Interim Results

Telecom Plus PLC 13 December 2005 TELECOM plus PLC 13 December 2005 Interim results for the six months ended 30 September 2005 Telecom plus PLC, the UK's leading low-cost integrated multi-utility (gas, electricity, fixed telephony, mobile telephony, broadband), announces interim results for the six months ended 30 September 2005. Financial and business highlights: â€¢ Turnover up 21% to Â£51.9m (2004: Â£42.8m) â€¢ Profit before tax of Â£5.1m (2004: Â£6.6m) â€¢ Subscriber base increased to 213,000 customers, taking 460,000 services â€¢ Significant progress in providing fixed telephony line rental and broadband â€¢ Distributor base has continued to grow steadily, and now exceeds 16,000 â€¢ Directors exploring alternative strategies to control losses in gas business Peter Nutting, Chairman, said: 'We remain focused on organic growth, providing a range of competitively priced utility services to a steadily growing customer base. Despite much talk by other utility and media companies of the advantages of so-called triple and quadruple 'Plays', we remain the only organisation thus far to have successfully implemented this strategy to the benefit of both ourselves and our customers.' For press enquiries, please contact: Charles Wigoder Neil Boom Telecom plus PLC Gresham PR Ltd. 020 8955 5000 020 7404 9000 TELECOM plus PLC CHAIRMAN'S STATEMENT I am able to report further growth across all areas of our business, in the first set of interim results we have presented under the new International Financial Reporting Standards ('IFRS'). Turnover for the six months to 30 September 2005 has increased by 21% to Â£51.9m (2004: Â£42.8m), our subscriber base has increased to 213,000 customers, and the number of services we supply to them has risen to over 460,000. This is equivalent to an average of 2.16 services per customer (2004: 1.85), and reflects the continuing success of our 'Discount Club' concept in which 60% of our customers are now members. The principal benefits of this unique multi-service approach are clearly demonstrated by our levels of churn and bad debt, both of which are believed to be significantly below those typically achieved by our competitors. Pre-tax profits during the first six months of this financial year fell to Â£5.1m compared with the same period last year (2004: Â£6.6m). There were three principal reasons for this reduction: first, an increase to around Â£1.9m (2004: Â£1.0m) in customer acquisition costs during the period, mainly due to the doubling in size of our broadband base to around 25,000 connections; secondly, a one-off increase in our underlying administration costs associated with a significant strengthening of our senior management team; and finally, the fact that fixed telephony revenues from calling mobile phones were significantly higher during the comparative period last year, before industry wide price reductions which took effect in September 2004. Our Distributor base has also continued to experience steady growth, and now exceeds 16,000 (2004: 14,300). Their continuing contribution and commitment to the growth and success of the business remains invaluable. We have made considerable further progress in taking greater control of our customers' telephony services, by assuming responsibility for providing the phone line as well as cheaper calls. The elimination of the historic BT relationship has been warmly welcomed by our customers, who now benefit from lower prices, simpler billing and better customer service than they had previously experienced, with around 75% of eligible new fixed telephony customers now choosing the complete service package. Although margins from providing Broadband and Line Rental to residential customers are currently unsatisfactory due to the uncompetitive wholesale prices available from BT, this is expected to improve over the next 18 months as Local Loop Unbundling gathers pace. This is anticipated to reduce costs significantly from their current level, particularly for companies such as our own which are providing both line rental and broadband to the same domestic premises. Within our mobile business, we have recently simplified our tariffs and handset proposition. We now have a straightforward and extremely competitive mobile offer, which will deliver continuing savings and excellent value to our customers, whilst enabling us to maintain an acceptable margin. In August, we launched the Utility Warehouse Discount Club for Business, offering a range of services specifically tailored towards small and medium sized businesses. This was well received by our Distributors, over 2,500 of whom have since attended training courses to enable them to promote these new services. The strong early take-up of these services gives us considerable confidence that this new Club will make a material contribution to our business over the coming years, as it builds on the experience of this sector we gained through purchasing TML some three years ago. TML continues to generate a satisfactory return on our investment. Oxford Power Holdings (trading as Opus, and in which we hold an effective 20% equity interest) continues to experience considerable success in growing its market share, notwithstanding challenging market conditions. Indeed, it is now profitable and in accordance with the new IFRS requirements, we have consolidated our share of these profits (amounting to Â£112,000) within our figures for the first time. In my last statement I reported we had raised Â£12.1m (net of expenses) to strengthen our capital base, which took our cash reserves as at 30 September 2005 to Â£21m, with no external debt. We also recently concluded a long term working capital facility with Barclays Bank plc. Together, these should enable us to implement a systematic hedging programme to progressively align our wholesale gas costs with those of our main competitors, although this process has not yet started due to the forward cost of gas remaining unacceptably high. Outlook and the current state of the gas market We substantially increased our retail prices for both gas and electricity at the beginning of October 2005, repositioning ourselves with a 'best value' rather than 'cheapest' price promise. This resulted in only a small loss of customers, providing further evidence of the commercial logic behind our unique multi-utility business model. These price rises (of around 30% for gas customers) were expected to substantially reduce our gas losses this winter. However the increasing volatility and unprecedented prices seen recently in the wholesale gas markets (where by way of example the 'December' and 'Day-Ahead' commodity prices doubled and trebled respectively in the space of less than two weeks during November) is having a significant impact on our business. On 23 November 2005, the Company therefore issued a trading statement drawing attention to this development, making shareholders aware of the effect it would have on our results for the full year. Profits are now expected to be significantly lower than last year and are also subject to considerable uncertainty. Although wholesale gas prices have since started to ease slightly, that uncertainty remains, as we are currently purchasing the majority of our gas for this winter on a short-term basis. The directors are therefore actively exploring alternative strategies to control the level of losses arising from our gas business. Our preferred outcome would be one which enabled us to achieve a consistent margin in future on what remains an important part of our multi-service proposition. We will provide shareholders with further information about this as soon as possible. In the circumstances, the directors believe it would therefore be prudent to defer a decision on the payment of an interim dividend until the outlook for the full year has become more clear. In the meantime we remain focused on organic growth, providing a range of competitively priced utility services to a steadily growing customer base. Despite much talk by other utility and media companies of the advantages of so-called triple and quadruple 'Plays', we remain the only organisation thus far to have successfully implemented this strategy to the benefit of both ourselves and our customers. Peter Nutting Chairman 13 December 2005 Consolidated Income Statement 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 restated* restated* Â£'000 Â£'000 Â£'000 Revenue 51,897 42,778 102,467 Cost of sales 38,338 29,423 77,747 ---------- ----------- --------- Gross profit 13,559 13,355 24,720 Distribution costs 3,392 2,902 6,157 Administrative expenses 5,503 4,176 8,876 ---------- ----------- --------- Operating profit 4,664 6,277 9,687 Share of profit in associates before tax 112 20 66 Finance income less costs 307 268 519 ---------- ----------- --------- Profit before tax 5,083 6,565 10,272 Income taxes 1,617 1,823 2,624 ---------- ----------- --------- Profit for the period 3,466 4,742 7,648 ---------- ----------- --------- Basic earnings per share 5.3p 7.7p 12.4p Diluted earnings per share 5.2p 7.5p 12.1p *Restated in accordance with IFRS Consolidated Balance Sheet As at As at As at 30 September 30 September 31 March 2005 2004 2005 restated* restated* Â£'000 Â£'000 Â£'000 Assets Non-current assets Property, plant and equipment 1,659 1,854 1,723 Goodwill 3,742 3,742 3,742 Other intangible assets 217 349 283 Investments in associates 524 360 597 Deferred tax 200 287 236 Other receivables 2,970 2,799 2,912 ----------- ---------- ---------- 9,312 9,391 9,493 Current assets Inventories 981 1,092 1,134 Trade and other receivables 910 2,761 2,939 Prepayments and accrued income 14,007 5,906 12,866 Cash and cash equivalents 20,974 13,393 6,275 ----------- ---------- ---------- 36,872 23,152 23,214 ----------- ---------- ---------- Total assets 46,184 32,543 32,707 ----------- ---------- ---------- Equity and liabilities Current liabilities Trade and other payables 3,409 4,109 5,832 Current tax payable 1,400 2,356 1,592 Accrued expenses and deferred income 11,839 8,234 7,504 ----------- ---------- ---------- Total liabilities 16,648 14,699 14,928 ----------- ---------- ---------- ----------- ---------- ---------- Total assets less total liabilities 29,536 17,844 17,779 ----------- ---------- ---------- Share capital 3,418 3,100 3,108 Share premium 19,027 6,996 7,145 Share option reserve 673 286 464 Retained earnings 6,418 7,462 7,062 ----------- ---------- ---------- Total equity 29,536 17,844 17,779 ----------- ---------- ---------- *Restated in accordance with IFRS Consolidated Cash Flow Statement +---------------------------------------------------------+-------------+-------------+----------+ | | As at| As at| As at| +---------------------------------------------------------+-------------+-------------+----------+ | | 30 September| 30 September| 31 March| +---------------------------------------------------------+-------------+-------------+----------+ | | 2005 | 2004 | 2005 | +---------------------------------------------------------+-------------+-------------+----------+ | | | restated*| restated*| +---------------------------------------------------------+-------------+-------------+----------+ | | Â£'000 | Â£'000 | Â£'000 | +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Operating activities | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Operating profit | 4,664 | 6,277 | 9,687 | +---------------------------------------------------------+-------------+-------------+----------+ |Depreciation of property, plant and equipment | 217 | 194 | 407 | +---------------------------------------------------------+-------------+-------------+----------+ |Depreciation of intangible assets | 66 | 65 | 131 | +---------------------------------------------------------+-------------+-------------+----------+ |Profit on disposal of property, plant and equipment | - | (50) | (25) | +---------------------------------------------------------+-------------+-------------+----------+ |Decrease in inventories | 153 | 54 | 12 | +---------------------------------------------------------+-------------+-------------+----------+ |Decrease/(increase) in trade and other receivables | 830 | 640 | (6,887) | +---------------------------------------------------------+-------------+-------------+----------+ |Increase in trade and other payables | 1,913 | 1,128 | 2,122 | +---------------------------------------------------------+-------------+-------------+----------+ |Amortisation of loan stock issue costs | - | 6 | 6 | +---------------------------------------------------------+-------------+-------------+----------+ |Costs attributed to the issue of share options | 210 | 126 | 302 | +---------------------------------------------------------+-------------+-------------+----------+ |Corporation tax paid | (1,600) | (1,284) | (3,190) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ |Net cash flow from operating activities | 6,453 | 6,880 | 2,565 | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Investing activities | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Purchase of property, plant and equipment | (154) | (546) | (629) | +---------------------------------------------------------+-------------+-------------+----------+ |Sale of property, plant and equipment | - | 67 | 43 | +---------------------------------------------------------+-------------+-------------+----------+ |Expenditure on intangible assets | - | (30) | (30) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ |Cash flow from investing activities | (154) | (509) | (616) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Financing activities | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Dividend paid for the previous year | (4,099) | (3,394) | (6,498) | +---------------------------------------------------------+-------------+-------------+----------+ |Interest received | 342 | 269 | 533 | +---------------------------------------------------------+-------------+-------------+----------+ |Interest paid | (35) | (1) | (14) | +---------------------------------------------------------+-------------+-------------+----------+ |Issue of ordinary shares | 12,192 | 313 | 470 | +---------------------------------------------------------+-------------+-------------+----------+ |Redemption of loan stock | - | (22) | (22) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ |Cash flow from financing activities | 8,400 | (2,835) | (5,531) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Increase/(decrease) in cash and cash | | | | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ |equivalents | 14,699 | 3,536 | (3,582) | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ |Cash and cash equivalents at the beginning of the period | 6,275 | 9,857 | 9,857 | +---------------------------------------------------------+-------------+-------------+----------+ | | | | | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ |Cash and cash equivalents at the end of the period | 20,974 | 13,393 | 6,275 | | | ----------| ----------| --------| +---------------------------------------------------------+-------------+-------------+----------+ | | | | | +---------------------------------------------------------+-------------+-------------+----------+ *Restated in accordance with IFRS Reconciliation of Shareholders' Equity +----------------------------------------------+--------+---------+--------+---------+---------+ | | | Share| Share| | | +----------------------------------------------+--------+---------+--------+---------+---------+ | | Share| Premium| Option| Retained| | +----------------------------------------------+--------+---------+--------+---------+---------+ | | Capital| Account| Reserve| Earnings| Total | +----------------------------------------------+--------+---------+--------+---------+---------+ | | Â£'000 | Â£'000 | Â£'000 | Â£'000 | Â£'000 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance 1 April 2004 | 3,076 | 6,625 | - | 3,313 | 13,014 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Changes in accounting policy | - | - | 160 | 2,977 | 3,137 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Restated balance | 3,076 | 6,625 | 160 | 6,290 | 16,151 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Profit for the period ended 30 September 2004 | - | - | - | 4,742 | 4,742 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Deferred tax on share options | - | - | - | (176) | (176) | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Total recognised