Telecom companies are racing to offer 'quad-play' packages of TV, broadband and both fixed-line and mobile telephony. TalkTalk (TALK) became the UK's first integrated provider after it began offering mobile services on O2's network in November. The strategy helped the cut-price operator widen its margin and increase its adjusted cash profits by 15 per cent to £245m for the year to March.
TalkTalk continues to attract droves of broadband, mobile, TV and corporate customers. It more than doubled its number of high-speed 'fibre' broadband users in the year, as consumers clamoured for increased bandwidth. And soaring data and carrier sales to businesses offset lower legacy voice revenues, driving divisional turnover up 14 per cent.
Greater adoption of multiple services drove TalkTalk's average revenue per user up 5 per cent to £28.18 a month. Coupled with improved customer service, that reduced churn to 1.3 per cent. The strong performance prompted management to raise its guidance; it now expects annual sales growth of at least 5 per cent going forward. It continues to target an adjusted cash-profit margin of 25 per cent in 2017.
TalkTalk expects to incur an extra £40m-£45m in cash costs this year as it integrates acquisitions and moves customers to its mobile network. It also expects a one-off jump in capital spending as it invests in mobile and fibre. On the bright side, it expects its five-year efficiency programme to unearth over £70m in savings by end-2017.
TalkTalk's gains look set to continue. Its new cut-price SIM card, which offers unlimited data, texts and calls for £12 a month, could appeal to penny-pinchers. It also inked a multi-year agreement with Sky to snag more movies and sports content - such as catch-up content and European football on Sky Sports 5 - for its TV customers. And it recently signed a revenue-share agreement with popular video-streaming platform Netflix.
Analysts at Barclays expect pre-tax profit of £196m, giving EPS of 16.8p, rising to £276m and 23.6p in 2016-17 (from £95m and 8.1p in 2014-15).
| TALKTALK (TALK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 372p | MARKET VALUE: | £3.6bn | |
| TOUCH: | 372-373p | 12-MONTH HIGH: | 415p | LOW: 261p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 48 | |
| NET ASSET VALUE: | 31p* | NET DEBT: | 198% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.77 | 57 | 3.9 | 5.6 |
| 2012 | 1.69 | 127 | 15.6 | 9.0 |
| 2013 | 1.67 | 122 | 11.3 | 10.4 |
| 2014 | 1.72 | 31 | 3.1 | 12.0 |
| 2015 | 1.80 | 32 | 7.8 | 13.8 |
| % change | +4 | +3 | +152 | +15 |
Ex-div: 9 Jul Payment: 3 Aug *Includes intangible assets of £668m, or 70p a share | ||||
