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TalkTalk swings back to profit after record quarter for fibre

At the statutory level, the telecoms group swung from last year’s £4m loss to a profit before tax of £1mln, with underlying profits up 39% to £140mln

Talktalk Telecom Group PLC -
A TalkTalk wireless router

Talktalk Telecom Group PLC’s (LON:TALK) reported improved first-half profits as it added a record number of new super-fast broadband customers and cut costs too.

Revenues for the FTSE 250 telecoms group came in at £764mln for the six months to 30 September, dipping 1% year on year, while on-network average revenue per user fell 2%.

READ: TalkTalk reaffirms full-year guidance after strong demand for fibre in first quarter

This was despite fibre net adds rising 52% to 292k over the hald, including a record 174k in the second quarter, accounting for a 33% share of all new fibre broadband lines on the Openreach network in the quarter and 22% in the half-year.

Underlying profits (EBITDA) were also up 39% to £140mln under new IFRS 16 accounting rules, or 14% higher to £115mln pre-IFRS, both considerably higher than the £110mln expected by analysts.

At the statutory level, TalkTalk swung from last year’s £4m loss to a profit before tax of £1mln or £4mln pre-IFRS.

Chief executive Tristia Harrison said the board’s headline EBITDA outlook for the year remained unchanged.

“We're pleased that our clear strategy to accelerate customer growth in fibre broadband while also reducing costs has led to a significant increase in profitability in the first half.” 

She said with more than 2mln customers taking a fibre product, this was good news for customers and TalkTalk. 

“It offers a faster, more reliable service whilst also reducing churn and comes with a materially lower cost to serve. In addition, our soon to be completed HQ move and shift to a self-service model is underpinning our cost reductions.”

Fibrenation sale and Openreach

Interim results, which were pushed back to Friday because of “ongoing advanced negotiations with interested parties” about selling a majority stake in its FibreNation wholesale full-fibre business, which was launched a year ago.

Fibrenation, for which TalkTalk has been searching for a funding partner since this summer, has so far rolled out fibre-to-the-premises to 61,000 houses and businesses in Yorkshire in August, with further plans to reach 100,000 premises.

The sale is expected to be completed by 31 March 2020, the company said, though the Labour Party’s new announcement about plans to renationalise BT Group PLC’s (LON:BT.A) Openreach network might complicate the sale talks.  

Quick facts: Talktalk Telecom Group PLC

Price: 79.4 GBX

LSE:TALK
Market: LSE
Market Cap: £910.14 m
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