Interim Results

Telecom Plus PLC 29 November 2007 Embargoed until 0700 29 November 2007 Telecom plus PLC Interim results for the six months ended 30 September 2007 Telecom plus PLC, the UK's leading low-cost multi-utility supplier (gas, electricity, telephony, internet), announces preliminary results for the six months ended 30 September 2007. Financial Highlights: • Turnover up 4% to £71.1m (2006: £68.5m) • Profit before tax up 15% to £6.4m (2006: £5.5m) • Net cash balance up £11.0m during the period • EPS up 16% to 6.6p (2006: 5.7p) • Interim dividend of 4p per share (2006: 2p) Operating Highlights: • Number of services being provided up 10,450 during the period • New Community Fundraiser opportunity • Launch of 'free' laptop offer • Competitive new mobile tariffs Commenting on today's results, Charles Wigoder, Chief Executive, said: 'The changes we made to our services at our sales conference last month have been extremely well received, and are already having a positive impact on our growth, churn and profitability. Although it is too early to assess the impact these will have over the longer term, we are confident that our results for the full year will be substantially ahead of the pre-tax profits of £11.6m reported for the year ended 31 March 2007.' There will be a meeting for analysts at Smithfield's offices at 10.15 for 10.30am today. For more information please contact: Telecom plus PLC Charles Wigoder, Chief Executive 020 8955 5000 Richard Hateley, Finance Director Smithfield Tania Wild / Reg Hoare 020 7360 4900 Interim Management Report We are pleased to report a further period of satisfactory performance in the first half of the current year. We continue to manage the business in line with our strategy of becoming one of the UK's leading suppliers of utility services to the residential marketplace. Financial Review Pre-tax profits rose by over 15% to £6.4m (2006: £5.5m) on a 4% increase in turnover to £71.1m (2006: £68.5m). This reflects the benefit from continued steady growth in the number of services we provide to our customers, partially offset by the effect of lower retail energy prices. Earnings per share increased by 16% to 6.6p (2006: 5.7p). The reduction in our gross profit margin from 22.4% to 20.5% is due to the changing sales mix, where the proportion of turnover derived from energy and telephone line rental has increased to 64% (2006: 59%); there has also been a reduction in high margin telephony revenues following the change in our multi-utility benefit from 'CashBack' to 'Free UK Calls' in October 2006. Oxford Power Holdings, in which we have a 20% equity investment, is trading significantly ahead of expectations. Our share of their profits for the first half of the current year has more than doubled to £401,000 (2006: £153,000) and they are on target to report pre-tax profits of around £6m for the full year. Our investment in this company clearly represents an increasingly valuable asset. Operating Review Within our residential business, customer numbers have shown a marginal reduction since 31 March 2007 to 204,763, although our Business Club continues to show steady growth and now has over 7,800 customers. Overall, the number of services we are providing has increased by 10,450 to 552,489 over the period. On 14 October 2007 the Company held its annual sales conference which was attended by almost 3,000 Distributors and staff. We announced some significant changes to the way in which we promote our services, as well as improvements to the underlying services themselves, including: • a 'free' laptop offer; • internet phone lines; • new mobile tariffs; • a new Community Fundraiser opportunity; and • premium membership options with enhanced benefits. Cash Flow Cash Flow has remained strong with our cash balance increasing by £11m to £36.8m since the year end. This has been achieved during a period in which we spent £3.8m on buying back 2,118,000 shares (to be held in Treasury) at an average cost of 181p per share, following approval of our capital reduction exercise at this year's AGM (subsequently confirmed by the High Court), and also paid a final dividend for last year of £4.1m. Interim Dividend In the light of our strong cash position, the Board have decided to pay an interim dividend of 4p (2006: 2p) which will be made on 7 January 2008 to shareholders on the register on 14 December 2007. Principal Risks and Uncertainties The principal risks and uncertainties affecting the Company's activities are detailed on pages 8 and 9 of the Report and Accounts for the year ended 31 March 2007. A copy of the Report and Accounts is available on the Company's website at www.telecomplus.co.uk/annualreport. Responsibility Statement The Directors are responsible for the preparation of the condensed set of financial statements and interim management report comprising this set of Interim Results for the six months ended 30 September 2007, each of whom accordingly confirms that to the best of his knowledge: • the condensed set of financial statements has been prepared in accordance with IAS 34; • the interim management report includes a fair review of the information required by the Financial Statements Disclosure 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 listed in the Telecom plus PLC Report & Accounts for the year ended 31 March 2007. Outlook Wholesale energy prices have increased substantially since the