REG - Telecom Plus PLC - Final Results <Origin Href="QuoteRef">TEP.L</Origin> - Part 2
13/06/2017 07:05
- Part 2: For the preceding part double click ID:nRSM8717Ha
Members
FY12 1.46%
FY13 1.23%
FY14 1.15%
FY15 1.10%
FY16 1.09%
FY17 1.15%
Delinquency (the proportion of Members who have at least two energy bills
outstanding) has been on a steady downward trajectory over the last few years,
although in the last year it has increased slightly to 1.15% (2016: 1.09%).
This increase is primarily due to a delay in fitting prepayment meters during
the second half of the year, which resulted from operational challenges with
one of our MOPs; this issue should be resolved over the coming months
following the recent appointment of a new MOP.
The average number of employees increased from 908 to 1,049. This reflects
our commitment to continue delivering the best possible experience to our
Members (increasing numbers of which are taking multiple services from us),
the additional services we are now supporting (such as Insurance, Daffodil and
the smart meter roll-out) and a significant ongoing investment in
strengthening both our IT resources and our management team. Personnel
expenses (excluding the non-cash accounting cost of share incentive schemes)
increased by 14.5% during the year to £35.3m (2016: £30.8m).
Overall, administrative expenses increased during the year by £2.8m to £55.2m
(2016: £52.4m) mainly as a result of higher staff costs and increased
investment in IT, partly offset by the recovery of previously incurred smart
meter rollout costs mentioned above.
Opus
Our 20% stake in Opus Energy Group Limited ('Opus') was sold in February 2017,
resulting in Opus becoming a discontinued operation. The sale resulted in the
receipt of £71.1m of cash and an exceptional profit from the sale of £62.3m.
As explained in the Chairman's Statement above, we intend to undertake a
tender offer this summer, through which we will be seeking to return up to
£25m of these proceeds to shareholders; full details will be sent to
shareholders alongside the forthcoming AGM documents.
Cash, Capital Expenditure and Working Capital
During the year we received an exceptional cash inflow of £71.1m following the
sale of our shareholding in Opus, paid the £21.5m deferred consideration to
npower, and fully repaid our revolving borrowing facilities pending the
announced tender offer. We ended the period with no debt and a cash balance of
£18.7m (2016: cash before borrowings of £35.3m).
As expected, our net working capital position showed a year on year cash
outflow of £9.2m primarily due to timing differences related to our energy
purchasing arrangements with npower.
Under the terms of our energy supply arrangements, Npower remains responsible
for funding the working capital requirements associated with providing energy
to Members who have chosen to pay on a Budget Plan.
Borrowings
Our balance sheet at the year-end shows a net cash position of £18.7m with
zero debt drawn down from our revolving borrowing facilities (2016: net debt
of £56.3m), following receipt of the £71.1m proceeds from the sale of our
shareholding in Opus. Following the return of cash to shareholders under the
impending share tender offer, the Group's Net Debt / EBITDA ratio would still
remain below 1.0x.
Dividend
The final dividend of 25p per share (2016: 24p) will be paid on 28 July 2017
to shareholders on the register at the close of business on 7 July 2017 and is
subject to approval by shareholders at the Company's Annual General Meeting
which will be held on 20 July 2017. This makes a total dividend payable for
the year of 48p (2016: 46p), an increase of 4.3% compared with the previous
year.
We believe our strong underlying cash flow, rising adjusted earnings and
strong credit profile will enable us to refinance any remaining borrowings as
they fall due, whilst maintaining a progressive dividend policy. In the light
of the steadily improving quality of our membership base and the good
visibility it provides over future revenues and margins, we expect to increase
our dividend to 50p per share for the current year. Our intention going
forward is to bring our dividend pay-out ratio back to around 85% of adjusted
EPS over the medium term, whilst maintaining our current progressive dividend
policy.
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges of £1.2m
(2016: £2.5m). These relate to an accounting charge under IFRS 2 Share Based
Payments ('IFRS 2').
