Telstra Corp (TLS)

CommSec CommSec

 

13 August 2020

Results 

Full Year 2020

Full Year 2019

Change

Total Income ($m)

26,161

27,807

-5.9%

Mobile Segment Revenue ($m)

10,084

10,545

-4.4%

Operating Expenses ($m)

16,951

19,835

-14.5%

Nbn payments ($m)

1,731

1,351

+28.1%

Reported EBITDA ($m)

8,905

7,984

+11.5%

Net Profit ($m)

1,839

2,149

-14.4%

Interim Dividend ($)

0.08

0.08

steady

Telstra (TLS) maintains dividend despite profit drop on nbn headwinds

What happened?

  • Australia’s largest telco has released full year profit results in-line with its own company guidance. Compared to the same time last year, net profit fell 14.4% to $1.8 billion with total income slipping by 5.9% to $26.2 billion but reported EBITDA increased 11.5% to $8.9 billion.
  • Telstra has kept its dividend intact with a final payment of $0.08 per share (split into a $0.05 ordinary dividend and $0.03 special dividend) with an ex-dividend date, the cut-off date to be eligible to receive the dividend, of 26 August 2020. 

Why did it happen?

  • The ongoing rollout of the National Broadband Network (nbn) remains a hindrance in terms of TLS’s bottom line as sales costs from access payments made to nbn jumped by $380 million or 28% while nbn migration also impacted its fixed-line revenue, which fell 12.1% to $4.6 billion. TLS is also facing greater competitive pressures and declines in its legacy products and services. The increased competition saw average revenue per user (ARPU) fall. Telstra has also taken a hit from its media business (TLS owns 35% of Foxtel) with 98,000 subscribers of Foxtel through Telstra leaving over the year.
  • Telstra’s biggest revenue maker, its mobile business, saw a slowdown in sales over the second half which led to revenue for the segment declining 4.4% to $10.1 billion. While TLS actually managed to lift the number of retail customers by 437,000 to a total of 18.8 million, the ARPU for both prepaid and postpaid services fell. Handset sales also fell 3% leading to hardware revenue declining 3.3% to $3 billion
  • The T22 strategy, which is designed to reduce costs by streamlining and creating a more efficient business, helped drive down its operating expenses which fell by 14.5% to $16.95 billion. Savings of $1.2 billion were made due to lower labour costs. This represents a 23% decline to $4.1 billion. Costs of goods sold was also lower by 7.5% to $3.49 billion mainly due to lower handset & equipment sales from slower trading activity.

Where to now?

  • Telstra provided financial guidance for FY21 with total income expected to be in the range of $23.2 to $25.1 billion, underlying EBITDA in the range of $6.5 to $7 billion (taking into account $400 million hit from Covid-19) and net one-off nbn receipts (less nbn net cost to connect) in the range of $0.7 to $1 billion. 
  • Moving forward, there is also a possibility that the ACCC will commence enforcement action against Telstra due to the conduct of a number of partner stores which sold mobile phones and plans to customers that could not afford or were not appropriate for their needs. TLS has set aside a $50 million provision for any potential penalties.
  • TLS shares have fallen 6.5% in early trade immediately following the result release. TLS shares are also weaker by ~10.5% so far in 2020 and is slightly underperforming the ASX 200 index.

Tags:

TLS

Start trading today with Australia's leading online broker

Join now >

Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non-guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 ("the Bank") and both entities are incorporated in Australia with limited liability.
This information is directed and available to and for the benefit of Australian residents only and is not a recommendation or forecast.

This information has been prepared without taking account of the objectives, needs, financial and taxation situation of any particular individual. For this reason, any individual should, before acting on the information on this site, consider the appropriateness of the information, having regards to their own objectives, needs, financial and taxation situation, and, if necessary, seek appropriate independent financial, foreign exchange and taxation advice. CommSec, and its related bodies corporate, do not accept any liability for any loss or damage arising out of the use of all or any part of this information. We believe that this information is correct as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness.

 

Disclaimer

This site is directed and available to and for the benefit of Australian residents only. © Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 ("CommSec") is a wholly owned, but non guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and both entities are incorporated in Australia with limited liability.

By clicking on the "Download the CommSec App" buttons above, you will be directed to itunes.apple.com or play.google.com. These sites are not affiliated with CommSec and may offer a different Privacy Policy and level of security.

Top