Shares in Telstra (ASX: TLS) look set to rise at the open after the giant telco reported a 7.1% increase in half-year net profit to $1.1 billion.
News of a 5.6% hike in the dividend to 9.5¢ per share and a $750 million share buyback are both welcome news for shareholders who have seen the share price go nowhere in 12 months.
The telco attributes its bumper 1H FY25 earnings - up 1.5% to $1.6 billion - to strong performance in its mobile business and deep cost cutting, which saw 9% of the workforce axed, half of which were in the enterprise division.
Cumulatively, the telco has reduced fixed costs by $283 million since FY22 and is on track to achieve its $350 million target by the end of FY25.
Earnings were up 6% to $4.25 billion, beating consensus estimates of $4.19 billion.
Strong business momentum
Commenting on the results today, Telstra CEO Vicki Brady highlighted the continued rollout of vital infrastructure, with the telco’s 3 million square kilometres now reaching 99.7% of the Australian population.
“To put that in perspective, our mobile network covers more than double the area of the Optus network, and around three times the area of the Vodafone/TPG network,” said Brady.
These are a strong set of results, delivering a fourth consecutive year of first half underlying growth, reflecting momentum across our business, strong cost control and disciplined capital.”
Brady also noted recent efforts to catch up with Silicon Valley and reset its enterprise division by slashing its product portfolio by 75% over the next few years and slashing costs.
On a segment-by-segment basis, the company’s consumer business was the standout performer, with income up 3.1% to $5.5 billion, and post-paid average revenue per user up from $52.18 to $53.60.
By comparison, the business enterprise division pulled back 1% to $1.4 billion, while the international business was down 4.8% to $1.26 billion.
Meanwhile, core fixed costs fell 4.8% ($161 million), while Fixed InfraCo earnings were up by $58 million.
Looking forward
Consistent with the telco’s capital management framework, Brady said the $750 million share buyback reflects confidence in both the underlying business and the future.
Brady also reaffirmed the company’s commitment to balance sheet setting consistent with an A band credit rating, with 1H FY25 net debt to earnings of 1.9 times - within its comfort level of 1.5 to 2.0 times.
The company said it would increase investment in its 5G network by $800 million over four years.
Last week the telco advised the market it was considering selling its data centre assets. This would mark the first infrastructure transaction since it sold a $2.8 billion mobile tower stake to superannuation investors four years ago.
Telstra has a market cap of $45.2 billion making it the 12 largest stock on the ASX; the share price is flat over 12 months and down 2.25% year to date.
The company’s shares are in a downtrend confirmed by multiple indicators. In the medium-term, the 5-day moving average is below the 50-day moving average.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