As a result of the relative size of share incentive scheme charges as a
proportion of our pre-tax profits, we are separately disclosing this amount
within the Consolidated Statement of Comprehensive Income for the period (and
excluding these charges from our calculation of adjusted profits and earnings)
so that the underlying performance of the business can be clearly identified.
Our current adjusted earnings per share have also therefore been adjusted to
eliminate these share incentive scheme charges.
Taxation
A full analysis of the taxation charge for the year is set out in note 4 to
the financial statements in the Annual Report. The tax charge for the year is
£10.4m (2016: £8.9m).
The effective tax rate for the year was 9.9% (2016: 21.9%), due to the sale of
our 20% shareholding in Opus on which no tax will be paid as it is eligible
for the substantial shareholding exemption. Excluding the sale of Opus and the
share of profit from Opus in both years, the effective tax rates for 2017 and
2016 would be 25.5% and 25.4% respectively.
Nick Schoenfeld
Chief Financial Officer
12 June 2017
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. No new principal risks have been identified
during the period, and save as set out below, nor has the magnitude of any
risks previously identified significantly changed during the period.
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, broadband and insurance services)
under the Utility Warehouse and TML brands. As a reseller, the Group does not
own any of the network infrastructure required to deliver these services to
its membership base. 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 limited fixed costs associated with acquiring new Members.
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 Members, 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 the service provided to its membership base, reputational risk
is principally mitigated through the Group's recruitment processes, a focus on
closely monitoring staff performance, including the use of direct feedback
surveys from Members (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 membership 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, generally long-standing, motivated and
experienced individuals. The Group relies on this software and any failure in
its operation could negatively impact service to Members and potentially be
damaging to the Group's brand.
All significant changes which are made to the billing and membership
management software are tested as extensively as reasonably practicable before
launch and are ultimately approved by the Chief Technology Officer and Billing
departments in consultation with the Chief Executive as appropriate.
Back-ups of both the software and underlying billing and membership data are
made on a regular basis and securely stored off-site. The Group also maintains
a disaster recovery facility in a warm standby state in the event of a failure
of the main system, designed to ensure that a near-seamless service to Members
can be maintained.
The Group has full strategic control over the source code behind its billing
and membership management system, thereby removing any risk of future software
development not being able to meet the precise requirements of the Group.
Data security risk
The Group processes sensitive personal and commercial data during the course
of its business. The Group looks to protect customer and corporate
information and data and to keep its infrastructure secure. A significant
breach of cyber security could result in the Group facing prosecution and
fines, loss of commercially sensitive information, financial losses from fraud
and theft, lost productivity from not being able to process orders and
invoices, and unplanned costs to restore and improve the Group's security.
This could damage the Group's brand and distributor confidence which might
take an extended period of time to rebuild. Ultimately, individuals' welfare
could be put at risk in the event that the Group was not able to provide
services or personal data was misappropriated. The Group uses high
specification firewalling, network segmentation, and multifaceted network and
endpoint anti-viral mitigation systems; external consultants are also used to
conduct penetration testing of the Group's internal and external IT
infrastructure.
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 and any failure to comply may
result in the Group being fined and lead to reputational damage which could
impact the Group's brand. 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 licenced gas and electricity supplier, and therefore has a
direct regulatory relationship with Ofgem. If the Group fails to comply with
its licence obligations, it could be subject to fines or to the removal of its
respective licences.
Proposed regulatory changes such as the imposition of retail energy price
caps, the rapid rollout programme of smart energy meters (with the potential
for additional costs if existing meters must be replaced prior to the end of
their planned lives), and the replacement of existing environmental and social
policies, could all have a potentially significant impact on the sector, and
the net profit margins available to energy suppliers.
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 seeks to maintain
appropriate relations with both Ofgem and Ofcom (the UK regulators for the
energy and communications markets respectively), the Department for Business,
Energy and Industrial Strategy ('BEIS'), and the Financial Conduct Authority
('FCA'). 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.
