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Telstra share price: What’s the outlook following FY20 results?

We look at the key takeaways from Telstra’s just released full-year results.

The Telstra (TLS) share price opened lower on Thursday, at $3.290 per share, after the blue-chip telco released its full-year (FY20) results to the market.

Overall, as part of these results, the company touted the strength of its top and bottom-line performance, with total income, profits (NPAT) and earnings (EBITDA) all meeting market expectations. The telco also unveiled an 8 cent final dividend – taking Telstra’s full-year dividend to 16 cents per share.

Commenting on these results, Telstra's esteemed CEO, Andrew Penn said:

'The COVID-19 period has also highlighted that connectivity has never been more critical. We have witnessed a huge acceleration in the digital economy, an area now critical to a fast economic recovery where Telstra has a key role to play.'

Full-year results examined

On the top line, Telstra noted that its total income fell by 5.9% to $26.2 billion. By comparison, on the bottom-line, the telco delivered earnings (NPAT) of $1.8 billion against reported EBITDA of $8.9 billion.

On a more granular level, it should be noted that Telstra reports a variety of EBITDA figures, including ‘reported EBITDA’, ‘reported lease adjusted EBITDA’ and ‘Underlying EBITDA’. That final measure, according to management, gives ‘the clearest view of the long-term business’ – and rose by $40 million in FY20.

Beyond those complexities, the telco continued to show the strength of its market leading position in Australia’s telecommunications sector, reporting robust customer growth. Specifically, during FY20 Telstra added 240,000 retail postpaid handheld services; 171,000 retail prepaid handheld users; 347,000 wholesale services; and 652,000 Internet of Things (IoT) services.

Despite that, mobile revenue fell by 4.4% on a year-over-year basis to $10,084 million. Mobile earnings (EBITDA) contribution margins also declined, hitting 34.7% – a figure dragged lower by a weaker second half.

Elsewhere, Telstra maintained a steady dividend, declaring a fully-franked 8 cents per share final dividend. This dividend was comprised of a 5 cent ordinary dividend and a 3 cent special dividend. Overall, this takes the company’s full-year payout to 20 cents per share – or $1.9 billion.

'The FY20 ordinary dividend is higher than the range indicated in our capital management framework to pay a fully franked ordinary dividend of 70 to 90 per cent of underlying earnings,’ the company noted.

Telstra share price: where next?

With Telstra already reiterating its FY20 guidance prior to today’s full-year results release, many analysts had begun to focus their attention towards what FY21 guidance Telstra would provide, if any. Telstra indeed provided such guidance today – with management noting that they currently expect declines across a number of the company's key top and bottom-line metrics, over the next year.

Looking forward, for FY21 the company expects to report:

  • Total income of between $23.2-$25.1 billion
  • Underlying earnings (EBITDA) of between $6.5-$7.0 billion
  • Capital expenditure of between $2.8-$3.2 billion

'We have invested, and will continue to invest, for long-term returns and opportunities, especially in mobile and our T22 strategy, the benefits of which will be realised over time,’ said Andrew Penn.

Telstra last traded at $3.20 per share.

How to trade Telstra, long or short

In the wake of Telstra’s FY20 results, where do you stand: are you bullish or bearish on the telco? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Telstra using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Telstra’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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