REG - Telecom Plus PLC - Half-Year Results to 30 September 2024
26/11/2024 07:00
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RNS Number : 5813N Telecom Plus PLC 26 November 2024
26 November 2024
Telecom Plus PLC
Half-Year Results for the Six Months ended 30 September 2024
"Compounding double-digit customer growth continues"
Telecom Plus PLC (trading as Utility Warehouse or UW), which supplies a wide
range of utility services focussed on domestic customers, today announces its
half-year results for the six months ended 30 September 2024 (H1 FY25).
Financial highlights
● Revenues of £697.8m (H1 FY24: £883.6m) due to lower retail energy
prices
● Gross profit up 1.7% to £167.8m (H1 FY24: £165.0m)
● Adjusted profit before taxation(1) up 5.5% to £46.1m (H1 FY24:
£43.7m)
● Adjusted EPS(1) up 12.4% to 43.6p (H1 FY24: 38.8p)
● Statutory profit before taxation up 9.2% to £39.0m (H1 FY24:
£35.7m)
● Statutory EPS up 19.0% to 35.1p (H1 FY24: 29.5p)
● Underlying net debt to EBITDA ratio(1) of 0.8x (FY24: 0.9x) on a
12-month rolling basis
● Interim dividend increased to 37p per share (H1 FY24: 36p)
Operating highlights
● Customer numbers up by 66,829 to 1,078,318 (March 2024: 1,011,489),
representing annualised customer growth for H1 of over 13%
● Total services supplied up by 139,252 to 3,266,349 (March 2024:
3,127,097)
● Launched our fastest ever full fibre "900" broadband product
● Introduced our first EV tariffs offering market leading overnight
charging prices for multiservice customers
● Winner of Best Customer Service and Best Value for Money at the
uSwitch 2024 Energy awards
● All Insurance products cleared to write new policies following FCA
review, with Bill Protector remediation completed in line with non-material
provision taken in FY24
Current trading & outlook
● Following three consecutive years of compound double-digit customer
growth, we remain firmly on track to increase our customer base to 2m over the
medium term
● Macro-economic pressures and long term structural trends continue to
provide a favourable environment for new Partner recruitment and engagement
● We are now the 7th largest energy supplier in the UK, with c.3%
market share
● Confident in meeting full year FY25 guidance of 12%-14% customer
growth and £124-£128m of adjusted pre-tax profit
● Capital allocation policy updated to prioritise dividend growth,
with a target dividend payout ratio of 80-90% of adjusted net profit. On the
basis of our restated financial guidance, this would result in our full year
dividend payout increasing by at least c.13% to 94p
● Gross cost of budget changes to employer's NIC and National Living
Wage would be c.£3m in FY26 which we expect to be able to mitigate
(1.) (The reconciliations for the following alternative performance measures:
adjusted profit before tax and net debt/adjusted EBITDA, and adjusted EPS, are
set out in notes 4 and 9 respectively.)
Commenting on today's results, Stuart Burnett, CEO said:
"We are pleased to see continuing double digit compound growth in customer
numbers for the third consecutive year, by continuing to help households to
stop wasting time and money. Our unique multiservice model means we can
continue to provide market-leading savings, and sustainably outcompete, in a
wide range of market conditions. With a new, market-leading EV charging tariff
and full fibre broadband offering, our Partners have even more ways to help
their friends and family to save, whilst building a valuable long-term
additional income for themselves.
A combination of improved efficiency and the strength of our multiservice
model led to a 5.5% increase in adjusted profit before tax, notwithstanding
lower revenues in the period as a result of falling energy prices.
The tax rises introduced in the recent Budget are expected to increase the
pressures on household budgets, an environment in which the savings and
earnings provided by our business model are likely to be in growing demand.
We look forward to helping more and more people up and down the country as we
take further strides towards doubling the business to 2 million customers and
beyond."
There will be a virtual management presentation for analysts and investors
today starting at 09.00am, accessible via https://brrmedia.news/TEP_H1_25
(https://brrmedia.news/TEP_H1_25)
For more information please contact:
Telecom Plus PLC
Stuart Burnett, CEO
020
8955 5000
Nick Schoenfeld, CFO
For investor relations:
Matthew Walker
07557 224386
matthew.walker@uw.co.uk
Peel Hunt
Dan Webster / Andrew Clark
020 7418 8900
Deutsche Numis
Mark Lander / Joshua Hughes
020 7260 1000
For media relations:
Lansons Communications
Tom Baldock/Ed Hooper
07860 101715
/07783 387713
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.
Customers benefit from the convenience of a single monthly bill, consistently
good value across all their utilities and exceptional service levels.
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.
Introduction
The business has delivered uninterrupted growth in customer numbers for every
one of its 26+ years, across a broad spectrum of market and macroeconomic
conditions. For the last 3 consecutive years, during which energy prices have
risen, fallen and then stabilised, we have delivered compounding double-digit
percentage customer growth. This performance clearly demonstrates the strength
of our business model and the achievability of our medium term ambition to
increase our customer base to 2m customers and beyond, alongside continuing
strong and sustainable growth in our earnings and dividends.
We bundle essential home services together to give UW customers peace of mind,
sustainable long-term savings, and a simple single monthly bill, together with
award-winning customer service; ensuring our customers stay with UW for far
longer than our competitors. The combination of higher revenues per customer
(from taking multiple services) and lower churn generate a significantly
higher average customer lifetime value.
With a single set of central overheads supporting our multiple revenue streams
we have a sustainable, structural cost advantage; this enables us to offer the
best value across our range of services and deliver significant savings to our
customers year after year.
The key to acquiring new multiservice customers is our unique and
hard-to-replicate word-of-mouth acquisition model. Over many years we have
built up a large UK-wide community of Partners, people from all walks of life,
who are real advocates for our proposition. They overcome the natural inertia
that exists to simultaneously switch multiple essential household services by
personally explaining to family, friends, work colleagues and acquaintances
the convenience of a single UW account for all their household services and
the long-term value we offer. This unique approach enables us to successfully
grow our multiservice customer base in a way that other customer acquisition
strategies cannot replicate.
