TIDMTEP
RNS Number : 5351S
Telecom Plus PLC
20 May 2009
?
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| Embargoed until 07.00 | 20 May 2009 |
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Telecom plus PLC
Final Results for the year ended 31 March 2009
Telecom plus PLC, the UK's leading low-cost multi-utility supplier (gas,
electricity, telephony and broadband), announces final results for the year
ended 31 March 2009.
Financial Highlights:
* Turnover up 49% to GBP278.3m (2008: GBP186.5m)
* Profit before tax up 34% to GBP22.5m (2008: GBP16.8m)
* Year-end net cash balance of GBP25.4m (2008: GBP30.3m)
* EPS up 37% to 24.2p (2008: 17.7p)
* Final dividend of 12.5p per share (2008: 10p) making a total for the year of
17.5p per share (2008: 14p); this represents an increase in the total payment of
25% compared with last year.
Operating Highlights:
* Accelerating organic growth
* Customer base now exceeds 281,000 (2008: 217,857)
* 34% increase in the number of services being supplied
* Business Club has grown by 69% to 16,163 members (2008: 9,537)
* Over 27,000 distributors at year end (2008: 19,600)
* Successful launch of new CashBack card
* New office headquarters - first phase refurbishment complete
Extract from the Chairman's Statement:
"We are still the UK's only fully integrated multi-utility provider, offering
customers consistent value across a wide range of services with the added
convenience of receiving just a single clear and concise bill each month. Our
distribution channel has demonstrated its continuing ability to gather high
quality new customers, cost-effectively and in increasing volumes; this gives us
a considerable competitive advantage in the residential market."
"The confidence we expressed last year in the ability of our business to deliver
strong results has been vindicated. I am delighted to report on a further year
of significant achievement for the Company in which we have seen strong growth
in turnover, profitability and earnings per share. We are recommending a final
dividend of 12.5p; this makes a total dividend of 17.5p (2008:14p) representing
an increase of 25% over last year."
"It remains our intention to pay a total dividend of 22p for the current year,
in the absence of unforeseen circumstances. This reflects our confidence in a
continuation of the current rapid growth we are seeing in both new services and
new customers, which can be expected to provide the Company with a platform from
which to deliver significantly higher profits in future years."
There will be a meeting for analysts at Smithfield's offices at 09.30 am today.
For more information please contact:
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| Telecom plus PLC | |
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| Charles Wigoder, Chief Executive | 020 8955 5000 |
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| Chris Houghton, Finance Director | |
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| Andrew Lindsay, Chief Operating | |
| Officer | |
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| KBC Peel Hunt | |
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| Richard Kauffer | 020 7418 8900 |
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| Nicholas Marren | |
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| Smithfield | |
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| Tania Wild / Reg Hoare | 020 7360 4900 |
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Chairman's Statement
I am delighted to report a further year of significant achievement for the
Company, in which we have seen strong growth in turnover, profitability and
earnings per share.
Results
Pre-tax profits increased by 34% to GBP22.5m (2008: GBP16.8m) on group turnover
up by 49% to GBP278.3m (2008: GBP186.5m). This strong financial performance has
been driven by the rapid growth in the number of customers using our services
during the course of the year. Gross margins during the year fell from 19.3% to
18.6%, in line with management expectations, primarily reflecting the higher
proportion of our business now represented by supplying gas and electricity,
where the margins are considerably lower than from selling telephony and
broadband services.
Earnings per share increased by 37% during the year to 24.2p (2008:17.7p) and we
are recommending a final dividend of 12.5p. This makes a total dividend of 17.5p
(2008:14.0p), representing an increase of 25% over last year.
The rate at which new customers have been signing up to become members of the
Utility Warehouse Discount Club has been gathering pace steadily throughout the
year. This has been driven by a combination of record numbers of new
distributors joining the business (almost 4,000 in the last quarter alone),
growing confidence in the value of our services and the quality of customer
service we provide, and an economic climate in which potential customers are
increasingly looking for credible ways to reduce their costs. Residential Club
membership increased by over 40% during the year to 222,705 (2008: 158,972) and
our Business Club membership grew by almost 70% during the year to 16,163 (2008:
9,537); together, these clubs (trading under the Utility Warehouse brand) now
account for 85% (2008: 77%) of our total customer base.
We are particularly encouraged by the accelerating rate of growth in the number
of services we are providing, which reached 794,118 (2008: 591,981) by the year
end - an increase of more than 202,000 services during the year. Of this total,
69,692 were added during the last quarter of the year, representing an
annualised growth rate of over 38%.
We continue to invest significant resources in improving our UK-based customer
service team, the effectiveness of which is clearly demonstrated by the various
awards we received from Which? magazine over the course of the year. Churn has
increased slightly from around 1.8% per month to 2% per month largely due to the
faster organic growth we have been experiencing, and average spend per customer
has grown to GBP1,057 (2008:GBP872).
Oxford Power Holdings ("Opus"), in which we maintain a 20% stake, continues to
produce satisfactory results. Our share of their profits was fractionally lower
than last year at GBP0.89m (2008: GBP0.94m) in what proved to be a very
difficult year for other independent resellers of commercial electricity, which
saw their two principal competitors (Bizz Energy and E4B) both going into
administration. Opus's solid performance demonstrates the resilience of their
business model and the strength and experience of their management team.
International Power Holdings PLC, which currently own a 30% stake in the
business (the remaining 50% is held by management), has a call option under
which it can acquire the remaining 70%. This option is exercisable during a
30 day window beginning on the date that Opus completes its audit for the year
to 31 March 2009, which is expected to occur shortly. The formula under which
this option can be exercised places a value of approximately GBP15m on our stake
in this business.
Year-end net cash balances fell by GBP4.9m to GBP25.4m (2008: GBP30.3m). This
reduction reflects the significant growth in our energy business and the impact
of an extremely cold winter which, combined with higher retail energy prices,
has increased budget plan debtors by GBP14.1m to GBP23.2m at the year-end, and
the cost of purchasing and refurbishing our new freehold headquarters office
building for around GBP10m. The overall cash outflow was partially offset by
issuing 1.5m shares from Treasury in February, which raised GBP4.7m.
