TPG Telecom (TPG) H2 2023 earnings summary

Executive summary

• FY23 service revenue rose 4.3% to $4,632m, with Mobile growth driving results; EBITDA on the updated guidance basis increased 7.6% to $1,930m.

• Operating Free Cash Flow improved to $167m from $92m despite higher capex and a change in handset financing; cash earnings are expected to improve as headwinds ease.

• Transformation continued through plan and product simplification, IT modernisation and 5G rollout; FY24 priorities include sustaining Mobile growth and stabilising Fixed broadband.

Financial highlights

• Service revenue increased 4.3% to $4,632m; total revenue rose 2.2% to $5,533m, partly offset by a 7.7% decline in handset, accessories and hardware revenue.

• Statutory EBITDA was $1,875m, down 12.2% including the prior-year $402m tower sale gain; adjusted EBITDA on the updated guidance basis was $1,930m, up 7.6%.

• Gross margin excluding FY22 tower gains increased 9.3% to $3,105m, supported by service revenue growth and $56m in telco cost savings.

• Statutory NPAT fell 90.4% to $49m; Adjusted NPAT was $584m, down 9.6%, and LTIP-basis EPS was 11.9 cents versus 14.2 cents.

• Cash capex was $1,126m; Operating Free Cash Flow increased to $167m from $92m.

Outlook and guidance

• FY24 EBITDA guidance is $1,950m–$2,025m, including transformation costs and excluding material one-offs; guidance assumes no material change in operating conditions.

• FY24 cash capex excluding spectrum is expected to be approximately $1.05b; D&A is expected to continue rising at a mid-single-digit rate.

• Cash earnings are expected to improve beyond FY24 as working capital, capex and interest-cost pressures lessen; year-on-year improvement is expected to accelerate from FY25.

• Post-FY26 capex excluding spectrum is expected at 13–15% of service revenue, or $700m–$800m, after the 5G rollout is completed.