Final Results
Telecom Plus PLC
10 June 2005
TELECOM plus PLC
10 June 2005
Preliminary results for the year ended 31 March 2005
Telecom plus PLC, the UK's leading integrated multi-utility (gas, electricity,
telephony, internet), announces preliminary results for the year ended 31 March
2005.
Financial and business highlights:
• Turnover up 25% to £102.5m (2004: £81.8m)
• Profit before tax of £10.1m (2004: £10.6m)
• Final dividend of 6.0p, total of 11.0p for the full year (2004: 10.0p)
• Earnings per share of 11.7p (2004: 12.2p)
• Subscriber base increased 15% to 205,000 (2004: 178,000)
• Number of services provided increased 29% to 401,000 (2004: 312,000)
Peter Nutting, Chairman, said:
'We ended the financial year with over 205,000 customers (2004: 178,000),
subscribing for over 401,000 services (2004: 312,000), an increase in services
provided of 29% during the year. This steady increase in the average number of
services being taken reflects the continued success of our 'Club' concept, where
over half our total customers are now members.
'Whilst each of the markets in which we operate remains extremely competitive,
we retain our unique position as the only fully integrated multi-utility
supplier. Our low operating costs and efficient systems enable our customers to
benefit from good value across our entire range of services, with the additional
benefit of receiving just a single bill each month.
'We are anticipating a significant increase in turnover during the current year
as both our customer base and the number of services taken by each customer
continue to grow. Profits however are expected to be slightly lower due to the
continuing impact of losses in our gas business and increased customer
acquisition costs. Nevertheless we remain committed to growing our energy
business and are confident that we will earn significant profits from this
sector in due course.'
For press enquiries, please contact:
Charles Wigoder/Stephen Davis Neil Boom
Telecom plus PLC Gresham PR Ltd
020 8955 5000 020 7404 9000
CHAIRMAN'S STATEMENT
I am pleased to report further growth across all areas of our business.
Turnover has increased by 25% to £102m (2004: £82m), and although in line with
market expectations, pre-tax profits for the year have fallen slightly to £10.1m
(2004: £10.6m) due to losses in our gas supply business. The Board however
remain confident in the prospects for the Company and have therefore increased
the final dividend to 6p (2004: 5.5p) making a total of 11p (2004: 10p) for the
year.
We ended the financial year with over 205,000 customers (2004: 178,000),
subscribing for over 401,000 services (2004: 312,000), an increase in services
provided of 29% during the year. This steady increase in the average number of
services being taken reflects the continued success of our 'Club' concept, where
over half our total customers are now members.
We experienced a number of customer service issues during the first few months
of 2005, primarily as a result of technical problems with our new Broadband
service, which adversely affected the confidence of our distribution channel,
and hence their activity. These issues have now been resolved and the activity
of our distribution channel has begun to pick up over the last few weeks.
Following a major overhaul of working practices, performance measurement
criteria and incentives, and the recruitment of key additional members of the
team, our customer service has returned to, and indeed exceeded, its previously
high standards.
As a result of this renewed confidence we are seeing record levels of customers
signing up for our Broadband service, which we regard as strategically important
for our future growth. Indeed, our Broadband business has more than doubled over
the last 6 months, albeit from a relatively small starting point.
Our Distributor base has also experienced steady growth to around 15,500 during
the year (2004: 13,000) and I would like to thank all our Distributors, and
indeed our staff as well, for their important contribution to the continuing
growth and success of the Company.
The supply of domestic gas and electricity now represents a substantial
proportion of group turnover, accounting for 40% of our Virtual Network Business
during the year (2004: 19%). As explained in my statement which accompanied our
interim figures, this growth from a low base during a period of rising wholesale
gas prices has meant we incurred a gross loss of over £3m in our gas business
during the year.
I am delighted we were able to raise £12.1m recently (net of expenses) through
the issue of new shares to a small number of leading City Institutions. That we
were able to do so at a difficult time for equity markets, and at a very small
discount to the market price, was a significant achievement. This fundraising
was necessary to support the greater working capital requirements associated
with our fast growing energy supply business, together with the need for a
larger capital base to undertake systematic hedging activities in order to align
our long-run average commodity costs with our principal competitors. It will
however take some time before this process can be completed.
