REG - Telecom Plus PLC - Final Results
27/06/2023 07:15
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RNS Number : 9655D Telecom Plus PLC 27 June 2023
Embargoed until 07.00 27 June 2023
Telecom Plus PLC
Final Results for the year ended 31 March 2023
"An exceptional performance with record revenues, profits and customer growth"
Telecom Plus PLC (trading as Utility Warehouse and UW), the UK's only supplier
of bundled household utility services, today issues its final results for the
year ended 31 March 2023.
Financial Highlights
● Revenues increased to £2,475.2 million (2022: £967.4m)
● Adjusted pre-tax profit up 55% to £96.2 million (2022: £61.9m)
● Adjusted EPS up 57% to 99.2p (2022: 63.2p)
● Statutory pre-tax profit up 81% to £85.5 million (2022: £47.2m)
● Statutory EPS up 92% to 86.6p (2022: 45.1p)
● Full year dividend of 80p (2022: 57p) per share
Operational Highlights
● Record organic growth
○ 22% increase in customers, taking our total base to 886,579 (2022:
728,680)
○ 24% increase in number of services supplied to 2.8 million (2022:
2.3 million)
● Sustainable multiservice cost advantage enabled us to save our
customers over £30m on their energy bills alone during the year
● Insurance business more than doubled to over 100,000 policies
● Ranked top supplier in Uswitch Energy Awards for 'Best Customer
Service' and 'Most Likely to Recommend'; 3rd in Which? Broadband Satisfaction
survey
● 25% increase in Partner numbers to almost 60,000 (2022: 48,000)
reflecting ongoing strong interest in our income opportunity as cost of living
pressures continue to be felt by UK households
Outlook
● Comfortable double-digit annual percentage customer growth, leading
to a broadly corresponding increase in adjusted pre-tax profits
● Ongoing investment in our services, people and technology with new
specialist customer support hubs in Burnley and Selkirk
● Positioned to scale our insurance business with establishment of
in-house broker and insurer
Andrew Lindsay & Stuart Burnett, Co-CEOs, said:
"This has been an outstanding year for the company: the fundamental strengths
of our business model have reasserted themselves and delivered a strong
outcome for all our stakeholders - particularly for our customers who
benefitted from the lowest energy prices in the country throughout the year,
saving over £30m on their bills.
The recent fall in the Ofgem Price Cap is welcome news for UK households,
although energy prices remain substantially above historical levels. When this
challenge is combined with reduced government support, rising mortgage costs
and continuing high inflation, the need for households to make savings across
all their essential utilities has never assumed such high importance. As the
UK's only multiservice utility provider, UW remains uniquely positioned to
help households to do exactly that, and we have seen a strong start to the
current year, with recent customer growth putting us firmly on track to meet
our goals.
However, we seek to go further than simply helping customers to save time and
money on their household bills: through the UW Partner opportunity, thousands
of people across the UK are earning a much-needed additional income every
month. We expect the ongoing pressure on household budgets to continue to
drive significant growth in the number of Partners recommending our
market-leading services to their friends and family.
This unique combination of offering consumers both meaningful savings and
additional earnings in the current economic environment underpins our target
of welcoming an additional million customers to UW over the medium term."
There will be a virtual meeting for analysts today at 9.00am. Please contact
CEN Advisory at: julian@cenadvisory.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
For investor relations:
CEN Advisory
Julian Wais
07720 999764
For media relations:
Lansons Communications LLP
Tom Baldock / Ed Hooper
07860 101715
/ 07783387713
utilitywarehouse@lansons.com
About Telecom Plus PLC ("Telecom Plus"):
Telecom Plus, which owns and operates Utility Warehouse (UW), is the UK's
leading multiservice utility provider, offering bundled household services -
energy, broadband, mobile and insurance - through one account.
Customers benefit from the convenience of a single monthly bill, consistently
good value across all their utilities and exceptional levels of service.
Customers sign up through a network of local UW Partners all across the
country. These Partners recommend UW's services to friends, family and people
they know by word of mouth.
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 an exceptional performance during FY23 with record
revenues, record profits, and record organic growth in both customer and
service numbers.
Adjusted pre-tax profits increased by 55% to £96.2m (2022: £61.9m)
reflecting both the strong double-digit growth we achieved in our customer and
service numbers over the last 18 months, and the significant rises in the
Ofgem Energy Price Cap over the period, partially offset by extra growth
related costs and an increase in the value of the energy savings we gave our
customers to a record level of over £30m.
Revenues grew by more than £1.5bn to £2,475.2m (2022: £967.4m) reflecting
both the strong organic growth achieved in customer and service numbers, and
the impact from progressively higher energy prices during the year.
Adjusted earnings per share for the year rose by 57% to 99.2p (2022: 63.2p).
Statutory pre-tax profits rose by 81% to £85.5m (2022: £47.2m), and
statutory EPS rose by 92% to 86.6p (2022: 45.1p).
We comfortably exceeded our internal growth targets for the year, with
customer numbers increasing by 157,899 (2022: 71,269) to 886,579 and service
numbers rising by 533,239 (2022: 191,112) to 2,798,148. The difference between
our growth in service numbers of 23.5% and customer numbers of 21.7%
demonstrates the strong appeal of our differentiated bundled proposition, even
during a year when energy prices dominated the domestic media agenda.
Our strong customer demographic (skewing towards multiservice homeowners),
competitive market positioning (where we are consistently offering the UK's
lowest energy prices to both new and existing customers), and limited appetite
amongst other suppliers to attract new customers during a period of rising
prices, resulted in our energy customer churn for the year remaining below 3%,
although in recent months it has ticked up modestly to around 5% on an
annualised basis.
Interest in the income opportunity we offer to our Partners continued to grow,
particularly during the second half, reflecting increased levels of confidence
in recommending the UW customer proposition and the growing demand for an
additional income as the cost of living continued to rise. This resulted in
total Partner numbers increasing to almost 60,000 by the end of the year.
I am exceptionally proud of the vital roles played by everyone in our
business, in enabling us to deliver this record Company performance, against a
background of repeated sizeable increases in the cost of energy alongside
considerable government and regulatory intervention. To have been ranked as
top supplier during such a challenging period by USwitch in their 2022 Energy
Awards for 'Best Customer Service' and 'Most Likely to Recommend' is a huge
achievement, and testament to both the value we offer and the considerable
efforts by all of our teams to deliver the best possible customer service.
In addition to supporting our customers with the UK's cheapest energy
throughout this challenging period, we also supported our employees in
managing the rising costs that they themselves were facing, by providing them
with £800 in one-off payments over the winter, and a company-wide CPI-linked
10.1% increase in salary from 1 April 2023.
Sustainability
Our people and the communities we serve are at the heart of our strategy. As a
Company, we are culturally very focussed on our sustainability as a business -
not just in our approach to building long-term relationships with our
customers and Partners and supporting our employees, but also ensuring that we
are doing business responsibly and considering our wider impact on the
environment around us and supporting the UK's transition to net zero. I am
pleased with the further progress we have made this year towards improving our
sustainability, in particular by having delivered on our commitment to publish
a net zero transition plan and to further develop our Climate-related
Financial Disclosures.
As families across the UK continue to face high inflation and a rising cost of
living, we are very proud of the role we play in helping our customers and
Partners navigate those challenges: by sharing the benefits we derive as an
integrated multiservice supplier with our customers by giving them sustainable
long-term savings on their essential household services. Our Partner
opportunity offers hard-working people, from all walks of life, the ability to
earn an additional income to help offset the rising cost of living.
Looking ahead, our FY24 ESG objectives demonstrate the Company's continued
commitment to improving its sustainability and I look forward to delivering
further progress over the year ahead.
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 Non-Executive Chairman, is to
provide strong leadership to enable the Board to operate effectively.
We believe that open and rigorous debate around key strategic issues, risks
and opportunities 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.
Dividend and Capital Allocation
The Company continues to be highly cash generative whilst delivering rapid
growth. We are proposing a final dividend of 46p (2022: 30p), bringing the
total for the year to 80p (2022: 57p). This will be paid on 11 August 2023 to
shareholders on the register at the close of business on 21 July 2023 subject
to approval by shareholders at the Company's AGM which will be held on 4
August 2023.
