Telstra share price: are we at an inflection point?

We look at the highlights from the telco’s FY21 results, released to the market on Thursday, 12 August.

Long-term Telstra (TLS) shareholders have languished. The stock is down 27% over the last five years, and a more substantial 48% since 1999. That return, of course doesn’t include the dividends the telco would’ve paid in that period.

In saying that, 2021 looks to have been a turning point for Australia’s largest telecommunications provider, with management saying:

'The 2021 financial year was significant for Telstra in that it was a turning point in our financial performance.’

'After a decade of disruption following the creation of the nbn, we can now clearly see the path to underlying growth ahead. Our investment in innovation and technology, digitisation and networks, improving our customer experience and being disciplined in our capital management, mean that Telstra is in a strong position to grow.’

Result highlights

On the top-line, the telco saw its revenue fall 11.6% year-on-year, with FY21 total income coming in at $23.1 billion. That was at the top-end of prior guidance, with management at the interim results guiding for full-year revenues of between $22.6 billion to $23.2 billion.

Postpaid handheld mobile APRU (average revenue per customer) performance across the second half of FY21 underscored the strong sequential growth experienced by the telco. For the half-year ending June 2021, postpaid ARPU hit $48.16, representing an impressive half-on-half growth rate of 4.7%, against year-on-year growth of just 1.3%.

On the bottom-line, the telco also impressed: with Telstra reporting underlying EBITDA of $6.7 billion. As with the postpaid ARPU performance, the key point here was the sequential growth from the first half of 2021 to the second half, with EBITDA coming in at ~$3.4 billion in the H2.

Looking forward, Telstra said it expect to book $7.0 billion to $7.3 billion in earnings (EBITDA) in FY22, implying a growth rate of between 4-9% year-on-year.

Dividends a plenty

This all equated to Telstra delivering full-year NPAT of $1.9 billion against EPS of 15.6 cents per share.

And from a dividends perspective, the telco kept a steady hand, declaring a final dividend of 8.0 cents per share, taking the full-year payout to 16 cents per share. The final dividend was made up of a 5.0 cent final ordinary dividend and a 3.0 cent final special dividend.

In addition to this, management said that they would undertake a $1.35 billion on-market, share buy-back, set to be completed across FY22. This comes following the telco’s 49% sale of its towers business.

Analysts from UBS described the FY21 results 'as an inflection point for earnings' adding that the '16cps dividend looks sustainable.'

At the time of writing, the Telstra share price has risen 5.00% in the last five sessions, trading close to the $4.00 per share mark – as investors positively anticipated and then enthusiastically responded to the telco’s full-year release.

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