Final Results

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

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