TalkTalk Telecom Group PLC

Preliminary results for the year ended 31 March 2019

(Full announcement)

Financial highlights

• Total Headline³ revenue (ex-Carrier and Off-net) up 2.2% to £1,544m (FY18: £1,511m²); Headline On-net revenue up 3.9% to £1,263m (FY18: £1,216m²)

• Statutory revenue of £1,632m (FY18: £1,653m²), a 1.3% decline

• Headline EBITDA³ of £237m (FY18: £203m²) (including FibreNation costs)

• YoY Headline EBITDA growth of 16.7% driven by a larger average base, increased Fibre penetration and a materially lower cost base

• Statutory operating profit of £47m (FY18: £44m loss²); Statutory loss before taxation of £5m (FY18: £100m loss²), after £42m of non-Headline costs associated with reorganising and simplifying the business

• Net debt of £781m (including finance leases of £39m) broadly flat year on year (FY18: £776m² including finance leases of £31m)

• Final dividend of 1.50p (FY18: 1.50p); total 2019 dividend of 2.50p (2018: 4.00p)

Operational highlights
• Accelerated Fibre uptake with 490k net adds in the year (FY18: 348k) and a record 152k in Q4 (Q4 FY18: 98k)

• Customer base growth of 150k (FY18: 192k), taking the closing base to 4,289k¹. Q4 net adds of 2k (Q4 FY18: 109k) representing the ninth consecutive quarter of base growth in a competitive market

• Ongoing low level of churn at 1.20% (FY18: 1.22%)

• Group On-net ARPU stabilising at £24.98 (FY18: £25.06 2), with year on year (YoY) Consumer ARPU growth

• Good progress on cost reductions, including the move of our HQ to Salford, creating one main campus and a more efficient operating model

• Continued momentum in FibreNation rollout, with York build nearing completion and investment partner process well underway

Looking forward

• Remain confident in FY20 EBITDA growth, with Headline EBITDA (including FibreNation costs) in line with market expectations (4)

• Outlook underpinned by accelerated Fibre growth, coupled with modest base growth, benefiting ARPU, lower Fibre wholesale costs due to commercial discounts, ongoing cost to serve reductions as we transition to a self-service model and significant cost savings from the move of our HQ to Salford (£25m-£30m annualised, with £16m-£20m in FY20), offset in part by continued Voice usage decline

Tristia Harrison, Chief Executive of TalkTalk, commented:
“Today’s results show that two years after re-setting TalkTalk, the fundamentals of the business are much stronger. We have grown our customer base in a disciplined way, accelerated Fibre take-up, and reduced costs. This is translating to revenue growth and a c.17% increase in Headline EBITDA.

"Looking forward the business will continue with the same plan, focused on accelerating Fibre, reducing costs and simplifying the business.

"Having re-structured the customer base to reduce the difference between our front and back book pricing, the business is also well placed to benefit from imminent regulatory changes related to fairer pricing. These trends, coupled with ongoing cost reductions including our move to one Salford campus, mean we are confident in delivering strong Headline EBITDA growth both next year and over the medium term.”

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

Webcast link: https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/7467/113427/Lobby/default.htm

Replay (available for 7 days):
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Contacts:
Investor Relations:
Tim Warrington
+44 (0) 20 3417 1821

Media:
Iain Wood
+44 (0) 79 9078 5019

References
1. All customer KPIs relate to the On-net base. The closing Off-net base represented less than 1% of the total broadband base (FY19: 29k, FY18: 43k).

2.  See note 1 for further details on the restatement of comparative information due to the retrospective application of IFRS 15 and IFRS 9.

3.  See note 1 for an explanation of alternative performance measures (APMs) and non-Headline items. See note 4 for a reconciliation of Headline information to Statutory information.

4.  FY20 Headline EBITDA consensus: £266m (excluding FibreNation costs) and £263m (including FibreNation costs), based on a range of estimates between £247m and £282m. Source: Internally compiled TalkTalk consensus published on corporate website

(https://www.talktalkgroup.com/events/events/FY19/FY19-Preliminary-Results-and-Consensus).