TIDMTEP
RNS Number : 3773X
Telecom Plus PLC
19 November 2014
Embargoed until 0700 19 November 2014
Telecom Plus PLC
Half-Year Results for the Six Months ended 30 September 2014
Telecom Plus PLC (trading as the Utility Warehouse), which
supplies a wide range of utility services (gas, electricity, fixed
line telephony, mobile telephony and broadband internet) to both
residential and business customers, today announces its half-year
results for the six months ended 30 September 2014.
Financial highlights:
-- Revenue up 9% to GBP267.3m (2013: GBP245.8m) notwithstanding unseasonably warm weather
-- Adjusted profit before tax up 55% to GBP21.3m (2013:
GBP13.7m); statutory GBP15.4m (2013: GBP12.6m)
-- Adjusted earnings per share up 41% to 21.8p (2013: 15.5p); statutory 14.4p (2013: 14.3p)
-- Interim dividend increased by 19% to 19p per share (2013: 16p)
Operating highlights:
-- Continuing strong organic growth
-- Total services supplied up by 126,537 for the period to 2,033,697 (2013: 1,767,774)
-- Customer numbers up by 34,733 for the period to 565,372 (2013: 494,940)
-- Recommended Provider and Best Buy Awards received from Which? and Moneywise
Commenting on today's results, Andrew Lindsay, Chief Executive,
said:
"I am pleased with the strong performance during the first half
of the year. Our consistent organic growth means that we now supply
over two million services to more than 565,000 households across
the country."
"We continue to build our market share for each of the services
we supply through a unique combination of personal recommendation,
an integrated multi-utility proposition, and a relentless focus on
looking after our customers. I am delighted with the progress we
are making towards our target of supplying one million households
in the medium term."
"We are confident that we will deliver record revenues, profits,
and earnings per share for the current year. This is reflected in
the 19% increase we are making in our interim dividend payment, and
our intention to pay a total dividend of 40p for the full
year."
For more information please contact:
Telecom Plus PLC
Andrew Lindsay, Chief Executive 020 8955 5000
Peel Hunt
Richard Kauffer / Dan Webster 020 7418 8900
MHP Communications
Reg Hoare / Katie Hunt / Giles
Robinson 020 3128 8788
Analyst call
Telecom Plus will host an analyst presentation at 9.30 a.m.
today. Please contact MHP Communications for details at
telecomplus@mhpc.com.
About Telecom Plus PLC ('Telecom Plus'):
Telecom Plus which owns and operates the Utility Warehouse
brand, is the UK's only fully integrated provider of a wide range
of competitively priced utility services spanning both the
Communications and Energy markets.
Customers benefit from the convenience of a single monthly bill,
consistently good value across all their utilities and exceptional
levels of customer service. The Company does not advertise, relying
instead on "word of mouth" recommendation by existing satisfied
customers and a network of over 45,000 part-time authorised
distributors ("Partners") in order to grow its market share.
Telecom Plus holds a significant minority stake (20%) in Opus
Energy Group Limited, the leading independent energy supplier to
the SME and corporate business markets.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP
LN). For further information please visit:
www.utilitywarehouse.co.uk.
Interim Management Report
Financial and Operating Review
Results
Adjusted Statutory
-------------------------------- -------------------------------
Half year to 30 September 2014 2013 Change 2014 2013 Change
Revenue GBP267.3m GBP245.8m 8.7% GBP267.3m GBP245.8m 8.7%
Profit before tax GBP21.3m GBP13.7m 55.5% GBP15.4m GBP12.6m 22.2%
Basic earnings (per share) 21.8p 15.5p 40.6% 14.4p 14.3p 0.7%
Interim dividend (per
share) 19.0p 16.0p 18.8% 19.0p 16.0p 18.8%
In order to provide a clearer understanding of the underlying
trading performance of the Group, adjusted profit before tax and
adjusted basic EPS exclude: (i) share incentive scheme charges; and
(ii) the amortisation of intangible assets arising on entering into
the new energy supply arrangements with npower in December 2013.
The amortisation of intangible assets has been excluded on the
basis that it represents a non-cash accounting charge.
We are extremely pleased with the strong overall performance of
the business during the first half of the financial year. Adjusted
profit before tax increased by 55% to GBP21.3m (2013: GBP13.7m) on
revenues ahead by 9% to GBP267.3m (2013: GBP245.8m), and adjusted
earnings per share increased by 41% to 21.8p (2013: 15.5p).
Statutory profit before tax, after the amortisation of intangibles
of GBP5.6m (2013: GBPNil) and share incentive scheme charges of
GBP0.3m (2013: GBP1.1m), increased by 22% to GBP15.4m (2013:
GBP12.6m).
The 9% increase in revenue reflects the 14% increase we have
seen in the size of our customer base over the last 12 months,
partially offset by the impact of lower average energy consumption
by domestic customers during an extended spell of exceptionally
warm weather so far this year.
The increase in gross margin for the period to 19.8% (2013:
15.9%) is in line with previous guidance, and primarily reflects
the new wholesale energy supply arrangements we negotiated with
npower last December (see note 4).
We sustained our record of delivering strong organic growth
during the half-year, with the number of customers and services
growing by 34,733(2013: 33,908) and 126,537(2013: 165,714)
respectively. This took our total customer base to 565,372 (31
March 2014: 530,639) and the number of services we are providing to
2,033,697 (31 March 2014: 1,907,160).
