£114m wiped off Talk Talk by bid to raise £200m

MORE than £114m was wiped off the value of Talk Talk after it issued a profit warning and asked investors to prop up its balance sheet with a £200m share placing.

The budget broadband provider said it would also cut its dividend, with bosses saying it was the final set of measures to ‘reset’ the firm.

But the announcement spooked investors, with shares falling by as much as 14pc in early trading, and closing 9.8pc down at 108p.

Talk Talk’s move to raise £200m by issuing shares infuriated The Investment Association, which accused it of ‘blatantly disregarding industry-accepted standards’.

It said it was an attack on shareholders’ rights, with the issue representing 19.99pc of existing capital – just below the 20pc limit requiring shareholder approval.

A spokesman said: ‘Talk Talk’s actions are a blatant disregard of the industry-accepted standards... this placing sets a very damaging precedent.’

But defending the measures, Tristia Harrison, Talk Talk’s chief executive, said it was needed to give them breathing room and ‘a little more flexibility’, with executive chairman Sir Charles Dunstone and other directors buying up £40m of the shares, adding: ‘We are not going to worry about the shortterm share price.’

The FTSE 250 company said the cash would go towards the roll-out of cutting-edge fibre broadband to 3m homes. Talk Talk is in talks with Infracapital, part of M&G Prudential, over setting up a joint company that would carry out the work, which is expected to cost £1.5bn.

Harrison added: ‘What we are doing today is providing answers to the questions about this company.

‘People asked whether can we can sustain this growth, and we have now seen the fourth consecutive quarter of growth. We have also been asked about when we will return to profitability. We are going to invest to do that – we are not just going to spend loads more on bringing in customers.

‘We have been pivoting the business in the past ten to 11 months, and this is the end of our reset.’

Since founder Dunstone returned to the company last year following a catastrophic loss of customer data that saw thousands of people ditch its services, Talk Talk has focused on returning to its roots as a low-cost internet provider.

Harrison said it would now concentrate on getting existing customers to spend more and implementing cost savings, including cutting the size of its call centres in South Africa and the Philippines. She refused to say if there would be UK job losses.

The firm said it added 37,000 customers in the three months to December 31, putting it on course to add at least 150,000 for the full year.

However, it warned that fullyear earnings were now expected to be between £230m and £245m – down from its previous estimate of £270m to £300m.