REG - Telecom Plus PLC - Final Results
21/06/2022 07:00
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RNS Number : 5526P Telecom Plus PLC 21 June 2022
Embargoed until 07.00 21 June 2022
Telecom Plus PLC
Final Results for the year ended 31 March 2022
"Record results ahead of expectations… and a return to 20% sustainable
growth"
Telecom Plus PLC (trading as Utility Warehouse), which supplies a wide range
of utility services focussed on domestic customers, today announces its final
results for the year ended 31 March 2022.
Financial Highlights:
· Record results, ahead of expectations
· Revenue up 12.3% to £967.4 million (2021: £861.2m)
· Adjusted pre-tax profit up 10.3% to £61.9 million (2021: £56.1m)
· Statutory pre-tax profit up 8.5% to £47.2 million (2021: £43.5m)
· Adjusted EPS up 10.1% to 63.2p (2021: 57.4p)
· Statutory EPS up 8.7% to 45.1p (2021: 41.5p)
· Full year dividend maintained at 57p per share
Operating Highlights:
· Number of customers up 10.8% to c. 729,000 (an annualised rate of
over 20% during H2), equal to the previous five years of growth combined
· Notable improvement in customer retention levels, as customers
benefit from higher savings on their UW services
· Return to rational pricing environment following permanent energy
retail market reset
Current trading and outlook:
· Continuing strong new customer volumes in line with guidance of 20%
net growth for FY23
· Subject to unforeseen circumstances, adjusted PBT for FY23 expected
to be around £75m, above consensus expectations, enabling an increase in our
dividend to not less than 65p for the full year
· Our new medium-term goal is to sign-up at least 1,000,000 additional
customers over the next four to five years
Andrew Lindsay, Co-CEO, said:
"The business is performing extremely well, delivering record results ahead of
expectations. Demand for the long term savings we offer remains high, and
underlying organic customer growth is continuing at an annualised rate of
around 20% in the new financial year.
"It is now inevitable that energy prices will rise significantly again in
October and are likely to remain high for the foreseeable future. Thanks to
our multiservice proposition we expect to continue offering our customers the
lowest energy prices in the country this winter, giving every household the
opportunity to make significant savings at a time when they need them the
most."
Stuart Burnett, Co-CEO, added:
"Our multiservice business model enables us to sustainably offer the lowest
energy tariffs in the country, with a typical household taking three UW
services expected to save around £140 a year relative to the Government price
cap from October on their energy alone - with significant additional savings
available on their other UW services - making us the best value supplier in
the country by far.
"Our Partners are growing more and more confident in the value we offer, and
as a result are recommending UW to their friends and families in increasing
volumes. By doing so, they are earning meaningful additional incomes that are
helping them meet the growing pressures on their personal finances. Working
together, we have already seen a return to sustainable 20% growth, and we look
forward to signing up a million additional customers over the next 4-5 years."
There will be a virtual meeting for analysts today at 9.00am. Please contact
MHP Communications at: telecomplus@mhpc.com for dial in details.
For more information please contact:
Telecom Plus PLC
Andrew Lindsay,
Co-CEO 020
8955 5000
Stuart Burnett, Co-CEO
Nick Schoenfeld, CFO
Peel Hunt
Dan Webster / Andrew
Clark 020
7418 8900
Numis
Mark Lander / Joshua
Hughes
020 7260 1000
MHP Communications
Reg Hoare / Catherine
Chapman
020 3128 8339
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 the Communications, Energy and Insurance markets.
Customers benefit from the convenience of a single monthly statement,
consistently good value across all their utilities and exceptional levels of
service. Telecom Plus does not advertise, relying instead on 'word of mouth'
recommendation by existing satisfied customers and Partners in order to grow
its market share.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP LN). For
further information please visit telecomplus.co.uk
LEI code: 549300QGHDX5UKE58G86
Cautionary statement regarding forward-looking statements
This Announcement may contain "forward-looking statements" with respect to
certain of the Company's plans and its current goals and expectations relating
to its future financial condition, performance, strategic initiatives,
objectives and results. Forward-looking statements sometimes use words such as
"aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal",
"believe", "seek", "may", "could", "outlook" or other words of similar
meaning. By their nature, all forward-looking statements involve risk and
uncertainty because they are based on numerous assumptions regarding the
Company's present and future business strategies, relate to future events and
depend on circumstances which are or may be beyond the control of the Company
which could cause actual results or trends to differ materially from those
made in or suggested by the forward-looking statements in this Announcement,
including, but not limited to, domestic and global economic business
conditions; market-related risks such as fluctuations in interest rates; the
policies and actions of governmental and regulatory authorities; the effect of
competition, inflation and deflation; the effect of legislative, fiscal, tax
and regulatory developments in the jurisdictions in which the Company and its
respective affiliates operate; the effect of volatility in the equity, capital
and credit markets on profitability and ability to access capital and credit;
a decline in credit ratings of the Company; the effect of operational risks;
an unexpected decline in sales for the Company; any limitations of internal
financial reporting controls; and the loss of key personnel. Any
forward-looking statements made in this Announcement by or on behalf of the
Company speak only as of the date they are made. Save as required by the
Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the
Listing Rules or by law, the Company undertakes no obligation to update these
forward-looking statements and will not publicly release any revisions it may
make to these forward-looking statements that may occur due to any change in
its expectations or to reflect events or circumstances after the date of this
Announcement.
Chairman's Statement
I am pleased to report a strong performance by the Company during a period of
exceptional market turbulence, with turnover, profit, customer and service
numbers all reaching record highs.
Adjusted pre-tax profits increased by 10.3% to £61.9m (2021: £56.1m) mainly
reflecting higher customer numbers during H2, on revenue up by 12.3% to
£967.4m (2021: £861.2m) largely due to higher energy prices and a growing
customer base. Adjusted earnings per share for the year rose by 10.1% to 63.2p
(2021: 57.4p). Statutory pre-tax profits rose by 8.5% to £47.2m (2021:
£43.5m), and statutory EPS rose by 8.7% to 45.1p (2021: 41.5p).
Customer numbers for the year increased by 71,269 (2021: 5,174) to 728,680 and
core service numbers grew by 191,112 (2021: 51,081) to 2,264,909, representing
growth of 10.8% and 9.2% respectively. All this growth was achieved
organically, and predominantly during H2, representing an annualised customer
growth rate for H2 of slightly over 20%. This was achieved despite our
decision not to participate in the multiple opportunities which arose to
acquire customer bases from insolvent suppliers during the autumn.
Churn within our energy customer base is continuing to run at an annualised
rate of less than 3%, and in the absence of a return to heavily discounted
introductory fixed tariffs from other suppliers - which now seems unlikely
given the current regulatory focus on ensuring a sustainable retail energy
marketplace - we would expect our churn rate to remain well below historical
levels for the foreseeable future.
Interest in our income opportunity for UW Partners accelerated over the course
of the year, particularly during the second half, as people focussed on the
impending cost of living crisis. We progressively improved both our customer
and Partner propositions; of particular importance was the simplification of
our bundling structure in March, enabling customers to lock-in guaranteed
savings of up to 5% below the Government's energy price cap when they take any
combination of our other core services.
We received a number of awards during the year recognising both the value we
offer and the quality of service provided by our UK-based support teams; these
are testament to our customer-centric approach, our commitment to treating our
customers fairly, and the significant efforts by our teams to deliver the best
possible customer service.
Dividend
We are proposing a final dividend of 30p (2021: 30p), bringing the total for
the year to 57p (2021: 57p); this will be paid on 5 August 2022 to
shareholders on the register at the close of business on 15 July 2022 subject
to approval by shareholders at the Company's AGM which will be held on 26 July
2022.
We remain committed to a progressive dividend policy consistent with the
underlying strong cash generation of our business, with a significant increase
to at least 65p expected for the current year.
Our ESG strategy
As a Company, we remain focussed on delivering against our ESG strategy. Never
before has sustainability been so relevant. The challenges of collectively
achieving net zero, the energy crisis of last autumn - and now the sharply
increasing cost of living faced by families throughout the UK - have brought
into sharper focus the importance of helping our communities thrive,
supporting a more sustainable future and doing business responsibly. These
three pillars underpin our ESG strategy and I am pleased to report that we
have made good progress over the last year, as set out in our ESG Report and
in our Sustainability Report in the 2022 Annual Report.
We recognise the importance of a low carbon future and are actively developing
a detailed Net Zero transition plan. We are committed to implementing the
recommendations of the Task Force on Climate-related Financial Disclosures
("TCFD") and our TCFD disclosures, consistent with the TCFD framework, can be
found in the 2022 Annual Report.
Our ESG targets and goals for the year ahead are set out in our ESG Report and
Sustainability Report and demonstrate the Company's continued engagement and
focus on its ESG agenda.
Corporate Governance
The UK Corporate Governance Code (the "Code") encourages the Chairman to
report personally on how the principles in the Code relating to the role and
effectiveness of the Board have been applied.
As a board we are responsible to the Company's shareholders for delivering
sustainable shareholder value over the long term through effective management
and good governance. A key role of mine, as Chairman, is to provide strong
leadership to enable the Board to operate effectively.
We believe that open and rigorous debate around key strategic issues and risks
faced by the Company is important in achieving our objectives and the Company
is fortunate to have non-executive directors with diverse and extensive
business experience who actively contribute to these discussions.
