The Australian share market remains buoyant since the Reserve Bank of Australia cut the official cash rate to an unprecedented 1.5 per cent in an attempt to place downward pressure on the Australian dollar and spur sluggish inflation and business investment.
Two of Australia’s largest listed companies, Commonwealth Bank and Telstra (TLS), have reported with no major negative surprises.
TLS’s report was messy. It published a net profit after tax of $5.8 billion but this included the $1.8b sale of Autohome shares, which implied underlying earnings fell for this financial year.
Net profit after tax from continuing operations actually fell 6.9pc to $3.8b. On a reported basis, sales revenues were up 1.9pc to $25.8b. The final dividend was 15.5 cents a share taking total dividend for FY16 to 31c.
Outside of the result, TLS announced a $1.5b share buy-back comprising a $1.25b off-market (conducted through a tender process) and $250m on-market share buy-back.
Also of significance, it announced $3b of customer-focused investments over the next three years to improve TLS networks and digitisation. Some would argue why this investment was not made earlier. That said, better late than never after the outages experienced by customers this year.
On a positive note, the rate of fixed voice revenue decline was broadly maintained due to retention activities such as bundles. Customers on bundle plans increased by 322, 000 to 83pc of the retail fixed customer basis and TLS Network Applications and Services division continues to perform strongly.
Concerns about TLS remain the same with the telco envrionment remaining challenging. TLS highlighted competitive intensity has increased across their segments and products.
Additionally, operating expenses increased by 6.4pc driven by increases in core sales costs and new business costs. Customer advocacy is declining with net promoter scores declining four points year on year.
- Christopher Hindmarsh is an adviser at JBWere Limited which is owned by NAB. Email christopher.hindmarsh@jbwere.com or contact (02) 9325 2639. This article contains general advice only. In preparing it JBWere didn't take into account the investment objectives, financial situation and needs of any particular person. Readers should assess if the information is appropriate for their circumstances.