Business Development
Our distributors have become increasingly confident in the overall strength of
our customer proposition, which combines convenience, value and a consistently
high quality of customer service; this has resulted in a substantial increase in
activity. We have seen a net increase of around 7,500 distributors over the year
(2008: net increase of 3,000), taking the total number of distributors to around
27,100 (2008:19,600); this represents an increase of over 38% during the year,
most of which took place during the second half and provides a strong indication
of the level of customer gathering activity that can be expected during the
first half of the current year. Our distributor numbers include approximately
1,000 Community Fundraisers, a relatively new business opportunity introduced in
October 2007, which enables local organisations (e.g. schools, sports clubs,
religious bodies and charities) to raise funds by promoting the benefits of
using our services within their communities.
Our IT systems have been designed to manage a significantly larger number of
customers than are currently using our services, and the recent purchase of a
substantial freehold office building gives us the additional physical space we
will need to support our anticipated future growth over the next 5 years. This
means we have the potential to benefit from substantial economies of scale as
the number of services we provide continues to grow. The achievement of these
economies of scale, and maintaining our current growth trajectory, remains our
key business priority over the next few years.
Last autumn we introduced full colour billing, enabling us to improve the
clarity of the information provided to customers, highlighting the various
savings and membership benefits they are receiving, and also giving us the
opportunity to incorporate more effective marketing messages each month.
We also launched a pre-payment MasterCard ("CashBack Card") as an important new
customer acquisition and retention tool. This gives our members the opportunity
to save an additional 5% on their shopping at a wide range of participating
retailers, which they receive as a credit on their next monthly bill from us.
This valuable additional membership benefit has been well received, and
customers using their new cards are achieving typical savings of 15%-30% on the
cost of their utilities each month.
We have also enhanced our customer proposition with the introduction of "Free
Global Calls" (where customers with multiple services can benefit from free
calls at any time of day to UK Local and National destinations, 0845 and 0870
numbers, and to 10 popular international destinations), whilst reducing our
fixed monthly line rental to GBP8.99, substantially below the price charged by
any of our principal competitors.
Recently published customer satisfaction surveys continue to compare us
favourably against our competitors, and we were delighted to receive our first
"Best Buy" recommendation from Which? magazine during the year for our combined
fixed telephony and broadband package. They also rated us as the best energy
supplier on two separate occasions, with a customer satisfaction rating
significantly higher than any of the "Big 6" suppliers. And when we asked our
own customers directly for their opinion, over 94% said they would recommend us
to a friend.
We intend to capitalise on these positive opinions by continuing to promote our
customer referral programme. This provides existing members who successfully
recommend a new customer to us with an ongoing additional discount on their own
monthly utility bill - a discount which increases with the number of new
customers they introduce. This initiative is being supported by our inbound
telesales fulfilment team, which enables potential new customers (particularly
those introduced by community fundraising groups) to sign up for our services
with the minimum of effort or inconvenience.
Once again I would like to thank our staff and distributors for the loyalty they
have shown, and the continuing contribution they are making to the success of
the Company.
Board Changes
I am delighted to welcome Christopher Houghton to the Board, who joined the
Company last autumn and was promoted to Finance Director in February 2009
following the departure of Mr Hateley. His previous experience at
PricewaterhouseCoopers, where he qualified as a chartered accountant and had
recently completed a two year secondment to The Takeover Panel, clearly identify
him as a candidate of exceptional ability, and we were delighted when he
accepted our offer. His appointment represents a further important step in our
continuing programme to strengthen our senior management team in line with the
significant organic growth being achieved.
Outlook
Since the year end we have seen continuing high levels of activity, with strong
growth in both new customer and new distributor numbers. The confidence we
expressed last year in the ability of our business to continue to deliver strong
results has been vindicated.
The nature of our business model continues to give us considerable visibility
over future revenues, and it is extremely encouraging that we were able to
maintain satisfactory gross margins last year in each of the business areas in
which we operate. However, it is more difficult to provide accurate guidance on
short-term profitability during periods of rapid growth, not least due to the
conservative accounting policy we adopt where all customer acquisition costs are
immediately written off against profits. This difficulty is exacerbated by the
seasonal nature of domestic energy consumption in the UK, where approaching 40%
of annual consumption occurs in the final quarter of each financial year, and
the actual amount used can fluctuate considerably depending on the weather.
Although the absolute amount of energy our customers will use this year remains
subject to considerable uncertainty, as explained above, the Company
remains protected against any volatility in the wholesale energy markets under
our long-term supply arrangements with npower, under which they are responsible
for providing the energy used by our customers in accordance with a price
formula designed to ensure we earn a positive margin whilst maintaining
competitive retail prices. The forward price curves for gas and electricity
suggest that retail prices are unlikely to fall much further from their current
levels over the next 12 months.
We are still the UK's only fully integrated multi-utility provider, offering
customers consistent value across a wide range of services with the added
convenience of receiving just a single clear and concise bill each month. Our
distribution channel has demonstrated its continuing ability to gather high
quality new customers, cost-effectively and in increasing volumes; this gives us
a considerable competitive advantage in the residential market.
The directors consider the rapid and accelerating growth curve we are currently
following is the best way to maximise shareholder value in the medium term,
notwithstanding any pressure it may create on our profitability in the meantime.
As we fund this rapid growth from the earnings generated by our current customer
base, it will clearly have an impact on our reported earnings, which are also
being adversely affected by a number of other factors, namely: a reduction in
our financial income of around GBP1.5m compared with last year as a result of
the sharp fall in interest rates; slightly lower energy margins following the
reduction in retail prices from 1 April and a further small reduction
anticipated later this year; additional fixed costs associated with our new
headquarters office building; and an increase in bad debts. For these reasons,
we believe at this stage it is unlikely our profits for the current year will
match the record figure for last year which we announced today.
Dividend
We are proposing a final dividend of 12.5p for the year (2008: 10p) making a
total for the year of 17.5p (2008: 14p). This represents an increase of 25% in
our total payment compared with last year. The final dividend will be paid on 7
August 2009 to shareholders on the register at the close of business on 10 July
2009 and is subject to approval by shareholders at the Company's Annual General
Meeting which is being held on 8 July 2009.
Notwithstanding anticipated lower profits in the short-term, it remains our
intention to pay a total dividend of 22p for the current year in the absence of
unforeseen circumstances, even though this may not be fully covered by our
earnings.
This reflects our confidence in a continuation of the current rapid growth we
are seeing in both new services and new customers, which can be expected to
provide the Company with a platform from which to deliver significantly higher
profits in future years.
