REG - Telecom Plus PLC - Half-Year Results
23/11/2021 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211123:nRSW1824Ta&default-theme=true
RNS Number : 1824T Telecom Plus PLC 23 November 2021
Embargoed until 0700 23 November 2021
Telecom Plus PLC
Half-Year Results for the Six Months ended 30 September 2021
Telecom Plus PLC (trading as Utility Warehouse), the UK's only fully
integrated provider of a wide range of competitively priced utility services
spanning the communications, energy and insurance markets, today announces its
half-year results for the six months ended 30 September 2021.
Financial highlights:
● Revenue up 6% to £371.3m (2020: £349.4m)
● Adjusted profit before tax of £26.2m (2020: £27.7m)
following one-off Ofgem settlement
● Statutory profit before tax of £19.9m (2020: £21.5m)
● Interim dividend maintained at 27p per share (2020: 27p)
Operating highlights:
● Resilient performance across all parts of the business
throughout the pandemic
● Customer numbers up by 3,289 to 660,700 (March 2021: 657,411)
● Total services supplied 2,079,756 (March 2021: 2,073,797)
Current trading and outlook:
Significant increase in activity following recent energy crisis and paradigm
shift in the retail energy market:
● Net customer growth in October of over 15,000
● Strong uplift in Partner recruitment in response to the emerging
cost of living crisis
● Expecting around 10% growth in customer base during H2 with
double-digit annual percentage growth thereafter
Commenting on today's results, Andrew Lindsay, Co-Chief Executive, said:
"These results demonstrate our resilience as a supplier of essential household
services following the disruption caused by the pandemic.
"The recent energy crisis has brought a seven-year destructive price war to an
abrupt end, and the subsequent spate of energy supplier failures has
demonstrated the inherent flaws in the regulator's policy of 'competition at
all costs'. Consumers now face a cost running into billions of pounds to tidy
up the mess, so we welcome Ofgem's commitment to prevent this situation from
happening again, and to create a retail market that allows sustainable
competition between suppliers, whilst enabling us to meet the challenges of
the transition to net zero together.
"The emerging cost of living crisis is driving increasing numbers of new
Partners to join us, attracted by the flexible and meaningful extra income we
offer in return for recommending our range of essential services (including
what are currently amongst the UK's lowest priced energy tariffs); this is an
encouraging lead-indicator for our future growth.
"Our recent trading has set new records. With momentum and confidence building
within our community of Partners, and the recent paradigm shift in the retail
energy market, we look forward to delivering around 10% growth in our customer
base during H2, and double-digit annual percentage growth thereafter."
The Company is holding a capital markets event today at 15.00 at Peel Hunt's
offices. Please contact MHP Communications at: telecomplus@mhpc.com for
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 Securities
Mark Lander / Simon Willis 020 7260 1000
MHP Communications
Reg Hoare / Catherine Chapman 020 3128 8339
About Telecom Plus PLC ("Telecom Plus"): (http://www.uw.co.uk/)
Telecom Plus, which owns and operates the Utility Warehouse brand, is the UK's
only fully integrated provider of a wide range of competitively priced utility
services spanning the Communications, Energy and Insurance markets.
Customers benefit from the convenience of a single monthly statement,
consistently good value across all their utilities and exceptional levels of
service. Telecom Plus does not advertise, relying instead on 'word of mouth'
recommendation by existing satisfied customers and Partners in order to grow
its market share.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP LN). For
further information please visit telecomplus.co.uk
LEI code: 549300QGHDX5UKE58G86
Cautionary statement regarding forward-looking statements
This Announcement may contain "forward-looking statements" with respect to
certain of the Company's plans and its current goals and expectations relating
to its future financial condition, performance, strategic initiatives,
objectives and results. Forward-looking statements sometimes use words such as
"aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal",
"believe", "seek", "may", "could", "outlook" or other words of similar
meaning. By their nature, all forward-looking statements involve risk and
uncertainty because they are based on numerous assumptions regarding the
Company's present and future business strategies, relate to future events and
depend on circumstances which are or may be beyond the control of the Company
which could cause actual results or trends to differ materially from those
made in or suggested by the forward-looking statements in this Announcement,
including, but not limited to, domestic and global economic business
conditions; market-related risks such as fluctuations in interest rates; the
policies and actions of governmental and regulatory authorities; the effect of
competition, inflation and deflation; the effect of legislative, fiscal, tax
and regulatory developments in the jurisdictions in which the Company and its
respective affiliates operate; the effect of volatility in the equity, capital
and credit markets on profitability and ability to access capital and credit;
a decline in credit ratings of the Company; the effect of operational risks;
an unexpected decline in sales for the Company; any limitations of internal
financial reporting controls; and the loss of key personnel. Any
forward-looking statements made in this Announcement by or on behalf of the
Company speak only as of the date they are made. Save as required by the
Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the
Listing Rules or by law, the Company undertakes no obligation to update these
forward-looking statements and will not publicly release any revisions it may
make to these forward-looking statements that may occur due to any change in
its expectations or to reflect events or circumstances after the date of this
Announcement.
Interim Management Report
Financial and Operating Review
Results
Adjusted Statutory
Half year to 30 September 2021 2020 Change 2021 2020 Change
Revenue (£'000) 371,275 349,370 6.3% 371,275 349,370 6.3%
Profit before tax (£'000) 26,205 27,655 (5.2)% 19,862 21,451 (7.4)%
Basic earnings (per share) 26.1p 28.6p (8.7)% 18.3p 20.8p (12.0)%
Interim dividend (per share) 27.0p 27.0p - 27.0p 27.0p -
In order to provide a clearer understanding of the underlying trading
performance of the Group, adjusted profit before tax and adjusted basic EPS
exclude: (i) share incentive scheme charges; and (ii) the amortisation of
intangible assets arising on entering into the new energy supply arrangements
with Eon (formerly npower) in December 2013. The amortisation of intangible
assets has been excluded on the basis that it represents a non-cash accounting
charge that does not impact the amount of profits available for distribution
to shareholders. Adjusted profit before tax also excludes the share of the
profit for the period attributable to the 25% non-controlling interest in Glow
Green. These balances can be derived directly from amounts shown separately on
the face of the condensed consolidated interim statement of comprehensive
income.
