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Talktalk Telecom Group

TalkTalk Telecom's profits hit by subscriber acquisition costs

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Profits took a tumble at telecoms and broadband provider TalkTalk Telecom (LON:TALK) last year as the recently demerged group invested in growth.

Headline earnings (EBITDA) plunged to £213mln in the 12 months to the end of March 2014 from £290mln in the year before, despite total revenue rising 3.4% to £1,727mln from £1,670mln.

The group appears to be following the well-trodden path of growing the top line in the expectation that increased profits will eventually follow, as it trumpeted its fifth consecutive quarter of year-on-year revenue growth in the first three months of the current year. The final quarter of the fiscal year saw total revenue rise 4.9% from the year before.

“I am delighted to report our first full year of revenue growth since demerger demonstrating that our strategy for growth is delivering,” claimed Dido Harding, the company’s chief executive officer.

“We have built a TV business with over one million customers in just 18 months - a quarter of our total customer base. We continue to grow faster than all the other UK TV operators put together and are confident that in time, all our customers will take TV. Our focus on data products for businesses is also delivering very strong growth and as a result, TalkTalk Business is one of the fastest growing B2B telecom operators in the UK,” she added.

Reported profit before tax more than halved to £61mln from £184mln 12 months earlier, as subscriber acquisition costs (SAC) and marketing expenses rose to £318mln from £234mln.

“Following investment in the first half, we delivered a sharp rebound in profitability in the second half combined with accelerating revenue growth. We are on track to deliver our financial targets by FY17, and are increasingly excited about the longer term growth opportunities beyond. As a result we are committing to another year of growing the dividend by no less than 15% in FY15,” Harding said.

The fiscal 2013/14 dividend was increased b 15.4% to 12p.

Shares were unchanged on the results.

Quick facts: Talktalk Telecom Group

Price: £1.01

Market: AIM
Market Cap: £11.52 m
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