Peter Nutting
Chairman
20 May 2009
Business Review
Performance
Overall performance for the year has been extremely encouraging in a number of
key respects:
* record Group turnover and pre-tax profits of GBP278.3m and GBP22.5m
respectively;
* continuing strong underlying cash generation;
* significant growth in the number of distributors actively promoting our
services;
* 34% increase in the number of services we are providing to over 790,000;
* successful launch of new CashBack Card and mobile Pre-Pay service;
* 69% increase in membership of our Business Club.
This exceptional performance has been driven by increasing confidence within our
distribution channel in our financial strength (as demonstrated by our
profitability, cash resources, and promotion into the FTSE250), the value of our
services, and our commitment to ensuring we consistently deliver a first class
experience to our customers (as evidenced by the numerous independent
endorsements we have received in magazines like Which?).
Our growth has benefited from the deteriorating economic climate, which has made
the part-time earning opportunity we offer new distributors increasingly
attractive against the background of a broader labour market where working hours
are being cut, overtime is being reduced, part-time jobs are less readily
available and unemployment is rising. It has also made it easier for
distributors to find new customers, as households become more focused on finding
new ways to reduce their monthly outgoings.
Margins
Gross margins improved during the year in all areas of our business, primarily
reflecting the continuing competitive pressure on the owners of network
infrastructure to attract and retain call traffic from the dwindling number of
substantial independent resellers like ourselves, and the impact of higher
energy prices compared with the previous year. The overall gross margin reduced
slightly, however, due to the increasing proportion of our turnover which
derives from supplying energy (which has relatively low gross margins) compared
with telephony and broadband (which has relatively high gross margins), and the
impact of providing "Free Global Calls" to a growing proportion of our
customers.
The Market
Our focus is on supplying a wide range of essential utility services (gas,
electricity, fixed telephony, mobile telephony and internet) to both domestic
and small business customers. These are substantial markets and represent a
considerable opportunity for further organic growth.
We remain a small operator in a market dominated by the former monopoly
suppliers and a handful of other new entrants. However, our unique position as
the only integrated multi-utility supplier gives us a considerable competitive
advantage. We combine a highly efficient cost base, good customer service and
competitive pricing with the unique benefit of a single monthly bill for each
customer.
Our Customers
The majority of our customers choose to take advantage of our multi-service
proposition, with over 85% having joined our Discount Club since its launch in
October 2003.
On average, each member of our residential club now takes 3.07 services (2008:
3.13) with 85% taking two or more services, and 51% taking three or more
services; this slight reduction in the average number of services per member
compared with last year reflects an increase in the proportion of "energy only"
customers, who are primarily in rental accommodation. These figures (which
exclude CashBack cards) are illustrated by the analysis below, and demonstrate
the effectiveness of our Club concept in encouraging customers to subscribe for
additional services:
+----------------------------+----------------------------+----------------------------+
| | Members | Non-Members |
+----------------------------+----------------------------+----------------------------+
| 1 Service | 15% | 55% |
+----------------------------+----------------------------+----------------------------+
| 2 Services | 34% | 37% |
+----------------------------+----------------------------+----------------------------+
| 3 Services | 13% | 6% |
+----------------------------+----------------------------+----------------------------+
| 4 Services | 14% | 2% |
+----------------------------+----------------------------+----------------------------+
| 5 Services | 20% | - |
+----------------------------+----------------------------+----------------------------+
| 6 Services | 3% | - |
+----------------------------+----------------------------+----------------------------+
| 7 Services | 1% | - |
+----------------------------+----------------------------+----------------------------+
At the year end we had 238,868 members and 42,307 non-members. Non-members
relate to customers gathered prior to the launch of our Discount Club in October
2003 or who have moved into a property where we were the incumbent utility
supplier, and have not yet applied to join the Discount Club.
The combination of an increasing proportion of customers taking our Broadcall
service and higher retail energy prices has led to a further increase in average
revenue per customer, notwithstanding considerable price deflation in the fixed
telephony markets over the last nine years.
+--------------------------------------------------+--------------------------------+
| | Average Revenue |
| | per Customer |
| | |
+--------------------------------------------------+--------------------------------+
| 1999 | GBP190 |
+--------------------------------------------------+--------------------------------+
| 2000 | GBP286 |
+--------------------------------------------------+--------------------------------+
| 2001 | GBP316 |
+--------------------------------------------------+--------------------------------+
| 2002 | GBP329 |
+--------------------------------------------------+--------------------------------+
| 2003 | GBP459 |
+--------------------------------------------------+--------------------------------+
| 2004 | GBP482 |
+--------------------------------------------------+--------------------------------+
| 2005 | GBP505 |
+--------------------------------------------------+--------------------------------+
| 2006 | GBP634 |
+--------------------------------------------------+--------------------------------+
| 2007 | GBP801 |
+--------------------------------------------------+--------------------------------+
| 2008 | GBP872 |
+--------------------------------------------------+--------------------------------+
| 2009 | GBP1,057 |
+--------------------------------------------------+--------------------------------+
We enjoy high levels of overall customer satisfaction, as evidenced by the
positive reviews we have received from Which? magazine on a regular basis, the
relatively low churn we experience and a recent survey which we carried out
amongst our members where over 94% stated that they would recommend us to their
friends. Our overall monthly churn increased slightly to around 2.0% during the
year, but remains considerably below the average levels experienced by our
competitors, when compared with customers who had similarly already switched
away from their original supplier.
We further increased the range of benefits available to our members during the
year, with the launch of a CashBack Card (which gives members the opportunity to
save an extra 5% on all their shopping at a wide range of leading UK retailers),
and the introduction of "Free Global Calls".
Services
Our range of essential utility services includes fixed telephony (calls and line
rental), mobile telephony, gas, electricity and internet. At the year end we
supplied a total of 794,118 services (2008: 591,981), representing an increase
of over 34% during the course of the year.
+----------------------------+----------------------------+----------------------------+
| | 2009 | 2008 |
| | | |
+----------------------------+----------------------------+----------------------------+
| Electricity | 209,262 | 133,873 |
+----------------------------+----------------------------+----------------------------+
| Gas | 177,452 | 113,761 |
+----------------------------+----------------------------+----------------------------+
| Home phone | 167,607 | 155,035 |
+----------------------------+----------------------------+----------------------------+
| Fixed line rental | 116,622 | 87,108 |
+----------------------------+----------------------------+----------------------------+
| Broadband | 76,717 | 55,564 |
+----------------------------+----------------------------+----------------------------+
| Mobile | 35,550 | 36,358 |
+----------------------------+----------------------------+----------------------------+
| Freephone | 10,908 | 10,282 |
+----------------------------+----------------------------+----------------------------+
| Total | 794,118 | 591,981 |
+----------------------------+----------------------------+----------------------------+
We saw strong growth in the number of customers to whom we supply gas,
electricity, broadband, home phone and fixed line rental, although there was a
small reduction in the number of mobile services during the first half of the
year prior to the launch of our mobile Pay as you Go service in the Autumn.
