Tele-Pacific profit pummelled by Aussie dollar's rapid plunge

Stuart Corner
Tuesday, 24 February 2009 05:09

IT Industry - Market

Prepaid phone card operator, Tele-Pacific (ASX: TPC), has posted reduced profits for the half year despite lifting revenues by 50 percent, saying it was caught out by the rapid fall in the value of the Australian dollar.

The company posted revenues of $31.8m, up from $21.8m for the six months to December 2007 but NPAT, normalised for one-off exceptional items, rose only 1.5 percent to $1.28m. When one-off items were taken into account NPAT was $0.81m. Revenue growth was partly organic growth ($2.5m) but the bulk ($8.0m) came from recent acquisitions of calling card businesses New Zealand.

The company said: "The material fall in the Australian/US dollar exchange rate, in particular during the last quarter, significantly increased carrier costs, at a speed not previously encountered by the business. As a result, the gross margin decreased by 5.7 percent to 20.3 percent compared to the previous corresponding period. Had the margin been maintained, an extra $1.8m would have been delivered in the half."

However some of these exceptional items also related to the shifting exchange rate. They included $238k of "unrealised revaluation loss of outstanding forward exchange contracts at 31December 2008."

To prevent a repeat occurrence the company says it has put in place "the capacity to make more responsive retail price adjustments to reflect the increase in underlying costs, and forward exchange contracts to fix the exchange rate for a short term to ensure a degree of retail pricing stability." It adds that unaudited management accounts since the half year result confirm the positive effect of these actions.