It should be noted that the regulatory environment for the various markets in
which the Group operates is generally focussed on promoting competition; it
therefore seems reasonable to expect that most potential 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, will always remain uncertain.
Political and consumer concern over 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 with
price controls for certain customer segments currently being proposed. In
addition, political and regulatory developments affecting the energy and
telecoms markets within which the Group operates may have a material adverse
effect on the Group's business, results of operations and overall financial
condition.
Financing risk
The Group has 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 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 Members who are not
considered creditworthy, the Group is obliged to supply domestic energy to
everyone who submits a properly completed application form. Where Members
subsequently fail to pay for the energy they have used ('Delinquent Members'),
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 switching their smart
meters to pre-payment mode, installing a pre-payment meter or disconnecting
their supply, and the costs associated with preventing such Delinquent Members
from increasing their indebtedness are not always fully recovered.
Fraud and bad debt within the telephony industry may arise from Members using
the services, or being provided with a mobile handset, 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 usage fraud. The Group is able to immediately eliminate any
further usage 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 Members
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 Members' 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 Members, the significant quantities of each service
they consume in aggregate, and the Group's 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 has different risks associated with it. The wholesale
price can be extremely volatile, and Member 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
Members, and where the price paid by the Group is set by reference to the
average of the standard variable tariffs charged by the 'Big 6' to their
domestic customers less an agreed discount; this may not be competitive
against the wholesale prices paid by new and/or other independent suppliers.
However, 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 and the costs of balancing.
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. New service innovations are
monitored closely by senior management and the Group is generally able to
respond within an acceptable timeframe by offering any new services using the
infrastructure of its existing suppliers. The increasing proportion of
Members who are benefiting from the genuinely unique multi-utility solution
that is offered by the Group, and which is unavailable from any other known
supplier, is considered likely to materially reduce any competitive threat.
The Directors anticipate that the Group will face continued competition in the
future as 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. In the event that smaller
independent energy suppliers were to experience financial difficulties as a
result of increasing wholesale prices for instance, it is possible that
customers could also have a loss of confidence in the Group, given that it is
also an independent energy supplier. 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 available to the Group. 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 membership 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 also 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 Members is reliant on the efficient
operation of third party physical infrastructure. There is a risk of
disruption to the supply of services to Members 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,
services required by Members could in due course be sourced from another
provider.
Energy industry estimation risk
A significant degree of judgement and estimation is required in order to
determine the actual level of energy used by Members and hence that should be
recognised by the Group as sales. There is an inherent risk that the
estimation routines used by the Group do not in all instances fully reflect
the actual usage of Members. However, this risk is mitigated by the relatively
high proportion of Members who provide meter readings on a periodic basis, and
the rapid anticipated growth in the installed base of smart meters resulting
from the national rollout programme.
Gas Leakage within the national gas distribution network
The operational management of the national gas distribution network is outside
the control of the Group. There is a risk that the level of leakage in future
could be higher than those historically experienced, and above the level
currently expected.
Key man risk
The Group is dependent on its key management for the successful development
and operation of its business. In the event that any or all of the members of
the key management team were to leave the business, it could have a material
adverse effect on the Group's operations.
Single site risk
The Group operates from one principal site and, in the event of significant
damage to that site through fire or other issues, the operations of the Group
could be adversely affected.
