Telstra has lifted its 2018-19 write-offs and associated restructuring costs to be revealed in August to half a billion dollars.
The telco announced yesterday higher costs from its current restructuring program and the write-off legacy IT assets to the tune of $200 million.
The restructuring costs are part of the company’s T22 change program announced in 2018 which contained 8,000 job cuts.
The restructuring is more advanced than planned according to Telstra’s statement yesterday with around 6,000 of the jobs expected to be cut by the end of the financial year.
That will result in a $200 million increase in total annual restructuring costs, which it now forecasts to total around $800 million by 2019-20.
It also said that restructuring costs related to the T22 initiatives are likely to be about $350 million in 2019-20.
CEO Andy Penn said in the statement the financial impact of the quicker pace of change were brought forward into FY19 and were the natural result of T22, the company’s transformation program.
“We understand the significant impact on our people and the uncertainty created by these changes,” Mr. Penn said in a statement on Wednesday.
“We will continue to see role reductions as we replace our legacy systems, digitise and simplify how we work, and respond to things like declining NBN and call volumes, but if a final decision is made on the proposal announced today we expect the majority of our T22 restructure will be behind us.”
“Telstra is also ahead of plan on the simplification of its structure and ways of working announced as part of T22, which as previously announced is expected to lead to a net reduction of around 8,000 employees over three years,” the company said in yesterday’s statement.
“Telstra today commenced consultation with employees and representative unions on proposed job reductions previously expected to be announced in the first half of FY20. This will result in the relevant restructuring cost being brought forward from FY20 to FY19.
“With today’s start of consultation, Telstra expects to have announced a reduction of approximately 6000 roles by the end of the financial year, which puts it on track to reach the previously announced net cost out target of $2.5 billion by the end of 2022.
“As a result of bringing these announcements forward, Telstra expects total FY19 restructuring costs to increase from around $600 million to around $800 million. While impacted employees will not be leaving the organisation until early FY20, consultation is expected to conclude in mid- June and therefore the costs will be included in Telstra’s FY19 results.
Shares in the company were worth $3.57, up 0.3% yesterday.
The shares are up 25% so far this year (helped by the ACCC blocking the proposed TPG-Vodafone merger).
Telstra said that the final outcomes and related impacts of the impairment of legacy IT assets and restructuring costs are subject to Audit & Risk Committee and Board approval and are therefore subject to change.
“This will be contained in Telstra’s full-year results on 15 August 2019. Telstra otherwise reaffirms FY19 Guidance,” the company added yesterday.