income and expenses | - | - | - | 4,566 | 4,566 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Other movements | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Dividends | - | - | - | (3,394) | (3,394) | +----------------------------------------------+--------+---------+--------+---------+---------+ |Issue of share capital | 24 | 371 | - | - | 395 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Share option expense | - | - | 126 | - | 126 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Net change directly in equity | 24 | 371 | 126 | (3,394) | (2,873) | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Total movements | 24 | 371 | 126 | 1,172 | 1,693 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance at 30 September 2004 | 3,100 | 6,996 | 286 | 7,462 | 17,844 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance 1 October 2004 | 3,100 | 6,996 | 286 | 7,462 | 17,844 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Profit for the period ended 31 March 2005 | - | - | - | 2,906 | 2,906 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Deferred tax on share options | - | - | - | (202) | (202) | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Total recognised income and expenses | - | - | - | 2,704 | 2,704 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Other movements | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Dividends | - | - | - | (3,104) | (3,104) | +----------------------------------------------+--------+---------+--------+---------+---------+ |Issue of share capital | 8 | 149 | - | - | 157 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Share option expense | - | - | 178 | - | 178 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Net change directly in equity | 8 | 149 | 178 | (3,104) | (2,769) | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Total movements | 8 | 149 | 178 | (400) | (65) | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance at 31 March 2005 | 3,108 | 7,145 | 464 | 7,062 | 17,779 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance 1 April 2005 | 3,108 | 7,145 | 464 | 7,062 | 17,779 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Profit for the period ended 30 September 2005 | - | - | - | 3,466 | 3,466 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Deferred tax on share options | - | - | - | (11) | (11) | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Total recognised income and expenses | - | - | - | 3,455 | 3,455 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Other movements | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Dividends | - | - | - | (4,099) | (4,099) | +----------------------------------------------+--------+---------+--------+---------+---------+ |Issue of share capital | 310 | 11,882 | - | - | 12,192 | +----------------------------------------------+--------+---------+--------+---------+---------+ |Share option expense | - | - | 209 | - | 209 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Net change directly in equity | 310 | 11,882 | 209 | (4,099) | 8,302 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | +----------------------------------------------+--------+---------+--------+---------+---------+ |Total movements | 310 | 11,882 | 209 | (644) | 11,757 | +----------------------------------------------+--------+---------+--------+---------+---------+ | | | | | | | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ |Balance at 30 September 2005 | 3,418 | 19,027 | 673 | 6,418 | 29,536 | | | -------| -------| -------| -------| ------| +----------------------------------------------+--------+---------+--------+---------+---------+ Notes to the Interim Report General information The financial information contained in this Interim Report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. No statutory accounts for the period have been delivered to the Registrar of Companies. The financial information contained in this Interim Report has been neither audited nor reviewed by the auditors. The statutory accounts for year ended 31 March 2005 have been filed with the Registrar of Companies. The auditors' report on these accounts was unqualified and did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985. The Group will adopt IFRS for the first time in its consolidated financial statements for the year ending 31 March 2006, which will include comparative financial information for the year ended 31 March 2005. IFRS 1 requires that an entity develops accounting policies based on the standards effective at the reporting date of its first IFRS financial statements. In accordance with the Listing Rules of the UKLA this Interim Report for the six month period ended 30 September 2005, including comparative information for the six month period ended 30 September 2004 and for the year ended 31 March 2005, has been prepared on a basis consistent with its anticipated 2005/6 IFRS accounting policies. The Group's consolidated financial statements were prepared in accordance with UK GAAP until 31 March 2005. This Interim Report has been approved for issue by the Board of Directors on 13 December 2005. Telecom plus PLC adopted IFRS with effect from 31 March 2005. Cyclicality of business: in respect of the energy segment of the business, approximately 60% is consumed by customers in the second half of the financial year. Business Segments For management purposes, the Group is currently organised into three operating divisions - Virtual Network - Telephony; Virtual Network - Energy; and