...as we have had results from Talk Talk (TALK) one of the UK's leading telephone, broadband, TV and mobile providers. They reported their final results today which on the face of it don't look that special as some of the profit earnings numbers down sharply but this does reflect the £112 million of incremental investment in growing their TV offering.
Despite this they had committed to growing their dividend by 15% this year, which they did taking it to 12 pence. With the shares around 300 pence this gives a yield of 4% including a final of 8 pence which will yield 2.67% alone. They have also forecast a further minimum 15% increase for the current year, which should take the dividend to at least 13.8 pence for a prospective yield of 4.6%.
One thing to watch on this one is the debt which increased by a further £104 million to £497 million which compares to their facilities which comprises a £560 million revolving credit facility, which matures in November 2015, a £30 million bilateral loan facility that matures in March 2015, and a £75 million term loan that matures in November 2015. So not that much headroom left although net finance costs came in at £20 million which is covered 4.7x by headline operating profit of £94 million. So that seems acceptable given the utility type nature of their business and cash flows. However the Company did say the following on financing and debt:
"We are in compliance with the covenant conditions on all funding facilities at the year end. It is our policy to refinance our facilities significantly in advance of maturity dates, and we have commenced re-financing discussions ahead of the expiry of current facilities.The Board reviews the capital structure of the Group on an annual basis. Net Debt/EBITDA at 31 March 2014 was 2.3x (FY13: 1.4x) driven primarily by the Group's investment in growth and an increased dividend pay-out. The Board is confident that this will fall over the medium term and that such a reduction will make it appropriate to consider a return of excess capital to shareholders in order to maintain an efficient capital structure."
So all in all a good and rapidly growing yield from a Utility type business and they expect to see turnover profits and margins recover once the investment in building the TV business reduces and as they cut costs along the way. So I'm happy to hold and enjoy the yield, but watching the debt. If you want to read more about the results and catch up on a webcast you can see all the details at their useful investor centre.