Telstra may return $1bn to shareholders after 14.3 per cent profit jump

Telco finished fiscal 2014 with NPAT of $4.275bn on the back of $26.8bn income

Telstra CEO, David Thodey.

Telstra CEO, David Thodey.

Telstra may return about $1bn of capital to shareholders, after it achieved a net profit after tax (NPAT) of $4.275 billion for the year, up 14.3 per cent on a total income of $26.8bn.

The buy-back option will be funded from excess cash generated through its operating performance and divestments, including the sales of Sensis for $454 million and CSL for $2.03bn.

Telstra CEO, David Thodey, claims the buy-back is the most effective way to deploy surplus capital from the telecommunications provider's strong operational performance and significant asset sales.

“Telstra’s level of free cashflow exceeds what we need in the short to medium term so the return of surplus capital to shareholders is considered appropriate in the current environment.”

The buy-back will be managed through a tender process closing on October 3.

Thodey also said that shareholders who retain their Telstra shares can expect to benefit from improved earnings per share, due to the reduced number of shares on issue as a result of the buy-back.

Telstra has also increased its final dividend to $0.15, sending its total fully-franked dividend to $0.295 after an interim figure of $0.145.

Commenting on its full-year figures, Thodey said key contributors to the telco’s result were investments in ehealth, global enterprise and services, and global applications and platforms.

“We continued to grow out capabilities in ehealth, acquiring DCA eHealth Solutions and 50 per cent of Fred IT. We also signed licensing agreements with Dr Foster, iSheduler, and InstantPHR, building on our objective to deliver ehealth solutions via connectivity of health services, electronic health records and electronic prescriptions," he said.

“In GES, our proposed joint venture with Telkom Indonesia aims to open opportunities in Indonesia and the Asian Network Applications and Services (NAS) market, and we acquired NSC Group and 02 Networks to further boost our NAS capabilities. We launched our start-up incubator muru-D to foster local technology innovation and in GAP this week announced the purchase of leading global video streaming company, Ooyala.”

On the National Broadband Network (NBN) front, Telstra said it continues to negotiate potential changes with the Government and NBN Co.

While no completion date has been said, Thodey said the telco supports the Government’s objective to finalise the NBN's Definitive Agreements as soon as possible.

“The renegotiations are progressing well and the parties are working constructively towards a common goal,” Thodey said.

“This is important as well will be NBN Co’s largest customer and one of their biggest suppliers.”

After excluding the $561m profit on the sale of CSL, Telstra’s income and EBITDA guidance for 2015 is broadly flat.

It expects continued low single-digit income and EBITDA growth, to offset the absence of CSL's 2014 operating revenue and EBITDA.

Telstra is predicting free cashflow of between $4.6bn and $5.1bn for 2015.

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