H1 FY25 Overview
With rational competition now firmly embedded in the retail energy market, the
company has continued to perform strongly, clearly demonstrating the enduring
ability of our business model to deliver double-digit organic growth under any
wholesale energy price environment; this underpins our confidence that the
profitable growth trajectory seen over the last three years will continue.
We were pleased to welcome 66,829 additional customers to UW during the first
half, representing an annualised growth rate of over 13%. This takes the total
number of customers we supply to a record high of 1,078,318. Ongoing
multiservice take-up amongst new customers seeking to maximise the savings
that they can make on their household bills resulted in the number of services
we supply to our customers increasing by a further 139,252, to a total of
3,266,349.
Our unique Partner network enables this growth by giving us a way of acquiring
high-quality hard to reach homeowner customers. Our Partners help to overcome
the natural inertia associated with switching multiple household services
simultaneously through providing a trusted source of information and
reassurance on the switching journey. Interest in our Partner income
opportunity remained strong in the period, bolstered by continued high
interest rates and cost of living pressures as well as long term trends
connected to the work transition and the UK pensions crisis.
While high-quality growth remains a core focus for the business, we have also
prioritised supporting our customers, delivering for our employees and on our
ESG objectives: we have increased support for vulnerable customers through our
prepayment customer service hub, investment in our Ability to Pay teams and
through the UW hardship fund, which is administered in partnership with the
Citizens Advice Bureau. We continue to play our role in the transition to net
zero, particularly through the smart meter rollout and our new EV tariffs.
Financial Results
Adjusted Statutory
Half year to 30 September 2024 2023 Change 2024 2023 Change
Revenue £697.8m £883.6m (21.0)% £697.8m £883.6m (21.0)%
Gross profit £167.8m £165.0m 1.7% £167.8m £165.0m 1.7%
Profit before tax £46.1m £43.7m 5.5% £39.0m £35.7m 9.2%
Basic earnings (per share) 43.6p 38.8p 12.4% 35.1p 29.5p 19.0%
Interim dividend (per share) 37.0p 36.0p 2.8% 37.0p 36.0p 2.8%
In order to provide a clearer presentation of the underlying performance of
the group, adjusted profit before tax and adjusted basic EPS exclude share
incentive scheme charges of £1.5m (2023: £2.4m), and the amortisation of the
intangible asset of £5.6m (2023: £5.6m) arising from entering into the
energy supply arrangements with E.ON (formerly npower) in December 2013; this
decision reflects both the relative size and non-cash nature of these charges.
The reconciliations for adjusted profit before tax and adjusted EPS are set
out in notes 4 and 9 respectively.
Adjusted profit before tax increased by 5.5% to £46.1m (2023: £43.7m) on
lower revenues of £697.8m (2023: £883.6m). Statutory profit before tax
increased by 9.2% to £39.0m (2023: £35.7m). The fall in revenues reflects
the reduction in the energy price cap during the period, compared with the
much higher level that prevailed in Q1 of the prior financial year. This
factor also resulted, as expected, in year on year profit growth in H1 being
lower than customer growth.
Adjusted earnings per share increased to 43.6p (2023: 38.8p). Statutory profit
before tax increased to £39.0m (2023: £35.7m), including energy supply
contract intangible amortisation of £5.6m (2023: £5.6m), and share incentive
scheme charges of £1.5m (2023: £2.4m).
We will be paying an interim dividend of 37p per share (2023: 36p) on 20
December 2024 to shareholders on the register on 6 December 2024; the
Company's shares will go ex-dividend on 5 December 2024.
Revenues
The decrease in revenue reflects lower average energy prices (against a strong
comparative in the first quarter of H1 FY24), partially offset by the increase
in the number of services we are supplying following a period of continued
strong customer growth.
Gross margin
Gross margin rose to 24.1% (2023: 18.7%), largely due to the increase in the
proportion of revenues which came from higher margin non-energy services.
Costs
Distribution expenses of £24.4m (2023: £25.4m) increased as a percentage of
sales, reflecting the higher residual commission percentages which we pay to
our Partners on non-energy services.
Administrative expenses (excluding the amortisation of the energy supply
contract intangible and share incentive scheme charges) increased to £77.8m
(2023: £76.4m). This modest increase was achieved (against the backdrop of
continued double-digit customer growth) through an ongoing focus on
operational efficiency.
The bad debt charge for the period fell to £15.1m (2023: £18.8m) due to
lower energy prices but remained broadly flat as a percentage of sales at 2.2%
(2023: 2.1%). This reflected continued elevated levels of customer non-payment
arising from previously high energy prices and the temporary moratorium on the
involuntary installation of prepayment meters. The temporary moratorium was
lifted in March 2024 and the progressive ramp-up of this debt recovery process
is ongoing. Any movements in bad debt levels across the industry are recovered
through increases in the relevant Ofgem price cap allowance, all of which
accrue to the Group. The gross cost of the October budget changes to
employer's NIC and National Living Wage would be c.£3m in FY26 which we
expect to be able to mitigate.
Cash Flow and Borrowings
The operating cash inflow of £53.6m during the period broadly reflected
operating profit and a small working capital benefit from short-term timing
differences relating to payments for wholesale energy which are not expected
to continue.
In H1 of the prior year the operating cash outflow of £142.6m mainly
reflected the unwinding of £121m of funds associated with the Government's
energy support schemes that were received in advance of the previous year end.
In addition, there were one-off timing differences relating to wholesale
energy supply payments, and higher corporation tax instalment payments.
Capital expenditure of £6.2m in the current period (2023: £6.3m) related
primarily to our ongoing technology investment programme.
Net debt (including lease liabilities) fell to £114.6m at the period end (31
March 2024: net debt £122.5m). This was mainly due to the short-term timing
benefits from wholesale energy supply payments referred to above. The
underlying net debt to EBITDA ratio (on a 12-month rolling basis) was 0.8x (31
March 2024: 0.9x).
Tax
Our effective tax rate for the first half was 29.1% (2023: 34.6%, this was
unusually high due to a movement in deferred tax). The overall level during
the current period was above the underlying rate of UK corporation tax of 25%
due mainly to the ongoing amortisation charge on our energy supply contract
intangible asset (which is not an allowable deduction for tax purposes).