summer, and we anticipate that the 'Big 6' retail energy suppliers will begin passing these through to their customers during the first quarter of 2008. Although we are no longer directly exposed to the wholesale markets or any volatility in short-term prices, we will nonetheless benefit from any widespread market move towards higher retail prices through increased turnover and an improvement in the net contribution we earn from supplying energy. The changes we made to our services at our sales conference last month have been extremely well received, and are already having a positive impact on our growth, churn and profitability. Although it is too early to assess the impact these will have over the longer term, we are confident that our results for the full year will be substantially ahead of the pre-tax profits of £11.6m reported for the year ended 31 March 2007. Given on behalf of the Board CHARLES WIGODER RICHARD HATELEY Chief Executive Finance Director 28 November 2007 Independent Review Report to Telecom plus PLC 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 2007 which comprises the consolidated income statement, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements This report is made solely to the Company in accordance with the terms of our engagement. 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. 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 Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union. 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. 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 United Kingdom. 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. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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. Conclusion 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 2007 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. PKF (UK) LLP London, UK Registered Auditors 28 November 2007 Consolidated Income Statement 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Revenue 71,069 68,499 176,065 Cost of sales 56,495 53,159 141,136 ----------- ----------- ----------- Gross profit 14,574 15,340 34,929 Distribution expenses 3,353 3,884 8,327 Administrative expenses 6,143 6,443 16,584 ----------- ----------- ----------- Operating profit 5,078 5,013 10,018 ----------- ----------- ----------- Financial income 887 356 1,105 Financial expenses - - 6 ----------- ----------- ----------- Net financial income 887 356 1,099 ----------- ----------- ----------- Share of profit of associates 401 153 473 ----------- ----------- ----------- Profit before taxation 6,366 5,522 11,590 Taxation (1,828) (1,611) (2,982) ----------- ----------- ----------- Profit for the period 4,538 3,911 8,608 ----------- ----------- ----------- Basic earnings per share 6.6p 5.7p 12.5p ----------- ----------- ----------- Diluted earnings per share 6.6p 5.7p 12.5p ----------- ----------- ----------- Interim dividend per share 4.0p 2.0p ----------- ----------- Consolidated Balance Sheet As at As at As at 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Assets Non-current assets Property, plant and equipment 969 992 884 Goodwill and intangible assets 3,755 3,828 3,761 Investments in associates 1,823 1,101 1,422 Deferred tax 852 525 904 Other receivables 873 2,919 858 ----------- ----------- ----------- Total non-current assets 8,272 9,365 7,829 ----------- ----------- ----------- Current assets Inventories 154 393 202 Trade and other receivables 3,344 1,302 3,258 Prepayments and accrued income 17,506 19,047 28,649 Cash and cash equivalents 36,806 24,570 25,801 ----------- ----------- ----------- Total current assets 57,810 45,312 57,910 ----------- ----------- ----------- Total assets 66,082 54,677 65,739 ----------- ----------- ----------- Current liabilities Trade and other payables (5,202) (5,138) (3,727) Current tax payable (1,929) (1,900) (1,969) Accrued expenses and deferred income (30,070) (19,163) (27,695) ----------- ----------- ----------- Total current liabilities (37,201) (26,201) (33,391) ----------- ----------- ----------- ----------- ----------- ----------- Total assets less total liabilities 28,881 28,476 32,348 ----------- ----------- ----------- Equity Share capital 3,452 3,425 3,446 Share premium - 19,121 19,444 Treasury shares (3,830) - - Retained earnings 29,259 5,930 9,458 ----------- ----------- ----------- Total equity 28,881 28,476 32,348 ----------- ----------- ----------- Consolidated Cash Flow Statement 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating activities Operating profit 5,078 5,013 10,018 Depreciation of property, plant and equipment 232 224 447 Depreciation of intangible assets 7 66 133 Profit on disposal of property, plant and equipment - (44) (44) Decrease in inventories 48 119 310 Decrease in trade and other receivables 11,042 9,716 218 Increase in trade and other payables 3,850 3,526 10,647 Costs attributed to the issue of share options (114) 219 425 Corporation tax (paid) / refunded (1,855) 277 (1,402) ----------- ----------- ----------- Net cash flow from operating activities 18,288 19,116 20,752 ----------- ----------- ----------- Investing activities Investment in Associates - (9) (9) Purchase of property, plant and equipment (318) (226) (341) Sale of property, plant and equipment 2 70 70 ----------- ----------- ----------- Cash flow from investing activities (316) (165) (280) ----------- ----------- ----------- Financing