Telecom New Zealand 2011 first quarter profit review

The Telecom New Zealand Ltd [TEL.NZX] first quarter 2011 result out today of NZ$103 million after tax is 36.8% lower than the result for the same period last year. This comes on revenue of $1.316 billion, down 2.9% on last year.

This comes in a year of turmoil for the company where its share price plunged and regulatory issues continued to hamper growth and future planning.

Telecom CEO, Paul Reynolds, said operational performance was "satisfactory with good cost control offsetting significantly higher regulatory costs and intensifying competition."

I see more of the same for full year 2011. With a stagnant to dropping revenue base the only way profit can grow slightly or stay at current levels is to cut operational costs further. Not good for the long-term.


Key Points

Net profit: 103,000; Down 36.8%; 163,000

Total operating revenue (before adjusting items): 1,316,000; Down 2.9%; 1,356,000

Earnings per share: 5 cps; 9 cps

First Quarter Dividend: 3.5 cps

Increased competition impacting on margins


Management appear reticent to make too much of future profit levels because of probable impacts of the rollout of the fast fibre network, but they have indicated a small increase in earnings before tax for 2012 - 2013.

2011 Profit Detail

Transcript from Investor Briefing
Management commentary
Presentation
Accounts


Telecom NZ @ Share Investor

Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

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c Share Investor 2010

Telecom Chart: Lazarus Recovery on lower volume

Since I have been closely following the Telecom NZ [TEL.NZ] share price I have wondered how low the share price was going to go and if indeed lows of $1.81 reached just a month ago meant that the stock was oversold.

Well, since then the share price has put on 12% on about half the volume (see 23 month TEL chart above) of the June share price plunge and is currently trading at $2.02. Short termers will be pleased with their current gains and have seen a new trading pattern emerge where opportunities exist for gains of more than 10c. Hard to say what might happen next short term but investors with a 12% gain might consider realising some cash.

Of interest too will be medium term investors who are trying to factor in what the company could be worth if they win a government contract to set up the new fibre network around the country and will be subsequently demerger Telecom into two separate business units, Chorus, their Network company and Telecom Retail, their public face and presence.

The value of the two units will be difficult to assess given no profit or revenue projections for a Chorus with the responsibility to build, run and sell business off the new network but Telecom see profit to be made so medium term the company could be worth a punt.

Long-term my view is avoid unless you have faith in current or future management that they can turn this ship around.

By on weakness for short or medium term returns.


Telecom NZ @ Share Investor

Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



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c Share Investor 2010

Ryman Healthcare Ltd: Australian Expansion Needs Care

Ryman Healthcare Ltd [RYM.NZ],the retirement village and aged care provider, is one of the NZXs best performing companies and historically it has increased earnings by at least 10% for each of the last 10 years.

Its full year result to March 31 2010 was up 16% on last years 2009 full year and indications are that these sorts of results are likely to continue for the foreseeable future considering the increasing age demographics for the New Zealand population and the seemingly unparalleled popularity of their offering to their prospective customers.

New Zealand has and will remain an important area of growth in revenue and profit for the long term and this has been stated by Ryman management on many occasions.

The decision announced today at the Ryman Healthcare Ltd [RYM.NZ] annual meeting to start looking at property in Australia to build one of their villages is a two edged sword for the company and its shareholders.

In an interview with Ryman Chief Financial Officer, Gordon Macleod coming up next week at Share Investor I put the question of expansion into Australia before today's announcement and the answer, now somewhat academic, will be adding to today's news.

On the one hand the company has a good business model, is brilliantly managed and Australia is a vast untapped market for them but on the other hand Australia is littered with the corpses of listed companies that have tried to expand there and have headed back with their tails between their legs and millions of dollars less in their pockets.

Ask management at The Warehouse Group Ltd [WHS.NZ], Telecom NZ [TEL.NZ], Restaurant Brands Ltd [RBD.NZ] Burger Fuel Worldwide [BFW.NZ] and a whole host of other companies that thought they could foot it in a much more competitive market. Australia has been the bogeyman of failure for New Zealand businesses looking for more opportunities for growth.

