TPG Telecom revealed a 56% slump in net profit for 2018-19 yesterday, a slump driven by the axing of the company’s plans to build Australia’s fourth mobile phone and data network and the now lengthy court battle to try and merge with Vodafone Hutchison Australia.
But the current 2019-20 year will see further downward pressure on earnings (excluding one-offs).
The lower profit and weak forecast saw TPG shares lose more than 3% to close at $6.41 on a day when the ASX 200 hit its highest close in a month.
TPG’s net profit for the 2019 financial year fell to $175 million, with earnings before interest, tax, depreciation and amortisation down 2.1% to $809.4 million.
TPG warned yesterday it expects EBITDA in 2019-20 to fall to a range between $735 million and $750 million as NBN headwinds hit a peak.
(Telstra said this week that the peak hit from the NBN migration will now be 2020-21 with the NBN due to reach 500,000 fewer house this financial year. Telstra said while its revenue would still fall by around $400 million because of the NBN, its earnings could be $100 million higher than guidance).
Despite the weak result, final dividend is an unchanged 2 cents a share which will put cash into the balance sheets of major shareholders, CEO, David Teoh, and Washington H.Soul Pattinson.
That makes a steady full-year payout of 4 cents a share.
Stripping out one-off hits, underlying profit slipped 12.9% to $376.2 million.
Revenue for 12 months to July 31 dipped 0.7% to $2.48 billion as Australian customers migrated to NBN services (as they have done elsewhere to Telstra and Optus).
The reason for the big slump was a $196.1 million write-off from scrapping its planned mobile network The write-off was against the value of its 4G spectrum licence).
There was a further $6.3 million of costs related to its merger attempt with Vodafone Australia.
That court case is back in the Federal Court later this month which will hear an appeal by TPG and Vodafone against the ACCC’s decision to block the $15 billion merger.
