TalkTalk bombs as Dunstone rips up Dido’s legacy

TalkTalk shares crashed today as executive chairman Sir Charles Dunstone ripped up the strategy of departing chief executive Dido Harding, slashed the dividend and warned on profits.

Taking the reins once again at the business he founded, Dunstone said he would axe payouts to shareholders — of which he is the biggest — and concentrate on gaining customers.

“The focus of the business is now growth, cash generation and profit, in that order,” he said.

Profit for the year was up from £260 million to £304 million, but that was well shy of the company’s own estimates.

“We missed our numbers,” he said, prompting speculation that a weakened TalkTalk is a bid target.

Profit next year will be even lower, perhaps down to £270 million, admits Dunstone.

The shares fell 13% in early trading and were later down 10% at 164p. Asked how much time he would spend on TalkTalk, he replied: “It is my job.”

Dunstone talked of a “less capital-intensive offering” and said he was tired of losing customers to rivals such as Sky and BT.

Harding said in February that she was stepping down, pledging “more activities in public service” and saying she is a “really big believer in chief executives not staying forever”.

The tone of the statement today suggests internal disquiet at her strategy, however. The cut in the dividend from 10.29p to 7.5p is much deeper than expected.

Dunstone points out that the shares were yielding a toppy 8%, suggesting he thinks Harding was overpaying. He said the new divi is more “credible”.

“We decided to cut the dividend because we want to invest in growth and we want to run the business in a very financially disciplined way and get our dividend cover up,” Dunstone said.

Russ Mould, investment director at AJ Bell, said: “The shares still yield more than 4.5% after today’s share price plunge and the proposed reduction in the dividend to 7.5p next year. At least shareholders know that Dunstone has every incentive to succeed on their behalf.”