British multi-service operator TalkTalk has published its financial results for the year ended 31 March 2016, claiming to have delivered headline financial results in line with the guidance it gave when reporting the first half of its latest fiscal year.
Revenues in the twelve-month period increased by 2.4% year-on-year to GBP1.838 billion (USD2.77 billion), with growth in the first half of 4.7%. Second-half growth was noticeably lower at just 0.2%, directly impacted by the cyber attack which ’resulted in a spike in churn and an extended period over which [the company was] unable to trade from our online channels’. On-net turnover totalled GBP1.399 million in FY 2016, representing an increase of 5.0% from the previous financial year, while off-net revenues declining by 36.8% to GBP55 million, attributed in the main to the disposal of TalkTalk’s consumer off-net base at the start of the year.
Headline EBITDA was up 6.1% y-o-y at GBP260 million, driven by revenue growth, subscriber acquisition cost efficiencies and benefits from the company’s ‘Making TalkTalk Simpler’ (‘MTSS’) programme. The net exceptional charge for TalkTalk in the fiscal year amounted to GBP83 million, almost double the GBP46 million reported a year earlier, with the increased figure comprising the costs incurred during Q3 FY16 in relation to the cyber-attack, alongside one-off costs related to delivering the MTTS programme. Profit before tax decreased 56% y-o-y to GBP14 million, a figure which TalkTalk said reflected the increase in exceptional costs offset by the increase in EBITDA.
Looking ahead, TalkTalk has said it expects revenues to grow ‘modestly’ in the year to 31 March 2017, driven by a broadly stable broadband base and continued growth in TalkTalk Business, while it has forecast headline EBITDA of between GBP320 million and GBP360 million.
In operational terms, at the end of March 2016 the number of customers signed up to TalkTalk’s on-net fixed broadband and phone service totalled 3.996 million, down from 4.177 million a year earlier. The company noted that the change in the customer total reflected two principal effects: an adjustment resulting from a change in credit terms from 180 days to the industry standard of 90 days, which resulted in 72,000 non-paying customers being disconnected in H1 2016; and a 95,000 impact in Q3 linked to the cyber-attack, with this ‘reflecting churn in the immediate aftermath of the attack and much lower additions activity as it took longer than expected to return the business to normal sales effectiveness’. Meanwhile, a total of 225,000 customers opted for the company’s fibre broadband plan during the financial year, bringing the total to 704,000. Mobile accesses also grow strongly, rising by 235,000 in FY16 to reach 699,000.