Telstra has finally broken the NBN profit anchor and is free to chart its own course for profit

Nothing in the corporate world has changed quite as much as opinions about the performance of outgoing Telstra CEO Andy Penn. But on Thursday, as he delivered his final score in the top job, he must be deeply satisfied that he fought his way through the critics to leave the telecom company on a high note.

His parting gift to Telstra — the company’s first dividend increase in seven years — is especially significant because it says everything about Telstra’s board of directors’ confidence in the company’s prospects for growing earnings.

Any company’s aspirations and guidelines can be rubbery and changeable, but the fact that Telstra is paying more in dividends than it makes in earnings is a clear statement of confidence in future earnings growth, at least year-to-date. Fiscal 2023 guidance for underlying earnings is $7.8 billion to $8 billion, up from $7.3 billion reported in 2022.

Telstra’s overall earnings before interest, taxes, depreciation and amortization and earnings declined 5 percent and 4.7 percent, respectively, but underlying earnings rose 8 percent. And it’s the underlying metric, free from many confounders, including NBN, that gives investors a deeper look into the company’s ongoing performance.

This is particularly important at this point as the final customer migration from Telstra to NBN has been completed. That $3.6 billion profit anchor has now been trimmed.

Penn delivered an impressive final act, but it’s been a rollercoaster ride, marked by a few stumbles and overwhelmed by issues beyond his control – most notably COVID-19 and, more recently, hyperinflation.

The outgoing Telstra boss Andy Penn says goodbye with a high note.

The outgoing Telstra boss Andy Penn says goodbye with a high note.Recognition:Louis Trerise

However, this year also marks the completion of Telstra’s strategic T22 overhaul. This was a massive undertaking that included simplifying cellular plans, rolling out 5G, saving $2.7 billion in costs and partially selling the Tower business, and introducing a new level of digitization.

The cost cuts and productivity gains have lent some positive force to the profits of most businesses, even those that were underperforming.

Telstra produces mixed results from its businesses each year and this year has been true to form.

https://www.smh.com.au/business/companies/telstra-has-finally-cut-the-nbn-earnings-anchor-and-can-chart-it-own-earnings-course-20220811-p5b93c.html?ref=rss&utm_medium=rss&utm_source=rss_business Telstra has finally broken the NBN profit anchor and is free to chart its own course for profit

Brian Lowry

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