TalkTalk Telecom Gp TALK Interim Results

  TalkTalk Telecom Gp (TALK) - Interim Results

RNS Number : 9445Q
TalkTalk Telecom Group PLC
13 November 2012




                                      

13^th November 2012

                          TalkTalk Telecom Group PLC

            Interim Results for the 6 months to 30 September 2012

· Strong on-net additions and best quarter for total net adds in two years

· Continued strong take-up of broadening range of additional products

· Next phase  of simplifying  business to deliver  incremental savings  of 
£30m-£50m

· On track to deliver all FY13 financial guidance

Financial Highlights

· Total revenue £828m (H1 FY12: £844m); Corporate revenue £160m (H1  FY12: 
£158m)

· On-net revenue £573m (H1 FY12:  £524m); Q2 on-net ARPU £25.37 (Q2  FY12: 
£23.99)

· 320bps improvement in gross margin to 54.7% (H1 FY12: 51.5%)

· Underlying EBITDA^1£155m, margin 18.7% (H1 FY12: £146m, margin 17.3%)

· Operating Free Cashflow^2£104m (H1 FY12: £97m)

· Headline^2 EPS 7.8p  (H1 FY12: 7.6p); Interim  Dividend raised to  3.45p 
(H1 FY12: 2.6p)

Q2 Operating Highlights

· 66,000 fully unbundled net adds; total net customer loss of 4,000

· 44% year on year growth in Plus customers, now 29% of on-net base

· 32,000 Mobile customers added, base now 117,000

· Data products trending strongly in TalkTalk Business

^1 Excluding exceptional items and one-off TV launch costs

^2Excluding exceptional items

Dido Harding, Chief Executive of TalkTalk commented:

These results show real trading momentum and are a strong platform from  which 
to build  towards  our  medium  term growth  targets.  We  have  successfully 
launched our  TV proposition  and  have installed  29,000 customers  to  date. 
Customer feedback has been positive and  we are growing the base according  to 
plan, at 1,000 per day. Meanwhile, our mobile handset proposition is  growing 
meaningfully in the  contract handset market.  The demand we  are seeing  for 
additional products from our increasingly profitable and stable customer base,
the progress we  are making in  TalkTalk Business, and  the savings we  expect 
from the next phase  of simplifying the business,  underpin our confidence  in 
delivering our  targeted 2%  CAGR in  revenues and  25% EBITDA  margin in  the 
medium term.





Analyst and investor presentation: The Lincoln Centre, 18 Lincoln's Inn Fields, WC2A
3ED at 10.30am


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SUMMARY FINANCIALS



                              6 months ended    6 months ended      

Headline Profit & Loss (£m) 30 September 2012 30 September 2011 Change
Revenue                                   828               844 -1.9%
Underlying EBITDA ^(1)                    155               146  +6.2%
Underlying EBITDA margin                18.7%             17.3%
Headline EBITDA ^(2)                      147               146
Headline EBITDA margin                  17.8%             17.3%
Profit after tax                           68                68
Headline Earnings per share              7.8p              7.6p  +2.6%
Dividend per share                      3.45p              2.6p +32.7%



                                6 months ended    6 months ended      
Headline Cash flow (£m)
                             30 September 2012 30 September 2011 Change
EBITDA ^(2)                                147               146
Working capital                            (5)                 0
Capital expenditure                       (38)              (49)
Operating free cashflow ^(3)               104                97
Interest and Tax                           (8)               (9)
Free cash flow                              96                88
Exceptional items                          (7)              (23)
Acquisitions and other items               (2)              (15)
Share repurchase                          (35)              (54)
Dividends                                 (56)              (35)
Net Debt                                   438               477

(1) Excludes £8m investment in launch of TV proposition (H1 FY12: £nil) and
exceptional charges

(2) Excludes exceptional charges and tax credit and amortisation of
acquisition intangibles

(3) Operating free cash flow is stated before exceptional costs but after £8m
investment in launch costs of TV proposition



                          6 months ended    6 months ended      

Statutory Profit & Loss 30 September 2012 30 September 2011 Growth
EBITDA (£m)                           138               126  +9.5%
EBIT (£m)                              56                49 +14.3%
Profit before tax (£m)                 46                41 +12.2%
Profit after tax (£m)                  38                73
Earnings per share (p)                4.3               8.1



Q2 OPERATING REVIEW

Best customer net adds numbers in two years

We have seen strong growth in the  number of customers on our network,  adding 
66,000 net new customers  to our more profitable  fully unbundled (MPF)  base, 
36,000 more than  we added in  Q1, driving growth  in our on-net  base to  3.8 
million customers.

With a reduction in the partially unbundled base of 27,000 and the  continuing 
decline in our off-net base, our total broadband customer base was 4,000 lower
at the end of the quarter than at the end of Q1 - our best quarterly net  adds 
performance in two  years, demonstrating  that before  the scaling  of our  TV 
proposition, we are  returning our base  of phone and  broadband customers  to 
stability.

Growing take-up of Plus and Mobile; successful launch of TV

The number of customers taking  our premium Plus product  grew by 44% year  on 
year and now comprises 29% of our on-net base.

We began connecting TV customers from the end of September and during  October 
we launched our above the line  marketing campaign. Demand from existing  and 
new customers  has  been  good.  The  current  base  of  installed  customers 
(including trialists)  stands  at  29,000 with  installation  rates  currently 
running at 1,000 per day.

We are getting positive feedback from our initial customers with net  promoter 
scores from  TV customers  significantly  ahead of  phone and  broadband  only 
customers and we are now beginning to scale the base according to plan.

Our mobile proposition, which we  enhanced by introducing handsets during  the 
summer, saw  strong demand,  with 32,000  TalkTalk customers  adding a  mobile 
connection to their service during the quarter (3.9% of all contract additions
in the UK during September - Gfk), taking the base to 117,000.

Year on year growth in On-net Revenue and ARPU

On-net revenue of £288m in the quarter was 10% higher year on year  reflecting 
growth in the base and ARPU growth.  On-net ARPU of £25.37 was 6% higher  year 
on year with unbundling mix, increased penetration of Plus, and the benefit of
line rental increases being partially offset by planned promotional spend  and 
lower usage.

Q2 revenue in Corporate was broadly flat  but we have seen strong momentum  in 
Ethernet, Data  Solutions  and  Carrier  Trading  offsetting  a  seasonal  and 
underlying decline in legacy voice revenues.

Off-net revenue,  which  represents  a  decreasing  proportion  of  our  total 
revenue, saw  a 40%  reduction  year on  year to  £46m  as this  legacy  base, 
comprising those customers that consume BT Wholesale products such as IPStream
(broadband only), Narrowband, CPS and WLR (voice only) continues to reduce.

As a result, total revenue for the quarter declined by 2% year on year.

