TalkTalk shares slide after £15m profit warning

TalkTalk shares fell on Friday morning trading after the company warned full-year earnings will take a hit of up to £15m due to rising costs.

The telecom group's share price sank nearly 8% to a more than seven-month low, after it said full-year earnings would fall short of expectations due to higher costs from attracting more customers and changes to the timing of when it reports on customer transactions within its accounts.

The company said it expected underlying full-year profit in 2019 to be within the £245m-250m range, up from the £197m projected for 2018.

TalkTalk also reported its eighth consecutive quarter of rising customer numbers, but those appear to have come at a high price.

Russ Mould, investment director at AJ Bell said: "Sometimes a good question to ask when assessing a business is 'if it didn't exist would I set it up today?' The answer with mobile and broadband provider TalkTalk seems likely to be a no.

"It operates in a highly competitive market with a brand which was significantly diminished by a big cyber security attack in 2015 and with a patchy reputation for customer service. It often features in Ofcom's list of most complained-about broadband providers.

"As today's profit warning reveals the company is achieving customer growth, even beating expectations on this metric, but only by offering deals to entice people onto its network.

"While this means the company is on track to beat its 150,000 target for new broadband customers for the financial year, it looks set to come at the cost of margin pressure.

"The company is also struggling to get more out of its customer base with average revenue per user dropping slightly year-on-year."