Included within the above figures are 16,163 members of our Business Club, who
are taking in aggregate over 39,497 services and contributing GBP24m (2008:
GBP11.1m) to Group turnover. We are extremely encouraged by this strong
performance, and the continuing enthusiastic response of our distribution
channel to this opportunity.
Customer Service
We pride ourselves on delivering first-class customer service through a single
call centre, based in the UK. Our policy is to ensure that the first person a
customer speaks to is able to resolve any issues with their account,
irrespective of how many different services we are providing to them.
We continue to invest in improving our customer service resources, and have
developed specialist teams capable of dealing with some of the more complicated
problems which arise due to continuing inefficiencies in the standard industry
processes for switching customers between suppliers. We are also developing a
range of qualitative and quantitative performance measurement tools for our Call
Centre, so that we can further improve the overall quality of our members'
customer service experience.
Our People
We rely on the combined efforts of over 400 employees to manage relationships
with both our customers and distributors, and deliver a consistently high
quality of service at all times. We pay considerable attention to recruiting and
retaining appropriate people.
The combination of valuing and developing our staff, our service oriented
culture and the day-to-day reinforcement of our core values are key competitive
advantages in enabling us to attract and retain a motivated, talented and
diverse workforce. Opportunities for employment, training, career progression
and promotion are determined on the basis of each individual's ability, attitude
and track record, irrespective of their gender, ethnic origin, nationality, age,
religion, sexual orientation or disability.
Employees are kept informed on a regular basis of the financial performance of
the business and other matters of potential concern to them through internal
communication channels including email and the Company's intranet service. We
also have an established staff forum, which includes a representative from each
department in the Company, to enable employees to give their views on any major
changes being considered by management which might have a material impact on
their roles within the organisation.
We continue to invest in our premises to ensure the working environment is as
attractive as possible, consistent with the practical needs of running the
business. We are currently part-way through a rolling programme that will
include redecorating our current office accommodation, and have just completed
the first phase of refurbishing our new headquarters office building.
The Company operates an HM Revenue and Customs approved employee share option
plan, under which employees are granted an option to purchase shares in the
Company which is exercisable between three and ten years from the date of grant.
The exercise price is the market price at the time of granting the option. Our
policy is to issue options to all employees after the satisfactory completion of
their probationary period. As at 31 March 2009, there were outstanding options
over 1,620,650 shares which had been granted to staff, representing
approximately 2% of the issued share capital of the Company.
Employees returning from maternity leave with children less than 12 months old
are able to benefit from a company contribution towards the cost of an external
childcare service provider of their choice. We also provide facilities for staff
to purchase childcare vouchers in a tax-efficient manner using a salary
sacrifice scheme, in accordance with HM Revenue and Customs guidelines.
We also encourage all employees to participate in a stakeholder pension scheme
operated by Legal & General. Participants can choose their own contribution
level which is matched by the Company within certain limits, depending on length
of service.
Our Distributors
Our distributors remain one of our key strengths. In contrast to other utility
suppliers, the alignment of financial interests provided by our revenue-sharing
model ensures that our distributors focus their activities on finding
credit-worthy and high-spending customers who will reap the maximum savings from
using our services, and will thus be least likely to churn. By doing so, they
maximise their own long-term income. This ensures that cases of mis-selling are
generally both inadvertent and extremely rare.
Our Car Plan, which provides eligible distributors with a subsidised Utility
Warehouse branded Mini, remains extremely popular and we have now supplied over
170 cars following the extension of the programme in October 2007 to bring it
within reach of a substantially larger number of distributors. Owners find these
helpful in raising their local profile, resulting in enquiries from both
potential new customers and distributors.
Distributors have generally seen a considerable increase in their average
earnings from each customer during the last three years as a result of the
growth in the number of services taken combined with rising energy prices. The
largest increases in earnings have however been achieved by those who have been
working consistently at building their personal and group customer numbers. Our
unique market position continues to make this predominantly part-time career
extremely attractive to potential new recruits.
We have continued to invest in our national training programme (the "College of
Excellence") during the year, in order to keep up with the massively increased
demand for its services from the rapidly growing numbers of new distributors who
are joining each month. These are designed to help our distributors maximise
their potential and provide our next generation of leaders with the additional
skills they will need. In addition to increasing the frequency and number of
venues for our "Career Opportunity Presentations" and "Getting Started Courses",
we now also run Goal Setting Courses, Accelerator Courses and an enhanced
Leadership training module. In addition, we have recently begun to investigate
the possibility of extending the scope of our training so that successful
participants can gain a valuable NVQ qualification, and will be trialling this
program over the next few months.
The Environment
The environment is becoming an increasingly important concern and we participate
in programmes to help reduce the environmental impact of our activities.
We operate an energy efficiency helpline to provide advice on how customers can
reduce their energy usage, and we also participate actively in the "Shred-it"
recycling programme, with a certificated saving of 165 trees during the year. We
also participate in a mobile phone recycling scheme which sends old handsets to
less developed parts of the world for re-use, rather than disposing of them in
landfill sites.
Principal Risks
The Group faces various risk factors, both internal and external, which could
have a material impact on long-term performance.
Reputation risk
Telecom plus's reputation amongst our business partners, suppliers, shareholders
and customers is fundamental to the future success of the Group. Failure to meet
expectations in terms of the services we provide, the way that we do business or
in our financial performance could have a material effect on the Group. These
risks are mitigated through our focus on quality customer service, the training
of our staff and our systems of internal control and risk management.
Wholesale prices
The Company does not currently own or operate any network infrastructure itself,
choosing instead to purchase the capacity needed from third parties. The
advantage of this approach is that the Company is not exposed to either
technological risk, capacity risk or the risk of obsolescence, as it can
purchase each month the exact amount of each service required to meet its
customers' needs.
