As forecast earlier this year, a big write-down of its now abandoned mobile network whacked the interim profit of TPG Telecom.
The company, which is part of the Brickworks-Soul Pattinson group of companies based in Sydney, said its first-half profit slumped 76.5% to $46.9 million after the $227.4 million impairment on its mobile network and asset.
Earnings for the first half of 2017-18 totaled $200 million.
TPG held its interim dividend at a fully franked 2.0 cents and reaffirmed full-year earnings before interest, tax, depreciation and amortisation guidance of $800 million to $820 million, excluding merger costs or expenses related to its Australia or Singapore mobile operations.
TPG shares rose 4.3% yesterday to $7.14, building on small early gains in the afternoon session.
It said underlying earnings edged up despite a 1.5% fall in revenue to $1.26 billion.
TPG also recorded $4.4 million in costs relating to its planned merger with Vodafone Australia, a tie-up that analysts suggest prompted TPG to scrap its mobile network on competition concerns.
CEO, David Teoh expressed frustration yesterday with the length of time the ACCC is taking to decide on the merger’s future.
Stripping out the one-off items, TPG said underlying earnings before interest, tax, depreciation, and amortisation rose 2.8% to $424.4 million, and underlying net profit increased by 3.5% to $225.2 million.
TPG, however, said that its underlying EBITDA was again hit by the loss of customers to low-margin NBN services, but it managed to offset that with a better outcome from its corporate division and internal cost efficiencies.
“The $39m of other EBITDA growth achieved relative to 1H18 was driven by growth in the Corporate Division (including an uplift in contribution from the VHA fibre contract) and the continued realisation of operating expense efficiencies across the Group,” directors said yesterday.
“The Consumer Segment’s EBITDA for 1H19 was $243.0m compared to $255.2m for 1H18. This movement comprises a $24.8m decrease in gross profit, partially offset by a $12.6m decrease in employment and overhead costs.
“The gross profit decline is driven by broadband gross margin erosion and loss of home phone voice revenue, both due to the NBN rollout. The significant decrease in employment and overhead costs reflects the results of ongoing operating cost optimisation work.
“The Corporate Segment achieved EBITDA of $182.5m for 1H19 compared to $158.7m for 1H18. This $23.8m increase was driven by a significant step up in the contribution from the contract to provide fibre services to VHA, complemented by other on-net fibre sales.
“The continued shift towards revenue delivered on the Group’s owned fibre infrastructure helped lift the Corporate Segment EBITDA margin to 48% in 1H19 compared to 42% in 1H18,” TPG directors said.