The Board adopts a disciplined approach to the allocation of capital, with the
overriding objective being to enhance long-term shareholder value. Our primary
objective when allocating capital is to fund sustainable organic growth.
Beyond that we have followed a long-standing progressive dividend policy in
order to return surplus capital to our shareholders.
Going forward, the Board intends to also consider the appropriateness of using
surplus cash to return capital to shareholders through share buy backs, any
such amounts being determined by what is available after funding organic
growth, modestly growing our current dividend payout, and maintaining an
appropriate level of gearing.
Outlook
As the only fully-integrated supplier in the UK spanning four essential
household markets (energy, broadband, mobile and insurance), our one-stop-shop
proposition delivers long-term savings funded by the inherent efficiency of
our bundled multiservice proposition, and has significant and growing appeal.
It gives us a sustainable cost advantage which sets us apart from our
competitors who are focussed on each individual market: and with 97 out of
every 100 UK households taking their essential home services from one of these
other suppliers, our organic growth opportunity has barely been tapped.
Since autumn 2021 we have grown our customer numbers at an annualised compound
rate of over 20%, spanning a period during which energy commodity prices rose
strongly for the first 12 months, before falling sharply over the subsequent
and most recent eight month period. That we have been able to deliver such
strong double-digit growth during both a rising and falling environment for
energy prices gives us considerable confidence in our ability to continue
doing so in future.
The strength of our competitive position is further supported by the more
responsible regulatory environment in which demanding new capital adequacy
requirements are being imposed upon suppliers, and the low regulatory margin
allowed on energy which makes it extremely challenging for any standalone
energy supplier to sell below the level of the price cap and earn an
acceptable return on capital - something we have uniquely and consistently
done throughout the current cost of living crisis and anticipate continuing to
do in future.
There was a marginal increase in customer churn towards the end of the year as
we saw a number of suppliers tentatively re-starting their customer retention
programmes, but there has yet to be any meaningful return to proactive
customer acquisition activity - reflecting the regulatory focus on ensuring a
sustainable retail energy marketplace, the ongoing impact of the Ofgem Market
Stabilisation charge, and the low margins available to energy suppliers.
The welcome fall in the Ofgem Price Cap to £2,074 creates a modest headwind
for us over the coming year in terms of lowering our average revenue per
customer, and potentially reducing the feeling of urgency amongst people to
switch their supplier. However, in a more stable retail market, and with
energy prices looking likely to remain at around these levels for the
foreseeable future, we are confident that our unique multiservice proposition
will continue to underpin our competitive position and support further strong
organic growth.
We remain focussed on our target of welcoming an additional one million
customers to UW, with the following medium-term internal base case planning
assumptions:
· annual percentage customer growth is expected to remain
comfortably in double-digits, albeit below the record level we achieved last
year
· adjusted pre-tax profits are expected to increase broadly in line
with customer growth
· excess capital will be returned to shareholders through a
combination of modestly increasing dividends and share buy-backs, as deemed
appropriate.
Both our people and our technology are vital to delivering an exceptional UW
experience to our customers, and as we scale, we continue to invest heavily in
strengthening our teams at all levels, and evolving and improving our systems.
As we increase the size of our team in response to the ongoing rapid growth in
the number of customers we support, a key area of focus for the year ahead is
to codify our distinct UW culture and embed it throughout our increasingly
widespread employee base.
It has been exciting to see our Partners once again demonstrating their
ability to recommend our strong and differentiated consumer proposition to a
record number of households, delivering significant and high quality organic
growth. With UK households facing continuing challenges and uncertainties
over the coming year, particularly for those coming to the end of a cheap
fixed-rate period on their mortgage, we anticipate that demand from new
Partners joining UW to earn an additional income will remain strong.
I would like to thank my boardroom colleagues for their support and all our
staff and Partners for their energy, drive and hard work through a challenging
but exciting year of growth, and the contribution they are making to the
ongoing strong performance of the business.
The last twelve months have put us firmly on track to achieve our medium-term
target of welcoming an additional one million customers to UW, and we look
forward to making significant further progress over the year ahead.
Charles Wigoder
Non-Executive Chairman
27 June 2023
Co-Chief Executives' Review
The year in summary: meeting consumer demand through multiservice bundles
Throughout our 25-year history, we have consistently helped UK households
reduce the cost and hassle of running their homes. And 2023 was no different.
As the rising cost of living has been felt by the nation, we have helped
families bolster their finances through savings on their home services and
earnings through the UW Partner opportunity. This has resulted in a year of
record growth for the business, as we remain on track to deliver our
medium-term goal of welcoming one million additional customers to UW.
2023 marked the first full year since sustainable pricing practices returned
to the energy market. And with the return to a rational marketplace our
business model has demonstrated its strength.
During the financial year, our multiservice bundles have provided real value
to UW customers across all their home services, not only in delivering over
£30 million of savings on their energy bills, but also a further £8m of
Cashback card savings. The demonstrable ongoing value that we offer households
on services they were previously buying from other suppliers is a clear
ongoing driver of our growth and was a key factor in attracting nearly 160,000
net additional customers during the year.
Whilst the dynamics in each of our markets constantly vary, we continually
focus our efforts on strengthening our core multiservice customer proposition
and supporting our Partner community.
In the immediate aftermath of the energy crisis and following the failure of
around 30 suppliers in autumn 2021, we experienced a marked increase in the
proportion of new customers applying for just energy services from UW. To
address this, we simplified our application journey, incorporated insurance
into our multiservice bundles, and introduced tiered savings 'Boosts' to
encourage multiservice take up amongst new customers. These initiatives have
yielded strong results, particularly during a year in which there was near
constant media coverage of high energy prices, with the growth in the number
of services we supply (+24%) pleasingly outstripping the strong underlying
growth in customers (+22%) during the year.
By integrating insurance into our multiservice bundles in April 2022, we made
this service part of our core proposition, and saw an immediate acceleration
in the rate of take up by new customers, leading to an increase in the number
of policies from 44,834 to 100,590 over the course of the year. This is an
encouraging trend for our future multiservice growth strategy.
As confidence in the strength of our customer proposition progressively
increased amongst our Partners, and as interest in the income opportunity we
offer grew in response to the rising cost of living faced by UK households, we
saw more and more people turning to UW to bolster their incomes. The total
number of UW Partners increased by over 25% during the year, reaching almost
60,000 for the first time. This reflects the appeal of our income opportunity
in the current economic climate, and underpins the sustainability of our
current high-quality growth with our Partners continuing to demonstrate their
unique capability to introduce high-value customers (i.e. multiservice
homeowners) to UW in significant volumes.
Rather than seeking growth at any cost, we take pride in the consistent
disciplined approach we have adopted to building a long-term, sustainable
business. In a year characterised by the demands of rapid customer growth,
inflated levels of contact from our customers in response to high energy
prices, and unprecedented regulatory and Government intervention, we have
concentrated our efforts on delivering our three key business priorities:
· Building a great culture and environment for our people
· Looking after our customers as we grow
· Maximising high-quality customer growth
Through focussing all our people on these priorities, we are pleased to have
made significant progress on each front:
· increasing our employee Net Promoter Score (eNPS) to +39
· increasing our post-contact Customer Effort Score (CES), that
measures the ease with which customers can use our services, resolve a support
issue, or find the information they need, by 19% to 75 in March 2023
· delivering a 20% improvement in the proportion of new customers
taking a multiservice bundle.
All of these have contributed to our double-digit organic growth for the year
and lay the foundation for further progress in the years ahead.
This is an exciting time for the business. After several years of modest
progress, we saw a return to strong growth in autumn 2021, which continued
throughout last year. This demonstrates our ability to respond to the
challenges created by rapid customer growth and strengthens our confidence in
successfully scaling the company over the medium term.
As we look at the external macro-economic environment around us, it seems
clear that demand will remain high for the sustainable savings we offer our
multiservice customers, and for the meaningful additional income opportunity
we provide our Partners. And with 97 out of 100 UK households not yet with
UW, there is scope for considerable further growth ahead.
