1st Feb 2019 11:28
LONDON (Alliance News) - TalkTalk Telecom Group PLC on Friday revealed that its earnings for its full financial year are set to miss analyst consensus, despite record client demand for its services in the third quarter.
TalkTalk shares were trading 6.5% lower at 104.30 pence each, making TalkTalk the biggest loser in FTSE 250 index in London on Friday.
Looking to its financial year ending March, TalkTalk said its underlying business is on track with "significant" year-on-year headline profit growth expected, as the company benefits from lower fibre input costs and further cost reductions as it continues to simplify the business.
TalkTalk is guiding for headline earnings before interest, tax, depreciation and amortisation of GBP245 million to GBP250 million, from GBP197 million a year prior. This is below the market consensus of GBP259 million however.
Earnings will be hit by between GBP10 million to GBP15 million due to accounting changes, investment, and mix in the Fibre segment.
TalkTalk said Friday it is confident on "strong" earnings growth in its year ending March 2020 and should meet market expectations of GBP271 million.
In the nine months to December, TalkTalk added 148,000 net customers to its broadband services, with guidance for its entire year ending March "in excess" of 150,000.
Third-quarter customer growth was 44,000, up from 37,000 in the same period a year before, with double-digit growth achieved in both Consumer and Business-to-Business.
TalkTalk reported a "record" accelerating fibre uptake in the third quarter, at 146,000 net adds, compared to just 89,000 a year before and 125,000 in the second quarter.
The company noted that 66% of its new customers chose to take one of its higher-speed products in the third quarter, up from 54% taking them products in the previous quarter.
Talktalk said it now has 2.3 million customers subscribed to its fixed low price plan, compared to 1.8 million subscribers it had in the third quarter last year.
Customer churn is low, the company continued, at 1.16% in the period, down from 1.25% a year before.
The TalkTalk Business Ethernet & EFM base grew, with 1,100 new lines added in the period, taking the total installed base of data connections to 56,000. However, the company highlighted that whilst growth in data connections remains strong, it is increasing at a slower rate.
Overall, third quarter revenue, comprising Consumer, Wholesale and Direct B2B broadband, increased 2.9% year-on-year excluding carrier and off-net to GBP386 million. Headline on-net revenue has risen 4.3% to GBP316 million.
Within Corporate, revenue was up 4.8% to GBP44 million, driven by a larger average base, as well as up-selling customers to higher speeds, the company said.
Chief Executive Tristia Harrison commented: "We continue to see strong trading momentum in the business, with customer growth ahead of expectations. The third quarter was the eighth consecutive quarter of rising customer numbers and we saw record demand for Fibre."
She added: "Year-on-year, we have increased revenue by growing the base and stabilising average revenue per user, which combined with lower costs is driving improved earnings. Our significant customer momentum, combined with the benefits of our reorganisation and headquarter move, gives us confidence in strong earnings growth for financial 2020."
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