PTCL: VSS in time, saves expenses down the line

Letting go is never easy, especially when the company in question is a former state-run entity and those being let go are the legions of workers admitted over the years preceding to the takeover by the new, private-sector management.
PTCL, the only integrated Telecommunications Comp-any in Pakistan, announced its 1QFY13 financial results on Wednesday. In the first three months of the new fiscal, PTCL recorded the top line growth of eight percent so that its revenues reached Rs15.646 billion in 1QFY13, compared to Rs14.483 billion during the same period in the preceding year.
The cost of sales grew by a larger proportion, rising 12 percent to reach Rs12.178 billion during the same period. This meant a constriction in the gross margin by four percent over the same comparison.
While administrative and general expenses, selling and marketing expenses grew in tandem with revenue growth, the company booked expenses related to its recently concluded Voluntary Separation Scheme.
The whopping charge of Rs10.998 billion under the VSS head pulled the bottom line into the red zone. Thus PTCL posted a net loss of Rs9.354 billion in the outgoing quarter.
Although the VSS has wiped off an otherwise profitable first quarter, the company can now look forward to improved efficiency and higher profitability in coming periods.
Under the Etisalat management, PTCL has redirected its focus from VOIP business, towards data services. The strategy has proved bountiful as PTCL is perched as the industry leader in broadband (both wire line and wireless), WLL telephony and Smart TV segments.
Having swallowed the bitter pill in the form of VSS expense in the outgoing quarter, PTCL can now look forward to smooth sailing for the remaining fiscal given a leaner workforce and the establishment of the International Clearing House that has cemented the company’s hold in the international inbound VOIP traffic.

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PTCL

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(Rs mn)                 1QFY13      1QFY12       chg

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Sales                  15,646      14,483         8%

Cost of sales          12,178      10,852        12%

Gross profit            3,468       3,631        -4%

Gross margin               22%         25%

VSS                    10,998         -

Operating profit       (9,244)      2,221

Profit before tax      (9,276)      2,155

PAT                    (9,354)      1,402

EPS (Rs)                (1.83)       0.28

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Source: KSE notice