Our two investments, TML (a wholly owned subsidiary) and Oxford Power Holdings
(trading as Opus, and in which we hold an effective 20% equity interest)
continue to perform in line with expectations. In particular, Opus is trading
profitably and continuing to grow notwithstanding the difficult wholesale market
conditions, and we are becoming increasingly confident in their future
prospects.
We have substantially strengthened our management team over the last few months
with the appointment of Stephen Davis as Group Finance Director (who joined us
from BDO Stoy Hayward where he was managing partner of their London office),
Andy McWilliams as Sales Director responsible for our Independent Distribution
Channel (who joined us from Ocado) and Ravi Khanna as Customer Service Director.
We have also filled several other key senior management posts.
The final dividend will be paid on 14 July 2005 to shareholders on the register
on 24 June 2005 and is subject to approval by shareholders at the Company's
Annual General Meeting which is being held on 13 July 2005.
Outlook
Whilst each of the markets in which we operate remains extremely competitive, we
retain our unique position as the only fully integrated multi-utility supplier.
Our low operating costs and efficient systems enable our customers to benefit
from good value across our entire range of services, with the additional benefit
of receiving just a single bill each month.
We have recently begun to provide line rental to our domestic customers,
removing the need for them to maintain any direct billing relationship with BT.
Around 6,000 customers are already benefiting from this enhancement to our
standard Home Phone service. We believe this is an important strategic
development for the business, which will further reduce churn and improve
customer satisfaction over the medium term, as well as contributing to group
profits in due course.
We will shortly be launching a new range of services and tariffs specifically
targeted at the SME market under the umbrella 'The Utility Warehouse Discount
Club for Business'. This area has obvious attractions due to our large base of
Independent Distributors and the many personal relationships they typically have
with this segment of the business market.
The wholesale forward price of gas for the coming winter remains close to record
highs, and our average cost price for the commodity will therefore again be
substantially greater this year than our competitors (who will be reaping the
benefit from historical hedging activity carried out when prices were
substantially lower). Although Centrica recently announced their domestic
customers could expect a further price increase of around 13% this year, and we
will be increasing our prices later this year as well, we still anticipate
significant losses within our gas supply business during the second half of this
year.
We are anticipating a significant increase in turnover during the current year
as both our customer base and the number of services taken by each customer
continue to grow. Profits however are expected to be slightly lower due to the
continuing impact of losses in our gas business and increased customer
acquisition costs. Nevertheless we remain committed to growing our energy
business and are confident that we will earn significant profits from this
sector in due course.
We remain focused on the profitable long term growth of the business and intend
to maintain a progressive dividend policy which reflects the Company's
anticipated growth in earnings. Dividend increases over the next few years will
however need to be considered carefully, given the need to build our retained
earnings in line with the greater working capital requirements of the business
as it continues to grow.
Finally, as was announced some two months ago, Richard Michell is retiring as a
full-time executive director at the end of August. Richard joined the company in
April 1997, was part of the birth of the business, and has been a key member of
the management team. I am delighted he will remain on the Board as a
non-executive director.
Peter Nutting
Chairman
9 June 2005
Consolidated Profit & Loss Account
Year ended 31 March 2005
Note 2005 2004
--------------------------------
£'000 £'000
Turnover 4 102,467 81,828
Cost of sales 77,747 56,590
--------------------------------
Gross profit 24,720 25,238
Sales and marketing costs 5,966 6,207
Administrative expenses 9,221 8,751
--------------------------------
Operating profit 9,533 10,280
Interest receivable 533 372
Interest payable (14) (20)
--------------------------------
Profit on ordinary
activities before taxation 10,052 10,632
Tax on profit on ordinary
activities 2,788 3,178
--------------------------------
Profit after taxation 7,264 7,454
Dividends 2 7,201 6,159
--------------------------------
Retained profit for
the year 63 1,295
================================
Basic earnings per share 3 11.7p 12.2p
Diluted earnings per share 3 11.5p 11.9p
Dividend per share 11.0p 10.0p
The Group has no recognised gains or losses other than the profit for the
period.All amounts relate to continuing activities.
