The Telstra Group Ltd (ASX: TLS) share price has fallen after the company reported its FY24 first-half result.
Telstra HY24 result
Here are some of the highlights or the six months to 31 December 2023:
- Total income rose by 1.2% to $11.7 billion
- Underlying EBITDA rose by 3.1% to $4 billion
- Net profit after tax (NPAT) increased 11.5% to $1 billion
- Interim dividend per share up 5.9% to $0.09
Breakdown
The important mobile division saw income rise by 4% to $5.3 billion and EBITDA rose by 13% to $2.5 billion. Mobile services in operation grew by 4.6%, with growth across consumer, small business, enterprise and wholesale. I think this is the most essential division for the Telstra share price
Telstra’s mobile average revenue per user (ARPU) grew by 3.4% excluding prepaid one-off product migration revenue in the previous year.
‘Fixed’ consumer and small business saw EBITDA growth of 110% to $105 million thanks to ARPU growth and an improved mix of product usage, and productivity gains. The nbn reseller EBITDA margin increased to 10% from 7% in HY24, through price rises and cost optimisation.
‘Fixed’ enterprise suffered a 67% decline in EBITDA, though income only dropped by 3% to $1.7 billion. It blamed network applications and services (NAS), with the CEO say it’s clearly a long way from where” it needs to be. It’s undertaking a review of the products and services provided within its enterprise business.
International income rose 5% excluding internal income ,or 15% including internal income, to $1.3 billion. The international EBITDA dropped 8%.
Telstra said it had remained disciplined at reducing its costs, which is impressive considering the inflation the country is seeing. It reduced its core fixed costs by $64 million in the half. It’s expecting to achieve the large majority of its cost reduction ambitions by FY25.
5G progress
Telstra is now reaching around 87% of the population with its 5G network, with 48% of mobile traffic on 5G.
It achieved its target of additional 100,000 km2 of mobile coverage, achieved ahead of time, with more than 140,000 km2 added since FY21.
Outlook for the Telstra share price
The company slightly reduced its underlying EBITDA guidance, to a range of between $8.2 billion to $8.3 billion, down from $8.2 billion to $8.4 billion.
Total income is still expected to be between $22.8 billion to $24.8 billion and free cashflow after lease payments is expected to be between $2.8 billion to $3.2 billion.
Telstra is not exactly a fast growth stock, but it’s going in the right direction. Net profit growth of more than 10% is a good result for a company of Telstra’s size. It needs to keep growing profit to justify a higher Telstra share price in the coming years, but subscriber growth will help with that.
I think Telstra is an attractive ASX blue chip share for its dividend income, but for capital growth there could better options.