Acquisition Risk
The Group may invest in other businesses, taking a minority, majority or 100%
equity shareholding, or through a joint venture partnership. Such investments
may not deliver the anticipated returns, and may require additional funding in
future.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2017
Note 2017£'000 2016£'000
Continuing operations
Revenue 1 740,290 744,732
Cost of sales (609,859) (620,858)
Gross profit 130,431 123,874
Distribution expenses (21,116) (21,424)
Share incentive scheme charges (101) (36)
Total distribution expenses (21,217) (21,460)
Administrative expenses (55,195) (52,355)
Share incentive scheme charges (1,084) (2,479)
Amortisation of energy supply contract intangible (11,228) (11,228)
Total administrative expenses (67,507) (66,062)
Other income 449 397
Operating profit 1 42,156 36,749
Financial income 89 126
Financial expenses (1,378) (1,801)
Net financial expense (1,289) (1,675)
Profit before taxation 40,867 35,074
Taxation (10,424) (8,909)
Profit for period 30,443 26,165
Discontinued operations
Profit for period from associate 64,517 5,609
Profit and other comprehensive income for the year attributable to owners of the parent 94,960 31,774
Basic earnings per share
Continuing operations 38.0p 32.8p
Discontinued operations 80.6p 7.0p
2 118.6p 39.8p
Diluted earnings per share
Continuing operations 37.8p 32.6p
Discontinued operations 80.1p 7.0p
2 117.9p 39.6p
Consolidated Balance Sheet
As at 31 March 2017
2017 2016
Assets £'000 £'000
Non-current assets
Property, plant and equipment 31,117 33,063
Investment property 9,089 9,211
Intangible assets 190,575 198,364
Goodwill 3,742 3,742
Investments in associate - 11,604
Other non-current assets 15,593 13,800
Total non-current assets 250,116 269,784
Current assets
Inventories 2,676 2,762
Trade and other receivables 29,812 27,749
Prepayments and accrued income 98,320 97,233
Cash 18,732 35,343
Total current assets 149,540 163,087
Total assets 399,656 432,871
Current liabilities
Deferred consideration - (21,500)
Trade and other payables (24,608) (26,580)
Current tax payable (5,407) (936)
Accrued expenses and deferred income (111,322) (114,583)
Total current liabilities (141,337) (163,599)
Non-current liabilities
Long term borrowings - (70,152)
Deferred tax (605) (839)
Total non-current liabilities (605) (70,991)
Total assets less total liabilities 257,714 198,281
Equity
Share capital 4,024 4,016
Share premium 138,642 137,729
Treasury shares (760) (760)
JSOP reserve (1,150) (1,150)
Retained earnings 116,958 58,446
Total equity 257,714 198,281
Consolidated Cash Flow Statement
For the year ended 31 March 2017
2017 2016
£'000 £'000
Operating activities
Profit before taxation - continuing operations 40,867 35,074
Adjustments for:
Net financial expense 1,289 1,675
Depreciation of property, plant and equipment 3,203 3,596
Profit on disposal of fixed assets (21) (12)
Amortisation of intangible assets 12,088 11,228
Amortisation of debt arrangement fees 229 985
Decrease/(increase) in inventories 86 (1,869)
(Increase)/decrease in trade and other receivables (4,084) 8,202
(Decrease)/increase in trade and other payables (5,241) 1,206
Share incentive scheme charges 1,185 2,515
Corporation tax paid (6,190) (8,755)
Net cash flow from operating activities 43,411 53,845
Investing activities
Purchase of property, plant and equipment (2,066) (4,080)
Purchase of intangible assets (3,406) -
Disposal of property, plant and equipment 60 22
Payment of deferred consideration (21,500) -
Disposal of associated company 71,103 -
Distribution from associated company 5,074 5,474
Purchase of shares in associated company (55) (626)
Interest received 91 115
Cash flow from investing activities 49,301 905
Financing activities
Dividends paid (37,633) (34,331)
Interest paid (1,370) (2,202)
Drawdown of long term borrowing facilities - 71,241
Repayment of long term borrowing facilities (71,241) (70,000)
Fees associated with long term borrowing facilities - (1,147)
Issue of new ordinary shares 921 496
Cash flow from financing activities (109,323) (35,943)
(Decrease)/increase in cash and cash equivalents (16,611) 18,807
Net cash and cash equivalents at the beginning of the year 35,343 16,536
Net cash and cash equivalents at the year end 18,732 35,343
Consolidated Statement of Changes in Equity
For the year ended 31 March 2017
Consolidated Share Share premium Treasury shares JSOP reserve Retained earnings Total
capital
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2015 4,011 137,238 (760) (2,275) 58,106 196,320
Profit and total comprehensive income - - - - 31,774 31,774
Dividends - - - - (34,331) (34,331)
Credit arising on share options - - - - 1,224 1,224
Credit arising on exercise of JSOP - - - 1,125 1,673 2,798
Issue of new ordinary shares 5 491 - - - 496
Balance at 31 March 2016 4,016 137,729 (760) (1,150) 58,446 198,281
Profit and total comprehensive income - - - - 94,960 94,960
Dividends - - - - (37,633) (37,633)
Credit arising on share options - - - - 1,185 1,185
Issue of new ordinary shares 8 913 - - - 921
Balance at 31 March 2017 4,024 138,642 (760) (1,150) 116,958 257,714
Notes
1. Segment reporting
The Group's reportable segments reflect the two distinct activities around
which the Group is organised:
· Customer Acquisition; and
· Customer Management.