Whilst there is a theoretical risk that in some of the areas in which the
Company operates it may be unable to secure access to the necessary
infrastructure on commercially attractive terms, in practice the pricing of
access to such infrastructure is either regulated (as in the energy market) or
subject to significant competitive pressures (as in telephony). The profile of
our customers, the significant quantities of each service they consume in
aggregate, and our clearly differentiated route to market has historically
proven attractive to potential partners, who compete aggressively in order to
secure a share of our business.
The supply of energy, which has been accounting for an increasing proportion of
our sales each year, has different risks associated with it. The wholesale price
can be extremely volatile, and customer demand can be subject to considerable
short term fluctuations depending on the weather. To avoid these, the Company
decided in 2005 to seek a relationship with a larger energy supplier which would
preserve our integrated multi-utility business model whilst passing the
substantive risks and rewards of hedging and buying energy to them. The
transaction with npower which was completed on 31 March 2006 achieved these
objectives, and has enabled the Company to earn a positive contribution from
providing energy since that date.
Bad debt risk on energy customers
The Company has a universal supply obligation in relation to the provision of
energy to domestic customers. This means that although the Company is entitled
to request a reasonable deposit from potential new customers who are not
considered credit worthy, the Company is obliged to supply domestic energy to
everyone who submits a properly completed application form. Where customers
subsequently fail to pay for the energy they have used ("Delinquent Customers"),
there is likely to be a considerable delay before the Company is able to
eliminate its exposure to future bad debt from them by either installing a
pre-payment meter or disconnecting their supply, and the costs associated with
preventing such Delinquent Customers from increasing their indebtedness are not
always recoverable.
Bad debt risk on telephony customers
There is regular fraud within the telephony industry which arises from customers
using the services without intending to pay their supplier. Although the amounts
involved are generally small, larger-scale fraud is sometimes attempted
involving calls to premium rate and/or international destinations. The Company
has sophisticated systems to prevent material losses arising as a result of such
fraud by processing all call traffic on an hourly or daily basis, and promptly
disconnecting any number whose usage profile appears to be suspicious, although
short delays are sometimes experienced in receiving information from our network
partners.
Information technology risk
The Company is dependent on its proprietary billing and customer management
software for the successful implementation of its business strategy. This
software is developed and maintained in accordance with the changing needs of
the business by a small team of highly skilled, motivated and experienced
individuals. Back-ups of both the software and data are made on a regular basis
and securely stored off-site.
Competitive risk
The Group operates in highly competitive markets and significant product
innovations or increased price competition could affect our margins. In order to
maintain our competitive position, we constantly focus on ways of improving our
operating efficiency and keeping our cost base as low as possible.
Legislation and regulatory risk
The Group is subject to varying laws and regulations, including possible adverse
effects from European regulatory intervention.
Risk management
The business continues to develop and operate a consistent and systematic risk
management process, which involves risk ranking, prioritisation and subsequent
evaluation, with a view to ensuring all significant risks have been identified
and prioritised, and systems of control are in place to manage such risks.
Charles Wigoder
Chief Executive
20 May 2009
Financial Review
Overview
Revenues of GBP278.3m (2008: GBP186.5m) were 49% higher than in the previous
financial year to 31 March 2008. The pre-tax profit was GBP22.5m (2008:
GBP16.8m), and we saw a net cash inflow from operating activities of GBP9.1m.
Overall, our year-end net cash position reduced slightly to GBP25.4m.
The increase in turnover to GBP278.3m was primarily due to the 34% increase in
the number of services we are providing compared with the previous year,
combined with the impact of higher retail energy prices. This was partially
offset by a reduction in our fixed monthly line rental charges last autumn.
The overall gross profit margin fell slightly during the year to 18.6%
(2008: 19.3%), reflecting the increasing proportion of our turnover which now
derives from supplying energy, partially offset by higher margins from each of
the individual services we provide. The increase at the operating profit level
was primarily due to the rise in the number of services we are providing,
combined with the impact of higher energy prices and improving economies of
scale, although our bad debt charge rose to GBP7.2m (2008: GBP3.1m) due to a
combination of significantly higher turnover and a more difficult economic
climate.
Earnings per share increased by 37% to 24.2p (2008: 17.7p) and the Company is
therefore proposing a final dividend of 12.5p (2008: 10p) per share, making a
total dividend of 17.5p (2008: 14p) per share for the year; a 25% increase.
Customer Management Business
Our customer management business experienced significant growth during the year,
with the rate accelerating with each passing quarter:
+------------------+------------------------+
| | Net growth in number |
| | of services provided |
+------------------+------------------------+
| Quarter to | 26,339 |
| 30/06/08 | |
+------------------+------------------------+
| Quarter to | 41,204 |
| 30/09/08 | |
+------------------+------------------------+
| Quarter to | 64,902 |
| 31/12/08 | |
+------------------+------------------------+
| Quarter to | 69,692 |
| 31/03/09 | |
+------------------+------------------------+
This growth has been driven by the significant increase in new distributor
recruitment over the last 12 months, mainly due to the attractiveness of this
predominantly part-time income opportunity in a recessionary economic climate,
supported by rising confidence in the financial strength of the Company, the
value we offer, and the quality of our customer service.
We saw particularly strong growth in the number of gas and electricity services
we supply. This was largely responsible for the increase of almost 50% in our
revenues for the year, although we also experienced high levels of demand from
new customers for our broadband and fixed telephony services on the back of our
"Best Buy" recommendation in Which? Magazine.
+----------------------------+------------+-------------+
| Revenue by Service (GBPm) | 2008 | 2009 |
+----------------------------+------------+-------------+
| | | |
+----------------------------+------------+-------------+
| Electricity | 65.8 | 101.6 |
+----------------------------+------------+-------------+
| Gas | 57.0 | 107.5 |
+----------------------------+------------+-------------+
| Fixed Telephony Calls | 29.7 | 30.3 |
+----------------------------+------------+-------------+
| Fixed Telephony Line | 10.6 | 10.8 |
| Rental | | |
+----------------------------+------------+-------------+
| Mobile | 10.8 | 9.5 |
+----------------------------+------------+-------------+
| Broadband | 10.2 | 14.3 |
+----------------------------+------------+-------------+
| | | |
+----------------------------+------------+-------------+
| Total | 184.1 | 274.0 |
+----------------------------+------------+-------------+
Customer Acquisition
The net cost in respect of our Customer Acquisition business increased during
the year to GBP5.0m (2008: GBP3.6m). This is mainly due to the costs associated
with the significant increase in the number of new customers, such as
third-party connection charges, distributor bonuses and the provision of
hardware (e.g. mobile handsets and broadband routers).