Looking ahead, we are confident in delivering profitable double-digit % annual
growth as we progress towards our medium-term goal of welcoming an additional
one million customers to UW.
A unique business model in the UK - Our sustainable cost advantage
As the UK's only multiservice utility provider, we receive revenue streams
from each of the services we supply to our customers, which we manage with a
single set of central overheads. This gives us significant operating
efficiencies relative to our competitors in each of our markets, and creates a
sustainable, structural cost advantage.
This ongoing cost advantage enables us to price competitively across each of
the individual services we supply, bundling them together into a unique
multiservice proposition.
By bundling their home services together, UW customers receive sustainable
long-term savings and the simplicity of a single monthly bill, whilst being
supported by our award-winning customer services team.
This differentiated UW experience delivers market-leading levels of customer
loyalty and creates a highly referable proposition that we harness through the
most powerful form of marketing being - word-of-mouth.
This word-of-mouth marketing, led by our community of UW Partners, is the key
to unlocking high levels of multiservice take-up by new customers, which in
turn, strengthens our structural cost advantage.
This self-reinforcing cycle is the core of our business model.
Bundles that reduce the cost and hassle of running a home
We supply households throughout the UK with a wide range of essential services
- energy, broadband, mobile and insurance - all under the UW brand.
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 easy to use customer app backed up by award-winning
support teams.
We believe that one supplier offering a single place for consumers to manage
all their 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
bills. And in genuinely delivering on this multiservice proposition, we
create something that is truly referable.
Loyal customers creating sustainable, long-term value
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 also seek to maximise their expected lifetime with us, by earning their
trust and loyalty in a number of ways:
· Treating our customers fairly
o We offer long-term, ongoing savings across our services, in preference to
shorter-term pricing tactics that inevitably undermine customer trust, loyalty
and longevity.
· Providing outstanding service
o We provide our customers with award-winning customer service online, on
our app and through our dedicated customer service teams, adopting a mantra of
'looking after every customer as though they were our own mum'.
· Offering customers incrementally better value with each
additional service they take
o Given the clear correlation between the number of services a customer
takes and their expected lifetime as a UW customer, it is beneficial to
both the customer and ourselves to provide additional savings to those who
take multiple services from us.
· Encouraging customers that own their home to choose UW
o Changes in who is occupying a property often leads to higher
administrative costs, greater churn and bad debt, and thus pose particular
challenges to suppliers of broadband and energy. By targeting homeowners who
are less likely to move property, we underpin the long-term value of the
business.
· Creating additional saving opportunities for our customers
o For example, through our Cashback offering (which allows customers to
further reduce their monthly bills through their everyday shopping) or through
our Customer Referral scheme.
We want UW customers to have such a positive overall experience with us that
they won't want to switch away from it, encouraging them to stay with us
longer generating sustainable, long-term returns, and recommending us to their
family and friends.
A unique Word of Mouth model that creates earning opportunities
Conventional advertising is ineffective at acquiring individual customers who
take multiple services - the proposition is too complicated, and the perceived
effort of switching is too high.
In contrast, a word of mouth recommendation from a trusted person will
overcome the natural inertia to switching multiple services simultaneously,
and deliver higher levels of multiservice take up by new customers.
We rely primarily on our community of Partners to provide these trusted
personal recommendations, and it is their word-of-mouth marketing of UW that
enables us to unlock the inherent value of a multiservice customer.
This word-of-mouth approach creates a genuine alignment of interests that is
in stark contrast to the traditional advertising strategies of our
competitors: these typically reach only a minority of highly engaged UK
consumers who are prone to serial switching and therefore unlikely to generate
long term returns.
Our Partners are paid for showing people they know how bundling their home
services with UW can save them time and money. Each time they introduce a new
customer they receive a one-off payment followed by an ongoing monthly
commission stream which continues for as long as the customer remains with UW,
and which grows as they build a team and acquire more customers.
At a time when the rising cost of living is applying increasing pressure to
households across the country, our word-of-mouth marketing model is not only
helping more and more families to benefit from much needed savings on their
bills, but is also providing an opportunity for increasing numbers of people
to more than offset the increased costs they are facing by earning a
meaningful additional income. We are seeing more and more people turning to UW
to do exactly that.
An inherently long-term business
Our 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 our lowest prices for longer in return
for switching all their services to UW.
· Our Partners receive a long-term recurring income stream from a
longer-lasting customer.
· Our shareholders access a growing earnings stream from an
inherently sustainable business.
Our bundles: best-in-class core services
Our multiservice bundles
We made a number of important improvements to our multiservice customer
proposition during the year:
i) We launched a new bundle structure centred on our 4 core services: energy,
broadband, mobile and insurance. The evolved proposition expanded the
qualifying services to include all our core products and gave customers
greater flexibility to tailor their personal bundle.
ii) We refined our customer acquisition investment in order to better attract
multiservice homeowners through the launch of our Boost incentive.
iii) We re-launched our customer referral programme with a traditional "give a
reward / get a reward" mechanic, designing these incentives to similarly
attract multiservice homeowners, as well revamping the digital referral and
onboarding experiences. We are excited by the potential for this logical
extension of our word of mouth marketing model but were frustrated to have to
postpone the planned marketing campaigns for the new referral programme in
response to the higher Ofgem Market Stabilisation Charges which we faced
during the final quarter of the financial year; we look forward to seeing a
marked increase in referral activity over the coming months.
As a result of this series of improvements, the last 12 months has seen a 20%
improvement in the proportion of new customers taking a multiservice
bundle.
In March 2023, in response to the new quarterly Ofgem Price Cap, we simplified
the structure of our ongoing multiservice energy discounts, moving from a
percentage-based discount to a consistent pounds-based discount. Importantly,
this change creates a clear and simple price promise that suits our word of
mouth marketing model whilst holding true to our 'take more, save more' value
proposition.
Energy
In a market characterised by unprecedented levels of commodity price inflation
and government intervention during the year, we were the fastest growing
retail supplier in the country, increasing the number of energy services we
supply by 24.8% from 1,219,836 to 1,522,350.
Whilst the Ofgem Price Cap increased sharply at the start of the year from
£1,277 to £1,971, underlying wholesale energy prices continued to climb,
driving retail prices to unsustainable levels with the Ofgem Price Cap soaring
to £3,549 in October. In response, the government implemented several new
schemes; the Energy Bill Support Scheme and Energy Price Guarantee supported
residential customers by bringing the effective customer cost down to £2,100
over the winter, while the Energy Bill Relief Scheme supported non-domestic
customers. Meanwhile the Ofgem Price Cap moved to a quarterly basis.
During this period the majority of energy suppliers withdrew their acquisition
tariffs and the switching market slowed dramatically. As a multiservice
supplier, we were uniquely positioned to continue acquiring customers
throughout this period, offering sustainable and market leading energy savings
funded by our margins from supplying the broadband, mobile or insurance
services that our customers also take from us, and the operational cost
advantage we enjoy as an integrated multi-utility supplier. We were pleased to
be ranked third in the Which? 2023 Energy Supplier Survey, and ended the year
replacing Utilita as the 8th largest energy supplier in the country.
In addition to implementing the numerous government support schemes, we
maintained our position at the forefront of the smart meter rollout programme,
successfully migrating our metering arrangements to Calisen group following
the divestment of UWHS in March 2022. We are delighted to have recently
passed the 1m smart meter milestone and remain fully committed to delivering
further progress on this vital element of the UK's transition to net zero.
Over the course of last winter, forward wholesale prices fell significantly,
triggering the Ofgem Market Stabilisation Charge, whereby a supplier who gains
a customer is obliged to compensate the losing supplier for a proportion of
their costs associated with hedging energy for that customer. This
additional acquisition cost resulted in us further increasing our focus on
acquiring multiservice customers during Q4, which reduced our overall growth
rate during this period.
Retail prices currently look set to stabilise at around the £2,000 level for
the rest of the year: whilst this is a significant reduction compared to
recent months, it is roughly twice the level of the past decade. This ongoing
additional pressure on household budgets can be expected to drive continued
high demand for the long-term energy savings that we offer.