This performance was achieved against a background of a
particularly competitive market, with smaller independent energy
suppliers enjoying a significant short-term pricing advantage due
primarily to a combination of falling wholesale energy prices and
not needing to make a full contribution towards certain social and
environmental charges. In the broadband market, a number of the
major telecoms companies have been jostling for position, heavily
promoting their respective television offerings in order to build
brand differentiation, and thus reduce churn. Against this
backdrop, to have seen such strong growth in all our core services
during the period, with net additions of approximately 61,000
energy services and over 55,000 communications services,
demonstrates the continuing attractiveness of our multi-utility
business model and the power of our route to market.
We remain clearly focussed on the quality of our customer base,
and are pleased that around 50% of new members during the period
applied for at least four of our core services (Gas, Electricity,
Mobile, Landline and Broadband). We also continue to invest in
providing best-in-class customer service from our UK-based call
centre. These have contributed to a reduction in our underlying
churn, which fell to below 1% a month. We are currently working on
a number of initiatives, in particular our home-mover processes,
which have the potential to further reduce our churn rates in the
future.
We are also delighted to have been recognised during the period
by Which? as the UK's best Phone and Broadband Provider, and by
Moneywise in their latest survey as the UK's Best Energy Provider
for Value and Service. These are a valuable endorsement of the
commitment and hard work of all our employees, and demonstrate the
progress we continue to make in our quest to become the Nation's
most trusted utility supplier.
Costs
Distribution expenses increased by GBP2.2m to GBP10.4m (2013:
GBP8.2m) reflecting the increase in the number of services we
supply, Partner holiday incentives, and promotional activity which
successfully boosted new customer numbers during July.
Overall administrative expenses before amortisation rose by
GBP3.1m to GBP22.3m, in line with the growth in the number of
services we are providing. Within this total, our bad debt charge
has fallen to around 1.75% of turnover (2013: 1.9%) reflecting the
improving quality of our customer base, with lower levels of both
churn and delinquency compared with the same period last year. We
have continued to invest in growing head count throughout the
Company, to ensure we maintain our current high standards of
customer service as the business continues to grow.
Route to market
Partner recruitment remains steady, with the total number of
Partners increasing by over 2,000 during the last six months to a
new record of 46,570, helped by a half-price introductory joining
offer that we ran during April.
On 14 and 15 September we held motivational sales conferences in
Aintree and Cheltenham. Both venues were packed to capacity, with a
total attendance of around 5,000 Partners spread across the two
days. The atmosphere was extremely positive reflecting recent
strong levels of activity (both in relation to customer gathering
and recruitment of new Partners), and we took advantage of the high
turnout to introduce some incremental improvements to the way new
Partners are trained. These changes have been designed to harness
their initial high levels of enthusiasm and increase their
productivity, and we believe there is still considerable scope for
further improvement in these areas in future.
Our Car Plan, which provides eligible Partners with a subsidised
Utility Warehouse branded BMW Mini, remains extremely popular and
almost 650 of these are now in circulation. We have also provided
approximately 10,000 Tablets to our Partners to enable them to use
the Business Builder App which we launched at our annual sales
conference in March, taking the total number of Partners using our
new sales tools to over 16,000.
Opus Energy Group Limited ("Opus")
Opus continues to make strong progress in building its market
share as the UK's leading independent supplier of energy to
business users, with the number of electricity and gas sites they
supply growing to 179,614 and 25,832 respectively. This represents
a combined increase of more than 25% on the previous year.
Turnover at Opus remains weighted towards the second half of the
financial year, and in spite of the exceptionally warm weather so
far this year, the rapid and consistent organic growth they are
achieving has resulted in our share of their profits for the first
half increasing by over 17% to GBP1,816,000 (2013:
GBP1,546,000).
The Opus Board remains confident that the outcome for the full
year will be significantly ahead of the record profits they
reported last year.
Charity of the Year Partnership
Thanks to the enthusiastic and generous support of customers,
Partners and staff, our charity partnership with Prostate Cancer UK
and the Breast Cancer Campaign is on track to raise significantly
in excess of our GBP200,000 target over a two year period ending in
March 2015. We are in the process of choosing a new Charity
Partnership for next year, which we will be announcing in
March.
Partner, Customer and Service Numbers
FY2015 FY2014
---------------------- ----------------------------------
Q2 Q1 Q4 Q3 Q2
Partners 46,570 46,602 44,046 42,489 42,223
Customers
Residential 529,716 511,783 495,234 478,171 458,751
Business 29,733 29,540 29,098 28,609 29,289
Total Telecom Plus 559,449 541,323 524,332 506,780 488,040
TML 5,923 6,055 6,307 6,599 6,900
Total Group 565,372 547,378 530,639 513,379 494,940
Services
Electricity 508,202 490,292 474,123 457,482 439,367
Gas 419,614 405,114 392,744 378,615 363,945
Fixed telephony 299,639 292,764 288,130 283,172 273,168
Fixed line rental 277,880 269,957 264,341 258,089 246,624
Broadband 237,688 228,737 221,938 214,457 202,102
Mobile 131,773 124,230 117,425 110,806 104,249
CashBack card 150,661 144,174 139,769 137,580 129,018
Non Geographic numbers 8,240 8,466 8,690 9,002 9,301
Total Group 2,033,697 1,963,734 1,907,160 1,849,203 1,767,774
Residential 1,929,164 1,860,198 1,804,830 1,747,682 1,665,772
Business 82,888 81,686 79,864 78,447 78,168
Total Telecom Plus 2,012,052 1,941,884 1,884,694 1,826,129 1,743,940
TML 21,645 21,850 22,466 23,074 23,834
Total Group 2,033,697 1,963,734 1,907,160 1,849,203 1,767,774
Cash Flow and Dividend
Our underlying operating cash flow generation remains strong at
GBP13.6m (2013: GBP7.7m). Net debt (including the deferred
consideration of GBP21.5m payable to npower in December 2016) at
the end of the period was GBP84.8m (31 March 2014: GBP75.1m). This
increase of GBP9.7m primarily reflects the costs of refurbishing
our new 130,000 sq ft headquarters office building in north-west
London, which we anticipate starting to occupy in February 2015,
together with paying a final dividend for last year of GBP15.1m in
August.
