TalkTalk ’s (TALK) hefty investing in sales and TV drove a 64 per cent slump in operating profits last year, but investors may not be too fussed. The low-cost telecoms provider - a product of Carphone Warehouse’s demerger in 2010 – has attracted over 1m customers to its TV service since it launched 18 months ago, far outpacing its peers.
Its primary audience is ‘freeview’ households who don’t subscribe to a premium service such as Sky TV. But that hasn't stopped TalkTalk from selling extra services: over 28 per cent of its TV customers buy paid-for content monthly.
Its other operations saw gains too. For instance, corporate data sales climbed 10 per cent year on year during the second half - having inched up about 1 per cent in the first six months. TalkTalk also added over 100,000 new customers to both its mobile and high-speed-broadband businesses.
Unsurprisingly, its success hasn’t come cheaply. TalkTalk’s sales and administrative costs leapt more than a third to £318m, while operating expenses rose 8 per cent to £427m. That and the big dividend payouts raised net debt by more than a quarter to nearly £500m.
Broker Barclays expects adjusted pre-tax profits of £164m this year, giving EPS of 13.9p.
TALKTALK TELECOM GROUP (TALK) | ||||
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ORD PRICE: | 294p | MARKET VALUE: | £2.8bn | |
TOUCH: | 293-294p | 12-MONTH HIGH: | 329p | LOW: 213p |
DIVIDEND YIELD: | 4.1% | PE RATIO: | 95 | |
NET ASSET VALUE: | 36p* | NET DEBT: | 143% |
Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
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2010 | 1.7 | 11 | -0.3 | 4.7 |
2011 | 1.8 | 57 | 3.9 | 5.6 |
2012 | 1.7 | 127 | 15.6 | 9.0 |
2013 | 1.7 | 122 | 11.3 | 10.4 |
2014 | 1.7 | 31 | 3.1 | 12.0 |
% change | +3 | -75 | -73 | +15 |
Ex-div: 02 Jul Payment: 01 Aug *Includes intangible assets of £620m, or 65p a share |