The TPG Telecom Ltd (ASX: TPG) share price is pushing higher following the release of its half year results.
At the time of writing the telco's shares are up 1% to $7.37.
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What did TPG Telecom announce?
To begin with, it is worth noting that these results are a predominantly going to reflect the performance of the Vodafone Australia business during the six months ended 30 June 2020.
This is because the merger between TPG and Vodafone Australia only became effective for accounting purposes on 26 June. Which, despite the company name, means its statutory income includes a full six months from Vodafone Australia but only four days from the TPG business.
It is also worth noting that significant pre-merger implementation restructuring steps occurred between 2 July 2020 and 13 July 2020. As a result, its balance sheet on 30 June was not fully reflective of its balance sheet after the merger was implemented.
What were its results?
During the first half of FY 2020, the company's reported earnings before interest, tax, depreciation and amortisation (EBITDA) was $531 million. This includes an EBITDA contribution of $9 million from the TPG business and $24 million of merger transaction costs.
On a like for like basis, excluding the TPG contribution and merger costs, underlying EBITDA was down 8% on the prior corresponding period to $546 million.
On the bottom line, the company's reported net profit after tax was $83 million. This includes a $226 million one-off, non-cash credit to its tax expense.
Excluding this, the effect of the merger transaction costs, and TPG's contribution, the company's underlying net loss after tax was $117 million. This is a $27 million improvement relative to the prior corresponding period.
What if the merger had completed on January 1?
To give investors an idea of what this half year result would look like if it had a full contribution from the TPG business, the company provided a pro forma result.
Pro forma revenue was $2,712 million for the half, comprising TPG revenue of $1,248 million and Vodafone revenue of $1,513 million.
Whereas pro forma EBITDA would have been $918 million. This comprises TPG EBITDA of $391 million and Vodafone EBITDA of $545 million. Pro forma EBITDA (pre AASB16) would have been $836 million.
COVID-19 impacts.
As with rival Telstra Corporation Ltd (ASX: TLS), there have been some negative impacts on its performance because of the COVID-19 pandemic.
Management revealed that global travel restrictions have had a significant impact on revenue and EBITDA, causing a ~80% reduction in roaming margin, ~30% decline in prepaid connections, and ~20% decrease in post-paid connections.
In addition to this, the company's ability to connect new customers was impacted during March and April when call centre capacity was temporarily reduced due to local lockdown restrictions in India. And while operations have now returned almost to full capacity, higher costs are being incurred due to changes in service delivery. I
t was a similar story for its retail store network. With about one third of retail stores temporarily closed between April and June, its sales were impacted negatively.
The company also offered financial support to its customers with a temporary $10 'Stay Connected' financial hardship plan during April and May. Combined with extra data and free national calls, TPG Telecom's mobile average revenue per user (ARPU) was negatively impacted.
Outlook.
No guidance was given for the full year. Though, it advised that it will continue to prioritise activities to realise merger synergies, while responding to the ongoing COVID pandemic.
Management also advised that demand for fixed line services is expected to remain strong. However, it expects continued challenging conditions in mobile while global travel restrictions remain in place.