Customer Acquisition revenues mainly comprise sales of equipment including
mobile phone handsets and wireless internet routers to customers. Customer
Management revenues are principally derived from the supply of fixed
telephony, mobile telephony, gas, electricity, internet services and home
insurance to residential and small business customers.
The Board measures the performance of its operating segments based on revenue
and segment result, which is referred to as operating profit. The Group
applies the same significant accounting policies across both operating
segments.
Operating segments - continuing operations
Year ended 31 March 2017 Year ended 31 March 2016 (restated)
Customer Management Customer Acquisition Total Customer Management Customer Acquisition Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 722,748 17,542 740,290 727,936 16,796 744,732
Segment result 60,445 (18,289) 42,156 51,305 (14,556) 36,749
Operating profit 42,156 36,749
Net financing expense (1,289) (1,675)
Profit before taxation 40,867 35,074
Taxation (10,424) (8,909)
Profit for the year from continuing operations 30,443 26,165
Segment assets 390,639 9,017 399,656 411,292 9,975 421,267
Investment in associates - - - 11,604 - 11,604
Total assets 390,639 9,017 399,656 422,896 9,975 432,871
Segment liabilities (138,850) (3,092) (141,942) (231,553) (3,037) (234,590)
Net assets 257,714 198,281
Capital expenditure (5,343) (129) (5,472) (3,988) (92) (4,080)
Depreciation 3,127 76 3,203 3,515 81 3,596
Amortisation 12,088 - 12,088 11,228 - 11,228
Statutory operating profit is stated after deducting share incentive scheme
charges (£1.2m) and the amortisation of the energy supply contract intangible
asset (£11.2m). It also includes a one-off recovery of £4.2m of costs
incurred in prior years relating to the smart meter rollout programme under
our energy supply agreement.
Revenue by service
2017 2016
£'000 £'000
Customer Management
- Electricity 310,370 313,689
- Gas 265,822 273,889
- Fixed communications 106,653 102,085
- Mobile 27,500 24,434
- Other 12,403 13,839
722,748 727,936
Customer Acquisition 17,542 16,796
740,290 744,732
The Group operates solely in the United Kingdom.
2. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
2017£'000 2016£'000
Earnings for the purpose of basic and diluted EPS 94,960 31,774
Share of profit related to associate (net of tax) (64,517) (5,609)
Earnings for the purpose of basic and diluted EPS - continuing operations 30,443 26,165
Share incentive scheme charges (net of tax) 968 2,278
Amortisation of energy supply contract intangible assets 11,228 11,228
Earnings excluding share incentive scheme charges and amortisation of intangibles for the purpose of adjusted basic and diluted EPS 42,639 39,671
Number Number
('000s) ('000s)
Weighted average number of ordinary shares for the purpose of basic EPS 80,073 79,789
Effect of dilutive potential ordinary shares (share incentive awards) 438 363
Weighted average number of ordinary shares for the purpose of diluted EPS 80,511 80,152
Continuing operations
Adjusted basic EPS1 53.3p 49.7p
Basic EPS 38.0p 32.8p
Continuing operations
Adjusted diluted EPS1 53.0p 49.5p
Diluted EPS 37.8p 32.6p
It has been deemed appropriate to present the analysis of adjusted EPS
excluding share incentive scheme charges due to the relative size and
historical volatility of the charges. In view of the size and nature of the
charge as a non-cash item the amortisation of intangible assets arising from
the energy supply agreement with Npower has also been adjusted.
