Monday, 29 May 2017

TalkTalk cuts dividends as full year revenue slips

By Nick Wood, Total Telecom
Wednesday 10 May 17

U.K. telco returns to retail customer growth in fiscal fourth quarter.

TalkTalk on Wednesday slashed dividends after reporting a 3% decline in fiscal 2017 revenue. The U.K. telco will pay a final dividend of 5 pence per share, compared to 10.58p a year ago, reducing the total dividend for the year ended 31 March to 10.29p versus 15.87p in fiscal 2016. For the year ahead, TalkTalk plans to lower the dividend further to 7…

TalkTalk on Wednesday slashed dividends after reporting a 3% decline in fiscal 2017 revenue.

The U.K. telco will pay a final dividend of 5 pence per share, compared to 10.58p a year ago, reducing the total dividend for the year ended 31 March to 10.29p versus 15.87p in fiscal 2016. For the year ahead, TalkTalk plans to lower the dividend further to 7.5p.

"The board is committed to returning the business to revenue and customer base growth, improving cash generation and reducing leverage," TalkTalk said, in its financial report. "The board expects to resume dividend growth once the business returns to earnings growth and has reduced leverage."

TalkTalk reported full year revenue of £1.78 billion, compared to £1.84 billion last year, as falling on-net and off-net revenue offset growing corporate revenue. However, cost cuts meant EBITDA surged to £304 million from £260 million.

Its on-net broadband customer base fell by 49,000, better than the 181,000 it lost in the previous year. Churn improved to 1.45% from 1.60%.

"The last 12 months have seen the business lay down solid foundations from which to drive sustainable base and revenue growth in both our retail and B2B businesses," said TalkTalk's new CEO, Tristia Harrison, in a statement.

"This will allow us to build upon our core strength as a value for money fixed-line connectivity provider as we focus on delivering growth, improving our customers' experience, investing in and future-proofing our fixed network, and driving operational efficiencies across the business, whilst being more disciplined and smarter with our assets," she said.

In the fiscal fourth quarter, TalkTalk said it saw stronger than expected demand for its Fixed Low Price Plans, which guarantee no change in price over the lifetime of the contract.

This helped the company notch up 22,000 net customer additions, with the retail base returning to growth.

However, TalkTalk's customer base is still down compared to last year. That, combined with a higher mix of wholesale customers and ARPU dilution from re-contracting customers, offset growing corporate revenue, resulting in a 2.5% year-on-year decline in group fourth quarter revenue.

Keen to maintain the positive momentum established in Q4, TalkTalk said spending will grow in fiscal 2018 in a bid to attract more customers.

As a result, it expects to generate full-year EBITDA of £270 million-£300 million, lower than the £304 million it generated in fiscal 2017.

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