Further detail of the Company's governance processes and compliance with the
Code is set out in the Corporate Governance Statement.
Board changes
As previously announced, non-executive directors Julian Schild and Melvin
Lawson will be retiring from the Board after the AGM in July. Melvin and
Julian have each made significant contributions to the success of the business
and will leave with our sincere thanks.
We are delighted to welcome Carla Stent to the Board as a Non-Executive
Director with effect from the AGM in July. Carla brings a broad range of
skills and experience at large and fast growing businesses, and demonstrates
the importance we place on meeting the highest possible standards of corporate
governance. She will immediately assume the role of chairing our Audit
Committee.
Outlook
We have now entered what seems likely to be an extended period of normal and
sustainable competition across the various essential household services we
provide - an environment in which our clearly differentiated and effective
route to market can be expected to thrive. It is hugely exciting to see our
community of Partners once again demonstrating their ability to deliver rapid
and high quality organic growth.
In helping UK households to manage and reduce their bills, we are a business
of its time. Consumer demand to reduce bills has never been higher, and is
likely to continue to grow over the coming months. Our multiservice model
enables us to offer consumers some of the cheapest energy tariffs in the
market - with guaranteed savings of up to 5% below the Government energy price
cap - in an entirely sustainable way.
And we are actively increasing our investment in staff and technology to
further improve the already strong customer experience and service levels that
earned us top position in the May 2022 survey carried out by Uswitch.
Whilst we expect our customer base to grow by around 20% during FY23, the
fundamental strengths of our business model mean there is much more to aim
for. Indeed, with 98 out of every 100 households in the UK taking their
essential home services from suppliers other than UW, our organic growth
opportunity is, for all practical purposes, unlimited.
Our new medium-term goal is to sign-up at least 1,000,000 additional customers
over the next four to five years - a target we believe is comfortably
achievable against an economic background where our ability to help families
both save on their bills and earn a meaningful additional income have never
been so needed or so valuable.
In the absence of unforeseen circumstances, and with growing visibility over
the level of the Government price cap for the coming winter period, we expect
that full-year adjusted profit before tax for FY23 will be around £75m, ahead
of current consensus market expectations; this would enable an increase in our
dividend to not less than 65p for the full year in line with our progressive
dividend policy.
Once again, I would like to thank my boardroom colleagues for their support
and all our staff and Partners for their loyalty and hard work throughout a
difficult and challenging few years, and the contribution they are making to
the strong performance we are currently seeing.
Charles Wigoder
Executive Chairman
21 June 2022
Co-Chief Executives' Review
THE YEAR IN SUMMARY
The business has experienced a dramatic turnaround in the past 12 months,
delivering a very strong performance that exceeded our expectations at the
start of the year.
We have regained our long term competitive edge, are offering some of the best
value services in the country, and starting to fire on all cylinders again.
A continuation of the long-running and value-destructive price war in the
energy retail market, combined with the after-effects of social distancing
restrictions associated with the pandemic, led to a slow first six months
until September 2021.
Since then, our trading environment and long-term outlook have significantly
improved, as shown by the 10% growth in both customers and service numbers in
the second half of the year - equal to the previous five years of growth
combined.
The end of the energy price war was a huge contributor to this rapid
improvement in performance: prior to September 2021, our long-term cost
advantage and multiservice approach had struggled to compete against the
irresponsible, below-cost pricing models of many now-failed energy
competitors. As wholesale energy prices rose last year, it exposed these
short-termist, unsustainable business models, resetting the energy market and
enabling the core strengths of our business model to come back to the fore.
Our disciplined refusal to engage in the value destructive fray of the energy
price war, instead remaining focused on long term value creation, has paid
off. Today, we are operating in a much smaller market with only ~15 remaining
suppliers and ongoing regulatory intervention that will prevent any possible
recurrence of unsustainable pricing practices.
But it is not simply the reset of the energy markets that has enabled the
business to return to growth and deliver a strong second half. The
macro-economic outlook for the UK is worsening, household budgets are coming
under increasing pressure, and demand for what we offer is clearly rising.
An inflationary environment is one that has historically suited our business
model, as we cater for both those looking to save money on their bills, and
those seeking to earn an additional income.
Households across the country are experiencing price rises for all their
essential home services - be it energy, broadband or mobile - and are
increasingly focussed on managing their monthly outgoings and interested in
hearing about ways to save.
At the same time, more and more people are looking to supplement their
earnings, and turning to the near-term income opportunity we offer our
Partners. It is hugely rewarding to see record numbers of Partners joining UW
and being active in recommending UW to their friends, families and colleagues,
helping them reduce their bills whilst earning a meaningful additional income
in the process. After several years of challenging conditions, the path ahead
for us to deliver sustainable and profitable double-digit annual growth is
clear.
The strong performance of the business over the last six months is exciting,
but with the cost of living squeeze driving increased consumer demand for what
we offer, and with 98 out of every 100 households across the UK using
suppliers other than UW, we believe there is much further to go. The business
is perfectly positioned to capitalise on these very positive dynamics, and we
continue to invest to ensure we maximise our growth prospects over the years
ahead.
A UNIQUE BUSINESS
All your home services in one
We supply households and small businesses throughout the UK with a wide range
of essential services under the UW brand - energy, broadband, mobile and
insurance. Our customers bundle together the services they want, and benefit
from a unique multiservice proposition that offers them:
· Simplicity - just one, simple bill for all their home services;
· Savings - compared with the prices they were previously paying; and
· Service - an award-winning customer app backed up by UK-based support
teams.
We help our customers to get on with more important things in their lives than
managing their bills, by delivering consistently fair value and great service,
ensuring they never need to think about switching their utilities again.
We believe that one supplier offering a single place to manage all your
essential home services, and a single monthly bill for all of them together,
is logically the easiest and most cost-effective way to deal with your
bills.
Our ultimate objective is that by fully delivering on our 'all your home
services in one' customer proposition, we create something that is truly
referable.
Word-of-Mouth
The power of a personal recommendation from someone you know and trust is as
great today as it ever has been, and delivers real impact. This is
increasingly apparent in a world of ubiquitous online reviews and relentless
digital marketing campaigns hitting consumers from all angles.
Almost every one of our 729,000 customers has been introduced to us by word of
mouth. Central to this differentiated marketing approach is our community of
UW Partners: they are local, trusted brand advocates who spread the word about
UW, one neighbour at a time.
In return for successfully recommending us to their friends and family, and
helping them switch their essential home services to UW, we offer our Partners
the opportunity to earn a meaningful additional income.
Our sustainable cost advantage
It is the combination of our unique 'all your home services in one' customer
proposition with our powerful 'word of mouth' route to market (that in itself
represents an attractive proposition to many consumers), that lies at the
heart of our business model. These are underpinned by strong wholesale supply
agreements for each of our services and a fully-integrated technology stack
that we've built in-house.
As the UK's only genuine multiservice provider, we derive significant ongoing
operating efficiencies relative to our competitors by spreading a single set
of overheads across the multiple individual service-related revenue streams we
receive from each of our customers.
->This creates a sustainable, structural cost advantage that enables us
to consistently price competitively across each of the services we supply.
->This in turn creates a highly attractive and referable customer
proposition that enables us to harness the most powerful form of marketing -
word of mouth.
->Our Partner-led word of mouth route to market enables us to
achieve high levels of multiservice take-up by new customers, maintaining our
sustainable cost advantage
OUR FOCUS
The energy, broadband, mobile and insurance markets are each individually
significant; combined, they present us with a vast opportunity. Further, with
a market share of around 2.5%, there are few practical constraints on the size
of business we can build organically.
However, we have never pursued growth at all costs. We take pride in building
an ever more robust and sustainable business that serves the interests of all
our key audiences: our customers, Partners, employees and our shareholders.
The underlying strength of our business and the conviction in our approach is
founded on two key areas of focus:
Loyal customers creating long-term value
We believe sustainable value can only come from long-term relationships with
our customers. We must compete toe-to-toe in each of the competitive markets
we operate in, but we're not trying to persuade people to buy something they
don't already have or may not need. We simply offer a better solution for the
essential household services they're already using, and one that's recommended
by a trusted friend or neighbour.
We seek to generate loyalty amongst our customers in a number of key ways:
· Incentivising them to take more services from UW
There's a clear correlation between the number of services a customer takes
and their lifetime as a UW customer, and so we offer incrementally better
value with each additional service they take from us.
· Providing outstanding service and treating them fairly
Above and beyond our award-winning customer app and telephone support, we
offer a promise of great value for as long as a customer stays with us,
eschewing the short-term 'tease and squeeze' pricing tactics that inevitably
undermine customer trust and loyalty.
· Encouraging homeowners to sign up to UW
Changes in occupancy pose particular challenges to broadband and energy
suppliers, leading to higher administrative costs and acting as a prime source
of both churn and bad debt. Our propositions are therefore weighted towards
homeowners as they tend to move less frequently.
Only a minority of UK consumers actively engage with the expensive advertising
strategies of our competitors; these are typically serial switchers and are
therefore unlikely to generate long-term returns. The majority of people are
considerably less engaged with switching, and it is this personal
recommendation from someone they know that overcomes this natural inertia and
then leads to longer lifetimes with us once they've switched. Moreover, these
'hard to reach' customers are where our less formal 'word of mouth' route to
market really comes to the fore, accessing people who are not actively
considering switching.