There have also been successes. Michael Hill International [MHI.NZ], Mainfreight Ltd [MFT.NZ] Pumpkin Patch Ltd [PPL.NZ], Sky City Entertainment Group Ltd [SKC.NZ] (after new management and a number of years) and others set out to achieve their goals and promises to shareholders for more growth across the ditch and have done well for shareholders in terms of returns.

One of the major stumbling blocks for Kiwi companies expanding across the Tasman has been their lack of research and the tendency to go full steam ahead without testing the market in a small way first. Significantly the aforementioned failures all bought standalone businesses (apart form BFW) and thought they could run them in a similar fashion to their New Zealand business model. The successful ones all tried their new businesses in Australia in a small way and grew a base from their initial success.

Management at Ryman have indicated that they have done their research for years and they are going to develop one village and see how it goes before committing any further shareholder cash to growth there:

“We have been carefully studying the Australian market for several years,” and we see it as the next logical step in the growth of the company. The Ryman model will be relatively unique in the Australian market.”

“We are in a strong financial position and the management team is ready to take this next step.”

“Shareholders can be reassured that we will be taking one step at a time, and that we will be very focussed on getting the first village successfully established.” Ryman Chairman Dr David Kerr at 2010 Annual Meeting.

Ryman shareholders should indeed be pleased that the company is taking the softly, softly approach to Australian expansion but cautious nonetheless that the outcome of expansion in OZ could be disappointing.

This company has been well managed in the past and I am mostly pleased about the announcement today, apart from the reservations I pointed out.

If the Australian move is executed with as much care and consideration - subject to proper research by RYM management and taking into account the vast differences in business, investment, employment practices and other country specific variables - as has been in New Zealand the company and shareholders are going to be richly rewarded in the long term.

I look forward to positive results from our Aussie branch over the next few years .

Disclosure: I own MHI, MFT, PPL RYM, WHS shares in the Share Investor Portfolio


Ryman Healthcare @ Share Investor

Share Investor Q & A: Ryman Healthcare's CFO Gordon MacLeod
Ryman Healthcare: Interview sneak peak
Ryman Healthcare Ltd: Australian Expansion Needs Care
Share Investor Q & A: Reader Questions to Ryman CFO Gordon Macleod
Long Term View: Ryman Healthcare Ltd
Stock of the Week: Ryman Healthcare Ltd
Why did you buy that stock? [Ryman Healthcare]
Long VS Short: Ryman Healthcare Ltd
Time for retirement?

Discuss RYM @ Share Investor Forum



c Share Investor 2010

Cavalier Corp: Profit Upgrade off low 2009 Result

The profit upgrade put out by Cavalier Corporation Ltd [CAV.NZ]today while great shouldn't be seen as de riguer for the beginning of the August - September reporting period but a highlight for investors in that company. The company is forecasting a 2010 full year profit of between $16.3 million and $16.7 million tax paid.

It is surprise to me that a company like Cavalier would increase their profit, given the slowdown in the building sector, but perhaps refurbishments instead of new installations have been the reason for the increase.

The increase of 22% on 2009 must also be put into context of a $17.9 million net profit for 2008 and a low result of $13.7 million in 2009.

With the notable exception of a few one-offs like Cavalier don't expect much excitement for the 2010 full year season.

I am expecting more of the flat to slightly down results we have seen earlier this year and one year ago on cost cutting measures.

Look for good results from the likes of Sky City Entertainment Group Ltd [SKC.NZ] Hallenstein Glasson Holdings [HLG.NZ] and Restaurant Brands Ltd [RBD.NZ]with a big focus on where the Telecom New Zealand [TEL.NZ]result is heading to see whether investors have been right to mark the stock down to well below 2 bucks over the last few months.


Disc I own HLG and SKC shares from the Share Investor Portfolio


Cavalier Corp @ Share Investor

Long Term View: Cavalier Corporation Ltd
Download CAV Company Reports
Discuss CAV @ Share Investor Forum





c Share Investor 2010

Telecom NZ: Stock Finally Finds Support?

Yep, I am looking at Telecom New Zealand [TEL.NZ] again. Since our last visit to the house of falling knives
the stock closed yesterday at $1.83 on low volume after reaching an all-time low of $1.81 on Monday (see chart below for price history).