activities Dividend paid for the previous year (4,142) (684) (2,062) Interest received 883 356 1,105 Interest paid - - (6) Issue of ordinary shares 122 59 404 Purchase of own shares (3,830) ----------- ----------- ----------- Cash flow from financing activities (6,967) (269) (559) ----------- ----------- ----------- ----------- ----------- ----------- Increase in cash and cash equivalents 11,005 18,682 19,913 ----------- ----------- ----------- Cash and cash equivalents at the beginning of the period 25,801 5,888 5,888 Cash and cash equivalents ----------- ----------- ----------- at the end of the period 36,806 24,570 25,801 ----------- ----------- ----------- Consolidated Statement of Changes in Equity Ordinary Share Share Treasury Retained Shares Capital Premium Shares Earnings Total '000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2006 68,429 3,421 19,065 2,469 24,955 Profit for the period ended 30 September 3,911 3,911 2006 Deferred tax on share options 15 15 -------- ------- 3,926 3,926 -------- ------- Dividends (684) (684) Issue of share capital 75 4 56 60 Credit arising on share options 219 219 ------- ------- -------- -------- -------- ------- Balance at 30 September 2006 68,504 3,425 19,121 5,930 28,476 Balance at 1 October 2006 68,504 3,425 19,121 5,930 28,476 Profit for the period 4,697 4,697 ended 31 March 2007 Deferred tax on share options 3 3 -------- ------- 4,700 4,700 -------- ------- Dividends (1,378) (1,378) Issue of share capital 425 21 323 344 Credit arising on share options 206 206 ------- ------- -------- -------- -------- ------- Balances at 31 March 2007 68,929 3,446 19,444 9,458 32,348 Balance at 1 April 2007 68,929 3,446 19,444 9,458 32,348 Profit for the period ended 30 September 4,538 4,538 2007 Deferred tax on share options (41) (41) -------- ------- 4,497 4,497 -------- ------- Dividends (4,142) (4,142) Issue of share capital 103 6 116 122 Cancellation of share (19,560) 19,560 - premium Purchase of treasury shares (3,830) (3,830) Credit arising on share options (114) (114) ------- ------- -------- -------- -------- ------- Balance at 30 September 2007 69,032 3,452 - (3,830) 29,259 28,881 ------- ------- -------- -------- -------- ------- Notes to the Interim Report 1. General Information The financial information contained in this Interim Report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. No statutory accounts for the period have been delivered to the Registrar of Companies. The financial information contained in this Interim Report has not been audited by the auditors. The statutory accounts for year ended 31 March 2007 have been filed with the Registrar of Companies. The auditors' report on these accounts was unqualified and did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985. The Group's consolidated financial information has been prepared in accordance with accounting policies consistent with those adopted in the financial statements for the year ended 31 March 2007 and has been drawn up in accordance with International Accounting Standard 34, 'Interim Financial Reporting'. This Interim Report has been approved for issue by the Board of Directors on 28 November 2007. Seasonality of business: in respect of the energy supplied by the company, approximately two thirds is consumed by customers in the second half of the financial year, however due to the majority of our energy customers being on budget plans paying equal monthly instalments during the year, our cash flow generation is biased to the first half of the year. 2. Business segments For management reporting purposes, the Group is currently organised into two operating divisions: Customer Management and Customer Acquisition. These divisions are the basis on which the Group reports its primary segment information. 6 months ended 6 months ended Year ended 30 September 2007 30 September 2006 31 March 2007 (audited) Operating Operating Operating Revenue Profit Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 £'000 £'000 Customer Management 70,054 6,732 67,315 6,366 173,735 13,107 Customer 1,015 (1,654) 1,184 (1,353) 2,330 (3,089) Acquisition Total 71,069 5,078 68,499 5,013 176,065 10,018 3. Dividends 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 March 2007 of 6.0p per share (2006: 1.0p) 4,142 684 684 Interim dividend for the year ended 31 March 2007 of 2.0p per share (2006: - - 1,378 Nil) --------- --------- --------- An interim dividend of 4.0p per share will be paid on 7 January 2008 to shareholders on the register at close of business on 14 December 2007. The estimated amount to be paid is £2.7 million. In accordance with IFRS accounting requirements this dividend has not been recognised in these accounts. 4. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings Earnings for the purpose of basic and diluted earnings per share 4,538 3,911 8,608 --------- --------- --------- Number of shares Number Number Number Weighted average number of ordinary shares for the purpose of basic earnings per share 68,325,229 68,444,429 68,606,607 Effect of dilutive potential ordinary shares (share options) 413,071 171,823 170,959 Weighted average number of ordinary shares for the purpose of diluted earnings --------- --------- --------- per share 68,738,300 68,616,252 68,777,566 --------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange

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