Share Search
Visit the Share Search
TalkTalk FY profits rise, dividend held as fibre sales grow
11th Jun 2020 07:01
(Sharecast News) - Telecoms group TalkTalk pulled guidance and set aside £15m for bad debts in 2021 in response to the coronavirus crisis but kept its dividend and reported a rise in core earnings on the back of higher fibre internet takeup.
The company on Thursday reported a 9.7% rise in earnings before interest, tax, depreciation and amortisation to £260m on the back of a 1.9% fall in revenue to £1.51bn. TalkTalk maintained a final dividend of 1.5p a share.
Net fibre customer additions rose to 605,000 compared with 490,000 a year ago. The on-net average revenue per customer fell slightly to £24.35, while the on-net churn rate was steady at 1.2%.
Despite pulling guidance due to Covid-19 uncertainties, the company said it expected to deliver stable headline core earnings year on year based on current trends.
TalkTalk added that it would be cutting back on the use of third party customer service call centres after lockdowns forced closures during the pandemic and the company was forced to moved to online contact.
"We will not be returning to pre-Covid-19 contact centre agent levels, further supporting our cost reductions," the company said.
CMC Markets analyst David Madden said the outlook for TalkTalk's share price remained bearish given increasing competition in the sector after Virgin Media and Telefonica announced plans to merge in a bid to take on rival BT.
"It is a challenging industry as the networks are capital intensive, while at the same time all the players are involved in a race to the bottom in terms of price in an effort to ramp up their customer base. Price wars tend to only benefit the clients, which often comes at the expense of the shareholders," Madden said.
"The TalkTalk share price has been in decline for over five years, and keep in mind the FTSE 250 hit a record high in December 2019. Price comparison websites, like moneysupermarket.com, have become very popular in recent years. As customers are savvier, that has prompted firms to be regularly offering attractive deals."
"I suspect price wars will continue to be common in the sector, even though it will probably lead to further consolidation - just to keep costs down."
The company on Thursday reported a 9.7% rise in earnings before interest, tax, depreciation and amortisation to £260m on the back of a 1.9% fall in revenue to £1.51bn. TalkTalk maintained a final dividend of 1.5p a share.
Net fibre customer additions rose to 605,000 compared with 490,000 a year ago. The on-net average revenue per customer fell slightly to £24.35, while the on-net churn rate was steady at 1.2%.
Despite pulling guidance due to Covid-19 uncertainties, the company said it expected to deliver stable headline core earnings year on year based on current trends.
TalkTalk added that it would be cutting back on the use of third party customer service call centres after lockdowns forced closures during the pandemic and the company was forced to moved to online contact.
"We will not be returning to pre-Covid-19 contact centre agent levels, further supporting our cost reductions," the company said.
CMC Markets analyst David Madden said the outlook for TalkTalk's share price remained bearish given increasing competition in the sector after Virgin Media and Telefonica announced plans to merge in a bid to take on rival BT.
"It is a challenging industry as the networks are capital intensive, while at the same time all the players are involved in a race to the bottom in terms of price in an effort to ramp up their customer base. Price wars tend to only benefit the clients, which often comes at the expense of the shareholders," Madden said.
"The TalkTalk share price has been in decline for over five years, and keep in mind the FTSE 250 hit a record high in December 2019. Price comparison websites, like moneysupermarket.com, have become very popular in recent years. As customers are savvier, that has prompted firms to be regularly offering attractive deals."
"I suspect price wars will continue to be common in the sector, even though it will probably lead to further consolidation - just to keep costs down."