Over the last month the stock has been trading mostly in the $1.80 - $1.90 range with a brief breakout above $1.90 in late June.

It seems that the stock may have some good support at these levels and the market appears to be saying that this is the value of the company,unless we get more company specific bad news or there is another overall market slump - the second scenario almost being guaranteed.

Buying now at these levels if you were interested in TEL is good buying but be patient for more bad news and you could get stock for much less.

Date	Open	High	Low	Close	Value	Volume
06 Jul 2010	1.820	1.840	1.780	1.830	5,094,764.840	2,810,864
05 Jul 2010	1.840	1.850	1.810	1.820	5,238,501.270	2,870,141
02 Jul 2010	1.840	1.840	1.810	1.840	17,518,102.840	9,544,061
01 Jul 2010	1.880	1.890	1.830	1.830	12,500,097.720	6,706,357
30 Jun 2010	1.860	1.890	1.850	1.890	15,272,041.030	8,122,635
29 Jun 2010	1.900	1.900	1.870	1.890	21,519,036.210	11,368,345
28 Jun 2010	1.970	1.970	1.900	1.900	19,243,991.610	10,032,644
25 Jun 2010	1.980	1.980	1.940	1.970	15,714,758.000	8,002,182
24 Jun 2010	1.950	1.970	1.930	1.970	22,252,800.380	11,449,639
23 Jun 2010	1.900	1.950	1.900	1.950	17,504,786.530	9,172,350

Telecom NZ @ Share Investor

Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free

Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Long Term View: Best Stocks from the Series

In the Long Term View series (see links to each individual stock at the bottom of this post) of posts I have looked at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO. The calculation of returns included dividends and tax credits and other relevant details.

The calculation of return is based on available data and may vary from stock to stock. An absence of data usually means a better return than I have calculated will be the case.

In each individual post the differences will be pointed out.

I have been surprised by the spectacular returns from some and not so surprised by the dismal returns of others but have learnt, once again, that the best returns come from holding good stocks for a long period.

My ideas on stocks as one of the better long-term investments have been reinforced by this series.

Below are rankings in the series from number one down to the bottom in terms of annual returns. Click on company name for more detail on returns.


Long Term View Series Ranking


1. New Zealand Refining Ltd [NZR.NZ] Over 21 years of available data NZR has returned 7800%, an annual return of just over 371%.

2. Port of Tauranga Ltd [POT.NZ] Over 18 years of available data POT has returned over 1475%, an annual return of just over 81%.

3. = Ryman Healthcare Ltd [RYM.NZ] Over 11 years of available data RYM has returned over 680%, an annual return of just over 60%.

3. = Mainfreight Ltd [MFT.NZ] Over 14 years of available data MFT has returned over 830%, an annual return of just over 60%.

5. Sanford Ltd [SAN.NZ] Over 22 years of available data NZR has returned over 895%, an annual return of just over 40%.

6. Sky City Entertainment Group Ltd [SKC.NZ] Over 14 years of available data SKC has returned over 540%, an annual return of just over 38%.

7. Auckland International Airport [AIA.NZ] Over 11 years of available data AIA has returned over 400%, an annual return of just over 36%.

8. Ebos Ltd [EBO.NZ] Over 13 years of available data EBO has returned over 455%, an annual return of just over 35%.

9. Freightways Ltd [FRE.NZ] Over 6 years of available data FRE has returned over 190%, an annual return of just over 31%.

10. The Warehouse Group Ltd [WHS.NZ] Over 16 years of available data WHS has returned over 500%, an annual return of just over 30%.

11. = Telecom New Zealand Ltd [TEL.NZ] Over 18 years of available data TEL has returned over 450%, an annual return of just over 25%.

11. = Telstra Corp Ltd [TLS.NZ] Over 12 years of available data TLS has returned over 300%, an annual return of just over 25%.

13. Pumpkin Patch Ltd [PPL.NZ] Over 6 years of available data PPL has returned over 125%, an annual return of just over 20%.