Ofgem remains focussed on its programme of retail market reform: through a
series of market compliance reviews, it is tightening up on unsustainable
supplier practices, and is currently consulting on numerous topics relating to
Price Cap allowances - notably debt and EBIT margins - to ensure supplier
sustainability. In so doing, Ofgem are ensuring a level playing field exists
between suppliers and creating a market in which an innovative, sustainable
multiservice proposition like ours stands to benefit. Further reform is
expected as the immediate energy crisis recedes and Ofgem returns its focus to
the transition to net zero.
Broadband
The broadband market continued to be highly competitive during the year,
albeit market-wide switching rates remain lower than pre-pandemic levels due
to greater concern over broadband disruption given the increased reliance many
consumers place on connectivity when working from home. This reluctance to
switch has tempered our broadband growth, albeit we still saw a near 10%
increase in service numbers to 354,118 over the course of the year.
In response to highly competitive market dynamics, we reduced our broadband
margins 18 months ago by offering introductory prices to new
customers. Whilst we would prefer not to offer these tariffs, they make us
one of the most competitively priced suppliers, particularly for our
multiservice customers. In the past few months many broadband providers have
increased their back-book prices by CPI+, and there are some early signs of a
welcome upward market-wide trend emerging in introductory tariffs. Thanks to
our multiservice model, we were able to keep our price increases below CPI and
maintain our introductory tariffs unchanged.
With consumers increasingly focused on speed and reliance, we were pleased to
be ranked 3rd in the 2023 Which? Broadband Satisfaction Survey, behind Zen and
Hyperoptic. Our broadband router retained its Best Buy status from Which? and
is supplemented by our whole home wifi Amazon eero proposition for larger
households. Together, these demonstrate our focus on offering our customers
what they value - quality services at affordable prices, as part of a
multiservice bundle.
We extended our long-term partnership with TalkTalk for a further five years,
gaining improved terms and access to their favourable agreements with
alternative fibre networks. With 25% of new customers already taking full
fibre services from us, this will enable us to accelerate our full fibre
rollout, and we are pleased to be adding CityFibre's footprint this summer,
increasing our addressable full fibre market to over 12.5m properties
nationwide.
Mobile
The trend in the mobile market towards sim-only contracts and higher average
data consumption continued through the year, with consumers now typically
paying between £15 and £20 per month. Both our £20 unlimited data mobile
plan, and our family bundle of four unlimited data sims for £59 per month,
are market leading, particularly given they are on the EE network which
provides the highest (99.6%) population coverage in the UK.
Our competitive and straightforward proposition has led to further strong
growth of over 20% in our mobile business, ending the year with 394,145
services. With over half of our new customers benefiting from the peace of
mind and value offered by our unlimited data plan, our mobile proposition
epitomises what UW stands for.
We extended our long running partnership with EE giving us the additional
flexibility to grow our base whilst continuing to offer market leading
products and data allowances. UW customers will soon start to benefit from
mobile coverage on the London Underground, and we expect to commence our
preparation for launching 5G services in the coming months.
Insurance
This year was transformative for our insurance business, with our policy book
more than doubling from 44,834 to 100,590. In focussing on delivering high
quality cover and excellent value to our customers, we continue to benefit
from strong retention rates of around 95%, and as our overall customer growth
has increased, we have seen demand from new and existing customers remain
strong for our insurance services. We are seeing the early benefits of this
growth on our unit economics, and expect this emergent trend to accelerate as
we achieve further economies of scale.
A key driver behind the marked acceleration in growth this year was the
incorporation of insurance into our multiservice bundles and new customer
onboarding journey at the start of the year. This has validated our strategy
of further embedding insurance into our core proposition, and we were pleased
that the Gibraltar insurance regulator ('GFSC') approved our insurer licence
for UWI Limited ('UWI') in March 2023 (see below).
By combining our platform of 100,000+ insurance policies with end-to-end
vertical integration through ownership of our own in-house broker and insurer,
we are now positioned to genuinely scale our insurance business and become one
of the UK's major personal lines insurance businesses over the coming years.
Cashback card
Our Cashback card saw significant growth this year with UW customers spending
over £500m (2022: £368m) and earning Cashback on everyday spending of £8.2m
(2022: £5.8m), an increase of over 40%. With households across the UK facing
significant increases in the cost of living, our Cashback card offers a unique
and valuable additional way of helping to reduce monthly outgoings.
Whilst not a material profit centre in its own right, our Cashback card adds
huge value to our business, generating regular positive touchpoints with
active cardholders through real time alerts of cashback earned, and creating
genuine loyalty amongst customers who benefit from reductions in their monthly
bills.
During the year we further strengthened our portfolio of retailer
relationships and launched Cashback Insights, our first step in leveraging our
new app platform to show our customers how much they have saved to date, and
to help them maximise their future cashback earnings.
Given the ongoing high demand we are seeing for the savings that our Cashback
card offers, we continue to seek additional retailer relationships and invest
in improving the customer experience further, confident that this will
translate into higher customer satisfaction and continued market-leading
retention rates across all of our services.
Set up of UWI Limited
As part of our long-term insurance strategy, we were pleased that our
application to the GFSC for authorisation for our own in-house insurer ("UWI")
was successful. UWI has been authorised to operate across six classes of
personal lines insurance, and has been approved to passport and write business
into the UK, and we started writing our first policies in April 2023.
In order to enable us to run our own in-house Insurer effectively, we have
hired an executive team of industry veterans, alongside a highly experienced
board, chaired by Andrew Blowers OBE. Our UWI CEO Austyn Tusler, has worked in
the insurance industry for over 25 years, including at AIG and Hiscox, and
most recently as CUO of UK General. He is supported by a talented and capable
team with deep experience of Personal Lines Insurance at leading names
including the AA, Canopius and Direct Line Group, and decades of experience
operating insurers in Gibraltar.
We believe that the launch of UWI will further accelerate scalable and
profitable growth of our insurance business, by enabling us to:
· Further integrate our insurance products into our multiservice
customer journeys, significantly improving penetration
· Improve our range of products
· Drive stronger claims management to protect our brand &
better oversee the customer experience we deliver
· Operate more efficiently through end-to-end integration and
control of our supply chain, enabling us to deliver greater value to our
customers and shareholders
· Secure our supply-chain and provide cover for our customers
throughout the underwriting cycle as we grow our insurance policy book
Investing for growth
Supporting our customers
In order to ensure our customers remain with us for the long term, and to earn
the trusted personal recommendations of our Partners, we must consistently
deliver a high standard of service, treat them fairly, and live up to our
promise of letting them get on with their lives and forget about their
utilities.
The rapid growth we have experienced over the last year, coupled with
widespread concern and uncertainty amongst consumers about energy prices,
resulted in a more-than-doubling in the number of calls and emails that we
received from our customers. In response, we not only significantly
increased the size of our internal customer service teams, but also developed
relationships with two UK-based outsource partners who specialise in the
energy sector in anticipation of a further uplift in contact over the winter
months. By the end of the financial year we had started tapering down this
temporary resource, and were very pleased with the flexibility that it
offered, and the service levels we delivered to our customers as a result.
We rely on the efforts of our colleagues in our customer support teams to look
after all the services that our customers take from us. Through their hard
work and commitment, we not only managed the increased number of contacts we
received from our customers, but further improved the level of service we
delivered, particularly during the winter, and were delighted that our
post-call Customer Effort Score (CES) increased 19% over the course of the
year.
We expanded our customer support capabilities through the opening of our first
"centre of excellence" in Burnley with a focus on supporting new customers
joining UW and specialising in the first 60 days of their journey with us:
this new team complements those already working remotely and in our Colindale
offices to meet the needs of our customers as we grow.
Given the increasing inflationary pressures on household budgets this year,
supporting our most vulnerable customers has been a key priority. We
significantly expanded our Ability to Pay teams to ensure that customers who
need further assistance with their bills are treated sensitively by highly
trained staff. Through our work with the Citizens Advice Bureau, we have also
implemented a UW hardship fund to build upon existing means of help - such as
the Warm Home Discount - and to create a pool of money that can be used to
help customers on a discretionary basis.
