Interim Results V22 print[2]f147d52a-fbfc-4650-8206... · H1(Headline(Proﬁt&(Loss((1)£million...

Interim Results 15 NOVEMBER 2011

2

Charles Dunstone Chairman

3

First Half Overview

•  Strategy delivering strong financial results

•  Unbundled base conInues to grow

•  On track to launch TV Spring 2012

•  Declared interim dividend of 2.6 pence/share in line with enhanced dividend policy

4

Amy SIrling Chief Financial Officer

5

Strong Financial Performance

EBIT (£m)

25%

EPS (p)

38%

OFCF (£m)

59%

Dividend (p)

53%

H1 Headline Profit & Loss (1)

£ million H1’ 12 H1 ‘11 % Growth

Revenue 844 887 -‐4.8%

EBITDA 146 121 +20.7%

EBITDA % Margin 17.3% 13.6%

EBIT 100 80 +25%

EBIT Margin 11.8% 9.0%

(1) Unaudited, excludes excepGonal costs and amorGsaGon of acquisiGon intangibles

6

H1 Customer Base and Revenue Profile

7

•  Customer base mix improving – 89% now unbundled •  Revenue profile reflects total customer base movement

H2 Revenue Stabilising

8

•  FY Guidance flat H2 on H1

•  Medium term 2% CAGR

•  Now expecIng posiIve broadband net adds during first half calendar 2012 •  Improved ARPU driven by pricing and up-‐sell, parIally off-‐set by usage and off-‐net churn •  Corporate growth H2

Reducing our Cost Base

9

4% y-‐o-‐y

11% y-‐o-‐y

14% y-‐o-‐y

6% y-‐o-‐y

SAC & markeVng

26%

Cost to serve 32%

Networks & IT 21%

Overheads 21%

Total Opex Spend £m

H1 ’11 316

H1 ’12 289

ReducIon Y-‐O-‐Y 27m (9%)

Significant Growth in Headline Earnings and Dividends


EBIT 100 80 +25%

Interest (8) (10) -‐-‐20%

PBT 92 70 +31%

TaxaVon (24) (20)

Effec&ve Tax Rate 26% 28.6% -‐2.6%

Earnings 68 50 +36%

Earnings per share 7.6p 5.5p +38%

Dividend per share 2.6p 1.7p +53%

10

OperaIng Cash GeneraIon ConInues to Improve


EBITDA 146 121 +21%

Working Capital 0 (10)

Capex (49) (50) -‐2%

OperaVng free cash flow 97 61 +59%

OFCF margin 11.5% 6.9%

ExcepVonals (23) (28) -‐18%

Free Cash flow 74 33 +124%

11

ExcepIonal Expenditure FY12

12

£ million P/L Cash FY 12 Benefit

Annualised Benefit

Tiscali IntegraIon -‐ 10 15 55

Back Office SimplificaIon 5 17 15 25

Waterford Closure 15-‐20 15-‐20 5 15

OFCOM fine 3 3 -‐

Total Impact in FY12 25-‐30 45-‐50 35 -‐

•  Completes Tiscali integraIon spend •  Delivers £40m of £40 to £50m operaIng efficiencies target

Net Debt Movement

13

FY12 Financial Guidance

14

(*) Assumed weighted average number of shares of 907m

Revenue -‐ •  Revenue Flat H2 vs. H1 Stabilising

EBITDA 17-‐18% • EBITDA margin conInues to improve through benefit of operaIng efficiency programmes and unbundling

Top end of range

OFCF as % of Revenue

10-‐11% •  H1 cash conversion conInues into H2 •  Working capital expected oujlow in H2 (£15-‐£20m)

Top end of range

Earnings per share

15.5p – 16.5p *

• Weighted average number of shares increases EPS Top end of

range

CAPEX as a % of

revenue 6%

• Investment in network and billing systems •  ExpecIng £105 -‐ £110m FY

Re-‐iterate guidance

FY12 Key Financial Developments

•  Share purchase in the year covers anIcipated share schemes diluIon

•  ExcepIonal spend to deliver £40m of £40 to £50m operaIng efficiencies all in FY12

