BT.A Bt Group Plc

(Rewrites, adds detail.)

By Simon Zekaria and Tapan Panchal

LONDON--TalkTalk Telecom Group PLC (TALK.LN) on Tuesday signaled growth in profit and said its operations are returning to normal, despite flagging higher-than-expected costs and a drop in customers following a cyberattack last year that dented its performance and reputation.

Last October, the company said 4% of its customers had their personal details accessed in the latest in a series of incidents where the company has been targeted by hackers.

Tuesday, TalkTalk said it sees costs relating to the attack at between 40 million pounds to GBP45 million ($57.7 million to $64.9 million), with an additional trading impact of around GBP15 million and around a GBP20 million indirect impact from a lower customer base. This compares with a previous estimate of costs relating to the attack of up to GBP35 million.

It also said the company lost 101,000 customers following the attack.

Still, the company--which faces off against larger rivals like Vodafone PLC (VOD.LN) and BT Group PLC (BT.A.LN) in the U.K.'s competitive telecoms, Internet and pay-television markets--said it expects fiscal 2016 earnings before interest, taxes, depreciation and amortization to total between GBP255 million and GBP265 million. It also reiterated that it expects to the grow the final dividend by 15%.

"Looking forward, we expect to deliver a material step up in profits in H2, with full-year results in line with market consensus," said Chief Executive Dido Harding.

For fiscal 2017, TalkTalk sees the earnings guidance at between GBP320 million and GBP360 million, with dividend no lower than in 2016.

For the third quarter, it posted revenue growth of 1.8%, boosted by pricing.

"It is encouraging to see the business returning to normal after a challenging quarter that was dominated by the cyber attack," said Ms. Harding. The company said almost half a million customers took up its offer of an upgrade to their service, as TalkTalk scrambled to calm ire and restore its reputation.

"Trust in the TalkTalk brand has improved since just after the attack and consideration is higher now than it was before the incident," claimed Ms. Harding.

At 1048 GMT, shares rose 10.6% to 241 pence, valuing the company at GBP2.08 million.

"Bearing in mind the unprecedented bad publicity that the company faced and its need to withdraw from active marketing for a time, these results look less bad than could have been feared," said Jefferies analyst Jerry Dellis.

Write to Simon Zekaria at simon.zekaria@wsj.com and Tapan Panchal at tapan.panchal@wsj.com

(END) Dow Jones Newswires

February 02, 2016 07:53 ET (12:53 GMT)

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