TPG’s (ASX:TPM) $1.4 billion acquisition of fellow internet service provider, iiNet, continues to pay dividends for the company, with its latest half-yearly financial results revealing an earnings surge from the freshly integrated business.
Overall, TPG's revenue for the first half of the company’s 2017 financial year (1H17), ending January 2017, increased by eight per cent, compared to the same period the year prior, to $1.24 billion.
Pre-tax earnings (EBITDA) for the period increased by eight per cent, to $473.4 million, while net profit after tax (NPAT) for the period swelled by 11 per cent, to $224 million.
IiNet, which TPG bought in 2015, contributed pre-tax earnings of $141.7 million in the first half, compared to $107.1 million for the five and a quarter month period since the publicly-listed telecommunications provider closed its acquisition of iiNet in the first half of the 2016 financial year.
According to TPG, iiNet’s $34.6 million growth in the first half of the 2017 financial year was partly pushed up by $14.7 million in organic EBITDA growth for the period, and $4 million of integration costs that were incurred the previous year, but were absent in 1H17.
TPG told shareholders that the organic pre-tax earnings growth seen by iiNet was driven by broadband subscribers, which increased to 990,000 during the period, as well as by the ongoing financial benefits coming from integrated activities, helping to lift the business’s earnings margin to 26 per cent, compared to last year’s figures.
“These growth drivers more than offset the adverse impact of the continued decline of legacy fixed voice business, and a lower contribution from Tech2,” the company told shareholders.
IiNet’s subscriber growth during the half saw TPG take a step closer to cracking 2 million broadband customers across its business units. While the iiNet business saw broadband customers increase, the TPG brand also saw an increase, claiming 921,000 by the end of the period.
Altogether, the group now has more than 1.91 million broadband subscribers, 173,000 of which are National Broadband Network (NBN) customers through TPG, and 215,000 of which are NBN customers via iiNet’s business.
Meanwhile, TPG’s corporate division brought in earnings of $141.1 million, and its consumer business reported $142.2 million – both up from the previous year’s results.
The period also saw TPG successfully bid at the new Entrant Spectrum Auction in Singapore, and in the three months since the auction has made a “strong start” to its mobile network rollout, the company said.
TPG said that it continues to expect its underlying EBITDA for the full year ending FY17 to be in the range of $80-830 million.
The latest results follow a 75 per cent surge in earnings for the company for the full year ending July, with iiNet delivering $242.6 million in earnings for the company since its acquisition.
According to TPG, as of July 31, iiNet had delivered a “maiden contribution” of $248.9 million in the 11 months since its acquisition, but also ate up $6.3 million of restructuring costs from integration activities associated with the acquisition.