A tripling of pre-tax profits and reassurances that TalkTalk is firmly on the road to recovery after last year’s cyber attack failed to cheer investors as the company’s share price fell almost 5% in early trading.
Dido Harding, the chief executive, said the company had tried to maintain a “relentless focus” on customers after the personal details of more than 150,000 were hacked last October.
“One year on from the cyber attack … we __have delivered an excellent uplift in first half profits and expect to deliver materially higher full-year profits than last year,” he said.
The company reported pre-tax profits of £46m in the six months to the end of September, compared with £14m in the same period last year.
Earnings before interest, tax, depreciation and amortisation (ebitda) – the profits metric most closely watched by analysts and investors – rose 44% to £130m. This was well ahead of analysts’ consensus expectations of ebitda of about £115m.
TalkTalk, which was fined a record £400,000 for the security failings that led to the hack, reported total revenues down 1.1% to £902m in the year to September.
Despite the profit surge, TalkTalk’s share price fell almost 5% in early trading as the company also reported that it lost 29,000 broadband customers and 56,000 TV customers in the first half of its financial year. The shares __have fallen more than 20% over the past year and are now trading at about 191p.
In the first half of 2015’s financial year TalkTalk lost 80,000 broadband customers, but added 25,000 TV customers.
The company said its attempt to “re-establish brand and value credentials” following the attack, with the launch of fixed low-price plans and more service improvements, is starting to pay off.
TalkTalk’s customer churn rate, the rate at which customers leave for rivals, fell in the three months to the end of September.
Harding said that the hard work that has been put in since the cyberattack to improve security and rebuild trust from customers and the wider public has paid off.
“Customers trust us more today than they did a year ago before the cyber attack,” said Harding. “They trust us more, rate us more highly as a brand, they are more satsified with us and there are fewer Ofcom [service] complaints. We tried to be open and honest and look after our customers and as a result our product is better than 18 months ago and we are more trusted.”
The move to offer lower fixed-cost plans six weeks ago has seen 10 times as many customers “re-contracting” than previously.
“We are delighted with the initial response to our fixed low-price plans, which offer customers simple, affordable and fair prices in an increasingly confusing market place,” said Harding. “By allowing our existing customers to switch to these new plans, we are delivering a value for money proposition to our customer base that is genuinely unique in the market, and are laying the foundations for a fundamental transformation of the TalkTalk brand.”
However, it admitted that the move would hit profits, restating expectations for full-year ebitda at the lower end of its £320m to £360m guidance range.
Harding said she expected TalkTalk to return to retail subscriber growth and revenue growth in its next financial year.
“I would be the first to admit that we have a historic reputation as a cheap challenger,” she said. “We have been on a journey to being a great value provider: Simple, reliable, affordable and fair is a great place to be.”