We took advantage of our strong cash position during the summer
to renegotiate the structure of our loans from Barclays. This
involved repaying one of the more expensive tranches and extending
the maturity and repayment schedule of the remainder, such that no
further repayments need to be made until December 2015. Consistent
with the progressive dividend policy previously adopted by the
Board, this gives us the headroom to start increasing our dividend
payout ratio from next year towards our historic level of around
75% of adjusted earnings per share, whilst ensuring that we retain
sufficient cash to fund our working capital requirements and repay
the GBP21.5m deferred consideration to npower in December 2016.
In the meantime, the Board has resolved to increase the interim
dividend by 19% to 19p per share (2013: 16p). This will be paid on
15 December 2014 to shareholders on the register on 28 November
2014. The Company's shares will go ex-dividend on Thursday 27
November 2014.
In the absence of unforeseen circumstances, the Board confirms
its intention to propose a final dividend of 21p (2014: 19p) making
a total of 40p (2014: 35p) for the full year.
Tax
The increase in our effective tax rate for the first half to
25.4% (2013: 20%) principally reflects the GBP5.6m charge relating
to amortisation of intangible assets, which is not an allowable
deduction for tax purposes. It also reflects the inclusion of our
share of the profits of Opus (in which we have a 20% shareholding)
which is shown on our Consolidated Statement of Comprehensive
Income net of tax, partially offset by the further small reduction
in the standard rate of UK corporation tax.
Future Opportunities
The television space remains confusing, with multiple hardware
platforms, distribution technologies and content providers all
jockeying for position (Cable, Satellite, Broadband, Freeview,
YouView, Netflix, Amazon, Google, Apple and many others), not to
mention the battle over sporting rights being fought out at ever
increasing cost between BT and Sky. We continue to retain a
'watching brief' on this area, but are growing increasingly
sceptical as to whether these services will ever offer an
attractive commercial opportunity that we can sensibly harness for
the benefit of all our stakeholders.
In the medium term, we intend to extend our current range of
services into a number of complementary areas, including insurance
(eg: household and motor policies) and the provision of boiler
cover.
The one major utility we have historically been unable to offer
our customers is the supply of water. We therefore welcome the
moves currently underway to open this market up to greater
competition in 2017 by requiring the existing regional monopoly
providers to hive-off their supply businesses into separate
companies. Initially, this opportunity will be restricted to
supplying water to business customers, and we are investigating the
feasibility of including this as an additional core service to
members of our Business Club; this would help us gain valuable
expertise as a water supplier, prior to the eventual likely opening
up to competition of the domestic water market - albeit that no
commitment to do so has yet been announced by the Government.
Outlook
We continue to invest in developing our online presence, which
we believe offers significant medium-term potential to increase our
current growth using complementary marketing initiatives aimed at
both new (eg: a customer referral scheme), existing (eg: additional
services) and former members (eg: a win-back campaign). We have
made significant progress with these projects over the course of
the last twelve months, successfully launching a new customer
sign-up process at www.jointheclub.co.uk in March 2014, and
conducting a thorough brand review over the summer. Our new company
website and automated refer-a-friend programme are due for
completion in the first quarter of 2015.
The CMA enquiry into the energy market is now underway, and we
look forward to its report which is due to be delivered in December
2015. We strongly believe that the so-called green levies and other
government imposed policy costs (such as ECO, Warm Home Discount,
etc) should be funded out of general taxation in future, rather
than the regressive way in which these are currently collected from
customers through their energy bills. This would immediately reduce
energy prices for virtually all UK households, create a stronger
competitive environment, and help to start rebuilding trust in the
energy industry by reducing the wide disparity in prices between
larger suppliers who are subject to these costs, and new/smaller
suppliers who are not.
As widely commented on in the media, the UK has experienced a
sustained period of unusually warm weather so far this year. This
has led to a significant reduction in average energy consumption by
domestic customers compared with the corresponding period last
year, particularly in respect of our gas revenues. However, in
contrast to typical retail energy suppliers, our new wholesale
energy supply agreement with npower protects us from any material
weather-related impact on our profitability.
The Board's focus remains firmly on maximising shareholder value
over the medium term, by leveraging the benefits of our unique
multi-utility proposition and our proven low-cost route to market
to increase our share of the UK market for each of the services we
supply. We are therefore supportive of the changes recently
announced by the FCA to remove the obligation upon quoted companies
to publish detailed interim management statements in addition to
the standard half-yearly updates, and are intending to cease
publishing these in future. Rather we intend to keep shareholders
informed about the progress of the business on an event driven
basis, for example following our annual distributor conference
which is generally held in March each year.
We remain confident that revenues, profits, earnings per share
and dividends for the current year will all set new records, in
line with our previous guidance. The strong organic growth we have
achieved so far this year will be reflected in next year's results,
and we remain well placed to benefit from the opportunities which
lie ahead.
Principal Risks and Uncertainties
Background
The Group faces various risk factors, both internal and
external, which could have a material impact on long-term
performance. However, the Group's underlying business model is
considered relatively low-risk, with no need for management to take
any disproportionate risks in order to preserve or generate
shareholder value.
