TalkTalk meets expectations for first quarter

Telecoms company TalkTalk announced strong growth for the three month period to June 30, today.

The group, which employs around 2,000 staff at its Salford Quays call centre, reported more than 80,000 net additions to its broadband customer base, taking its closing balance to 4.219 million.

Total headline revenue rose 4.1% to £382m, compared with a 1.8% decline in the first quarter of the 2018 financial year.

There are now 2.1 million customers on the group’s fixed low price plans (FLPP), and it enjoys a low level of churn, or customer loss, at just 1.28%.
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The group also revealed a net ARPU (average revenue per user) increase of 2-3% on fixed low price plans customers coming out of contract.

And it enjoyed good growth in its business to business sector, including data connections of more than 1,900.

Following today’s announcement, the group said its full year guidance remains unchanged, with 15% year-on-year headline EBITDA growth, driven by a larger customer base, stabilising ARPU and significant cost reductions.

Chief executive Tristia Harrison said: “We are pleased to have delivered strong customer and headline revenue growth in the first quarter and we remain firmly on track to deliver at least 150,000 net adds this financial year.

“After resetting the business last year, we are now a much simpler, lower-cost business.

“As our strategy to be the UK’s leading value provider of fixed connectivity continues to deliver, we are on course to report headline revenue growth, stable ARPU and a 15% year-on-year increase in headline EBITDA.

“Alongside the core business we continue to make good progress on our plans for full fibre.”

TalkTalk confirmed that its first quarter performance was in line with expectations.

“We saw excellent growth in wholesale, offsetting a modest decline in retail. We remain fully on track to deliver growth in both retail and wholesale bases for financial year 2019, having made an encouraging start to trading in July,” it said.

“In consumer we have again seen good demand for our FLPP, with the base growing to 2.1m in the quarter, in spite of a large number of customers coming to the end of their contract. Churn remains low at 1.28% for the quarter.

“We have continued to see solid demand for fibre with 67,000 net adds in the quarter, with 44% of new acquisition customers choosing to take our higher speed products. These customers are accretive to customer lifetime value with materially lower churn and cost to serve.

“Once again, we saw strong growth in the TalkTalk Business Ethernet & EFM base, with 1,900 new lines added, taking the total installed base of data connections to 53,000.

“We continue to make good progress towards our total commitment of 54,000 homes passed in our full fibre build out.

“Penetration of the initial 14,000 homes in York is now over 35%, of which the majority are TalkTalk customers and we are continuing to see outstanding customer advocacy scores.”

Looking ahead, the group said: “Continued momentum in the first quarter of the financial year means our 2019 guidance remains unchanged, with growth in both the retail and wholesale broadband customer bases and headline revenue growth year-on-year.

“This, combined with our ongoing cost reduction programme and savings, will see headline EBITDA growth of 15% and improving free cash flow.”

TalkTalk will release its first half period results on November 21.

Shares rose 5% in early trading to 115.5p this morning.

Commenting on today’s announcement Russ Mould, investment director at Manchester-based investment platform AJ Bell, said: “Sometimes companies set themselves such a low bar that it is difficult not to clear it. Broadband provider TalkTalk is a case in point, with its share price rising sharply as it commits to full year guidance in a first quarter trading update.

“This is underpinned by the addition of 80,000 new broadband users in the period. This customer acquisition has come at a cost, with lots of them on fixed low-cost plans. Notably, average revenue per user fell slightly year-on-year.

“There is also a slight uptick in the proportion of customers leaving TalkTalk, which suggests the positive sentiment created by today’s update might be short-lived.

“Tomorrow’s AGM could be a test for management as they look to defend a £200m rights issue earlier this year.”