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TalkTalk to sell B2B business after sinking to loss
TalkTalk announced the sale of its direct business-to-business operation for £175m as falling revenue and rising costs drove the broadband operator to a loss last year.
The FTSE 250 company has agreed to sell the direct B2B arm to Daisy Group, a technology and cloud provider to businesses. The deal covers less than 20% of TalkTalk's B2B revenues and will leave the company with a core strategic partner and wholesale business. TalkTalk said the deal would simplify its business, cut costs and strengthen its balance sheet.
The company announced the sale as it reported a pre-tax loss of £73m for the year to the end of March compared with a £70m profit a year earlier. Headline earnings dropped to £233m from £361m in line with consensus.
Revenue fell 4% to £1.71bn after TalkTalk scrapped its mobile business and quit other activities. The company spent an extra £36m on marketing as it sought to stem an outflow of customers. TalkTalk added a net 192,000 customers last year after losing 49,000 the year before and reported its lowest "churn" rate of 1.22%.
The company's shares rose 9.3% to 132.5p at 08:13 BST.
TalkTalk has been beset by problems in recent years, including a security breach that allowed the theft of data for about 150,000 customers. Former chief executive Dido Harding left in May 2017 and Charles Dunstone, the founder of former parent Carphone Warehouse, became executive chairman. In February it raised £200m from shareholders to strengthen its finances and cut its dividend guidance, to much City consternation.
Dunstone and chief executive Tristia Harrison set about scrapping non-essential businesses such as TalkTalk's mobile operation while funding a drive to connect more than 3m homes and businesses to full-fibre broadband. Charles Bligh will leave his post of chief operating officer to run the full-fibre joint venture set up with M&G Prudential.
Harrison said: "When we reset TalkTalk a year ago, we said we would focus on delivering sustained customer growth whilst radically simplifying the business. One year into the strategy, we are making good progress on both. We have also made real progress in simplifying the business to focus on core, fixed connectivity. This will continue into FY19 with the sale of our direct B2B business. As expected, our decision to invest in growth has come with short-term implications for [earnings] but positions us well for FY19."
She said TalkTalk was on track to increase earnings by 15% earnings growth in the current year, excluding a £15m reduction from selling the B2B business, and for revenue to rise.
Some analysts have said TalkTalk's dividend is under further threat after two downgrades to guidance. The company will pay an annual dividend of 4p a share, down from 10.29p the year before. It forecast a dividend of 2.5p a share for the current year and predicted a "more normalised" dividend policy after earnings start to rise and debt is reduced.
TalkTalk spent £119m on one-off reorganisation costs last year, down from £129m a year earlier.