You really have to admire a company for growing at a solid clip in a highly competitive business like telecommunications. That's just what TPG Telecom Ltd (ASX: TPM) has done in its FY 2014 full year results. The stock shot up 4.4% on Monday when the results came out.
When you have industry giant Telstra Corporation Ltd (ASX: TLS) and other nimble rivals around, you have to constantly grow, innovate and stay sharp.
Here's what TPG achieved over the past 12-month reporting period.
Revenue and earnings
Group revenue was up 34% to $970.9 million and net profit after tax climbed 15% to $171.7 million.
EPS was 21.6 cents per share (cps), up from 18.8 cps for a 15% gain.
The final dividend was raised from 4 cents per share to 4.75 cps for a full year dividend of 9.25 cps.
This is the sixth year in a row that both earnings and dividends increased. That's an impressive track record.
Customer revenue and higher ARPU
Consumer subscriber numbers and revenue were up, especially for broadband users. Business subscriber revenue saw a great increase from the addition of its recently acquired AAPT business.
The average revenue per user (ARPU) for broadband increased for the third year in a row.
Cash flow increase
Operating cash flow was up from $318 million to $396 million, helping TPG repay $117 million in debt. Part of that was for costs from acquiring AAPT. Group debt is $350 million as of July 31, 2014. That's a little more than two times its net profit, so it shows the company can handle that level of debt.
FTTB and NBN
After the reporting period, the company did get a boost for its "fibre-to-the-building" (FTTB) network that can offer high-speed broadband similar to the national broadband network. The ACCC will allow it to operate alongside the NBN.
One of the reasons to acquire AAPT was for its internet network infrastructure. With it, TPG can extend its current network system and possibly supply around 500,000 urban residences and businesses with its FTTB.
There was a concern that the ACCC would block it, but now that's out of the picture. This gives the company pricing power and a competitive advantage as a wholesale and retail service provider. The company has started offering the FTTB service this month.
Lastly, TPG Telecom has given guidance for FY 2015 EBITDA of $455 – $460 million. FY 2014 reported EBITDA was $363.7 million, so next year it could increase around 25% – 26.5%.
All in all, the company showed impressive growth as it moves forward with its high-speed network expansion plans.
The stock does have a 31 PE, so it isn't at bargain prices. However, if the company can reach the average 22% annual earnings growth forecast by analysts over the next two years, it could still deliver share price gains. It offers a 1.3% dividend yield fully franked.
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