Our Customers
We were delighted to welcome over 66,829 net additional customers to UW during
the first half, representing an annualised growth rate of over 13%.
H1 FY2024 H1
FY2025
FY2024
Residential 1,064,442 995,892 931,464
Small Business 13,876 15,597 17,716
Total 1,078,318 1,011,489 949,180
We continue to focus on driving high-quality customer growth, with
multiservice homeowners being our primary target demographic. Our small
business offering remained closed to new customers during the period, although
it is expected to re-open over the coming months.
Our Services
We are pleased to have seen further healthy growth across our energy, mobile
and broadband services during the period. In particular, we saw 26% annualised
growth in mobile services following the introduction of a more competitive and
market-leading second SIM mobile offer.
Service growth overall was modestly behind customer growth, reflecting several
factors including the temporary pause on new sales for some Insurance products
(which has now been lifted), strong demand for our mobile only service,
greater take up of our 2-service fixed energy tariff compared with the
3-service tariff and higher energy service churn related in part to the lack
of an EV tariff until late in the period.
H1 FY2024 H1
FY2025
FY2024
Core services
Energy 1,729,863 1,678,404 1,606,509
Broadband 384,890 374,792 363,595
Mobile 526,167 466,216 424,114
Insurance 135,113 139,109 118,889
Other services
Cashback Card 470,810 448,529 434,588
Legacy services 19,506 20,047 21,151
Total 3,266,349 3,127,097 2,968,846
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.
Energy
In June, we won Best Customer Service and Best Value for Money at the uSwitch
2024 Energy awards, demonstrating our ability to sustainably offer some of the
lowest-priced energy tariffs in the market to our multi-service customers,
supported by award-winning customer service. After starting the year at
£1,690, the Ofgem Price Cap fell to £1,568 in July before rising to £1,717
in October. We expect to see energy prices remain at around this level during
the remainder of H2.
Against this backdrop, with the energy market seeing a return to more stable
pricing levels, and with suppliers continuing to compete rationally, we
continued to grow strongly, increasing the number of energy services we supply
to 1,729,863 during H1.
We have now successfully launched our new EV proposition, which offers
market-leading overnight charging rates for our multiservice service customers
and we continue to maintain our position at the forefront of the smart meter
rollout programme. We are now at over 74% penetration against a market average
of 63% and we remain fully committed to delivering further progress on this
vital element of the UK's transition to net zero.
Ofgem has published its retail energy vision, including an aspiration to raise
the standards of customer experience across the industry. It is currently
consulting on numerous topics relating to Price Cap allowances for operating
costs and bad debt, whilst the change of government has led to a renewed focus
on management of customer debt and on the standing charge element of energy
bills. In addition, Ofgem has retained the ban on acquisition tariffs until at
least March 2026.
Broadband
Our broadband service numbers increased to 384,890, with 60% of new customers
enjoying the benefits of Full Fibre broadband without being faced with
mid-contract price rises. At our recent sales conference in September we
extended our Full Fibre offering by launching a 900mbps service, and combined
with the introduction of VoIP (Voice over Internet Protocol) in the coming
months we expect to see a further increase in Full Fibre penetration. We have
strengthened our relationship with CityFibre by launching a 6 month free 'Try
before you Buy' offer, whilst the industry-wide introduction of One Touch
Switching provides a welcome boost to the personal support our Partners can
provide to potential customers who are looking to switch their broadband
service to UW.
Mobile
Our mobile base has experienced strong growth, surpassing 500k services in the
period.
Through our long-term MVNO (Mobile Virtual Network Operator) relationship with
EE we can offer our customers the most complete geographic network coverage in
the UK, and one of the most competitive unlimited multi-SIM offerings in the
market. During H1, we enhanced our Unlimited SIM offering, with customers
able to add up to three additional SIMs for only £8 per month. These
additional SIMs also count as an extra service, unlocking further discounts on
customers' energy bills which, coupled with 5G speeds on the EE network,
continue to demonstrate our commitment to providing our customers with
high-quality services whilst saving them both time and money.
Insurance
Insurance policy numbers decreased marginally, due to our decision to
temporarily pause sales of our Bill Protector, Income Protector and Boiler
& Home Cover products to new customers whilst we reviewed them with the
FCA. Following positive engagement with the FCA we have now received clearance
to restart selling all of our insurance products and we are working towards
re-integrating them into our sales journey. In addition, we have completed the
remediation associated with our Bill Protector product, in line with the
non-material provision taken in the FY24 accounts. We are now focussed on
rebuilding momentum in our insurance business, and delivering on the
significant growth opportunity in this exciting marketplace.
Cashback card
Our cashback card remains a unique and powerful tool to help reduce our
customers' bills, and is a core part of our proposition that differentiates us
from all of our competitors. It has continued to deliver record performance,
earning customers £5.7m of savings off their bills in H1. We have been
successfully trialling Pay by Bank with staff, which is expected to unlock
cost savings as well as driving an improved customer experience, and are
currently in the process of rolling it out to customers. We have also
recently launched Apple Pay, which has been very well received by customers
and we expect this will lead to further cashback card take-up and usage.
A unique word-of-mouth route to market that is hard to replicate
The key to acquiring new multiservice customers is our unique and
hard-to-replicate word-of-mouth acquisition model. Our network of Partners is
motivated by the opportunity to earn additional income in the context of
continuing cost of living pressures, the satisfaction of helping people to get
a better deal on their essential services and the need to save for retirement.
Our Partner opportunity benefits from a long term structural trend towards
individuals across the UK having multiple incomes from various sources, as
within the UK this is the case for over 20 million people.
Our Partners earn a monthly commission based on the services being used by the
customers they have referred, with the opportunity in some cases to choose to
receive a prepayment of some of this future commission as a lump sum. As
Partners refer more people to UW who then sign-up as customers and as more new
Partners join their teams, their income stream can continue to grow, creating
truly life-changing opportunities. As customers benefit from exceptional
value, great service, and a more convenient way of buying their essential
household services, and Partners build a valuable residual income stream,
there is a genuine alignment of interests between our Partners, customers and
UW.