Against the backdrop of widespread apathy towards switching in the aftermath
of the pandemic, the business delivered a resilient performance during the
first half, with the recent energy crisis acting as a catalyst to end an
unsustainable seven-year price war. With over 20 suppliers having subsequently
exited the market, we saw an immediate pick up in the number of customers
joining UW, with a net increase of over 15,000 new customers in October alone.
Adjusted profit before tax decreased marginally to £26.2m (2020: £27.7m) on
revenues of £371.3m (2020: £349.4m), following a one-off increase to the
provision for the Ofgem settlement of £1.0m relating to a historical issue
(total settlement £1.5m). Adjusted earnings per share fell to 26.1p (2020:
28.6p). Statutory profit before tax decreased to £19.9m (2020: £21.5m),
after energy supply contract intangible amortisation of £5.6m (2020: £5.6m)
and share incentive scheme charges of £0.6m (2020: £0.6m).
We will be paying an interim dividend of 27p per share (2020: 27p) on 17
December 2021 to shareholders on the register on 3 December 2021; the
Company's shares will go ex-dividend on 2 December 2021.
Revenues
The increase in revenue primarily reflects a colder spring relative to the
prior year, supplemented by the impact of the greater number of services we
supply and, to a lesser extent, higher energy prices. This was partially
offset by lower fixed line call volumes, which returned to more typical levels
as we emerged from lockdown.
Gross margin decreased to 22.9% (2020: 23.7%), reflecting the higher
proportion of our revenues derived from supplying lower margin energy
services, and a growing penetration of fibre broadband services.
Costs
Distribution expenses fell to £12.7m (2020: £13.5m), reflecting the lower
levels of customer acquisition and Partner activity during the period.
Administrative expenses (excluding amortisation of the energy supply contract
intangible) rose by £4.3m to £40.6m (2020: £36.3m). Around half of this
increase resulted from higher amortisation of technology costs, providing for
the new management incentive scheme approved by shareholders last December,
and an increase to the provision for the Ofgem settlement.
The remaining increase in administrative expenses is broadly in line with the
level of revenue growth, reflecting continued expansion in the number and
range of services we are providing and ongoing investment in marketing and
technology.
The bad debt charge for the year increased to £5.1m (2020: £4.6m)
representing 1.4% of revenues (2020: 1.3%).
Cash Flow and Borrowings
Operating cash flow of £22.5m (2020: £42.7m) was lower year on year, mainly
reflecting the benefit of a covid-related deferral in VAT payments last year.
Capital expenditure of £4.8m (2020: £5.3m) related primarily to our ongoing
technology investment programme. Net debt (including lease liabilities) during
the period rose to £77.8m (31 March 2021: £71.4m), mainly reflecting our
continued investment in technology and the provision of Amazon eero whole home
wifi systems to broadband customers.
At this level, our net debt to EBITDA ratio (on a 12-month rolling basis)
remains low at around 1.2x, underpinning our progressive dividend policy.
In recognition of the exciting growth prospects for the business, the Group
recently agreed to extend its revolving credit facilities to £175.0 million
with Barclays Bank PLC, Lloyds Bank PLC and Bank of Ireland Group PLC for the
period to 30 June 2024.
Tax
Our effective tax rate for the first half was 28.3% (2020: 23.9%). This
overall level remains higher than the underlying rate of corporation tax due
mainly to the ongoing amortisation charge on our energy supply contract
intangible asset (which is not an allowable deduction for tax purposes) and an
increase in deferred tax due to the future rise in the corporation tax rate to
25%.
Our Customer proposition - all your home services in one
We offer our customers a clearly differentiated product, saving them both time
and money by supplying them with all their home services in one, simple,
monthly bill. As the UK's only fully integrated multi-service provider, we
derive significant operating efficiencies by spreading a single set of
overheads across the multiple revenue streams we receive from our customers.
Customer numbers increased modestly during the period by 3,289 to 660,700
(FY21: 657,411), with the number of services supplied to them increasing by
5,959 (2020: 15,004); this positive net outcome reflected a period of
declining customer numbers over the spring and summer as the UK adjusted from
a prolonged succession of lockdowns, followed by an uptick in customer
gathering activity in early September following our first major in-person
Partner event; this momentum received a sharp boost from the energy crisis
which occurred soon after.
H1 H1
FY 2022 FY2021 FY 2021
Partners 44,325 48,573 46,698
Customers
Residential 637,553 633,616 626,036
Business 23,147 23,798 24,461
Total 660,700 657,411 650,497
Core services
Energy 1,090,319 1,079,044 1,063,017
Broadband 316,276 324,499 324,993
Mobile 306,738 302,654 288,567
Insurance 35,608 32,928 31,497
Other services
CashBack Card 305,875 308,439 301,717
Legacy services 24,940 26,233 27,929
Total 2,079,756 2,073,797 2,037,720
The table above excludes the customer and service numbers of TML; Insurance
includes Home Insurance and Boiler & Home Cover policies
Supporting our customers
In order to earn the trusted personal recommendations of our Partners, we must
deliver a consistently high standard of service to our customers, treat them
fairly, and live up to our promise of letting them get on with their lives and
forget about their utilities.
Our customers increasingly seek to self-serve through the UW customer app and
online MyAccount area, and we maintain our focus on further improving the
functionality and ease of use of these tools. That said, we also rely
heavily on the efforts of our colleagues to provide personalised support for
those customers that wish to talk to us or email us.
We are pleased with the decision we made last year to embrace the additional
flexibility and scalability that remote working offers us, and around 40% of
our customer-facing team members are now permanently home-based. We have
made real progress during the period in improving the management tools that we
require to operate on a fully remote basis, and continue to invest in
providing our remote colleagues with the systems that enable them to deliver
UW service levels to each of our customers.
Churn
Prior to the recent energy crisis, our energy churn had fallen significantly
to 0.7% per month (2020: 1.2%), reflecting a less aggressive retail energy
market caused by upward wholesale pricing pressures.
Following the universal withdrawal of discounted acquisition tariffs since
mid-September, there has been a further decrease in market-wide switching,
leading to a significant further reduction in our churn.
Our Partners - a unique route to market
We offer our Partners a smarter way to earn: in their own time and on their
own terms. They are one of the key strengths of our business, and certainly
our greatest point of differentiation.
