6th Jun 2006 07:02
Telecom Plus PLC06 June 2006 TELECOM plus PLC 6 June 2006 Preliminary results for the year ended 31 March 2006 Telecom plus PLC, the UK's leading low-cost multi-utility supplier (gas,electricity, telephony, internet), announces preliminary results for the yearended 31 March 2006. Financial and business highlights: • Turnover up 33% to £136.3m (2005: £102.5m) • Loss before tax of £1.6m (2005: profit £10.5m) • Final dividend of 1.0p (2005: 6.0p) • Elimination of exposure to wholesale energy prices • Number of services provided increased 23% to 496,000 (2005: 402,000) • Significant increase in value of investment in Oxford Power Holdings Peter Nutting, Chairman, said: "We are still the UK's only fully-integrated supplier of a wide range ofattractively-priced utility services, combined with a distribution channel ofproven ability in cost effectively gathering significant numbers of high qualitynew customers each month. This combination continues to give us a considerablecompetitive advantage in the domestic market. With the recent elimination ofour exposure to wholesale energy prices, the directors are confident that the current year will see a return to overall profitability and a resumption ofgrowth in our dividend payments to shareholders." For press enquiries, please contact: Charles Wigoder/Stephen Davis Neil Boom/Tanya FenessTelecom plus PLC Gresham PR Ltd.020 8955 5000 020 7404 9000 CHAIRMAN'S STATEMENT As you will already be aware, we experienced very difficult trading conditionslast year due to the extreme volatility and record prices in the wholesaleenergy markets during November and December. Indeed, the losses we experiencedin our gas business alone during those two months reached almost £8m, more thanoff-setting the satisfactory profits of £5.5m achieved during the firsthalf-year. This led to our decision to enter into the transaction with npower which weannounced in February 2006. Although not completed until 31 March 2006, itbecame effective retrospectively from 1 January 2006 in all financial respects,and enabled our energy business to return to profitability during the lastquarter of the financial year. The structure of the transaction preserves ourunique business model from a customer perspective as a fully integratedmulti-utility supplier, whilst passing the substantive risks and rewards ofhedging and buying energy to a larger business partner. In future, we expect tomake a small positive margin from supplying energy to our customers, albeit at alower level than anticipated when we entered the energy business some years ago,irrespective of the level (or volatility) of wholesale energy prices, orfluctuations in demand caused by unseasonably cold or warm weather. Notwithstanding these issues, I am pleased to report that we achievedconsiderable growth during the year, with turnover increasing by 33% to £136m(2005: £102m). This was due to a combination of higher retail energy prices andgrowth of over 23% to 496,000 (2005: 402,000) in the number of services beingprovided to our customers. However, as a result of the losses in our gas business during November andDecember, combined with exceptional costs of around £1.9m associated withentering into the new npower arrangements, we incurred an overall pre-tax lossfor the year of £1.6m (2005: profit £10.5m). Notwithstanding this small loss, weare proposing a final dividend of 1p for the year, reflecting our strong balancesheet and confidence in the future prospects for the business. The final dividend will be paid on 4 August 2006 to shareholders on the registerat the close of business on 7 July 2006 and is subject to approval byshareholders at the Company's Annual General Meeting which is being held on 12July 2006. Important highlights during the year included the successful launch of our newBusiness Club in August 2005, which we anticipate will become an increasinglyimportant growth area for the Company over the coming years; substantial growthin the number of broadband customers we supply; and the extremely encouragingtake-up by both existing and new customers of the opportunity to transfer theirhome phone line rental to us. Since the year-end, International Power Plc has announced the purchase fromexisting shareholders (other than Telecom plus) of a 30% stake in Oxford PowerHoldings Ltd ("OPH"). This transaction places an implicit value of £4.8m on our20% investment in OPH compared with a total cost of £1m. At the AGM we will be saying good-bye to John Levin who is not standing forre-election as a Director. He was one of the original founders of the businessand made a significant contribution to the management of the Company during itsstart-up period. I would also like to take this opportunity to thank all thepeople involved with Telecom plus who have played such an important role indeveloping the business this year, in particular our extremely hard-working headoffice team and our network of Independent Distributors, who display great skilland determination in continuing to grow our business. Outlook Since the year end, Carphone Warehouse (through their Talk Talk brand) have beenattracting considerable publicity for their new combined broadband and telephonypackage. Although it is still early days, we have seen little effect from thisoffer on our own