We continued to see strong interest in our Partner opportunity, as confidence
in the strength of our customer proposition continues to build, enhanced by
new initiatives such as mobile second SIM, new market-leading EV-tariff, and
fastest ever "900" full-fibre broadband product. This underpins the
sustainability of our growth, with our Partners being a unique route-to-market
for signing up high quality customers in significant volumes.
Investing in Customer Service
To gain our customers' trust and ensure their loyalty for the long term, we
give them an excellent standard of service, fair treatment, and swiftly
resolve any issues they might have. This is also important in delivering to
our Partners a proposition which they can confidently recommend to people they
know, and this is one of the key goals for our customer service and operations
teams.
To ensure that customers joining UW have a great first experience, we have a
dedicated Welcome team who can assist customers in their first few weeks
across our Energy, Mobile, Broadband and Insurance services. Our advanced
routing technology allows us to route new customer calls automatically to
these dedicated advisors.
We continue to invest in our customer experience across all of our contact
channels. Our most recent addition is our Whatsapp channel, introduced last
year, which is now our fastest growing channel and receives excellent feedback
from our customers. With increasing digital capabilities, our customers are
now managing more of their services through the UW app, which also now
supports both Apple pay and Android pay as part of our cashback card.
Our use of AI tools has expanded to assist our advisors in providing the very
best levels of service through the development of agent assist to place
accurate and concise knowledge in front of our teams when they are talking to
our customers. As a result, we are resolving our customers' queries quicker
than before and nearly all at the first point of contact. We are leveraging
our more mature AI tools for greater impact, including using the data gathered
from our call transcripts to become more precise in understanding our
customers' most frequent requests and to identify cross-sell opportunities
with increased accuracy.
Supporting vulnerable customers continues to be a focus across UW and
following a successful partnership between the UW Hardship Fund and the
Citizens Advice Bureau we have extended the programme for another year and
increased investment.
As a result of our ongoing focus on providing market-leading savings and
service, we were awarded "Best Customer Service" and "Best Value for Money" by
Uswitch in their 2024 Energy Awards, received a 5 star rating for customer
service from Uswitch in their 2024 Broadband Rankings, achieved 2nd place in
the Citizen's Advice Bureau league table of energy suppliers, and maintained
an "Excellent" rating on Trustpilot. We also placed in the top 25 of all
companies in the UK in the Customer Satisfaction Index, with no other energy
company ranking in the top 50.
Our People
This year, in our collective efforts to drive sustainable growth, we're
focussing on embedding a culture of performance and efficiency. We started
off the new financial year by establishing goal setting and performance
conversations as core practices, especially for People Leaders. To support
this work, we've provided resources to equip leaders with the skills to set
meaningful goals and conduct impactful performance discussions, alongside
ongoing training for all team members across the business.
Efficiency has been another key focus, particularly in Operations, where we're
implementing scalable structures to maximise efficiency and enhance the
customer experience. This includes eliminating duplication and improving team,
department, and role design across all areas of our Operations function. In
the People team, we've launched a new case management system, 'Ask the People
Team'. Replacing the previous method of employees contacting one email
account, this new platform includes live chat and digital self-service
resources to help people get the information they need as quickly as possible.
In addition to performance and efficiency, unlocking team potential is
essential for meeting our objectives. We've introduced a talent review process
to celebrate standout performers and identify future leaders, forming a
foundation for succession and development plans.
Our progress in the first half of this year reflects a strong commitment to
our "we put people first" culture, which supports both individual and
collective achievements. We look forward to building on this progress in the
months ahead.
Our ESG Progress
We are delighted to have made progress on our commitment to refresh our green
product offering. Our new EV tariffs and enhanced Smart Export Guarantee
("SEG") tariff will help us to better serve our customers as the UK energy
retail market continues to evolve alongside the UK's transition towards net
zero.
As cost of living challenges continue to impact people across the UK we
continue to support vulnerable customers nationwide through the deployment of
the UW-funded Hardship Fund.
We are proud to continue to progress our Diversity, Inclusion and Belonging
agenda. Following their launch last year our Belonging Groups go from strength
to strength. With the recent launch of our Neurodiversity Belonging Group, we
now have seven groups embedded across the business providing peer-to-peer
support and helping to inform our People policy and agenda.
Finally, we are pleased to announce that going forward Carla Stent, Chair of
the Audit & Risk Committee, will take on the role of ESG Board Champion.
This new role will help us to further enhance our ESG governance and support
the business as we embed sustainability within our broader business
priorities.
Dividend & Capital Allocation
The Company continues to be highly cash-generative whilst delivering strong,
sustainable growth. The Board adopts a disciplined approach to the allocation
of capital, with the overriding objective being to enhance long-term
shareholder value, whilst maintaining an appropriate level of gearing; this
means retaining sufficient resources within the business to ensure that our
organic growth will not be constrained by lack of capital. We intend to
continue following a progressive distribution policy, returning 80%-90% of
adjusted net income to shareholders over the medium term.
Having undertaken a £10m share buyback in H2 of FY24, the Board has decided
to revert to its previous capital allocation policy of prioritising dividend
growth. The Board expects that a higher dividend yield will prove relatively
more attractive to investors as we move towards a lower interest rate
environment. The Board is proposing to increase the interim dividend to 37p
(2023: 36.0p), with the full year dividend payout expected to increase by at
least 13% to 94p as a result of our updated policy and our restated financial
guidance.
Board changes
Bindi Karia joined the Board as a new independent non-executive director
immediately following the AGM in August. We expect her extensive experience,
particularly in technology and innovation (where she has held senior board,
investment, and advisory roles across the technology sector in Europe), to be
of considerable value over the coming years.
Outlook
We are the only fully-integrated supplier in the UK spanning four essential
household markets (energy, broadband, mobile and insurance) and our
one-stop-shop proposition delivers long-term savings funded by the inherent
efficiency of our bundled multiservice proposition. This sustainable cost
advantage sets us apart from our competitors, each of whom are focussed on
individual market segments; and with only c.3% market share in energy and c.1%
(or less) in our other markets, our organic growth opportunity has barely been
tapped.