Consolidated Balance Sheet
As at 31 March 2005
2005 2004
------- -------
£'000 £'000 £'000 £'000
FIXED ASSETS
Tangible assets 2,006 1,903
Intangible assets 3,286 3,742
Investments 1,038 1,038
------- -------
6,330 6,683
CURRENT ASSETS
Stocks 1,134 1,146
Debtors (due within one year) 15,805 9,164
Debtors (due after one year) 3,112 2,666
Cash 6,275 9,857
------- -------
26,326 22,833
CREDITORS
Amounts falling due
within one year 19,027 16,502
------- -------
NET CURRENT ASSETS 7,299 6,331
TOTAL ASSETS LESS
------- -------
CURRENT LIABILITIES 13,629 13,014
======= =======
CAPITAL AND
RESERVES
Called up share capital 3,108 3,076
Share premium account 7,145 6,625
Profit and loss account 3,376 3,313
SHAREHOLDERS'
------- -------
FUNDS 13,629 13,014
======= =======
Approved by the board on 9 June 2005
Consolidated Cash Flow Statement
Year ended 31 March 2005
2005 2004
-------------------------
£'000 £'000
Reconciliation of operating profit
to cash flow from operating activities
Operating profit 9,533 10,280
Goodwill amortisation 456 456
Depreciation 538 487
(Profit) on disposal of fixed assets (25) (28)
Decrease/(Increase) in stocks 12 (556)
(Increase) in debtors (6,887) (1,014)
Increase in creditors 2,122 481
Amortisation of loan stock issue costs 6 24
-------------------------
Net cash flow from operating activities 5,755 10,130
=========================
CASH FLOW STATEMENT
Net cash flow from operating activities 5,755 10,130
Returns on investments and
servicing of finance 519 346
Capital expenditure (616) (416)
Corporation tax paid (3,190) (2,109)
Dividends paid (6,498) (4,717)
-------------------------
Net cash flow before management of liquid
resources and financing (4,030) 3,234
Financing 448 567
-------------------------
(Decrease)/Increase in cash (3,582) 3,801
=========================
Reconciliation of net cash flow to movement
in net funds
(Decrease)/Increase in cash (3,582) 3,801
Conversion of loan stock to equity shares 82 276
Redemption of Loan Stock 22 -
-------------------------
Movement in net funds for the year (3,478) 4,077
Net funds at 1 April 2004 9,753 5,676
-------------------------
Net funds at 31 March 2005 6,275 9,753
=========================
NOTES
1 The financial information set out above does not constitute the Group's
statutory information for the years ending 31 March 2005 or 2004, but is
derived from these accounts. Statutory accounts for 2004 have been
delivered to the Registrar of Companies and those for 2005 will be
delivered following the Company's annual general meeting. The auditors have
reported on these accounts, their reports were unqualified and did not
contain statements under the Companies Act 1985, s237(2) or (3).
There have been no changes to the accounting policies of the Group as set
out in the Report and Accounts for the year ended 31 March 2004.
2 DIVIDENDS
2005 2004
-------------------------
£'000 £'000
Interim dividend paid 5.0p (2004: 4.5p) per share 3,102 2,765
Final dividend proposed 6.0p (2004: 5.5p) per share 4,099 3,394
-------------------------
7,201 6,159
=========================
3 EARNINGS PER SHARE
The calculation of basic earnings per share is based on a profit of
£7,264,000 (2004: £7,454,000) and a weighted average of 61,921,044
(2004: 60,898,714) shares in issue.
2005 2004
-------------------------
Basic earnings per share 11.7p 12.2p
Diluted earnings per share 11.5p 11.9p
=========================
Diluted earnings per share assumes dilutive options and convertible loan notes
have been converted into ordinary shares. The calculations are as follows:
2005 2004
------ ------
Shares Shares
Profit No. Profit No.
£'000 000 £'000 000
Basic earnings 7,264 61,921 7,454 60,899
Dilutive effects:
- Options - 1,409 - 1,591
- Loan notes - - 10 208
------- -------- ------- --------
Diluted earnings 7,264 63,330 7,464 62,698
======= ======== ======= ========
4 TURNOVER AND SEGMENTAL ANALYSIS
The activities of the Group divide into two segments: the Distribution
Business, which is responsible for obtaining new customers, and the Virtual
Network Business, which supplies airtime, gas, electricity and value added
services to those customers. All of its activities are carried out in the
UK.
2005 2004
---------------------------------------------
£'000 £'000
Virtual Network
Turnover 99,700 79,004
Operating profit 12,066 13,770
Net assets 15,378 14,299
=============================================
Distribution
Turnover 2,767 2,824
Operating loss (2,533) (3,490)
Net (liabilities) (1,749) (1,285)
=============================================
This information is provided by RNS
The company news service from the London Stock Exchange