Preliminary Results FY th May 2017

Transcription

1 Preliminary Results FY17 10 th May 2017

2 Agenda Introduction FY17 Review Financial Review Strategic Overview Operational Priorities Summary Charles Dunstone Tristia Harrison Iain Torrens Tristia Harrison Charles Bligh Tristia Harrison Q&A 2

3 Introduction 3

4 FY17 Performance Review 4

5 Strong foundations for delivering future retail growth FLPP Take-Up 1, Oct Nov Dec Jan Feb Mar Apr Net add growth from (71K) in first 9m to +22K inq4 Over1m customers on our Fixed Price Plans now, with strong brand momentum and NPS Nearly 60% of on-net Retail base in-contract Re-launched our brand focusing on four values Simple Affordable Reliable Fair Leading to happier, more loyal customers; lower churn and positive retail net adds 5

6 Another strong year in TalkTalk Business Corporate Revenue Data Voice 375m 384m 397m % * 31% *Excluding Carrier Data revenue growth of 30%+ Significant slow down in the decline of legacy voice Carrier FY15 FY16 FY17 6

7 Improving customer experience in retail and B2B Customer Experience CSAT NPS Completed MTTS savings in year of 34m, cumulatively delivered 87m Measurable improvement in retention and customer satisfaction Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Strong churn improvement On Net Churn FY16 FY % 1.58% 1.40% 1.64% 1.36% 1.36% 1.43% 1.40% Q1 Q2 Q3 Q4 7

8 Customer Base Development Broadband base Penetration Ethernet base Consistent growth Strong product take-up Strong progress in Ethernet order conversion Healthy pipeline 8

9 Q4 performance: clear evidence of growth On-Net Net Adds On-Net Churn Corporate Revenues % (9) (20) (42) 1.4% 1.4% 1.4% Q1 Q2 Q3 Q4 (4.4%) 9.2% 3.0% 9.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Underpinned by a number of important regulatory announcements which will drive improvements to service and price optionality over the coming years 9

10 10 FY17 Financials 10

11 Summary Profit & Loss FY17 FY16 m m Headline Revenue 1,783 1,838 Gross Profit Operating costs & SAC (645) (733) Headline EBITDA Margin 17.0% 14.1% Profit after tax Headline EPS (Basic) 10.5p 8.4p Dividend per share 10.29p 15.87p 11

12 Revenue and Gross Margin Revenue 57m 11m 37m 26m 2m On-Net ARPU ,838m 1,783m FY16 On-Net Off-Net Data Legacy Voice Carrier FY17 FY16 Pricing & Proposition Triple / Quad Play Voice Usage Mix FY17 Gross Margin Wholesale Mix & Fibre Penetration 1.8% 2.3% 1.3% Wholesale 19% 3% FY16 FY17 Fibre FY16 15% FY17 6% 54.0% 53.2% 77% 77% FY16 On Net Data Voice & Carrier FY17 12 Calculated as % of average base

13 Opex and SAC 733M SAC 260M Opex 473m 645m SAC 186m Opex 459 MTTS incremental in year savings Lower gross adds in year drive lower SAC Channel optimisation reflects extended distribution agreement FY16 FY17 13

14 Summary Cashflow m FY17 FY16 EBITDA Working Capital (28) 10 CAPEX (133) (166) Operating Free Cash Flow Interest and Tax (33) (22) Free Cash Flow Acquisitions (18) (12) Exceptional Items (46) (88) Share Sale 1 63 OUTLOOK Working Capital to stabilise CAPEX to revert to 6-7% of revenues Exceptional Items to fall to 10m - 20m Net Debt to reduce in FY18 Dividends (150) (135) NET CASH FLOW (103) (90) Net Debt * (782) (679) Net Debt / EBITDA 2.57x 2.61x * Net of derivatives 39m 14

15 Strategic Review 15

16 UK s leading value for money connectivity provider Ruthlessly prioritise our core strengths Grow the Retail base Sustain momentum in B2B Step change in customer experience and operational efficiencies Fixed network investment Less capital intensive priorities 16

17 Sustained Retail Base Growth Long term price certainty Ongoing simplification of our product and pricing portfolio Ongoing investment in fixed price plans New plans available to both new and existing customers Happier, more loyal, lower churning customers and net adds growth 17

18 Driving ARPU (Fibre, TV and mobile and pricing) Strong fibre take up among new and existing customers Material improvements in TV quality and engagement New distribution model for Mobile Sensible pricing decisions; always the value provider 18

19 Sustaining momentum in TTB National & Metro Ethernet Volume Forecast Data revenues: high growth and high margin Growth Carrier Phone and BB (retail and wholesale) TalkTalk Group Data & Next Gen Voice Legacy Voice Gross Margin *Ovum Forecasts Regulated pricing + dark fibre offer further opportunities 19

20 Operational Priorities 20

21 Customer demand & expectations Fixed line - average household usage (GB/month) Average Number of Connected Devices (a) 2016 (a) Always on - An essential utility". Source: OECD, Cartesian 21

22 Driving operational excellence Will Deliver COO Cost reductions Simplification Total cost focus Consumer Operations B2B Operations Network IT Security Procurement Operational stability. Opex/Revenue declining over time Quality Cost 22

23 Delivering a step change in customer experience Consistently good Service Join/Move & Repair In Home Experience Multichannel Join/Move re design Routers Digital First Repair re design Homesafe 2.0 Case Management. Nuisance Calling. Customer Satisfaction Churn 23

24 The Network Story in 3 phases BUILD & SCALE UPGRADE Build UK First All IP network 500 Exchanges 3037 Exchanges Core Upgrade New DNS/DLM Exchange Upgrade FTTP Ethernet, IPTV, FTTC NEW PRODUCTS Dark Fibre Deployment 24

25 Ranking Sam Knows - External Network Performance Ranking of Top 5 FTTC providers We are ranked 1st from Peak throughput % April 15 April 16 Sept 16 April 17 Note: Ranking of 2 denotes 2nd best in performance, Sam Knows Industry Panel

26 Total Network OPEX Network upgrade Delivered within the normal CAPEX envelope 75m Exchange upgrade Dark Fibre rollout FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Open Existing Backhaul Opex - Dark Fibre Cost/gb = Hold network opex with customer & usage growth 26

27 Growing confidence in FTTP from York Progress to date Next steps 14k homes passed at build cost of under 500 (T1 / T2) 27% penetration of serviceable homes Majority of TalkTalk customers Excellent customer feedback ASAT at 82% Churn to date is 1 customer 100% uptime since launch POP POP Complete build of FTTP across York (40,000 homes)(t3) Continued to learn and drive down build cost / increase take-up 27

28 Summary Strong plan for delivering sustained growth in retail and B2B Step change in customer experience and ongoing fixed network investment Fewer simpler priorities 28

29 Outlook and Guidance FY18 Modest base and revenue growth EBITDA m Net debt reduced Dividend 7.5p Future KPIs Total broadband base Retail and B2B revenues 29

30 Appendices 30

31 Our Network Infrastructure today 31

32 KPIs FY13 FY14 FY15 FY16 FY17 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 On-Net Base (m) Broadband & Voice Broadband Only Total On-Net Churn (p.m.) 1.6% 1.5% 1.6% 1.6% 1.4% 1.3% 1.5% 1.7% 1.4% 1.5% Mobile (m) Fibre (m) TV (m) Ethernet and EFM lines 7,100 10,200 13,700 17,400 21,600 26,200 30,700 35,100 39,300 42,700 Total Broadband (m) Revenue ( m) On-Net Off-Net Corporate Total On-Net ARPU ( )

33 FY17 Preliminary Results 10 th May