The Telstra Group Ltd (ASX: TLS) share price is in focus after the ASX telco share announced its FY23 result to the market.
FY23 result
Here are some of the highlights from the report for the 12 months to 30 June 2023:
- Total income rose 5.4% to $23.2 billion
- Reported EBITDA (EBITDA explained) rose by 8.4% to $7.9 billion
- Net profit after tax (NPAT) went up 13.1% to $2.1 billion
- Profit / earnings per share (EPS) grew 16% to 16.7 cents
- Reported return on invested capital (ROIC) improved 0.8 percentage points to 7.9%
- Telstra annual dividend of 17 cents per share, up 3%
The business saw pleasing growth in a number of areas. The 5G population coverage reached its FY23 target of 85%, while 41% of mobile traffic was on 5G.
Deals have been signed with low Earth orbit satellite providers OneWeb and Starlink, meaning Telstra will soon be able to deliver “new and improved” services in regional and remote Australia.
Divisional breakdown
In the important mobile division, it saw an increase of number of retail services in operation (SIO) by 1.7 million to 22.5 million, with 8.8 million postpaid retail SIOs, an increase of 86,000 in the year. Postpaid average revenue per user (ARPU) increased from $48.53 to $51.15 thanks to price rises and higher international roaming. Postpaid handheld services revenue rose 6.9% to $5.4 billion. This is useful for the long-term health of the Telstra share price.
Prepaid handheld unique users increased by 247,000, and there was a 9.4% rise in ARPU thanks to increased usage and one-off revenue from product migration. Prepaid handheld revenue rose 16.5% to $1.08 billion.
Wholesale mobile revenue increased by 14.6% to $353 million, with ARPU growth and a 298,000 increase in the mobile unique users.
The mobile EBITDA margin increased by 2.7 percentage points to 44.9% thanks to high-margin service revenue, hardware margin growth and cost reduction.
Telstra’s fixed segments all saw revenue decline, while international saw revenue rose 61.8% to $2.43 billion, partly thanks to the Digicel Pacific acquisition. Excluding Digicel Pacific, international income rose 13.9% to $1.7 billion.
Telstra dividend
The board of directors of Telstra decided to declare a final dividend of 8.5 cents per share, which was the same as the last year’s final dividend.
The full year dividend was 3% higher than FY22’s payout.
Outlook for the Telstra share price
The business has guided that for FY24, total income could be between $22.8 billion to $24.8 billion – that could mean a decline of revenue, or growth of up to 7%. The mid-point of the guidance suggests a rise of $600 million.
Underlying EBITDA is expected to be between $8.2 billion to $8.4 billion. This would be growth of between 3.8% to 6.3%.
Capital expenditure is predicted to be between $3.6 billion to $3.7 billion.
Free cashflow after lease payments is projected to be between $2.8 billion to $3.2 billion.
It’s good to see that underlying EBITDA is expected to keep rising, profitability improvement should help the Telstra share price over the years.
All we can ask of Telstra is to grow its profit and dividend, which it is doing. It’s not expected to achieve incredible growth, but more mobile users, higher ARPU and stronger margins are all helping. It wouldn’t be the first thing I’d buy, but I would happily have it in an income- focused portfolio.