Broadband provider TalkTalk Telecom PLC (LON:TALK) reiterated full-year guidance after adding 80,000 new broadband customers in its fiscal first quarter.
The firm said core headline revenue for the group was 4.1% higher in the three months to the end of June than in the same period of last year.
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The telecoms firm now has 2.1mln customers on fixed low-price plans (FLPP), up from 2.0mln at the end of March. TalkTalk said the increase was despite a large number of customers coming to the end of their contracts, which contributed to an increase in churn – the proportion of customers leaving the company – rising to 1.28%, compared to an average of 1.22% in the previous financial year.
TalkTalk saw an increase of 2-3% in net average revenue per user (ARPU) on FLPP customers coming out of contract. Given the continued take-up of its fibre offering and the companies efforts to sell more of its services to existing customers, the firm expects to see ARPU stabilise in the first half of the current financial year.
The first quarter proceeded according to plan
Full-year guidance was left unchanged at a projected 15% year-on-year gain in headline underlying earnings (EBITDA), which the firm said would be driven by a larger customer base, stabilising ARPU and cost-cutting measures.
"We are pleased to have delivered strong customer and headline revenue growth in the first quarter and we remain firmly on track to deliver at least 150,000 net adds this financial year,” said Tristia Harrison, who took over as the chief executive in February of last year.
Neil Wilson of markets.com said the company was on track to report 15% growth in headline earnings "before nasties".
"All this is broadly in line but the real focus is tomorrow’s AGM and what investors will say about the £200m rights issue earlier this year. We’re also eyeing the potential sale of the business and with shares still at multi-year lows, the appeal of a growing subscriber base is important, albeit at the expense of margins," Wilson said.
The number of shares issued in the rights issue was just below the level that would have required shareholders to give approval to the fund-raising exercise.
Russ Mould, the investment director at AJ Bell, seemed slightly bemused by the positive share price reaction to the update.
“Sometimes companies set themselves such a low bar that it is difficult not to clear it. Broadband provider TalkTalk is a case in point, with its share price rising sharply as it commits to full -ear guidance in a first-quarter trading update," he commented.
“This is underpinned by the addition of 80,000 new broadband users in the period. This customer acquisition has come at a cost, with lots of them on fixed low-cost plans. Notably, average revenue per user fell slightly year-on-year.
“There is also a slight uptick in the proportion of customers leaving TalkTalk, which suggests the positive sentiment created by today’s update might be short-lived.
“Tomorrow’s AGM could be a test for management as they look to defend a £200m rights issue earlier this year.”
Shares in TalkTalk opened 6.7% higher at 117.3p.
TalkTalk's share price rises almost 7% as Q1 delivers 80,000 bdbd customers, decent rev growth. The "reset" strategy to move customers to fixed low price plans (now 2.1m) looks to be paying off...
— Mark Sweney (@marksweney) July 17, 2018
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