What you need to know about our 2020 half-year financial results
Posted on February 13, 2020
7 min read
Here’s what you need to know about our half-year financial results for FY20.
Our half year financial results for FY20, in line with guidance and market expectations, show that our T22 strategy is building value and delivering positive financial momentum.
On a reported basis Total Income1 for the first half decreased 2.8 per cent to $13.4 billion and NPAT decreased 6.4 per cent to $1.2 billion. Reported EBITDA for the first half was $4.8 billion.
Our underlying EBITDA2 decreased 6.6 per cent to $3.9 billion. Underlying EBITDA excluding the in-year nbn headwind3 grew by approximately $90 million, the first time this figure has grown since FY16.
We continue to make further progress in our cost reductions program as part of our T22 strategy, reducing underlying costs by $422 million, or 12.1 per cent. In total, we’ve reduced underlying costs by $1.6 billion and we’re on track to achieve our $2.5 billion net cost reduction target in FY22.
Impact of bushfires
The 2020s started in Australia with devastating bushfires. As well as impacting many of our customers, there has also been a financial impact to our business.
We’ve seen one-off costs related to the bushfires of around $10 million during the first half of FY20 which included assistance to customers, refunds and donations. We also anticipate the total impact of the bushfires on Telstra to be around $50 million.
With lives lost and whole ecosystems changed forever, climate change and environmental footprint must sit at the top of the agenda for all Australian businesses.
We need more urgent action on climate as changing weather patterns deliver more frequent bushfires, floods, droughts and storms, and today more than ever businesses must consider their impact on the environment. We are one of the largest consumers of power in the country – managing our environmental impact is a key priority and we have a significant program of initiatives to do our part.
Strong progress on our T22 strategy
Our T22 strategy to transform our business and radically redesign how we improve our customers’ experience is coming to the end of its second year, and we have made significant progress on our journey.
We have put 1.7 million of our award-winning Telstra Smart Modems in customers’ homes and businesses, with technology that helps our customer support teams and field technicians to remotely diagnose issues and reduce the number of service calls made to premises, further streamlining our customer experience.
Telstra Plus, our loyalty program to reward customers for choosing to be with Telstra, has had a very successful first year with more than 1.2 million members already enjoying the benefits including discounts on the latest devices and accessories. We added our millionth member in November of last year and are well on our way to the next milestone.
We radically reduced the number of Consumer & Small Business plans in market from more than 1800 to just 20, and we have signed up 2.4 million customers to these new simplified plans since their launch in June last year. Our Consumer & Small Business transactions are becoming more digital, too, with customers increasingly choosing to shop online and use 24×7 Live Chat rather than visiting our retail stores.
The same is true for our Enterprise customers, with the number of digital service interactions rising and the radical rationalisation of our Enterprise product set still underway. We’ve reduced active Enterprise products in market by 23 per cent since FY18, and are on track for a 50 per cent reduction by FY21.
Continued customer growth and 5G expansion
We have seen strong growth in customer numbers, particularly in mobile. During this half, we added 137,000 retail postpaid mobile services including 91,000 from Belong, 135,000 retail prepaid mobile services mobiles and 173,000 pre- and postpaid Wholesale services including IoT.
We also continue to rollout our 5G network and now have 5G coverage in selected areas in 32 Australian cities and regional areas. We are on track to reach our target of 35 cities by the end of FY20.
At CES this year we announced that a quarter of all Android phones we have sold since July 2019 are 5G capable, so there are many customers with devices already set to receive the benefits of our new network. In total, we’ve sold more than 100,000 5G-enabled mobile devices and we look forward to that number continuing to grow.
Shareholder returns and FY20 guidance
Shareholders will receive a total fully franked interim dividend of 8 cents per share, comprising an interim ordinary dividend of 5 cents per share and an interim special dividend of 3 cents per share consistent with our capital management framework and dividend policy.
Telstra reconfirmed guidance for FY204, with Total Income5 in the range of $25.3 to $27.3 billion, underlying EBITDA6 in the range of $7.4 to $7.9 billion, restructuring costs of around $300 million, capital expenditure of $2.9 to $3.3 billion, and free cash flow after operating lease payments7 of $3.3 to $3.8 billion.
After excluding the expected in-year nbn headwind8, which Telstra continues to expect to be in the range of ~$600 million to ~$800 million, underlying EBITDA is expected to grow up to $500 million in FY20.
“We are sitting at an incredibly exciting inflection point – the dawn of the 2020s, the dawn of 5G, and we see significant opportunities in technology, in telecommunications and for Telstra.
“Society is rightly holding business more accountable than ever for our actions and the expectation from all stakeholders today is for responsible business at a time of great change – great change in technology, change in the climate, change in our customers’ expectations of us.
“T22 is positioning us for this new world – as a simpler, more digitally enabled business; with the best network; the right economic model; optionality; a strong balance sheet; and the skills, capabilities, culture and ways of working we need to succeed.” – Andrew Penn, Telstra CEO
More information is available on our Investor Relations website.
Things you need to know
- Excluding finance income.
- Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C, and guidance adjustments including one-off restructuring costs, but includes depreciation of mobile lease right-of-use assets.
- Refer to Footnote 8. As at 31 December 2019, the in-year nbn headwind was ~$360 million.
- This guidance assumes wholesale product price stability and no impairments in and to investments or property, plant and equipment and intangible assets, and excludes any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance assumes the nbn rollout and migration in FY20 is broadly in accordance with the nbnTM Corporate Plan 2020. Guidance is provided on the basis of AASB16 Leases and assumes impacts consistent with management estimates and current interpretation of the standard. Capex is measured on an accrued basis and excludes expenditure on spectrum and externally funded capex and capitalised leases under AASB16 Leases.
- Excluding finance income.
- Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C, guidance adjustments including one-off restructuring costs, but includes depreciation of mobile lease right-of-use assets.
- FY20 free cashflow defined as operating cash flows less investing cash flows less operating leases (reported in financing cash flow under AASB16 Leases). FY20 free cashflow guidance includes ~$1b working capital increase including from exit of mobile lease plans, remaining outflows from restructuring costs announced in May 2019, and an increase in nbn receivables.
- In-year nbn headwind defined as the net negative recurring EBITDA impact on our business based on management best estimates including key input of the nbn Corporate Plan 2020.
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