Year to March th May 2015

Transcription

1 Year to March th May

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3 FY15 highlights FY15-FY17 Financials Update on Strategic Priorities 3

4 4.2% * revenue growth for FY15, accelerating to 6.0% in Q4 1m new RGUs added in FY15 (+20%) and lowest churn (Q4: 1.3%) 40% growth in Data driving Corporate revenue growth of 10% Acquisitions that will drive future growth (Virgin Media and Tesco broadband bases, blinkbox, tipicall) 15% growth in Headline EBITDA 15% growth in dividend *Statutory revenue after 5m exceptional VAT adjustment in FY14 Raising revenue target to FY17 to 5% CAGR and on track to deliver FY17 EBITDA margin 25% 4

5 3.1%* 4.2% 12.3% 13.6% -4.4% -1.0% FY12 FY13 FY14 FY15 213m 76m FY14 +15% 245m 110m FY15 318m - 9m 309m 10.4p 12.0p +15% 13.8p FY14 FY15 FY13 FY14 FY15 *Statutory revenue after 5m exceptional VAT adjustment in FY14 5

6 (51) (3) 76m m (133) FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 Customers taking TV, mobile or fibre all have higher NPS and lower churn than phone & broadband customers 6

7 % 1.7% 1.6% 1.5% 1.4% % % RGUs On-net Churn Phone and Broadband = 1RGU/customer 16% growth in RGU/Customer, 2.3% growth in ARPU, larger base from which to upsell 7

8 Growing Base and Penetration Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 40% 35% 30% 25% 20% 15% 10% 5% 0% 37% of phone and broadband customers taking TV vs 26% a year ago TV customers deliver higher lifetime value than broadband customers Higher NPS Churn half that of dual play Incremental content revenue (+45%) Blinkbox acquisition enables Acceleration of TV to Go App development Expanding pay per view content Agreement signed with HBO to offer Game of Thrones (s1-4) on Buy to Own basis access on TV to Go App from June Greater engagement, higher content ARPU and lower churn The vast majority of customers will take TV over time 8

9 479k 15k 30k 52k 73k 95k 396k 308k 241k 207k 177k 142k 12.7% of phone and broadband base now taking fibre vs c6% a year ago Demand growing gradually, helped by bandwidth requirement and self-install Margin squeeze regulation now in place; expect tougher pro-competition measures in due course Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 464k 398k 348k 308k 284k 260k 236k 202k 175k 152k 85k 117k 12.3% of phone and broadband base now taking mobile vs 7% a year ago Strong growth in SIM-only demand (13% market share in March 15 vs 4% a year ago) Strong take-up of bundled SIM from Plus TV customers Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 9

10 Corporate Revenue 5.4 Data +39% CAGR Data Carrier Voice -10% CAGR Voice FY13 FY14 FY15 Ethernet & EFM Lines ( 000) % growth in Corporate revenue (over 15% vs 2 years ago) Strong growth in Data revenues (+40%) more than offsetting decline in legacy Voice Over 26,000 business Data lines Significant opportunity to drive growth in Data products in medium sized corporates material market share opportunity tipicall acquisition will enable TTB to aggressively enter fast growing B2B VOIP market Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 10

11 9,191 Ofcom Complaints 1.8% Churn 1.7% 6,355 5, % 1.5% 1.4% 1.3% 1.2% FY13 FY14 FY15 MTTS Benefits 70m+ 30m- 50m 15m 25m 15m Process improvements recognised by our customers and our regulator Some systems implementation delayed 15m 17m Significantly greater benefits identified for delivery in FY16-FY17 FY13 FY14 FY15 FY16-FY17 Original Delivered Delivered Additional Target Delayed Identified Total 11

12 Delivered accelerating revenue growth Broadened trading strategy to be a true quad play provider Added RGUs at lower CPA Reduced churn Delivered most but not all of the planned savings from MTTS Delivered FY15 as planned Upgrading to 5% CAGR to FY17 and >5% beyond FY17 Expect continuing quad play momentum to FY17 and beyond Expect greater benefits from MTTS over next two years and beyond On track deliver 25% EBITDA margin in FY17 12

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14 +0.3% +4.2% +3.9% Q3FY14 VAT impact FY15 1 FY14 yoy Headline Revenue 1,795 1, % Headline Statutory Gross Profit % 54.6% 55.5% Operating costs (735) (745) -1.3% FY14 Price & Proposition Mix FY15 EBITDA % 13.6% 12.3% 318 SAC & Marketing 309 (1) Headline results excluding exceptional items and amortisation of acquisition intangibles 427 Opex 426 FY14 FY15 14