Our unique multiservice proposition delivered through our word-of-mouth route
to market drives the ongoing acquisition of loyal customers, thereby building
long term value for all parties:
● Our customers benefit from consistently lower prices in return for
switching all their services, and stay with us longer.
● Our Partners receive a long-term residual income stream from a
longer-lasting customer.
● Our shareholders receive a sustainable earnings stream from an
inherently sustainable business.
Word-of-mouth as a sustainable route to market
We believe attracting multiservice customers at scale is best achieved through
word of mouth. This is a core tenet of our business model and gives us a
significant competitive advantage, with a direct ability to communicate the
benefits of our unique multiservice retail proposition to high quality
customers, many of whom may never have previously switched supplier. This is
in stark contrast to the traditional and costly routes to market - billboards
and digital banner ads to name a few - that are adopted by most other
suppliers.
Moreover, and also unlike other routes to market, this word-of-mouth model
creates a genuine alignment of interests. Our Partners can earn meaningful
short-term financial rewards for introducing new customers to UW, as well as a
long-term residual income for as long as their customers remain with us.
As an opportunity to earn a meaningful additional income it offers genuine
flexibility, as Partners earn in their own time and on their own terms, and
it's highly accessible, as anyone can become a UW Partner, recommend UW from
anywhere and no previous experience is needed.
Almost all of our customers have signed up to UW following a recommendation
from a UW Partner. In some cases this only generates a one-off income, but in
most cases Partners can generate real financial security for themselves and
their families - something that has once again started to strike a real chord
around the country in recent years.
The pandemic reinforced the appeal of the UW Partner opportunity, with rising
demand for an alternative, flexible income stream to supplement earnings. More
recently with the inexorably rising cost of living, we're experiencing a
further surge in interest as UK consumers increasingly look for additional
ways to bolster their household finances.
OUR CORE SERVICES
We help UK households to save time and money by bundling together all their
essential home services into one. Whilst a number of price comparison sites
seek to provide an all-encompassing home services proposition on a brokerage
basis, we are unique in doing this on a genuinely integrated basis, as the
actual retail supplier across each of our core services. We believe this is
the only way to earn the trust and loyalty of our customers, as we can manage
their end-to-end experience.
Yet we are essentially a virtual business. Instead of owning any of the
underlying infrastructure assets necessary to provide our services, we rely on
the investments made by others, and resell their services. This approach is
founded on strong, long-term commercial relationships with the wholesale
suppliers of the core services we supply. It is also capital-light, ensures
access to emerging technologies, avoids any obsolescence risk, whilst enabling
us to retain full control of our retail proposition.
Our suppliers recognise the value of our unique approach to each of the
markets we operate in, and the importance of ensuring we maintain a
competitive and attractive customer proposition so our word-of-mouth model
continues to thrive. In return, they benefit from a complementary and clearly
differentiated route to market which increases their market share, whilst the
proven sustainability of our business model, the strength of our balance
sheet, and the longevity of our multiservice customers means we benefit from
long term competitive terms.
We believe these are genuinely mutually beneficial relationships, and the
average tenure for suppliers - typically over 15 years - is testament to their
strength, and the value that both sides attribute to them.
None of this would be possible without our in-house technology platform, which
is managed by a team of engineers who are innovating daily to deliver seamless
customer and Partner experiences. By fully integrating all the household
services we supply into a single monthly bill, supported by a single set of
central overheads, our technology gives us the fundamental, long-term cost
advantage that enables us to sustainably compete with other suppliers in each
of the markets we operate in.
Energy
The Energy market landscape has experienced an unprecedented upheaval since
the energy crisis began in October last year. Unsustainable pricing and
hedging practices have resulted in 30 companies supplying over four million
customers going into administration in the last year.
The customer impact has gone well beyond a change of supplier. The rapid
inflation in wholesale prices have led to two consecutive significant
increases in the Government price cap - a key driver of the cost of living
crisis. And with most suppliers not currently accepting new customers unless
onto a very expensive fixed deal, more than 22 million households are now on
standard variable tariffs, priced at the Government price cap, and switching
across the market has dramatically reduced.
Our long term, sustainable approach to pricing, giving customers a guaranteed
discount to the Government price cap, led to us being consistently the most
competitively priced supplier since October. The combination of this
attractive pricing and record low churn, resulted in our energy service base
growing by 13% in the last year, heavily skewed towards the second half.
We have continued to focus our growth in this period on high quality
customers. We chose not to participate in the multiple opportunities to
acquire customer bases from insolvent suppliers during the autumn (through the
Supplier of Last Resort ("SOLR") process) and have maintained our focus on
acquiring multi-service home-owners through our unique word of mouth route to
market.
Despite our rapid return to growth, our customer service quality has remained
market leading, and we were delighted to have won three awards in the Uswitch
energy awards 2022 including 'Best Customer Service', 'Most Likely to
Recommend' and 'Best Rewards' in addition to coming runner-up for 'Best App'.
More recently, we topped the Citizens Advice Bureau ("CAB") rankings - a
testament to our focus and investment in this area, and the exceptional work
of our teams providing the support.
Ofgem continues to run multiple concurrent consultations on interventions to
prevent any recurrence of unsustainable practices, including, but not
restricted to pricing, hedging, consumer credit balance management, direct
debit management, price cap review timeframes etc. We welcome this increased
scrutiny, and Ofgem's desire to ensure a sustainable energy market. Equally
we are constantly alert to the risk of unintended consequences of highly
prescriptive regulatory intervention, not least the significant administrative
burden that this puts on suppliers.
Consumer engagement with the transition to net zero may have waned somewhat in
the face of rising bills, but remains on a longer term upward trend. Whilst
we view ourselves as a multiservice provider, not simply an energy supplier,
we have both a direct role to play in the transition, and also an indirect
role, by helping our customers to do likewise. The key priority for the
energy retail industry is the smart meter roll-out programme. Not only is
this vital to the broader transition to net zero, it also improves billing
accuracy and customer satisfaction, and critically, it helps customers
actively monitor in real time how much energy they are using.
We maintain our belief that Government intervention is required if the smart
rollout is to achieve its full potential - namely the introduction of
legislation to remove the ability for customers to opt-out from the national
rollout programme by refusing to have a new smart meter installed.
We continue to move ahead of the wider market in our smart meter rollout
programme, with penetration now at 65% (up from 57% at the start of the year)
despite our recent acceleration in growth. In order to focus on our core
multiservice customer proposition, and to ensure the continued cost-effective
rollout of smart meters to our customers, we took the decision to divest UWHS,
our smart meter installation business, in March. The new owners will
continue to fulfil our smart rollout obligations in line with our growth.
Our boiler installation business (Glow Green) made a loss of £1.9m during the
year. This disappointing performance resulted from a combination of labour
and supply chain issues, a more competitive post-pandemic environment, and
start-up costs associated with entering the solar panel and battery
installation market. In order to focus on our core multiservice proposition,
we took the decision to divest the business in March to Charles Wigoder,
Executive Chairman of the Group, for cash consideration of £1.
Wholesale energy markets remain volatile. We have just seen the Government
price cap increase by 54% from April, and it is now inevitable that prices
will rise significantly again in October. In addition, the ramifications of
the additional SOLR processes are yet to be fully seen, with costs still to be
absorbed by the market and new requirements on existing and new market
entrants expected. Energy prices are therefore likely to remain high for the
foreseeable future.
We have already seen early indications of customers actively taking steps to
reduce their energy consumption in response to higher prices, and it seems
increasingly likely that additional Government support will be provided for
those most at risk of fuel poverty this winter. The combination of these two
factors suggest that any increase in bad debts across the energy industry this
year will be more manageable than had previously been feared, although
uncertainty remains over the eventual impact.
In any event, we expect to be sheltered to a degree from these pressures by
our customer demographic which skews towards more mature, creditworthy, and
multi-service homeowners.
Broadband
Consumer expectations for broadband services have never been higher with
demands for faster speeds and better in-home Wi-Fi coverage as a result of the
pandemic continuing to impact consumer behaviour.
In H1 we saw a dip in our Broadband service numbers following a period of
heavy re-contracting during the pandemic as people sought faster speeds; this
resulted in many of our prospects being locked into their existing suppliers
last summer with large termination fees and being cautious about disrupting
their service.
As the national full fibre roll-out gathers pace, the quality of the in-home
Wi-Fi experience is increasingly the important factor for customers, and a
focus for us. In April last year we launched our Whole Home Wi-Fi solution,
powered by the Amazon Eero mesh system, and we are pleased that a significant
number of new customers now benefit from this chargeable option. In
September we upgraded the router we offer at no additional cost to all new
customers and we're delighted that in February Which? awarded it Best Buy
status.
This February, responding to increasing budgetary pressures on household
finances, and in stark contrast to the CPI+ annual price increases forced on
their customers by the majority of large broadband providers, we launched a
competitive pricing structure for new customers alongside a guarantee that we
will not increase prices mid-contract. At the same time, we introduced a new,
faster Full Fibre 500mb product to meet growing consumer demand at the top of
the market. Combined with faster overall customer growth, these improvements
have resulted in a return to growth for our broadband service and we expect
this improved trajectory to continue.
Mobile
The UK mobile market continues to be split between the big four Mobile Network
Operators ("MNOs") focussed on coupled airtime and handset contracts and tied
closely to a handset refresh cycle, and the largely SIM-only Mobile Virtual
Network Operators ("MVNOs") offering more flexibility and more data at lower
prices. SIM-only demand continues to grow and with more customers turning away
from expensive handset contracts, our focus remains on a SIM-first strategy.
