TalkTalk share price plummets as dividend is slashed

 
Oliver Gill
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Major shareholder Charles Dunstone recently changed from non-executive to executive chairman of TalkTalk (Source: Getty)

TalkTalk shares plummeted over 11 per cent after it slashed its dividend in the hope of generating better growth and delivering "strong sustainable shareholder returns".

With full-year revenues floundering, the telecoms firm halved its final payout and reduced full-year returns by a third.

The figures

Revenue for the year to March fell three per cent to £1.8bn. Corporate sales rose by four per cent, data returns jumped 31 per cent but "legacy voice" fell 18 per cent.

Customer churn, effectively the number of people leaving the network, fell from 1.64 per cent at the end of December to 1.40 per cent.

Earnings were 17 per cent higher at £304m. Statutory profit before tax jumped from £14m to £79m. Earnings per share were 6.1p compared with 0.2p last year.

Read more: TalkTalk insists it's holding onto customers

Despite the increase in earnings dividends were cut. The firm's final dividend fell from 10.58p to 5.0p per share. This meant total over the year dividends fell from 15.87p to 10.29p.

Net debt increased from £782m from £679m. Although its multiple compared to earnings – in other words the number of years a firm needs to exist to pay off its debt – fell from 2.61x to 2.57x.

Why it's interesting

Retail mogul (and TalkTalk's largest shareholder) Charles Dunstone has returned to the firm as executive chairman, having previously been non-executive chairman.

He said this morning he is "enjoying having a more 'hands on role' at TalkTalk". Insiders at the firm have told City A.M. Dunstone was pulling the strings in the background under former chief exec Dido Harding's tenure.

Read more: Dido Harding steps down as TalkTalk chief executive

The dividend cut was reported over the weekend and the revenue fall was expected by analysts. Nonetheless this morning's confirmation has disappointed investors.

What the company said

Dunstone added:

"I'm very excited about the progress we have already made and the prospects for the business.

"The promotion of Tristia Harrison and Charles Bligh to their new positions has created a clear and simpler operating structure and I can already see the difference they are making. My focus for the company is growth, cash generation and profit ­ in that order.

"We will be smart about how we invest, focusing on our fixed network, avoiding other capital intensive distractions.

In light of these new priorities, we have also decided to reset the dividend as we look to deliver growth and strong sustainable shareholder returns over the long term.

Chief executive Tristia Harrison said:

"The last 12 months have seen the business lay down solid foundations from which to drive sustainable base and revenue growth in both our retail and business to business businesses.

"This will allow us to build upon our core strength as a value for money fixed line connectivity provider as we focus on delivering growth, improving our customers' experience, investing in and future­proofing our fixed network, and driving operational efficiencies across the business, whilst being more disciplined and smarter with our assets."

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