Telstra share price on watch after profits jump 13% in FY23

Telstra delivered strong profit growth in FY 2023.

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The Telstra Group Ltd (ASX: TLS) share price will be on watch today.

That's because the telco giant has just released its FY 2023 results. Let's see how it did.

Telstra share price on watch after hitting guidance

  • Total income up 5.4% to $23.2 billion
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) up 9.6% to $8 billion
  • Net profit after tax up 13.1% to $2.1 billion
  • Earnings per share up 16% to 16.7 cents
  • Final dividend flat at 8.5 cents per share (FY 2023 dividend up 3% to 17 cents per share)

What happened during FY 2023?

For the 12 months ended 30 June, Telstra reported a 5.4% increase in total income to $23.2 billion and a 9.6% lift in underlying EBITDA to $8 billion. The latter was at the very top of the company's guidance range of $7.8 billion to $8 billion and ahead of the consensus estimate of $7.94 billion. This could bode well for the Telstra share price today.

Telstra's EBITDA growth was driven by a 15.1% increase in Mobile EBITDA to $4,602 million and an 84.2% jump in International (Digicel Pacific etc) EBITDA to $713 million. This offset softer earnings in its Fixed businesses.

On the bottom line, Telstra's net profit after tax rose 13.1% to $2.1 billion and its earnings per share climbed 16% to 16.7 cents.

Telstra's free cash flow (on a guidance basis) came in at $2.8 billion, which allowed the company's board to declare a fully franked full-year dividend of 17 cents per share. This is up 3% year on year from 16.5 cents per share in FY 2022.

Management commentary

Commenting on the company's performance, Telstra's CEO, Vicki Brady, said:

Our mobiles business remains central to our growth and continues to perform very strongly. Our infrastructure, international, Consumer and Small Business (C&SB) fixed line and health businesses also grew earnings. At the same time, there are aspects of our Enterprise fixed business that are experiencing headwinds. We remain disciplined on reducing our costs, particularly considering the external economic environment.

Brady also revealed that she was pleased with the progress the company is making with its T25 strategy. The CEO said:

In a few months' time we will hit the halfway point in delivering our strategy and the response from customers tells me we are absolutely on the right path. We continue to see the positive impact of product simplification, digitisation, answering consumer and small business calls in Australia, and bringing our retail stores in house.

Outlook

One slight negative for the Telstra share price is the news that inflation is putting pressure on its cost reduction plans. Ms Brady said:

Looking ahead to FY24, lifting customer experience remains my top priority, and I believe that if we are successful in that, we will in turn achieve our growth ambitions. While our cost reduction ambition is being challenged by high inflation, we still expect to achieve the large majority of this by FY25. We remain absolutely committed to delivering our FY25 underlying EBITDA and EPS growth ambitions.

Telstra has provided the following guidance for FY 2024:

  • Total income of $22.8 billion to $24.8 billion (-1.7% to +6.9% growth)
  • Underlying EBITDA of $8.2 billion to $8.4 billion (2% to 5% growth)
  • Capex of $3.6 billion to $3.7 billion
  • Free cash flow after lease payments of $2.8 billion to $3.2 billion

The consensus estimate is for EBITDA of $8.35 billion in FY 2024, which means the company's guidance is largely in line with expectations.

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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