10th Jun 2005 07:00
Telecom Plus PLC10 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 March2005. 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 servicesprovided of 29% during the year. This steady increase in the average number ofservices being taken reflects the continued success of our "Club" concept, whereover 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-utilitysupplier. Our low operating costs and efficient systems enable our customers tobenefit from good value across our entire range of services, with the additionalbenefit of receiving just a single bill each month. "We are anticipating a significant increase in turnover during the current yearas both our customer base and the number of services taken by each customercontinue to grow. Profits however are expected to be slightly lower due to thecontinuing impact of losses in our gas business and increased customeracquisition costs. Nevertheless we remain committed to growing our energybusiness and are confident that we will earn significant profits from thissector in due course." For press enquiries, please contact: Charles Wigoder/Stephen Davis Neil BoomTelecom plus PLC Gresham PR Ltd020 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 withmarket 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 howeverremain confident in the prospects for the Company and have therefore increasedthe final dividend to 6p (2004: 5.5p) making a total of 11p (2004: 10p) for theyear. 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 servicesprovided of 29% during the year. This steady increase in the average number ofservices being taken reflects the continued success of our "Club" concept, whereover half our total customers are now members. We experienced a number of customer service issues during the first few monthsof 2005, primarily as a result of technical problems with our new Broadbandservice, which adversely affected the confidence of our distribution channel,and hence their activity. These issues have now been resolved and the activityof our distribution channel has begun to pick up over the last few weeks.Following a major overhaul of working practices, performance measurementcriteria and incentives, and the recruitment of key additional members of theteam, our customer service has returned to, and indeed exceeded, its previouslyhigh standards. As a result of this renewed confidence we are seeing record levels of customerssigning up for our Broadband service, which we regard as strategically importantfor our future growth. Indeed, our Broadband business has more than doubled overthe last 6 months, albeit from a relatively small starting point. Our Distributor base has also experienced steady growth to around 15,500 duringthe year (2004: 13,000) and I would like to thank all our Distributors, andindeed our staff as well, for their important contribution to the continuinggrowth and success of the Company. The supply of domestic gas and electricity now represents a substantialproportion of group turnover, accounting for 40% of our Virtual Network Businessduring the year (2004: 19%). As explained in my statement which accompanied ourinterim figures, this growth from a low base during a period of rising wholesalegas prices has meant we incurred a gross loss of over £3m in our gas businessduring the year. I am delighted we were able to raise £12.1m recently (net of expenses) throughthe issue of new shares to a small number of leading City Institutions. That wewere able to do so at a difficult time for equity markets, and at a very smalldiscount to the market price, was a significant achievement. This fundraisingwas necessary to support the greater working capital requirements associatedwith our fast growing energy supply business, together with the need for alarger capital base to undertake systematic hedging activities in order to alignour long-run average commodity costs with our principal competitors. It willhowever 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 tradingprofitably and continuing to grow notwithstanding the difficult wholesale marketconditions, and we are becoming increasingly confident in their futureprospects. We have substantially strengthened our management team over the last few monthswith the appointment of Stephen Davis as Group Finance Director (who joined usfrom BDO Stoy Hayward where he was managing partner of their London office),Andy McWilliams as Sales Director responsible for our Independent DistributionChannel (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 registeron 24 June 2005 and is subject to approval by shareholders at the Company'sAnnual General Meeting which is being held on 13 July 2005. Outlook Whilst each of the markets in which we operate remains extremely competitive, weretain our unique position as the only fully integrated multi-utility supplier.Our low operating costs and efficient systems enable our customers to benefitfrom good value across our entire range of services, with the additional benefitof 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 ourstandard Home Phone service. We believe this is an important