Between October 2007 and February 2009 we offered a "BroadCall Laptop" tariff,
under which customers were provided with a free laptop in return for entering
into a two-year service agreement on a premium tariff. The cost of supplying
these laptops has been capitalised and is being amortised against the profits we
earn from supplying their broadband service over the minimum contract term. The
amount included on the balance sheet at 31 March 2009 in respect of these
laptops was GBP1.3m (2008: GBP0.6m); all other customer acquisition costs are
expensed as incurred. Although this tariff is no longer available for new
customers, those already benefiting from it are able to continue using this
service for as long as they choose.
Distribution and Administrative Expenses
Distribution costs, which primarily represent the share of our revenues which we
pay as commission to distributors, increased by GBP3.1m to GBP11.7m (2008:
GBP8.6m); this reflects the substantial growth in turnover during the year.
Administration expenses have remained constant at around 7.2% of turnover,
notwithstanding an increase in bad debts due to a combination of higher revenues
and a more difficult economic climate. Personnel expenses increased to GBP11.6m
(2008: GBP8.9m) as we continue to build our customer service and administration
resources to support the significant increase in the number of services we are
providing. Property costs have also increased following our acquisition of
additional freehold office premises at the end of September and our move to new
leasehold warehouse premises in November.
Share Option Costs
The operating profit is stated after share option expenses of GBP454,000 (2008:
GBP54,000). These expenses relate to an accounting charge under IFRS 2 'Share
based payments'.
Taxation
The amount of corporation tax payable in respect of the year is GBP7.0m (2008:
GBP5.1m).
The effective tax rate for the year is 28.0% (2008: 28.7%).
Treasury Shares
At the start of the year, the Company held 2,879,868 shares in treasury
following the successful share repurchase programme which had been in operation
the previous year.
During the year, 586,093 of these shares were used to satisfy exercises under
the Company's two share option plans, and 1,500,000 were issued for cash in
February 2009 to provide additional working capital, leaving a balance in
treasury of 793,775 at 31 March 2009.
Cash Flow and Balance Sheet
Underlying cash flow remains strong, with net cash generated from operating
activities of GBP9.1m (2008: GBP15.3m) notwithstanding the significant organic
growth we achieved during the year. The primary reason for this reduction of
GBP6.2m compared with last year is the impact on customer budget plan balances
of the exceptionally cold weather this winter. Overall cash outflows were
partially offset by the GBP4.7m proceeds from the sale of Treasury Shares in
February 2009.
Budget plan customers spread the cost of their expected annual energy
consumption into 12 equal monthly instalments. As a high proportion of each
customer's annual energy consumption is used during the winter period, this
means that our energy debtors reach a peak at the end of each winter before
falling as we move through the spring and summer months. Winter this year was
much colder than usual (following average winter temperatures in 2008), which
has led to an increase in the gross energy budget plan debtor balance of
GBP14.1m (included within prepayments and accrued income) compared with the
position at the end of March 2008. This adverse movement was exacerbated by the
higher retail energy prices which applied this winter, compared with the
corresponding period the previous year.
We purchased a freehold office building during the year at a cost (including
refurbishment) of around GBP10m, which has been funded from our existing cash
resources.
The Group does not have a policy with respect to interest rate management as it
currently has no debt funding requirements. Cash surpluses are placed on deposit
with Barclays Bank plc at money market rates to maximise returns, after allowing
for the Company's working capital requirements.
Chris Houghton
Finance Director
20 May 2009
Consolidated income statement
For the year ended 31 March 2009
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| | | | Note | 2009 | 2008 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | GBP'000 | GBP'000 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Revenue | | | 1 | 278,342 | 186,458 |
+----------------------------------+-----+--------+------+---------+---------+
| Cost of sales | | | | 226,581 | 150,478 |
+----------------------------------+-----+--------+------+---------+---------+
| Gross profit | | | | 51,761 | 35,980 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Distribution expenses | | | | 11,745 | 8,566 |
+----------------------------------+-----+--------+------+---------+---------+
| Administrative expenses | | | | 20,107 | 13,454 |
+----------------------------------+-----+--------+------+---------+---------+
| Other income | | | | 73 | - |
+----------------------------------+-----+--------+------+---------+---------+
| Operating profit | | | 1 | 19,982 | 13,960 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Financial income | | | | 1,647 | 1,865 |
+----------------------------------+-----+--------+------+---------+---------+
| Financial expenses | | | | 26 | 2 |
+----------------------------------+-----+--------+------+---------+---------+
| Net financial income | | | | 1,621 | 1,863 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Share of profit of associates | | | | 888 | 939 |
+----------------------------------+-----+--------+------+---------+---------+
| Profit before taxation | | | | 22,491 | 16,762 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Taxation | | | | (6,307) | (4,808) |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Profit for the year | | | | 16,184 | 11,954 |
+----------------------------------+-----+--------+------+---------+---------+
| | | | | | |
+----------------------------------+-----+--------+------+---------+---------+
| Basic earnings per share | | | 2 | 24.2p | 17.7p |
+----------------------------------+-----+--------+------+---------+---------+
| Diluted earnings per share | | | 2 | 23.9p | 17.6p |
+----------------------------------+-----+--------+------+---------+---------+
Statement of recognised income and expense
For the year ended 31 March 2009
+-----------------------------------------------+--------+---------+---------+
| | | Group |
+-----------------------------------------------+--------+-------------------+
| | Note | 2009 | 2008 |
+-----------------------------------------------+--------+---------+---------+
| | | GBP'000 | GBP'000 |
+-----------------------------------------------+--------+---------+---------+
| | | | |
+-----------------------------------------------+--------+---------+---------+
| Profit for the year | | 16,184 | 11,954 |
+-----------------------------------------------+--------+---------+---------+
| Deferred tax on share options recognised | | 22 | 211 |
| directly in equity | | | |
+-----------------------------------------------+--------+---------+---------+
| | | | |
+-----------------------------------------------+--------+---------+---------+
| Total recognised income and expense for the | | 16,206 | 12,165 |
| year | | | |
+-----------------------------------------------+--------+---------+---------+
Consolidated balance sheet
As at 31 March 2009
+-----------------------------------------------+------+---------+---------+
| | | Group |
+-----------------------------------------------+------+-------------------+
| | Note | 2009 | 2008 |
+-----------------------------------------------+------+---------+---------+
| | | GBP'000 | GBP'000 |
+-----------------------------------------------+------+---------+---------+