Continued service improvements drive reduction in churn

During the  quarter our  ongoing  focus on  customer service  improvement  has 
continued to have  a positive  impact with both  total calls  to our  customer 
service centre and complaints  to Ofcom reducing. Call  volumes were down  19% 
year on year and complaints to Ofcom fell by 38% year on year and by 18%  over 
the previous quarter.

We saw continuing improvement in churn  through the quarter with on-net  churn 
at 1.6%. We expect churn to  continue to reduce from further improvements  in 
customer service and as we see the benefit of more customers taking additional
products from us.



H1 BUSINESS REVIEW

We have continued to make progress across all elements of our strategy during
the first half.

Strong growth in profitable customers and expanding network reach

In the first half, we added 49,000 net new on-net customers, comprising strong
growth of 96,000 in our  core MPF broadband and  voice product, offset by  the 
net loss of 47,000 legacy SMPF broadband-only customers. 78% of our  broadband 
customers are now  fully unbundled and  able to benefit  from our added  value 
products such as Plus TV, mobile,  fibre and Homesafe™which in turn will  lead 
to lower customer churn.

The total broadband base was 23,000 lower at the end of H1 as we continued  to 
see a reduction in the off-net broadband  base (-72,000), both as a result  of 
migration to on-net and churn.

The increase in the on-net base combined with the expansion of fully unbundled
customers and positive take-up  of Plus has led  to a significant increase  in 
on-net revenue and margin.

Our unbundling programme continued at pace with 187 new exchanges added in the
period extending  the  reach of  our  value  for money  proposition  to  2,695 
exchanges and approximately  94% of  the UK population.  We are  on track  to 
unbundle a further 30 or so exchanges in H2. We plan to unbundle another  300 
exchanges in FY14 and  now see an opportunity  to extend the programme  beyond 
that as  the cost  of  unbundling exchanges  falls  and customer  ARPU  grows, 
allowing us to profitably extend our geographic reach.



Value for money Quad play

We have made significant progress in delivering our value for money quad play
proposition.

TalkTalk TV

At the end of July we announced our TV product for Plus customers, featuring:

· Free YouView set top box and no additional monthly fee

· Seven day  catch up,  over 70 Freeview  channels including  some in  HD, 
search pause & record live TV, a huge library of the best films and shows from
the US and UK

· Free 12 month subscription to LOVEFiLM Instant

· Simply priced, easy and flexible access to premium content including all
Sky Sports channels and Sky Movies one month at a time, with no costly  annual 
subscriptions

As planned, we began connecting customers  from the end of September and  have 
seen good demand following  the launch of our  marketing campaign in  October, 
with an installed base of 29,000  (11^th November) and connections running  at 
1,000 per day. The  positive feedback from our  summer trials and the  recent 
engineer-installed base, demonstrates  a high level  of customer  satisfaction 
with the technology and the installation  process giving us confidence in  our 
plans for scaling the base.

TalkTalk Mobile

In August,  we launched  our TalkTalk  Mobile contract  handset  proposition. 
Available  exclusively   to  TalkTalk   customers,  TalkTalk   Mobile   offers 
simplicity, range and great value  plans - all handsets,  of which there is  a 
broad range  available, are  completely free  with plans  starting from  £5  a 
month.

Three plans are  available -  Small, Medium  and Large  with different  prices 
depending on the choice of handset. Customers can buy online or over the phone
with those buying online  getting double the  data allowance. This  simplicity 
coupled with low  running costs  means that TalkTalk  can now  offer the  most 
popular handsets at competitive prices,  ranging from basic feature phones  to 
smartphones.

As a  result our  mobile offering  has gained  strong traction,  with  117,000 
customers now  taking  advantage  of our  innovative  mobile-to-fixed  calling 
offers, competitive  call rates,  and  now handsets.  We expect  the  growing 
mobile base to drive ARPU growth and over time, reduce churn.

TalkTalk Business Services

Corporate revenue primarily comprises our growing business data services (c15%
of revenue) and carrier services (c25%  of revenue), and our declining  legacy 
voice services (c60% of revenue).

Business  data  services,  which   include  Ethernet,  managed  networks   and 
co-location, have continued to  build momentum, delivering  a 31% increase  in 
revenue year on year  as we continue  to expand our product  set and start  to 
scale up our volume capability. With customers increasingly looking to us for
additional value  for money  solutions, we  have recently  launched an  80Mbps 
fibre product with generous usage allowances, network prioritisation for  data 
traffic and business grade routers.

For businesses  requiring high  performance data  and voice  services, we  now 
offer a  very competitive  alternative toBT's  ISDN30 service  with our  Next 
Generation Voice  service, which  we are  making widely  available to  channel 
partners.

From January 2013, we shall also offer  an Ethernet over Fibre variant of  the 
service which will deliver high speed symmetrical services at a  significantly 
lower price point than traditional Ethernet technologies. The launch of  Fibre 
for  our  business  customers  is  a  significant  milestone  for  us  in  the 
development of both our Broadband and Ethernet families of products.

Carrier services,  which  provides  UK termination  for  international  mobile 
operators saw revenue growth of 20% year on year.

As expected, lower margin legacy voice  related revenues declined by 14%  year 
on year, driven by the impact of mobile termination rates and continuing fixed
line voice minutes decline, offset by the growth in data services and Carrier.

In May, TalkTalk Business ("TTB") as part  of a consortium led by Fujitsu  was 
awarded a contract  to provide network  services for the  phone and  broadband 
customers of the Post Office. The  5-year contract will see services go  live 
in the  summer of  2013 and  will give  Post Office  customers access  to  our 
advanced Next Generation Network.

This is  a  significant  step forward  in  our  strategy of  growing  TTB  and 
highlights the  opportunities that  our network  is capable  of delivering  by 
working with major systems integrators. With a less than 5% share of its  core 
SME and small corporate markets, we  believe TTB has an excellent  opportunity 
to leverage the strength and capability  of our extensive network and drive  a 
welcome element of competition into this market.

In order to fully leverage the growth potential of TTB, we are implementing an
extensive restructuring of  systems and processes  as part of  our new  Making 
TalkTalk Simpler programme. This will  create among other things, a  Business 
Grade delivery platform allowing the business  to grow scale, and will  enable 
TTB to contribute  materially to the  Group's medium term  revenue growth  and 
profitability targets.



Operating efficiencies

We have  continued  to  deliver significant  improvements  to  our  customers' 
experience in the first half with a  19% year on year reduction in calls  into 
our contact centres and over 70% of customers now benefitting from first  time 
resolution of  their query.  This is  reflected in  the substantially  reduced 
number of complaints to Ofcom during the half - down 38% year on year.

In April  2012 we  announced Phase  2 of  our contact  centre  rationalisation 
programme with the outsourcing of  our operations in Preston and  Northampton. 
This is  expected  to deliver  savings  of c£5m  during  H2 FY13,  with  total 
annualised savings  from  FY14  of  £10m.  These  initiatives  completed  our 
Operating Efficiencies programme, with £50m of annualised benefits.

