Internet provider returns to profit and is on course

TalkTalk's offices in Salford

Internet provider and mobile phone company TalkTalk is back in the black, its interim figures out today, show.

The group, which moved HQ to Salford earlier this year, reported statutory revenues for the six months to September 30, of £792m, compared with £822m a year ago, although a pre-tax profit of £4m showed an improvement on a £4m pre-tax loss the same time last year.

Net debt has risen from £760m to £830m.

Chief executive Tristia Harrison said: “We’re pleased that our clear strategy to accelerate customer growth in fibre broadband, while also reducing costs, has led to a significant increase in profitability in the first half, with a 14% year-on-year increase in like-for-like EBITDA.

“We now have over two million customers taking a fibre product, adding nearly 300,000 customers in the half.

“Fibre broadband is good news for customers and TalkTalk.

“It offers a faster, more reliable service whilst also reducing churn and comes with a materially lower cost to serve.

“In addition, our soon to be completed HQ move and shift to a self-service model is underpinning our cost reductions.”

In a trading update in July this year the group said the move to MediaCity from London has helped it to cut costs by up to £30m.

Highlights during the six month reporting period included a 52% increase in fibre net additions to 292,000, including a record 174,000 in the second quarter (Q2 FY19: 125k), accounting for 33% share of all new Openreach Fibre to the Cabinet (FTTC) lines in the second quarter (H1 FY19: 22%).

Headline EBITDA (pre-IFRS 16) represents 13.9% growth with increased fibre penetration and headquarter move efficiencies driving a materially lower cost base.

The headline EBITDA outlook for the year (pre-IFRS 16) remains unchanged.

TakTalk said the increase in net debt (pre-IFRS 16) was driven by working capital outflows due to a change in distribution model and accelerated fibre growth, the cash cost of the HQ move, and continued investment in FibreNation.

In an overview statement, the group said: “It has now been two and a half years since we set out our strategy to be Britain’s leading value provider of core fixed connectivity.

“As we exit the first half of the year, our strategy remains unchanged, with our focus on providing our customers the best value for money connectivity, whilst radically simplifying TalkTalk to focus on fewer priorities as a leaner, more efficient business.

“Data usage continues to increase exponentially (30% year-on-year), driven by video streaming, online gaming and cloud storage services.

“Consequently, the demand for affordable and reliable fixed connectivity continues to rise, as does the consumer demand for higher speed and more resilient broadband.

“These market dynamics continue to validate our strategy to focus on fixed connectivity and to specifically narrow our focus on higher bandwidth fibre broadband, as copper fast becomes a legacy product.

“Crucially, alongside this, we are continuing to right-size our cost-base, as we remain resolutely focused on addressing our central costs.

“This strategy has led to a significant increase in profitability in the first half, with a 14% year-on-year increase in pre-IFRS 16 headline EBITDA to £115m.

“In an uncertain economic climate where price really matters, TalkTalk remains well positioned to benefit as the only scale, value provider.”

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