business, either in relation to growth in our own broadbandbase or on churn. We are committed to maintaining a competitive position in this sector, andexpect to be launching a new range of broadband packages later this year oncethe proportion of local exchanges which are unbundled has increased. We areconfident the competitive advantages provided by our integrated business modeland low-cost route to market will enable us to generate an acceptable returnfrom supplying this service in future. Within our telephony business, margins have started to edge upwards recently aswe negotiate lower wholesale prices with our partners. Our position has beenhelped by consolidation within the sector, which has made the call volumes underour control increasingly sought after. We are still the UK's only fully integrated supplier of a wide range ofattractively-priced utility services, combined with a distribution channel ofproven ability in cost effectively gathering significant numbers of high qualitynew customers each month. This combination continues to give us a considerablecompetitive advantage in the domestic market. With the recent elimination of ourexposure to wholesale energy prices, the directors are confident that thecurrent year will see a return to overall profitability and a resumption ofprogressive growth in our dividend payments to shareholders. Peter NuttingChairman6 June 2006 BUSINESS REVIEW Performance Our overall performance for the year has been encouraging in a number of keyrespects, against a background of extremely difficult conditions in thewholesale energy markets and continued competition in supplying both telephonyand broadband services. We have seen considerable growth in turnover which increased by 33% to £136m(underpinned by a 23% increase in the number of services we supply) although ourprofitability was severely affected by the volatility and record wholesaleprices for energy during the last quarter of 2005. The new arrangements with npower, which became retrospectively effective on 1January 2006 (following completion on 31 March 2006), have eliminated thewholesale price risks which we previously faced, and will enable us to earn apositive contribution from supplying energy to our customers in future. Activity within our distribution channel was subdued during the second half ofthe year, largely as a result of uncertainty over the outcome of our energyissues, however we still experienced an increase of 360 distributors during theyear, bringing the total to over 16,000 by the year end. We were particularlyencouraged by the pick-up in activity during March following the announcement ofthe new npower arrangements. The Market Our primary focus is on supplying a wide range of essential utility services(gas, electricity, home telephony, mobile telephony and broadband internet) todomestic customers. These are substantial markets and represent a considerableorganic growth opportunity for our business. At the year end we were supplying around 496,000 services to over 211,000households throughout the UK. We remain however a small operator in a marketdominated by the former monopoly suppliers. Our unique position as the onlyintegrated multi-utility supplier provides us with a highly efficient cost-base,and enables us to combine good service and competitive pricing with a singlemonthly bill for each customer. The approximate size of the UK market for the principal services we provide isestimated at around £34 billion as follows: Number of Retail Market Households Value Gas 20m £10.1bnElectricity 25m £10.5bnHome Phone - Calls 24m £3.9bnHome Phone - Line Rental (Lines) 24m £2.4bnMobile (Excluding Pre-Pay) 15m £5.0bnBroadband 10m £2.1bn Retail market values based on average prices charged by us to customers for eachservice during the year ended 31 March 2006. We have also been providing a similar range of services to small and mediumsized business customers since August 2005, when we introduced the UtilityWarehouse Discount Club for Business. This new opportunity was warmly welcomedby our Distribution Channel, who had recruited over 2,200 businesses by the yearend. Our Customers The majority of our customers choose to take advantage of our multi-serviceproposition, with over 65% having joined our Discount Club since its launch inOctober 2003. On average each member takes 2.76 services (2005: 2.25) with over 75% taking 2or more services, and almost 50% taking 3 or more services. These figures areillustrated by the analysis below, which demonstrates the effectiveness of ourClub concept in encouraging customers to subscribe for additional services:- Members Non-Members 1 Service 24% 66%2 Services 28% 19%3 Services 22% 11%4 Services 15% 3%5 Services 8% 1%6 Services 2% -7 Services 1% - Non-members relate to customers gathered prior to the launch of our DiscountClub in October 2003. This has been reflected in a further increase in Average Revenue per Customer,which has been increasing steadily against a background of considerable pricedeflation in the fixed telephony market since we first implemented ourmulti-utility strategy. Average Revenue per CustomerYear £ 1999 190 2000 286 2001 316 2002 329 2003 459 2004 482 2005 505 2006 634 We enjoy high levels of overall customer satisfaction, as evidenced by therelatively low churn we experience. For