There remain significant  further opportunities  for us to  drive process  and 
efficiency improvements over the medium term. In September 2012, we began our
new Making TalkTalk  Simpler programme. We  expect that combined  initiatives 
under this programme will drive incremental savings of £30m-£50m over the next
3-5 years. In  the first  phase of this  programme we  are restructuring  the 
systems and processes in TTB to remove duplication and better align our  sales 
and service model with our growth ambitions; and reviewing and simplifying our
IT outsourcing. We expect these initiatives to deliver incremental  annualised 
cost savings of  £10m from FY14,  with around a  third of this  benefit to  be 
delivered in H2 FY13.

We see  considerable  opportunities  to  make  TalkTalk  simpler,  better  for 
customers, and therefore less costly  to operate. Making TalkTalk Simpler  is 
therefore a key  component of our  medium term  plan to achieve  a 25%  EBITDA 
margin.



Fibre Access

We saw an acceleration of demand for fibre in the first half, with 22,000 more
customers choosing to take paid-for speed uplifts (versus 5,000 in the  second 
half of FY12), taking our base of fibre customers to 30,000. We expect demand
to grow from here, for example from customers who are interested in taking  TV 
from us and live  in a fibre-enabled  area, but who  currently do not  receive 
sufficient speed  to  take  our  TV  product  (at  least  3Mbps  for  standard 
definition  content  and  greater  than  5Mbps  for  premium/high   definition 
content).

Nevertheless, we expect overall fibre demand among our customer base to remain
modest until the value for money benefits become clearer and the  installation 
process simpler.





GUIDANCE

As we indicated in  July, we expect to  see a return to  year on year  revenue 
growth in FY13 as the continued growth in the on-net base, ARPU increases  and 
modest improvements in Corporate revenue offset the overall decline in off-net
revenue. In line  with previous  years, we  expect to  see underlying  EBITDA 
margin growth to be second half-weighted.

As a result we are re-iterating the  FY13 financial guidance set out with  our 
Preliminary Results in May and our Q1 update in July:

Revenue

Return to revenue growth in FY13.

Operating expenses

Broadly flat  in  FY13 with  customer  service improvements  and  back  office 
simplification cost  reductions  offset  by increased  investment  in  network 
footprint and resilience.

Underlying EBITDA margin

Underlying EBITDA  margin  excluding investment  in  TV of  20%-21%  in  FY13, 
through continued ARPU growth and mix driven margin improvement.

One-off TV launch costs

We expect to incur £7-12m on the launch of TV in H2, comprising initial  above 
the line marketing expenditure and promotional costs associated with launch.

Variable TV SAC

We expect the  incremental SAC per  triple play customer  to be  approximately 
£140, with total costs in H2 determined by the take up of the product.

Cash flow items

We expect no material net exceptional cash expenditure in FY13, with the  cash 
benefit of the  historic dispute with  BT expected to  offset the  exceptional 
spend on our efficiency programmes (H1 FY13: £7m; FY13: c£20m).

Capex is expected to  be in line  with our stated policy  of c.6% of  revenue, 
with no incremental expenditure arising from the launch of TV.

We do not currently anticipate  any material adverse working capital  movement 
from the launch of triple play.

Dividend

Full year dividend growth of a minimum of 15%.



Medium term outlook

At our preliminary results  in May we  set out new medium  term targets of  2% 
CAGR in revenue and 25% EBITDA margin.

The key components of our revenue  growth strategy are: an improving  customer 
mix (from off-net to on-net; and from single and dual play to triple and  quad 
play), continued  progress in  upsell  (Essentials to  Plus, fibre  and  other 
boosts), and growth in data products and services for our Corporate customers.
We expect  this  growth  to  contribute  significantly  to  our  profitability 
target.

Whilst some of this growth will require us to invest in SAC in the short term,
for example as we build scale in TV and mobile, we expect the resulting  lower 
churn to deliver material savings in  SAC over the medium term. In  addition, 
we expect other operating  costs to benefit from  our Making TalkTalk  Simpler 
programmes, which we expect to deliver  incremental savings over the next  3-5 
years of £30m-£50m.

FINANCIAL REVIEW



Headline Profit & Loss



Revenue

Revenue decreased by 2% to £828m in H1 FY13 (H1 FY12: £844m). We continued to
see growth in on-net  revenue, increasing by 9.4%  to £573m (H1 FY12:  £524m), 
driven by an increase in both our on-net base and ARPU as a greater proportion
of our customers take our Plus package, MVNO and Fibre products, offset by the
continued decline in  voice usage. Off-net  revenue at £95m  (H1 FY12:  £162m) 
reduced in line with our expectations, reflecting the contraction in the  base 
and voice usage. Corporate revenue increased by £2m to £160m (H1 FY12:  £158m) 
with strong growth in  new data products and  carrier services offsetting  the 
decline in voice usage.



Gross margin

Gross profit increased to £453m (H1 FY12: £435m), a gross margin of 54.7%  (H1 
FY12: 51.5%). Two thirds of this margin improvement was driven by an improved
customer mix as off-net  and broadband only customers  are replaced by  higher 
value on-net broadband and voice. The remainder of the margin improvement  was 
driven equally by the change in LLU line rental pricing from 1 April 2012, and
a combination of line rental increases and new products.



EBITDA

Underlying EBITDA improved by 6.2% to £155m (H1 FY12: £146m), with  underlying 
EBITDA margin growing  to 18.7% (H1  FY12: 17.3%). This  reflected the  margin 
benefit from higher  on-net revenues  and the  delivery of  cost savings  from 
operating efficiencies and our reorganisation programme, offset by  investment 
in our network roll out and the  SAC associated with growth in on-net and  new 
products. After TV launch costs of £8m, headline EBITDA remained broadly flat
at £147m (H1 FY12: £146m).



Exceptional items

Exceptional income statement charges of £9m (H1 FY12: £20m) have been incurred
in the period.



In April 2012 we  announced the outsourcing of  our operations in Preston  and 
Northampton (the second  phase of  our Operating  Efficiencies contact  centre 
rationalisation programme), with  an associated  exceptional income  statement 
charge for  the  period  of  £6m. This  programme  is  expected  to  generate 
annualised cost savings  of approximately  £10m from  FY14, of  which half  is 
expected to be realised in the second half of this financial year.



In September 2012  we announced  the 'Making TalkTalk  Simpler' programme.  As 
part of this programme, we are consolidating the systems and processes  within 
TTB to align our sales and service model for growth; implementing a review and
consolidation  of  our  outsourced  partners,  and  rebalancing  our  on-shore 
footprint. Associated exceptional income statement  charges of £3m have  been 
recognised for the period. We expect  this phase of the programme to  deliver 
annualised cost savings of  £10m from FY14, and  expected around one third  of 
this benefit to be delivered in H2 FY13.



Headline EBIT decreased by  £5m to £95m  (H1 FY12: £100m) as  a result of  the 
investment in TV, and higher depreciation and amortisation charges of £6m from
the continued investment in our exchange roll out.



