Telecom giant Telstra [ASX:TLS] released its FY22 results today, reporting a dip in total income, NPAT, and EBITDA for the 2022 financial year but a higher dividend.
Despite the dip in profit, TLS shares were trading largely flat on Thursday, down 1%.
TLS shares are down 5% year-to-date.
Source: www.tradingview.com
Telstra’s year: 2022 results
This morning, Telstra released its full-year results ending 30 June 2022.
The telecommunications giant announced that it has increased its dividend ‘for the first time in seven years’ following the completion of its T22 revamp.
Telstra’s total dividend for the year was 16.5 cents per share.
This means Telstra will return roughly $1.9 billion to shareholders, on top of the $1.35 billion share buyback finished in May 2022.
The company’s T22 strategy was meant to position the business in such a way that it would help Telstra manage ‘uncertain economic climates’.
However, despite a dividend increase, and ‘strong mobiles performance’, total income and net profit fell in FY22:
- Total income fell 4.7% to $22 billion
- EBITDA fell 5% to $7.3 billion
- Net profit after tax fell 4.6% to $1.8 billion
- Earnings per share (EPS) fell 7.7% to 14.4 cents
- Underlying ROIC rose 2% to 7%
- Cash and cash equivalents fell $117 million to $1.04 billion
Why did underlying ROIC rise a full 2% when profit fell 4.6%?
Telstra said it calculated underlying ROIC by excluding ‘material one-offs, such as mergers and acquisitions, disposals, impairments, spectrum, restructuring costs and other such items as determined by the Board and management’.
Operational highlights
Telstra noted its mobiles business performed ‘very strongly’ with $700 million EBITDA growth, up 21.2%.
Mobile services revenue grew 6.4%.
Telstra said it added 155,000 net retail post-paid handheld services along with one million Internet of Things services.
Telstra said performance in small businesses was more challenging this year, with the nation-wide move to NBN services impacting EBITDA, retail bundles decreasing 87,000.
Telstra management commentary
Telstra’s CEO Andy Penn said:
‘When we launched our T22 strategy four years ago, we were in part responding to the operational and financial headwinds created by the rollout of the nbn. We were also responding to the technology innovation we could see around us and the growing rate of digital adoption.
‘We knew we needed to fundamentally transform the company, to simplify and digitise, to set bold aspirations and radical interventions and that is what we have done.
‘Telstra is a very different company today and while of course there is always more to do, we are much better equipped to face the very exciting digital future ahead.’
Outlook for Telstra shares
Telstra said that it has been making ‘good progress’ on its corporate restructuring, a process that began in May 2019, when 6,000 employees were laid off to cover costs of its T22 strategy.
Telstra released its guidance for 2023, anticipating a return to growth in FY23:
- Total income of $23 billion to $25 billion
- Underlying EBITDA of $7.8 billion to $8 billion
- Capex of $3.5 billion to $3.7 billion
Economic challenges and surviving the bear market
Mr Penn commented on the current economic conditions affecting the business:
‘What we could not have foreseen was COVID and the other seismic economic, political and social changes that have unfolded.
‘While we are by no means immune, the transformational changes we made through T22 have prepared us well to manage through the uncertainty – we are a much simpler, more agile, more efficient, leaner, more customer-focussed and more digitally-enabled business.’
Telstra is not the only business managing its way through uncertainty.
Plenty of businesses have not been faring so well during the current economic environment.
The fact remains that we’re still in a bearish macro context.
And it can be a difficult time to discern what the next steps should be.
However, help is at hand.
Our editorial director Greg Canavan has seen a bear market or two.
Armed with that experience — and his value-focused approach to investing — he put together a new report on how to weather a bear market while still exploiting mispricing opportunities.
If you’d like to read Greg’s ‘The Stocks You Should Own in a Bear Market’ report, click here.
Regards,
Kiryll Prakapenka
