Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mobile service revenues surpassed $1 billion for the first time, indicating strong growth in this segment.
- Customer satisfaction grew by 7 points, reflecting improved service quality.
- Employee engagement remains strong, maintaining top quartile sustainability benchmarking.
- Data center revenue growth exceeded targets, increasing by 54.2% to $37 million.
- High-tech revenues grew by 21.5%, driven by IoT and other technological advancements.
Negative Points
- Adjusted revenue decreased by 1.2% to $3.861 billion due to challenging economic conditions.
- Adjusted EBITDAI reduced by 2.5% to $1.163 billion, impacted by lower revenue and higher costs.
- Adjusted NPAT declined by 21% to $342 million, affected by higher finance expenses and depreciation.
- Free cash flow reduced by 32.5% to $330 million, contributing to higher net debt.
- Intensified competition in the business mobile segment led to a 3.5% decline in revenue.
Q & A Highlights
Q: Could you provide clarity on your base assumption for operating conditions through FY25 for the guidance range?
A: The mobile market is expected to grow around 3%, maintaining share within that. The cost program includes a $50 million net reduction in labor and $30 million in OpEx. IT services are expected to stabilize, with IT products already in growth. We don't expect significant improvement in macro conditions in the first half of FY25, relying on internal work to support a sustainable cost base and earnings.
Q: What are your internal targets for fixed wireless for FY25?
A: We haven't set a specific target for wireless broadband to be shared, but it continues to be an opportunity for growth, especially with the rollout of 5G. The speed has grown substantially, particularly on 5G, contributing to cost savings. The market is very price competitive, but we are investing in the network to support growth.
Q: How are you managing the risks within the business with significant cost savings, particularly in labor costs?
A: The Operate Program includes changes across various parts of the business, including consumer, mobile, broadband, and network operations. We balance risk and ensure a balanced approach. In enterprise and government, we address structural challenges by integrating subsidiaries, simplifying product portfolios, and reducing duplication, leading to labor and OpEx cost reductions.
Q: How long are you willing to pay a dividend that sits outside of the 80% to 100% of free cash flow?
A: The capital management framework outlines our long-run approach to dividends. For FY25, free cash flow of $400 million to $440 million funds a good portion of the dividend. Our intention is to grow free cash flow over time, aligning with our capital management framework and EBITDAI growth.
Q: Can you comment on the timing and progress of the data center partnering process?
A: The immediate term funding approach includes the DRP and potential issuance of hybrid capital notes, providing funding for at least the next 18 months. We have commenced work on capital partnerships and will update the market as it evolves.
Q: What are the building blocks to get back to 3% mobile service revenue growth, especially from an enterprise market perspective?
A: Consumer demand for more data and plan adjustments, annual price reviews, and stabilization in the enterprise market are key drivers. We expect demand for data to continue growing, supporting the 3% growth target.
Q: Are there any issues within the company hampering the performance of fixed wireless in the broadband business?
A: No, we are continuing to roll out the mobile networks, with over 200,000 customers using our broadband, representing 31% of our base. We are the market leader in this segment.
Q: What is the logic behind paying a partly unimputed dividend funded by the DRP?
A: We aim to balance shareholder returns, investing for the future, and maintaining balance sheet strength. The DRP reduces the cash payment of the dividend, ensuring flexibility to invest in data center assets. The focus is on growing free cash flow in FY25 through EBITDAI growth and cost reductions.
Q: How do you plan to bring net debt back to the target metric of 1.7 times EBITDAI?
A: A combination of growing free cash flow, working capital initiatives, reduced capital investment, and the DRP will help address the net debt position. The potential issuance of hybrid capital notes also supports this goal.
Q: How do you justify including other gains in the adjusted EBITDAI metric?
A: We have a long-held position of differentiating between reported and adjusted items based on individual items greater than $25 million. Clear disclosures are provided for transparency. The focus for FY25 is on returning EBITDAI to growth through cost reductions and growth in mobile and data centers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