The Group 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, prioritised and (where
possible) eliminated, and that systems of control are in place to
manage any remaining risks.
A formal document is prepared by the executive directors and
senior management team on a regular basis detailing the key risks
faced by the Group and the operational controls in place to
mitigate those risks; this document is then reviewed by the Audit
Committee.
Business model
The principal risks outlined below should be viewed in the
context of the Group's business model as a reseller of utility
services (gas, electricity, fixed line telephony, mobile telephony
and broadband internet) under the Utility Warehouse and TML brands.
As a reseller, the Group does not own any of the network
infrastructure required to deliver its services to customers. This
means that while the Group is heavily reliant on third party
providers, it is insulated from all the direct risks associated
with owning and/or operating such capital intensive infrastructure
itself.
The Group's services are promoted using 'word of mouth' by a
large network of independent Partners, who are paid solely on a
commission basis. This means that the Group has minimal fixed costs
associated with acquiring new customers.
The principal specific risks arising from the Group's business
model, and the measures taken to mitigate those risks, are set out
below:
Reputational risk
The Group's reputation amongst its customers, suppliers and
Partners is believed to be fundamental to the future success of the
Group. Failure to meet expectations in terms of the services
provided by the Group, the way the Group does business or in the
Group's financial performance could have a material negative impact
on the Group's performance.
In relation to customer service, reputational risk is
principally mitigated through the Group's recruitment processes, a
focus on closely monitoring staff performance, including the use of
direct customer feedback surveys (Net Promoter Score), and through
the provision of rigorous staff training.
Responsibility for maintaining effective relationships with
suppliers and Partners rests primarily with the appropriate member
of the Group's senior management team with responsibility for the
relevant area. Any material changes to supplier agreements and
Partner commission arrangements which could impact the Group's
relationships are generally negotiated by the executive Directors
and ultimately approved by the full Board.
Information technology risk
The Group is dependent on its proprietary billing and customer
management software for the successful operation of its business
model. This software is developed and maintained in accordance with
the changing needs of the business by a team of highly skilled,
long-standing, motivated and experienced individuals.
All significant changes which are made to the billing and
customer management software are tested as extensively as
reasonably practical before launch and are ultimately approved by
the heads of the IT and Billing departments in consultation with
the Chief Executive as appropriate.
Back-ups of both the software and underlying billing and
customer data are made on a regular basis and securely stored
off-site. The Group also has extensive back-up information
technology infrastructure in the event of a failure of the main
system, designed to ensure that a near-seamless service to
customers can be maintained.
Legislative and regulatory risk
The Group is subject to varying laws and regulations, including
possible adverse effects from European regulatory intervention. The
energy markets in the UK and Continental Europe are subject to
comprehensive operating requirements as defined by the relevant
sector regulators and/or government departments. Amendments to the
regulatory regime could have an impact on the Group's ability to
achieve its financial goals. Furthermore, the Group is obliged to
comply with retail supply procedures, amendments to which could
have an impact on operating costs.
The Group is a licensed gas and electricity supplier, and
therefore has a direct regulatory relationship with Ofgem. If the
Group fails to maintain an effective relationship with Ofgem and
comply with its licence obligations, it could be subject to fines
or to the removal of its respective licences.
Recent regulatory changes such as the new requirements in
relation to smart energy meters (with the potential for additional
costs if existing meters must be replaced prior to the end of their
planned lives) and social tariffs, and changes to the current
decommissioning regime could all have a potentially significant
impact on the sector, although any additional costs associated with
smart metering are not expected to affect the net margins earned by
energy suppliers (as any such extra costs are likely to be
reflected in higher retail charges).
In general, the majority of the Group's services are supplied
into highly regulated markets, and this could restrict the
operational flexibility of the Group's business. In order to
mitigate this risk, the Group maintains an appropriate relationship
with both Ofgem and Ofcom (the UK regulators for the energy and
communications markets respectively) and the Department for Energy
and Climate Change ("DECC"). The Group engages with officials from
all these organisations on a periodic basis to ensure they are
aware of the Group's views when they are consulting on proposed
regulatory changes or if there are competition issues the Group
needs to raise with them.
However, it should be noted that the regulatory environment for
the various markets in which the Group operates is generally
focussed on promoting competition. As one of the new entrants, it
seems reasonable to expect that most such changes will broadly be
beneficial to the Group, given the Group's relatively small size
compared to the former monopoly incumbents with whom it competes,
although these changes, and their actual impact, remain uncertain
at present. Furthermore, the governmental focus on reform of the
energy market and the investigation by the Competition and Markets
Authority, appears to be targeted at the large vertically
integrated suppliers, with consideration being given to the
desirability of breaking the link between energy generation and
retail supply.
Political and consumer concern over rising energy prices and
fuel poverty may lead to further reviews of the energy market which
could result in further consumer protection legislation being
introduced through energy supply licences. The Government could
also choose to introduce adverse measures such as a windfall tax on
the Group or price controls for certain customer segments, or even
to renationalise the energy supply industry. In addition, political
and regulatory developments affecting the energy markets within
which the Group operates may have a material adverse effect on the
Group's business, results of operations and overall financial
condition, although the proposed Labour Party energy price freeze
for 20 months following the forthcoming election is not expected to
put pressure on the margins of the Group if implemented.