Through UW, they can create real financial security for themselves and their
families by signing up new customers and introducing our income opportunity to
other like-minded people; in doing so, they can earn meaningful short-term
financial rewards combined with a long-term residual income.
Over the last six months our Partners have had to adjust their ways of working
as restrictions on social interactions have been lifted. Gauging the
appetite of prospects to meet in person has been challenging, however the
proportion of customer applications that are fulfilled remotely has stabilised
during the first half at around 25%, demonstrating the longer-term benefit of
having developed this capability at the onset of the pandemic.
We held our first in-person Partner conference in two years during early
September; this was well-attended and was an important milestone on our
recovery from the challenging virtual environment of the past 18 months.
As the emerging cost of living crisis deepens, we believe that increasing
numbers of people will turn to UW to earn an extra income. With a
registration fee of just £10, and the opportunity to earn upwards of £250
for each customer that they introduce, as well as an ongoing income stream, UW
Partnership is a highly attractive proposition that is ideally suited to the
current times.
Energy
Over twenty energy companies have ceased trading since the summer, leaving
over two million customers dependent on the safety net provided by the market
regulator, Ofgem, to maintain their supplies and protect their credit balances
through the Supplier of Last Resort (SOLR) mechanism. These corporate
failures take the total number of suppliers that have exited the market in the
past five years to over 50, with further failures expected over the coming
months.
Whilst primarily blamed on rising wholesale prices, this catalogue of
failures, and the associated billions of pounds of costs that will ultimately
be borne by consumers, reflect a regulatory regime that encouraged a clearly
unsustainable 'race-to-the-bottom' approach to competition. The resultant
price war has eroded consumer trust and caused significant financial
detriment, as the cost of these failures will need to be recouped through
higher energy bills over the coming years.
Ofgem's recent open letter to energy suppliers is therefore a welcome
statement of intent to reform the regulatory framework towards one that
genuinely fosters sustainability, investment, good service and fair
competition amongst properly resourced and differentiated suppliers.
It is clear that the retail energy market has undergone a paradigm shift,
bringing an end to the unsustainable practices which had become widespread
over the last seven years of selling energy below cost to attract new
customers, using customer credit balances as working capital, and failing to
accrue for regulated renewable obligation payments.
In that environment, it stands to reason that an established, well-capitalised
energy supplier benefiting from a sustainable cost advantage that is derived
from bringing consumers a highly differentiated 'all your home services in
one' proposition, should thrive. As the dust settles on the prolonged
energy market price war, we believe we are better positioned than ever to grow
our market share significantly over the coming months and years.
Broadband and Mobile
Broadband switching was muted across the market during the period, reflecting
the high number of consumers who upgraded to faster broadband speeds in
spring/summer 2020 in response to the initial lockdowns: this resulted in many
households being placed into new 18 month contracts with their existing
suppliers. A further near-term factor is an increased reluctance to switch
broadband providers given the challenges posed by any disruption to internet
access when working from home.
We are pleased that the modest decline in broadband service numbers that we
saw in the first half has recently been reversed, as overall customer
acquisition levels have picked up. With a competitive fibre proposition,
supported by our partnership with Amazon eero to provide fast and secure whole
home wifi, we are well placed to grow our broadband market share as the full
fibre rollout continues apace.
We improved our Mobile tariffs towards the end of the period, ensuring that we
continue to offer one of the most competitive unlimited data tariffs in the
market.
Insurance
Our insurance book continued to perform ahead of our overall business, growing
at 8% during the period, to over 35,000 policies; in particular, the
incorporation of our market leading Boiler and Home Cover policy into our main
onboarding journey since April has yielded encouraging results, and provides
us with a proven distribution model which we can now replicate to drive future
growth for our additional insurance products.
In line with trends emerging over recent weeks, we anticipate that growth in
policies will accelerate sharply during the second half of the year as a
result of overall higher levels of customer acquisition, a streamlined
quotation journey for Home Insurance, more competitive quoting from our panel
of Home Insurance underwriters, and the seasonality associated with writing
new Boiler and Home Cover policies.
Our approach of providing 'everyday low prices' rather than discounted
introductory deals means that we need no significant amendments to our
processes in order to comply with the FCA price walking interventions that are
being implemented from 1 January 2022. We view this as a vital step towards
creating fairer outcomes for consumers and anticipate that this intervention
will be materially beneficial for the further growth of our high-quality Home
Insurance book.
We remain focussed on building scale for our current range of personal
insurance products, strengthening our Home Insurance panel, and increasing the
conversion ratio amongst our customers, whilst maintaining robust margins. In
due course we expect to launch further complementary insurance products to our
customers and have growing confidence in our decision to invest strategically
in this marketplace in order to generate significant shareholder value over
the longer term.
Cashback
Our third-generation cashback card launched in October, offering UW customers
a significantly enhanced product experience, with instant spend notifications,
no-fee FX transactions and a redesigned customer app. Our new platform is
highly scalable, having partnered with best-in-class technology partners, and
this will enable us to significantly extend our cashback rewards proposition
in the future.
Over the last three years alone customer spend with this product has more than
doubled, with annual spend now approaching £400m and improvement across
several key engagement metrics. We are targeting growth to £1bn/year of spend
as our next key milestone, and are excited by the new opportunities that the
adoption of this product unlocks and the additional engagement and loyalty it
drives amongst our customers.
Glow Green - our installation business
The post-pandemic period has seen reduced demand for boiler installation, and
the conclusion of industrial action at British Gas in the spring resulted in a
more competitive marketplace during the summer.
Good progress has been made in extending Glow Green's installation capability
beyond boilers, to include both heat pumps and solar PV systems, with volumes
of the latter recently picking up significantly. These represent promising
longer-term revenue opportunities.
As we move through the important winter season, boiler installation volumes
have started to increase, and we are gaining some early traction from our
initial campaigns to cross-sell boiler installations to our UW customers. We
anticipate that the business will be broadly breakeven for the full year.