We have now delivered double-digit percentage customer growth for six
consecutive reporting periods (3 years), during which time we have seen energy
prices rise, fall and now stabilise. This clearly demonstrates our ability to
sustainably outcompete, in a wide range of different market conditions, as a
result of our unique multi-service proposition and differentiated route to
market, and giving us confidence in our ability to continue delivering
double-digit customer growth in the future.
Our key medium-term planning assumptions are:
● annual percentage customer growth remaining within the
10-15% range,
● adjusted pre-tax profits increasing broadly in line with
customer growth,
● excess capital being returned to shareholders primarily
through dividends, in line with our updated capital allocation policy.
For FY25 we reiterate our guidance of 12%-14% organic customer growth with
Adjusted PBT expected to be within a range of £124m to £128m.
Having continued our strong double-digit momentum in customer growth in the
first half, we are firmly on track to achieve our next milestone of two
million customers over the medium term, and we look forward to making
significant further progress towards this in the second half of the year.
Given on behalf of the Board
STUART BURNETT NICK SCHOENFELD
Chief Executive Chief Financial Officer
25 November 2024
Principal Risks and Uncertainties
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 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 mainly acquires new customers via word-of-mouth referrals from 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 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 privacy, information security, cyber security and fraud 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
data privacy and information/cyber security strategy, providing effective
control to mitigate the relevant threats and risks. The Group is PCI (Payment
Card Industry) 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 any of the companies within
the Group fail to comply with privacy or data protection legislation or
regulations, then such Group company could be subject to ICO enforcement
action (which could include significant fines).
Information, data and cyber security risks are overseen by the Group's
Information Security and Legal & Compliance teams.
Fraud has the potential to impact the Group from a financial, regulatory and
reputational perspective. To mitigate and control the risk of fraud effective
controls are in place to identify and reduce incidents of fraud, actively
investigate potential fraud, and report on fraud activity and trends both
internally and to our industry partners. Fraud risks are overseen by the
Group's Fraud Team which sits within Legal & Compliance.
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 extent of regulatory change
continues to be more substantial since the period generally referred to in the
UK as the 'energy crisis', which has been associated with, amongst other
things, increased wholesale costs volatility linked to the war in Ukraine and
the subsequent business failures of financially unsustainable energy
suppliers. In addition to the industry-wide programmes of work, such as the
continuing rollout of smart meters, and an increasingly prescribed approach to
social obligations, Ofgem has completed its 'Financial Resilience' reforms,
significantly increasing its oversight of suppliers' financial health and
operational sustainability. The primary impact of this regulatory change
environment is more frequent and detailed reporting to Ofgem, typically in the
form of mandatory Requests for Information.
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. Significant regulatory changes to the fixed line and broadband
switching processes have taken effect in September 2024. 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 Partner loans and hire purchase agreements, and
offers a prepaid card to customers, known as the "Cashback card", enabling
them to benefit from discounts on purchases from various retailers. Further,
in 2023 UWI became 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, customer redress and
risk losing its authorised status, severely restricting its ability to offer
insurance services to customers and consumer credit services to Partners.
Regulatory changes relating to insurance pricing practices and the FCA's
Consumer Duty have had a significant impact on the financial services sector
as a whole. The business has worked to deliver the Board-approved
implementation plan and will continue to be informed by any clarifications and
additional guidance issued.
In general, as the majority of the Group's services are supplied to consumers
in highly regulated markets 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 Department for
Energy Security and Net Zero, 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 telecommunications markets which could result in
further consumer protection legislation being introduced. 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 the telephony
and broadband markets). 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 E.ON (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, and certain other associated supply costs is set by
reference to the Ofgem published energy price cap, 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, growth rates and Partner productivity. 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
Operating our own in-house insurer requires taking on some underwriting risk,
we 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, regulatory changes, and 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 direct 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 the CEO, 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. We have a dedicated Head of Sustainability and
continue to use external specialists as needed.
The Group is committed to achieving net zero greenhouse gas emissions. In FY23
we evaluated our emissions and target against recognised standards. 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.
Based on this analysis we committed to 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 set an interim target to reduce emissions by 63% across Scopes 1, 2,
and 3 by 2035, from an FY22 emissions baseline, in line with a 1.5c world. The
Group will have its targets validated by the SBTi, the leading body on
emissions target setting, and will track and disclose progress against them.
The Group remains committed to continuing to implement the recommendations of
the Task Force on Climate-related Financial Disclosures ("TCFD"), as well as
the requirements of the Companies Act 2006 as amended by the Companies
(Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.
Directors' Responsibilities
The Directors are responsible for the preparation of the condensed set of
financial statements and interim management report comprising this set of
Half-Yearly Results for the six months ended 30 September 2024, each of whom
accordingly confirms that to the best of their knowledge:
● the condensed set of financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" and provides
a true and fair view of the assets, liabilities, financial position and profit
of the Group as a whole;
● the interim management report includes a fair review of
the information required by the Financial Statements Disclosure Guidance and
Transparency Rules (DTR) 4.2.7R (indication of important events during the
first six months and their impact on the financial statements and description
of principal risks and uncertainties for the remaining six months of the
year); and
● the interim management report includes a fair review of
the information required by DTR 4.2.8R (disclosures of related party
transactions and changes therein).