example, our energy churn of under 1.5%per month compares with an industry average of around 5% per month amongstcustomers who have switched away from their original supplier. Similarly, ourtelephony monthly churn of around 2% (which we anticipate will reduce in futureas a result of the rapid take-up of our line rental service, which enablescustomers to terminate their historic relationship with BT) compares favourablywith our understanding of the much higher levels (typically around 4%)experienced by other suppliers. Services Our range of essential utility services includes fixed telephony (calls and linerental), mobile telephony, gas, electricity and internet. At the year end wesupplied a total of 495,679 services (2005: 401,561), representing an increaseof over 23% during the course of the year. 2006 2005Services:Gas 86,379 69,362Electricity 101,710 81,494Home phone 169,990 166,960Line rental 40,519 -Freephone 11,056 11,265Mobile 45,197 48,554Internet 40,828 23,926 -------------- -------------Total 495,679 401,561 -------------- ------------- As can be seen from the above table, we experienced significant growth duringthe year in the number of customers to whom we supplied gas, electricity,internet and home phone line rental. Overall, our home phone service saw modestgrowth, whilst our mobile service experienced a modest fall in customer numbers,reflecting increasing competition in these areas of our business. In relation to our Business Club, over 2,200 customers had joined by the yearend taking in aggregate around 4,000 services. We are extremely encouraged bythese strong early sales, and the enthusiastic response of our DistributionChannel to this opportunity (where over 2,400 distributors have attended specialBusiness Club training sessions during the year). The substantial size of thetarget market (there are over 1m home-based, small and medium sized businessesin the UK) gives us considerable confidence that this will make a significantcontribution to the Group in due course. Customer Service We pride ourselves in offering first class customer service through a singlecall centre, based in the UK. Our policy is to try and ensure that the firstperson a customer speaks to is able to resolve all issues raised, irrespectiveof how many different services we are providing to them. We were delighted to have the quality of our customer service recognised thisyear by Which? magazine, who in a reader survey rated our customer service at78%, compared to BT at 29%. This survey was subsequently widely reported in thenational press. Meanwhile, we are constantly striving to enhance further all aspects of theservice we provide. During the year we introduced a range of qualitative andquantitative performance measurement tools into our Call Centre, which havecontinued to improve the overall quality of our members' customer serviceexperience. Our People Our customers rely on the combined efforts of around 210 employees to managerelationships with both our Customers and Distributors, and deliver aconsistently high quality of service at all times. We pay considerable attentionto recruiting and retaining appropriate people. The Company operates an Inland Revenue-approved employee share option scheme,under which employees are granted an option to purchase shares in the Companybetween 3 and 7 years from the date of grant. The exercise price is the marketprice at the time of granting the option. Our policy is to issue options to allemployees after the satisfactory completion of their probationary period,without any performance conditions being attached to the exercise thereof. As at31 March 2006, options over 1,342,100 shares had been granted to staff,representing 2% of the issued share capital of the Company. During the year, the Company launched a scheme under the government approvedHome Computer Initiative (HCI), to encourage employees to obtain computers forhome use in a tax efficient way. Over half the group's employees participated inthe scheme. It is regrettable that the government have withdrawn this initiativein respect of any future equipment purchases, with effect from 6 April 2006. We also encourage all employees to participate in a stakeholder pension schemeoperated by Legal & General. Participants can choose their own contributionlevel which is matched by the Company, within certain limits depending on lengthof service. Our Distributors Our Distributors remain one of our key strengths compared with other utilitysuppliers. The alignment of financial interests provided by our revenue sharingmodel ensures they focus their activities on finding credit-worthy and highspending customers who will reap the maximum savings from using our services,and will thus be least likely to churn. By doing so, they maximise their ownlong-term returns. Our Car Plan, which provides eligible Distributors with a subsidisedfully-branded Mini has become increasingly popular, and we have now suppliedalmost 50 cars. Users find these extremely useful in raising their localprofile, resulting in enquiries from both potential new customers andDistributors. Distributors have seen a considerable increase in their average earnings fromeach customer during the year as a result of the growth in the average number ofservices taken combined with sharply higher energy prices. This