Financing risk
As a result of the transaction with npower in December 2013, the
Group entered into new debt facilities leading to increased debt
service obligations which may place operating and financial
restrictions on the Group. This debt could have adverse
consequences insofar as it: (a) requires the Group to dedicate a
material proportion of its cash flows from operations to fund
payments in respect of the debt, thereby reducing the flexibility
of the Group to utilise its cash to invest in and/or grow the
business; (b) increases the Group's vulnerability to adverse
general economic and/or industry conditions; (c) may limit the
Group's flexibility in planning for, or reacting to, changes in its
business or the industry in which it operates; (d) may limit the
Group's ability to raise additional debt in the long term; and (e)
could restrict the Group from making larger strategic acquisitions
or exploiting business opportunities.
Each of these prospective adverse consequences (or a combination
of some or all of them) could result in the potential growth of the
Group being at a slower rate than may otherwise be achieved.
Fraud and bad debt risk
The Group has a universal supply obligation in relation to the
provision of energy to domestic customers. This means that although
the Group is entitled to request a reasonable deposit from
potential new customers who are not considered creditworthy, the
Group 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 Group is able
to control 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 fully recovered.
Fraud within the telephony industry may arise from customers
using the services without intending to pay their supplier. The
amounts involved are generally relatively small as the Group has
sophisticated call traffic monitoring systems to identify material
occurrences of fraud. The Group is able to immediately eliminate
any further bad debt exposure by disconnecting any telephony
service that demonstrates a suspicious usage profile, or falls into
arrears on payments.
More generally, the Group is also exposed to payment card fraud,
where customers use stolen cards to obtain credit (e.g. on their
CashBack card) or goods (e.g. Smartphones and Tablets) from the
Group; the Group regularly reviews and refines its fraud protection
systems to reduce its potential exposure to such risks.
Wholesale prices risk
The Group does not own or operate any utility network
infrastructure itself, choosing instead to purchase the capacity
needed from third parties. The advantage of this approach is that
the Group is protected from technological risk, capacity risk or
the risk of obsolescence, as it can purchase the 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 Group 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 and broadband). The profile
of the Group's customers, the significant quantities of each
service they consume in aggregate, and its clearly differentiated
route to market has historically proven attractive to
infrastructure owners, who compete aggressively to secure a share
of the Group's growing business.
The supply of energy, which accounts for an increasing
proportion of 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. The Group has a long-standing supply
relationship with npower under which the latter assumes the
substantive risks and rewards of hedging and buying energy for the
Group's customers, and where the price paid by the Group is set by
reference to the average of the variable prices charged by the 'Big
6' to their domestic customers less an agreed discount; this may
not be competitive against the wholesale prices available to new
and/or other independent suppliers. If the Group did not have the
benefit of this long term supply agreement it would be exposed to
the pricing risk of securing access to the necessary energy on the
open market.
Competitive risk
The Group operates in highly competitive markets and significant
service innovations or increased price competition could impact
future profit margins. In order to maintain its competitive
position, there is a consistent focus on ways of improving
operational efficiency and keeping the cost base as low as
possible. New service innovations are monitored closely by senior
management and the Group is typically able to respond rapidly by
offering any new services using the infrastructure of its existing
suppliers. The Group offers a unique multi-utility proposition. The
increasing proportion of customers who are benefiting from a
genuine multi-utility solution, that is unavailable from any other
known supplier, materially reduces any competitive threat.
The Directors anticipate that the Group will face continued
competition in the future as the market grows, new companies enter
the market and alternative technologies and services become
available. The Group's services and expertise may be rendered
obsolete or uneconomic by technological advances or novel
approaches developed by one or more of the Group's competitors. The
existing approaches of the Group's competitors or new approaches or
technologies developed by such competitors may be more effective or
affordable than those supplied to the Group. There can be no
assurance that the Group's competitors will not develop more
effective or more affordable technologies or services, thus
rendering the Group's technologies and/or services obsolete,
uncompetitive or uneconomical. There can be no assurance that the
Group will be able to compete successfully with existing or
potential competitors or that competitive factors will not have a
material adverse effect on the Group's business, financial
condition or results of operations. However, as the Group's
customer base continues to rise, competition amongst suppliers of
services to the Group is expected to increase. This has already
been evidenced by various volume-related growth incentives which
have been agreed with the Group's three largest wholesale
suppliers. This should ensure that the Group has direct access to
new technologies and services available to the market.
Infrastructure risk
The provision of services to the Group's customers is reliant on
the efficient operation of third party physical infrastructure.
There is a risk of disruption to the supply of services to
customers through any failure in the infrastructure e.g. gas
shortages, power cuts or damage to communications networks.
However, as the infrastructure is generally shared with other
suppliers, any material disruption to the supply of services is
likely to impact a large part of the market as a whole and it is
unlikely that the Group would be disproportionately affected. In
the event of any prolonged disruption isolated to the Group's
principal supplier within a particular market, it is anticipated
that services required by customers could be sourced from another
provider.
Directors' responsibilities
The Directors are responsible for the preparation of the
condensed set of financial statements and interim management report
comprising this set of Half-Yearly Results for the six months ended
30 September 2014, each of whom accordingly confirms that to the
best of his knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" and
provides a true and fair view of the assets, liabilities, financial
position and profit of the Group as a whole;
-- the interim management report includes a fair review of the
information required by the Financial Statements Disclosure and
Transparency Rules (DTR) 4.2.7R (indication of important events
during the first six months and their impact on the financial
statements and description of principal risks and uncertainties for
the remaining six months of the year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosures of related party
transactions and changes therein).
