Telstra’s net profit fell back by 12.8 percent but that didn’t worry the markets, as shares rose today.
Telstra’s FY24 net profit fell by 12.8 percent to $1.8 billion (US$1.2 billion) for the year, largely due to its struggling fixed-line enterprise business, against which it recorded a $311 million writedown.
In May, the Australian telco said it was implementing several measures to prop up its lagging fixed-line business performance, where revenue fell by 67 percent for the full year. It included the axing of up to 2,800 jobs—close to 10 percent of its entire workforce—with the majority of this to occur within 2024.
That, along with a reduction of its non-labour and indirect labour costs, would result in $350 million in cost reductions by the end of FY25, it said.
The number of data and connection services in operation dropped 3.8 percent, or about 6,000 connections, over the full year. That resulted in an income decline of $748 million, or 6.8 percent, for that business sector.
This was offset by stronger performance in its mobile division, where revenues were up 5.6 percent, more than 560,000 new customers were added over the past financial year, and a $150 million expansion in its InfraCo asset base, with underlying profit up 7.5 percent to $2.3 billion.
“While most parts of our business performed strongly, fixed enterprise is clearly a long way from where we need it to be,” chief executive Vicki Brady said.
“We commenced action during the year to address challenges in our enterprise business, and took additional action on cost overall.
“As enterprises move to the cloud, obviously the big technology hyperscale companies play a bigger role in that so there has been large, structural change underway,” she said.
Recovery Will Be Slow
Chief Financial Officer Michael Ackland said losses in the telco’s fixed enterprise business would take time to recoup.
“Recovery will take a number of years,” he said.
While mobile is underpinning performance at present, it remains to be seen whether this remains the case when postpaid prices rise this month, and prepaid prices follow suit in October, on average by between $2 and $4 a month.
Brady said the telco would be supportive of a sale if it were offered the right price for its 35 percent stake.
“From our point of view, if it got to the stage where there was an offer for Foxtel at the right level of value, then, yes, we would be supportive of that with News Corp,” she said.
“Just to be clear on Foxtel, we’re not at that stage.”
Despite the overall poor performance, shareholders would have been placated by a lift in the full-year dividend of 5.9 percent to 18 cents, including a final dividend of 9 cents, fully franked.
The markets didn’t seem deterred by the result, with Telstra shares edging higher after the announcement in line with market forecasts and the company tightening its FY25 EBITDA guidance range.
Telstra shares were up 2.7 percent in afternoon trade, at $3.98 each.