Telstra, Australia’s largest Telco, reported first-half earnings of almost $1.5 billion, a touch below analyst expectations, thanks to sharply improved returns from its mobile phones business which more than offset more weakness in its Yellow Pages – Sensis business.
In fact the Yellow Pages – Sensis business looks increasingly marginal inside Telstra as revenue fell by nearly a quarter in the six months to December, and expectations of further weakness this half.
The company is again paying a 14c a share interim dividend, but has ruled out a special dividend once money from the still to be finished NBN deal arrives.
The company reaffirmed the 28c a share payout for the full year.
Telstra said yesterday that it added almost one million new mobile services in the six months ending December 31, which drove group net earnings up 22.5% to $1.48 billion, up from $1.2 billion the previous first half year.
That was just shy of analyst estimates for a $1.5 billion profit, a shortfall that was artificially constructed by the analysts, but helped push the shares lower yesterday.
Management confirmed guidance of low single-digit revenue growth for the full financial year.
The shares dropped around 2% (7c) to $3.37 yesterday.
While revenue from the company’s fixed-line business again fell (this time by 9%), domestic mobile revenue jumped by close to 11% as the benefits from revamp of the business continued to kick in.
Total revenue for the half was $12.4 billion, up 1.1% and CEO David Thodey said it was "one of the best years for customer growth".
Telstra added 958,000 mobile customers in Australia during the half year, signed up 106,000 fixed-broadband customers and 166,000 new T-Box and T-Hub services.
"This momentum has continued into the first half of fiscal 2012," Mr Thodey said in the statement.
However revenue from the struggling Sensis business plunged 24% to $528 million because of unspecified problems implementing a new digital strategy and fewer businesses taking out advertisements in the Yellow Pages.
There was no mention of a potential share buy back from the deal with NBN Co because Telstra is still waiting for a key regulatory document to be approved – the so-called "structural separation undertaking".
Mr Thodey said the board had not yet made up its mind how it would handle a possible share buy back, but he did rule out a special dividend.
"The board has reviewed capital management. They have made no decision," he told analysts.
Further details would come at a special briefing once the NBN deal was completed.
Results for the first half of the year were in line with our expectations despite the difficult macro economic backdrop,’’ Telstra said in yesterday’s statement.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 3.75% to $4.75 billion, a profit margin of a still fabulous 38%.
The fixed-line business, however, continued to struggle, shedding 136,000 customers. While revenues fell 9%, they were still a very substantial $2.49 billion for the half year.
Property and retail group, Stockland saw a 28% fall in first-half net profit because of the sluggish economic conditions, but expects full year guidance to be met with a stronger second half.
Stockland reported a net profit of $307.6 million in the six months to December 31, 2011, down from $425.1 million in the previous corresponding period.
"Economic conditions were very tough at the start of FY12 resulting in poor consumer sentiment, reduced discretionary spending and weaker demand for Sydney CBD office space which affected our result," managing director Matthew Quinn said in a statement yesterday.
"Despite these challenging conditions, our Retail business proved resilient with earnings growth of 6% on the previous corresponding period. We also achieved a material reduction in overheads across our business.
"In our Residential business our strategy of reducing lot sizes to improve affordability saw us increase revenue from single lot sales by 4%, but we experienced a fall in superlot sales due to contract settlements being skewed to the second half.
"We have seen Residential sales pick up in the last four months, particularly from first home buyers who are very attracted to our affordable product.
"Office earnings were lower than last year primarily due to asset sales and weak demand in the Sydney CBD," according to Mr Quinn.
Stockland said it still expects its earnings per share (EPS) for the financial year to be the same as in the previous year, assuming current residential conditions continue.
Earnings per share in the 2011 financial year were 31.6c.
EPS in the first half of 2011/12 were 14.9c.
Stockland’s distribution per Security was up 2% to 12c, reflecting half of the expected full year distribution.
"Conditions will remain challenging with credit markets tightening, the Australian economy under pressure and tough property markets," Mr Quinn said.
"Stockland is well-capitalised with a strong balance sheet and there are good opportunities for revenue growth in the second half and beyond, particularly in our retail and residential businesses," he added.
