Posted: 21 July 2020

Q1 FY21 Trading Update

TalkTalk Telecom Group PLC

Trading update for the 3 months to 30 June 2020 (Q1 FY21)

Positive H1 trajectory

FY21 outlook; stable to growing Headline EBITDA, strong cash conversion with reduction in net debt

Headline revenue (excluding Carrier and Off-net) £358m (Q1 FY20: £387m)¹. Contraction primarily due to COVID-19 impact (trading restrictions and cancellation of live sports) and ongoing industry-wide declines in Voice usage exacerbated by lockdown.

The revenue decline, and consequently margin, has been offset by incremental and ongoing cost savings of a similar amount, with all key cost areas significantly lower year on year.

June and July has seen trading recovery and significant ARPU improvement. We expect ARPU to continue to improve through the remainder of the year, driven by growth of Fibre and Ethernet products.

Excluding the COVID-19 impacts and Voice usage, Q4 to Q1 revenue and ARPU would have been flat (Q1 FY21: £23.20).

B2B Ethernet trading has recovered to pre-COVID-19 levels, with strong 1Gb mix. We have also secured a number of meaningful B2B contract wins in the period.

Our expected FY21 COVID-19 impact of c.£15m remains conservative based on current bad debt trends in both our Consumer and B2B markets.

Tristia Harrison, Chief Executive of TalkTalk, commented:

“As the UK’s internet usage continues to soar, our role as the UK’s only scale affordable provider of Fibre broadband has become even more important. Given this, we see a positive outlook to H1 and are confident in our full year plan to deliver stable to growing Headline EBITDA with strong cash conversion.

As with many businesses, we have seen a short-term COVID-19 impact primarily due to lockdown trading restrictions and cancellation of live sports. Revenue, Fibre net adds and ARPU trends have all improved in June and July as lockdown restrictions have eased. Encouragingly customer payment trends are in line with the pre-COVID-19 period and we continue to see an ever-increasing demand for our higher speed Fibre and Ethernet products.

We are also pleased to have launched our new ‘Business Grade Homeworker’ packages for consumers and businesses, as the country adapts to working from home for the long-term. It is early days, but sales are strong. In addition, we are launching our Full Fibre services with Openreach and continuing to sell on the CityFibre Holdings network at scale. The last few months have shown that the Government’s ambition to reach UK-wide Full Fibre penetration by 2025 is more essential than ever before.”

The person responsible for arranging the release of this announcement on behalf of the Company is Tim Morris, General Counsel and Company Secretary.


Investor Relations:

Tim Warrington

+44 (0) 77 7541 4240


Lucy Thomas

Dafydd Wyn

+44 (0) 77 7963 9460

+44 (0) 77 9870 4841

¹ Q1 FY21 revenue split: Consumer and Wholesale B2B2C (On-net): £293m, B2B (Corporate): £72m (Data: £45m, Voice: £20m and Carrier: £7m) and Off-net: £2m. Q1 FY20: Consumer and Wholesale B2B2C (On-net): £317m, B2B (Corporate): £78m (Data: £47m, Voice: £23m and Carrier: £8m) and Off-net: £3m.

Further Q1 Highlights:

Continued focus on Fibre in Consumer and B2B

Lowest ever On-net churn at 0.68% (Q1 FY20: 1.29%).

Despite the challenges from COVID-19, we saw continued strong momentum in Fibre net adds with 67k added to the base during Q1 (Q1 FY20: 118k), with an improving trajectory in June and July compared to April and May.

84% of new Consumer customers took a Fibre product (Q1 FY20: 70%) with 59% of these taking the faster, higher ARPU 80Mbps product (Q1 FY20: 39%).

We saw similar encouraging trends in B2B, with 58% of new Partner customers in our B2B division taking a Fibre product (Q1 FY20: 50%).

Our Full Fibre plans continue at pace with Openreach FTTP launching in July, bringing likely price inflation.

CityFibre FTTP connections continue in York, and in Aberdeen, Bolton, Milton Keynes, Newcastle and Peterborough later this year.

Stable network with ample headroom despite exponential growth and new peaks

Our network has remained resilient in the face of continued data usage increases (nearly 40% year on year), with ongoing reductions in cost per Gb.

OTT video and online gaming traffic has increased 54% and 137% respectively year on year.

New Ofcom data found TalkTalk average download speeds to be faster over any given 24-hour period on both our 40Mbps and 80Mbps Fibre products than equivalent products from industry equivalents².

We saw our highest ever Fibre NPS scores and reducing complaints. We remain focused on continuing to demonstrate improvement in this area.

Consistent performance in B2B, with strong pipeline and meaningful base wins

Whilst impacted by COVID-19, the Ethernet base grew by 0.4k (Q1 FY20: 1.0k), as we continue to take more than our market share of new Openreach Ethernet lines. 41% of new orders were for the higher ARPU 1Gb lines (Q1 FY20: 33%).

Ethernet order volumes and installs in June have recovered from lower levels in April and May, and now exceed the prior year. The outlook remains strong, despite COVID-19, with stable growth versus FY20.

We have secured a number of meaningful contract wins with our partners in the period. Including critical national infrastructure projects for the NHS.

Our Direct business, serving SOHO and SME, is now trading ahead of pre-COVID-19 levels and early performance of our Homeworker propositions, including forward pipeline, is strong.

We have also signed a new five year contract with The Post Office for provision of network and IT services. This is still subject to Government approval which we expect in due course.

² According to data from Ofcom, the industry regulator, comparing average download speeds over 24 hours (in November 2019) for TalkTalk’s Faster and Superfast Fibre versus equivalent products from industry equivalents.