Shares in TalkTalk (TALK) slumped 5 per cent after the TV, broadband and telephony provider laid out plans to spend £20m-£25m more on acquiring customers next year. Still, the group's rock-bottom prices attracted droves of customers, sending its first-half cash profit up by almost a half to £110m.
TalkTalk added 300,000 TV customers, taking its total to 1.2m, and attracted over 190,000 more consumers to its broadband, mobile and fibre offerings. Moreover, its corporate revenues climbed 9 per cent as businesses clamoured for its cheap data products.
Investors may fret about TalkTalk's thin margins. But average revenue per user is rising, and the group is on track to increase its cash-profit margin from 12.6 per cent to 25 per cent by 2017. Financing also appears under control, thanks to a new £100m loan and a £560m credit facility. And rising customer-acquisition costs shouldn't be a concern, as TalkTalk has shown it can cut them: it is now signing up TV customers for £125 - about a quarter less than a year ago - by promoting self-installations and online sales.
Like other broadband providers, TalkTalk is securing premium content to keep its customers happy. It recently wrangled a deal with Sky for Sky Sports 5, its European football channel, and video-streaming service Netflix will be available on TalkTalk TV from early next year.
Broker Cenkos expects full-year pre-tax profit of £164m, giving EPS of 12.5p, up from £74m and 6.6p.
| TALKTALK (TALK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 282p | MARKET VALUE: | £2.7bn | |
| TOUCH: | 281-282p | 12-MONTH HIGH: | 334p | LOW: 245p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 51 | |
| NET ASSET VALUE: | 30p* | NET DEBT: | 196% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 843 | -9.0 | -0.8 | 4.0 |
| 2014 | 871 | 20.0 | 1.6 | 4.6 |
| % change | +3 | - | - | +15 |
Ex-div: 20 Nov Payment: 12 Dec *Includes intangible assets of £617m, or 65p a share | ||||