To ensure our growing customer base is properly protected, we continue to
invest in our cybersecurity and anti-fraud infrastructure. Over the last
twelve months, we have increased the size of our privacy team and implemented
additional data privacy training for employees. Our security operations centre
is FIRST.Org accredited and our Data & Record Management is governed by
Data, Security and Data Privacy teams with comprehensive processes and
practices.
Investing in our customer experience continues to be a key business priority,
both as a way of supporting our word-of-mouth marketing model and also our
underlying operational efficiency. Major progress has been made on our new
customer onboarding, bill payment and home-mover digital journeys, as well as
the development of multiple new mobile and broadband self-serve capabilities.
Our customer service advisor experience has seen similar further improvements,
enabling faster and more efficient query resolution for our customers.
The strength of our customer service was recognised in our win for 'Best
Customer Service' at the Uswitch Energy Awards 2022, and our highly commended
award for 'Best Customer Support' in the Expert Reviews Energy Awards.
Considering the rise in customer calls triggered by inflationary pressures,
government intervention in the energy sector, and our rapid customer growth,
these endorsements are a testament to effective policies and the hard work and
commitment of our support teams.
Supporting our Partners
As our multiservice bundles have become increasingly compelling, so the
confidence, enthusiasm and activity levels of our Partners have increased.
Armed with a highly referrable customer proposition, and invigorated by the
increased demand for the savings and earnings they can offer to people they
know, momentum has built amongst our Partners, and they have played a key role
in delivering the record levels of customer growth we have achieved this
year.
In the face of rising living costs, people from all walks of life across the
UK - nurses, teachers, students, retirees - have been joining UW in record
numbers to earn an additional income as UW Partners. As higher energy prices
evolved into a broader inflationary trend during the year, many found that
they could not balance their household finances through savings alone. The
opportunity to earn a secondary income that could more than offset the rising
costs they are facing has proven a popular proposition.
To capitalise on this increased demand for the UW Partner opportunity, and to
help more Partners succeed and earn, we took a number of steps to strengthen
both our customer and Partner propositions during the year:
· Through implementing the market-wide energy 'Faster Switching' in
the summer we significantly reduced the delay between customer sign up and
commission payment, resulting in faster earnings for Partners
· In introducing our multiservice savings Boost in the autumn, we
increased the referability of our customer proposition and therefore the
earnings opportunity for Partners
· In January we extended the full Customer Bonus to new Partners,
enabling them to start earning sooner, and helping more experienced Partners
to accelerate the building of their teams and their long-term residual
income
· To support our growing Partner community, we were excited to
launch our inaugural 'Save a Bundle' billboard, radio and digital marketing
campaign towards the end of the year - seeking to raise consumer awareness of
UW, add credibility to the UW proposition and facilitate our Partners when
recommending us to people they know
Given the key role our Partners play in unlocking our highest value customers
- multiservice homeowners - the ongoing growth of our Partner community puts
us in a strong position for continued high-quality customer acquisition.
We are hugely proud of the positive societal impact the business is having in
helping our Partners to earn an additional income and to meet the current
rising cost of living; and we will continue to invest in supporting our
Partners and helping them to achieve their goals through UW.
Operational performance and non-financial KPIs
We exceeded our growth targets for the year with customer numbers rising by
21.7% (2022: 10.8%) to 886,579.
Customers 2023 2022
Residential 866,403 705,634
Business 20,176 23,046
Total 886,579 728,680
This growth was slightly skewed towards the first half due to the adverse
impact of the Ofgem Market Stabilisation Charge in the second half of the
year.
The total number of services we supply to our customers grew by 23.5% (2022:
9.2%) to 2,798,148.
Services 2023 2022
Core services
Energy 1,522,350 1,219,836
Broadband 354,118 323,623
Mobile 394,145 324,773
Insurance 100,590 44,834
Other services
Cashback card 405,118 327,949
Legacy telephony 21,827 23,894
Total 2,798,148 2,264,909
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.
Customers can take any combination of services - energy, broadband, mobile or
insurance - they wish from us. The more services a customer takes, the greater
the savings they make, and there is a clear correlation between the number of
services taken and the customers' expected lifetime value to the business.
We saw healthy growth across all our core services, especially in energy which
has clearly been the focal point of media attention and widespread consumer
interest. However we were particularly pleased with the significant
acceleration in the uptake of insurance, and the 125% growth in this service
since it was incorporated into our multiservice bundles at the start of the
year.
Average number of Core services 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
Q1 FY23 2.24
Q2 FY23 2.53
Q3 FY23 2.24
Q4 FY23 2.38
Following the launch of our simpler multiservice bundles at the start of the
year we saw a solid improvement in the average number of service types being
taken by new customers. As concerns over the future upward trajectory of
energy retail prices increased during the summer months, we saw a temporary
surge in the proportion of customers switching three or more services to us in
order to access our competitive fixed price energy tariff. This returned to
more normalised levels over the autumn, but increased again in the final
quarter as we sharpened our focus on attracting our highest value customers -
multiservice homeowners - in response to the incremental cost of acquiring new
customers that resulted from the increased Ofgem Market Stabilisation Charge
since January 2023.
The average number of Core services taken by new customers is a key metric
that underpins the long-term sustainability of the business: customers taking
two or more Core services from us are benefitting from a genuinely
differentiated proposition, as well as greater ongoing savings, meaning that
they are less likely to leave us.
Our long-term focus on winning our customers' loyalty and maximising their
lifetimes with us continues to pay dividends, and our electricity supply point
churn (the percentage of supply points leaving during the period, which we use
as a proxy for overall churn) was extremely low at just 2.8% for the year
(2022: 6%). There was a marginal increase towards the end of the year as we
saw a number of suppliers tentatively re-starting their customer retention
programmes, but there has yet to be any meaningful return to proactive
customer acquisition activity - reflecting both the regulatory focus on
ensuring a sustainable retail energy marketplace, the impact of the Ofgem
Market Stabilisation charge, and the low margins available to energy only
suppliers. Whilst churn is unlikely to remain at these record low levels, we
are confident that our differentiated multiservice proposition and sustainable
competitive pricing strategy mean that our churn will remain below the levels
we were experiencing during the energy price war.
Average revenue per customer increased significantly to £3,025 (2022:
£1,340). This was primarily due to materially higher energy prices,
particularly in the second half of the year.
The year ahead: our three FY24 Business priorities
Having exceeded our internal 20% growth target for 2023, we are firmly on
track to achieve our medium-term growth target of welcoming an additional one
million customers to UW. As the immediate challenges of a year characterised
by a return to rapid growth, heightened concern about energy prices, and
significant regulatory and Government intervention are left behind, we have
taken the opportunity to revisit our business priorities and adjust them to
reflect the growth trajectory for the year ahead:
1. Evolving our distinct company culture
Our goal is to motivate and empower our people to deliver an excellent
customer experience and ultimately, continue to drive growth. With a
significantly larger and growing team, this year we will be focussing on
evolving our distinct UW culture to help attract, develop and keep great
people. And as a result, create the type of working environment, mindset and
talent needed to deliver our growth targets.
To do this, we will focus on three core objectives:
· We will define, develop and start to embed our distinct culture
across all aspects of the experience that our people have with UW.
· We will develop and grow our People Leaders to become culture and
career builders.
· Lastly, we want to create an environment where our
customer-facing teams feel empowered and engaged, and want to stay with UW.
2. Delivering a seamless multiservice customer experience
Our multiservice customer experience is key to our success and following the
opening of our first customer service hub in Burnley in autumn 2022, we will
shortly be opening our second hub in the Scottish borders town of Selkirk:
this new centre of excellence will be focussed on ensuring our prepayment
energy customers are fully supported against the wider backdrop of increasing
affordability challenges.
Within this business priority, we are also focussed on delivering a
streamlined digital experience for both new and existing customers, to enable
our customers to access and make changes to their UW services without having
to contact us.
For those that do want to contact us, we will continue to focus on providing
our customer service advisors with the latest technical systems to support the
delivery of award winning service.
