Carphone Warehouse 2009 Annual Report Download - page 16

12 The Carphone Warehouse Group PLC Annual Report 2009
Directors’ Report – Business Review
TalkTalk Group – continued
Short-Term Risks
and Challenges
▪
A weak consumer
environment could affect
market growth and increase
the level of bad debts
▪
We may not be able to pass
on in full the copper price
increases allowed by OFCOM
to our customers
▪
Struggling competitors may
behave irrationally and
undercut the market
Longer-Term Risks
and Challenges
▪
Some of our competitors
have much greater financial
resources and may choose
to use broadband as a
loss-leader for other products
▪
Regulation may curb our
access to fibre infrastructure
at fair prices, thus preventing
us from delivering higher
speeds to customers
▪
Network or customer service
may deteriorate, increasing
our churn rate
Headline Financials
2009 2008
£m £m
Revenue 1,385 1,424
Residential* 1,089 1,112
Business 296 312
EBITDA pre-SAC and marketing 307 280
SAC and marketing (126) (164)
EBITDA 181 116
Depreciation and amortisation (57) (47)
EBIT 124 69
EBIT % 9.0% 4.8%
* Comprises residential customers and small business customers with similar proles.
TalkTalk Group delivered another good
performance last year, growing its
customer base, increasing the proportion
of its customers on its unbundled
network from 67% to 78% and achieving
a substantial reduction in its churn rate.
Despite the unexpected slow-down in
the rate of growth in the broadband
market, TalkTalk Group still increased in
protability, with Headline EBIT growing
by 80% to £124m and Headline EBIT
margins almost doubling from 4.8% to
9.0%. TalkTalk Group has also started
to deliver strong cash ows, and has
signicantly increased visibility of these
cash ows going forward.
Residential revenues were down
marginally in the last nancial year,
falling 2% to £1,089m (2008: £1,112m).
Blended broadband monthly ARPU
rose by 3% to £22.65. The increase
was driven by the greater proportion
of higher ARPU TalkTalk customers
within the base. Non-broadband ARPU
rose 18% to £20.93, reecting price
increases in line with BT’s voice price
increases during the year.
B2B revenues declined by 5% to £296m
(2008: £312m). Opal continued to
improve its revenue mix, with an ongoing
trend towards higher value services
offsetting falling premium rate trafc.
In the second half, the business
launched its new suite of data products
for the small business market, which is
expected to drive moderate revenue
growth in 2009-10.
During the year underlying growth in the
broadband base was 186,000 customers,
but as part of the AOL integration
process, we identied a discrepancy
of 93,000 customers and reduced the
base accordingly at the half year.
This delivered a net increase of 93,000
customers to 2.8m.
Our base of non-broadband customers,
encompassing customers taking our
voice-only service or narrowband
package, continued to decline in line
with our expectations, ending the year
at 1.1m customers. A large number of
these customers are signing up to our
own bundled broadband services.
The TalkTalk broadband base made
further excellent progress during the
year, increasing by 339,000 customers
or 27%. The customer service issues
of previous years are now behind us
and our simple value proposition
continues to gain traction in the market.
Growth picked up noticeably towards the
end of the nancial year, reecting what
is seasonally our strongest quarter for
broadband growth but also underlining
the brand’s value credentials as
customers increasingly look to save
money in the current economic climate.
Trends in churn at TalkTalk were also very
encouraging, with annualised churn
falling materially year-on-year as
customers became increasingly satised
with our service levels, and the housing
market became more subdued. With our
highly efcient, fully-unbundled network,