•  HMRC agreement on uIlisaIon of VNL tax losses from Tiscali acquisiIon

•  Deferred Tax Asset £47m

•  EsImated discounted cash tax value £75m

•  Refinancing of £550m RCF signed November

•  H2 ‘12 cash cost of approx. £7m

•  Cost of funding broadly unchanged and £690m total faciliIes now in place

15

Dido Harding Chief ExecuIve

17

Strategy Delivering

•  Strong Financial performance

•  159k fully unbundled customers added

•  Delivering a bener experience for customers and operaIng efficiencies.

•  Significant progress on up-‐sell

•  TV offering on track for launch in Spring 2012

OperaIng efficiencies

Largest unbundled UK network

Value-‐for-‐money

quad-‐play

B2B services

Fibre access

AddiIonal £40-‐50m

2,700 exchanges 93% of customers

Broadband, voice TV, mobile

Exploit network advantage

Future-‐proof service delivery

EXPAND MARGIN GROW REVENUE

20% EBITDA margin + 2% Revenue CAGR

1 2 3 4 5

An enduring Value for Money provider

18

19

Ahead of plan on Unbundling 700 new exchanges


1

% of Customers Unbundled No. of Exchanges Unbundled

•  201 exchanges unbundled in H1, and on track to deliver 450 full year

•  Added 159k fully unbundled customers in H1

20

We are improving the quality of our customer base.

H1’11 H2’11 H1’12


1

Mix Of Customers Value of Customers

IPS SMPF MPF Blended

ARPU per month £30 £15 £27 £25

Average Cont^n per month

£4 £10 £15 £12

ExpecVng posiVve total broadband net adds in first half of calendar year 2012

21

We are making significant progress in simplifying our business and reducing costs


2

Cost Saving

AcVviVes

£40m of £40-‐50m target idenVfied

•  Completed in 2010/11

•  Run Rate -‐ £55m

-‐ £40m in 10/11 -‐ £13m in H1 11/12 -‐ £15m in FY 11/12

•  Restructured Finance, Technology, HR and other back office funcIons

•  540 headcount reducIon


-‐ £5m in H1 11/12 -‐ £15m in FY 11/12

Tiscali IntegraVon Back Office

SimplificaVon Improving Customer

Service

•  Call volume reducIon •  Consolidated offshore service providers

•  Closed Waterford call centre


-‐ £5m in FY 11/12

22

We are conInuing to improve our customer experiences

40% Improvement


2

Calls to Customer Service

66%

First Time Fix Rate

Online Contacts as % of Total

14%

OFCOM Complaints

UP-‐SELL & RE-‐CONTRACTING •  CommunicaVng the value of our products, and saving customers money Now

CALL CENTRE IMPROVEMENTS •  Improving Online self serve experience •  Simplified Scripts and beler training •  Fewer contact centres

Now

SPEED / CONNECTIVITY •  Engineers to opVmise Speed •  Improved DiagnosVcs to increase First

Vme Fix •  Beler Network monitoring

Q3

SYSTEM & PROCESS IMPROVEMENT •  Home-‐mover improvements •  Flexible Payment dates Q4

23

We have a pipeline of work that will further improve customers experience and churn

ExpecVng posiVve total broadband net adds in first half of calendar year 2012


quad-‐play

3

24

More customers are saving more money by buying more products from TalkTalk

H1 10/11 H1 11/12 Change

Fully UNBUNDLED CUSTOMERS 2,600,00 2,900,000 + 300,000

PLUS CUSTOMERS 350,000 800,000 + 450,000

MOBILE MINUTE BOOSTS -‐ 250,000 + 250,000

MOBILE Customers 17,000 50,000 + 33,000

HOMESAFE ACTIVATIONS -‐ 200,000 + 200,000


quad-‐play

3

H1 10/11 H1 11/12 Change

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HomeSafe – a real compeIIve advantage