Interest and tax

Finance costs  were  slightly  higher  at  £10m (H1  FY12:  £8m)  due  to  the 
amortisation of the facility fees arising on the refinancing in November 2011.



Our effective headline  tax rate was  20% (H1 FY12:  26%) reflecting both  the 
increase in the tax charge  from the impact on the  deferred tax asset of  the 
reduction in the UK statutory corporation tax rate, and the annual recognition
of a further tranche  of the tax  losses acquired with  Tiscali, based on  our 
rolling forecast, in line with our agreement with HMRC.



Earnings per share

Underlying basic  earnings  per  share  grew  from  7.6  pence  to  8.6  pence 
principally as  a  result of  the  improved underlying  profitability  of  the 
business. The full period  effect of the purchase  of shares by the  Employee 
Benefit Trust  in H1  FY12, is  reflected in  the weighted  average number  of 
shares for  the  period,  which has  reduced  to  874 million  (H1  FY12:  900 
million).



Net of the investment in TV, profit  for the period has remained flat  however 
the weighted average  number of  shares, as noted  above, has  reduced to  874 
million (H1 FY12: 900 million). As a result headline EPS increased by 2.6%  to 
7.8p (H1 FY12: 7.6p).



Dividend

The Board has declared an  Interim Dividend of 3.45p  per share, in line  with 
our commitment  to  grow  the  full  year  dividend  by  at  least  15%.  The 
ex-dividend date is 21 November 2012 and the record date is 23 November  2012. 
We expect the dividend to be paid on or around 14 December 2012.



Headline Cashflow and Net Debt



We generated £104m of operating free cash flow in the first half, an  increase 
of 7.2% on the prior year (H1  FY12: £97m). This represents 12.6% of  revenue, 
and an increase on the prior year (H1 FY12: 11.5%).



Capital expenditure in the first half  was £38m (H1 FY12: £49m),  representing 
4.6% of revenue  (H1 FY12: 5.8%).  Investment in the  first half included  the 
majority of  our  exchange  rollout  programme for  this  year  and  continued 
development of our billing systems.  Our investment is second half  weighted, 
with the  majority  of  our  network resilience  programme  delivered  in  H2, 
alongside continued investment in our core network and IT infrastructure.



We had a working capital outflow of £5m in the first half (H1 FY12: neutral).
This reflects an increase in carrier trading debtors and an increase in  stock 
in preparation  for the  launch of  TV,  partially offset  by an  increase  in 
creditors as a result of both of these factors.



Net cash exceptional spend  in the first  half was £7m  (H1 FY12: £23m),  this 
predominantly related  to  redundancy and  project  management costs  for  the 
outsourcing of operations in Preston and Northampton.



We expect  full year  exceptional cash  to  be neutral,  with the  cash  costs 
associated  with  the  operating  efficiencies  and  Making  TalkTalk  Simpler 
programmes being offset by an inflow relating to the historic BES dispute.



Interest and tax paid in  the period were in line  with the prior year at  £8m 
(H1 FY12: £9m).



In September  2012  the  first  tranche  of  both  the  TalkTalk  Group  Value 
Enhancement Scheme and the Carphone Warehouse TalkTalk Group Value Enhancement
Scheme (together  referred to  as "the  VES")  vested. As  part of  this,  we 
purchased the participants'  VES shares  in return  for a  combination of  the 
issue of new PLC shares and cash resulting  in a cash outflow of £35m. In  the 
prior period, share repurchases totalling  £54m (42 million shares) were  made 
by the Employee  Benefit Trust  in order  to cover  anticipated future  option 
exercises.



Net acquisition expenditure in the period was £2m in relation to our continued
investment in the YouView joint venture (H1 FY12: £2m). In the prior year  we 
invested £11m on TalkTalk Business acquisitions.



The dividend paid in the period was £56m, being the final dividend for FY12 of
6.4 pence per share.



Net cash outflow was £4m and net debt  at the end of the first half  increased 
modestly to  £438m from  £434m as  at 31  March 2012  reflecting the  dividend 
payment, VES settlement, exceptional items and investment in YouView.



Movements in share capital and reserves

The settlement of the VES  schemes resulted in a  net movement in reserves  of 
£31m being  the recognition  of share  premium of  £32m and  a £63m  debit  in 
retained earnings and other  reserves. The £63m  debit to reserves  represents 
the cash outflow of £35m and the issue of 17 million new PLC shares at a value
of £32m, net  of the repayment  of the  associated VES loans,  interest and  a 
reduction in the Group's liability to settle the schemes.

APPENDIX 1 - QUARTERLY METRICS



                    Q1 11/12 Q2 11/12 Q3 11/12 Q4 11/12 Q1 12/13 Q2 12/13
KPIs
On-Net
Broadband & Voice      2.827    2.910    2.966    3.066    3.096    3.162
Broadband Only         0.815    0.758    0.712    0.689    0.669    0.642
Total On-net           3.642    3.668    3.678    3.755    3.765    3.804
Churn                                              1.7%     1.6%     1.6%
Unbundled                87%      89%      90%      92%      93%      94%
Fully Unbundled          68%      70%      73%      75%      77%      78%
Plus                   0.667    0.764    0.883    1.026    1.092    1.097
MVNO                   0.027    0.038    0.045    0.061    0.085    0.117
Homesafe               0.054    0.149    0.228    0.320    0.440    0.518
Fibre                  0.001    0.003    0.005    0.008    0.015    0.030
Off-net
Broadband              0.530    0.461    0.401    0.311    0.282    0.239
Voice                  0.621    0.573    0.525    0.476    0.436    0.407
Total Broadband        4.172    4.129    4.079    4.066    4.047    4.043
Revenue
On-net                   261      263      276      284      285      288
Off-net                   85       77       67       58       49       46
Corporate                 77       81       79       79       80       80
Total                    423      421      422      421      414      414
ARPU
On-net                 24.00    23.99    25.05    25.47    25.27    25.37
Off-net                23.41    23.49    22.79    22.57    21.71    22.48
Exchanges
Unbundled in period       30      171      130      170       83      104
Total unbundled        2,037    2,208    2,338    2,508    2,591    2,695







Condensed consolidated income statement for the 6 months ended 30 September
2012

With 6 months ended 30 September 2011 comparatives



                          Before Amortisation        After       Before Amortisation        After
                    amortisation              amortisation amortisation              amortisation
                              of          of           of           of           of           of
                     acquisition  acquisition  acquisition  acquisition  acquisition  acquisition
                     intangibles  intangibles  intangibles  intangibles  intangibles  intangibles
                             and          and          and          and          and          and
                     exceptional  exceptional  exceptional  exceptional  exceptional  exceptional
                           items     items **        items        items     items **        items