15 Full year Revenue Growth ARPU Growth +2.3%* 1,722m* 1,795m On-net New products Voice usage * Mix Price & Proposition Corporate Off-net FY14 FY15 * Adjusted for FY14 exceptional VAT impact 15

16 Accelerating Revenue Growth Q4 FY % +3.6% +4.2%* +6.0% On-net growth 7.3% Underlying base + ARPU Virgin base in Q4 ARPU growth of 4.6% Corporate growth 14.3% Off-net decline 33.3% RGU growth of 16% to 1.56 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 * After 5m exceptional adjustment in FY14 for VAT 16

17 Full Year Opex Focus on driving efficiency blinkbox 2 Innovation 426 Reducing costs through fewer engineer visits Better contractual terms Whilst investing in growth Investing to scale TV, mobile & ultrafast MTTS Business Expansion Investing in our network Opex 23.7% of revenue, a reduction of 110bps FY14 FY15 17

18 SAC & Marketing Additional investment in growing mobile, fibre and broadband offset by lower TV volumes Underlying SAC falling due to lower churn and lower CPA for TV and broadband FY14 CPA Churn Growth FY15 Increased investment in H2 FY15 Product Net Adds Mobile Fibre TV BB H1 FY14 H2 FY14 H1 FY15 H2 FY15 H1 FY14 H2 FY14 H1 FY15 H2 FY15 18

19 Gross Profit 17 MTTS 16 Lower CPA 7 30 Lower Churn Investment in Growth 245 FY15 EBITDA up 15% H2 EBITDA margin of 14.6% FY14 FY15 19

20 SAC reduction through lower CPA SAC reduction through lower Churn > 30m Investment in Growth 25% Incremental Gross Profit MTTS > 40m > 70m 13.7% > 100m Illustrative EBITDA 475m 12.3% +5% CAGR EBITDA 213m EBITDA 246m FY14 FY15 FY17 20

21 2.4 x Successfully refinanced core debt Renewed bank debt 2.3 x OFCF 30 Exceptionals 36 Investments 24 Interest & Tax Dividend Accessed US private placement market Capex stable at c6% of revenues for FY15 FY16 core capex 6-6.5% with further 1-2% capex investment in mobile and ultrafast fibre projects Exceptional items FY15: Primarily MTTS FY16: expected 40m- 45m driven by mobile, acquisitions and MTTS Investments FY14 FY15 Acquisitions of Tesco and Virgin Media broadband bases and blinkbox Youview and York JV 21

22 Revenue growth 5% Strong on-net growth driven by base and ARPU Strong growth in Data products Continued decline in off-net and corporate Legacy Voice Multi-product strategy with continued investment in growth Strong growth in EBITDA and Operating FCF H2 weighted Net debt / EBITDA < FY15 Dividend growth of 15% 22

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24 Ultrafast Fibre Inside Out Mobile On-net Network Advantage Integrated Quad-play Making TalkTalk Simpler TalkTalk Business Revenue growth >5% and sustained FCF generation 24

25 FY14-FY17 Beyond FY17 Making TalkTalk Simpler The No.1 Priority Brand reputation transformed Network Advantage Scaling and simplifying Rising bandwidth usage, lower marginal cost Quad Play Growing take-up of TV, fibre and mobile Growing household market share Scaling TTB Ultrafast and Inside Out Mobile Growing data revenues Trialling and laying the foundations Doubled market share Step change economics enable scaling A HIGH GROWTH, INTEGRATED, VALUE FOR MONEY TELECOMS NETWORK 25

26 1. Quad play growth ambitions 2. How making TalkTalk Simpler will transform our customers experience 3. Long term potential of Ultrafast and Inside Out Mobile 26

27 Premium Speed Best value BROADBAND Best value TV vs Discounted broadband but Premium Content Best value MOBILE Value for money in all 4 elements of quadplay Discounted Sport but Premium broadband & voice Acquisition of Premium mobile base in EE Premium mobile TV and broadband?? 27

28 TalkTalk Sky BT Plusnet EE BT Virgin Media TalkTalk EE BT Plusnet BT Virgin Media Sky 18m Cost of Dual Play 18m Cost of Triple Play TalkTalk EE BT Virgin Media 18m Cost of Quad Play Not Unlimited TalkTalk 3 Vmed BT Voda EE O2 3G 4G 3G 4G 4G 4G 4G Cheapest UNLIMITED SIM-Only 28

29 TV >75% Mobile 1/hh 37% 7% 26% 5% 7% 12% FY13 FY14 FY15 FY17 FY20 FY13 FY14 FY15 FY17 FY20 Fibre >50% RGUs >2 2% 6% 13% FY13 FY14 FY15 FY17 FY20 FY13 FY14 FY15 FY17 FY20 29