Sustainability achievements
Following the publication of our first ESG Strategy Report in June, we have
made good progress on our sustainability initiatives. Key highlights include:
Our smart meter rollout - We believe that smart meters are the foundational
infrastructure for a smarter energy system - which is critical if the UK is to
reach its net zero target. Not only do they help our customers reduce their
carbon emissions by being smarter about how they use their energy, but they
are also future-proofing our customers' homes for renewables and low-carbon
energy solutions. For that reason, we are leading the charge on the smart
meter rollout and have one of the highest penetration rates in the UK. To
date, 62% of our customers are enjoying the benefits of smart meters and we
continue to install thousands each and every month in our customers' homes.
Renewable and low-carbon home energy solutions - We have been trialling
small-scale installations of solar panels, home batteries and electric vehicle
charging points through our Glow Green installation business.
Enhanced employee engagement - We have undertaken our first all-employee
'Heartbeat' survey. Over 50% responded and as a result of their feedback, we
have implemented a number of initiatives including a free virtual GP service,
improvements to holiday booking and working hours processes for call centre
colleagues, the launch of a well-being toolkit to respond to the evolving
mental health and well-being needs of our colleagues, and the development of
our new 'inclusive leader' training content to support and equip our leaders
in managing their teams with fairness and empathy.
We will provide a full update on progress against our ESG targets and
commitments when we publish our annual results next summer.
Co-Chief Executive - Stuart Burnett
We are delighted to appoint Stuart Burnett as Co-CEO alongside Andrew
Lindsay. The recent acceleration in our growth rate, and the increasingly
exciting growth prospects for our business, have brought forward a transition
that has been planned for some time.
Stuart and Andrew have been working in close partnership since the start of
the pandemic, with Andrew focusing on our Partner community and longer-term
growth strategy, and Stuart on the Customer proposition, the multiple
regulated markets we operate in, and running the day-to-day operations of the
business.
Having worked together for over five years, they share a united vision of how
to deliver on our ambition to more than double the size of the business over
the next few years.
Outlook
The Government has confirmed that the energy price cap will remain at its
current level of £1,277 for the rest of the winter, before increasing
significantly in April 2022; in the meantime, several more suppliers are
expected to fail.
In response to the sharp rise in wholesale energy costs during September,
virtually all suppliers rapidly withdrew their discounted acquisition tariffs,
leaving our standard energy tariffs amongst the cheapest in the market. As a
result, we have seen a very strong start to H2, with a net increase of over
15,000 customers during October alone. Whilst we do not believe this run-rate
will continue, we expect to see an increase of around 10% in our customer
numbers for the second half.
At the same time, we have seen new Partner recruitment more than double, as
more people turn to UW as a way to earn an extra income in response to the
deepening cost of living crisis. Whilst it is still early days, we expect this
momentum to build through the second half, helping us maintain a high rate of
organic customer growth as we move into FY23.
In response to our significantly steeper growth trajectory, we have taken
advantage of a number of energy suppliers exiting the market to recruit an
additional 80 colleagues with relevant experience, significantly strengthening
our support teams. In the absence of unforeseen circumstances, and despite
the additional short-term costs associated with growing our headcount and
faster customer growth, we maintain our previous guidance that full-year
adjusted profit before tax and dividends will be around £60m and 57p (2020:
57p) per share, respectively.
For FY23, we anticipate that the combination of higher energy revenues and
continued growth in the number of services we supply will lead to a material
increase in profits and cash generation, accompanied by progressive dividend
growth in line with our stated policy.
Looking further out, we expect to be a long-term beneficiary of the paradigm
shift that has occurred in the energy markets and look forward to harnessing
the power of our Partners to deliver consistent and sustainable double-digit
organic growth.
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 on a regular basis detailing the key
risks faced by the Group and the operational controls in place to mitigate
those risks; this document is then reviewed by the Audit Committee. No new
principal risks have been identified during the period, and save as set out
below, nor has the magnitude of any risks previously identified significantly
changed during the period.
Business model
The principal risks outlined below should be viewed in the context of the
Group's business model as a reseller of utility services (gas, electricity,
fixed line telephony, mobile telephony, broadband and insurance services)
under the Utility Warehouse and TML brands. As a reseller, the Group does not
own any of the network infrastructure required to deliver these services to
its 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's services are promoted using 'word of mouth' by a large network of
independent Partners, who are paid predominantly on a commission basis. This
means that the Group has limited fixed costs associated with acquiring new
customers.
The principal specific risks arising from the Group's business model, and the
measures taken to mitigate those risks, are set out below.
Reputational risk
The Group's reputation amongst its customers, suppliers and Partners is
believed to be fundamental to the future success of the Group. Failure to meet
expectations in terms of the services provided by the Group, the way the Group
does business or in the Group's financial performance could have a material
negative impact on the Group's performance.
In developing new services, and in enhancing current ones, careful
consideration is given to the likely impact of such changes on existing
customers.
In relation to the service provided to its customer base, reputational risk is
principally mitigated through the Group's recruitment processes, a focus on
closely monitoring staff performance, including the use of direct feedback
surveys from customers (Net Promoter Score), and through the provision of
rigorous staff training.
Responsibility for maintaining effective relationships with suppliers and
Partners rests primarily with the appropriate member of the Group's senior
management team with responsibility for the relevant area. Any material
changes to supplier agreements and Partner commission arrangements which could
impact the Group's relationships are generally negotiated by the executive
directors and ultimately approved by the full Board.
Information technology risk
The Group is reliant on its in-house developed and supported systems for the
successful operation of its business model. Any failure in the operation of
these systems could negatively impact service to customers, undermine Partner
confidence, and potentially be damaging to the Group's brand. Application
software is developed and maintained by the Group's Technology team to support
the changing needs of the business using the best 'fit for purpose' tools and
infrastructure. The Technology team is made up of highly-skilled, motivated
and experienced individuals.
Changes made to the systems are prioritised by business, Product Managers work
with their stakeholders to refine application and systems requirements. They
work with the Technology teams undertaking the change to ensure a proper
understanding and successful outcome. Changes are tested as extensively as
reasonably practicable before deployment. Review and testing are carried out
at various stages of the development by both the Technology team and the
operational department who ultimately take ownership of the system.
The Group has strategic control over the core customer and Partner platforms
including the software development frameworks and source code behind these key
applications. The Group also uses strategic third-party vendors to deliver
solutions outside of our core competency. This largely restricts our
counterparty risks to services that can be replaced with alternative vendors
if required, albeit this could lead to temporary disruption to the day-to-day
operations of the business.