3. Bringing more multiservice homeowner customers on board
The current climate offers a unique opportunity for UW to continue to help UK
households both save and earn in the face of the increased cost of living;
maximising the number of services our home owning customers take maximises
their savings and delivers the most valuable long-term customer relationships
for UW. And our word-of-mouth route to market remains at the heart of our
ongoing growth strategy as the best route to acquiring these, our highest
value customers.
To this end our primary goal is to significantly grow our existing Partner
community, but also to continue to innovate around and extend our
word-of-mouth model to appeal to new audiences such as through our rapidly
growing Customer Referral programme.
Delivering exceptional value and service remains at the heart of our core
multiservice proposition and we will continue to invest in each of our
individual services, as well as our multiservice bundled benefits, with the
goal of maximising customer lifetimes and increasing customer advocacy to
further fuel our future growth.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
27 June 2023
Financial Review
Overview of Results
Adjusted Statutory
2023 2022 Change 2023 2022 Change
Revenue £2,475.2m £967.4m 155.9% £2,475.2m £967.4m 155.9%
Profit before tax £96.2m £61.9m 55.4% £85.5m £47.2m 81.1%
Basic EPS 99.2p 63.2p 57.0% 86.6p 45.1p 92.0%
Dividend per share 80.0p 57.0p 40.4% 80.0p 57.0p 40.4%
Throughout this report the Group presents various alternative performance
measures ('APMs') in addition to those reported under IFRS. The measures
presented are those adopted by the Chief Operating Decision Makers ('CODMs',
deemed to be the Co-Chief Executive Officers), together with the main Board,
and analysts who follow us in assessing the performance of the business. In
order to provide a presentation of the underlying performance of the group,
adjusted profit before tax and adjusted basic EPS exclude share incentive
scheme charges of £2.8m (2022: £1.0m) and the amortisation of the intangible
asset of £11.2m (2022: £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). In FY23 adjusted profit before
tax excludes the Group profit on disposal of Glow Green of £3.6m. The
reconciliations for adjusted profit before tax and adjusted EPS are set out in
notes 2 and 3 respectively of the financial statements.
Summary
Adjusted profit before tax increased by 55.4% to £96.2m (2022: £61.9m) on
higher revenues of £2,475.2m (2022: £967.4m). Statutory profit before tax
increased 81.1% to £85.5m (2022: £47.2m). These increases reflect the
impact of strong organic growth in both customer and service numbers, combined
with higher retail energy prices. Within revenues, payments from the
Government EPG and EBRS energy support schemes amounted to £681.6m.
Distribution expenses increased to £49.7m (2022: £29.7m), reflecting our
growth in customers, services, and average revenues per customer during the
year.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year by £44.6m to £129.0m (2022: £84.4m), largely due to higher staff,
technology and infrastructure costs as we responded to the faster rate of
customer growth, and to increased customer contact relating to higher energy
bills and the multiple Government schemes introduced to help shield customers
from the full impact of higher energy commodity prices.
The bad debt charge for the year (which is separately identified on the income
statement as impairment loss on trade receivables) increased to £28.7m (2022:
£11.6m), representing 1.6% of revenues for the year (2022: 1.2%) excluding
amounts paid directly to us by government (included in revenues) under their
various support schemes.
Adjusted earnings per share increased by 57.0% to 99.2p (2022: 63.2p), with
statutory EPS increasing by 92.0% to 86.6p (2022: 45.1p). In accordance with
previous guidance and our strong cash position, the Board is proposing to pay
a final dividend of 46p per share (2022: 30p), making a total dividend of 80p
per share (2022: 57p) for the year.
Revenues
The growth in the number of services we are supplying accelerated
significantly, increasing by 533,239 services (2022: 191,112) during the
course of the year, and taking the total number of services provided to our
customers to 2,798,148 (2022: 2,264,909).
The increase in revenues reflects this increase in service numbers, strong
organic customer growth since autumn 2022, and much higher energy prices
during the period:
Revenues £m 2023 2022
Electricity 1,214.7 450.5
Gas 1,028.3 295.7
Landline and broadband 132.7 129.7
Mobile 56.8 44.7
Other 42.7 46.8
2,475.2 967.4
Margins
Our overall gross margin for the year was 12.4% (2022: 19.5%) predominantly
due to the big increase in the proportion of lower margin energy sales during
the period, resulting from strong customer growth and higher retail
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 £49.7m (2022: £29.7m), mainly
reflecting higher Partner commissions and incentive costs associated with our
increased growth in the year.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year by £44.6m to £129.0m (2022: £84.4m), mainly as a result of higher
staff, technology and infrastructure costs. The increase in staff costs
mainly reflects inflation-linked salary increases and cost of living support
payments, and the continued investment in strengthening our customer service
and management teams in order to ensure we continue to deliver outstanding
support across all of our services given our increased growth. In anticipation
of materially higher levels of contact from our customers over the winter
period, we also temporarily boosted our energy customer service capacity with
additional outsourced teams, which we have since scaled back.
The bad debt charge for the year increased to £28.7m (2022: £11.6m), mainly
as a result of the impact of higher energy prices, and a consequent increase
in the number of customers having difficulty paying their bills. The
proportion of customers with at least two energy bills outstanding increased
to 2.34% (2022: 2.04%). We have invested in our Payment Solutions Team during
the period to help customers in payment difficulties. We have also established
a hardship fund to assist vulnerable customers.
Accrued Income and Accrued Expenses
The increases in accrued income to £267.6m (2022: £134.9m), and accrued
expenses to £417.4m (2022: £113.5m), at the year-end were mainly as a result
of the significant increases in energy retail prices and wholesale costs, and
the increase in the customer base.
Disposals
During the period, the Group received the necessary FCA change of control
approval and completed the previously agreed sale of its 75% shareholdings in
Glow Green Limited and Cofield Limited on 31 July 2022. This sale resulted in
a profit on disposal of £3.6m shown on a separate line in the Consolidated
Statement of Comprehensive Income, which has been excluded in calculating the
adjusted profit before tax of £96.2m in order to more accurately reflect the
underlying performance of the business.
Cash, Capital Expenditure, Working Capital and Borrowings
We ended the period with a reported net cash position including lease
liabilities of £103.4m (2022: net debt of £70.4m), comprising cash of
£193.8m less bank loans of £89.7m and lease liabilities of £0.7m. The cash
position includes £120.8m of funds received in advance associated with the
government energy support schemes, and which will diminish during the current
year as the schemes cease to apply.
The Group's underlying Net Debt/adjusted EBITDA ratio (excluding advanced
funds associated with the government energy support schemes) remains low at
around 0.2x (adjusted EBITDA of £110.1m used in this ratio represents
operating profit of £85.9m, plus depreciation and amortisation of £21.4m and
share incentive scheme charges of £2.8m).
Our net working capital position showed a year-on-year cash inflow of £146.3m
(2022: cash outflow of £10.4m), mainly reflecting the impact of the
government energy support schemes advance payments of £120.8m. Capital
expenditure of £11.0m (2022: £9.9m) related primarily to our ongoing
investment in our technology platform and software, to support our ability to
continue delivering a market leading customer experience as our multiservice
bundled customer base continues to grow.
Dividend
The final dividend of 46p per share (2022: 30p) will be paid on 11 August 2023
to shareholders on the register at the close of business on 21 July 2023 and
is subject to approval by shareholders at the Company's Annual General Meeting
which will be held on 4 August 2023. This makes a total dividend payable for
the year of 80p (2022: 57p).
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges of £2.8m
(2022: £1.0m). 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 historically, and the
fluctuations in the amount of this charge from one year to another, we are
continuing to separately disclose 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 in a consistent manner
to that adopted during previous periods. 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 of the 2023 Annual Report. The tax charge for the
year is £17.3m (2022: £12.2m). The effective tax rate for the year was 20.2%
(2022: 25.9%).
Nick Schoenfeld
Chief Financial Officer
27 June 2023
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 and Risk Committee.
