Posted: 17 December 2020

Interim Results - H1 FY21

Strong Ethernet and Fibre net adds; resilient network performance

Operational highlights

  • Robust operational performance despite ongoing impact of COVID-19. Data usage has soared by over 40% since the start of the pandemic and the importance of fast, reliable and affordable connectivity has never been clearer.
  • Although trading has been impacted by COVID-19, we saw 187k Fibre net adds (H1 FY20: 292k). Significant improvement in Q2 of 120k (Q1 FY21: 67k), returning close to previous levels (FY20 quarterly average: 151k), accounting for 37% of all new Openreach Fibre to the Cabinet (FTTC) lines (Q2 FY20: 33%).
  • Improving On-net ARPU trends with Q2 (£23.40) up on Q1 (£23.20) driven by growth of Fibre products and return of live sports seeing customers turn their sports boosts back on.
  • Lowest levels of On-net monthly churn at 0.91% for the half (H1 FY20: 1.27%, H2 FY20: 1.12%).
  • Strong Ethernet net adds of 2.1k (H1 FY20: 2.1k), with 1.7k in Q2 accounting for 24% of all new Openreach Ethernet connections, which is significantly above our market share.
  • Launch of Fibre to the Premise (FTTP) services on CityFibre and Openreach networks. Our national FTTP footprint provides access to c.3m marketable homes and businesses, rising to over 4m by the end of the financial year.
  • Recommended cash offer for TalkTalk by Tosca IOM Limited (a company newly formed at the direction of Toscafund Asset Management LLP and Penta Capita LLP) announced separately today.

Tristia Harrison, Chief Executive of TalkTalk, commented: “Our financials have been resilient in the first half, albeit with some impact of COVID-19 on Headline revenue and EBITDA. Lockdown has taught us that fast, reliable and affordable connectivity is more important than ever, and we have seen excellent network performance despite a 40%+ increase in data usage.

“We have added 187k FTTC customers during the first half, with 120k in Q2 representing over a third of all new Openreach FTTC connections; and over 80% of new retail customers are choosing Fibre products. Customers will benefit from even greater speeds as we transition to the next generation after FTTC – Full Fibre.

“Our B2B Wholesale and Ethernet business has seen a very robust performance. We’re adding Ethernet connections significantly above our market share, with a growing proportion of higher speed circuits. B2B is a crucial area of our business going forwards and I’m delighted at the sustained progress we’re making.”

Financial highlights 

  • Despite providing a critical service, we have not been immune to the effects of the pandemic, with an estimated £9m 2 impact to Headline EBITDA in the period primarily due to trading restrictions, the removal of call usage caps, ARPU dilution from early re-contracting in search of better value deals and an increase in bad debt provisioning, partially offset by additional cost savings in key areas such as contact centres, engineers and marketing.
  • Headline revenue (excluding Carrier and Off-net) £717m (H1 FY20: £764m), contracted by 6.2% year on year (YoY), primarily due to COVID-19 impacts outlined above. The remainder is driven by ongoing industry-wide Voice decline and a lower average base YoY. This has been partly offset by a continued increase in Fibre penetration.
  • YoY revenue trend improved from Q1 (-7.5%) to Q2 (-4.8%), with further improvement expected in the second half.
  • Statutory revenue £740m (H1 FY20: £792m), contracted by 6.6% mainly due to the reasons outlined above combined with declining Carrier revenue and lower non-Headline MVNO revenue as we wind down this business.
  • Headline EBITDA £122m (H1 FY20: £140m), represented a YoY reduction of 12.9% reflecting the lower revenue partially offset by savings in our cost base primarily due to the lower cost of serving our increasing Fibre customers and other cost initiatives including COVID-19 mitigating actions. c.£9m of the YoY delta relates to COVID-19, with the remainder as expected due to legacy Voice drags and the lower average base.
  • Statutory operating profit £20m (H1 FY20: £29m), declined YoY with the contraction in Headline EBITDA offset by the ongoing reduction in non-Headline items which occurred during the period.
  • Small increase in net debt in the period to £967m (FY20: £954m) 3 with improved free cash flow generation YoY offset by higher non-Headline items primarily relating to cash payments associated with the sale of the Fibre Assets Business in the prior year and the purchase of shares by the employee share ownership trust (ESOT).

Outlook

  • As highlighted in this announcement, COVID-19 has had some impact on the TalkTalk Group. Given the ongoing uncertainty created by COVID-19, we will be withdrawing the current full year EBITDA guidance and we will not be providing updated formal guidance.

Read or download the full results here: TalkTalk-FY21-Interim-Results-RNS.pdf

Contacts:

Investor Relations:
Tim Warrington
+44 (0) 77 7541 4240

Media:
Dominic Laurie
+44 (0) 78 1481 0626