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- Telecommunication giant Telstra (TLS) has recorded a 6.4 per cent drop in profits compared to the same time in 2018 in its latest half-year report
- The profit slump was attributed to the huge restructuring of company operations, costs from the NBN roll-out, and the Australian bushfire crisis
- The company is now at the halfway mark of the T22 restructuring strategy, estimated to cost $600 million
- Nevertheless, Telstra is paying out an eight-cent per share dividend to shareholders
- Further, Afterpay Interim Chair Elana Rubin has been appointed to the Telstra board
- Shares in Telstra saw a morning spike but declined suddenly before lunchtime
- Shares closed 1.57 per cent down, trading at $3.76 each
Telstra lost 6.4 per cent in half-year net profits, to 1.2 billion, according to the company half-year report.
Total income for the first half decreased by 2.8 per cent to 13.4 billion. This is despite a 12.1 per cent increase in reported earnings before interest, tax, depreciation, and amortisation (EBITDA) compared to on the same time last year, coming in at $4.8 billion.
However, the underlying EBITDA figure tells a slightly different story: when not accounting for one-off transactions, earnings were 6.6 per cent lower than the same period the year before at $3.9 billion.
Telstra CEO Andrew Penn said these results are largely due to the huge restructuring of the telco giant’s business – dubbed Telstra 2022, or simply T22 – which was announced in June 2018.
The company is at the halfway mark of the business turnaround, which by its end would see $600 million worth of new restructuring charge and 8000 employees laid off, among other big changes.
“We know that there is more work to do and we still face challenges within our business and across the telecommunications sector. However, our T22 strategy gives us a detailed understanding of what we need to achieve and how we will get there,” Andrew told shareholders in today’s half-year report.
“Our resolve is to focus on the things that are within our control and it’s particularly pleasing to see a continued strong performance on reducing our costs and delivering new and simplified products and services to our customers,” he said.
Telstra said as part of the business’ simplification, underlying fixed costs have been cut by $422 million or 12.1 per cent.
Bushfires and the NBN
Telstra attributes the profit slump to the ongoing costs from the NBN rollout.
As customers migrated to the government-lead national broadband network in the six months since FY19, Telstra says it’s created a $360 million headwind headache.
It brings the total shortfall brought on by NBN expenses to $1.7 billion since FY16.
Between $600 and $700 million could be spent on the broadband rollout by the nd of this financial year. It’s not the end of the road, however; the telco giant expects these costs to peak in the 2021 financial year.
Telstra also says it was impacted by the ongoing bushfire crisis, and has reaffirmed its dedication to improving its environmental footprint in the years to come.
“We’ve seen one-off costs related to the bushfires of around $10 million during the first half of FY20 which included assistance to customers, refunds and donations. We also anticipate the total impact of the bushfires on Telstra to be around $50 million,” a media statement said.
New non-executive director
Yesterday Telstra announced the appointment of Elana Rubin as a non-executive Director on the board.
Elana is currently on the Board of Slater and Gordon and Afterpay, where she is Interim Chair.
And is reported to have more than 20 years Board experience across the financial service sector.
Elena’s appointment to the Board is effective as of 14 February 2020.
Looking ahead
Moving forward, Telstra said it is on track to meet its income guidance of between $25.3 and $27.3 billion. The company has another $300 million planned for restructuring costs, but expects total capital expenditure of between $2.9 billion and $3.3 billion.
To keep shareholders happy, however, the company has maintained its eight-cent per share fully franked dividend. This year’s interim dividend, however, consists of a five-cent per share ordinary dividend combined with a three-cent per share special dividend.
Today’s results came after Telstra yesterday announced that a copy of the CEO’s speech on the results may have lost confidentiality.
Though Telstra says this was an administrative error and they are not aware of any member of the public accessing the speech.
Shares in Telstra saw a morning spike but declined suddenly before lunchtime. When the market closed, shares were trading 1.57 per cent lower at $3.76 each.