The Directors of Telecom Plus PLC are:
Charles Wigoder Executive Chairman
Julian Schild Non-Executive Deputy Chairman
Andrew Lindsay Chief Executive
Melvin Lawson Non-Executive Director
Michael Pavia Non-Executive Director
Given on behalf of the Board
CHARLES WIGODER ANDREW LINDSAY
Executive Chairman Chief Executive
18 November 2014
Independent Review Report to Telecom Plus PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-year results for the six months
ended 30 September 2014 which comprises the condensed consolidated
statement of comprehensive income, the condensed consolidated
balance sheet, the condensed consolidated cash flow statement, the
condensed consolidated statement of changes in equity and the
related explanatory notes.
We have read the other information contained in the half-year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-year results are the responsibility of and have been
approved by the directors. The directors are responsible for
preparing the half-year results in accordance with the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in these half-year
results have been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-year results
based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting its responsibilities in
respect of half-year results in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority and for no other purpose. No person is entitled to rely
on this report unless such a person is a person entitled to rely
upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-year results for the six months ended 30 September 2014
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
BDO LLP
London
United Kingdom
18 November 2014
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed Consolidated Statement of Comprehensive Income
Note 6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Revenue 267,296 245,817 658,760
Cost of sales (214,351) (206,661) (558,509)
--------------- --------------- ------------
Gross profit 52,945 39,156 100,251
Distribution expenses (10,338) (8,160) (18,641)
Share incentive scheme
charges (74) (61) (125)
------------------------- ----- --------------- --------------- ------------
Total distribution
expenses (10,412) (8,221) (18,766)
Administrative expenses (22,261) (19,200) (41,560)
Share incentive scheme
charges (240) (1,042) (4,068)
Amortisation of
intangible assets 4 (5,603) - (3,785)
------------------------- ----- --------------- --------------- ------------
Total administrative
expenses (28,104) (20,242) (49,413)
Other income 206 391 650
--------------- --------------- ------------
Operating profit 14,635 11,084 32,722
Financial income 78 31 109
Financial expense (1,139) (41) (855)
--------------- --------------- ------------
Net financial expense (1,061) (10) (746)
Share of profit of
associate 1,816 1,546 4,654
--------------- --------------- ------------
Profit before taxation 15,390 12,620 36,630
Taxation (3,915) (2,567) (7,655)
--------------- --------------- ------------
Profit and total
comprehensive
income for the year
attributable
to owners of the parent 11,475 10,053 28,975
--------------- --------------- ------------
Basic earnings per share 14.4p 14.3p 39.8p
Diluted earnings per
share 14.2p 14.0p 39.2p
Interim dividend per
share 19.0p 16.0p
Condensed Consolidated Balance Sheet
Note As at As at As at
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 3 32,880 19,111 23,379
Goodwill 3,742 3,742 3,742
Other intangible assets 4 215,175 2,969 220,778
Investment in associate 6,653 5,706 8,814
Deferred tax 985 1,817 2,399
Other non-current receivables 14,351 11,985 13,061
Total non-current assets 273,786 45,330 272,173
--------------- --------------- -------------
Current assets
Inventories 874 578 1,771
Trade and other receivables 21,738 17,271 39,336
Prepayments and accrued income 77,170 82,386 120,786
Cash 5,568 3,344 45,389
Total current assets 105,350 103,579 207,282
Total assets 379,136 148,909 479,455
--------------- --------------- -------------
Current liabilities
Short term borrowings - (4,736) (19,804)
Trade and other payables (8,079) (5,721) (7,749)
Current tax payable (2,667) (2,156) (3,360)
Accrued expenses and deferred
income (73,244) (65,593) (137,780)
Total current liabilities (83,990) (78,206) (168,693)
--------------- --------------- -------------
Non-current liabilities
Long term borrowings 5 (68,877) - (79,216)
Deferred consideration 4 (21,500) - (21,500)
JSOP creditor (3,757) (1,477) (4,080)
--------------- --------------- -------------
Total non-current liabilities (94,134) (1,477) (104,796)
Total assets less total liabilities 201,012 69,226 205,966
--------------- --------------- -------------
Equity
Share capital 4,008 3,542 4,001
Share premium 6 136,967 9,069 136,651
Shares held in treasury (760) - -
Shares held in JSOP (2,275) (2,275) (2,275)
Retained earnings 63,072 58,890 67,589
Total equity 201,012 69,226 205,966
--------------- --------------- -------------
Condensed Consolidated Cash Flow Statement
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
Operating activities GBP'000 GBP'000 GBP'000
Profit before taxation 15,390 12,620 36,630
Adjustments for:
Share of profit of associate (1,816) (1,546) (4,654)
Net financial expense 1,061 10 746
Depreciation of property, plant and equipment 892 630 1,307
Loss on disposal of fixed assets 6 - -
Amortisation of intangible assets 5,603 - 3,785
Amortisation of debt arrangement fees 172 - 118
(Increase) / decrease in inventories 897 (87) (1,280)
Decrease in trade and other receivables 59,910 31,146 41,284
Decrease in trade and other payables (64,119) (33,019) (92,208)
Share incentive scheme charges 314 1,103 4,193
Corporation tax paid (4,719) (3,194) (7,104)
Net cash flow from operating activities 13,591 7,663 (17,183)
-------------- ------------- --------------
Investing activities
Purchase of property, plant and equipment (10,444) (791) (5,736)
Disposal of property, plant and equipment 46 - -
