TIDMTALK
RNS Number : 7582O
TalkTalk Telecom Group PLC
01 February 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
01 February 2019
TalkTalk Telecom Group PLC
Q3 FY19 Trading Update
Momentum in customer, revenue and earnings growth
Operational and Financial Highlights
-- Customer base growth of 44k (Q3 FY18: 37k), with double digit growth
in both Consumer and B2B, taking the closing base to 4,287k (1)
-- YTD broadband net adds of 148k vs previous net adds guidance of in excess
of 150k for the full year
-- Accelerating Fibre uptake with a record 146k net adds in the quarter
(Q3 FY18: 89k)
-- YTD Fibre net adds of 338k
-- Ongoing low level of churn at 1.16% (Q3 FY18: 1.25%)
-- 2.3m customers have now taken a Fixed Low Price Plan ("FLPP") (Q3 FY18:
1.8m)
-- Total Headline (2) revenue (ex-Carrier & Off-net) up 2.9% to GBP386m
(Q3 FY18: GBP375m (3) ); Headline On-net revenue up +4.3% to GBP316m
(Q3 FY18: GBP303m (3) )
-- Group On-net ARPU of GBP24.70 (Q3 FY18: GBP25.18 (3) ), with YoY Consumer
ARPU growth
FY19 Outlook
-- Underlying business on track, with significant YoY Headline profit growth
expected, reflecting a bigger base, stabilising ARPU and meaningful
cost reductions
-- IFRS 15 timing adjustment and investment in base growth and Fibre mix
impacting FY19 consensus EBITDA (4) GBP10m-GBP15m, pre-FibreNation costs
-- FY19 Headline EBITDA range GBP245m-GBP250m (FY18: GBP197m (3) ), pre-FibreNation
costs
-- GBP5m-GBP10m FibreNation costs dependent on JV process, as we complete
York build and prepare for roll-out in Harrogate
-- Confident in strong FY20 EBITDA growth, in line with market expectations
(4) . Growth driven by customer momentum and cost savings (GBP25m-GBP30m
annualised from reorganisation and HQ move, with approximately two-thirds
of this expected in FY20)
Tristia Harrison, Chief Executive of TalkTalk, commented:
"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."
(1) All customer KPIs relate to the On-net base. The closing
Off-net base amounted to 30k at the end of Q3 FY19 (Q3 FY18: 53k),
representing less than 1% of the total broadband base.
(2) Headline revenue excludes revenue from MVNO proposition
during the current and prior period.
(3) The current period and prior period has been presented
applying IFRS 15 "Revenue from Contracts with Customers and IFRS 9
"Financial Instruments". Current and prior period restatements are
subject to audit.
(4) FY19 EBITDA consensus: GBP259m. FY20 EBITDA consensus:
GBP271m. Source: Bloomberg as at 31/01/2019
Q3 trading - continued base and revenue growth
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 (Q3 FY18: 37k, Q2 FY19: 24k),
with double digit growth in both Consumer and B2B.
After a record number of Fibre net adds in Q2 (125k), we have
seen demand for Fibre continue to grow with 146k net adds in Q3 (Q3
FY18: 89k). This uptick is driven by 66% of new Consumer customers
choosing to take one of our higher speed products at the end of
December (end of Q2 FY19: 54%). These customers are not only a
driver of stabilising ARPU, they also have lower cost to serve and
materially lower churn.
In Consumer, we continue to see healthy demand for our FLPP,
with 2.3m customers now having taken a plan (Q3 FY18: 1.8m). With a
greater proportion of customers in-contract (71% at the end of
December) we have been able to keep churn broadly flat at
1.16%.
The TalkTalk Business Ethernet & EFM base grew again, with
1.1k new lines added, taking the total installed base of data
connections to 56k. Whilst growth in data connections remains
strong, it is increasing at a slower rate. This is countered by a
higher volume of 1Gb connections in the mix, which comes with
significantly higher ARPU.
Total Headline revenues of GBP386m excluding Carrier (GBP12m)
and Off-net (GBP3m) grew by 2.9% year-on-year during the quarter.
On-net revenue of GBP316m (comprising Consumer, Wholesale and
Direct B2B broadband) was up 4.3% year-on-year, driven by a larger
average base and increased Fibre penetration, offset by moderate
On-net ARPU decline (Q3 FY19 ARPU: GBP24.70 vs Q3 FY18 ARPU:
GBP25.18) largely due to the Wholesale and Retail base mix. These
dilutionary effects are expected to stabilise in line with guidance
by the end of the full year, as we are seeing YoY ARPU growth in Q3
in Consumer with positive re-contracting behaviour alongside
increasing take-up of Fibre. Within Corporate, Data revenue was up
4.8% to GBP44m driven by a larger average base, as well as
upselling customers to higher speed and higher ARPU services.
FY19 Outlook
We continue to see profits grow year on year driven by revenue
growth from a bigger base and stabilising ARPU from re-contracting
behaviour and Fibre upsell. Alongside this, we have the benefits of
lower Fibre input costs and further cost reductions as we continue
to simplify the business.
IFRS 15 timing adjustments and additional investment in net adds
growth and Fibre mix will have a GBP10m-GBP15m impact on FY19
consensus EBITDA. We expect underlying profit to be within the
range GBP245m-GBP250m (FY18: GBP197m), pre-FibreNation costs
(c.GBP5m-GBP10m), representing significant YoY 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 GBP25m-GBP30m, with approximately two-thirds of this
expected in FY20.
The person responsible for arranging the release of this
Announcement on behalf of the Company is Tim Morris, General
Counsel and Company Secretary.
There will be a webcast and conference call for analysts and
investors at 8.30am.
Webcast link:
https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/7467/110449/Lobby/default.htm
Conference call dials: Participants do not need a PIN for the
live call - they simply need to ask to be put through to the
TalkTalk results call.
Live Call: UK & International +44 (0) 20 3003 2666
Replay (available
for 7 days): UK & International +44 (0) 20 8196 1998
PIN Code: 3649802#
Contacts:
Investor Relations: Tim Warrington +44 (0) 20 3417 1821
Media: Iain Wood +44 (0) 79 9078 5019
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END
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