The Telstra Corporation Ltd (ASX: TLS) share price is on watch after reporting its FY22 result and revealing underlying growth.
Telstra is the biggest telecommunications company in Australia. It just reported its result for the 12 months to 30 June 2022.
Telstra’s FY22 result
Here are some of the highlights from the result:
- Total income down 4.7% to $22 billion
- Underlying EBITDA (EBITDA explained) up 8.4% to $7.3 billion
- Underlying earnings per share (EPS) rose 48.5% to 14.4 cents
- Reported net profit after tax (NPAT) fell 4.6% to $1.8 billion
- Free cashflow rose 5.9% to $4 billion
- Final dividend of 8.5 cents, up 6.25%
Within the mobile division, it saw EBITDA growth of 21.2%. There was 2.9% growth of postpaid handheld average revenue per user (ARPU) and 6.4% growth of mobile services revenue growth. Telstra said that 155,000 net retail postpaid handheld services were added.
On top of handheld services growth, there were one million internet of things (IoT) services added, along with 218,000 wholesale services.
Enterprise also returned to growth at both the income and EBITDA level. Fixed enterprise EBITDA increased 2.3%.
EBITDA in the international business grew 15.2% in Australian dollars. It also recently acquired the Digicel Pacific business.
Telstra Health saw revenue rise 51% to $243 million, which included the acquisition of MedicalDirector. It’s on track to become a $500 million revenue business by FY25.
During the year, Telstra also signed a network sharing agreement with TPG Telecom Ltd (ASX: TPG).
Underlying fixed costs were down $454 million and total operating expenses dropped 5.8%, or $906 million.
FY23 guidance
Telstra gave some guidance about what to expect from the new financial year:
- Total income of between $23 billion to $25 billion
- Underlying EBITDA of between $7.8 billion to $8 billion
- Capital expenditure of between $3.5 billion to $3.7 billion
- Free cashflow after lease payments of between $2.6 billion to $3.1 billion
Why did Telstra increase the dividend?
This dividend increase seemed to come early. Telstra’s outgoing CEO Andy Penn said:
This represents the first increase in the total Telstra dividend since 2015 and recognises the confidence of the board following the success of our T22 strategy, the ambition in our T25 strategy and high-teens EPS growth from FY21 to FY25, the strength of our balance sheet and the recognition by the board of the importance of the dividend to shareholders.
Final thoughts on Telstra
This seems like a very promising update by Telstra. Growth of underlying EBITDA and an increase of the dividend is a good sign of what could come next. I’m impressed by what Telstra has managed to achieve. Underlying EPS growth will be key in the coming years.
It is worth buying? It’s an interesting idea. Telstra is not at the top of my own watchlist, but I do think Telstra now has an attractive future for the next few years. I think it’s a solid blue chip choice.
