TalkTalk sees strong level of re-contracting, full year in line with guidance

1st Feb 2017 07:34

(ShareCast News) - Alongside departure of chief executive Dido Harding, telecoms group TalkTalk reported that revenue and earnings for the current financial year would be affected by strong levels of customer re-contracting, but will be in line with previous guidance.The FTSE 250 company, which will see current chairman Charles Dunstone take on executive responsibilities amid the major boardroom reshuffle, expects the final dividend will be unchanged year-on-year at 10.58p.After launching a new 'fixed low price' plans in early October, re-contracting rates in the third quarter were stronger than expected, which has been "transformative" for TalkTalk's "brand reputation and business", and as a result management expect to deliver positive net additions and lower churn in the fourth quarter, with a higher quality retail base driving revenue growth for the 2018 financial year.But the strong re-contracting activity, while expected to deliver long-term benefits for a more stable and higher quality base, will hit revenue and earnings, before tax, depreciation and amortisation (EBITDA) for the 2017 financial year, which will be in line with previous guidance.Re-contracting has a short-term impact on third quarter results due to the re-pricing of legacy tariffs, which affects on-net revenue and saw heightened churn among customers on legacy tariffs that were re-priced to simplify tariffs.This drove on-net churn 1.6% and on-net net adds fell by 42,000, affected by both churn and lower new acquisition activity in October in order to launch integrated pricing a month earlier than the rest of the industry.These effects were partially mitigated by the positive impact of pricing activity on customers who have chosen to remain on legacy tariffs, and continued growth in fibre and mobile, which the company said, helped to limit the year-on-year decline in third quarter on-net revenues to 5.4% with average revenue per user of £28.05.TalkTalk said it has continued to improve cash flows during the second half of the year, and as a result year-end leverage net debt over EBITDA, is expected to be below 2.5 times.In January, the company also refinanced £400m of its short-dated bank debt through the issue of a debut five-year public bond.