TelOne recently announced their annual results and as part of those annual results they also shared their progress for the first 6 months of the year. Subscribers and revenue grew, so did their profit before tax figures.
In the statement sent out to the press, TelOne noted the following:
For the first time in three years, an EBIT profit of $1million from negative $4,2million has been recorded over the period marking a $125% increase.
This is in line with a number of improvements TelOne has been making. In 2018 the company continued to make losses but reversed the downward spiral as their losses fell from $39 million (2017) to $19 million.
The $1 million profit for the first 6 months is also an improvement from the $4.2 million loss during the same period last year but EBIT profits should be taken with a pinch of salt once you consider their nature more closely.
An EBIT (Earning Before Interests, Tax) profit doesn’t take into account taxes, interests which will inevitably have to to be settled. TelOne will have to shell out money towards interest cost on its borrowings and pay the taxman his dues from their operating income. This is why Warren Buffet is quoted as being pretty annoyed when EBIT & EBITDA figures are thrown around:
People who use EBITDA are either trying to con you or they’re conning themselves. Telecoms, for example, spend every dime that’s coming in. Interest and taxes are real costs.
Whilst TelOne did used EBIT (not EBIDTA) in this case, it’s always a good thing to keep in mind when companies don’t account for taxes and interest payments in their profit announcements, that something may be slightly amiss.