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. The Group has a dedicated information security
team which provides governance and oversight ensuring the confidentiality,
availability and integrity of the Group's systems and operations whilst
ensuring that any risks and vulnerabilities that arise are managed and
mitigated.
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,
telecommunications 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 could
potentially lead to a significant impact on the sector, and the net profit
margins available to energy suppliers. The pace and extent of regulatory
change continues to be more substantial than in previous years. In addition to
the industry-wide programmes of work, such as the continuing rollout of smart
meters, and a growing range of environmental and social obligations, Ofgem has
been implementing a special package of reform measures. These specific reforms
emerged in response to the 'energy crisis': the period since the autumn 2021
associated with high wholesale energy costs, supplier failures and a
consolidation of competition. The reforms cover development of the price cap,
intensive assessment of suppliers' financial resilience and compliance
performance, and temporary interventions 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 telecommunications 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 ongoing implementation of the European Electronic Communications Code has
resulted in an increased regulatory burden and an even stronger Ofcom focus on
compliance monitoring. Regulatory changes to the fixed line and broadband
switching processes effective this calendar 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 and has
recently become authorised for insurance underwriting in Gibraltar by the
Gibraltar Financial Services Commission ("GFSC"). If the Group fails to comply
with FCA/GFSC 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 practices and the
FCA's new Consumer Duty will have a significant impact on the financial
services sector as a whole. The business has prepared and the Board has
approved an implementation plan which will continue to be informed by any
clarifications and additional guidance issued.
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 Energy Security and Net Zero ("DESNZ"), the FCA and the GFSC. 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, such as the Digital Markets,
Competition and Consumers Bill which is being monitored. Political and
regulatory developments affecting the energy and telecommunications 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.
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, and continually monitors
legal and regulatory developments. The team also conducts compliance and
assurance tests on the policies and procedures.
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
Whilst the Group's focus on multiservice home-owners acts as a mitigating
factor against bad debt, 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 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.
Underwriting risk
Whilst operating our own in-house insurer will require taking on some
underwriting risk, we will largely mitigate these risks through: (i) migrating
highly predictable existing lines of business, for which we have several years
of trading history, and have already achieved sufficient scale to maintain low
volatility and predictable returns; (ii) targeting conservative returns on
capital through a risk-averse investment strategy; (iii) where appropriate,
using conservative levels of reinsurance, including protection for catastrophe
risks such as storm, flood and freeze; (iv) using real-time and proprietary
data, such that we are aware of all risks incepted in real time, and are able
to price risks accurately, and manage overall portfolio exposure; and (v)
maintaining and growing our existing home insurance panel, such that our
in-house insurer can selectively target risk profiles that are suitable for
our balance sheet (e.g. houses with lower rebuild cost and not adversely
exposed to catastrophe (CAT) perils).
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.
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
greenhouse gas 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
impacts government decision-making, consumer demand and supply chains.
Development of climate-related policy and regulatory change as well as shifts
in consumer sentiment could impact on the Group's ability to achieve its
financial goals and result in increased compliance costs or reputational
damage.
In recognition of this, climate change risk is integrated into the Group's
risk management framework. Climate change is designated as a standalone
principal risk for the business and the Legal & Compliance Director is
assigned as the owner for managing this risk. It is designated as a controlled
risk due to the Group's agile reseller business model which means the business
is strategically resilient as it is able to respond quickly to climate change
developments and is insulated from more severe physical risks. The risk is
further mitigated through the Group's approach to understanding and monitoring
the developments and the impacts from climate change. The ESG Strategy
Committee, consisting of co-CEOs, CFO, Company Secretary, Executive Leadership
Team and senior management is updated by the ESG Working Group on climate
issues. Climate issues are then assessed and used to inform the Group's
strategy as needed. To bolster our understanding of climate change in FY23 we
created a new Head of Sustainability role and continued to use external
specialists as needed.
The Group is committed to achieving net zero greenhouse gas emissions. In line
with our commitment to develop a detailed net zero transition plan and carbon
target plan in FY23 we evaluated our emissions and target against recognised
standards including Science Based Targets initiative ("SBTi") Corporate Net
Zero Standard, the gold standard framework for emissions target-setting. We
modelled our emissions trajectory and used credible assumptions on external
factors that, as a reseller, will strongly influence the Group's
decarbonisation ability including our key suppliers' decarbonisation plans and
the UK government's published projections about the decarbonisation trajectory
of the UK energy grid. We have adjusted our target to be Net Zero on or before
2050, across scopes 1,2 and 3 to allow us to implement a credible
science-based plan by aligning with the UK government and our key suppliers.
We will use an FY22 emissions baseline, and we will set an interim target to
reduce emissions by 63% across Scopes 1, 2, and 3 by 2035. The Group will have
its targets validated by the SBTi, the leading body on emissions target
setting. Once targets are validated to SBTi we will begin tracking and
disclosing progress against them.
The Group is committed to continuing to implement the recommendations of the
Task Force on Climate-related Financial Disclosures ("TCFD").
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
Note 2023 2022
£'000 £'000
Revenue 1 2,475,160 967,433
Cost of sales (2,168,964) (778,958)
Gross profit 306,196 188,475
Distribution expenses (49,692) (29,686)
Administrative expenses (129,014) (84,423)
Share incentive scheme charges (2,849) (960)
Amortisation of energy supply contract intangible (11,228) (11,228)
Total administrative expenses (143,091) (96,611)
Impairment loss on trade receivables (28,675) (11,566)
Impairment of goodwill - (1,536)
Other income 1,156 1,844
Operating profit 85,894 50,920
Financial income 1,016 136
Financial expenses (5,051) (2,709)
Net financial expense (4,035) (2,573)
Profit / (Loss) on disposal of subsidiary 3,595 (1,139)
Profit before taxation 85,454 47,208
Taxation (17,293) (12,205)
Profit for the period 68,161 35,003
Profit and other comprehensive income for the year attributable to owners of 68,426 35,467
the parent
Loss for the year attributable to non-controlling interest (265) (464)
Profit for the period 68,161 35,003
Basic earnings per share 3 86.6p 45.1p
Diluted earnings per share 3 85.2p 45.0p
Consolidated Balance Sheet
As at 31 March 2023
Assets 2023 2022
£'000 £'000
Non-current assets
Property, plant and equipment 25,816 26,180
Investment property 8,271 8,345
Intangible assets 142,491 152,418
Goodwill 3,742 3,742
Other non-current assets 47,529 32,855
Total non-current assets 227,849 223,540
Current assets
Inventories 5,698 4,152
Trade and other receivables 58,863 50,463
Current tax receivable 3,083 -
Accrued income 267,576 134,917
Prepayments 16,954 4,077
Costs to obtain contracts 20,912 15,151
Cash 193,804 29,647
Assets classified as held for sale - 3,838
Total current assets 566,890 242,245
Total assets 794,739 465,785
Current liabilities
Trade and other payables (55,396) (38,101)
Accrued expenses and deferred income (417,354) (113,493)
Current tax payable - (8)
Liabilities classified as held for sale - (7,551)
Total current liabilities (472,750) (159,153)
Non-current liabilities
Long term borrowings (89,721) (99,215)
Lease liabilities (659) (766)
Deferred tax (901) (1,078)
Total non-current liabilities (91,281) (101,059)
Total assets less total liabilities 230,708 205,573
Equity attributable to equity holders of the parent
Share capital 4,003 3,982
Share premium 150,652 147,112
Capital redemption reserve 107 107
Treasury shares (5,502) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 82,598 61,935
230,708 206,484
Non-controlling interest - (911)
Total equity 230,708 205,573
Consolidated Cash Flow Statement
