This morning, shareholders in Telstra Corporation Ltd (ASX: TLS) awoke to a very pleasing 2014 full-year results presentation. Here's what you need to know:
- Net profit up 14.6% year-on-year
- Earnings per share up 14.3% to 34.4 cents
- Final dividend of 15 cents per share, up from 14 cents
- Total income up 6.1%
- Announcement of a buyback of $1 billion of shares
- Free cash flow of $7.5 billion
- Return on equity of 32.3%, up 1.3 percentage points
- Gross debt of $16 billion, up 2.7%
- Capex at $3.7 billion
- Gearing of 43%
- Interest cover of 13.8 times
The key performers for Telstra in FY14 clearly were the Network Application Services (NAS) division and the International division, which increased revenues 27.8% and 15.1% respectively. Their strong performances helped the telco outweigh the weaker results from the Fixed, Media and Data & IP divisions. Mobiles (Telstra's most lucrative division) grew revenues by 5.1% with 937,000 new customers added in 2014.
In FY15 the telco has forecast broadly flat EBITDA and income growth with a targeted capex to sales ratio of 14%. Free cash flow is expected to be in the range of $4.6 billion to $5.1 billion.
Telstra: Should you buy?
I have been saying for a while Telstra shares are not cheap and although today's results have exceeded my own forecasts and expectations, I still do not think they're a bargain. Whilst the next two years will be exciting for current shareholders, given the growth outlook for NAS and International, I'm waiting for a lower entry point before hitting the buy button.