strategicdevelopment for the business, which will further reduce churn and improvecustomer satisfaction over the medium term, as well as contributing to groupprofits in due course. We will shortly be launching a new range of services and tariffs specificallytargeted at the SME market under the umbrella "The Utility Warehouse DiscountClub for Business". This area has obvious attractions due to our large base ofIndependent Distributors and the many personal relationships they typically havewith this segment of the business market. The wholesale forward price of gas for the coming winter remains close to recordhighs, and our average cost price for the commodity will therefore again besubstantially greater this year than our competitors (who will be reaping thebenefit from historical hedging activity carried out when prices weresubstantially lower). Although Centrica recently announced their domesticcustomers could expect a further price increase of around 13% this year, and wewill be increasing our prices later this year as well, we still anticipatesignificant losses within our gas supply business during the second half of thisyear. We are anticipating a significant increase in turnover during the current yearas both our customer base and the number of services taken by each customercontinue to grow. Profits however are expected to be slightly lower due to thecontinuing impact of losses in our gas business and increased customeracquisition costs. Nevertheless we remain committed to growing our energybusiness and are confident that we will earn significant profits from thissector in due course. We remain focused on the profitable long term growth of the business and intendto maintain a progressive dividend policy which reflects the Company'santicipated growth in earnings. Dividend increases over the next few years willhowever need to be considered carefully, given the need to build our retainedearnings in line with the greater working capital requirements of the businessas it continues to grow. Finally, as was announced some two months ago, Richard Michell is retiring as afull-time executive director at the end of August. Richard joined the company inApril 1997, was part of the birth of the business, and has been a key member ofthe management team. I am delighted he will remain on the Board as anon-executive director. Peter NuttingChairman9 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 ordinaryactivities before taxation 10,052 10,632 Tax on profit on ordinaryactivities 2,788 3,178 -------------------------------- Profit after taxation 7,264 7,454 Dividends 2 7,201 6,159 -------------------------------- Retained profit forthe 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 theperiod.All amounts relate to continuing activities. Consolidated Balance Sheet As at 31 March 2005 2005 2004 ------- ------- £'000 £'000 £'000 £'000 FIXED ASSETSTangible assets 2,006 1,903Intangible assets 3,286 3,742Investments 1,038 1,038 ------- ------- 6,330 6,683CURRENT ASSETSStocks 1,134 1,146Debtors (due within one year) 15,805 9,164Debtors (due after one year) 3,112 2,666Cash 6,275 9,857 ------- ------- 26,326 22,833 CREDITORSAmounts falling duewithin one year 19,027 16,502 ------- ------- NET CURRENT ASSETS 7,299 6,331 TOTAL ASSETS LESS ------- -------CURRENT LIABILITIES 13,629 13,014 ======= ======= CAPITAL ANDRESERVESCalled up share capital 3,108 3,076Share premium account 7,145 6,625Profit 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 £'000Reconciliation of operating profitto cash flow from operating activitiesOperating profit 9,533 10,280Goodwill amortisation 456 456Depreciation 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 481Amortisation 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 10,130Returns on investments andservicing of finance 519 346Capital expenditure (616) (416)Corporation tax paid (3,190) (2,109)Dividends paid (6,498) (4,717) ------------------------- Net cash flow before management of liquidresources and financing (4,030) 3,234Financing 448 567 -------------------------(Decrease)/Increase in cash (3,582) 3,801 ========================= Reconciliation of net cash flow to movementin net funds (Decrease)/Increase in cash (3,582) 3,801 Conversion of loan stock to equity shares 82 276Redemption 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 2,765Final 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 12.2pDiluted earnings per share 11.5p 11.9p ========================= Diluted earnings per share assumes dilutive options and convertible loan noteshave been converted into ordinary shares. The calculations are as follows: 2005 2004 ------ ------ Shares Shares Profit No. Profit No. £'000 000 £'000 000Basic earnings 7,264 61,921 7,454 60,899Dilutive 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 £'000Virtual NetworkTurnover 99,700 79,004Operating profit 12,066 13,770Net assets 15,378 14,299 =============================================DistributionTurnover 2,767 2,824Operating 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 ExchangeRelated Shares:
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