For the year ended 31 March 2023
2023 2022
£'000 £'000
Operating activities
Profit before taxation 85,454 47,208
Adjustments for:
Net financial expense 4,035 2,573
Impairment of goodwill - 1,536
(Profit) / Loss on disposal of subsidiaries (3,595) 1,139
Depreciation of property, plant and equipment 3,968 4,558
Profit on disposal of fixed assets (85) (940)
Amortisation of intangible assets 17,407 15,786
Amortisation of debt arrangement fees 506 436
(Increase)/decrease in inventories (1,546) 2,173
Increase in trade and other receivables (including Costs to obtain contracts) (176,146) (18,750)
Increase in trade and other payables 323,974 6,144
Share incentive scheme charges 2,849 960
Corporation tax paid (20,605) (11,528)
Net cash flow from operating activities 236,216 51,295
Investing activities
Purchase of property, plant and equipment (3,535) (2,196)
Purchase of intangible assets (7,480) (7,747)
Disposal of property, plant and equipment 91 1,567
Cash held in subsidiaries at disposal (596) -
Interest received 847 136
Cash flow from investing activities (10,673) (8,240)
Financing activities
Dividends paid (50,601) (44,787)
Interest paid (4,934) (2,630)
Interest paid on lease liabilities (17) (238)
Drawdown of long term borrowing facilities 55,000 65,000
Repayment of long term borrowing facilities (65,000) (55,000)
Fees associated with borrowing facilities - (597)
Repayment of lease liabilities (107) (1,530)
Issue of new ordinary shares 3,561 2,032
Cancellation of B shares in subsidiary - (2)
Cash flow from financing activities (62,098) (37,752)
Increase in cash and cash equivalents 163,445 5,303
Net cash and cash equivalents at the beginning of the year 30,359 25,056
Net cash and cash equivalents at the year end 193,804 30,359
Cash and cash equivalents per balance sheet 193,804 29,647
Cash and cash equivalents included within assets classified as held for sale - 712
Net cash and cash equivalents at the year end 193,804 30,359
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
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 at 1 April 2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
- - - - - 35,467 (464) 35,003
Profit and total comprehensive income
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
Balance at 1 April 2022 3,982 147,112 107 (5,502) (1,150) 61,935 (911) 205,573
- - - - - 68,426 (265) 68,161
Profit and total comprehensive income
Dividends - - - - - (50,601) - (50,601)
Credit arising on share options - - - - - 2,849 - 2,849
Deferred tax on share options - - - - - (11) - (11)
Issue of new ordinary shares 21 3,540 - - - - - 3,561
Disposal of non-controlling interest - - - - - - 1,176 1,176
Balance at 31 March 2023 4,003 150,652 107 (5,502) (1,150) 82,598 - 230,708
Notes
1. Revenue
Revenue by service
2023 2022
£'000 £'000
Electricity 1,214,683 450,544
Gas 1,028,267 295,696
Landline and broadband 132,678 129,703
Mobile 56,777 44,673
Other 42,755 46,817
2,475,160 967,433
The Group operates solely in the United Kingdom. During the current period,
revenue includes payments received from the Government energy support schemes
of £367.8m in respect of electricity and £313.8m in respect of gas.
2. Alternative performance measures
Throughout this document the Group presents various alternative performance
measures ('APMs') in addition to those reported under IFRS. The measures
presented are those adopted by the Chief Operating Decision Makers ('CODMs',
deemed to be the Co-Chief Executive Officers), together with the main Board,
and analysts who follow us in assessing the performance of the business.
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 2023 adjusted profit before tax also excludes the loss on
the disposal of Glow Green; this decision reflects the one-off non-operating
nature of this item.
2023 2022
£'000 £'000
Statutory profit before tax 85,454 47,208
Adjusted for:
Loss for period attributable to non-controlling interest 265 464
Amortisation of energy supply contract intangible assets 11,228 11,228
Share incentive scheme charges 2,849 960
Loss on disposal of subsidiary - UWHS - 1,139
Profit on disposal of subsidiary - Glow Green (3,595) -
Impairment of goodwill - Glow Green - 1,536
Profit on sale of freehold property - (603)
Adjusted profit before tax 96,201 61,932
3. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
2023 2022
£'000 £'000
Earnings for the purpose of basic and diluted EPS 68,426 35,467
Share incentive scheme charges (net of tax) 2,346 793
Amortisation of energy supply contract intangible assets 11,228 11,228
(Profit) / Loss on disposal of subsidiary (3,595) 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 78,405 49,675
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 79,049 78,601
Effect of dilutive potential ordinary shares (share incentive awards) 1,220 286
Weighted average number of ordinary shares for the purpose of diluted EPS 80,269 78,887
Adjusted basic EPS 1 (#_ftn1) 99.2p 63.2p
Basic EPS 86.6p 45.1p
Adjusted diluted EPS1 97.7p 63.0p
Diluted EPS 85.2p 45.0p
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 E.ON has also been adjusted. It has also
been deemed appropriate to exclude the impact of the disposal of Glow Green
Limited and Cofield Limited ("Glow Green"). The amortisation of the energy
supply contract intangible assets, the profit on the disposal of Glow Green
have not been adjusted for taxation as these items do not impact the amount of
corporation tax paid by the Group.
4. Dividends
2023 2022
£'000 £'000
Prior year final paid 30p (2022: 30p) per share 23,689 23,559
Interim paid 34p (2022: 27p) per share 26,912 21,228
The Directors have proposed a final dividend of 46p per ordinary share
totalling approximately £36.4 million, payable on 11 August 2023, to
shareholders on the register at the close of business on 21 July 2023. In
accordance with the Group's accounting policies the dividend has not been
included as a liability as at 31 March 2023. 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
11.1% 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 in the Annual Report.
Details of the total remuneration paid to the directors of the Company as key
management personnel for qualifying services are set out below:
2023 2022
£'000 £'000
Short-term employee benefits 3,816 3,200
Deferred shares bonus 723 443
Social security costs 543 428
Post-employment benefits 12 12
5,094 4,083
Share incentive scheme charges 400 42
5,494 4,125
During the year, the Group acquired goods and services worth £Nil (2022:
£Nil) from companies in which directors have a beneficial interest. No
amounts were owed to these companies by the Group as at 31 March 2023.
During the year, the Group sold goods and services worth £Nil (2022: £Nil)
to companies in which directors have a beneficial interest.
During the year directors purchased goods and services on behalf of the Group
worth £256,000 (2022: £306,000). The directors were fully reimbursed for the
purchases and no amounts were owing to the directors by the Group as at 31
March 2023. During the year ended 31 March 2023, the Group made sales to
Glow Green worth £159,300 and purchases worth £161,000. During the year
the directors purchased goods and services from the Group worth approximately
£109,000 (2022: £28,000) and persons closely connected with the directors
earned commissions as Partners for the Group of approximately £9,000 (2022:
£6,000).
As set out in note 6, during the period the Group completed the sale of its
75% interests in Glow Green Limited and Cofield Limited to Non-Executive
Chairman Charles Wigoder.
Subsidiary companies
During the year ended 31 March 2023, the Company purchased goods and services
from the subsidiaries in the amount of £782,000 (2022: £96,000 purchased by
the Company from the subsidiaries).
During the year ended 31 March 2023 the Company also received distributions
from subsidiaries of £60,000,000 (2022: £50,000,000). At 31 March 2023 the
Company owed the subsidiaries £104,376,000 which is recognised within trade
payables (2022: £55,257,000 owed by the Company to the subsidiaries).
6. Disposal
Having received FCA change of control approval, the Group completed the
disposals of its 75% shareholdings in Glow Green Limited and Cofield Limited
("Glow Green") for cash consideration of £1 to Charles Wigoder, Non-Executive
Chairman of the Group on 31 July 2022.
Since acquiring Glow Green in 2018, the business was consistently loss-making;
this contributed to a cumulative funding requirement of over £6m that
remained with Glow Green as a debt to the Group and will be repaid over
time. The repayment of the loan has been personally guaranteed by Charles
Wigoder.
As a smaller related party transaction, the 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.
The net liabilities of Glow Green as at 31 July 2022 were £(4.7)m and the
profit on disposal of the Group's 75% share was therefore £3.6m in the
current period. This has been reflected in the Profit on disposal of
subsidiary line in the Consolidated Statement of Comprehensive Income.
7. Basis of preparation
The financial information set out above does not constitute the Group's
statutory information for the years ended 31 March 2023 or 2022, 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 2022. Statutory accounts for 2022 have
been delivered to the Registrar of Companies and those for 2023 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 - Non-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
Carla Stent - 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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