Manchester move will help telecoms firm save £30m

Talk Talk’s decision to move its head office from London to Manchester will help the firm save £30m.

The figure was revealed in trading update published by the telecoms business this morning which also included a profit warning.

The firm announced a major reorganisation last year which included the move of its head office to Manchester.

As a result around 500 jobs are moving North.

It has also been announced that 60 jobs  are being moved Talk Talk’s site in Stornoway, Lewis,  to Manchester.

Shares in the firm dropped by 10 per cent this morning following the update.

Russ Mould, investment director at AJ Bell, said: “Talk Talk operates in a highly competitive market with a brand which was significantly diminished by a big cyber security attack in 2015 and with a patchy reputation for customer service. It often features in Ofcom’s list of most complained-about broadband providers.

“As today’s profit warning reveals the company is achieving customer growth, even beating expectations on this metric, but only by offering deals to entice people onto its network.

“While this means the company is on track to beat its 150,000 target for new broadband customers for the financial year, it looks set to come at the cost of margin pressure.

“The company is also struggling to get more out of its customer base with average revenue per user dropping slightly year-on-year.

“Accounting changes are another factor behind the earnings shortfall as well as spend on providing fibre connections directly to households (FTTP). Some analysts have raised concerns about the risks and costs associated with building an FTTP network.”

Talk Talk saw its customer base grow from 37,000 to 44,000 in the last quarter with double digit growth in both Consumer and B2B clients.

Tristia Harrison, chief executive of TalkTalk, said: “We continue to see strong trading momentum in the business, with customer growth ahead of expectations. Q3 was the eighth consecutive quarter of rising customer numbers and we saw record demand for Fibre.

“The underlying business is on track. The change to earnings guidance is due to IFRS 15 timing adjustments and investment in growth.

“Year on year, we have increased revenue by growing the base and stabilising ARPU, which combined with lower costs is driving improved earnings.

“Our significant customer momentum, combined with the benefits of our reorganisation and HQ move, gives us confidence in strong earnings growth for FY20.”

“The underlying business continues to trade well, and we have once again seen good base growth in the third quarter.

“This represents the eighth consecutive quarter of growth, adding a further 44k to the broadband base with double digit growth in both Consumer and B2B.

“Total headline revenues of £386m excluding Carrier (£12m) and Off-net (£3m) grew by 2.9% year on year during the quarter.”

“We expect underlying profit to be within the range £245m-£250m, pre-FibreNation costs representing significant growth.

“We remain confident in strong FY20 EBITDA growth, in line with market expectations, driven by our customer momentum and cost savings.

“The annualised benefit of our reorganisation and HQ move will be £25m-£30m, with approximately two-thirds of this expected in FY20.”