TPG Telecom has cut interim dividend by three quarters to preserve cash as its mobile expansion plan gathers pace and the impact of the NBN bites the bottomline.
Dividend was cut to 2 cents a share from 8 cents a share a year ago as TPG reported a first-half net profit of just $198.7 million — 11% down on the first half of 2016-17 when it benefited from $55.8 million in non-recurring items.
But the company remains optimistic and upgraded its full-year earnings guidance. It upgraded its full-year underlying earning guidance to between $825 million and $830 million, from between $800 million and $815 million previously,=.
In a statement to the market, TPG said it faced pressures like the cost of moving customers to the lower-margin National Broadband Network (NBN) and higher electricity charges.
Underlying profit, which accounts for the previous year’s cash benefit, rose 5% to $217.7 million, compared to $207.5 million a year ago.
Underlying earnings also rose slightly from $417.6 million to $418.2 million, and revenue edged up to $1.3 billion, from $1.2 billion.
TPG’s consumer division fell compared to a year ago when the company included a $7 million one-off revenue.
The fall was driven by broadband margin erosion and loss of home phone voice revenue on the back of the national broadband network rollout, TPG said.
But the company’s corporate segment’s earnings rose to $158.9 million from $157.2 million a year ago, on the back of continued strong data and internet sales offsetting ongoing declines in voice revenues. TPG reckons this will see an upturn in revenue once its dark fibre deal with Vodafone kicks in from May.
As at the end of January the group had bank debt of $1.394 billion. It has undrawn headroom on its debt facilities of $900 million which suggests it will not have to raise capital to meet its mobile investment commitments or around $1.9 billion.
Like Telstra and Vocus there is a three letter word that undermines telco share prices in this country and that is NBN. its as much why the share priece weakened yesterday as a lack of belief in the profit. The shares fell more than 4% to $5.76, a tenetative thumbs down from investors to the report and the optimistic outlook.
