Slide 1: ASX cover announcement: Half-Year Results Investor Presentation
Market Announcements Office Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000 Sydney, 24 August 2023 TPG Telecom Limited Results for Half-Year Ended 30 June 2023 – Investor Presentation Please find attached for immediate release to the market an Investor Presentation concernin
Slide 2: TPG Telecom Limited Half-Year Results
TPG Telecom Limited For personal use only Half-Year Results 24 August 2023
Slide 3: Acknowledgement of Country
Acknowledgement of Country For personal use only TPG Telecom acknowledges the Traditional Custodians of Country throughout Australia and the lands on which we and our communities live, work and connect. We pay our respects to their Elders, past and present. ‘Listening to Land - Connecting to Country
Slide 4: Agenda
Agenda For personal use only Results highlights and business update • Iñaki Berroeta Chief Executive Officer and Managing Director Review of financial performance • Grant Dempsey Chief Financial Officer Strategy and outlook • Iñaki Berroeta Chief Executive Officer and Managing Director 3
Slide 5: Results highlights and business update
Results highlights For personal use only and business update Iñaki Berroeta Chief Executive Officer and Managing Director
Slide 6: HY23 highlights: strong first-half result drives upgrade to earnings guidance
HY23 highlights: strong first-half result drives upgrade to earnings guidance as TPG transformation continues For personal use only Mobile service revenue growth continues: Postpaid plan refresh delivering strong ARPU improvement Fixed profitability continues to improve in highly competitive NBN mar
Slide 7: Connecting our customers with great offers and plans
Connecting our customers with great offers and plans Connect better TPG delivers For personal use only with iiNet's award- simple and great winning services value services – Fibre Connect – Fibre Connect launched on launching in 9 August September Vodafone continues to bring innovation and better va
Slide 8: HY23 financial summary
HY23 financial summary: strong EBITDA growth supported by service revenue gains and strong cost performance Metric HY22 HY23 Change Commentary For personal use only Service revenue $2,190m $2,288m 4.5% Driven by Consumer Mobile and EGW Gross margin $1,380m $1,526m 10.6% Service revenue growth plus l
Slide 9: Mobile service revenue: Postpaid plan refresh and simplified offerings
Mobile service revenue: Postpaid plan refresh and simplified offerings fuelling growth For personal use only Average Revenue Per User (ARPU) ($) Subscribers (‘000) Up 6.2% vs. 1H22 Postpaid 44.6 3,233 3,228 42.0 42.7 2.1 Excluding incoming ARPU1, up 8.4% vs. 1H22 Up 5k vs. 2H22, customer growth 2.3
Slide 10: Fixed profitability: Fixed Wireless growth and NBN plan repricing
Fixed profitability: supported by Fixed Wireless growth and NBN plan repricing For personal use only Average Margin Per User (AMPU) ($) Subscribers (‘000) 25.4 2,223 2,218 41 35 2,175 Up 20.4% vs. 1H22, 28 24.5 113 171 Up 38k vs. 2H22, driven by supported by a larger Fixed 209 strong demand for Fixe
Slide 11: Enterprise, Government & Wholesale
Enterprise, Government & Wholesale: growth underpinned by customer wins and Fast Fibre demand For personal use only • Enterprise & Government revenue up E&G revenue ($m) ...2023 continues with 5.6%, gross margin up 6.1% 342 361 strong customer wins 38 43 Handset Enterprise & • Supported by recurring
Slide 12: Review of financial performance
Review of financial For personal use only performance Grant Dempsey Chief Financial Officer
Slide 13: Gross margin: up 10.6%
Gross margin: up 10.6%, driven by larger Mobile subscriber base and successful Postpaid plan refresh For personal use only Gross margin ($m) Strong growth in on-net Fast Fibre and solid customer wins Larger subscriber base and initial 47 1,526 benefits of repricing 30 3 12 74 (20) Margin accretive c
Slide 14: Operating expense: inflationary pressures
