Investors could get a headache working their way through today’s half year update from broadband and calls supplier TalkTalk (TALK). There is plenty of detail, which is good, but the figures are typically littered with all sorts of one-offs and adjustments.
For example, reported revenue declined 0.6% to £822m but the company chooses to concentrate on what it calls ‘headline revenues’, which basically strip out mobile partner carrier costs and ‘off-net’ which, in other words, are customers not taking broadband internet services (just calls). These rose 3.9% to £771m.
By and large business seems to be in line, although investors don't appear very happy with the status quo, sending the stock spinning 6% lower to 114.7p. Perhaps they are still hoping that someone comes along and buys them out.
WHEN A PROFIT IS REALLY A LOSS
This adjustment, plus depreciation and amortisation costs, turns a £101m of earnings before interest, tax, depreciation and amortisation (EBITDA) into an operating profit of just £19m. It also sends the reported £6m pre-tax profit £4m into the red.
Another £55m has been cut from net debt, which now stands at £800m. This seemingly positive move is largely due to a previously-announced deep cut to dividends (1p per share has been announced, versus 2.5p a year ago) and lower capital expenditure of £59m.
NEW FIBRE IDEA
TalkTalk has also decided to rip up its previous fibre to the premises (FTTP) roll-out plans with Infracapital. It will now set-up a new company called FibreNation alongside wholesale partner Sky (SKY).
The original idea was to cover 3m homes but at a projected £1.5bn cost. That has now bitten the dust. FibreNation still aims to for the same number of homes but how much it will cost remains to be seen, as does answering where cash needed will come from.
