TPG Telecom (TPG) H1 2024 earnings summary

Executive summary

• Achieved solid trading and strong cash performance in H1 2024, with increased focus on cost efficiency and strategic initiatives for H2 and 2025.

• Mobile service revenue grew 7.2% year-over-year, driven by higher ARPU, network investment, and a major MVNO contract win.

• Fixed Broadband ARPU increased 6.3%, supported by Fixed Wireless growth and improved on-net margin despite NBN competition.

• Operating free cash flow improved by $340 million to $278 million, reflecting better working capital and lower capex.

• Operational efficiencies include a reduction of 120 roles, expected to slow OpEx growth and save $20 million annually.

Financial highlights

• EBITDA guidance for 2024 is $1.95–2.025 billion, tracking toward the midpoint; EBITDA up 3.5% to $974 million, adjusted EBITDA up 2.2% to $979 million.

• Gross margin up 3.9% to $1,585 million, outpacing service revenue growth of 1.7% to $2,327 million.

• Statutory NPAT was $29 million, down 39.6% year-over-year; adjusted EPS was 4.8c, down from 6.2c.

• Operating free cash flow rose to $278 million from $(62) million in 1H23.

• Interim dividend maintained at 9.0c per share, 87% franked, payout ratio of 63%.

Outlook and guidance

• Confident in achieving EBITDA within guidance range, with moderating indirect cost growth and reduced cash capex guidance to $1.02 billion for 2024.

• Cash capex expected to fall further in 2025/2026, and to $700–800 million from 2027.

• Expect material improvement in cash earnings over the medium term, enabling debt reduction.

• Non-cash charges of $230–250 million expected at full year if ACCC approves Optus regional sharing.

• Regional network sharing with Optus pending ACCC approval, decision due 13 September 2024.