| Assets | | | |
+-----------------------------------------------+------+---------+---------+
| Non-current assets | | | |
+-----------------------------------------------+------+---------+---------+
| Property, plant and equipment | | 11,470 | 866 |
+-----------------------------------------------+------+---------+---------+
| Goodwill and intangible assets | | 3,743 | 3,749 |
+-----------------------------------------------+------+---------+---------+
| Investments in associates | | 2,703 | 1,815 |
+-----------------------------------------------+------+---------+---------+
| Deferred tax | | 2,036 | 1,361 |
+-----------------------------------------------+------+---------+---------+
| Other receivables | | 1,697 | 1,036 |
+-----------------------------------------------+------+---------+---------+
| Total non-current assets | | 21,649 | 8,827 |
+-----------------------------------------------+------+---------+---------+
| | | | |
+-----------------------------------------------+------+---------+---------+
| Current assets | | | |
+-----------------------------------------------+------+---------+---------+
| Inventories | | 357 | 175 |
+-----------------------------------------------+------+---------+---------+
| Trade and other receivables | | 5,071 | 5,126 |
+-----------------------------------------------+------+---------+---------+
| Prepayments and accrued income | | 51,120 | 25,478 |
+-----------------------------------------------+------+---------+---------+
| Cash and cash equivalents | | 25,357 | 30,331 |
+-----------------------------------------------+------+---------+---------+
| Total current assets | | 81,905 | 61,110 |
+-----------------------------------------------+------+---------+---------+
| Total assets | | 103,554 | 69,937 |
+-----------------------------------------------+------+---------+---------+
| | | | |
+-----------------------------------------------+------+---------+---------+
| Current liabilities | | | |
+-----------------------------------------------+------+---------+---------+
| Trade and other payables | | 16,322 | 6,075 |
+-----------------------------------------------+------+---------+---------+
| Current tax payable | | 3,944 | 3,019 |
+-----------------------------------------------+------+---------+---------+
| Accrued expenses and deferred income | | 38,696 | 28,409 |
+-----------------------------------------------+------+---------+---------+
| Total current liabilities | | 58,962 | 37,503 |
+-----------------------------------------------+------+---------+---------+
| | | | |
+-----------------------------------------------+------+---------+---------+
| Total assets less total liabilities | | 44,592 | 32,434 |
+-----------------------------------------------+------+---------+---------+
| | | | |
+-----------------------------------------------+------+---------+---------+
| Equity | | | |
+-----------------------------------------------+------+---------+---------+
| Share capital | | 3,452 | 3,452 |
+-----------------------------------------------+------+---------+---------+
| Share premium | | 1,992 | 2 |
+-----------------------------------------------+------+---------+---------+
| Treasury shares | | (1,457) | (5,286) |
+-----------------------------------------------+------+---------+---------+
| Retained earnings | | 40,605 | 34,266 |
+-----------------------------------------------+------+---------+---------+
| | | | |
+-----------------------------------------------+------+---------+---------+
| Total equity | | 44,592 | 32,434 |
+-----------------------------------------------+------+---------+---------+
Statement of cash flows
For the year ended 31 March 2009
+-----------------------------------------------+---+----------+----------+
| | | Group |
+-----------------------------------------------+---+---------------------+
| | | 2009 | 2008 |
+-----------------------------------------------+---+----------+----------+
| | | GBP'000 | GBP'000 |
+-----------------------------------------------+---+----------+----------+
| Operating activities | | | |
+-----------------------------------------------+---+----------+----------+
| Operating profit | | 19,982 | 13,960 |
+-----------------------------------------------+---+----------+----------+
| Depreciation of property, plant and equipment | | 579 | 480 |
+-----------------------------------------------+---+----------+----------+
| Amortisation of intangible assets | | 6 | 12 |
+-----------------------------------------------+---+----------+----------+
| Distribution from associated company | | - | 546 |
+-----------------------------------------------+---+----------+----------+
| Profit on disposal of property, plant and | | - | (1) |
| equipment | | | |
+-----------------------------------------------+---+----------+----------+
| (Increase) / Decrease in inventories | | (182) | 27 |
+-----------------------------------------------+---+----------+----------+
| (Increase) / Decrease in trade and other | | (26,248) | 1,127 |
| receivables | | | |
+-----------------------------------------------+---+----------+----------+
| Increase in trade and other payables | | 20,534 | 3,065 |
+-----------------------------------------------+---+----------+----------+
| Repayment of inter-company receivable | | - | - |
+-----------------------------------------------+---+----------+----------+
| Costs attributed to the issue of share | | 454 | 54 |
| options | | | |
+-----------------------------------------------+---+----------+----------+
| Corporation tax paid | | (6,030) | (4,009) |
+-----------------------------------------------+---+----------+----------+
| Net cash flow from operating activities | | 9,095 | 15,261 |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Investing activities | | | |
+-----------------------------------------------+---+----------+----------+
| Purchase of property, plant and equipment | | (11,183) | (464) |
+-----------------------------------------------+---+----------+----------+
| Sale of property, plant and equipment | | - | 3 |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Cash flow from investing activities | | (11,183) | (461) |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Financing activities | | | |
+-----------------------------------------------+---+----------+----------+
| Dividends paid | | (9,988) | (6,815) |
+-----------------------------------------------+---+----------+----------+
| Interest received | | 1,647 | 1,865 |
+-----------------------------------------------+---+----------+----------+
| Interest paid | | (26) | (2) |
+-----------------------------------------------+---+----------+----------+
| Issue of ordinary shares | | - | 122 |
+-----------------------------------------------+---+----------+----------+
| Purchase of own shares | | - | (5,659) |
+-----------------------------------------------+---+----------+----------+
| Sale of treasury shares | | 5,481 | 219 |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Cash flow from financing activities | | (2,886) | (10,270) |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| (Decrease)/Increase in cash and cash | | (4,974) | 4,530 |
| equivalents | | | |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Cash and cash equivalents at the beginning of | | 30,331 | 25,801 |
| the year | | | |
+-----------------------------------------------+---+----------+----------+
| | | | |
+-----------------------------------------------+---+----------+----------+
| Cash and cash equivalents at the end of the | | 25,357 | 30,331 |
| year | | | |
+-----------------------------------------------+---+----------+----------+
Notes
1. Segment reporting
For management reporting purposes, the Group is currently organised into two
operating divisions:
* Customer Management
* Customer Acquisition
These divisions are the basis on which the Group reports its primary segmental
information.