                                                                                  
                          6 months ended 30 September 2012       6 months ended 30 September 2011

                                              (Unaudited)                            (Unaudited)
              Notes           £m           £m           £m           £m           £m           £m
Revenue                      828            -          828          844            -          844
Cost of sales              (375)            -        (375)        (409)            -        (409)
Gross profit                 453            -          453          435            -          435
Operating
expenses
excluding
amortisation,
depreciation
and
investment in
TV              7          (298)          (9)        (307)        (289)         (20)        (309)
Underlying
EBITDA*                      155          (9)          146          146         (20)          126
Investment in                                          (8)                                      -
TV                           (8)            -                         -            -
Headline                                               138                                    126
EBITDA                       147          (9)                       146         (20)
Depreciation                (39)            -         (39)         (32)            -         (32)
Amortisation    7           (11)         (30)         (41)         (12)         (31)         (43)
Share of                                                                                       
results of
joint venture                (2)            -          (2)          (2)            -          (2)
Profit before
interest and
taxation                      95         (39)           56          100         (51)           49
Finance costs   3           (10)            -         (10)          (8)            -          (8)
Profit before
taxation                      85         (39)           46           92         (51)           41
Taxation      4, 7          (17)            9          (8)         (24)           56           32
Profit for
the period                    68         (30)           38           68            5           73
Attributable
to the equity
holders of
the parent
company                       68         (30)           38           68            5           73
Earnings per
share
Underlying
Basic (pence)   8            8.6                                   7.6
Diluted
(pence)         8            8.0                                   7.2
Headline
Basic (pence)   8            7.8                       4.3          7.6                       8.1
Diluted                      7.2                       4.0          7.2                       7.8
(pence)         8





* Underlying EBITDA is defined as Headline EBITDA excluding costs relating  to 
investment in TV.

** A  reconciliation  of  Headline information  to  statutory  information  is 
provided in note 7 to the interim condensed financial statements.



The accompanying notes  are an  integral part of  this condensed  consolidated 
income statement. All amounts relate to continuing operations.





Condensed consolidated income statement for the 6 months ended 30 September
2012

With year ended 31 March 2012 comparatives



                          Before Amortisation        After       Before Amortisation        After
                    amortisation              amortisation amortisation              amortisation
                              of          of           of           of           of           of
                     acquisition  acquisition  acquisition  acquisition  acquisition  acquisition
                     intangibles  intangibles  intangibles  intangibles  intangibles  intangibles
                             and          and          and          and          and          and
                     exceptional  exceptional  exceptional  exceptional  exceptional  exceptional
                           items      items**        items        items      items**        items

                                                                                  
                          6 months ended 30 September 2012               Year ended 31 March 2012

                                               (Unaudited)                              (Audited)
              Notes           £m           £m           £m           £m           £m           £m
Revenue                      828            -          828        1,687            -        1,687
Cost of sales              (375)            -        (375)        (803)            -        (803)
Gross profit                 453            -          453          884            -          884
Operating
expenses
excluding
amortization,
depreciation
and
investment in
TV              7          (298)          (9)        (307)        (558)         (27)        (585)
Underlying
EBITDA*                      155          (9)          146          326         (27)          299
Investment in                                          (8)                                      -
TV                           (8)            -                         -            -
Headline                                               138                                    299
EBITDA                       147          (9)                       326         (27)
Depreciation                (39)            -         (39)         (65)            -         (65)
Amortisation    7           (11)         (30)         (41)         (27)         (61)         (88)
Share of                                                 
results of
joint venture                (2)            -          (2)          (1)            -          (1)
Profit before
interest and
taxation                      95         (39)           56          233         (88)          145
Finance costs   3           (10)            -         (10)         (18)            -         (18)
Profit before
taxation                      85         (39)           46          215         (88)          127
Taxation      4, 7          (17)            9          (8)         (56)           67           11
Profit for
the period                    68         (30)           38          159         (21)          138
Attributable
to the equity
holders of
the parent
company                       68         (30)           38          159         (21)          138
Earnings per
share
Underlying
Basic (pence)   8            8.6                                  18.0
Diluted
(pence)         8            8.0                                  17.2
Headline
Basic (pence)   8            7.8                       4.3         18.0                      15.6
Diluted
(pence)         8            7.2                       4.0         17.2                      14.9







* Underlying EBITDA is defined as Headline EBITDA excluding costs relating  to 
investment in TV.

** A  reconciliation  of  Headline information  to  statutory  information  is 
provided in note 7 to the interim condensed financial statements.



The accompanying notes  are an  integral part of  this condensed  consolidated 
income statement. All amounts relate to continuing operations.



Condensed consolidated statement of comprehensive income for the 6 months
ended 30 September 2012



                                               6 months     6 months    Year

                                                  ended        ended     ended
                                           30 September 30 September  31 March

                                                   2012         2011      2012
                                            (Unaudited)  (Unaudited) (Audited)
                                                     £m           £m       £m
Profit for the period                                38           73       138
Other comprehensive income for the period
Currency translation and cash flow hedges           (2)          (1)         -
Total recognised income for the period               36           72       138
Attributable to the equity holders of the            36           72       138
parent company



Condensed consolidated statement of changes in equity for the 6 months ended
30 September 2012



                            Share   Share Translation Demerger  Retained Total
                          capital premium     reserve  reserve  earnings
                                                               and other     
                                                              reserves
                               £m      £m          £m       £m        £m    £m
At 1 April 2012                 1     586        (65)    (513)       435   444
Total comprehensive
income for the period           -       -           -        -        36    36
Issue of own shares*            -      32           -        -      (63)  (31)
Taxation of items
recognised directly in
reserves                        -       -           -        -         4     4
Share-based payments
reserve credit                  -       -           -        -         3     3
Equity dividends (note 6)       -       -           -        -      (56)  (56)
At 30 September 2012            1     618        (65)    (513)       359   400



                           Share   Share Translation Demerger  Retained  Total
                         capital premium     reserve  reserve  earnings
                                                              and other      
                                                             reserves
                              £m      £m          £m       £m        £m     £m
At 1 April 2011                1     586        (65)    (513)       406    415
Total comprehensive
income for the period          -       -           -        -        72     72
Net purchase of own
shares                         -       -           -        -      (54)   (54)
Share-based payments
reserve credit                 -       -           -        -         2      2
Share-based payments reserve                                                 
debit                              -         -         -    -       (1)  (1)
Equity dividends (note 6)          -         -         -    -      (35) (35) 
At 30 September 2011           1     586        (65)    (513)       390    399



                    Share  Share premium Translation Demerger  Retained  Total
                   capital                   reserve  reserve  earnings
                                                              and other
                                                               reserves
                        £m            £m          £m       £m        £m     £m
At 1 April 2011          1           586        (65)    (513)       406    415
Total
comprehensive
income for the
year                     -             -           -        -       138    138
Net purchase of                                                  
own shares               -       -                 -        -      (54) (54)
Settlement of
Group ESOT shares        -             -           -        -         1      1
Share-based
payments reserve
credit                   -             -           -        -         4      4
Share-based
payments reserve
debit                    -             -           -        -       (2)    (2)
Equity dividends
(note 6)                 -             -           -        -      (58)   (58)
At 31 March 2012         1           586        (65)    (513)       435  444 



* On 17 September 2012, the Group's Remuneration Committee determined that the
relevant performance  conditions of  the  VES schemes  (including the  5%  TSR 
requirement) had been satisfied meaning the VES participants were entitled  to 
exercise 60% of  their options as  set out in  note 9. The  settlement of  the 
schemes resulted  in the  recognition of  share  premium of  £32m and  a  £63m 
movement in retained earnings and other reserves. 



