REPORTING SEASON: Telstra Corporation Limited (TLS)
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Figure 1: Telstra Corporation Limited 12 month chart
Telstra Corporation Limited (TLS) posts slight fall in profit as expected
– Telstra Corp (TLS) posted a 1% drop in profit to an in-line with consensus $4,231m over FY15. Australia’s largest telco’s revenue continues to be driven by its Mobile division. Profit was partly held back by the sale of its CSL Hong Kong mobile business in May 2014, which added $561m in profit from its sale in the FY14 result.
– Mobile continues to be its biggest earner, accounting for 41% of sales. New mobile client subscribers rose 298k to 16.7m over the year (7.2m above Optus and 11.4m more than Vodafone). TLS is expected to raise spending in its Mobile business by an additional $500m over FY16.
– The strongest growth in revenue was in its NAS (Network Application & Services) division, which contributed $2.4bn to sales and surged 23.2% over the year. Despite the unit’s solid growth it only accounted for 9% of total revenue. NAS’ jump in revenue has easily offset its decreasingly popular Fixed line unit. NAS provides network services for both corporate and government customers domestically and internationally. Foxtel from Telstra (previously Premium Pay TV) revenue rose 9.4% to $662m. The result was boosted by close to 20% growth in subscribers and competitive pricing (Foxtel’s basic package pricing was almost halved in late 2014). Streaming services like Netflix are estimated to have as many as 800k subscribers in Australia. The merger of iiNet & TPG could add further competition in the broadband space.
– A 15.5c/share fully franked dividend was announced, payable to investors on 25 Sept. A Dividend Reinvestment Plan has been introduced by TLS for this payment. TLS has a ~4.9% yield. Although TLS undertook a successful $1bn buyback in 2015, no additional capital controls were announced. Looking ahead, TLS’s FY16 guidance was slightly disappointing to the market – forecasting low-single digit growth in underlying profit.
– TLS shares fell in response to the result; however has surged in recent years partly thanks to its dividend payments. TLS shares have more than doubled in value over the past five years.