Distribution. These divisions are the basis on which the Group reports its primary segment information. +----------------------------+----------------------+----------------------+----------------------+ | | 6 months ended| 6 months ended| Year ended| +----------------------------+----------------------+----------------------+----------------------+ | | 30 September| 30 September| 31 March 2005| | | 2005| 2004| | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | | | | | | | | | | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | Revenue| | Result| Revenue| | Result| Revenue| | Result| +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | Â£'000 | | Â£'000 | Â£'000 | | Â£'000 | Â£'000 | | Â£'000 | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | | | | | | | | | | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ |Virtual Network - telephony | 29,220 | | 6,528 | 31,389 | | 7,876 | 60,219 | | 16,252 | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ |Virtual Network - energy | 21,368 | | (5) | 10,294 | | (570) | 39,481 | | (4,289) | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ |Distribution | 1,309 | | (1,859) | 1,095 | | (1,029) | 2,767 | | (2,276) | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | | | | | | | | | | | | -------| | -------| -------| | -------| -------| | -------| +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | Total | 51,897 | | 4,664 | 42,778 | | 6,277 |102,467 | | 9,687 | | | -------| | -------| -------| | -------| -------| | -------| +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ | | | | | | | | | | | +----------------------------+---------+--+---------+---------+--+---------+---------+--+---------+ 30 September 30 September 31 March 2005 2004 2005 Â£'000 Â£'000 Â£'000 Dividends Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 March 2005 of 6p (2004 : 5.5p) 4,099 3,394 3,394 Interim dividend for the year ended 31 March 2005 of 5p (2004 : 4.5p) - - 3,104 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings Earnings for the purpose of basic and diluted earnings per share 3,466 4,742 7,648 ---------- ---------- -------- Number of shares Number Number Number Weighted average number of ordinary shares for the purpose of basic earnings per share 65,931,678 61,752,698 61,921,044 Effect of dilutive potential ordinary shares (share options) 648,218 1,591,442 1,409,289 Weighted average number of ordinary shares for ---------- ---------- -------- the purpose of diluted earnings per share 66,579,896 63,344,140 63,330,333 ---------- ---------- -------- Share Capital In addition to certain share options being exercised, the Group issued 6,000,000 new ordinary shares at a price of 205 pence each during the period. Explanation of transition to IFRS The reconciliations of equity at 1 April 2004 (date of transition to IFRS), 30 September 2004 and at 31 March 2005 (date of last UK GAAP financial statements) and the reconciliation of profit for the six months ended 30 September 2004 and the year ended 31 March 2005, as required by IFRS 1, including the significant accounting policies and full notes to 31 March 2005, have been published on the Group's website, www.telecomplus.co.uk, on 12 December 2005. Details of the main adjustments are given below: (a) Goodwill amortisation Under UK GAAP, goodwill is amortised over its expected useful economic life, whereas under IFRS goodwill is considered to have an indefinite life and is not amortised, but is tested for impairment annually. No impairment provisions were required since the date of transition. This adjustment reverses the goodwill amortisation charged under UK GAAP since the date of transition. (b) Share options Under UK GAAP there is no charge to the profit and loss account for share options granted at the market price since they have no intrinsic value. IFRS requires that the fair value of such options at the date of grant is charged to the income statement. The fair value has been determined using the binomial model and is being charged to the income statement evenly over the vesting period of 3 years. (c) Dividend accrual Dividends relating to an accounting period are dealt with in that period under UK GAAP. IFRS does not recognise a dividend until it is declared, usually after the accounting period to which it relates. This adjustment writes back the accrual for the interim and final dividend as appropriate. (d) Associated Companies Under IFRS it is considered that the Group exercises significant influence over its investment in Oxford Power Holdings Limited and as such, the investment is now classified as an associate. This investment is accounted for using the equity method. The reconciliation of equity and profit are as follows: 31 March 30 September 1 April 2005 2004 2004 Â£'000 Â£'000 Â£'000 Equity under UK GAAP 13,629 14,905 13,014 Adjustments: Goodwill amortisation IFRS3 456 228 - Share based payments IFRS2 36 287 435 Investments in Associates IAS28 (441) (678) (692) Dividends IAS10 4,099 3,102 3,394 ---------- ---------- -------- Equity under IFRS 17,779 17,844 16,151 ---------- ---------- -------- Profit under UK GAAP 7,264 4,598 - Adjustments: Goodwill amortisation IFRS3 456 228 - Share based payments IFRS2 (323) (98) - Investments in Associates IAS28 251 14 - ---------- ---------- -------- Profit under IFRS 7,648 4,742 - ---------- ---------- -------- This information is provided by RNS The company news service from the London Stock Exchange

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