Condensed consolidated balance sheet as at 30 September 2012

                                           30 September 30 September 31 March

                                                 2012         2011      2012
                                     Notes  (Unaudited)  (Unaudited) (Audited)
                                                     £m           £m       £m
Non-current assets
Goodwill                                            480          478       480
Other intangible assets                             172          232       202
Property, plant and equipment                       280          289       292
Non-current asset investments                         1            1         1
Investment in joint venture            5              7            4         7
Deferred tax assets                                 116          145       120
                                                  1,056        1,149     1,102
Current assets
Cash and cash equivalents                             2           28         2
Inventories                                          13            3         3
Trade and other receivables                         205          176       184
Loans to related parties                              2            2         2
                                                    222          209       191
Total assets                                      1,278        1,358     1,293
Current liabilities
Trade and other payables                          (404)        (395)     (379)
Loans and other borrowings                         (25)            -      (26)
Corporation tax liabilities                        (17)         (20)      (16)
Provisions                            11            (8)         (28)       (8)
                                                  (454)        (443)     (429)
Non-current liabilities
Loans and other borrowings                        (415)        (505)     (410)
Provisions                            11            (9)         (11)      (10)
                                                  (424)        (516)     (420)
Total liabilities                                 (878)        (959)     (849)
Net assets                                          400          399       444
Equity
Share capital                         12              1            1         1
Share premium                                       618          586       586
Translation and hedging reserve                    (65)         (65)      (65)
Demerger reserve                                  (513)        (513)     (513)
Retained earnings and other reserves                359          390       435
Funds attributable to equity
shareholders                                        400          399       444



Condensed consolidated cash flow statement for the 6 months ended 30 September
2012



                                   6 months     6 months                Year

                                      ended        ended                 ended
                                                                      31 March
                               30 September 30 September
                                       2012         2011                  2012
                         Notes  (Unaudited)  (Unaudited)             (Audited)
                                        £m          £m                   £m
Operating activities
Profit before interest
and taxation                             56           49                   145
Adjustments for non-cash
items:
 Share-based            9
payments                                  3            2  4
 Depreciation                       39           32    65
 Amortisation                       41           43                    88
 Share of losses of
joint venture                             2            2                     1
 Profit on disposal
of property, plant and
equipment                                 -            -                   (9)
 Profit on disposal
of customer base                          -          (3)                   (3)
Operating cash flows
before movements in
working capital                         141          125                   291
Increase in trade and
other receivables                      (23)         (19)                  (20)
Increase in inventory                  (10)            -                     -
Increase in trade and
other payables                           28           20                    13
Decrease in provisions                  (1)          (8)                  (29)
Cash generated by
operations                              135          118                   255
Income taxes paid                         -          (1)                   (2)
Net cash flows generated
from operating
activities                              135          117                   253
Investing activities
Acquisition of
subsidiaries and joint
venture, net of cash
acquired                                (2)         (13)                  (20)
Disposal of customer
base                                      -            3                     3
Acquisition of
intangible assets                      (11)         (15)                  (28)
Acquisition of property,
plant and equipment                    (27)         (34)                  (78)
Profit on disposal of
property, plant and
equipment                                 -            -                     9
Cash flows from
investing activities                   (40)         (59)                 (114)
Financing activities
Settlement of Group ESOT
shares                                    -            -                     1
Net purchase of own
shares                                 (35)         (54)                  (54)
Repayment of borrowings                   4           75                     5
Refinancing fees                          -            -                   (7)
Interest paid                           (8)          (8)                  (17)
Dividends paid                         (56)         (35)                 (58)
Cash flows from
financing activities                   (95)         (22)                 (130)
Net increase in cash and
cash equivalents                          -           36                     9
Cash and cash
equivalents at the start
of the period                             1          (8)                   (8)
Effect of exchange rate
fluctuations                              1            -                     -
Cash and cash
equivalents at the end
of the period                             2           28                     1
Cash and cash
equivalents for the
purposes of this
statement comprise:
Cash and bank balances    10              2           28                     2
Bank overdrafts *         10              -            -                   (1)
                                          2           28                     1



 * Bank overdrafts are disclosed within Loans and other borrowings less
than one year. 



1. Basis of preparation and accounting policies



Basis of preparation



The unaudited interim  condensed consolidated financial  statements for the  6 
months  ended  30  September  2012  have  been  prepared  in  accordance  with 
International Accounting Standard 34 'Interim Financial Reporting' ('IAS  34') 
and thereby  in accordance  with International  Financial Reporting  Standards 
('IFRS') as issued  by the International  Accounting Standards Board  ('IASB') 
and as adopted by the European Union ('EU').



The interim condensed financial statements for the 6 months ended 30 September
2012 do not comprise statutory accounts for the purpose of section 434 of  the 
Companies Act 2006, and should be  read in conjunction with the Annual  Report 
2012 of TalkTalk  Telecom Group  PLC (the  'Annual Report  2012'). The  Annual 
Report 2012 was audited by the Group's auditor, Deloitte LLP, their report was
unqualified and  did not  include a  reference  to any  matters to  which  the 
auditor drew attention by way of emphasis without qualifying their report.



The Annual  Report  2012  can  be  found  on  the  Group's  corporate  website 
www.talktalkgroup.com.



The financial information  for the  6 months ended  30 September  2012 and  30 
September 2011 has not been subject to audit or review by the Group's auditor.



The  Group's  future  cash  forecasts  and  revenue  projections,  which   are 
considered to be based on prudent assumptions, indicate that the

Group will  be able  to operate  within  the level  of its  current  committed 
facilities as disclosed for the foreseeable  future and as such the  Directors 
believe that it is appropriate to continue to prepare the financial statements
of the  Group  on  a  going concern  basis.  The  committed  facilities  were 
disclosed in the Annual Report 2012.



The interim condensed financial statements for the 6 months ended 30 September
2012 have been prepared using  accounting policies and methods of  computation 
consistent with those set out on pages 37 to 39 of the Annual Report 2012.



2.  Segmental reporting



IFRS 8 'Operating  Segments' requires the  segmental information presented  in 
the financial statements to be that used by the chief operating decision maker
to evaluate the  performance of  the business and  to decide  how to  allocate 
resources. The  Group has  identified  the Board  of  Directors as  its  chief 
operating decision maker. The Board of Directors considers the results of  the 
business as a whole when assessing the performance of the business and  making 
decisions about the  allocation of  resources. Accordingly the  Group has  one 
operating segment.



