Interim Results

Telecom Plus PLC 13 December 2006 TELECOM plus PLC 13 December 2006 Interim results for the six months ended 30 September 2006 Telecom plus PLC, the UK's leading low-cost multi-utility supplier (gas, electricity, telephony, internet), announces interim results for the six months ended 30 September 2006. Financial and business highlights • Turnover up 32% to £68.5m (2005: £51.9m) • Profit before tax up 9% to £5.5m (2005: £5.1m) • Net cash balance up £18.7m during the period • Interim dividend of 2p per share (2005: Nil) • Services provided up 5% to 521,000 during the period • Launch of attractive new broadband packages • Positive contribution from energy, with npower agreement protecting Telecom plus from fluctuations in wholesale energy markets Peter Nutting, Chairman, said: 'The difficulties of last winter are now firmly behind us, and the business is now in excellent shape. We are confident of delivering results for the full year which exceed our previous best pre-tax profits of £10.5m to 31 March 2005, and we look forward to the future with renewed confidence.' For press enquiries, please contact: Charles Wigoder/Richard Hateley Neil Boom/Laura Black Telecom plus PLC Gresham PR Ltd. 020 8955 5000 020 7404 9000 Chairman's Statement I am pleased to report significant progress in the development of our business during the period covered by these results. Pre-tax profits rose by 9% to £5.5m (2005: £5.1m) on turnover which increased by 32% to £68.5m (2005: £51.9m). The reduction in gross margin from 26% to 22% is due to the changing sales mix within our business, where the proportion of turnover which is derived from energy and telephony line rental has increased to 59% (2005: 43%). The number of services provided to our customers climbed to 521,000, an increase of 5% over the period, with the total customer base increasing marginally to around 213,000 households. The absence of significant net customer growth mostly resulted from our decision to delay responding to the so-called 'free' broadband offers launched by other companies during the spring and early summer, until the necessary network infrastructure to support such services was more widely available and had been properly tested. On 17 September 2006, our annual Distributor conference was attended by around 2,500 of our business partners. We announced a number of important changes including the launch of 'BroadCall' (a new service available to all residential households in the UK from just £20 per month), which combines line rental, broadband and attractive call prices within a single package. We also announced the introduction of 'Free UK Calls' as a multi-service discount, replacing our previous 'Cashback' scheme. These changes were well received by those present, and the resultant increase in activity, particularly in respect of the number of new Distributors now joining the business each week, is an encouraging sign that customer growth will resume during the second half. We have received a positive response to these changes from our customers, with many of them having already chosen to transfer additional services to us in order to increase the value of the benefits they receive. Our relationship with npower is progressing well, and we are achieving the positive contribution from supplying energy which we anticipated at the time the transaction was announced earlier this year. We are now fully insulated from any fluctuations in the wholesale energy markets over the winter months, and look forward to a further positive contribution from our energy business during the second half. Cash Flow and Dividend Our cash balances increased by over £18 million during the period, reflecting the combination of strong underlying profits, the final unwinding of our historic energy purchasing commitments following the transfer of buying responsibility to npower, and the positive seasonal cash flow swing from supplying energy on 'Budget Plan' (where a customer's expected annual energy consumption is divided into 12 equal monthly instalments). The greater working capital expected to be absorbed by the business during the winter in funding Budget Plan, needs to be reflected in the timing of future dividend payments. This means that the total amount we distribute to shareholders each year can be expected to be weighted towards the final dividend. The Board have therefore decided to pay an interim dividend of 2p per share (2005: Nil) which will be made on 1 February 2007 to shareholders on the register at the close of business on 12 January 2007. Boardroom Changes I am delighted to announce that Michael Pavia (60) has agreed to join the Board as a non-executive director and chairman of the audit committee with immediate effect. Michael is a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW), and has significant experience of the energy industry, having served on the Boards of LASMO, SEEBOARD and London Electricity. He is currently a non-executive director of Thames Water, British Nuclear Fuels PLC and WHAM Energy PLC, and is a member of the Council of the ICAEW. I am sorry to announce that Stephen Davis has decided to step down as Finance Director in order to join Credo Group (U.K.) Limited, a private client wealth management group, and will be leaving on 31 December 2006. Over the last 18 months he has played an important role in the development of the business, particularly in establishing our relationship with npower, and we wish him well with his future career. Stephen will be succeeded as Finance Director by Richard Hateley (42) who joined the company in June 2006 as Head of Finance and Company Secretary and will join the Board on 31 December 2006. Richard qualified as a Chartered Accountant with Ernst & Young, and subsequently worked for a number of companies including Level (3) Communications, Kvaerner Group and Blue Circle. Outlook The difficulties of last winter are now firmly behind us, and the business is now in excellent shape. We are confident of delivering results for the full year which exceed our previous best pre-tax profits of £10.5m to 31 March 2005, and we look forward to the future with renewed confidence. Peter Nutting Chairman 13 December 2006 TELECOM plus PLC Consolidated income statement For the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 30 31 March September September 2006 2006 2005 (audited) (unaudited) (unaudited) £'000 £'000 £'000 Revenue 68,499 51,897 136,343 Cost of sales 53,159 38,338 117,603 Gross profit 15,340 13,559 18,740 Distribution expenses 3,884 3,392 7,810 Administrative expenses 6,443 5,503 11,659 Operating profit / (loss) before 5,013 4,664 (729) exceptional costs Exceptional costs in respect of - - (1,860) restructuring Operating profit / (loss) 5,013 4,664 (2,589) Financial income 356 342 641 Financial expenses - 35 39 Net financial income 356 307 602 Share of profit of associates 153 112 343 Profit / (loss) before taxation 5,522 5,083 (1,644) Taxation (1,611) (1,617) 263 Profit / (loss) for the period 3,911 3,466 (1,381) Basic earnings / (loss) per share 5.7p 5.3p (2.1p) Diluted earnings / (loss) per share 5.7p 5.2p (2.1p) Interim dividend per share 2.0p Nil TELECOM plus PLC Consolidated Balance Sheet As at 30 September 2006 As at As at As at 30 30 31 March September September 2006 2006 2005 (audited) (unaudited) (unaudited) £'000 £'000 £'000 Assets Non-current assets Property, plant and equipment 992 1,659 1,016 Goodwill and intangible assets 3,828 3,959 3,894 Investments in associates 1,101 524 940 Deferred tax 525 200 509 Other receivables 2,919 2,970 2,954 Total non-current assets 9,365 9,312 9,313 Current assets Inventories 393 981 512 Trade and other receivables 1,302 910 4,951 Prepayments and accrued income 19,047 14,007 25,078 Cash and cash equivalents 24,570 20,974 5,888 Total current assets 45,312 36,872 36,429 Total assets 54,677 46,184 45,742 Current liabilities Trade and other payables (5,138) (3,409) (5,906) Current tax payable (1,900) (1,400) (12) Accrued expenses and deferred income (19,163) (11,839) (14,869) Total current liabilities (26,201) (16,648) (20,787) Total assets less total liabilities 28,476 29,536 24,955 Equity Share capital 3,425 3,418 3,421 Share premium 19,121 19,027 19,065 Retained earnings 5,930 7,091 2,469 Total equity 28,476 29,536 24,955 TELECOM plus PLC Consolidated Cash Flow Statement Six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 31 March 2006 September 2006 (unaudited) 2005 (audited) (unaudited) £'000 £'000 £'000 Operating activities Operating profit / (loss) 5,013 4,664 (2,589) Depreciation of property, plant and 224 217 445 equipment Depreciation of intangible assets 66 66 131 Profit on disposal of property, plant and (44) - (282) equipment Decrease in inventories 119 153 622 Decrease / (increase) in trade and other 9,707 830 (14,266) receivables Increase in trade and other payables 3,526 1,913 