Penn’s golden farewell
OUTGOING Telstra chief executive Andy Penn has left shareholders a parting gift, with the telco lifting its dividend for the first time in seven years and returning $1.9bn to shareholders despite posting a drop in annual profit.
The telco giant posted a net profit after tax of $1.8bn for the 12 months ending June 30 – down 4.6 per cent year-onyear. Total income was down 4.7 per cent to $22.05bn and earnings per share (EPS) fell 7.7 per cent to 14.4c.
The results, which were within guidance and expectations, were in part affected by the tail end of NBN headwinds, which Mr Penn said had been a “large and difficult pill to swallow”.
The telco’s one-off payments from NBN connection revenue was $672m lower than last year.
Despite the profit fall, Telstra will pay a fully franked final dividend of 8.5c per share, including a 1c special dividend, to be paid on September 22. It brings the total dividend for the year to 16.5c, up from 16c the previous year, returning $1.9bn to shareholders.
“This represents the first increase in the total Telstra dividend since 2015 and recognises the confidence of the board following the success of our T22 strategy, the ambition in our T25 strategy of high-teens EPS growth from FY21 – FY25, the strength of our balance sheet and the recognition by the board of the importance of the dividend to shareholders,” Mr Penn said.
He said the company had performed particularly strongly across its mobile segment, with postpaid per user revenues up 2.9 per cent.
Mr Penn will be replaced by chief financial officer Vicki Brady as CEO on September 1.
Chairman John Mullen paid tribute to Mr Penn’s leadership. “Andy has driven a focus on digitisation underpinned by a commitment to simplifying our products and services for our customers and employees,” he said. “He has also maintained our leadership in mobile and fixed networks, including recently through our investment to lead on 5G.”
Ms Brady said the telco “remains absolutely committed” to growing the dividend through the 2023 financial year and in to the future, but that inflation and other factors including changes in customer demand would impact the company’s earnings from the 2026 financial year onwards, and in particular its $1.6bn inner-city fibre project. Telstra last month signed a five-year strategic agreement with Microsoft that will see Microsoft become the anchor tenant of the telco’s new fibre network. “Not surprisingly, in the current economic environment we have seen cost inflation for construction and fibre supply,” she said.
Telstra provided guidance for total income of $23bn to $25bn for the 2023 financial year and underlying earnings before interest, tax, depreciation and amortisation of between $7.8bn and $8bn.
Natalie Tan, an equities analyst at abrdn, said that the results were largely in line with expectations with the exception of the dividend lift, which came as a surprise.
“That was a real positive and will trigger upgrades to dividend forecasts in FY23 and beyond,” she said. “The mobile result was also particularly strong, with a 6.4 per cent growth in mobile services revenue.”