We continue to improve the quality of service for our new and existing
customers with the roll-out of 4G and Wi-Fi calling during the year.
Additionally, we have been proactively migrating some of our customers from
legacy tariffs onto our current proposition to improve their experience at low
or no additional cost.
In September we launched a new tariff structure to reflect the wider market
demand for increased data allowances. At the same time we improved the pricing
of our Unlimited data SIM - a change which has allowed us to offer one of the
best value Unlimited tariffs in the market with additional value for
households taking multiple SIMs.
In the second half of the year, the majority of mobile providers began to
charge again for EU roaming. Along with a handful of other MVNOs we have
continued to offer this to our customers at no additional cost as a key
customer benefit and differentiator of our proposition.
Our mobile base has grown by over 7% in the last year. We look forward to
accelerating this rate of growth over the year ahead on the back of the
additional energy discounts customers can now receive by taking a UW mobile
service in our new bundle structure, and as we continue to deliver feature
improvements such as 5G.
Insurance
Insurance is increasingly proving itself a natural fit for our brand and
business model, and we are pleased to have grown the number of insurance
services by 36% over the year, and with the pace of growth now accelerating.
We have invested in building an insurance platform that can scale rapidly with
high operating leverage, and are very excited by the growth opportunity that
insurance represents for UW as our fourth core service: it is a key pillar of
our future growth strategy.
We have been directly authorised by the FCA as an insurance broker since
October 2020. We welcome their intervention to ban dual pricing in the home
and motor insurance markets during the year, as well as the increased scrutiny
of pricing practices more broadly, which we believe improves customer outcomes
and strengthens our competitive position.
Across our Home Insurance and Boiler & Home Cover products, we continue to
achieve very strong renewal retention rates of over 90%, demonstrating our
focus on delivering excellent value combined with a best-in-class experience.
In March 2022 we integrated insurance into our bundle proposition, which has
resulted in an increased propensity amongst new customers to take an insurance
service at sign-up, and is an important step towards further scaling our
insurance business.
We are committed to taking significant market share in the insurance markets,
and are continuing to invest significantly in order to achieve this aim.
Over the coming year we therefore will be focussed on further accelerating our
insurance service growth, securing and, where possible, increasing our
margins, and evaluating opportunities to expand our range of insurance
products in the future.
Cashback card
Our unique Cashback card proposition enables our customers to save up to 10%
at a range of participating retailers, and 1% on all their other spend,
applied automatically as a credit to their next UW bill.
It materially increases the savings opportunity we offer our customers, from
four essential household services to all their everyday spending - groceries,
fuel, travel, clothing etc.
We launched the Cashback card in 2008 following the global financial crash and
subsequent rise in cost of living. Petrol had just reached the £1/litre
mark, and demand was high. As we enter a further period of considerably
greater pressure on household budgets, we believe the Cashback card has a
significant role to play in supporting our customers and accelerating our
growth.
During the year we paid out £5.8m of cashback to our customers, and spend on
the programme has grown to over £368m annually, making it one of the largest
prepaid card programmes in the UK. In January we migrated over 300,000 cards
to Mastercard, a move that, combined with our investment in the full stack
infrastructure, will enable us to accelerate our innovation-led product
roadmap in order to fully capitalise on the growth stimulus we believe the
Cashback card represents.
OPERATIONAL PERFORMANCE AND NON-FINANCIAL KPIs
The number of customers we supply increased during the year by over 10% to
728,680, and the number of services they take to 2,264,909. All of this
growth was achieved organically, and predominantly during H2, in spite of our
decision not to participate in the multiple opportunities which arose to
acquire customer bases from insolvent suppliers during the autumn.
Our primary focus is the residential market, and in this segment our customer
base increased by over 11% during the year. With 29 million households
across the UK, we have just 2.5% market share.
Customers 2022 2021
Residential 705,634 633,613
Business 23,046 23,798
Total 728,680 657,411
We offer our customers four core services: broadband, mobile, energy and
insurance, with many also taking our Cashback card. Customers can take any
combination of services they wish from us, but given the clear correlation
between the number of services they take and their expected lifetime value to
us, we encourage new customers to switch as many services to us as they can in
order to secure our best prices.
Services 2022 2021
Core services
Energy 1,219,836 1,079,044
Broadband 323,623 324,499
Mobile 324,773 302,654
Insurance 44,834 32,928
Other services
Cashback card 327,949 308,439
Legacy telephony 23,894 26,233
Total 2,264,909 2,073,797
Note: The table above sets out the individual services supplied to customers.
Legacy telephony comprises non-geographic numbers (08xx) and landline only (no
broadband) services provided.
The average number of services taken by new residential customers signed up by
Partners fell slightly during FY22 compared with the preceding year, mainly
due to an influx of customers over the autumn who were only looking to replace
their previous energy supplier who had ceased trading. This temporary bias
towards new customers seeking to switch only their energy to UW was still
visible, albeit less pronounced, in March 2022 on the back of 22 million
households across the UK receiving price increase notifications from their
energy suppliers in advance of the significant increase in the Government
price cap on 1 April 2022.
Average number of core service types taken by new
residential customers signed up by Partners
Q1 FY22 2.28
Q2 FY22 2.16
Q3 FY22 1.84
Q4 FY22 2.09
In late March we launched a simpler bundle proposition for our customers, in
order to give them greater flexibility in accessing our lowest energy pricing.
We expect this to have a positive impact on the average number of services
taken per customer, whilst also reducing the proportion of new customers
taking just energy from us, and leading to a greater proportion benefitting
from a genuinely differentiated multiservice UW proposition: by taking two or
more core services from us, customers are receiving a proposition that they
cannot get from any other provider, rendering them less likely to leave us.
We have long benefitted from market-leading customer loyalty, and use our
electricity supply point churn (the percentage of supply points leaving during
the period) as a proxy for overall churn. This important measure of customer
value fell significantly during the year to around 6% (2021: 13%) for the full
year, with churn continuing at historic levels of around 10% during H1
followed by a rapid reduction to an annualised rate of 3% during H2 as all the
remaining energy suppliers withdrew their 'below cost' acquisition tariffs in
October. Whilst we do not anticipate that churn will remain at this very
subdued level indefinitely, the ending of the energy price war and the
increasing regulatory scrutiny on the sustainability of suppliers and their
pricing strategies should ensure our churn rate remains considerably below
historical levels for the foreseeable future.
Average revenue per customer from providing Core and Other services increased
to £1,340 (2021: £1,254) primarily due to higher energy prices during the
winter following the Government price cap increase in October.
Supporting our customers
In order to maximise the expected lifetimes of our customers, and to earn the
trusted personal recommendations of our Partners, we must deliver a
consistently high standard of service to our customers, treat them fairly, and
live up to our promise of letting them get on with their lives and forget
about their utilities.
We rely on the efforts of our colleagues in our unified support centre to look
after all the services that our customers choose to take from us.
Historically based in north London, these teams now increasingly support our
customers from their homes throughout the UK: in offering our colleagues a
more flexible approach to working hours, and through accessing a greater pool
of talent nationwide, we believe we are well positioned to meet the needs of
our customers as we grow. During the year we invested heavily in improving
the support we offer our remote colleagues, providing them with improved home
office systems and quicker and easier access to expert knowledge that is held
within the business.
We continue to invest heavily in offering the digital experience that our
customers increasingly expect from us - enabling them to self-serve without
having to speak to one of our team if they wish. We further improved our UW
customer app and online My Account functionality, increasing the range of
self-service capabilities. We continue to employ numerous qualitative and
quantitative performance measurement tools to monitor all aspects of our
customers' interactions with us.
We are pleased to have been recognised as providing the Best Customer Service
(https://www.uswitch.com/gas-electricity/uswitch-energy-awards-2022/) in the
Uswitch Energy Awards 2022, and to have been identified as the supplier that
customers are most likely to recommend. With numerous energy suppliers
collapsing in the autumn, inflationary trends becoming apparent across all the
markets in which we operate, and our growth rate accelerating, we have
received significantly greater levels of contact from our customers in recent
months; these endorsements are vital to our word of mouth marketing model, and
are a testament to the positive attitudes and hard work of our support
teams.
Supporting our Partners
The significant acceleration in our organic growth which started during the
autumn was driven by an enthusiastic response from our Partners to the
improved competitive landscape and the demand for a sustainable, secure and
good value energy supplier.
As the energy market dynamics shifted in the autumn and our Partners began to
understand how much more referable the UW customer proposition had become, and
grow in confidence,
we re-prioritised elements of our product roadmap accordingly.
Following the removal of social distancing restrictions, Partners continued to
consistently sign up around 40% of new customers and Partners remotely,
realising the ability to conduct their referrals nationally as opposed to
locally, accessing a broader range of their friends and family and in a more
convenient and efficient fashion.
We are pleased with the impact of the Customer Bonus that we launched last
April, simplifying the structure, and acting as a key driver of the high
recruitment and customer gathering levels we saw throughout the second half of
the year. The Customer Bonus was originally conceived in the aftermath of
the last inflationary cycle in 2008-2010, during which we were unable to offer
new Partners a sufficient near-term income. We believe we are now
exceptionally well placed to meet increasing demand for an additional
near-term income, offering up to £300 in Customer Bonus for signing-up a home
owner taking all four core services from us.