Monitoring, backing up and restoring of the software and underlying data are
made on a regular basis. Backups are securely stored or replicated to
different locations. Disaster recovery facilities are either provided through
cloud-based infrastructure as a service, 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. 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 the Group is a data controller registered 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 and Compliance team.
Legislative and regulatory risk
The Group is subject to various laws and regulations. The energy,
communications and financial services markets in the UK are subject to
comprehensive operating requirements as defined by the relevant sector
regulators and/or government departments. Amendments to the regulatory regime
could have an impact on the Group's ability to achieve its financial goals and
any material failure to comply may result in the Group being fined and lead to
reputational damage which could impact the Group's brand and ability to
attract and retain customers. Furthermore, the Group is obliged to comply with
retail supply procedures, amendments to which could have an impact on
operating costs.
The Group is a licensed gas and electricity supplier, and therefore has a
direct regulatory relationship with Ofgem. If the Group fails to comply with
its licence obligations, it could be subject to fines or to the removal of its
respective licences.
Further regulatory changes relating to retail energy price caps, faster
switching, the impact of covid on bad debt, the rollout programme of smart
energy meters, and the development of existing environmental and social
policies, could all have a potentially significant impact on the sector, and
the net profit margins available to energy suppliers.
The Group is also a supplier of telecoms services and therefore has a direct
regulatory relationship with Ofcom. If the Group fails to comply with its
obligations, it could be subject to fines or lose its ability to operate.
Regulatory changes relating to the European Electronic Communications Code
could have an impact on the telecoms sector with increased regulatory burden
and on the Group's product offering.
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"). If the Group fails to comply with FCA regulations, it could
be exposed to fines and risk losing its authorised status, severely
restricting its ability to offer insurance services to customers.
In general, the majority of the Group's services are supplied into highly
regulated markets, and this could restrict the operational flexibility of the
Group's business. In order to mitigate this risk, the Group seeks to maintain
appropriate relations with both Ofgem and Ofcom (the UK regulators for the
energy and communications markets respectively), the Department for Business,
Energy and Industrial Strategy ('BEIS'), and the FCA. The Group engages with
officials from all these organisations on a periodic basis to ensure they are
aware of the Group's views when they are consulting on proposed regulatory
changes or if there are competition issues the Group needs to raise with
them.
It should be noted that the regulatory environment for the various markets in
which the Group operates is generally focussed on promoting competition; it
therefore seems reasonable to expect that most potential changes will broadly
be beneficial to the Group, given the Group's relatively small size compared
to the former monopoly incumbents with whom it competes. However, these
changes and their actual impact will always remain uncertain and could
include, in extremis, the re-nationalisation of the energy supply industry.
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. In addition, political and
regulatory developments affecting the energy and telecoms markets within which
the Group operates may have a material adverse effect on the Group's business,
results of operations and overall financial condition.
The Group is also aware of legal and compliance challenges in relation to
climate change and managing climate-related risk.
Financing risk
The Group has debt service obligations which may place operating and financial
restrictions on the Group. This debt could have adverse consequences insofar
as it: (a) requires the Group to dedicate a proportion of its cash flows from
operations to fund payments in respect of the debt, thereby reducing the
flexibility of the Group to utilise its cash to invest in and/or grow the
business; (b) increases the Group's vulnerability to adverse general economic
and/or industry conditions; (c) may limit the Group's flexibility in planning
for, or reacting to, changes in its business or the industry in which it
operates; (d) may limit the Group's ability to raise additional debt in the
long-term; and (e) could restrict the Group from making larger strategic
acquisitions or exploiting business opportunities.
Each of these prospective adverse consequences (or a combination of some or
all of them) could result in the potential growth of the Group being at a
slower rate than may otherwise be achieved.
Fraud and bad debt risk
The Group has a universal supply obligation in relation to the provision of
energy to domestic customers. This means that although the Group is entitled
to request a reasonable deposit from potential new 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.
Fraud and 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.
More generally, the Group is also exposed to payment card fraud, where
customers use stolen cards to obtain credit (e.g. on their CashBack card) or
goods (e.g. Smartphones) from the Group; the Group regularly reviews and
refines its fraud protection systems to reduce its potential exposure to such
risks.
Wholesale price risk
The Group does not own or operate any utility network infrastructure itself,
choosing instead to purchase the capacity needed from third parties. The
advantage of this approach is that the Group is largely protected from
technological risk, capacity risk or the risk of obsolescence, as it can
purchase the amount of each service required to meet its customers' needs.
Whilst there is a theoretical risk that in some of the areas in which the
Group operates it may be unable to secure access to the necessary
infrastructure on commercially attractive terms, in practice the pricing of
access to such infrastructure is 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. In addition, the timing of
any quarterly price changes under the Eon (formerly npower) arrangement may
not align with changes in retail prices, creating temporary short-term
fluctuations in the underlying margins earned by the Group from supplying
energy. 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 or increased price competition could impact future profit margins.
In order to maintain its competitive position, there is a consistent focus on
ways of improving operational efficiency. New service innovations are
monitored closely by senior management and the Group is generally able to
respond within an acceptable timeframe by offering any new services using the
infrastructure of its existing suppliers. The increasing proportion of
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, is considered likely to materially reduce any competitive threat.
The Directors anticipate that the Group will face continued competition in the
future as new companies enter the market and alternative technologies and
services become available. The Group's services and expertise may be
rendered obsolete or uneconomic by technological advances or novel approaches
developed by one or more of the Group's competitors. In the event that
smaller independent energy suppliers continue to experience financial
difficulties as a result of increasing wholesale prices for instance, it is
possible that customers could also have a loss of confidence in the Group,
given that it is also an independent energy supplier. The existing
approaches of the Group's competitors or new approaches or technologies
developed by such competitors may be more effective or affordable than those
available to the Group. There can be no assurance that the Group will be
able to compete successfully with existing or potential competitors or that
competitive factors will not have a material adverse effect on the Group's
business, financial condition or results of operations. However, as the
Group's customer base continues to rise, competition amongst suppliers of
services to the Group is expected to increase. This has already been evidenced
by various volume-related growth incentives which have been agreed with some
of the Group's largest wholesale suppliers. This should also ensure that the
Group has direct access to new technologies and services available to the
market.
