Telstra hits guidance and declares 16 cents per share FY 2020 dividend

The Telstra Corporation Ltd (ASX:TLS) share price will be on watch on Thursday after hitting its guidance and maintaining its dividend…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Telstra Corporation Ltd (ASX: TLS) share price will be in focus on Thursday after the release of its full year results for FY 2020.

How did Telstra perform in FY 2020?

For the 12 months ended 30 June 2020, Telstra reported a 5.9% decline in total income to $26.161 billion. This means the telco giant achieved its guidance of $25.3 billion to $27.3 billion.

The main drag on its performance during FY 2020 was the Consumer and Small Business segment. Telstra's largest segment reported a 6.7% decline in income to $13.326 billion during the 12 months. It was impacted by an 8.4% decline across fixed products and a 5.2% decline in mobile service revenues. The latter was due to a reduction in its average revenue per user (ARPU), which offset customer additions.

The company's Enterprise segment also posted a decline for the year. It recorded income of $7.97 billion, down 3.3% on the prior corresponding period. This was largely due to declines in legacy calling and fixed products.

Offsetting some of these declines was a solid reduction in operating expenses during the year. Telstra's operating expenses fell 14.5% to $16.951 billion in FY 2020 thanks to strong progress with its T22 strategy.

This ultimately led to Telstra posting reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of $8.9 billion and underlying EBITDA of $7.4 billion. The latter was within its guidance range and represents a 9.7% decline on the prior year. However, if you exclude the NBN headwind, Telstra's underlying EBITDA would have increased by $40 million in FY 2020.

It is worth noting that the underlying result includes an estimated net negative impact from COVID-19 of approximately $200 million. This relates to lower international roaming, financial support for customers, delays in NAS professional services contracts, and additional bad debt provisions.

On the bottom line, Telstra's net profit after tax fell 14.4% to $1.8 billion and its earnings per share dropped 15.5% to 15.3 cents.

Telstra maintains its dividend.

Telstra also delivered on its guidance for free cash flow in FY 2020. It reported free cash flow of $3.4 billion, compared to its guidance of $3.3 billion to $3.8 billion.

In light of this, it was able to maintain its full year dividend of 16 cents per share fully franked. This will see $1.9 billion returned to shareholders for the year. Its final dividend of 8 cents per share will be paid on 24 September.

Outlook.

While the company acknowledges that it will not be immune from further disruption and difficulty during the pandemic, it is confident enough in its outlook to provide guidance for FY 2021.

It expects total income to be in the range of $23.2 billion to $25.1 billion, underlying EBITDA in the range of $6.5 billion to $7 billion, and free cashflow after operating lease payments of $2.8 billion to $3.3 billion.

Management also expects the in-year NBN headwind for FY 2021 to have a negative impact on underlying EBITDA of approximately $700 million. As a result, to achieve growth in FY 2021 (excluding the in-year NBN headwind), underlying EBITDA will need to be around the mid-point of its guidance range.

It is also worth noting that this underlying EBITDA guidance assumes an estimated negative impact from the COVID-19 pandemic in FY 2021 of approximately $400 million.

While it did not mention its dividend, based on this guidance, Telstra appears well-placed to maintain its 16 cents per share payout next year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Megaport, Pilbara Minerals, Vysarn, and WiseTech shares are falling today

These shares are ending the week in the red. But why?

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young female investor sits in her home office looking at her ipad and smiling as she sees the QBE share price rising
Share Market News

5 things to watch on the ASX 200 on Friday

A good finish to the week is expected for Aussie investors.

Read more »