We are hugely encouraged by the number of new Partners who joined during the
second half of the year, and believe that we can play an important role in
helping thousands of families more than offset the increased cost of living
they are facing, simply by recommending UW.
Our community of Partners is in a very different mode from 12 months ago.
Confidence is returning, momentum is building, and whilst an informal word of
mouth route to market will never respond instantaneously to improved market
conditions, there has been an encouraging uptick in activity. The number of
Partners actively referring customers, the value of Customer Bonuses earned,
and the number of new and existing Partners earning them, all reached record
levels towards the end of FY22.
OUR PRIORITIES FOR THE YEAR AHEAD
Having delivered 10% growth in customer and service numbers in the second half
of the year alone, and with a high degree of confidence over our continued
growth trajectory, we have set three key business priorities for the year
ahead.
Building a great culture and environment for our people
We aim to create a working environment - at home and in the office - that
attracts great people, keeps great people and gets everyone talking proudly
about UW.
The acceleration in the number of customers joining UW, combined with the
severe squeeze on household incomes leading to heightened concern from our
customers over their monthly outgoings, means our teams are extremely busy.
This, set against relatively recent adoption of entirely new ways of working,
with the majority of our colleagues working from home all or most of the time,
means we must redouble our efforts to create a working environment and culture
that enables our people to grow as we grow, that values and respects the
commitment and hard work of our teams, all of whom contribute to delivering
our 'all your home services in one' proposition day in, day out.
Looking after our customers as we grow
We aim to deliver a multiservice customer experience that customers will
increasingly refer to their friends and families, and view this as a key
metric of our success.
We seek to reduce the need for customers joining UW to contact us directly by
providing easier means to help themselves faster; this includes streamlining
our onboarding processes and proactively providing them with timely
information on each of the services they take from us.
We will continue to invest in delivering best in class service and support to
all our customers, through growing our technology and customer support teams
and improving the systems they use to do so.
Maximising high-quality customer growth
More and more people are turning to UW to earn an additional income, and we
see considerable value in broadening the appeal of our Partner opportunity,
making it more accessible and easier to make a success of, but still highly
rewarding.
With the aim of helping tens of thousands of people, from all backgrounds, to
meet the challenges of the rising cost of living we will continue to invest in
making it easier for our Partners to successfully refer UW and earn in the
process - be it improving the competitiveness of our customer offer, or the
support and tools we provide to our Partners.
Ultimately we want all our customers to become genuine brand advocates, and to
make additional savings on their bills simply by recommending UW to people
they know.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
21 June 2022
Financial Review
Overview of Results
Adjusted Statutory
2022 2021 Change 2022 2021 Change
Revenue £967.4m £861.2m 12.3% £967.4m £861.2m 12.3%
Profit before tax £61.9m £56.1m 10.3% £47.2m £43.5m 8.5%
Basic EPS 63.2p 57.4p 10.1% 45.1p 41.5p 8.7%
Dividend per share 57.0p 57.0p 0.0% 57.0p 57.0p 0.0%
In order to provide a clearer presentation of the underlying performance of
the group, adjusted profit before tax and adjusted basic EPS exclude share
incentive scheme charges of £1.0m (2021: £1.4m) and the amortisation of the
intangible asset of £11.2m (2021: £11.2m) arising from entering into the
energy supply arrangements with npower in December 2013; this decision
reflects both the relative size and non-cash nature of these charges. In
FY22 adjusted profit before tax and adjusted basic EPS also exclude: (i) the
loss on the disposal of UWHS (£1.1m), (ii) the write-off of goodwill
associated with the conditional disposal of Glow Green of (£1.5m); and (iii)
the profit on disposal of a freehold property of (£0.6m). The
reconciliations for adjusted profit before tax and adjusted EPS are set out in
notes 2 and 3 respectively.
Summary
Adjusted profit before tax increased by 10.3% to £61.9m (2021: £56.1m) on
higher revenues of £967.4m (2021: £861.2m). Statutory profit before tax
increased 8.5% to £47.2m (2021: £43.5m). These increases mainly reflect
the impact of customer growth and higher retail energy prices from 1 October
2021 (in line with an increase in the Government price cap).
Distribution expenses increased to £29.7m (2021: £27.8m), mainly reflecting
increased Partner activity during the second half.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year by £7.6m to £84.4m (2021: £76.8m), mainly as a result of higher staff,
technology and infrastructure costs as we responded to the rapid increase in
the rate of customer growth during the autumn.
The bad debt charge for the year (separately identified on the income
statement as impairment loss on trade receivables) increased to £11.6m (2021:
£11.2m) representing 1.2% of revenues (2021: 1.3%).
Adjusted earnings per share increased by 10.1% to 63.2p (2021: 57.4p), with
statutory EPS increasing by 8.7% to 45.1p (2021: 41.5p). In accordance with
previous guidance and our strong cash position, the Board is proposing to pay
a final dividend of 30p per share (2021: 30p), making a total dividend of 57p
per share (2021: 57p) for the year.
Revenues
The growth in the number of services we are supplying significantly
accelerated, with an increase of 191,000 services (2021: 51,000) during the
course of the year, taking the total number of services provided to our
customers to a little under 2.3 million (2021: 2.1 million).
The increase in revenues mainly reflects higher customer numbers and energy
prices during the period:
Revenues £m 2022 2021
Electricity 450.5 391.8
Gas 295.7 248.0
Landline and broadband 129.7 132.2
Mobile 44.7 40.6
Other 46.8 48.6
967.4 861.2
Margins
Our overall gross margin for the year was 19.5% (2021: 20.1%) mainly
reflecting the higher proportion of energy sales during the period resulting
from higher customer growth and increased prices.
Distribution and Administrative Expenses
Distribution expenses include the share of our revenues that we pay as
commission to Partners, together with other direct costs associated with
gathering new customers. These increased to £29.7m (2021: £27.8m), mainly
reflecting higher Partner commissions and incentive costs associated with our
rapid return to sustainable growth in the second half of the year.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year by £7.6m to £84.4m (2021: £76.8m), mainly as a result of higher staff,
technology and infrastructure costs. The increase in staff costs mainly
reflects the investment in strengthening our customer service and management
teams in order to ensure we continue to deliver outstanding service levels
across all of our services as our growth accelerates.
The bad debt charge for the year increased to £11.6m (2021: £11.2m)
representing 1.2% of revenues (2021: 1.3%). The proportion of customers with
at least two energy bills outstanding, fell marginally to 2.04% (2021: 2.08%).
Disposals
During the period the Group disposed of its shareholding in UW Home Services
Limited ("UWHS") on 31 March 2022 for a consideration of £1 to Lowri Beck
Holdings Limited, a specialist meter operator owned by the Calisen Group.
The net assets of UWHS at the point of disposal were £1.1m and the loss on
disposal for the Group was £1.1m. This has been shown separately on the
face of the Consolidated Statement of Comprehensive Income.
The Group also agreed to sell, subject to the necessary FCA change of control
approval, its 75% shareholdings in Glow Green Limited and Cofield Limited
("Glow Green") for a cash consideration of £1 to Charles Wigoder, Executive
Chairman of the Group. As a result, the goodwill associated with Glow Green
of £1.5m has been impaired in the current period, and this has been reflected
in the 'Goodwill impairment' line in the Consolidated Statement of
Comprehensive Income.
Since acquiring Glow Green in 2018, the business has been consistently
loss-making; this has contributed to a cumulative funding requirement of over
£6m that will remain with Glow Green as a debt to the Group and be repaid
over time. The repayment of the loan has been personally guaranteed by
Charles Wigoder. The Board believe that the disposal of Glow Green is in the
best interests of the Group given the significant management resource it would
otherwise require, particularly at a time when the growth opportunities within
the core business are so exciting.
As a smaller related party transaction, this disposal fell within the
requirements of section 11.1.10R of the Listing Rules and the Board obtained
written confirmation from its sponsor (Peel Hunt) that the terms of the
proposed transaction were fair and reasonable as far as the shareholders of
the Group are concerned.
The Group also disposed of a freehold building during the period which
realised a profit on disposal of £0.6m. This has been reflected in the
Other income line in the Consolidated Statement of Comprehensive Income.
In order to show the underlying performance of the business, the loss on
disposal of UWHS, impairment of goodwill associated with the conditional
disposal of Glow Green, and the profit on disposal of the freehold building,
have been excluded in calculating the adjusted profit before tax of £61.9m.
Cash, Capital Expenditure, Working Capital and Borrowings
We ended the period with a net debt position including lease liabilities of
£70.4m (2021: £71.4m), comprising bank loans of £99.2m and lease
liabilities of £0.8m, less cash of £29.6m. This slight decrease mainly
reflects a reduction in lease liabilities due to the disposal of UWHS, offset
by increases in working capital. The Group's Net Debt/adjusted EBITDA ratio
remains low at around 1.0x (adjusted EBITDA of £73.7m used in this ratio
represents operating profit of £50.9m plus impairment of goodwill of £1.5m,
depreciation and amortisation of £20.3m and share incentive scheme charges of
£1.0m).
Our net working capital position showed a lower year-on-year cash outflow of
£10.4m (2021: cash outflow of £12.5m); this reflects the ongoing investment
we make in supplying broadband routers to customers and increased trade
debtors. Capital expenditure of £9.9m (2021: £10.0m) related primarily to
our continuing digital transformation programme.