Infrastructure risk
The provision of services to the Group's customers is reliant on the efficient
operation of third party physical infrastructure. There is a risk of
disruption to the supply of services to customers through any failure in the
infrastructure e.g. gas shortages, power cuts or damage to communications
networks. However, as the infrastructure is generally shared with other
suppliers, any material disruption to the supply of services is likely to
impact a large part of the market as a whole and it is unlikely that the Group
would be disproportionately affected. In the event of any prolonged disruption
isolated to the Group's principal supplier within a particular market,
services required by customers could in due course be sourced from another
provider.
The development of localised energy generation and distribution technology may
lead to increased peer-to-peer energy trading, thereby reducing the volume of
energy provided by nationwide suppliers. As a nationwide retail supplier,
the Group's results from the sale of energy could therefore be adversely
affected.
Similarly, the construction of 'local monopoly' fibre telephony networks to
which the Group's access may be limited as a reseller could restrict the
Group's ability to compete effectively for customers in certain areas.
Smart meter rollout risk
The Group is in part reliant on third party suppliers to fully deliver its
smart meter rollout programme effectively. In the event that the Group suffers
delays to its smart meter rollout programme the Group may be in breach of its
regulatory obligations and therefore become subject to fines from Ofgem. In
order to mitigate this risk the Group dual-sources (where practicable) the
third party metering and related equipment they use.
The Group may also be indirectly exposed to reputational damage and litigation
from the risk of technical complications arising from the installation of
smart meters or other acts or omissions of meter operators, e.g. the escape of
gas in a customer's property causing injury or death. The Group mitigates
this risk through having established their own meter operator (UW Home
Services Limited) and ensuring that all employees receive appropriate training
and proper supervision.
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 rapid anticipated growth in the installed base of smart meters resulting
from the national rollout programme.
Gas leakage within the national gas distribution network
The operational management of the national gas distribution network is outside
the control of the Group, 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.
Key man risk
The Group is dependent on its key management for the successful development
and operation of its business. In the event that any or all of the members
of the key management team were to leave the business, it could have a
material adverse effect on the Group's operations. The Group seeks to mitigate
this risk through its remuneration policy.
Single site risk
The Group operates from one principal site and, in the event of significant
damage to that site through fire or other issues, the operations of the Group
could be adversely affected. In order to mitigate, where possible, the
impact of this risk the Group has in place appropriate disaster recovery
arrangements.
Acquisition risk
The Group may invest in other businesses, taking a minority, majority or 100%
equity shareholding, or through a joint venture partnership. Such investments
may not deliver the anticipated returns, and may require additional funding in
future. This risk is mitigated through conducting appropriate
pre-acquisition due diligence where relevant.
Virus outbreak risk
In the event of further virus outbreak (or new variants of covid emerging)
which are resistant to vaccinations and/or treatments, the Company faces a
number of risks from any highly infectious virus or disease which causes
serious incapacity amongst those infected, including: (i) staff may be unable
to attend their normal place of work and fulfil their normal duties due to
falling ill or being required to self-isolate (either due to exposure to
carriers of the virus, or to reduce the likelihood of being so exposed); (ii)
the Company may be required to shut Network HQ to prevent transmission of the
virus in the workplace; (iii) the efficiency of our operations may be reduced;
(iv) we may be unable to recruit and train new members of staff; (v) customers
may find it more difficult to contact the company; (vi) we may be unable to
resolve faults and challenges faced by customers which require a visit to
their home or other engineering works to be carried out; (vii) customers may
stop paying their bills, or we may be required by the Government to offer
payment holidays to customers in respect of their utilities (in a similar
fashion to the mortgage payment provisions), putting pressure on the Company's
working capital; (viii) we may be restricted from carrying out normal debt
enforcement procedures including suspension of telephony services and
installation of smart meters; (ix) the Company's Partners may find it more
difficult to grow their businesses during a period when restrictions on
movement are imposed by the Government; (x) we may be unable to visit
customers' homes to install smart meters and/or our free lightbulb replacement
service; (xi) the various providers of third party infrastructure used to
supply our services may be unable to cope with the increased demands placed
upon them; and (xii) churn could increase during periods when customers are
isolated at home.
These are mitigated by: (i) the Company has proven technology to enable most
employees to carry out their duties remotely; (ii) the demographic mix of our
customer base is heavily skewed towards homeowners and older/retired
customers; this means we are significantly less exposed to payment issues than
most other providers of similar services; (iii) the Company has a strong
balance sheet with modest gearing, and access to significant, recently
refinanced, additional debt facilities (if required) to cover any temporary
pressure on working capital; in extremis, these could be enhanced by a
temporary suspension of the dividend; (iv) the Company has developed tools
which are now in widespread use, enabling Partners to sign-up new customers,
recruit new Partners, and to help existing Partners support new Partners
remotely to teach them how to build their own successful UW business; and (v)
the wide range of services provided to customers gives us significant
resilience from a revenue and profit perspective against an external event
which affects any individual revenue stream.
AGM response statement
At the Company's Annual General Meeting ("AGM") held on 22 July 2021, votes
against of over 20% were received in respect of the following three
resolutions: (i) To receive the 2021 Annual Report and Accounts; (ii) To
approve the 2021 Directors' Remuneration Report; and (iii) To re-elect Charles
Wigoder. The Board understands that these votes were principally driven by
concerns raised by certain shareholders around the level of Board diversity
and historical directors' remuneration policy issues.
In accordance with the UK Corporate Governance Code, the Board has reflected
on the feedback received, and will take these views into consideration in
filling any Board vacancies which arise in future.
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.
In November 2021 the Group agreed to extend its revolving credit facilities to
£175.0 million with Barclays Bank PLC, Lloyds Bank PLC and Bank of Ireland
Group PLC for the period to 30 June 2024. As at 30 September 2021, £95.0
million of this facility was drawn down and the Company had a cash balance of
£23.2 million.
Under the Group's energy supply arrangements, the Group benefits from its
relationship with Eon (formerly npower) who fund the principal seasonal
working capital requirements relating to the supply of energy to the Group's
customers.
The Group has continued to trade throughout the covid pandemic and its
financial performance to date and available liquidity are in line with
expectations. 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.
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.
