The Telstra share price is on watch for FY22.
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Telstra said that on a reported basis, total income decreased by 11.6% to $23.1 billion and net profit grew 3.4% to $1.9 billion.
On a guidance basis, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 9.7% to $6.7 billion. That included an in-year NBN headwind of around $650 million and an estimated $380 million financial impact from COVID-19. Excluding the in-year NBN headwind, underlying EBITDA in FY21 dropped $70 million.
But FY22 has already started and it has provided guidance. The guidance can have an impact on the Telstra share price.
What is Telstra expecting in FY22?
Telstra said that its guidance shows the underlying business returning to full year growth.
Total income is expected to be in a range of $21.6 billion to $23.6 billion in the new financial year.
Underlying EBITDA is expected to be in a range of $7 billion to $7.3 billion (compared to $6.7 billion in FY21).
The telco is expecting to spend $2.8 billion to $3 billion on capital expenditure. Free cashflow after lease payments is expected to be between $3.5 billion to $3.9 billion.
One of the key ways that Telstra is looking to help its profit and the Telstra share price is its T22 strategy.
Asset sales were part of the plan, with Telstra monetising its InfraCo Towers business by selling a 49% stake. It’s returning half of the net proceeds with a $1.35 billion to shareholders with a share buyback.
Under the T22 strategy, it is driving productivity. Total operating expenses dropped 10.2% in FY21. Underlying fixed costs declined $490 million, or 8.1%, during FY21. Since FY16, the company has achieved around $2.3 billion of net productivity and remains on track to meet its target of $2.7 billion by the end of FY22.
The company has reduced its number of roles by 8,300 net full time roles, meeting the T22 commitment one year early and also reducing 17,400 indirect roles and removing on average more than four management layers.
The company has a number of initiatives that could help the Telstra share price and profit.
In an interview with the Australian Financial Review, the Telstra CEO Andrew Penn said:
I’d say three things – one is that it’s absolutely front and centre about continuing to transform customer experience and just taking that to the next level.
Secondly, it’s about growth, both within the core but also some of our new business investments are really starting to help to get some traction.
Obviously, we’re going to be launching energy, sort of imminently. And then it’s also about building on all of the capabilities and the foundations that we’ve laid in T22.
Mr Penn also reference the telco’s recent acquisition of MedicalDirector for $350 million. This business currently supports around 23,000 medical practitioners and is used to deliver more than 80 million medical consultations a year. It is a GP clinical and practice management software company.
Mr Penn also said:
What we’re trying to do is we are focused on very much digitising and connecting different parts of the healthcare system.
You would appreciate the healthcare system is highly fragmented, and it isn’t as efficient as it could be – it could be much more digitally enabled.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.