TPG Telecom reports strong annual results

Internet service provider TPG Telecom (ASX: TPM) reported an FY13 net profit of $149.2 million today, up 64% on FY12. When normalised for a one off $23.2 million tax expense incurred in FY12, net profit is up 31%.

The fast-growing group provides broadband and telecommunication services to residential users, small businesses and large corporate enterprises. It has consistently grown market share and is nicely positioned to take advantage of growing demand for very high-speed broadband services.

Competitive pricing coupled with a solid brand reputation means the group continues to add customers. The consumer division added 76,000 broadband subscribers in FY13 compared to 47,000 in FY12. Mobile subscribers also increased substantially for the year.

A final dividend of 4 cents per share was declared, bringing the total for FY13 to 7.5 cents, an increase of 36% on the prior year. The group is currently trading on a dividend yield of approximately 1.9%.

Forecast EBITDA for FY14 is in the range of $290-300 million, flat compared to FY13’s actual $293.1 million.

Foolish takeaway

In the last year the share price has rallied from around $2 to more than $4, providing shareholders with some spectacular returns. On FY13’s results the company trades on a price to earnings ratio above 21. In a competitive market, it will need to sustain its fast growing earnings to justify further increases in the current valuation.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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