TPG Reaffirms Guidance

By Glenn Dyer | More Articles by Glenn Dyer

TPG Telecom’ (TPM) interim was better than market forecasts and the company is close to regaining its mantle as a growth darling for aggressive fund managers and investors looking for a play in the slow moving telco sector.

A nice boost to interim dividend no doubt helped refocus attention on the telco which has been in the ’naughty corner’ since last September when it warned of the danger of profit margin compression from the growing spread of the NBN.

The teleco’s first-half net profit after tax jumped 11% to $224 million in the six months ended January 31 from the first half of 2015-16. Underlying net profit rose 28% to $207.5 million.

Both figures were well above many market forecasts which had both versions of net profit under the $200 million mark.

And TPG reaffirmed its guidance, provided in September for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the full-year to come between $820 million and $830 million. Revenue rose a solid 7.7 % to $1.242 billion in the half.

The company said in a statement to the ASX that first-half EBITDA rose 8% to $473.4 million, while underlying EBITDA was up 13% to $417.6 million.

TPG declared an interim dividend of 8 cents a share payable on May 23. That was up 14% from a year earlier.

Combined, TPG and iiNet (7,000) added 43,000 consumer broadband subscribers to take its total to 1.91 million.

It grew the number of subscribers on its NBN plans by 54,000 in the first half to 173,000, and as of January 31 had 24,000 consumer subscribers on its own fibre-to-the-building service.

TPG is building its own fibre-to-the-basement network, competing directly with NBN in covering 500,000 apartments and businesses in highly profitable metropolitan areas.

TPG’s latest numbers also included a $48.8 million profit realised on the sale of its shares in rival telco Vocus and $7 million in non-recurring revenue earned by the telco’s consumer division.

Mr Teoh previous warning of shrinking margins for TPG from customers that roll over onto the NBN halted the company’s share price in its tracks and sparked a sell-off.

Since the warning issued at the company’s full year results in September, TPG shares have lost more than 40%, but have since steadied and were up more than 5% to more than $7 at one stage yesterday, with many analysts more upbeat about the company than they have been for a while. The shares closed at $6.98, up 5.4%.

The company has 453,000 mobile subscribers and says it is keeping a close eye on the impending decision by the Australian Competition and Consumer Commission on the domestic mobile roaming issue, which the telco is broadly supportive of.

“On domestic mobile roaming we certainly think it should occur and we have made that view clear to the ACCC,” the telco said.

TPG is also rolling out a mobile network in Singapore and says it expects to spend up to $A280 million on the build with recruitment and network planning activities currently underway.

The telco entered the Singapore market in December following a successful $A99 million bid for 4G mobile spectrum.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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