Telstra FY19 profit slumps 39.6%

Telstra has reported a 39.6% slump in net profit for FY19 to $2.1 billion, largely as a result of the ongoing impact of the nbn rollout on the company’s bottom line.

The company absorbed around $600 million of negative recurring ebitda impact as a result of the nbn, resulting in a 21.7% decrease in ebitda to $8 billion.

Since FY16, Telstra estimates that the nbn has adversely impacted ebitda by around $1.7 billion, according to CEO Andy Penn. The company believes it has now absorbed 50% of the anticipated recurring financial impact.

Revenue for the year fell 2.3% to $25.26 billion, with fixed line revenue falling 9.4% to $5.2 billion, data and IP revenue down 7.7% to $2.4 billion, and mobile revenue increasing 1.6% to $10.5 billion.

The company added 378,000 retail postpaid mobile subscribers during the financial year, taking its total base to 8.2 million. Telstra also added 107,000 new fixed line retail bundle and data services customers.

Telstra’s IoT business meanwhile generated revenue growth of 19.4%, with an average of 2000 things being connected to Telstra’s dual-technology IoT network every day.

Penn said Telstra is close to halfway towards its target of achieving $2.5 billion in net cost reductions by FY22 as a result of its T22 transformation strategy and an investment program which commenced in 2016 and concluded this year.

The $2.5 billion in cost reductions represents one of four pillars of the T22 strategy. The other three involve spinning off Telstra’s infrastructure assets into the separate Telstra InfraCo division — a process completed last financial year, simplifying the company’s management structure, and simplifying its product offerings.

The company is already making good progress along these lines, consolidating the number of retail residential and small business product offerings available from about 1800 to around 20, and eliminating an average of three layers of management across its operations.

Penn said around 75% of the net 8000 job cuts planned as part of the strategy have now been identified.

“Returning our business to growth will take time. However, I have great confidence that our strategy can arrest the decline in our earnings and create opportunities for growth,” Penn said.

For FY20, Telstra is forecasting revenue in the range of $25.7 billion to $27.7 billion, and ebitda of between $7.3 billion and $7.8 billion.

Pictured: Andy Penn. Courtesy Telstra.

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