The Directors of Telecom Plus PLC are:
Charles Wigoder Non-Executive Chairman
Stuart Burnett Chief Executive
Officer
Nick Schoenfeld Chief Financial Officer
Beatrice Hollond Senior Non-Executive
Director
Andrew Blowers Non-Executive Director
Bindi Karia
Non-Executive Director
Carla Stent
Non-Executive Director
Suzi Williams Non-Executive
Director
Independent Review Report to Telecom Plus PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the condensed consolidated interim statement of
comprehensive income, the condensed consolidated interim statement of
financial position, the condensed consolidated interim statement of cash
flows, the condensed consolidated interim statement of changes in
shareholders' equity and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with IAS 34 Interim Financial
Reporting as adopted for use in the UK and the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the
UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with
UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Mark Wrigglesworth
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
United Kingdom
25 November 2024
Condensed Consolidated Interim Statement of Comprehensive Income
Note 6 months ended 30 September 2024 (unaudited) 6 months ended 30 September 2023 (unaudited) Year
£'000 £'000 ended
31 March 2024 (audited)
£'000
Revenue 697,750 883,631 2,039,131
Cost of sales (529,935) (718,583) (1,683,921)
Gross profit 167,815 165,048 355,210
Distribution expenses (24,424) (25,358) (51,294)
Administrative expenses - other (77,804) (76,379) (151,943)
Share incentive scheme charges (1,536) (2,373) (5,160)
Amortisation of energy supply contract intangible 6 (5,614) (5,614) (11,228)
Total administrative expenses (84,954) (84,366) (168,331)
Impairment loss on trade receivables (15,138) (18,759) (30,712)
Other income 780 645 1,377
Operating profit 44,079 37,210 106,250
Financial income 1,477 1,592 3,482
Financial expenses (6,570) (3,087) (9,255)
Net financial expense (5,093) (1,495) (5,773)
Profit before taxation 38,986 35,715 100,477
Taxation (11,358) (12,348) (29,440)
Profit for the period 27,628 23,367 71,037
Basic earnings per share 9 35.1p 29.5p 89.9p
Diluted earnings per share 9 34.8p 29.1p 88.8p
Interim dividend per share 37.0p 36.0p -
Condensed Consolidated Interim Balance Sheet
As at As at
30 September
31 March
2024 As at
2024
(unaudited)
30 September
(audited)
2023*
(unaudited)
Assets Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 25,213 24,534 26,773
Investment property 5 7,969 8,158 8,049
Intangible assets 6 132,491 139,341 135,785
Goodwill 3,742 3,742 3,742
Other non-current assets 63,363 53,324 55,892
Total non-current assets 232,778 229,099 230,241
Current assets
Inventories 3,019 4,759 3,749
Trade and other receivables 103,505 72,238 104,066
Current tax receivable 3,907 4,987 101
Accrued income 92,740 113,935 222,036
Prepayments 79,507 132,581 9,958
Costs to obtain contracts 23,542 22,392 23,411
Cash 70,824 37,220 57,829
Total current assets 377,044 388,112 421,150
Total assets 609,822 617,211 651,391
Current liabilities
Trade and other payables (48,015) (61,696) (56,016)
Accrued expenses and deferred income (147,843) (212,802) (181,308)
Total current liabilities (195,858) (274,498) (237,324)
Non-current liabilities
Long term borrowings 7 (181,891) (119,491) (176,509)
Lease liabilities (3,562) (584) (3,821)
Deferred tax (556) (2,025) (1,106)
Total non-current liabilities (186,009) (122,100) (181,436)
Total assets less total liabilities 227,955 220,613 232,631
Equity
Share capital 4,031 4,006 4,007
Share premium 158,767 151,253 151,553
Capital redemption reserve 107 107 107
Treasury shares (15,688) (5,502) (15,688)
JSOP reserve (1,150) (1,150) (1,150)
Retained earnings 81,888 71,899 93,802
Total equity 227,955 220,613 232,631
* The presentation of the 30 September 2023 balance sheet has been restated
to reclassify £118.5m from accrued expenses to prepayments because a
prepayment was previously netted off against accruals in the 30 September 2023
balance sheet. This reflects the position with the Group's energy supplier,
which was in an accrual position at 31 March 2024 but a prepaid position at 30
September 2023 and 2024. This movement is due to the fact that energy use is
seasonal, but supplier payments are scheduled so as to spread payment evenly
through the year. There is no impact on profit, net assets, or net cashflow
from operating activities.
Condensed Consolidated Interim Cash Flow Statement
6 months Year
ended
ended
Note
30 September 6 months
31 March
2024
ended
2024
(unaudited)
30 September
(audited)
2023*
(unaudited)
£'000 £'000 £'000
Operating activities
Profit before taxation 38,986 35,715 100,477
Adjustments for:
Net financial expense 5,093 1,495 5,773
Depreciation of property, plant and equipment 1,989 1,743 3,561
Profit on disposal of fixed assets - - (129)
Amortisation of intangible assets and impairment 6 9,309 9,118 18,280
Share incentive scheme charges 1,536 2,373 5,160
Amortisation of debt arrangement fees 382 119 389
Corporation tax paid (15,625) (13,124) (26,248)
Decrease/(increase) in inventories 730 939 1,949
Decrease/(increase) in trade and other receivables 52,584 17,280 (4,239)
(Decrease)/increase in trade and other payables (41,393) (198,221) (237,460)
Net cash flow from operating activities 53,591 (142,563) (132,487)
Investing activities
Purchase of property, plant and equipment (189) (348) (882)
Purchase of intangible assets 6 (6,015) (5,968) (11,614)
Disposal of property, plant and equipment - - 129
Cash held in subsidiaries at disposal - - 681
Interest received 1,485 1,676 3,535
Cash flow from investing activities (4,719) (4,640) (8,151)
Financing activities
Dividends paid 8 (37,145) (36,445) (64,982)
Interest paid (6,595) (3,106) (7,195)
Interest paid on lease liabilities (48) (9) (26)
Drawdown of long-term borrowing facilities 30,000 30,000 183,550
Repayment of long-term borrowing facilities (25,000) - (95,000)
Fees associated with borrowing facilities - (350) (2,151)
Repayment of lease liabilities (399) (75) (252)
Issue of new ordinary shares 9 3,310 604 905
Purchase of own shares - - (10,186)
Cash flow from financing activities (35,877) (9,381) 4,663
Increase/(decrease) in cash and cash equivalents 12,995 (156,584) (135,975)
Net cash and cash equivalents at the beginning of the year 57,829 193,804 193,804
Net cash and cash equivalents at the year end 70,824 37,220 57,829
* The presentation of the 30 September 2023 cashflow has been restated to
reclassify £118.5m from the movement in Trade and other payables to the
movement in Trade and other receivables because a prepayment was previously
netted off against accruals in the 30 September 2023 balance sheet. This
reflects the position with the Group's energy supplier, which was in an
accrual position at 31 March 2024 but a prepaid position at 30 September 2023
and 2024. This movement is due to the fact that energy use is seasonal, but
supplier payments are scheduled so as to spread payment evenly through the
year. There is no impact on profit, net assets, or net cashflow from operating
activities.
