TIDMTEP
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 GBP371.3m (2020: GBP349.4m)
-- Adjusted profit before tax of GBP26.2m (2020: GBP27.7m) following one-off Ofgem settlement
-- Statutory profit before tax of GBP19.9m (2020: GBP21.5m)
-- 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
Stuart Burnett, Co-CEO 020 8955 5000
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"):
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 (GBP'000) 371,275 349,370 6.3% 371,275 349,370 6.3%
Profit before tax
(GBP'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 GBP26.2m
(2020: GBP27.7m) on revenues of GBP371.3m (2020: GBP349.4m),
following a one-off increase to the provision for the Ofgem
settlement of GBP1.0m relating to a historical issue (total
settlement GBP1.5m). Adjusted earnings per share fell to 26.1p
(2020: 28.6p). Statutory profit before tax decreased to GBP19.9m
(2020: GBP21.5m), after energy supply contract intangible
amortisation of GBP5.6m (2020: GBP5.6m) and share incentive scheme
charges of GBP0.6m (2020: GBP0.6m).
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 GBP12.7m (2020: GBP13.5m),
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 GBP4.3m to GBP40.6m (2020:
GBP36.3m). 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 GBP5.1m (2020:
GBP4.6m) representing 1.4% of revenues (2020: 1.3%).
Cash Flow and Borrowings
Operating cash flow of GBP22.5m (2020: GBP42.7m) was lower year
on year, mainly reflecting the benefit of a covid-related deferral
in VAT payments last year. Capital expenditure of GBP4.8m (2020:
GBP5.3m) related primarily to our ongoing technology investment
programme. Net debt (including lease liabilities) during the period
rose to GBP77.8m (31 March 2021: GBP71.4m), 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 GBP175.0 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 GBP10, and the opportunity
to earn upwards of GBP250 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 GBP400m
and improvement across several key engagement metrics. We are
targeting growth to GBP1bn/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 GBP1,277 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 GBP60m 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 GBP175.0 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, GBP95.0 million of this facility was drawn
down and the Company had a cash balance of GBP23.2 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 6 months Year
ended 30 ended 30 ended
September September 31 March
2021 (unaudited) 2020 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'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 the parent 14,383 16,324 32,577
(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 As at
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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 6 months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'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
Capital Non-controlling
Share Share redemption Treasury JSOP Retained interest
capital premium reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
Profit and total
comprehensive
income for the period - - - - - 16,324 1 16,325
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
Profit and total
comprehensive
income for the period - - - - - 16,253 (19) 16,234
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
Profit and total
comprehensive
income for the period - - - - - 14,383 (144) 14,239
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
GBP11.9 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 IT Software
Contract & Web Development Total
GBP'000 GBP'000 GBP'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 6 months
ended 30 ended 30 Year ended
September September 31 March
2021 (unaudited) 2020 (unaudited) 2021 (audited)
GBP'000 GBP'000 GBP'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)
GBP'000 GBP'000 GBP'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 GBP21.2m 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 GBP'000 GBP'000 GBP'000
EPS is based on the following data:
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
basic and diluted EPS 20,490 22,454 44,999
--------------- --------------- ------------
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 GBP1.5m 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.
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END
IR FLFFDLILFFIL
(END) Dow Jones Newswires
November 23, 2021 01:59 ET (06:59 GMT)
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