TPG Telecom (TPM) has upgraded its earnings guidance, beating analyst expectations for its interim profit and raised industry speculation it could make a move on rival telecommunications provider iiNet (IIN).
As a result, TPG shares had a very strong day as they jumped more than 8% on the upgrade at one stage, but eased to end the day up 7.3% at $6.18.
The company, which is in the process of digesting AAPT, revealed that earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 8% to $165.6 million for the first half of 2013-14, well above market forecasts of around $149 million.
The AAPT purchase was completed on February 28 and had no impact on the interim result.
Net profit for the half was up 15% to $90.1 million, compared to the same period in 2012-13.
TPG reported a 36,000 net increase in broadband subscribers during the half year, which was below analyst forecasts of around 40,000 subscribers.
But it was much faster than iiNet which only increased its first half subscribers levels by 16,000.
As at January 31 this year TPG said it had 707,000 broadband subscribers and 370,000 mobile subscribers.
Some industry analysts believe the departure of iiNet founder and chief executive Michael Malone last week has increased the chances of TPG making a successful acquisition attempt on the company as early as 2014.
But TPG yesterday did not provide any extra insight on its controversial fibre-to-the-basement network, which is designed to be put it in direct competition with NBN Co.
The interim dividend was set at 4.5¢ per share, up 30% on the first half of 2012-13’s payout and is payable on May 20.
TPG vs IIN 1Y – TPG shares jump on solid earnings upgrade
Looking to the rest of the year TPG directors lifted their guidance, saying the Group’s FY14 EBITDA guidance (excluding AAPT) has been boosted from $290-300m to a new estimated range of $325-330m.
"AAPT is expected to contribute EBITDA of $15-25m (net of one-off acquisition and integration related expenses of $7-12m) for the 5 months from date of acquisition to 31 July, giving an estimated FY14 EBITDA range for the merged Group of $340m-355m," directors said.
That’s why the shares hit a new high yesterday.
Directors said the consumer division’s EBITDA for the period was $100.2 million which includes $1million of non-recurring benefits arising from a retrospective supplier credit.
"As reported last year, the division’s EBITDA for 1H13 of $94.8m benefitted from $10.0m of back-dated rebates arising from favorable regulatory determinations that occurred in that period.
"The Consumer division’s underlying EBITDA growth for 1H14 relative to 1H13 is therefore $14.4m or 17%," directors said.
Directors added that the corporate division achieved an EBITDA of $64.5 million for the period.
"This result includes $5.6m of non-recurring benefits (comprising $4.0m of back-dated supplier credits and a $1.6m IRU gain). As reported last year, the division’s 1H13 EBITDA of $57.5m included a $10.5m IRU gain. The Corporate division’s underlying EBITDA growth for 1H14 relative to 1H13 is therefore $11.9m or 25%.
"This growth has been achieved through revenue growth as well as an improvement in underlying margin from 41% to 49%".