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 2021, 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 Executive Chairman
Andrew Lindsay Co-Chief Executive
Officer
Stuart Burnett Co-Chief
Executive Officer
Nick Schoenfeld Chief Financial Officer
Beatrice Hollond Senior Non-Executive
Director
Andrew Blowers Non-Executive Director
Melvin Lawson Non-Executive
Director
Julian Schild Non-Executive
Director
Suzi Williams Non-Executive
Director
Given on behalf of the Board
ANDREW LINDSAY STUART BURNETT NICK SCHOENFELD
Co-Chief Executive Co-Chief Executive Chief Financial Officer
22 November 2021
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 2021 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 2021 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").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the 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.
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
International Financial Reporting Standards as adopted for use in the UK. 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.
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.
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.
Robert Seale
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
United Kingdom
22 November 2021
Condensed Consolidated Interim Statement of Comprehensive Income
Note 6 months ended 30 September 2021 (unaudited) 6 months ended 30 September 2020 (unaudited) Year
£'000 £'000 ended
31 March 2021 (audited)
£'000
Revenue 371,275 349,370 861,204
Cost of sales (286,295) (266,721) (688,104)
Gross profit 84,980 82,649 173,100
Distribution expenses (12,697) (13,522) (27,849)
Administrative expenses (40,574) (36,296) (76,820)
Share incentive scheme charges (585) (590) (1,377)
Amortisation of energy supply contract intangible 4 (5,614) (5,614) (11,228)
Total administrative expenses (46,773) (42,500) (89,425)
Impairment loss on trade receivables (5,071) (4,599) (11,213)
Other income 669 574 1,175
Operating profit 21,108 22,602 45,788
Financial income 26 53 84
Financial expenses (1,272) (1,204) (2,358)
Net financial expense (1,246) (1,151) (2,274)
Profit before taxation 19,862 21,451 43,514
Taxation (5,623) (5,126) (10,955)
Profit for the period 14,239 16,325 32,559
Profit and other comprehensive income for the period attributable to owners of 14,383 16,324 32,577
the parent
(Loss)/profit for the period attributable to non-controlling interest (144) 1 (18)
Profit for the period 14,239 16,325 32,559
Basic earnings per share 8 18.3p 20.8p 41.5p
Diluted earnings per share 8 18.3p 20.7p 41.4p
Interim dividend per share 27.0p 27.0p
Condensed Consolidated Interim Balance Sheet
Note As at As at
30 September
31 March
2021 As at
2021
(unaudited)
30 September
(audited)
2020
(unaudited)
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 33,009 36,975 34,865
Investment property 3 8,463 8,381 8,575
Intangible assets 4 156,997 164,377 160,626
Goodwill 5,324 5,324 5,324
Other non-current assets 30,215 28,635 28,595
Total non-current assets 234,008 243,692 237,985
Current assets
Inventories 6,451 5,695 6,325
Trade and other receivables 62,451 57,559 61,706
Current tax receivable 1,402 1,454 726
Accrued income 81,515 69,304 120,395
Prepayments 12,359 11,638 10,471
Cash 23,175 41,382 25,056
Total current assets 187,353 187,032 224,679
Total assets 421,361 430,724 462,664
Current liabilities
Trade and other payables (33,365) (45,380) (30,374)
Accrued expenses and deferred income (81,419) (80,893) (122,295)
Total current liabilities (114,784) (126,273) (152,669)
Non-current liabilities
Long term borrowings 5 (94,554) (79,198) (89,376)
Lease liabilities (6,465) (8,310) (7,096)
Deferred tax (1,695) (932) (1,145)
Total non-current liabilities (102,714) (88,440) (97,617)
Total assets less total liabilities 203,863 216,011 212,378
Equity
Share capital 3,970 3,967 3,970
Share premium 145,317 144,551 145,094
Capital redemption reserve 107 107 107
Treasury shares (5,502) (5,502) (5,502)
JSOP reserve (1,150) (1,150) (1,150)
Retained earnings 61,712 74,466 70,306
204,454 216,439 212,825
Non-controlling interest (591) (428) (447)
Total equity 203,863 216,011 212,378
Condensed Consolidated Interim Cash Flow Statement
Note 6 months Year
ended
ended
30 September 6 months
31 March
2021
ended
2021
(unaudited)
30 September
(audited)
2020
(unaudited)
£'000 £'000 £'000
Operating activities
Profit before taxation 19,862 21,451 43,514
Adjustments for:
Net financial expense 1,246 1,151 2,274
Depreciation of property, plant and equipment 2,421 2,359 4,731
Profit on disposal of fixed assets (312) (35) (47)
Amortisation of intangible assets 7,681 7,157 14,550
Amortisation of debt arrangement fees 178 178 356
Increase in inventories (126) (1,062) (1,694)
Decrease/(increase) in trade and other receivables 34,628 47,355 (6,713)
Decrease in trade and other payables (37,726) (30,478) (4,046)
Share incentive scheme charges 585 590 1,377
Corporation tax paid (5,753) (5,925) (10,945)
Net cash flow from operating activities 22,684 42,741 43,357
Investing activities
Purchase of property, plant and equipment (769) (1,527) (2,582)
Purchase of intangible assets (4,052) (3,815) (7,457)
Disposal of property, plant and equipment 628 47 100
Interest received 26 31 98
Cash flow from investing activities (4,167) (5,264) (9,841)
Financing activities
Dividends paid 6 (23,559) (23,524) (44,708)
Interest paid (1,323) (1,001) (2,002)
Interest paid on lease liabilities (108) (128) (246)
Drawdown of long-term borrowing facilities 25,000 - 30,000
Repayment of long-term borrowing facilities (20,000) (15,000) (35,000)
Repayment of lease liabilities (631) (713) (1,321)
Issue of new ordinary shares 7 223 660 1,206
Cash flow from financing activities (20,398) (39,706) (52,071)
Decrease in cash and cash equivalents (1,881) (2,229) (18,555)
Net cash and cash equivalents at the beginning of the period 25,056 43,611 43,611
Net cash and cash equivalents at the end of the period 23,175 41,382 25,056
Condensed Consolidated Interim Statement of Changes in Equity
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 2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
16,325
Profit and total comprehensive income for the period 16,324
- - - - - 1
Dividends - - - - - (23,524) - (23,524)
Credit arising on share options - - - - - 590 - 590
Retained earnings tax adjustments 8
- - - - - 8 -
Issue of new ordinary shares 5 655 - - - - - 660
Balance at 30 September 2020 3,967 144,551 107 (5,502) (1,150) 74,466 (428) 216,011
Balance at 1 October 2020 3,967 144,551 107 (5,502) (1,150) 74,466 (428) 216,011
16,234
Profit and total comprehensive income for the period 16,253
- - - - - (19)
Dividends - - - - - (21,184) - (21,184)
Credit arising on share options - - - - - 779 - 779
Deferred tax on share options - - - - - (8) - (8)
Issue of new ordinary shares 3 543 - - - - - 546
Balance at 31 March 2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
Balance at 1 April 2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
14,239
Profit and total comprehensive income for the period
- - - - - 14,383 (144)
Dividends - - - - - (23,559) - (23,559)
Credit arising on share options - - - - - 585 - 585
Deferred tax on share options - - - - - (11) - (11)
Retained earnings tax adjustments 8
- - - - - 8 -
Issue of new ordinary shares - 223 - - - - - 223
Balance at 30 September 2021 3,970 145,317 107 (5,502) (1,150) 61,712 (591) 203,863
Notes to the condensed interim financial statements
1. General information
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
2021, and are consistent with those that the Company expects to apply in its
financial statements for the year ended 31 March 2022.