Operating expense: inflationary pressures impacting employee and IT support costs For personal use only Operating expense ($m) 22 7 587 17 585 15 543 (19) General Higher IT Inflationary inflationary Costs incurred on support costs pressures and pressures on the MOCN and electricity investment in mar
Slide 15: Capital expenditure
Capital expenditure: PP&E additions lower in 1H23 but cash outcome impacted by timing of payments Capital expenditure ($m) TPG anticipates post mid-2020s For personal use only capital spend ex spectrum to be c.13%-15% of service revenue 700 699 67% 59% 670 c.61% Accruals capex 47 550-600 485 487 476
Slide 16: Cash flow: strong underlying performance
Cash flow: strong underlying performance excluding unwind of third-party handset receivables financing Cash flow conversion bridge ($m) For personal use only Cash conversion normalised in HY23, following supply chain disruption in 2022 941 928 (13) 714 (214) Unwinding impact peaks in HY23 214 152 (6
Slide 17: Debt position
Debt position: new debt facilities have diversified and extended TPG’s borrowings at attractive rates Debt maturity profile as at 21 August 2023 ($m) For personal use only 250 • Weighted average tenor doubled to four years • Pricing reflects the strong credit profile of the group • Reduced refinanci
Slide 18: Disciplined capital allocation framework
Disciplined capital allocation framework: will drive growth and return aspirations For personal use only Recurring capital management Value maximisation levers Annual Enhanced Transformation Additional Sustaining Strong Growth dividend to portfolio investment return to investment balance sheet inves
Slide 19: Earnings guidance upgraded
Earnings guidance: upgraded to top quartile of previous range following strong first-half result For personal use only Previous Updated HY23 FY23 guidance FY23 guidance1 $957m $1,850m to $1,950m $1,925m to $1,950m EBITDA excl. material one-offs and excl. material one-offs and excl. material one-offs
Slide 20: Strategy and outlook
Strategy For personal use only and outlook Iñaki Berroeta Chief Executive Officer and Managing Director
Slide 21: Strategic focus: three guiding principles
Strategic focus: evolving as market recovery continues and transformation accelerates For personal use only Three guiding principles Integrate and simplify Win smart Maximise our potential Moving from post-merger planning Infrastructure sharing focus to Potential monetisation of fixed and integratio
Slide 22: Customer experience simplification
Customer experience simplification expected to unlock long-term financial and operational efficiencies For personal use only Strengthening our Future state: lower cost-to-serve and customer value proposition improved customer experience • Capex of ~$80m in FY24 and FY25 funded within existing TPG ~$
Slide 23: Mobile network update
Mobile network update: continuing to explore infrastructure sharing to extend network reach For personal use only • More than 2,500 TPG sites now converted to 5G, over half of metro network1 • TPG will not seek a judicial review of Australian Competition Tribunal decision not to authorise the region
Slide 24: Potential Vocus transaction
Potential Vocus transaction: reflects TPG’s objective to unlock value from fixed infrastructure assets For personal use only Potential transaction announced 1 August 2023 Strategic rationale and potential benefits • Vocus Group has made an indicative, highly conditional, non-binding offer to acquire
Slide 25: Growth drivers
Growth drivers: strong FY23 operating momentum with transformation creating a simpler, smarter company For personal use only FY23 Building on solid operating Postpaid mobile International Focus on Fixed Enterprise Govt. and Maintain cost foundations plans refresh to roaming recovery, profitability t
Slide 26: Questions and Answers
For personal use only Answers Questions and
Slide 27: Appendices
For personal use only Appendices
Slide 28: Revenue and gross margin by product