Dividend
The final dividend of 30p per share (2021: 30p) will be paid on 5 August 2022
to shareholders on the register at the close of business on 15 July 2022 and
is subject to approval by shareholders at the Company's Annual General Meeting
which will be held on 26 July 2022. This makes a total dividend payable for
the year of 57p (2021: 57p).
Our medium-term intention remains to gradually return to a dividend pay-out
ratio of around 85% of adjusted EPS, whilst maintaining our long-standing
progressive dividend policy with reference to profit evolution.
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges of £1.0m
(2021: £1.4m). 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, and the fluctuations in the amount of this
charge from one year to another, 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 5 to
the financial statements in the 2022 Annual Report. The tax charge for the
year is £12.2m (2021: £11.0m).
The effective tax rate for the year was 25.9% (2021: 25.2%), this remains
higher than the underlying rate of corporation tax due mainly to the ongoing
amortisation charge on our energy supply contract intangible asset (which is
not an allowable deduction for tax purposes).
Nick Schoenfeld
Chief Financial Officer
21 June 2022
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.
The directors have carried out a robust assessment of the Company's emerging
and principal 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. A risk
relating to climate change has been added during the period. Save as set out
below the magnitude of any risks previously identified has not 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 customer 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 is able to secure the wholesale supply of all the services it offers
at competitive rates, enabling it to generate a consistently fair level of
profitability from delivering a great value bundled proposition to its
customers. There is an alignment of interests between the Group and its
wholesale suppliers which means that it is in the interests of the suppliers
to ensure that the Group remains competitive, driving growth and maximising
their benefit from our complementary route to market. Furthermore, the group
benefits from a structural cost advantage, due to the multiple revenue streams
it receives from customers who take more than one service-type, and only
having one set of overheads. The Group has alternative sources of wholesale
supply should an existing supplier become uncompetitive or no longer
available.
In relation to energy specifically, the Group's wholesale costs are calculated
by reference to a discount to the prevailing standard variable retail tariffs
offered by the 'Big 6' to their domestic customers (effectively the Government
price cap), which gives the Group considerable visibility over profit margins.
The Group's services are promoted using 'word of mouth' by a large network of
independent Partners, who are paid predominantly on a commission basis. This
means that the Group has limited 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 developing new services, and in enhancing current ones, careful
consideration is given to the likely impact of such changes on existing
customers.
In relation to the service provided to its customer 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 customers (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 reliant on its in-house developed and supported systems for the
successful operation of its business model. Any failure in the operation of
these systems could negatively impact service to customers, undermine Partner
confidence, and potentially be damaging to the Group's brand. Application
software is developed and maintained by the Group's Technology team to support
the changing needs of the business using the best 'fit for purpose' tools and
infrastructure. The Technology team is made up of highly-skilled, motivated
and experienced individuals.
Changes made to the systems are prioritised by business, Product Managers work
with their stakeholders to refine application and systems requirements. They
work with the Technology teams undertaking the change to ensure a proper
understanding and successful outcome. Changes are tested as extensively as
reasonably practicable before deployment. Review and testing are carried out
at various stages of the development by both the Technology team and the
operational department who ultimately take ownership of the system.
The Group has strategic control over the core customer and Partner platforms
including the software development frameworks and source code behind these key
applications. The Group also uses strategic third-party vendors to deliver
solutions outside of our core competency. This largely restricts our
counterparty risks to services that can be replaced with alternative vendors
if required, albeit this could lead to temporary disruption to the day-to-day
operations of the business.
Monitoring, backing up and restoring of the software and underlying data are
made on a regular basis. Backups are securely stored or replicated to
different locations. Disaster recovery facilities are either provided through
cloud-based infrastructure as a service, and in critical cases maintained in a
warm standby or active-active state to mitigate risk in the event of a failure
of the production systems.
Data security risk
The Group processes sensitive personal and commercial data and in doing so is
required by law to protect customer and corporate information and data, as
well as to keep its infrastructure secure. A breach of security could result
in the Group facing prosecution and fines as well as loss of business from
damage to the Group's reputation. Recovery could be hampered due to any
extended period necessary to identify and recover a loss of sensitive
information and financial losses could arise from fraud and theft. Unplanned
costs could be incurred to restore the Group's security.
The Group has deployed a robust and industry-appropriate Group-wide layered
security strategy, providing effective control to mitigate the relevant
threats and risks. The Group is PCI compliant and external consultants conduct
regular penetration testing of the Group's internal and external systems and
network infrastructure.
The Information Commissioner's Office ('ICO') upholds information rights in
the public interest and, where required, companies within the Group are
registered as data controllers with the ICO. If the Group fails to comply with
all the relevant legislation and industry specific regulations concerning data
protection and information security, it could be subject to enforcement
action, significant fines and the potential loss of its operating licence.
Information security risks are overseen by the Group's Information Security
and Legal & Compliance teams.
Legislative and regulatory risk
The Group is subject to various laws and regulations. The energy,
communications and financial services markets in the UK 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 material failure to comply may
result in the Group being fined and lead to reputational damage which could
impact the Group's brand and ability to attract and retain customers.
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 comply with
its licence obligations, it could be subject to fines or to the removal of its
respective licences.
The regulatory framework for the UK's energy retail market, as overseen by
Ofgem, is subject to continuous development. Any regulatory change decision
could potentially lead to a significant impact on the sector, and the net
profit margins available to energy suppliers. The current pace and extent of
regulatory change is more substantial than in previous years. In addition to
the industry-wide programmes of work, such as the rollout of smart meters, and
a growing range of environmental and social obligations, Ofgem has been
implementing a special package of reform measures. These special reforms have
arisen in response to the 'energy crisis', which emerged in the autumn of 2021
and is associated with high wholesale energy costs and a consolidation of
competition, with many new-entrant suppliers having ceased trading. The
reforms cover the future of the price cap, assessing suppliers' financial
resilience and compliance performance, and temporary interventions, in part,
to protect suppliers from their financial exposures to the wholesale market.
The Group tracks this changing landscape closely, to identify risks and
opportunities, to prepare for any subsequent operational changes, and also to
input directly into Ofgem's work.
The Group is also a supplier of telecoms services and therefore has a direct
regulatory relationship with Ofcom. If the Group fails to comply with its
obligations, it could be subject to fines or lose its ability to operate. The
implementation of the European Electronic Communications Code will result in
an increased regulatory burden and an even stronger Ofcom focus on compliance
monitoring. Regulatory changes to the fixed line and broadband switching
processes for next year are substantial and require cooperation from all fixed
telecom providers. The Group is closely engaged in the relevant forums and
industry groups to both influence and prepare for the changes.
The Group is authorised and regulated as an insurance broker for the purposes
of providing insurance services to customers by the Financial Conduct
Authority ("FCA"). In addition, the Group holds consumer credit permissions
related to the provision of staff and Partner loans and hire purchases. If the
Group fails to comply with FCA regulations, it could be exposed to fines and
risk losing its authorised status, severely restricting its ability to offer
insurance services to customers and consumer credit services to staff and
Partners.
Recent regulatory changes relating to insurance pricing and future expected
changes around increased consumer protections could have a significant impact
on the financial services sector as a whole and will need to be implemented
across the business. The Group is closely monitoring and keeping abreast of
these regulatory developments in order to prepare the business for the
upcoming changes in this sector.
In general, the majority of the Group's services are supplied to consumers in
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 telecommunications markets respectively), the Department
for Business, Energy and Industrial Strategy ('BEIS'), and the 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.
Political and consumer concern over energy prices, broadband availability and
affordability, vulnerable customers and fuel poverty may lead to further
reviews of the energy and telecoms markets which could result in further
consumer protection legislation being introduced. 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.
The Group is also aware of and managing the impact of a developing regulatory
landscape in relation to climate change and the Net Zero transition. We have
recently appointed a new Head of Sustainability role to support us in
implementing developments in relation to the environment and climate change.
To mitigate the risks from failure to comply with legislative requirements in
an increasingly active regulatory landscape, the Group's Legal &
Compliance team has developed and rolled out robust policies and procedures,
undertakes regular training across the business, continually monitors legal
and regulatory developments and has recently recruited additional members into
the Legal & Compliance team in order to increase available capacity and
expertise.
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.
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, 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 customers from
increasing their indebtedness are not always fully recovered.
Bad debt within the telephony industry may arise from customers 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.
Wholesale price risk
Whilst the Group acts as principal in most of the services it supplies to
customers, 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 largely
protected from technological risk, capacity risk or the risk of obsolescence,
as it can purchase the precise 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 typically 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 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 customer demand can be subject to
considerable short-term fluctuations depending on the weather. The Group has a
long-standing supply relationship with Eon (formerly npower) under which the
latter assumes the substantive risks and rewards of buying and hedging energy
for the Group's customers, and where the price paid by the Group to cover
commodity, balancing, transportation, distribution, agreed metering,
regulatory and certain other associated supply costs 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, which is set at the start of each
quarter; this may not be competitive against the equivalent supply costs
incurred by new and/or other independent suppliers. However, if the Group
did not have the benefit of this long-term supply agreement it would need to
find alternative means of protecting itself from 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 by others or increased price competition, could impact future
profit margins and growth rates. In order to maintain its competitive
position, there is a consistent focus on improving operational efficiency.