Condensed Consolidated Interim Statement of Changes in Equity
Share Share premium Capital redemption reserve Retained earnings Total
capital
Treasury shares JSOP
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2023 4,003 150,652 107 (5,502) (1,150) 82,598 230,708
- - - - - 23,367 23,367
Profit and total comprehensive income for the period
Dividends - - - - - (36,445) (36,445)
Credit arising on share options - - - - - 2,373 2,373
Deferred tax on share options - - - - - (5) (5)
Retained earnings tax adjustments - - - - - 11 11
Issue of new ordinary shares 3 601 - - - - 604
Balance at 30 September 2023 4,006 151,253 107 (5,502) (1,150) 71,899 220,613
Balance at 1 October 2023 4,006 151,253 107 (5,502) (1,150) 71,899 220,613
- - - - - 47,670 47,670
Profit and total comprehensive income for the period
Dividends - - - - - (28,537) (28,537)
Credit arising on share options - - - - - 2,787 2,787
Deferred tax on share options - - - - - (17) (17)
Issue of new ordinary shares 1 300 - - - - 301
Purchase of treasure shares - - - (10,186) - - (10,186)
Balance at 31 March 2024 4,007 151,553 107 (15,688) (1,150) 93,802 232,631
Balance at 1 April 2024 4,007 151,553 107 (15,688) (1,150) 93,802 232,631
- - - - - 27,628 27,628
Profit and total comprehensive income for the period
Dividends - - - - - (37,145) (37,145)
Dedit arising on share options - - - - - (2,392) (2,392)
Deferred tax on share options - - - - - (5) (5)
Issue of new ordinary shares 24 7,214 - - - - 7,238
Balance at 30 September 2024 4,031 158,767 107 (15,688) (1,150) 81,888 227,955
Notes to the Condensed Interim Financial Statements
1. Basis of preparation
The condensed consolidated interim financial statements presented in this
half-year report ("the Half-Year Results") have been prepared in accordance
with IAS 34 as adopted for use in the UK. The principal accounting policies
adopted in the preparation of the condensed consolidated financial statements
are unchanged from those used in the annual report for the year ended 31 March
2024, and are consistent with those that the Company expects to apply in its
financial statements for the year ended 31 March 2025.
The condensed consolidated financial statements for the year ended 31 March
2024 presented in this half-year report do not constitute the Company's
statutory accounts for that period. The condensed consolidated financial
statements for that period have been derived from the Annual Report and
Accounts of Telecom Plus PLC. The Annual Report and Accounts of Telecom Plus
PLC for the year ended 31 March 2024 were audited and have been filed with the
Registrar of Companies.
The Independent Auditor's Report on the Annual Report and Accounts of Telecom
Plus PLC for the year ended 31 March 2024 was unqualified and did not draw
attention to any matters by way of emphasis and did not contain statements
under s498(2) or (3) of the Companies Act 2006. The financial information for
the periods ended 30 September 2024 and 30 September 2023 is unaudited but has
been subject to a review by the Company's auditor.
Seasonality of business: amounts reported in the half year period may not be
indicative of the amounts that will be reported for the full year due to
seasonal fluctuations in customer demand for gas and electricity. In respect
of the energy supplied by the Group, approximately two thirds is consumed by
customers in the second half of the financial year.
The Half-Year Results were approved for issue by the Board of Directors on 25
November 2024.
2. Going concern
Recent developments in the Group's business activities, together with the
factors likely to affect its future development, performance and financial
position are set out above.
As at 30 September 2024 the Group had revolving credit facilities of £175.0
million with Barclays Bank PLC, Lloyds Bank PLC and Bank of Ireland Group PLC
for the period to 17 November 2027. As at 30 September 2024, £108.6 million
of this facility was drawn down and the Company had a cash balance of £70.8
million. In addition, the Company has £75.0 million of private placement debt
provided by Pricoa and MetLife which matures in November 2030. The Group
remains in compliance with the relevant covenants of these facilities, details
of which are set out in Note 15 of the 2024 Annual Report.
Under the Group's energy supply arrangements, the Group benefits from its
relationship with E.ON who fund the principal seasonal working capital
requirements relating to the supply of energy to the Group's customers, and
therefore the Group is not directly exposed to short-term fluctuations in the
energy wholesale markets.
The Group has considerable financial resources together with a large and
diverse retail and small business customer base and long-term contracts with a
number of key suppliers. As a consequence, the Directors believe that the
Group is well placed to manage its business risks.
The Directors have prepared base and sensitised forecasts for a period of at
least 12 months from the date of authorisation of these financial statements,
including the effect of severe, but plausible, downside scenarios, such as
increased bad debt. Those forecasts indicate that the Group can continue to
operate within the terms of its existing bank facilities. Furthermore, the
Directors have considered the possibility of taking mitigating action, such as
the temporary reduction or cancellation of the annual dividend, in the event
of any severe but plausible scenarios.
On this basis the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for at least 12 months
from the date of the approval of the interim financial statements. The interim
financial statements have therefore been prepared on a going concern basis.
3. Judgements and estimates
The preparation of the condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates. The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised and in future periods if applicable.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements as at and for the year
ended 31 March 2024.
4. Alternative performance measures
In order to provide a clearer presentation of the underlying performance of
the group, adjusted EBITDA, 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 E.ON
(formerly npower) in December 2013; this decision reflects both the relative
size and non-cash nature of these charges.
