Telstra share price on watch amid earnings miss and guidance revision

Will the market be disappointed with the telco giant's update?

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

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

Let's see how the company performed during the six months ended 31 December.

Telstra share price on watch amid solid growth

  • Total income up 1.2% to $11.7 billion
  • Reported EBITDA up 3.8% to $4 billion
  • Underlying EBITDA up 3.1% to $4 billion
  • Net profit after tax up 11.5% to $1 billion
  • Fully franked interim dividend up 5.9% to 9 cents per share

What happened during the first half?

During the half, Telstra reported a modest 1.2% increase in total income to $11.7 billion. This reflects growth across mobile services, International, Telstra InfraCo Fixed, and Amplitel.

Telstra's income growth was partly offset by declines across mobile hardware, Fixed C&SB, Fixed Enterprise, and Fixed Active Wholesale.

Telstra's cost discipline during the half delivered $64 million core fixed cost out, and cumulatively it has now delivered $105 million since FY 2022. Thanks to this discipline and a strong performance from its Mobile business, Telstra's underlying EBITDA came in 3.1% higher at $4,007 million and its net profit after tax jumped 11.5% to $1 billion.

Telstra's EBITDA was a touch short of the consensus estimate of $4,038 million.

Finally, the Telstra board increased its fully franked interim dividend by 5.9% to 9 cents per share. Management notes that this is consistent with its capital management framework. Telstra's dividend will be paid to eligible shareholders on 28 March.

Management commentary

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

Our mobiles business remains central to growth and continues to perform strongly, growing EBITDA almost $300 million in the half driven by more customers, ARPU growth and cost discipline. Our Consumer & Small Business Fixed business more than doubled EBITDA largely due to productivity, and our Infrastructure businesses also grew, reflecting continued strong demand for our assets. Within our Enterprise Fixed business, Data & Connectivity is performing as expected, however NAS [network applications and services] is clearly a long way from where we need it to be.

In response to the underperformance of the NAS business, the company has launched a review. Brady explained:

We are undertaking a full review of the products and services we provide within our Enterprise business, and particularly our NAS portfolio, to make sure they both meet the current and future needs of our customers, and create shareholder value.

Outlook

Potentially weighing on the Telstra share price today is news that the underperformance of the NAS business has impacted the company's guidance. Brady said:

Given the performance in our NAS business, we are tightening our FY24 Underlying EBITDA guidance range to $8.2 to $8.3 billion. FY24 guidance across other measures is reaffirmed.

This compares to its previous guidance of $8.2 billion to $8.4 billion.

Brady concludes:

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.

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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