Once again, financial results from TalkTalk (TALK) have wiped out all the share price progress of the past few months. Management revealed a deep first-half loss and promised a further step up in investment in the second six months of the year. Thus, adjusted cash profits are now expected at the lower end of previous guidance (£270m-£300m), down from £304m in the year to March 2017.
But investors shouldn’t really be surprised at the news. When founder Charles Dunstone returned to the company as chairman, he promised “growth, cash generation and profit – in that order”. And TalkTalk is beginning to deliver on the growth part of the strategy. The broadband and TV businesses added 46,000 and 24,000 new customers respectively, having both reported declines in the first half of 2016. Average revenue per user is up because 40 per cent of new broadband customers are now choosing the expensive fast fibre option. And churn has fallen from 1.5 per cent to 1.3 per cent, in line with peers.
Overhauling the strategy is not cheap. Restructuring, rationalisation and redundancies cost the group £59m in the first half, and sent cash profits down by three-quarters to £29m. More spending is expected to tighten analyst guidance for the year to March 2018, but prior to these results Numis forecast adjusted cash profit of £286m and adjusted EPS of 9.8p (down from £304m and 10.4p in FY2017).
| TALKTALK (TALK) | ||||
| ORD PRICE: | 170p | MARKET VALUE: | £1.62bn | |
| TOUCH: | 169-170p | 12-MONTH HIGH: | 220p | LOW: 145p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 4.1p* | NET DEBT: | £837m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 902 | 30 | 2.2 | 5.29 |
| 2017 | 856 | -75 | -7.5 | 2.50 |
| % change | -5 | - | - | -53 |
| Ex-div: | 23 Nov | |||
| Payment: | 18 Dec | |||
| *Includes intangible assets of £749m, or 78.4p a share | ||||