6 months ended 30 September 2024 (unaudited) 6 months ended 30 September 2023 (unaudited) Year ended 31 March 2024 (audited)
£'000 £'000 £'000
Statutory profit before tax 38,986 35,715 100,477
Adjusted for:
Amortisation of energy supply contract intangible assets 5,614 5,614 11,228
Share incentive scheme charges 1,536 2,373 5,160
Adjusted profit before tax 46,136 43,702 116,865
Adjusted EBITDA
Rolling 12 months ending 30 September 2024 (unaudited) Rolling 12 months ending 30 September 2023 (unaudited)
Year ended 31 March 2024 (audited)
£'000 £'000 £'000
Operating profit 113,119 95,974 106,250
Adjusted for:
Depreciation, amortisation and impairment 22,278 22,055 21,841
EBITDA 135,397 118,029 128,091
Share incentive scheme charges 4,323 4,481 5,160
Adjusted EBITDA 139,720 122,510 133,251
Net debt/Adjusted EBITDA ratio
Year ended 31 March 2024 (audited)
30 September 2024 (unaudited) 30 September 2023 (unaudited)
£'000 £'000 £'000
Long-term borrowings (181,891) (119,491) (176,509)
Lease liabilities (3,562) (584) (3,821)
Less:
Cash on balance sheet 70,824 37,220 57,829
Net debt (114,629) (82,855) (122,501)
Adjusted EBITDA 139,720 122,510 133,251
Net debt/adjusted EBITDA 0.8x 0.7x 0.9x
5. Investment property
Investment properties are properties which are held either to earn rental
income or for capital appreciation or for both. Investment properties are
stated at cost less accumulated depreciation.
Rental income from investment properties is accounted for on an accruals
basis. The operation of the Company were transferred into new head offices
at Merit House in 2015 and the former head office building, Southon House, was
vacated. Southon House is held as an investment property and separately
disclosed on the balance sheet of the Company with a book value of £8.0m.
An independent valuation of Southon House was conducted on 7 May 2024 in
accordance with RICS Valuation - Global Standards effective from 31 January
2022 (the Red Book). The independent market value of Southon House was
determined to be £10.6 million and has been categorised as a Level 3 fair
value based on the inputs to the valuation technique used. The valuation was
prepared on a Market Value basis as defined in the Valuation Standards and was
primarily derived from using comparable market transactions carried out on an
arm's length basis. These inputs are deemed unobservable. The Directors
believe that there have not been any material changes in circumstances that
would lead to a significant reduction in the market valuation of Southon House
from £10.6m.
6. Intangible assets
Energy Supply Contract IT Software & Web Development
Total
£'000 £'000 £'000
Cost
At 31 March 2024 224,563 54,575 279,138
Additions - 6,015 6,015
At 30 September 2024 224,563 60,590 285,153
Amortisation
At 31 March 2024 (116,023) (27,330) (143,353)
Charge for the period (5,614) (3,695) (9,309)
At 30 September 2024 (121,637) (31,025) (152,662)
Net book amounts
At 30 September 2024 (unaudited) 102,926 29,565 132,491
At 31 March 2024 (audited) 108,540 27,245 135,785
At 30 September 2023 (unaudited) 114,154 25,187 139,341
The Energy Supply Contract intangible asset relates to the entering into of
the energy supply arrangements with E.ON (formerly npower) on improved
commercial terms through the acquisition of Electricity Plus Supply Limited
and Gas Plus Supply Limited from Npower Limited having effect from 1 December
2013. The intangible asset is being amortised evenly over the 20-year life
of the energy supply agreement.
The IT Software & Web Development intangible asset relates to the
capitalisation of certain costs associated with the development of new IT
systems.
7. Interest bearing loans and borrowings
6 months ended 30 September 2024 (unaudited) 6 months ended 30 September 2023 (unaudited)
Year ended 31 March 2024 (audited)
£'000 £'000 £'000
Bank loans and private placement loans 183,550 120,000 178,550
Unamortised loan arrangement fees (1,659) (509) (2,041)
181,891 119,491 176,509
Due within one year - - -
Due after one year 183,550 120,000 178,550
183,550 120,000 178,550
8. Dividends
6 months 6 months Year
ended
ended
ended
30 September
30 September
31 March
2024
2024
2024
(unaudited)
(unaudited)
(audited)
£'000 £'000 £'000
Final dividend for the year ended 31 March 2024 of 47p per share 37,145 - -
Final dividend for the year ended 31 March 2023 of 46p per share - 36,445 36,445
Interim dividend for the year ended 31 March 2024 of 36p per share (2023: 34p) - - 28,537
An interim dividend of 37.0p per share will be paid on 20 December 2024 to
shareholders on the register at close of business on 6 December 2024. The
estimated amount of this dividend to be paid is approximately £29.2m and, in
accordance with IFRS accounting requirements, has not been recognised in these
accounts.
9. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
6 months 6 months Year
ended
ended
ended
30 September
30 September
31 March
2024
2023
2024
(unaudited)
(unaudited)
(audited)
£'000 £'000 £'000
Earnings for the purpose of basic and diluted EPS 27,628 23,367 71,037
Share incentive scheme charges (net of tax) 1,150 1,797 3,901
Amortisation of energy supply contract intangible assets 5,614 5,614 11,228
Earnings for the purpose of adjusted basic and diluted EPS 34,392 30,778 86,166
Number Number Number
('000s) ('000s) ('000s)
Weighted average number of ordinary shares for the purpose of basic EPS 78,806 79,229 79,058
Effect of dilutive potential ordinary shares (share incentive awards) 697 1,045 963
Weighted average number of ordinary shares for the purpose of diluted EPS 79,503 80,274 80,021
Adjusted basic EPS 1 (#_ftn1) 43.6p 38.8p 109.0p
Basic EPS 35.1p 29.5p 89.9p
Adjusted diluted EPS1 43.3p 38.3p 107.7p
Diluted EPS 34.8p 29.1p 88.8p
1 In order to provide a clearer understanding of the underlying trading
performance of the Group, adjusted basic EPS excludes:
(i) share incentive scheme charges; and (ii) the amortisation of intangible
assets arising on entering into the energy supply
arrangements with E.ON (formerly npower) in December 2013. The amortisation of
intangible assets and share incentive
scheme charges have been excluded on the basis that they represent non-cash
accounting charges. These balances are
derived directly from amounts shown separately on the face of the condensed
consolidated interim statement of comprehensive
income and adjusted for tax where appropriate.
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