7,439 Costs attributed to the issue of share 219 210 434 options Corporation tax refunded / (paid) 277 (1,600) (1,601) Net cash flow from operating activities 19,107 6,453 (9,667) Investing activities Purchase of property, plant and equipment (226) (154) (484) Sale of property, plant and equipment 70 - 1,028 Cash flow from investing activities (156) (154) 544 Financing activities Dividend paid for the previous year (684) (4,099) (4,099) Interest received 356 342 641 Interest paid - (35) (39) Issue of ordinary shares 59 12,192 12,233 Cash flow from financing activities (269) 8,400 8,736 Increase / (decrease) in cash and cash equivalents 18,682 14,699 (387) Cash and cash equivalents at the beginning of the period 5,888 6,275 6,275 Cash and cash equivalents at the end of the period 24,570 20,974 5,888 TELECOM plus PLC Reconciliation of Movement in Capital and Reserves Six months ended 30 September 2006 Ordinary Share Share Retained Shares Capital Premium Earnings Total '000 £'000 £'000 £'000 £'000 Balance at 1 April 2005 62,161 3,108 7,145 7,526 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 Dividends (4,099) (4,099) Issue of share capital 6,209 310 12,082 12,392 Share issue costs (200) (200) Credit arising on share options 209 209 Balances at 30 September 2005 68,370 3,418 19,027 7,091 29,536 Balance at 1 October 2005 68,370 3,418 19,027 7,091 29,536 Profit for the period ended 31 March (4,847) (4,847) 2006 Deferred tax on share options - - Total recognised income and expenses (4,847) (4,847) Issue of share capital 59 3 38 41 Credit arising on share options 225 225 Balances at 31 March 2006 68,429 3,421 19,065 2,469 24,955 Balance at 1 April 2006 68,429 3,421 19,065 2,469 24,955 Profit for the period ended 30 September 2006 3,911 3,911 Deferred tax on share options 15 15 Total recognised income and expenses 3,926 3,926 Dividends (684) (684) Issue of share capital 75 4 56 60 Credit arising on share options 219 219 Balance at 30 September 2006 68,504 3,425 19,121 5,930 28,476 TELECOM plus PLC NOTES 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 2006 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's consolidated financial information has been prepared in accordance with accounting policies consistent with those adopted in the financial statements for the year ended 31 March 2006. This Interim Report has been approved for issue by the Board of Directors on 13 December 2006. 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 reporting 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 2006 30 September 2005 31 March 2006 (unaudited) (unaudited) (audited) Revenue Result Revenue Result Revenue Result £'000 £'000 £'000 £'000 £'000 £'000 Virtual Network - 31,228 5,957 29,220 6,528 59,440 13,538 telephony Virtual Network - 36,087 409 21,368 (5) 74,437 (10,776) energy Distribution 1,184 (1,353) 1,309 (1,859) 2,466 (3,491) Total 68,499 5,013 51,897 4,664 136,343 (729) The above Result relates to Operating profit / (loss) before exceptional costs. The exceptional costs in respect of restructuring for the year ended 31 March 2006, related to transferring the Group's energy customers to individually licensed companies, which were ultimately disposed of to npower Limited on 31 March 2006. 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Dividends Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 684 4,099 4,099 March 2006 of 1.0p (2005 : 6.0p) per share Interim dividend for the year ended 31 - - - March 2006 of Nil (2005 : Nil) per share An interim dividend of 2.0p per share will be paid on 1 February 2007 to shareholders on the register at close of business on 12 January 2007. The estimated amount to be paid is £1.4 million. In accordance with IFRS accounting requirements this dividend has not been recognised in these accounts. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings Earnings / (loss) for the purpose of 3,911 3,466 (1,381) basic and diluted earnings per share Number of shares Number Number Number Weighted average number of ordinary 68,444,429 65,931,678 67,170,166 shares for the purpose of basic earnings per share Effect of dilutive potential ordinary 171,823 648,218 - shares (share options) Weighted average number of ordinary shares for the purpose of diluted earnings per share 68,616,252 66,579,896 67,170,166 This information is provided by RNS The company news service from the London Stock Exchange

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