Telstra profit falls by 14% after year of bush fires and COVID-19

Andy Penn (Telstra)

Telstra has posted another year of tumbling profits as the summer bush fires and COVID-19 pandemic hit its already beleaguered finances.

Australia’s largest telco closed the financial year ending 30 June 2020 with a net profit after tax of $1.8 billion, a 14-per cent decline year-on-year.

At the same time, revenue fell by 6 per cent to $23.7 billion while underlying EBITDA declined by 9.7 per cent to  $7.4 billion when the so-called “NBN headwinds”were factored in.

According to Telstra, the COVID-19 pandemic has cost the telco $200 million in underlying pre-tax earnings (EBITDA) this year, while the NBN’s impact totalled $830 million.

“The enormous, ongoing disruption and pain caused by the COVID-19 pandemic has made the past few months extraordinarily challenging for everyone,” said CEO Andy Penn.  

“However, we have been thoughtful about the best ways we can make a difference and taken strong and decisive action to support our employees, our customers, and the community.”

In addition, the company is expecting to spend $44 million across FY20 and FY21 in restoring infrastructure damaged during the bushfires. 

Excluding the impact of the NBN roll-out, Telstra’s EBITDA however increased to $8.9 billion.

Broken down, Telstra’s revenue declined across network applications and services (NAS), managed network services and industry solutions, the latter of which was expected due to contracts expiring and as a result of the NBN’s roll-out.

However, growth areas were seen in unified communications, which increased by  5.7 per cent to $1.067 million, while cloud services revenue increased by 0.9 per cent to $434 million.

This financial year saw the consolidation of the telco’s professional and technical services businesses into a single brand dubbed ‘Telstra Purple’. Since then, the business unit has delivered more than 3,000 projects, Telstra claimed.

Telstra also continued its cost-cutting strategy, shaving 10 per cent off its operating expenditure this year. 

Despite bringing on 1,000 new contractors to assist with customer service during the COVID-19 pandemic, Telstra’s labour costs still plunged by 23.1 per cent to $4 million, saving $457 million in salaries and costs.

This comes despite Telstra freezing its ongoing headcount reduction program due to the coronavirus pandemic.

In total, Telstra claimed to have saved $1.8 billion in costs since FY16 and is on track to meet its target of $2.5 billion.in savings by 2022, as part of its T22 strategy.

Looking forward, Telstra estimated its total income to be in the range of $23.2 billion to $25.1 billion for the next financial year. 

It also intends to bring forward $500 million of capital expenditure planned for the second-half of FY21 into calendar year 2020 to accelerate its 5G roll-out.

The acceleration will see Telstra 5G coverage reach around 75 per cent of the Australian population by June 2021, the telco claimed.