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Telstra posts underlying EBITDA of $3,875 million and reiterates guidance

The Telstra Corporation Ltd (ASX: TLS) share price could be on the move on Thursday following the release of its half year results this morning.

How did Telstra perform in the first half?

For the six months ended December 31, the telco giant reported total income of $13,413 million. This was a 2.8% decline on the prior corresponding period.

Telstra’s underlying EBITDA declined 6.6% to $3,875 million during the half, but underlying EBITDA excluding the in-year NBN headwind increased by approximately $90 million. This was the first time this figure has grown since FY 2016.

And on the bottom line, on a reported basis, net profit after tax declined 6.4% to $1,150 million. This was in line with its guidance and driven by the ongoing success of its T22 strategy.

Underlying fixed costs were reduced by $422 million or 12.1% during the half. This latest reduction has taken its total underlying fixed cost reductions to around $1.6 billion since FY 2016.

T22 Strategy progress.

Telstra’s CEO, Andrew Penn, was pleased with the progress the company is making with its T22 strategy.

He said: “We are approaching the halfway point of our T22 strategy and we are really pleased to see our customers responding positively to the changes we’re making.”

“As our new products and services are improving the customer experience, we continue to see more customers choosing to interact with us online. Digital service interactions have risen to 57 per cent, 26 per cent of our Consumer and Small Business sales transactions are now digital, and the volume of calls to our call centres continues to fall,” he added.

Dividend.

The Telstra board has decided to hold firm with its dividend and will be paying shareholders a fully franked interim dividend of 8 cents per share.

This comprises an interim ordinary dividend of 5 cents and an interim special dividend of 3 cents. Telstra’s interim dividend has a record date of February 27 and a payment date of March 27.

Customer growth.

Telstra’s multi-brand strategy continued to deliver growth in customer numbers during the half, particularly in the mobile market.

During the first half the business added 137,000 retail postpaid mobile services. This includes 91,000 from Belong, 135,000 retail prepaid mobile services, and 173,000 pre and postpaid and IoT Wholesale services.

Guidance.

The telco giant has reconfirmed its guidance for FY 2020. It expects total income in the range of $25.3 billion to $27.3 billion, underlying EBITDA in the range of $7.4 billion to $7.9 billion, restructuring costs of ~$300 million, capital expenditure of $2.9 billion to $3.3 billion, and free cash flow after operating lease payments of $3.3 billion to $3.8 billion.

And after excluding the expected in-year NBN headwind, which Telstra continues to expect to be in the range of ~$600 million to ~$800 million, underlying EBITDA is expected to grow up to $500 million in FY 2020.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.