Telstra share price on watch amid strong half-year profit growth

Hold the phone! Telstra has delivered strong growth during the first half

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Key points

  • Telstra has released its half year results and reported solid top and bottom line growth
  • The telco giant's mobile business was a key driver of its strong performance
  • Telstra has lifted its dividend by 6%

The Telstra Group Ltd (ASX: TLS) share price will be one to watch this morning.

That's because the telco giant has just released its half-year results.

Telstra share price on watch amid strong growth

What happened during the half?

For the six months ended 31 December, Telstra reported a 6.4% increase in total income to $11.6 billion. This was driven by momentum from its mobiles business and support from the acquisition of Digicel Pacific.

The star of the show was Telstra's mobile business, which reported continued growth in revenue, average revenue per users (ARPU), services in operation (SIO), and earnings. Mobile services revenue was up 9.3%, assisted by the return of international roaming. Postpaid handheld ARPU was up 4.5% and SIOs up a net 68,000. Prepaid handheld revenue was up 28.7% with unique users up 137,000.

This was supported by growth in the Fixed Consumer and Small Businesses, InfraCo Fixed, and International businesses, and partially offset by weakness in the Fixed Enterprise business due to impacts from ongoing disruption from technology change and competition.

And although inflation is having an impact on Telstra's operations, it has been using cost mitigants and revenue levers to offset this.

On the bottom line, Telstra reported a 25.7% increase in net profit after tax to $0.9 billion. This allowed the company's board to increase its dividend by 6.3% to 8.5 cents per share. This will be paid to shareholders on 31 March.

Management commentary

Telstra's new CEO, Vicki Brady, was pleased with the half. She said:

We are a growing business with a lot to be excited about in our future, and our T25 strategy provides a clear roadmap to get us there. On the back of our continued growth, the Board resolved to pay a fully franked interim dividend of 8.5 cents per share representing a 6.3 percent increase on the prior corresponding period, and in line with the second half of last financial year. The interim dividend is consistent with our policy to maximise the fully franked dividend and seek to grow it over time.

Outlook

Telstra has reaffirmed its guidance for FY 2023 across all measures.

However, it now expects its income to be at the bottom end of guidance due to mobile hardware and fixed product revenues being lower than expected.

Telstra's guidance is for:

  • Total income of $23 billion to $25 billion
  • Underlying EBITDA of $7.8 billion to $8 billion
  • Capex $3.5 billion to $3.7 billion
  • FCFaL of $2.6 billion to $3.1 billion

Looking further ahead, management has reiterated its commitment to its $500 million FY 2025 cost out ambition.

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 has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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