Business segments
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | Year ended 31 March 2009 | Year ended 31 March 2008 |
+------------------------+-------------------------------------+-------------------------------------+
| | Customer | Customer | Total | Customer | Customer | Total |
| | Management | Acquisition | | Management | Acquisition | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Revenue: | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| External sales | 274,012 | 4,330 | 278,342 | 184,145 | 2,313 | 186,458 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Segment result | 24,957 | (4,975) | 19,982 | 17,566 | (3,606) | 13,960 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Operating profit | | | 19,982 | | | 13,960 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Net financing income | | | 1,621 | | | 1,863 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Share of profit of | | | 888 | | | 939 |
| associates | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Profit before taxation | | | 22,491 | | | 16,762 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Taxation | | | (6,307) | | | (4,808) |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Profit for the year | | | 16,184 | | | 11,954 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Segment assets | 98,087 | 2,764 | 100,851 | 66,595 | 1,527 | 68,122 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Investment in equity | 2,703 | - | 2,703 | 1,815 | - | 1,815 |
| method associates | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Total assets | 100,790 | 2,764 | 103,554 | 68,410 | 1,527 | 69,937 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Segment liabilities | (58,736) | (226) | (58,962) | (37,217) | (286) | (37,503) |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Net assets | | | 44,592 | | | 32,434 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Capital expenditure | 11,009 | 174 | 11,183 | 458 | 6 | 464 |
+------------------------+------------+-------------+----------+------------+-------------+----------+
| Depreciation and | 576 | 9 | 585 | 486 | 6 | 492 |
| amortisation | | | | | | |
+------------------------+------------+-------------+----------+------------+-------------+----------+
The share of profit of associates relates to the Customer Management business
segment.
All turnover is derived in the United Kingdom and substantially arises from the
provision of services.
2. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 March 2009 was based on the
profit attributable to ordinary shareholders of GBP16,184,000 (2008:
GBP11,954,000) and a weighted average number of ordinary shares outstanding
during the year ended 31 March 2009 of 66,757,038 (2008: 67,407,883).
+------------------------------------------------------+-------+-------+-------+-------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-------+-------+-------+-------+
| | | | | |
+------------------------------------------------------+-------+-------+-------+-------+
| Basic earnings per share | | | 24.2p | 17.7p |
+------------------------------------------------------+-------+-------+-------+-------+
| Diluted earnings per share | | | 23.9p | 17.6p |
+------------------------------------------------------+-------+-------+-------+-------+
Diluted earnings per share
Diluted earnings per share assumes dilutive options have been converted into
ordinary shares. The calculations are as follows:
+------------------------------------------------------+---------+--------+---------+--------+
| | 2009 | 2008 |
+------------------------------------------------------+------------------+------------------+
| | Profit |Number | Profit |Number |
| |GBP'000 | of |GBP'000 | of |
| | |shares | |shares |
| | | '000 | | '000 |
+------------------------------------------------------+---------+--------+---------+--------+
| Basic earnings | 16,184 | 66,757 | 11,954 | 67,408 |
+------------------------------------------------------+---------+--------+---------+--------+
| Dilutive effects - Options | | 827 | | 353 |
+------------------------------------------------------+---------+--------+---------+--------+
| | | | | |
+------------------------------------------------------+---------+--------+---------+--------+
| Diluted earnings | 16,184 | 67,584 | 11,954 | 67,761 |
+------------------------------------------------------+---------+--------+---------+--------+
The share options may be dilutive in future periods.
3. Dividends
+------------------------------------------------------+-------+-------+---------+---------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-------+-------+---------+---------+
| | | | GBP'000 | GBP'000 |
+------------------------------------------------------+-------+-------+---------+---------+
| | | | | |
+------------------------------------------------------+-------+-------+---------+---------+
| Prior year final paid 10p (2008: 6p) per share | | | 6,656 | 4,142 |
+------------------------------------------------------+-------+-------+---------+---------+
| Interim paid 5p (2008: 4p) per share | | | 3,332 | 2,673 |
+------------------------------------------------------+-------+-------+---------+---------+
The Directors have proposed a final dividend of 12.5p per ordinary share
totalling GBP8.5 million, payable on 7 August 2009, to shareholders on the
register at the close of business on 10 July 2009. In accordance with the
Group's accounting policies the dividend has not been included as a liability as
at 31 March 2009.
4. Related parties
Identity of related parties
The Group has a related party relationship with its associate and with its
directors and executive officers.
Transactions with key management personnel
Directors of the Company and their immediate relatives control 28.86% of the
voting shares of the Company.
During the year, the Company acquired goods and services worth approximately
GBP92,000 (2008: GBP20,000) from companies in which directors have a beneficial
interest.
Other related party transactions
Associates
During the year ended 31 March 2009, the associate supplied goods to the Group
in the amount of GBP386,000 (2008: GBP325,000) and at 31 March 2009 the
associate was owed by the Group GBP80,000 (2008 owed by the group: GBP33,000).
Transactions with the associate are priced on an arm's length basis. Dividends
received during the year from the associate amounted to GBPnil (2008:
GBP545,510) relating to the financial year to 31 March 2008.
5. Basis of preparation
The financial information set out above does not constitute the Group's
statutory information for the years ended 31 March 2009 or 2008, but is derived
from these accounts. The Group's consolidated financial information has been
prepared in accordance with accounting policies consistent with those adopted
for the year ended 31 March 2009. Statutory accounts for 2008 have been
delivered to the Registrar of Companies and those for 2009 will be
delivered following the Company's annual general meeting. The auditors have
reported on these accounts, their reports were unqualified and did not contain
statements under the Companies Act 1985, s237(2) or (3).
6. Directors' responsibility statement
The directors confirm, to the best of their knowledge:
(a) the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the EU, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Group and
the undertakings included in the consolidation taken as a whole; and
(b) the management report includes a fair review of the development and
performance of the business and the position of the Group and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
The directors of Telecom Plus plc and their functions are listed below:
Peter Nutting - Non Executive Chairman
Charles Wigoder - Chief Executive
Chris Houghton - Finance Director
Andrew Lindsay - Chief Operating Officer
Melvin Lawson - Non Executive Director
Richard Michell - Non Executive Director
Michael Pavia - Non Executive Director
Keith Stella - Non Executive Director
By order of the Board
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAXSNFSFNEFE
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