Sunday, 24 September 2017

Telstra shares slide on dividend cut

By Mary Lennighan, Total Telecom
Thursday 17 August 17

Australian operator expects 22 cents-per-share dividend next year, from FY2017 payout of 31 cents.

Telstra on Thursday reported a relatively unremarkable set of full-year financial results, but the market reacted badly to its new dividend policy, which will see payouts cut by around a third next year. The Australian incumbent posted revenue of A$26.01 billion (&euro…

Telstra on Thursday reported a relatively unremarkable set of full-year financial results, but the market reacted badly to its new dividend policy, which will see payouts cut by around a third next year.

The Australian incumbent posted revenue of A$26.01 billion (€17.6 billion) for the 12 months to the end of June, down by 2.7% on the previous year.

Net profit plummeted 32.7% to A$3.89 billion, however the previous year's figure included the proceeds from the sale of Chinese online car business Autohome. Stripping out that 2016 gain, net profit after tax grew by 1.1% on a reported basis from continuing operations.

Telstra CEO Andy Penn said in a company video interview published alongside the results that he is "pretty pleased with that result overall."

But shareholders are doubtless less pleased after Telstra announced that it has reviewed its dividend policy and in future will pay out significantly smaller sums than investors have come to expect.

"Shareholders received A$5.2 billion," for full-year 2017 in dividends and buybacks following the sale of Autohome, Penn said.

The telco announced a 15.5 cent per share final dividend, bringing the annual total to 31 cents.

However, the company needs "the right balance sheet settings and the right capital management approach for the future," Penn said. And that "will mean a reduction in dividend."

Telstra expects to make a total dividend payout of 22 cents per share in full-year 2018.

To date, Telstra has paid out "more or less 100% of its profits," but from now on will reduce that to 70%-90% of underlying earnings and 75% of the one-off payments it receives from NBN.

"That's much more in line with our global peers and it's much more in line with large companies in Australia," Penn said.

That may well be the case, but the announcement naturally had an impact on the operator's share price.

Telstra's shares closed at A$3.87 in Sydney on Thursday, down from the previous day's closing price of A$4.33.

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