“(HomeSafe) was revolutionary, as for years the ISPs argued that such a service was technically impossible. We should be able to choose what comes into our homes, and finally we can. I, for one, say hurrah for that.” Eleanor Mills, Sunday Times


quad-‐play

3

“I’d like to pay tribute to the brand TalkTalk for what they’ve done here – they really have been pioneers” Tim Loughton MP & Children’s Minister

26

YouView is a Powerful ProposiIon for TalkTalk

•  IPTV is growing strongly in other markets •  Iliad – France

•  PCCW – Hong Kong

•  China Telecom

•  Easy access of catch-‐up content is the key driver of take-‐up

•  Available to fully unbundled customers


quad-‐play

3

TalkTalk well posiIoned for TV

Our research tells us:

•  TalkTalk ideally posiIoned to offer an upgrade to Freeview customers....

...they are over indexed in our base,

...they want a linle extra but not a lot

...and TalkTalk has a track record of up-‐selling products •  TalkTalk ideally posiIoned to offer an entrance to PayTV for late adopters

...offering best value TV

...offering a simple customer experience


quad-‐play

3

27

28

TalkTalk TV – High Level Imetable

APPROVED DEVELOP TRIAL PILOT LAUNCH

• BBC trust and OFCOM approves YouView

•  Shareholders commined

Sept 2010

•  Huawei Set-‐top Box • Youview Soqware Plajorm

•  Provisioning flows •  CRM CompaIbility

• OperaIonal Readiness

Now & Q3 Q4 Late Q4 / Early Q1 Spring 2012


quad-‐play

•  Up to 3,000 •  Friends and Family

• E2E trial •  Customer Experience

•  Up to 10,000 • Extension of the trial to test: a) Scale b) Resilience

• Full launch of TV

3

20% of Group Revenue with significant growth potenIal

29

TalkTalk Business revenue on track B2B

services

4

•  Year-‐on-‐year growth of 17% •  Ethernet •  Managed SoluIons

•  Significant compeIIve advantage in scale of return

•  Executel and Greystone trading on plan

•  Fixed Line Usage decline & pricing pressure as anIcipated

•  MTR reducIons

•  Leveraging voice network capability

30

Low Fibre demand today, IPTV in Ime will drive demand

Fibre access

•  Launched and available to exisIng TalkTalk customers

•  Up to 40meg downstream and 2 upstream ( 40/2 )

•  Weekly sales c300 per week, current base 3k

5

•  Reached commercial agreement on 80/20 product

•  StarIng pre-‐registraIon in Jan ‘12 @ £15/month

•  £200 savings vs. equivalent Virgin product *

* Based on 18 Month contract




quad-‐play

B2B services

Fibre access

1 2 3 4 5

One year in, making great progress, with more to do

•  89% On-‐ net • 201 exchanges unbundled

• 159k fully unbundled net adds

•  £40m now idenIfied •  Back office

•  Waterford •  OSP ConsolidaIon

•  HomeSafe •  Plus •  Mobile •  TV on track

• Corporate Revenue on track

•  Ethernet

•  Low demand •  Building for scale • Launching 80/20 next year

31

EXPAND MARGIN GROW REVENUE

Confident we are well placed to deliver medium term strategy

Appendix

EPS

£ million H1’12 H1’11 FY’12

34

* Guidance issued on 907m shares, now expect approximately 884m on weighted average basis

*

FY12 other items •  HMRC agreement on uIlisaIon of VNL tax losses from Tiscali acquisiIon

–  RecogniIon of a £47m deferred tax asset ( 5 years )

–  Associated credit in excepIonal tax line in H1’12 –  AnIcipated discounted cash tax value of c.£75m ( 10 years )

•  Re-‐financing of £550m RCF signed November –  New RCF of £520m matures November 2015

–  Bilateral loans of £70m also signed

–  Associated fees of c£7m paid in H2 ‘12

–  Total commined faciliIes now £690m

•  Cash investment of £7m in H2 –  Greystone acquisiIon (small B2B reseller)

–  YouView joint venture

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Interim Results V22 print[2]f147d52a-fbfc-4650-8206... · H1(Headline(Proﬁt&(Loss((1)£million...

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