14. Contact Energy Ltd [CEN.NZ] Over 11 years of available data CEN has returned over 200%, an annual return of just over 18%.

15. Sky Network Television Ltd [SKT.NZ] Over 13 years of available data SKT has returned over 215%, an annual return of just over 16%.

16. Metlifecare Ltd [MET.NZ] Over 16 years of available data MET has returned over 540%, an annual return of just under 16%.

17. Delegats Group Ltd [DGL.NZ] Over 4 years of available data DGL has returned 50% an annual return of 12.5%.

18. Fisher & Paykel Healthcare Ltd [FPH.NZ] Over 8 years of available data FPH has returned over 93%, an annual return of just over 11%.

19. = Goodman Fielder Ltd [GFF.NZ] Over 4 years of available data GFF has returned over 30%, an annual return of just under 7%.

19. = Hellaby Holdings Ltd [HBY.NZ] Over 16 years of available data HBY has returned over 30%, an annual return of just under 7%.

21. Restaurant Brands Ltd [RBD.NZ] Over 13 years of available data RBD has returned over 60%, an annual return of just under 4.5%.

22. Briscoe Group Ltd [BGR.NZ] Over 9 years of available data BGR has returned over 21%, an annual return of just over 2.33%.

23. Fisher & Paykel Appliances Ltd [FPA.NZ] Over 8 years of available data FPA has returned over 11%, an annual return of just over 1.37%.

24. Air New Zealand Ltd [AIR.NZ] Over 8 years of available data AIR has returned over 6%, an annual return of just over 0.75%.

25. AMP Ltd [AMP.NZ] Over 12 years of available data AMP has returned minus 50%, an annual return of just over minus 4%.


Disc I own AIA, BGR, FPH, FRE, GFF, MFT, PPL, RYM, SKC, WHS shares in the Share Investor Portfolio


Download Company Reports from the Long Term View series






c Share Investor 2010

Telecom maybe oversold

Every market watcher is talking about it, just how low is the Telecom NZ [TEL.NZ] share price going to go.

Well at time of market close today the TEL share price is down 11c to a new all time low of $1.85 (see 2 month chart above) on lowish volume.

I don't want to discuss this today though.

I think the market has oversold the stock at this point and seems to be discounting the value that could be added to shareholders if the company decides to split up its various divisions so it can bid for 1.5 billion in taxpayer dosh to build a new fibre network for faster broadband in New Zealand.

The decision to split the company is by no means a definite one but beleaguered CEO Paul Reynolds indicated yesterday that this could be on the cards and the company is investigating the possibility of breaking Telecom into two parts - Chorus and Telecoms other divisions.

Depending on how a possible separation is executed, this could be a good move for existing shareholders as a split could realise them full value of the companies two parts by opening the Chorus lines/infrastructure business to the posibility of nabbing a slice of that taxpayer moola.

While there might be one-off and ongoing costs for the two separate businesses I think investors at these price levels will benefit from a separation, at least in the short term.


Telecom NZ @ Share Investor

Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010

Telecom NZ Share Price has "Jumped the Shark"

I wrote about Telecom NZ [TEL.NZ] share price back in March and at that stage, March 17, the share price had reached $2.15 at close of trading after touching $2.13. At that time an all-time low for the company since it listed back in 1992.

Well, today, thanks to more global economic uncertainty because of free spending debt laden Greeks and other PIIIGS the TEL share price has dipped below the magical 2 buck mark for the first time and it is all on for young and old. It has now "jumped the shark".

Like most other NZX traded stocks the Telecom NZ share price has traded down (see TEL comparison with the overall NZX on chart above) on very large volume today but the company still has other negative factors going against it like more money to be spent on capital infrastructure, more competition and more problems delivering adequate service in all its areas of business; Telecom landlines, Mobile, Internet and infrastructure delivery.

Below 2 bucks is an important psychological level for the share price and it is anyones guess where that level will reach but I am picking it is all downhill from here, even if global markets"recover" from the slippery Greeks.

Beware the shark.



Telecom NZ is currently trading at $2 even on nearly $25 million traded.


Telecom NZ @ Share Investor

I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss TEL at Share Investor Forum - Register free


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2010