Revenue and gross margin by product Revenue ($m) Gross margin ($m) Consumer HY23 2,209 499 2,708 1,093 426 7 1,526 For personal use only Enterprise, Group Government & Wholesale HY22 2,142 484 2,626 1,015 356 9 1,380 Unallocated Total Mobile HY23 723 233 871 5 377 2,209 Mobile postpaid 793 291 9 1,0
Slide 29: Gross margin breakdown by half-year period
Gross margin breakdown by half-year period CONSUMER ENTERPRISE, GOVERNMENT & WHOLESALE Reported Reported Reported Change Change Reported Reported Reported Change Change $m 1H22 2H22 1H23 vs 1H22 vs 2H22 1H22 2H22 1H23 vs 1H22 vs 2H22 For personal use only Service revenue 1,744 1,796 1,832 5.0% 2.0%
Slide 30: Income statement summary
Income statement summary $m HY22 HY23 Change Service revenue 2,190 2,288 4.5% For personal use only Handset, accessories & hardware 436 420 (3.7)% Total revenue 2,626 2,708 3.1% Other income 13 11 (15.4)% Cost of provision of telco services (831) (784) (5.7)% Cost of handsets sold (428) (409) (4.4)%
Slide 31: Balance sheet summary
Balance sheet summary $m 31 DEC 2022 30 JUN 2023 Change Cash and cash equivalents 114 82 (32) For personal use only Trade and other receivables 681 827 146 Inventories 155 126 (29) Other current assets 83 97 14 Total current assets 1,033 1,132 99 Trade and other receivables 358 422 64 Property, plan
Slide 32: EBITDA to cash flow reconciliation
EBITDA to cash flow reconciliation EBITDA TO NET CASH FLOW RECONCILIATION CASH FLOW FROM OPERATING ACTIVITIES TO OPERATING FREE CASH FLOW (OFCF) RECONCILIATION For personal use only Contribution to Contribution to $m HY22 HY23 $m HY22 HY23 change in cash flow change in cash flow EBITDA 837 941 104 H
Slide 33: EBITDA to NPAT reconciliation
EBITDA to NPAT reconciliation EBITDA TO NPAT RECONCILIATION $m HY22 HY23 Change For personal use only EBITDA 837 941 12.4% Depreciation of PPE (283) (278) (1.8)% Depreciation of right of use assets (62) (95) 53.2% Amortisation of Spectrum licence (135) (138) 2.2% Amortisation of Customer base (80) (
Slide 34: Dividends
Dividends For personal use only Reconciliation of statutory to Adjusted NPAT ($m) Dividends (cps) 21 320 17 Interim dividend 16 9.0 9.0 9.0 80 8.5 9.0 cps 138 Fully franked1 FY21 FY22 FY22 FY23 final interim final interim 48 Total dividend at % of Adjusted NPAT Number of ordinary shares 1,859m PA d
Slide 35: Return on Invested Capital
Return on Invested Capital $m HY22 HY23 Statutory EBIT 151 219 For personal use only Add back acquired customer base amortisation 80 80 Adjustment for restructuring, transformation or transaction costs 35 33 EBIT adjusted for specific items 266 332 Notional tax (80) (100) Net Operating Profit After
Slide 36: Additional debt information
Additional debt information Funding cost increased in line with market rates For personal use only $m HY22 HY23 comment Weighted average bank funding cost 1.8% 5.0% Prevailing rate of c.5.5% expected for 3Q23 Net bank interest expense 40 100 c.$6.5m impact for every ± 50 bps movements in BBSY for 2H
Slide 37: Mobile subscribers
Mobile subscribers SUBSCRIBERS (‘000) For personal use only 5,281 5,320 4,981 5,086 14 13 16 15 297 301 135 310 304 90 38 Prepaid net adds ('000) 2,016 2,054 1,791 1,881 (46) 2H21 1H22 2H22 1H23 64 2,864 2,886 2,950 2,956 22 6 Postpaid net adds ('000) (33) 2H21 1H22 2H22 1H23 2H21 1H22 2H22 1H23 Pos
Slide 38: Mobile ARPU breakdown
Mobile ARPU breakdown For personal use only Overall Mobile ARPU Postpaid Mobile ARPU Prepaid Mobile ARPU Data sims ARPU ($/month) ($/month) ($/month)2 ($/month) 44.6 33.0 19.6 19.4 19.2 18.9 42.7 2.1 42.0 1.7 1.5 1.3 16.0 15.5 41.3 1.2 15.2 14.8 32.2 2.3 2.2 32.1 2.8 17.9 17.9 17.9 17.7 3.1 2.2 40.3
Slide 39: Fixed broadband ARPU breakdown
Fixed broadband ARPU breakdown For personal use only NBN ARPU ($/month) Vision network ARPU ($/month) Fixed Wireless ARPU ($/month) 59.3 58.8 43.9 67.7 66.8 58.1 42.8 57.6 42.6 64.7 64.4 41.4 2H21 1H22 2H22 1H23 2H21 1H22 2H22 1H23 2H21 1H22 2H22 1H23 1. ARPU = Average revenue per user. ARPU represe
Slide 40: Disclaimer
Disclaimer Future performance and forward-looking statements Forward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on