Annual General Meeting Year to March 2016 20 th July 2016 1
We made considerable progress towards our goal of being the Value for Money provider in our sector: › Revenue up 2.4%, EBITDA up by 6.1% › Customers took more products: revenue generating units up 254,000 But the year was dominated by the cyber attack we suffered on October 21 st › Took proactive decision to warn all customers immediately › 157k directly affected › Offered all our customers free credit monitoring and a free upgrade › £42m exceptional costs from cyber attack Business has recovered strongly since and we have learnt many important lessons that are enabling us to improve the business going forward
Strong recovery in Q4 post cyber attack › Lowest ever churn at 1.3% › Flat net adds › Focus on existing customers › Making TalkTalk Simpler benefits coming through › Strongest quarter of RGU growth +148k (90k mobile net adds, 72k Fibre net adds, -14k TV net adds) FY EBITDA £260m in line with guidance; material step up in H2 margin to 18.4% Net debt /EBITDA reduced to 2.6x (H1: 2.8x) Dividend per share up 15% to 15.87p in line with commitment
Y-O-Y Revenue Growth Y-O-Y Revenue Growth EBITDA +6.1% +2.4% £1,838m £260m £245m FY FY £1,795m +25.9% £926m +0.2% £135m £170m H2 H2 £924m +4.7% -18.2% £110m £912m £110m £90m £90m £871m £110m H1 H1 £76m FY15 FY15 FY16 FY16 Dividend per share Net Debt / EBITDA 15.9p 2.8x +15% 2.6x 13.8p FY16 Year End FY15 H1
Lessons from last 6 months Implications for FY17 and beyond Customers valued our open and honest Customers know that we save them money, approach during the cyber attack: and protecting that position is always important • Vast majority (73%) believe we looked after them Making TalkTalk Simpler is key to • 14% (489k) took free upgrade transforming from cheap to value for money: • Brand trust (47%) and consideration • Starting to deliver meaningful benefits (57%) higher than they were before the • Critical to long term future cyber attack Our relentless focus on improving customer experience is paying off: More work to do to simplify products and • Satisfaction growing propositions to help customers make informed choices • Calls to contact centres down • New systems working well • Abandoning line rental Value for money Quad-play is working • Taking learnings from free upgrade offer into ongoing marketing If we look after our customers they return that loyalty in spades 5
TalkTalk is a brand I trust (%) Satisfaction with Customer Service 47 45 41 74% 73% 72% 38 72% 72% 71% 37 37 36 36 70% 35 35 69% 69% 34 34 £110m 30 30 66% £76m 64% 64% Nov-14 Nov-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Lowest ever monthly churn Revenue Generating Units Added (k) 2.1% * Adjusted for bad debt disconnects (72k) 148 129 119 1.6% 1.4% 1.4% 1.3% 1.3% 1.3% 1.3% Q1'16 Q2'16 Q3'16 Q4'16 (70) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
Resilient revenue performance (flat year on year) despite lower customer base Strong growth in Corporate revenue (+7.5%) and Data (+38.5%) Healthy growth in Revenue Generating Unit penetration (+6.8% year on year), driven by mobile and fibre On-net churn reduced year on year and stable quarter on quarter at 1.36% York fibre to the premise trial on track to deliver proof of concept Reiterating all FY financial guidance, including EBITDA of £320m-£360m
Key Customer Deliverables Continue to improve our customers experience through our Making TalkTalk Simpler Program Learn from the “Free Upgrade” and simplify our products and promotions Improve our mobile proposition by moving from Voda to O2 and launching 4G Continue growing our quad play products and B2B data business Continue to rollout UFO in York Key Financial Deliverables Modest revenue growth EBITDA £320m-£360m Dividend at least in line with FY16 and covered by Free Cashflow Net debt at year end broadly similar to that at year end FY16 Net Debt / EBITDA expected to continue to fall towards 2x target
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