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