30 m m What s changed Clear vision of end goal 30m- 50m 25m Learned from Salesforce implementation Delivered 55+ projects 15m 17m 15m 70m Seconded team of senior leaders; 160 FTEs, rising to 280 FTEs at peak Identified, scoped and resourced 140+ projects 15m FY13 FY14 FY15 FY6-FY17 Original Delivered Delivered Delayed Target Delayed from FY15 + Additional Identified Beyond -FY17 Total 30

31 WHAT CUSTOMERS WANT FROM TALKTALK FINANCIAL BENEFITS Clear, simple products and tariffs Joining and upgrading process that just works Fast, reliable network Major systems and process transformation Significantly lower call volumes Lower leakage between sales and connection Lower bad debt from right first time bills and easier payment processes Efficient multi-channel selfservice Lower operating costs from fewer engineer visits and router replacements Clear and fair billing Lower retention costs from happier customers ALL AT VALUE FOR MONEY PRICES 70m by FY17 31

32 Clear, simple products and tariffs Great joining and upgrading process Fast, reliable network Flexible and efficient customer service Clear and fair billing and payments 2015 Sold IP Stream Rebranded AOL Significantly reduced legacy tariffs Launched online welcome centre Online now 35% of sales and upsell Better manual processes New fault diagnostic tools trialled Deep dive analysis of connectivity issues Nexidia based agent training Pega selected for decisioning & CRM Liveperson webchat Voice Activated IVR New credit scorecard for new customers Simpler rules for credits 17m delivered FY Migrate/exit residual SMPF moved to Critical Path replacing 6 legacy systems Simplified mobile tariffs Moved to Pega, retiring old iprocess Order Management Single UPRN based address validation Self install for Fibre Next-best-offer decisioning New fault diagnostic and repair tools Single fault ticketing system End to end check of exchange NGE rollout start Scale Webchat Pega case management Voiceprint ID Pega decisioning system Salesforce retired Easier billing queries New collections system and processes Redesigned bills Further credit check improvements 40m Simple quad play product set at great prices Dynamic, rapid continuous improvement Always on integrated network, including mobile offload to fixed network and increasing Superfast fibre Customer service integrated across all channels and all products >80% of contact selfserve 100% e-billing m++ 32

33 464k 398k 348k 308k 284k 260k 236k 202k 175k 152k 85k 117k Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Market leading Quad play Plus TV Unlimited broadband Anytime calls Free SIM worth minutes 250 texts 200MB data Market leading Unlimited SIM Launched April 27th Unlimited voice, texts and data for day contract 7.9% 10.7% 4.2% 5.0% Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Only available to TalkTalk broadband customers Source: GfK 33

34 FY THIN MVNO WITH VOD THIN MVNO WITH O2 THICK MVNO WITH O2 FEMTO ROLLOUT WITH TT SPECTRUM Reseller economics based on new entrant volumes 3G 400k customers Mainly mobile as add-on New SIM market share 13% Improved reseller economics reflecting scale and growth of base 4G Mobile bundled as quad play Unbundled economics (similar to LLU) from building own core mobile network 4G and national roaming Offload significantly drives down cost/mb 4G in home better experience Seamless integrated inside out network Inside out mobile network Structurally lower costs Significantly better customer experience Improved economics will enable us to drive volume 34

35 Building 1Gig fibre to the premise to 20,000 homes and businesses in York with Sky and CityFibre Micro-trench trial completed and 1,200 homes passed in first dig area Successfully connected test house Systems build is on track for go-live date in autumn Ultrafast brand launch due very soon 35

36 JV economics very powerful if can deliver right cost to build (< 500 per home passed) and penetration (30%-40%) Expect to validate build technologies, phasing, build costs, penetration ramp and opex variables Potential to scale to 10m premises in Tier2 cities Preliminary discussions on financing have been positive Supportive regulator Achievable, affordable and value accretive 36

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38 Delivered accelerating revenue growth in FY15 as planned Value for money quad play delivering strong RGU growth and lower churn TalkTalk Business growing strongly Identified greater benefits from MTTS than originally planned Upgrading revenue growth target to 5% CAGR to FY17 and on track to deliver 25% EBITDA margin Well positioned to build a high growth, integrated, value for money telecoms network Ultrafast fibre and inside out mobile networks present long term growth opportunities Expect to grow revenues at >5% beyond FY17 with strong FCF generation 38

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40 Exceptional MTTS Acquisition Innovation 46 FY15 Headline FY15 Exceptional FY15 Statutory EBITDA 245 (46) 199 Depreciation (78) (5) (83) Amortisation (42) (12) (54) Share of JVs (8) (8) Interest (22) (22) Profit Before Tax 95 (63) 32 Tax (19) Effective Tax Rate 20% Profit After Tax 76 (4) 72 DPS 22 Headline EPS EPS DPS

