Hold the phone! Telstra (ASX:TLS) delivers solid underlying growth and declares 8cps dividend

Telstra had a solid half…

| More on:
A young woman in a red polka-dot dress holds an old-fashioned green telephone set in one hand and raises the phone to her ear representing the Telstra share price and the opportunity for investors in FY23

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Telstra has released its half year results and delivered solid underlying earnings growth
  • The telco giant's result was driven by its mobile business and cost cutting
  • The Telstra Board has declared an 8 cents per share fully franked interim dividend

The Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Thursday.

This follows the release of the telco giant's half year results this morning.

Telstra share price on watch after delivering solid result

  • Revenue down 4.4% to $10.5 billion
  • Operating expenses down 6.7% to $7.4 billion
  • Reported EBITDA down 14.8% to $3.5 billion
  • Underlying EBITDA up 5.1%
  • Fully franked interim dividend maintained at 8 cents per share
  • FY 2022 guidance reaffirmed

What happened during the first half?

For the six months ended 31 December, Telstra posted a 4.4% decline in revenue to $10.5 billion and a 14.8% decline in reported EBITDA to $3.5 billion. However, it is worth noting that the prior corresponding period had a number of one-offs such as the sale of the Velocity and South Brisbane exchange assets. This means its underlying result is more reflective of its performance.

On an underlying basis, thanks to a 6.7% reduction in its operating expenses to $7.4 billion and positive momentum in the mobile business, Telstra's EBITDA came in 5.1% higher year on year. This was ahead of what analysts at Morgans were expecting. They had pencilled in a 4% increase in underlying EBITDA for the period.

This puts the company on track to achieve its full year underlying EBITDA guidance of $7 billion to $7.3 billion in FY 2022.

Also largely on track is its free cash flow. On a guidance basis, Telstra's free cash flow after lease liabilities came in at $1.7 billion. This compares to its full year guidance of $3.5 billion to $3.9 billion.

This allowed the Telstra board to declare an 8 cents per share fully franked interim dividend, which is flat on the prior corresponding period.

Management commentary

Telstra's CEO, Andrew Penn, was pleased with the half and believes its results reflect the positive momentum delivered through the company T22 strategy. He also believes it puts the company in a strong position as it transitions into T25.

Mr Penn commented: "This was the second consecutive half of underlying growth. The results show we have stayed disciplined and focussed on delivering what we said we would. The benefits of T22 are flowing through for our customers and our shareholders. As the nation has developed an ever-increasing reliance on digital connectivity, we are well placed to deliver the infrastructure, solutions and security needed to support Australia's aspiration to become a world leading digital economy."

"Our continued focus on mobile network leadership and building value resulted in five percent post-paid handheld ARPU growth, 6.3 percent mobile services revenue growth and $392 million mobile EBITDA growth. We added 84,000 net retail post-paid mobile services including 62,000 branded with a strong contribution from Enterprise. Our branded performance reinforces the benefits of our clear leadership in 5G."

Outlook

Management didn't provide any commentary relating to the second half, but Telstra has reaffirmed all aspects of its FY 2022 guidance.

This includes full year underlying EBITDA of $7 billion to $7.3 billion and free cash flow after lease liabilities of $3.5 billion to $3.9 billion.

Motley Fool contributor James Mickleboro 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 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.

More on Earnings Results

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »

A young man sitting at an outside table uses a card to pay for his online shopping.
Consumer Staples & Discretionary Shares

Why is the Kogan share price crashing 12%?

Profits are down at this ecommerce company during the second half.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Resources Shares

Guess which ASX 200 mining stock is sinking 7% following its quarterly update

Let's see how this miner performed during the third quarter.

Read more »