TPG (ASX:TPG) share price on watch after 71% jump in first half revenue

This telco will be on watch on Friday…

| More on:
group of friends checking facebook on their smartphones

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The TPG Telecom Ltd (ASX: TPG) share price will be one to watch this morning.

This follows the release of the telco giant's first half year results since its merger with Vodafone Australia.

TPG share price on watch after delivering strong first half growth

  • Revenue increased 71% to $2,630 million
  • EBITDA up 67% to $886 million
  • Net profit after tax down 8% to $76 million
  • Fully franked interim dividend of 8 cents per share

What happened in FY 2021 for TPG?

As I mentioned above, this was effectively the first half year result the company has released since its merger with Vodafone Australia. The prior corresponding period included only four days' contribution compared to a full six months in the first half of FY 2021. This ultimately led to TPG reporting a 71% increase in revenue to $2,630 million.

And while things were not as positive on the bottom line, this was largely due to a one-off non-cash benefit of $226 million in the prior corresponding period. This led to net profit after tax falling 8% to $76 million during the first half of FY 2021. A better reflection of its performance will be its EBITDA metric. This increased 67% to $886 million, which could bode well for the TPG share price today.

During the first half, TPG increased its overall broadband subscriber base by 23,000 to 2.2 million. However, due to the NBN rollout, the average number of DSL subscribers declined by 237,000 compared to the prior corresponding period. This caused a $23 million decline in gross profit as the average gross profit contribution from providing an NBN service was $16 per month lower than for a DSL service.

The company's mobile customer based declined during the half, but at a significantly reduced rate of decline compared to 2020. The company lost 136,000 mobile subscribers in the six months to 30 June 2021 compared to a decline of 737,000 in 2020. Reduced numbers of international visitors and temporary visa holders due to COVID continued to be a major driver of these customer number declines.

What did management say?

TPG's Chief Executive Officer, Iñaki Berroeta, was pleased with the half considering the challenges it faced.

He said: "The group's EBITDA result is pleasing and demonstrates a solid underlying performance achieved through the realisation of $38 million in merger cost synergies and strong commercial management."

"In an environment with continued headwinds from COVID-19, NBN margin erosion and the new RBS levy, and residual challenges from the merger delay and 5G vendor restrictions, we are performing well. Through the groundwork we have laid across the company over the past year since the merger, we are now in a stronger position to take advantage of our growth potential."

Potentially giving the TPG share price a lift was Mr Berroeta highlighting its infrastructure assets. There has been speculation that the company may follow the lead of Telstra Corporation Ltd (ASX: TLS) by trying to unlock value through asset sales.

He said: "With 7.5 million consumer and business services, the largest family of owned telco brands in Australia, and a valuable portfolio of infrastructure assets, there is enormous potential to drive greater shareholder returns and exceptional customer experiences."

What's next for TPG?

The good news for the TPG share price is that the company is entering the second half in a strengthened position following solid progress on integration activities and its strategic priorities.

It is on track to reach 85% 5G population coverage in ten of Australia's largest cities and regions by the end of the year. This is expected to support future growth in mobile and home wireless.

Management revealed its second half priorities. It explained: "The company's key strategic focus areas for the second half of 2021 are bringing more fixed customers onto its own infrastructure, lifting its impact in the enterprise and government market, improving mobile performance and achieving its $70 million merger cost synergy target for 2021."

No guidance has been provided for the full year.

TPG share price performance

The TPG share price is down a disappointing 7% year to date. This compares to a 32% gain by the shares of rival Telstra. Shareholders may be hoping this result is an inflection points for its shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

Up 74% in 2024, why is this ASX 200 stock rallying today?

Recurring revenues continue to grow.

Read more »

Man pointing at a blue rising share price graph.
Earnings Results

Guess which ASX All Ords share is soaring on 21% FY 2024 growth

Investors are piling into the ASX All Ords share today. Let’s find out why.

Read more »

Girl sliding down on snow with arms spread out.
Earnings Results

Elders shares on ice for a $475 million acquisition after profits plunge 55%

What on earth is going on with Elders shares today?

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Energy Shares

This ASX 200 mining stock just reported a 40% earnings jump

Investors appear pleased with this miner's performance during the first quarter.

Read more »

Business people discussing project on digital tablet.
Earnings Results

2 ASX All Ords shares surging over 10% on strong results

Investors are buying these shares in response to strong results this morning.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Earnings Results

Xero share price rockets to record high on explosive half-year growth

The tech star delivered another impressive half year results this morning.

Read more »

A man cheers after winning computer game while woman sitting next to him looks upset.
Earnings Results

2 high-flying ASX 200 gaming shares splitting ways today

Which gaming giant is winning the admiration of investors amid results?

Read more »

Male building supervisor wearing high vis vest and hard hat stands and smiles with his arms crossed at a building site
Industrials Shares

This $23 billion ASX 200 stock is surging 6% while the market sinks. Here's why

This ASX 200 stock is shrugging off the wider market sell down today and racing higher. But why?

Read more »