 million in shares he has received for four years work. So a parting gift of $3 million on top of paying all his US tax is comparitively chump change. Maybe he could donate it to the bushfire victims who surely need it more than him.

Steve Johnson at the excellent BristleMouth blog inspired me to come up with an alternative “Telstra” press release. As I commented to Steve, earning releases should be about balance and honest transparency, but sadly most are from it. While most companies like to focus on the positive, Telstra have taken spin to dizzy heights.

When reading press releases it is essential to look beyond the words and think about what management are not saying. With that in mind I hope you enjoy my alternative “Telstra” press release.

Telstra Corporation Limited and controlled entities
Results and operations review
Half-year ended 31 December 2008

Results highlights:

• Foxtel partnership and revenue income falls off a cliff, down 45%
• Profit down 1.1% or $21 million to $1921M.
• Basic earnings per share down 0.6% to 15.5 cents.
• EBIT margin on sales revenue down 1.1%.
• Reported EBIT decreased by 1.3% or $41 million. [Telstra did include this number in their release]
• Net assets down 4.1% or $500 million
• Derivative financial assets [often called weapons of massive destruction] up 464% to $2,505 million.
• Gross debt up 7.2% or $1,157 million.
• Return on assets down 0.8% to 16%
• Net debt to capitalisation up 2.8% to 58.3%
• Cash and cash equivalents down 2.4% to $909 million
• Total PSTN, fixed line, revenue fell 5.1% or $172 million to $3,219 million.
• Local calls fell 7%, long distance was down 4.1% and fixed to mobile also fell 1.2%.
• “Other non-current liabilities were impacted by the turnaround of our defined benefit pension asset from a $182 million asset at June 2008 to a defined benefit liability of $1,169 million due to an actuarial loss of $1,272 million of which $758 million was caused by the significant decrease in the discount rate used to measure the obligations. Also contributing was the $314 million decline in the value of the assets held by the superannuation plans. (1)

(1) The key here is that due to the overall market falls the value of the super fund has fallen $314 million. This should come as no surpise as we are near the low point in this market cycle. 

Note: I still hold some shares of Telstra in controlled accounts. I have no plans of buying more, but if the current sell-off continues I may be tempted. Telstra was down 9 cents yesterday and is down a further 14 cents to $3.54 today.

Related posts:

1. Telstra – Stock Market Returns Inverted
2. Telstra Looks Like a Strong Buy
3. Telstra Calling
4. Telstra looks like a great buy
5. Telstra out of National Broadband Network
6. CVTX Q3 2008 Conference Call