The condensed consolidated financial statements for the year ended 31 March
2021 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 2021 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 2021 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 2021 and 30 September 2020 is unaudited but
has been subject to a review by the Company's auditors.
Seasonality of business: in respect of the energy supplied by the Group,
approximately two thirds is consumed by customers in the second half of the
financial year.
The Half-Year Results were approved for issue by the Board of Directors on 22
November 2021.
2. 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 2021.
3. 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 Company vacated its former head office, Southon House, in 2015
and the property is now held as an investment property.
An independent valuation of Southon House was conducted on 4 June 2021 in
accordance with RICS Valuation - Professional Standards UK January 2014
(revised April 2015) guidelines. The independent market value of Southon
House was determined to be £11.9 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.
4. Intangible assets
Energy Supply Contract IT Software & Web Development
Total
£'000 £'000 £'000
Cost
At 31 March 2021 224,563 28,270 252,833
Additions - 4,052 4,052
At 30 September 2021 224,563 32,322 256,885
Amortisation
At 31 March 2021 (82,339) (9,868) (92,207)
Charge for the period (5,614) (2,067) (7,681)
At 30 September 2021 (87,953) (11,935) (99,888)
Net book amount at 30 September 2021 (unaudited) 136,610 20,387 156,997
Net book amount at 31 March 2021 (audited) 142,224 18,402 160,626
Net book amount at 30 September 2020 (unaudited) 147,838 16,539 164,377
The Energy Supply Contract intangible asset relates to the entering into of
the energy supply arrangements with Eon (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.
5. Interest bearing loans and borrowings
6 months ended 30 September 2021 (unaudited) 6 months ended 30 September 2020 (unaudited)
Year ended 31 March 2021 (audited)
£'000 £'000 £'000
Bank loans 95,000 80,000 90,000
Unamortised loan arrangement fees (446) (802) (624)
94,554 79,198 89,376
Due within one year - - -
Due after one year 95,000 80,000 90,000
95,000 80,000 90,000
6. Dividends
6 months 6 months Year
ended
ended
ended
30 September
30 September
31 March
2021
2020
2021
(unaudited)
(unaudited)
(audited)
£'000 £'000 £'000
Final dividend for the year ended 31 March 2021 of 30p per share 23,559 - -
Final dividend for the year ended 31 March 2020 of 30p per share - 23,524 23,524
Interim dividend for the year ended 31 March 2021 of 27p per share (2020: 27p) - - 21,184
An interim dividend of 27.0p per share will be paid on 17 December 2021 to
shareholders on the register at close of business on 3 December 2021. The
estimated amount of this dividend to be paid is approximately £21.2m and, in
accordance with IFRS accounting requirements, has not been recognised in these
accounts.
7. Share capital
During the period the Company issued 33,865 new ordinary shares to satisfy the
exercise of employee and distributor share options.
8. Earnings per share
6 months 6 months Year
ended
ended
ended
30 September
30 September
31 March
2021
2020
2021
(unaudited)
(unaudited)
(audited)
The calculation of basic and diluted EPS is based on the following data: £'000 £'000 £'000
Earnings for the purpose of basic and diluted EPS 14,383 16,324 32,577
Share incentive scheme charges (net of tax) 493 516 1,194
Amortisation of energy supply contract intangible assets 5,614 5,614 11,228
Earnings excluding share incentive scheme charges for the purpose of adjusted 20,490 22,454 44,999
basic and diluted EPS
Number Number Number
('000s) ('000s) ('000s)
Weighted average number of ordinary shares for the purpose of basic EPS
78,526 78,389 78,433
Effect of dilutive potential ordinary shares (share incentive awards)
193 305 273
Weighted average number of ordinary shares for the purpose of diluted EPS
78,719 78,694 78,706
Adjusted basic EPS(1) 26.1p 28.6p 57.4p
Basic earnings per share 18.3p 20.8p 41.5p
Adjusted diluted earnings per share1 26.0p 28.5p 57.2p
Diluted earnings per share 18.3p 20.7p 41.4p
9. Post balance sheet event
An investigation into the Group's debt management processes was announced by
Ofgem in June 2018. In order to settle the matter, on 10 November 2021 the
Group agreed to make a payment of £1.5m into Ofgem's Voluntary Redress Fund.
(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 Eon (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 can be derived directly from amounts shown
separately on the face of the condensed consolidated interim statement of
comprehensive income.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FLFFDLILFFILRecent news on Telecom Plus
See all newsREG - Telecom Plus PLC - Total Voting Rights
AnnouncementREG - Telecom Plus PLC - Year End Trading Update and Notice of Results
AnnouncementREG - Telecom Plus PLC - Total Voting Rights
AnnouncementREG - Telecom Plus PLC - Block listing Interim Review
AnnouncementREG - Telecom Plus PLC - Telecom Plus Passes One Million Customer Milestone
Announcement