News: Financial results show costs double what management predicted.
TalkTalk’s latest set of financial results reveal the full extent of the cost to the telecoms provider of the mega cyber attack that it suffered in October 2015.
In total, the firm lost 101,000 customers and £60m as a result of the attack. This is double the cost of the attack that had previously been predicted by the firm’s management. In November 2015 , CEO Dido Harding told the BBC that the costs of the attack would be between £30-£35m.
However, the company’s financial results for its third quarter of fiscal year 2016 said that the trading impact of the attack was £15m, with exceptional costs put at between £40m and £45m.
The firm also said that there had been a "higher churn" of customers, with people choosing not to renew contracts. However, Harding said that half a million customers had taken up the firm’s offer of an unconditional upgrade.
Churn for the quarter was -2.1%, and the firm estimated that about 0.6% of that was as a result of the cyber attack. It also attributed some of the loss of customers to closing down its online sale and service channels in response to the cyber attack.
"Both churn and new connections recovered during December and January and independent external research has revealed that customers believe that we acted in their best interest. In fact trust in the TalkTalk brand has improved since just after the attack and consideration is higher now than it was before the incident," said Harding.
It also said that having a period of online shut-down limited how it was able to upsell products such as mobile, fibre and television. It pointed out that mobile in particular is predominantly purchased online.
Overall though, revenue for the quarter was up 1.8% at £357m, with the impact of the cyber attack on revenue estimated at about 3%.
Reacting to the results, Citi Managing Director of Telecoms Research Simon Weeden wrote that the quarter’s revenue was in line with forecasts, while it had predicted a net loss of as many as 120,000 online customers.
Looking forward, guidance for its fiscal year 2016 is that EBITA will be between £2555 and £265m, with the final dividend up 15%. Guidance for its fiscal year 2017 is EBITDA of between £320m and £360m, with the dividend at at least the same level as full year 2016.
Harding said: "Looking forward, we expect to deliver a material step up in profits in H2, with full year results in line with market consensus.
With a renewed focus on our existing customers and the benefits of our transformation programme, we expect to deliver a further material improvement in profits in FY17."
The breach, which was caused by a DDoS attack, resulted in the personal details of 156,959 being accessed, and 15,656 bank account numbers and sort codes being stolen.
TalkTalk shares closed the day on February 2nd at 222p a share on the back of the results, having closed on February 1st at 217.9p a share.