New energy supply agreement:
- Cash consideration and fees paid - - (202,629)
- Cash held in statutory entities acquired - - 64,175
Distribution from associated company 4,148 3,056 3,056
Purchase of shares in associate (171) - -
Interest received 92 31 107
Cash flow from investing activities (6,329) 2,296 (141,027)
-------------- ------------- --------------
Financing activities
Dividends paid (15,105) (12,656) (23,921)
Interest paid (1,226) (41) (769)
Drawdown of borrowing facilities - - 100,000
Repayment of borrowing facilities (30,000) - -
Fees associated with borrowing facilities (315) - (1,098)
Issue of new ordinary shares 323 573 131,061
Payment of share issue costs - - (2,447)
Purchase of own shares (760) - -
Cash flow from financing activities (47,083) (12,124) 202,826
-------------- ------------- --------------
Increase/(decrease) in cash and cash equivalents (39,821) (2,165) 44,616
Net cash and cash equivalents at the beginning
of the period 45,389 773 773
-------------- ------------- --------------
Net cash and cash equivalents at the end
of the period 5,568 (1,392) 45,389
-------------- ------------- --------------
Cash 5,568 3,344 45,389
Short term borrowings (cash equivalents) - (4,736) -
Net cash and cash equivalents at the end
of the period 5,568 (1,392) 45,389
-------------- ------------- --------------
Condensed Consolidated Statement of Changes in Equity
Share Share Treasury JSOP Retained
Capital Premium Shares Shares Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2013 3,530 8,508 - (2,275) 60,979 70,742
Profit and total comprehensive
income for the period - - - - 10,053 10,053
Deferred tax on share
options - - - - 203 203
Dividends - - - - (12,656) (12,656)
Credit arising on share
options - - - - 311 311
Issue of new shares 12 561 - - - 573
Balance at 30 September
2013 3,542 9,069 - (2,275) 58,890 69,226
Balance at 1 October
2013 3,542 9,069 - (2,275) 58,890 69,226
Profit and total comprehensive
income for the period - - - - 18,922 18,922
Deferred tax on share
options - - - - 545 545
Dividends - - - - (11,265) (11,265)
Credit arising on share
options - - - - 497 497
Issue of new shares 459 130,029 - - - 130,488
Costs associated with
the issue of new ordinary
shares - (2,447) - - - (2,447)
Balance at 31 March 2014 4,001 136,651 - (2,275) 67,589 205,966
Balance at 1 April 2014 4,001 136,651 - (2,275) 67,589 205,966
Profit and total comprehensive
income for the period - - - - 11,475 11,475
Deferred tax on share
options - - - - (1,524) (1,524)
Dividends - - - - (15,105) (15,105)
Purchase of treasury
shares - - (760) - - (760)
Credit arising on share
options - - - - 637 637
Issue of new shares 7 316 - - - 323
Balance at 30 September
2014 4,008 136,967 (760) (2,275) 63,072 201,012
-------- -------- --------- -------- --------- ---------
Notes to the condensed financial statements
1. General information
The condensed consolidated financial statements presented in this
half-year report ("the Half-Year Results") have been prepared in
accordance with IAS 34. The principal accounting policies adopted
in the preparation of the condensed consolidated financial statements
are unchanged from those used in the annual report for the year ended
31 March 2014 and are consistent with those that the company expects
to apply in its financial statements for the year ended 31 March
2015.
The condensed consolidated financial statements for the year ended
31 March 2014 presented in this half-year report do not constitute
the company's statutory accounts for that period. The condensed consolidated
financial statements for that period have been derived from the Annual
Report and Accounts of Telecom Plus Plc. The Annual Report and Accounts
of Telecom Plus Plc for the year ended 31 March 2014 were audited
and have been filed with the Registrar of Companies.
The Independent Auditors' Report on the Annual Report and Accounts
of Telecom Plus Plc for the year ended 31 March 2014 was unqualified
and did not draw attention to any matters by way of emphasis and
did not contain statements under s498(2) or (3) of the Companies
Act 2006. The financial information for the periods ended 30 September
2014 and 30 September 2013 is unaudited but has been subject to a
review by the company's auditors.
Seasonality of business: in respect of the energy supplied by the
Group, approximately two thirds is consumed by customers in the second
half of the financial year.
The Half-Year Results was approved for issue by the Board of Directors
on 18 November 2014.
2. Operating segments
For management reporting purposes, the Group is currently organised
into two operating divisions: Customer Management and Customer Acquisition.
These divisions form the basis on which the Group reports its segment
information.
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2014
2014 2013
(unaudited) (unaudited) (audited)
Segment Segment Segment
Revenue Result Revenue Result Revenue Result
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Customer Management 259,412 21,033 238,229 16,819 642,541 44,858
Customer Acquisition 7,884 (6,398) 7,588 (5,735) 16,219 (12,136)
Total 267,296 14,635 245,817 11,084 658,760 32,722
-------- ------------------ -------- ------------- -------- ----------------
As at 30
September
2013
As at 30 As at
September 31 March
2014 (unaudited) (unaudited) 2014 (audited)
GBP'000 GBP'000 GBP'000
Customer Management 371,412 145,211 474,145
Customer Acquisition 7,724 3,698 5,310
Total Assets 379,136 148,909 479,455
------------------ ------------- ----------------
Customer Management (175,647) (77,415) (269,841)
Customer Acquisition (2,477) (2,268) (3,648)
Total Liabilities (178,124) (79,683) (273,489)
------------------ ------------- ----------------
3. Property, plant and equipment
The increase in property plant and equipment during the six
month period to 30 September 2014 mainly relates to the costs of
refurbishing Merit House, the Company's new headquarters office in
north-west London.
