TalkTalk’s (TALK) new Fixed Low Price Plan (FLLP) for broadband is cheap – it’s in the name. That’s good because it helped the telecoms giant attract 192,000 new customers in the year to March 2018 against a 49,000 decline last year. But it’s also bad because average revenue per user in the core on-net customer base (which contributes 76 per cent of revenues) fell by 3 per cent, dragging headline revenues down 4 per cent to £1.7bn.
What’s more, TalkTalk has had to spend a lot of money attracting new customers. Headline marketing expenditure rose 31 per cent to £203m, wiping £128m (or 35 per cent) from adjusted cash profits (Ebitda, or earnings before interest, tax, depreciation and amortisation). Add in the restructuring costs and extra finance charges associated with higher average net debt, and headline pre-tax profits collapsed 77 per cent to £46m.
The group’s focus on low-price broadband means it will now sell part of its corporate telecoms division to private group Daisy for £175m. But management was keen to point out that, excluding the impact of the sale, it is confident of hitting the 15 per cent Ebitda growth target in 2019. JPMorgan isn’t so sure. Prior to these results, the broker had forecast Ebitda of £251m for FY2019, and adjusted EPS of 5.32p (from £233m and 3.01p in 2018).
| TALKTALK (TALK) | ||||
| ORD PRICE: | 112.7p | MARKET VALUE: | £1.29bn | |
| TOUCH: | 111.8-112.7p | 12-MONTH HIGH: | 220p | LOW: 89p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | na | |
| NET ASSET VALUE: | 18p* | NET DEBT: | £755m | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 1.72 | 31.0 | 3.1 | 12.0 |
| 2015 | 1.80 | 32.0 | 7.8 | 13.8 |
| 2016 | 1.84 | 14.0 | 0.2 | 15.9 |
| 2017 | 1.78 | 70.0 | 6.1 | 10.3 |
| 2018 | 1.71 | -73.0 | -8.1 | 5.0 |
| % change | -4 | - | - | -51 |
| Ex-div: | 5 Jul | |||
| Payment: | 3 Aug | |||
| *Includes intangible assets of £752m, or 66p a share | ||||