The Group's revenue is  presented split by its  On-net, Off-net and  Corporate 
products as  this  information is  provided  to the  Group's  chief  operating 
decision maker. On-net  and Off-net comprise  Consumer customers and  business 
customers that receive similar services.



                  6 months ended 30        6 months ended 30     Year ended 31
                          September                September             March
                               2012                     2011              2012
                                 £m                       £m                £m
On-net                          573                      524             1,084
Off-net                          95                      162               287
Corporate                       160                      158               316
                                828                      844             1,687







3. Finance costs



Finance costs are analysed as follows:

                              6 months ended 30  6 months ended 30  Year ended
                                      September          September    31 March
                                           2012               2011        2012
                                             £m                 £m          £m
Interest on bank loans and
overdrafts                                    8                  6          14
Facility fees and similar
charges                                       2                  1           3
Unwinding of discount on
provisions                                    -                  1           1
                                             10                  8          18





4. Taxation



An effective rate of 20% (6 months ended 30 September 2011: 26%; year ended 31
March 2012: 26%)  has been  applied to  Headline profit  before taxation  from 
continuing operations. A tax credit at 24% has been recognised in the  current 
period (6 months ended 30 September 2011: 26%; year ended 31 March 2012:  26%) 
in  respect  of  the  amortisation  of  acquisition  intangibles  net  of  any 
adjustments in respect of prior periods.



On 3 July 2012  a reduction in  the UK Statutory rate  of Corporation tax  was 
substantively enacted, bringing the tax rate down from 24% to 23% with  effect 
from 1 April 2013. Accordingly the  tax assets and liabilities recognised  at 
30 September 2012  take account of  this change.  This has resulted  in a  tax 
charge to the income  statement as the  value of the  Group's tax assets  have 
been reduced.  In addition  the asset  reflects the  annual recognition  of  a 
further tranche of the tax losses acquired with Tiscali UK Limited,  including 
Video Networks Limited, based on the Group's rolling forecast and in line with
the Group's agreement with HMRC.





5. Acquisitions and disposals



A further £2m has been invested in YouView TV Limited in the 6 months ended 30
September 2012 (6  months ended 30  September 2011: £2m;  year ended 31  March 
2012: £4m). The share of losses recognised by the Group in the period was £2m
(6 months ended 30 September 2011: £2m;  year ended 31 March 2012: £1m).  The 
resulting net  investment at  30 September  2012 was  £7m (6  months ended  30 
September 2011: £4m; year ended 31 March 2012: £7m).





6. Equity dividends



                                              6 months     6 months

                                                 ended        ended Year ended
                                                                      31 March
                                          30 September 30 September
                                                  2012         2011       2012
                                                    £m           £m         £m
Ordinary dividends
Final dividend for the year ended 31
March 2011 of 3.9p per ordinary share                -           35         35
Interim dividend for the year ended 31
March 2012 of 2.6p per ordinary share                -            -         23
Final dividend for the year ended 31
March 2012 of 6.4p per ordinary share               56            -          -
Total dividends                                     56           35         58



The proposed dividend for the  6 months ended 30  September 2012 is 3.45p  per 
ordinary share on 891 million shares (£31m). The proposed interim dividend was
approved by the  Board on  12 November  2012 and has  not been  included as  a 
liability as at 30 September 2012.





7. Reconciliation of Headline information to statutory information



                                        Profit before
                                         interest and Profit before Profit for
                                 EBITDA      taxation      taxation the period
6 months ended 30 September 2012     £m            £m            £m         £m
Headline results                    147            95            85         68
Exceptional items - Operating       (3)           (3)           (3)        (2)
expenses (a)
Exceptional items - Operating       (6)           (6)           (6)        (5)
expenses (b)
Amortisation of acquisition           -          (30)          (30)       (23)
intangibles (e)
Statutory results                   138            56            46         38



6 months ended 30 September 2011
Headline results                             146  100   92   68
Exceptional items - Operating expenses (c)   (3)  (3)  (3)  (2)
Exceptional items - Operating expenses (b)  (14) (14) (14) (14)
Exceptional items - Operating expenses (d)   (3)  (3)  (3)  (3)
Amortisation of acquisition intangibles (e)    - (31) (31) (23)
Exceptional items - taxation (f)               -    -    -   47
Statutory results                            126   49   41   73



Year ended 31 March 2012
Headline results                             326  233  215  159
Exceptional items - Operating expenses (c)  (11) (11) (11)  (8)
Exceptional items - Operating expenses (b)  (14) (14) (14) (11)
Exceptional items - Operating expenses (d)   (2)  (2)  (2)  (2)
Amortisation of acquisition intangibles (e)    - (61) (61) (45)
Exceptional items - taxation (f)               -    -    -   45
Statutory results                            299  145  127  138



Headline information  is  provided  because the  Directors  consider  that  it 
provides assistance in understanding the Group's underlying performance.



 a) Operating efficiencies - Phase III (Making TalkTalk Simpler)



During the 6 months to 30 September 2012, the Group has continued a review  of 
operating structure to  look for  further opportunities to  drive process  and 
efficiency improvements over the medium term.



Initiatives that  form  part  of  the  Group's  new  Making  TalkTalk  Simpler 
programme  were  implemented  in  the  6  months  to  30  September  2012:   a 
restructuring of  the systems  and processes  in TalkTalk  Business to  remove 
duplication and better align  the sales and service  model for future  growth; 
and a review and consolidation of the outsourcing partners and rebalancing  of 
the Group's on-shore footprint. This has resulted in redundancy, dual running,
property and project  management costs.  The total  charge incurred  in the  6 
months ended 30  September 2012  was £3m (6  months ended  30 September  2011: 
£nil; year ended 31 March 2012: £nil).



A total taxation credit of  £1m has been recognised in  the 6 months ended  30 
September 2012 (6 months  ended 30 September 2011:  £nil; year ended 31  March 
2012: £nil).



b)  Operating efficiencies - Phase II (Consumer contact centre
rationalisation)



On 24 April 2012, the Group announced  the second stage of its contact  centre 
rationalisation. This resulted in consolidating and outsourcing operations  in 
Preston and Northampton. Costs  were incurred in  respect of redundancy,  dual 
running and consultancy. The  total charge incurred in  the 6 months ended  30 
September 2012 was £6m (6 months ended 30 September 2011: £nil; year ended  31 
March 2012: £nil).



On 7 September 2011,  the Group announced the  closure of the Group's  contact 
centre in Waterford,  Ireland, which resulted  in redundancy, consultancy  and 
onerous property lease costs. The total charge incurred in the 6 months  ended 
30 September 2011 was £14m (year ended 31 March 2012: £14m).