New service innovations are monitored closely by senior management and the
Group is generally able to respond within an acceptable timeframe where it is
considered desirable to do so, by sourcing comparable features and benefits
using the infrastructure of its existing suppliers. The increasing
proportion of customers 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, further reduces 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. 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 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 some of the
Group's 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 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,
services required by customers could in due course be sourced from another
provider.
The development of localised energy generation and distribution technology may
lead to increased peer-to-peer energy trading, thereby reducing the volume of
energy provided by nationwide suppliers. As a nationwide retail supplier,
the Group's results from the sale of energy could therefore be adversely
affected.
Similarly, the construction of 'local monopoly' fibre telephony networks to
which the Group's access may be limited as a reseller could restrict the
Group's ability to compete effectively for customers in certain areas.
Smart meter rollout risk
The Group is in part reliant on third party suppliers to fully deliver its
smart meter rollout programme effectively. In the event that the Group suffers
delays to its smart meter rollout programme the Group may be in breach of its
regulatory obligations and therefore become subject to fines from Ofgem. In
order to mitigate this risk the Group dual-sources (where practicable) the
third party metering and related equipment they use.
The Group may also be indirectly exposed to reputational damage and litigation
from the risk of technical complications arising from the installation of
smart meters or other acts or omissions of meter operators, e.g. the escape of
gas in a customer's property causing injury or death. The Group mitigates
this risk through using established reputable third party suppliers.
Energy industry estimation risk
A significant degree of estimation is required in order to determine the
actual level of energy used by customers 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 customers. However, this risk is mitigated by the relatively high
proportion of customers who provide meter readings on a periodic basis, and
the high level of penetration the Group has achieved in its installed base of
smart meters.
Gas leakage within the national gas distribution network
The operational management of the national gas distribution network is outside
the control of the Group, and in common with all other licensed domestic gas
suppliers the Group is responsible for meeting its pro-rata share of the total
leakage cost. There is a risk that the level of leakage in future could be
higher than historically experienced, and above the level currently expected.
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. This risk is mitigated through conducting appropriate
pre-acquisition due diligence where relevant.
Virus outbreak risk
In the event of a disease or virus outbreak (or different variants of an
existing disease or virus emerging) which are resistant to vaccinations and/or
treatments, and which causes serious incapacity amongst those infected, the
Company faces a number of risks including: (i) staff may be unable to attend
their normal place of work and fulfil their normal duties due to falling ill
or being required to self-isolate (either due to exposure to carriers of the
virus/disease, or to reduce the likelihood of being so exposed); (ii) the
Company may be required to shut Network HQ to prevent transmission of the
virus/disease in the workplace; (iii) the efficiency of our operations may be
reduced; (iv) we may be unable to recruit and train new members of staff; (v)
customers may find it more difficult to contact the company; (vi) we may be
unable to resolve faults and challenges faced by customers which require a
visit to their home or other engineering works to be carried out; (vii)
customers may stop paying their bills, or we may be required by the Government
to offer payment holidays to customers in respect of their utilities (in a
similar fashion to the mortgage payment provisions), putting pressure on the
Company's working capital; (viii) we may be restricted from carrying out
normal debt enforcement procedures including suspension of telephony services
and installation of smart meters; (ix) the Company's Partners may find it more
difficult to grow their businesses during a period when restrictions on
movement are imposed by the Government; (x) we may be unable to visit
customers' homes to install smart meters; (xi) the various providers of third
party infrastructure used to supply our services may be unable to cope with
the increased demands placed upon them; and (xii) churn could increase during
periods when customers are isolated at home.
These are mitigated by: (i) the Company has proven technology to enable most
employees to carry out their duties remotely; (ii) the demographic mix of our
customer base is heavily skewed towards homeowners and older/retired
customers; this means we are significantly less exposed to payment issues than
most other providers of similar services; (iii) the Company has a strong
balance sheet with modest gearing, and access to significant, recently
refinanced, additional debt facilities (if required) to cover any temporary
pressure on working capital; in extremis, these could be enhanced by a
temporary suspension of the dividend; (iv) the Company has developed tools
which are now in widespread use, enabling Partners to sign-up new customers,
recruit new Partners, and to help existing Partners support new Partners
remotely to teach them how to build their own successful UW business; and (v)
the wide range of services provided to customers gives us significant
resilience from a revenue and profit perspective against an external event
which affects any individual revenue stream.
Climate change risk
Climate change has the potential to significantly impact the future of our
planet. Everyone has a role to play in reducing the effects of harmful GHG
emissions in our atmosphere and ensuring that we meet a 1.5°C target in line
with the Paris Agreement. No business is immune from the risks associated with
climate change as it acts as a driver of other risks and affects government
decision-making, consumer demand and supply chains. In recognition of this,
the Group has designated climate change as a standalone principal risk for our
business and has assigned the Legal & Compliance Director as the owner for
managing climate change risk.
We are committed to implementing the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) and this year, we have made our
first set of disclosures consistent with the TCFD framework in our 2022 Annual
Report including our considerations of the specific risk implications to the
Group arising from climate change.
We are developing our metrics and planning our targets to achieve Net Zero by
2040 in line with SBTi. To assist with this, we are working with third parties
and have invested in software to develop and manage progress against our
targets.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2022
Note 2022 2021
£'000 £'000
Revenue 1 967,433 861,204
Cost of sales (778,958) (688,104)
Gross profit 188,475 173,100
Distribution expenses (29,686) (27,849)
Administrative expenses (84,423) (76,820)
Share incentive scheme charges (960) (1,377)
Amortisation of energy supply contract intangible (11,228) (11,228)
Total administrative expenses (96,611) (89,425)
Impairment loss on trade receivables (11,566) (11,213)
Impairment of goodwill (1,536) -
Other income 1,844 1,175
Operating profit 50,920 45,788
Financial income 136 84
Financial expenses (2,709) (2,358)
Net financial expense (2,573) (2,274)
Loss on disposal of subsidiary (1,139) -
Profit before taxation 47,208 43,514
Taxation (12,205) (10,955)
Profit for the period 35,003 32,559
Profit and other comprehensive income for the year attributable to owners of 35,467 32,577
the parent
Loss for the year attributable to non-controlling interest (464) (18)
Profit for the period 35,003 32,559
Basic earnings per share 3 45.1p 41.5p
Diluted earnings per share 3 45.0p 41.4p
Consolidated Balance Sheet
As at 31 March 2022
Assets 2022 2021*
£'000 £'000
Non-current assets
Property, plant and equipment 26,180 34,865
Investment property 8,345 8,575
Intangible assets 152,418 160,626
Goodwill 3,742 5,324
Other non-current assets 32,855 28,595
Total non-current assets 223,540 237,985
Current assets
Inventories 4,152 6,325
Trade and other receivables 50,463 51,666
Current tax receivable - 726
Accrued income 134,917 120,395
Prepayments 4,077 4,809
Costs to obtain contracts 15,151 15,702
Cash 29,647 25,056
Assets classified as held for sale 3,838 -
Total current assets 242,245 224,679
Total assets 465,785 462,664
Current liabilities
Trade and other payables (38,101) (30,374)
Accrued expenses and deferred income (113,493) (122,295)
Current tax payable (8) -
Liabilities classified as held for sale (7,551) -
Total current liabilities (159,153) (152,669)
Non-current liabilities
Long term borrowings (99,215) (89,376)
Lease liabilities (766) (7,096)
Deferred tax (1,078) (1,145)
Total non-current liabilities (101,059) (97,617)
Total assets less total liabilities 205,573 212,378
Equity attributable to equity holders of the parent
Share capital 3,982 3,970
Share premium 147,112 145,094
Capital redemption reserve 107 107
Treasury shares (5,502) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 61,935 70,306
206,484 212,825
Non-controlling interest (911) (447)
Total equity 205,573 212,378
* The presentation of the balance sheet has been re-stated to reclassify the
Costs to obtain contracts on the face of the statement, previously these were
included in Trade and other receivables and Prepayments (refer to the
Presentation of financial statements section of the Notes to the consolidated
financial statements in the Annual Report).