trend can beexpected to continue during the course of the current year, as they have not yetreceived the full benefits from the latest energy price rises which took effecton 1 March and 1 May 2006 respectively, making this predominantly part-timecareer increasingly attractive to potential new recruits. Our national training programme has seen considerable improvements during theyear, with new modules to support the launch of our Business Club, theintroduction of Commercial Energy, the increasing popularity of BlackBerrys, anda Personal Development Programme to provide our next generation of leaders withthe additional skills they will need. The Environment The environment is becoming an increasingly important concern and we participatein programmes to help reduce the environmental impact of our activities. Our energy efficiency commitment programme for the year was designed to deliver430 GW hours of savings through subsidised loft insulation and cavity wallinsulation in private homes and for local authorities, 50% of which was targetedat priority groups. 5.7% of our electricity purchases are from renewablesources, obtained under government approved arrangements. In addition, we operate an energy efficiency helpline to provide advice on howcustomers can reduce their energy usage, and we also participate actively in the"Shred-it" recycling programme, with a certificated saving of 50 trees during2005. Principal risks The Group faces various risk factors, both internal and external, which couldhave a material impact on long-term performance. Reputation riskTelecom plus' reputation amongst our business partners, suppliers, shareholdersand customers is fundamental to the future success of the Group. Failure to meetexpectations in terms of the services we provide, the way that we do business orin our financial performance could have a material effect on the Group. Theserisks are mitigated through our focus on quality customer service, the trainingof our staff and our systems of internal control and risk management. Wholesale PricesThe Company does not currently own or operate any network infrastructure itself,choosing instead to purchase the capacity needed from third parties. Theadvantage of this approach is that the Company is not exposed to eithertechnological risk, capacity risk or the risk of obsolescence, as it canpurchase each month the exact amount of each service required to meet itscustomer's needs. While there is a theoretical risk that in some of the areas in which the Companyoperates it may be unable to secure access to the necessary infrastructure oncommercially attractive terms, in practice the pricing of access to suchinfrastructure is either regulated (as in the energy market) or subject tosignificant competitive pressures (as in telephony). The profile of ourcustomers combined with our clearly differentiated route to market hashistorically proven attractive to potential partners, who compete aggressivelyin order to secure a share of our business. The supply of Energy, which has been accounting for an increasing proportion ofour sales each year, has different risks associated with it. The wholesale pricecan be extremely volatile, and customer demand can be subject to considerableshort term fluctuations depending on the weather. These issues caused theCompany to incur substantial losses during the third quarter of last year, henceour decision to seek a relationship with a larger energy supplier whichpreserved our integrated multi-utility business model whilst passing thesubstantive risks and rewards of hedging and buying energy to them. Thetransaction with npower which was completed on 31 March 2006 achieved theseobjectives, and will enable the Company to earn a positive contribution fromproviding energy in future, irrespective of the level of underlying wholesaleprices, market volatility or abnormal seasonal temperature fluctuations. It alsoremoves the need for the Company to tie up valuable capital to support forwardpositions in the wholesale energy markets which would otherwise have beenrequired. Competitive riskThe Group operates in highly competitive markets and significant productinnovations or increased price competition could affect our margins. In order tomaintain our competitive position, we constantly focus on ways of improving ouroperating efficiency and keeping our cost base as low as possible. Legislation and regulatory riskThe Group is subject to varying laws and regulations, including possible adverseeffects from European regulatory intervention. Risk managementThe business continues to develop and operate a consistent and systematic riskmanagement process, which involves risk ranking, prioritisation and subsequentevaluation, with a view to ensuring all significant risks have been identifiedand prioritised, and systems of control are in place to manage such risks. Charles WigoderChief Executive 6 June 2006 FINANCIAL REVIEW The Group's Annual Report for 2006 is presented for the first time underInternational Financial Reporting Standards ("IFRS"). This accounting changehas, however, had little overall impact on our results as the additional cost ofaccounting for the equity value of share options through the Income Statementhas been offset by the benefit of including our share of profits from OxfordPower Holdings