3. Dividends
2017 2016
£'000 £'000
Prior year final paid 24p (2016: 21p) per share 19,205 16,734
Interim paid 23p (2016: 22p) per share 18,428 17,597
The Directors have proposed a final dividend of 25p per ordinary share
totalling approximately £20.1 million, payable on 28 July 2017, to
shareholders on the register at the close of business on 7 July 2017. In
accordance with the Group's accounting policies the dividend has not been
included as a liability as at 31 March 2017. This dividend will be subject to
income tax at each recipient's individual marginal income tax rate.
4. Related parties
Identity of related parties
The Company has related party relationships with its subsidiaries, formerly
its associate until disposal on 10 February 2017 and with its directors and
executive officers.
Transactions with key management personnel
Directors of the Company and their immediate relatives control approximately
23.3% of the voting shares of the Company. No other employees are considered
to meet the definition of key management personnel other than those disclosed
in the Directors' Remuneration Report.
Details of the total remuneration paid to the directors of the Company as key
management personnel for qualifying services are set out below:
2017 2016
£'000 £'000
Short-term employee benefits 1,475 1,377
Social security costs 196 184
Post-employment benefits 80 80
1,751 1,641
Share incentive scheme charges 186 1,555
1,937 3,196
During the year, the Company acquired goods and services worth approximately
£130,000 (2016: £59,000) from companies in which directors have a beneficial
interest. No amounts were owed to these companies by the Company as at 31
March 2017. During the year, the Company sold goods and services worth
approximately £12,000 (2016: £33,000) to companies in which directors have a
beneficial interest.
During the year directors purchased goods and services on behalf of the
Company worth approximately £118,000 (2016: £161,000). The directors were
fully reimbursed for the purchases and no amounts were owing to the directors
by the Company as at 31 March 2017.
Other related party transactions
Associates
During the year ended 31 March 2017 up to the date of disposal on 10 February
2017, the associate supplied goods to the Group which amounted to £1,304,000
(2016: £1,371,000). Transactions with the associate are priced on an arm's
length basis. Dividends received during the year from the associate amounted
to £5,074,000 (2016: £5,474,000) relating to the financial year to 31 March
2016.
Subsidiary companies
During the year ended 31 March 2017, the Company's subsidiaries purchased
goods and services from the Company in the amount of £61,235,000 (2016:
£50,519,000). At 31 March 2017 the Company owed the subsidiaries £34,023,000
which is recognised within trade payables (2016: £35,466,000 owed by the
Company to the subsidiaries).
5. Basis of preparation
The financial information set out above does not constitute the Group's
statutory information for the years ended 31 March 2017 or 2016, but is
derived from those 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 2016. Statutory accounts for 2016 have
been delivered to the Registrar of Companies and those for 2017 will be
delivered following the Company's annual general meeting. The auditor has
reported on these accounts, their reports were unqualified and did not contain
statements under the Companies Act 2006, s498(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 Statements ("IFRSs") as adopted by the European Union,
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 Chairman's Statement, Chief Executive's Review, Financial Review and
Principal Risks and Uncertainties include 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:
Charles Wigoder - Executive Chairman
Julian Schild - Deputy Chairman and Senior Non Executive Director
Andrew Lindsay - Chief Executive Officer
Nick Schoenfeld - Chief Financial Officer
Andrew Blowers - Non Executive Director
Beatrice Hollond - Non Executive Director
Melvin Lawson - Non Executive Director
By order of the Board
1 Adjusted basic and diluted EPS for continuing operations exclude share
incentive scheme charges and the amortisation of the intangible asset
recognised as a result of the new energy supply arrangements entered into with
Npower in December 2013.
This information is provided by RNS
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