7. Reconciliation of Headline information to statutory information
(continued)



A total taxation credit of  £1m has been recognised in  the 6 months ended  30 
September 2012 (6 months  ended 30 September 2011:  £nil; year ended 31  March 
2012: £3m).



c)  Operating efficiencies - Phase I (Back office restructuring)



On 26 January 2011 a major restructure of the Group was announced to integrate
technology and  IT capabilities  and consolidate  back office  functions.  The 
reorganisation principally resulted in a reduction in headcount, and  required 
project management  and  consulting  costs  to  deliver  these  benefits.  The 
programme also resulted in onerous contract and dual running costs relating to
a  number  of  technology   contracts  where,  services  previously   provided 
externally are now being provided in-house. The total charge incurred in the 6
months ended 30  September 2012 was  £nil (6 months  ended 30 September  2011: 
£3m; year ended 31 March 2012: £11m).



A total taxation credit of £nil has  been recognised in the 6 months ended  30 
September 2012 (6  months ended 30  September 2011: £1m;  year ended 31  March 
2012: £3m).



d) Other



During the 6 months ended  30 September 2011, Ofcom fined  the Group £3m as  a 
result of  contravention of  General  Condition 11  under  section 94  of  The 
Communication Act 2003. No tax credit was recognised in respect of the fine.



For the One Company  integration, implemented during the  year ended 31  March 
2010, a  credit of  £1m was  recognised in  the year  ended 31  March 2012  in 
respect of a provision release for costs no longer anticipated to be incurred.



e) Amortisation of acquisition intangibles



An amortisation  charge in  respect  of acquisition  intangibles of  £30m  was 
incurred in the 6 month period ended  30 September 2012 (6 month period  ended 
30 September 2011: £31m; year ended 31 March 2012: £61m). A tax credit at  24% 
in the 6 month  period ended 30  September 2012 (6  months ended 30  September 
2011: 26%; year ended 31  March 2012: 26%) has  been recognised in respect  of 
the amortisation of acquisition intangibles, net of any adjustments in respect
of prior periods.  The tax  credit was  £7m for the  6 month  period ended  30 
September 2012 (6  month period ended  30 September 2011:  £8m; year ended  31 
March 2012: £16m).



f) Exceptional items - taxation



During the 6 month period ended 30 September 2011 the Group reached  agreement 
with HMRC over the utilisation of brought forward tax losses acquired with the
Tiscali UK business in 2009, including  those of Video Networks Limited.  This 
resulted in the  recognition of  deferred tax assets  of £47m  (year ended  31 
March 2012: £45m), in  addition to those recognised  at the acquisition  date. 
The recognition of the deferred tax  asset has been recognised in  exceptional 
items as it is both material and one-off in nature, and does not relate to the
underlying performance of the business.





8. Earnings per share



Basic and  diluted  earnings  per  ordinary  share  have  been  calculated  in 
accordance with IAS 33  'Earnings per share'. Earnings  per share is shown  on 
both a Headline  and Statutory  basis to assist  in the  understanding of  the 
underlying performance of the Group.



                                     6 months ended  6 months ended Year ended
                                                                     31 March
                                    30 September 30 September
                                           2012         2011       2012
                                              £m           £m         £m
Underlying earnings*                             75              68        159
Headline earnings (note 7)                       68              68        159
Statutory earnings                               38              73        138
Weighted average number of shares
(millions)
Shares in issue**                               915             914        914
Less weighted average holdings by
Group ESOT                                     (41)            (14)       (29)
For basic earnings per share                    874             900        885
Dilutive effect of share options                 68              38         40
For diluted earnings per share                  942             938        925
Basic earnings per share
Underlying (pence)                              8.6             7.6       18.0
Headline (pence)                                7.8             7.6       18.0
Statutory (pence)                               4.3             8.1       15.6
Diluted earnings per share
Underlying (pence)                              8.0             7.2       17.2
Headline (pence)                                7.2             7.2       17.2
Statutory (pence)                               4.0             7.8       14.9



* Underlying earnings of £75m is defined as headline EBITDA excluding costs of
£8m relating to the investment in TV less an allocation of taxation of £1m
based on the Group's effective tax rate (6 months ended 30 September £68m;
year ended 31 March 2012: £159m).

** The number of shares in issue increased by 17 million on 21 September 2012
as set out in note 12.



9. Share-based Payments



a) TTG VES and CPW TTG VES



On 17 September 2012, the  Group's Remuneration Committee determined that  the 
relevant performance  conditions of  the  VES schemes  (including the  5%  TSR 
requirement) had been satisfied meaning the VES participants were entitled  to 
exercise 60% of their  VES options. The remaining  40% will vest in  September 
2013 subject to on-going performance conditions being met. Further details  on 
the VES  schemes are  set  out on  page  44 of  the  Annual Report  2012.  The 
participants' options were acquired by the Company for new ordinary shares  in 
the Company and cash resulting in a cash outflow of £35m. The net issue of  17 
million shares in  the Company was  at a price  of £1.86 per  share being  the 
average closing price of the Company's shares on 18 and 19 September 2012.



The settlement of the schemes resulted in  a net movement in reserves of  £31m 
being the recognition of share  premium of £32m and  a £63m debit in  retained 
earnings and other  reserves. The £63m  debit to reserves  represents a  total 
cash outflow of £35m and the value of new PLC shares issued of £32m net of the
repayment of the associated VES loans, interest and a reduction in the Group's
liability to settle the schemes.



b) IFRS2 charge



A charge of £3m has been recognised  in the 6 month period ended 30  September 
2012 (6 months ended 30 September 2011: £2m; year ended 31 March 2012: £4m).





10. Net debt



Analysis of net debt



                                                                     31 March
                                      30 September 30 September
                                             2012         2011     2012
                                                   £m              £m       £m
Cash and cash equivalents                           2              28        2
Bank overdrafts*                                    -               -      (1)
Current loans and other borrowings               (25)               -     (25)
Non-current loans and other                     (415)
borrowings                                                      (505)    (410)
Net debt excluding loans to related             (438)
parties                                                         (477)    (434)
Loans to related parties                            2               2        2
Total net debt                                 (436)           (475)    (432)



* Bank overdrafts are disclosed within Loans and other borrowings less than
one year.



All movements relate to net cash flows.





11. Provisions



                                                          
                             Operating One Company          Contract and
                          efficiencies integration Property        other Total
                                    £m          £m       £m           £m    £m
At 1 April 2012                      1           2        9            6    18
Charged to income                                -        -            -     2
statement                            2
Utilised in the year                 -           -        -          (3)   (3)
At 30 September 2012                 3           2        9            3    17



                Operating One Company           Contract
             efficiencies integration Property and other                 Total
                       £m          £m       £m        £m                    £m
At 1 April
2011                   12          10        9        15                    46
Charged to                          -        1         -                    11
income
statement              10
Utilised in          (10)         (4)      (1)       (3)                  (18)
the year
Released in             -           -        -       (1)                   (1)
the year
Unwinding of            -           -        -         1                     1
discount
At 30                  12           6        9        12                    39
September
2011
                                   
                                             
                Operating One Company           Contract
             efficiencies integration Property and other                 Total
                                                         £m

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