TalkTalk Telecom Group PLC TalkTalk Trading Update Q1 FY21 (5510T)

TIDMTALK

RNS Number : 5510T

TalkTalk Telecom Group PLC

21 July 2020

21 July 2020

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) GBP358m (Q1 FY20: 
       GBP387m) (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: GBP23.20). 
 --   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.GBP15m 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.

Contacts:

 
 Investor Relations:    Tim Warrington    [phone] 
                        Lucy Thomas       [phone] 
 Media:                  Dafydd Wyn        [phone] 
 

(1) Q1 FY21 revenue split: Consumer and Wholesale B2B2C (On-net): GBP293m, B2B (Corporate): GBP72m (Data: GBP45m, Voice: GBP20m and Carrier: GBP7m) and Off-net: GBP2m. Q1 FY20: Consumer and Wholesale B2B2C (On-net): GBP317m, B2B (Corporate): GBP78m (Data: GBP47m, Voice: GBP23m and Carrier: GBP8m) and Off-net: GBP3m.

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 equivalents (2) . 
 --   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.

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July 21, 2020 02:00 ET (06:00 GMT)