Consolidated Cash Flow Statement
For the year ended 31 March 2022
2022 2021
£'000 £'000
Operating activities
Profit before taxation 47,208 43,514
Adjustments for:
Net financial expense 2,573 2,274
Impairment of goodwill 1,536 -
Loss on disposal of subsidiary 1,139 -
Depreciation of property, plant and equipment 4,558 4,731
Profit on disposal of fixed assets (940) (47)
Amortisation of intangible assets 15,786 14,550
Amortisation of debt arrangement fees 436 356
Decrease/(increase) in inventories 2,173 (1,694)
Increase in trade and other receivables (including Costs to obtain contracts) (18,750) (6,713)
Increase/(decrease) in trade and other payables 6,144 (4,046)
Share incentive scheme charges 960 1,377
Corporation tax paid (11,528) (10,945)
Net cash flow from operating activities 51,295 43,357
Investing activities
Purchase of property, plant and equipment (2,196) (2,582)
Purchase of intangible assets (7,747) (7,457)
Disposal of property, plant and equipment 1,567 100
Interest received 136 98
Cash flow from investing activities (8,240) (9,841)
Financing activities
Dividends paid (44,787) (44,708)
Interest paid (2,630) (2,002)
Interest paid on lease liabilities (238) (246)
Drawdown of long term borrowing facilities 65,000 30,000
Repayment of long term borrowing facilities (55,000) (35,000)
Fees associated with borrowing facilities (597) -
Repayment of lease liabilities (1,530) (1,321)
Issue of new ordinary shares 2,032 1,206
Cancellation of B shares in subsidiary (2) -
Cash flow from financing activities (37,752) (52,071)
Increase/(decrease) in cash and cash equivalents 5,303 (18,555)
Net cash and cash equivalents at the beginning of the year
25,056 43,611
Net cash and cash equivalents at the year end 30,359 25,056
Cash and cash equivalents per balance sheet 29,647 25,056
Cash and cash equivalents included within assets classified as held for sale 712 -
Net cash and cash equivalents at the year end 30,359 25,056
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Share Share premium Capital redemption reserve Retained earnings Non-controlling interest Total
capital
Treasury shares JSOP
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 April 2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
Profit and total comprehensive income 32,559
- - - - - 32,577 (18)
Dividends - - - - - (44,708) - (44,708)
Credit arising on share options 1,377
- - - - - 1,377 -
Deferred tax on share options (8)
- - - - - (8) -
Issue of new ordinary shares 8 1,198 - - - - - 1,206
Balance at 31 March 2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
Balance at 1 April 2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
35,003
Profit and total comprehensive income
- - - - - 35,467 (464)
Dividends - - - - - (44,787) - (44,787)
Credit arising on share options 960
- - - - - 960 -
Deferred tax on share options (11)
- - - - - (11) -
Issue of new ordinary shares 14 2,018 - - - - - 2,032
Cancellation of B shares in subsidiary (2)
(2) - - - - - -
Balance at 31 March 2022 3,982 147,112 107 (5,502) (1,150) 61,935 (911) 205,573
Notes
1. Revenue
Revenue by service
2022 2021
£'000 £'000
Electricity 450,544 391,813
Gas 295,696 248,008
Fixed communications 129,703 132,241
Mobile 44,673 40,580
Other 46,817 48,562
967,433 861,204
The Group operates solely in the United Kingdom.
2. Alternative performance measures
In order to provide a clearer presentation of the underlying performance of
the group, adjusted profit before tax and adjusted basic EPS exclude share
incentive scheme charges and the amortisation of the intangible asset arising
from entering into the energy supply arrangements with npower in December
2013; this decision reflects both the relative size and non-cash nature of
these charges. The loss for the period attributable to the non-controlling
interest is excluded as these losses are not attributable to shareholders of
the Company. In FY22 adjusted profit before tax also excludes: (i) the loss
on the disposal of UWHS, (ii) the write-off of goodwill associated with the
conditional disposal of Glow Green; and (iii) the profit on disposal of a
freehold property; this decision reflects the one-off non-operating nature of
these items.
2022 2021
£'000 £'000
Statutory profit before tax 47,208 43,514
Adjusted for:
Loss for period attributable to non-controlling interest 464 18
Amortisation of energy supply contract intangible assets 11,228 11,228
Share incentive scheme charges 960 1,377
Loss on disposal of subsidiary - UWHS 1,139 -
Impairment of goodwill - Glow Green 1,536 -
Profit on sale of freehold property (603) -
Adjusted profit before tax 61,932 56,137
3. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
2022 2021
£'000 £'000
Earnings for the purpose of basic and diluted EPS 35,467 32,577
Share incentive scheme charges (net of tax) 793 1,194
Amortisation of energy supply contract intangible assets 11,228 11,228
Loss on disposal of subsidiary - UWHS 1,139 -
Impairment of goodwill - Glow Green 1,536 -
Profit on disposal of freehold office building (net of tax) (488) -
Earnings excluding share incentive scheme charges and amortisation of 49,675 44,999
intangibles for the purpose of adjusted basic and diluted EPS
Number Number
('000s) ('000s)
Weighted average number of ordinary shares for the purpose of basic EPS 78,601 78,433
Effect of dilutive potential ordinary shares (share incentive awards) 286 273
Weighted average number of ordinary shares for the purpose of diluted EPS 78,887 78,706
Adjusted basic EPS 1 (#_ftn1) 63.2p 57.4p
Basic EPS 45.1p 41.5p
Adjusted diluted EPS1 63.0p 57.2p
Diluted EPS 45.0p 41.4p
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.
4. Dividends
2022 2021
£'000 £'000
Prior year final paid 30p (2021: 30p) per share 23,559 23,524
Interim paid 27p (2021: 27p) per share 21,228 21,184
The Directors have proposed a final dividend of 30p per ordinary share
totalling approximately £23.6 million, payable on 5 August 2022, to
shareholders on the register at the close of business on 15 July 2022. In
accordance with the Group's accounting policies the dividend has not been
included as a liability as at 31 March 2022. This dividend will be subject to
income tax at each recipient's individual marginal income tax rate.
5. Related parties
Identity of related parties
The Company has related party relationships with its subsidiaries and with its
directors and executive officers. Related party transactions are conducted
on an arm's length basis.
Transactions with key management personnel
Directors of the Company and their immediate relatives control approximately
16.3% 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:
2022 2021
£'000 £'000
Short-term employee benefits 3,200 2,882
Deferred shares bonus 443 383
Social security costs 428 386
Post-employment benefits 12 11
4,083 3,662
Share incentive scheme charges 42 139
4,125 3,801
During the year, the Group acquired goods and services worth £Nil (2021:
£Nil) from companies in which directors have a beneficial interest. No
amounts were owed to these companies by the Group as at 31 March 2022.
During the year, the Group sold goods and services worth £Nil (2021: £Nil)
to companies in which directors have a beneficial interest.
During the year directors purchased goods and services on behalf of the Group
worth £306,000 (2021: £145,000). The directors were fully reimbursed for
the purchases and no amounts were owing to the directors by the Group as at 31
March 2022. During the year the directors purchased goods and services from
the Group worth approximately £28,000 (2021: £27,000) and persons closely
connected with the directors earned commissions as Partners for the Group of
approximately £6,000 (2021: £7,000).
As set out in note 6, the Group has agreed to sell, subject to the necessary
FCA change of control approval, its 75% interests in Glow Green Limited and
Cofield Limited to Executive Chairman Charles Wigoder.
Subsidiary companies
During the year ended 31 March 2022, the Company purchased goods and services
from the subsidiaries in the amount of £96,000 (2021: £153,000 purchased by
the Company from the subsidiaries).
During the year ended 31 March 2022 the Company also received distributions
from subsidiaries of £50,000,000 (2021: £50,000,000). At 31 March 2022 the
Company owed the subsidiaries £55,257,000 which is recognised within trade
payables (2021: £61,204,000 owed by the Company to the subsidiaries).
6. Disposals
The Group disposed of its shareholding in UW Home Services Limited ("UWHS") on
31 March 2022 for consideration of £1 to Lowri Beck Holdings Limited, a
specialist meter operator owned by the Calisen Group. The net assets of UWHS
at the point of disposal were £1.1m and the loss on disposal for the Group
was £1.1m. This has been shown in a separate line on the face of the
Consolidated Statement of Comprehensive Income.
The Group has also agreed to sell, subject to the necessary FCA change of
control approval, its 75% shareholdings in Glow Green Limited and Cofield
Limited ("Glow Green") for cash consideration of £1 to Charles Wigoder,
Executive Chairman of the Group.
Since acquiring Glow Green in 2018, the business has been consistently
loss-making; this has contributed to a cumulative funding requirement of over
£6m that will remain with Glow Green as a debt to the Group and be repaid
over time. The repayment of the loan has been personally guaranteed by
Charles Wigoder. The Board believe that the disposal of Glow Green is in the
best interests of the Group given the significant management resource it would
otherwise require, particularly at a time when the growth opportunities within
the core business are so exciting.
As a smaller related party transaction, this disposal fell within the
requirements of section 11.1.10R of the Listing Rules and the Board obtained
written confirmation from its sponsor that the terms of the proposed
transaction were fair and reasonable as far as the shareholders of the Group
are concerned. In the light of the consideration level the goodwill
associated with Glow Green of £1.5m has been impaired in the current
period. This has been reflected in the goodwill impairment line in the
Consolidated Statement of Comprehensive Income.
The assets and liabilities of Glow Green have been reclassified as held for
sale on the balance sheet. A summary of these assets and liabilities is
shown below.
2022 2021
£'000 £'000
Assets classified as held for sale
Property, plant and equipment 673 -
Inventories 934 -
Trade and other receivables 1,519 -
Cash and cash equivalents 712
3,838 -
Liabilities classified as held for sale
Trade and other payables (7,064) -
Accrued expenses and deferred income (101) -
Finance lease liabilities (386) -
(7,551) -
7. Basis of preparation
The financial information set out above does not constitute the Group's
statutory information for the years ended 31 March 2022 or 2021, 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 2021. Statutory accounts for 2021 have
been delivered to the Registrar of Companies and those for 2022 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).
8. Directors' responsibility statement
The directors confirm, to the best of their knowledge:
(a) the financial statements, prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006, 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, Co-Chief Executives' 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
Andrew Lindsay - Co-Chief Executive Officer
Stuart Burnett - Co-Chief Executive Officer
Nick Schoenfeld - Chief Financial Officer
Beatrice Hollond - Senior Non Executive Director
Andrew Blowers - Non Executive Director
Melvin Lawson - Non Executive Director
Julian Schild - Non Executive Director
Suzi Williams - Non Executive Director
By order of the Board
1 (#_ftnref1) Adjusted basic and diluted EPS 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.
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