Telstra Corporation Ltd (ASX: TLS) is one of the largest telecommunications and technology companies in Australia. Telstra offers a full range of communications services and is competing in all telecommunications markets. In Australia, Telstra provide 18.3 million retail mobile services, 3.7 million retail fixed bundles and standalone data services and 1.4 million retail fixed standalone voice services. Telstra has a market capitalisation of A$44 billion.
What are the key features of Telstra’s HY20 results?
- Total revenue (excluding finance income) for HY20 is A$12,164 million, down 3.4% compared with the previous period.
- Total operating expenses for HY20 is A$8,638 million, down 9.5% compared with the corresponding period.
- Profit attributed to equity holders of Telstra for HY20 is A$1,139 million, down 7.6% compared with the previous period.
- Capital expenditure for HY20 is A$1,366, down 41% compared with the corresponding period.
- Earnings per share for HY20 is A9.6 cents, down 7.7% compared with the corresponding period.
- Dividend is A8 cents per share, comprising an interim ordinary dividend of A5 cents and an interim special dividend of A3 cents.
What are the main drivers of this result?
Telstra’s management notes:
The results show that the T22 strategy is building value and delivering positive financial momentum. We have 2.4 million services on our new, radically simplified plans and more than 1.2 million customers are now able to enjoy the benefits of being a Telstra Plus member. More customers are choosing to interact with us online with digital service interactions rising to 57 per cent and the volume of calls to our call centres continuing to fall.
What is the outlook for Telstra?
Telstra’s management notes FY20 guidance is as follows:
- Total Income in the range of A$25.3 billion to A$27.3 billion, underlying EBITDA in the range of A$7.4 billion to A$7.9 billion, restructuring costs of around A$300 million, capital expenditure of A$2.9 to A$3.3 billion and free cash flow after operating lease payments of A$3.3 billion to $3.8 billion.
Telstra’s management note that during the HY20 their T22 strategy is on track to be fully executed. The T22 strategy has four key pillars:
- Radically simplify our product offerings, eliminate customer pain points and create all digital experiences
- Establish a standalone infrastructure business unit to drive performance and set up optionality post the NBN rollout
- Greatly simplify our structure and ways of working to empower our people and serve our customers
- Industry leading cost reduction program and portfolio management
Telstra’s CEO Andrew Penn said:
This year we will reach the half-way point of our T22 strategy and we have built good momentum in delivering for our customers, our employees and our shareholders
What is the market reaction to Telstra’s HY20 results?
That market reaction to Telstra’s HY20 result is negative (13 February 2020). Telstra’s share price was down 2.5% and is currently trading at A$3.78. Telstra has a forward P/E ratio in the low-teens and an annual dividend yield of around 3.5%.
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