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42 GOOD BETTER BEST Simply Broadband Essentials TV Plus TV 5.00* 10.00* 20.00* Totally unlimited broadband, no caps and no speed loss at peak times Britain's safest connection, with award winning HomeSafe security service Free calls between all TalkTalk customers * Excluding Line Rental at per month Totally unlimited broadband, no caps and no speed loss at peak times Unlimited eve & w/e calls to UK landlines including 0870 and 0845 numbers Britain's safest connection with award winning HomeSafe security service Free calls between all TalkTalk customers FREE YouView box worth Freeview channels some in HD 7-day catch up with BBC iplayer, ITV Player, Demand5 and 4oD Pause for up to 30 minutes Access to Now TV & TalkTalk BOX OFFICE Add entertainment channels with Kids or Picturebox TV Boosts a month at a time Totally unlimited broadband, no caps and no speed loss at peak times Unlimited anytime calls to UK landlines including 0870 and 0845 numbers Britain's safest connection with award winning HomeSafe security service and Super Safe Boost Free calls between all TalkTalk customers FREE YouView + box with PVR, worth Sky Entertainment Channels 70+ Freeview channels some in HD Pause, rewind & record, including whole series record at the touch of a button Record over 200+ hours of freeview 7-day catch up with BBC iplayer, ITV Player, Demand5 and 4oD Access to Now TV & TalkTalk BOX OFFICE Add entertainment channels with TV Boosts like Sky Sports and Sky Movies a month at a time Free Mobile SIM worth 90 including a monthly allowance of 100 minutes, 250 texts & 250Mb of data 42

43 DUAL PLAY TalkTalk BT PlusNet Sky Virgin Media EE Product Name Simply Broadband Unlimited Broadband PlusNet Unlimited Virgin Media Broadband Unlimited Broadband Broadband 50 MB Unlimited Broadband Monthly Fee Line Rental Total Monthly Fee Postage / Setup Inclusive Calls None Included None Included Weekend Weekend None Included Weekend Contract 18 Months 12 Months 12 Months 12 Months 12 Months 12 Months Total Cost 18m Savings with TalkTalk (18m) Monthly Average TRIPLE PLAY TalkTalk BT Plusnet Sky Virgin Media EE Product Name TV Starter + Unlimited Sky Original Bundle TalkTalk Essentials EE TV, Broadband & Broadband + Evening Plusnet Fibre, TV & Calls with Broadband Big Easy (50 MB) TV Calls & Weekend Calls Unlimited Monthly Fee Line Rental Total Monthly Fee Postage TV Connection Fee 0.00* Inclusive Calls Evening & Weekend Weekend Weekend Weekend Weekend Weekend Contract 18 Months 12 Months 18 Months 12 Months 18 Months 18 Months Total Cost 18m Savings with TalkTalk (18m) Monthly Average QUAD PLAY TalkTalk BT Virgin Media EE Product Name TalkTalk Plus TV TV Starter, Unlimited EE TV, Broadband, Broadband, Anytime Big Easy (50 MB) + Anytime Anytime Calls + 250MB Calls + BT Mobile Calls + 250MB Sim Sim 500MB Plan Monthly Fee Line Rental Total Monthly Fee Postage TV Connection Fee 0.00* Inclusive Calls Evening & Weekend Weekend Weekend Weekend Contract 18 Months 12 Months 18 Months 18 Months Total Cost 18m Savings with TalkTalk (18m) Monthly Average FIBRE TalkTalk BT Virgin Media Sky PlusNet EE Product Name TalkTalk Simply BB with Fibre Medium Unlimited BT Infinity 1 Broadband Only (50 MB) Fibre Unlimited & Unlimited Fibre and Unlimited Fibre Talk Weekends Calls Monthly Fee Line Rental Total Monthly Fee Postage / Setup Inclusive Calls N/A Weekend N/A Weekend Eve & Wkd Weekend Total Cost 18m Savings with TalkTalk (18m) Monthly Average

44 FY13 FY14 FY15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 On-Net Broadband & Voice Broadband Only Total On-net Churn 1.6% 1.6% 1.5% 1.5% 1.4% 1.7% 1.6% 1.5% 1.4% 1.4% 1.3% 1.3% Fully Unbundled 77% 78% 80% 81% 82% 83% 84% 85% 86% 87% 88% 88% Mobile Fibre TV Off-net Broadband Voice Total Broadband Revenue On-net Off-net Corporate Total ARPU On-net Off-net Prior year revenue adjusted to reflect exceptional item resulting from HMRC ruling on VAT treatment 44