4. Intangible assets
6 months 6 months Year ended
ended 30 ended 30 31 March
September September 2014 (audited)
2014 (unaudited) 2013 (unaudited)
GBP'000 GBP'000 GBP'000
Cost
Amount brought forward 224,563 2,969 2,969
Additions - - 221,594
------------------ ------------------ ----------------
Amount carried forward 224,563 2,969 224,563
Amortisation
Amount brought forward (3,785) - -
Charge for the period (5,603) - (3,785)
------------------ ------------------ ----------------
Amount carried forward (9,388) - (3,785)
Carrying amount 215,175 2,969 220,778
------------------ ------------------ ----------------
The additions to intangible assets during the year ended 31
March 2014 related to the entering into of the new energy supply
arrangements with npower on improved commercial terms through the
acquisition of Electricity Plus Supply Limited and Gas Plus Supply
Limited ("the Companies") from npower Limited having effect from 1
December 2013 ("the Transaction"). For accounting purposes, the
Transaction was treated as an asset purchase, not a business
combination, as the Companies acquired did not constitute
businesses. Further information on the Transaction can be found in
Note 21 of the 2014 annual financial statements.
The total consideration for the Transaction comprised a payment
to npower of GBP196.5 million on 20 December 2014, a deferred
amount of GBP21.5 million payable on 20 December 2016 and a payment
of GBP2.5 million made in January 2014 for the net assets acquired
in the Companies which comprised cash and short term working
capital balances.
The addition to intangible assets of GBP221.6 million in the
year ended 31 March 2014 therefore represents the total
consideration paid and payable to npower, excluding the payment for
net assets acquired in the Companies, plus transaction costs of
GBP3.6 million, which in accordance with the relevant accounting
standards, have been recognised as a cost of acquisition.
The intangible asset is being amortised evenly over the 20 year
life of the energy supply agreement.
5. Interest bearing loans and borrowings
6 months 6 months Year ended
ended 30 ended 30 31 March
September September 2014 (audited)
2014 (unaudited) 2013 (unaudited)
GBP'000 GBP'000 GBP'000
Bank loans 70,000 - 100,000
Unamortised loan arrangement
fees (1,123) - (980)
Working capital facilities - 4,736 -
------------------ ------------------ ----------------
68,877 4,736 99,020
------------------ ------------------ ----------------
Due within one year - 4,736 20,000
Due after one year 70,000 - 80,000
------------------ ------------------ ----------------
70,000 4,736 100,000
------------------ ------------------ ----------------
The Group entered into total bank loan facilities of GBP125
million during the year ended 31 March 2014, comprising a
transaction facility of GBP100 million ("the Transaction Facility")
which was fully drawn down as at 31 March 2014 and working capital
facilities of GBP25 million ("the Working Capital Facilities") of
which GBPNil were drawn down as at 31 March 2014.
The Transaction Facility was divided into two tranches: (i) Term
Loan A of GBP70 million repayable by 20 December 2016; and (ii)
Term Loan B of GBP30 million repayable by 20 December 2015.
In July 2014 the Group restructured the Transaction Facility
which involved the early repayment of Term Loan B and extending the
maturity and repayment dates of Term Loan A. An extension to the
Working Capital Facilities up to a maximum of GBP40 million was
also agreed.
6. Share premium
The increase in the share premium account during the year ended
31 March 2014 related mainly to the issue of 8,813,500 new ordinary
shares at a price of 1475p per share on 20 December 2013 in order
to fund the acquisition of Electricity Plus Supply Limited and Gas
Plus Supply Limited from npower Limited.
7. Dividends
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Final dividend for the year
ended 31 March 2014 of 19p
per share 15,105 - -
Final dividend for the year
ended 31 March 2013 of 18p
per share - 12,656 12,656
Interim dividend for the
year ended 31 March 2014
of 16p per share (2013: 13p) - - 11,265
-------------- ----------------- ------------------
An interim dividend of 19p per share will be paid on 15 December
2014 to shareholders on the register at close of business on 28
November 2014. The estimated amount of this dividend to be paid
is GBP15.1 million and, in accordance with IFRS accounting requirements,
has not been recognised in these accounts.
8. Earnings per share
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
The calculation of the basic
and diluted earnings per share
is based on the following data: GBP'000 GBP'000 GBP'000
Earnings for the purpose of basic
and diluted earnings per share 11,475 10,053 28,975
Share incentive scheme charges
(net of tax) 248 850 4,038
Amortisation of intangible assets 5,603 - 3,785
--------- ----------------- ------------
Earnings excluding share incentive
scheme charges for the purpose
of adjusted basic and diluted
earnings per share 17,326 10,903 36,798
--------- ----------------- ------------
Number Number Number
(000s) (000s) (000s)
Weighted average number of ordinary
shares for the purpose of basic
earnings per share 79,538 70,211 72,775
Effect of dilutive potential
ordinary shares (share options) 1,038 1,439 1,223
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share 80,576 71,650 73,998
--------- ----------------- ------------
Adjusted basic earnings per share(1) 21.8p 15.5p 50.6p
------- ---------- -------------
Basic earnings per share 14.4p 14.3p 39.8p
------- ---------- -------------
Adjusted diluted earnings per
share(1) 21.5p 15.2p 49.7p
------- ---------- -------------
Diluted earnings per share 14.2p 14.0p 39.2p
------- ---------- -------------
(1) In order to provide a clearer understanding of the
underlying trading performance of the Group, adjusted basic EPS
excludes: (i) share incentive scheme charges; and (ii) the
amortisation of intangible assets arising on entering into the new
energy supply arrangements with npower in December 2013. The
amortisation of intangible assets has been excluded on the basis
that it represents a non-cash accounting charge.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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