Limited and no longer needing to amortise the goodwill fromacquiring Telecommunications Management Limited some years ago. Overview Revenues of £136m were 33% higher than in the previous financial year to 31March 2005. The pre-tax profit (before the exceptional charge of £1.9m inrespect of reorganising the energy business) was £0.2m compared with £10.5m inthe last financial year. This reduction in profitability together with thegrowth in our energy business created a net cash outflow from operatingactivities of £9.7m; there was however only a slight reduction in our net cashposition at the year end from £6.3m to £5.9m, due to the share issue which tookplace in May 2005 when we raised £12.2m. Revenue and margins Revenue increased by 33% from £102m to £136m during the year, a significantproportion of which was accounted for by increases in the energy prices chargedto our customers. The reduction in operating profits (from a profit of £9.7m to a loss of £0.7mbefore exceptional costs) was primarily due to losses incurred in our gasbusiness resulting from unprecedented volatility and record prices in thewholesale energy markets during the late autumn, combined with higheradministration costs resulting from continued growth in the number of serviceswe provide and the strengthening of our senior management team. Revenue and margins in our telephony business were slightly lower than last yearnotwithstanding the significant growth in our broadband customer base, for fourprincipal reasons: 1. Revenues from call charges (particularly to mobile destinations)were substantially lower following price reductions to all customers which wereintroduced in September 2004.2. An increasing proportion of turnover relates to the supply ofHome Phone Line Rental, where the gross margin is significantly lower than forcalls. Indeed, during most of the last financial year prior to wholesale pricereductions from BT in March 2006, the gross margin was negative (although stillconsidered of overall benefit to the business due to anticipated lower churn oncustomers who no longer have a direct relationship with BT).3. Within TML, our wholly-owned subsidiary focussed on the SMEsegment of the telephony market, revenues reduced by almost £2m to £10.1m due tolower retail prices and the decision to withdraw from the particularlycompetitive area of supplying mobile services to large corporates, althoughmargins remained at a satisfactory level.4. Mobile revenues reduced by around £2m caused by a combination oflower retail tariffs, more customers taking advantage of our loyalty discountscheme, and a small reduction in the number of customers using this service. The effect of these reductions in turnover was largely offset by considerablegrowth in the number of customers taking Broadband and Home Phone Line Rentalfrom us. Distribution The loss in respect of our Distribution business increased during the year to£3.5m (2005: £2.3m). This was mainly caused by faster growth in the number ofbroadband customers being supplied, where we incur a charge from BT of £50 foreach new broadband connection (reduced to £40 with effect from 1 March 2006)together with the cost of providing a free USB modem to most customers. Operating expenses Operating expenses before exceptional items have increased substantially duringthe year from £15m to £19.5m. The principal elements of this are highercommission payments to our Distributors and an increase in our bad debt charge(in line with the growth in turnover), and an increase in the average number ofstaff we employ to 211 during the year under review (which has enabled us toimprove customer service, as well as significantly enhancing the strength of themanagement team). Share Option Costs The operating loss is stated after share option expenses of £434,000 (2005:£303,000). These expenses relate to an accounting treatment in respect of IFRS 2'share based payment'. Taxation The amount of corporation tax payable in respect of the year is £13,000 (2005:£3.0m). Cash Flow The small overall pre-tax loss for the year combined with the substantialadditional working capital requirements of our energy businesses during thesecond half, resulted in a net cash out flow from operating activities of £9.7m(2005: Inflow £2.6m). This was offset by the £12.2m net proceeds from the shareplacing which took place in June 2005. In February 2006, we entered into a sale and leaseback arrangement on 2buildings which formed part of our head office complex for an aggregateconsideration of £1m. As at 31 March 2006, our cash balance amounted to £5.9m (2005: £6.3m). This ishowever expected to increase significantly during the first 6 months of thecurrent year once the new settlement structure with npower has taken fulleffect. The March cash position is also (and will continue to be in future)adversely affected by energy customers who pay by Budget Plan, where the highproportion of annual energy consumption used during the winter period means thatour energy debtors reach a peak at the end of each winter before falling sharplyas we go into the summer. The Group does not have a policy with respect to interest rate management as itcurrently has no debt funding requirements. With regard to cash surpluses, theseare placed on deposit to secure the highest return available. International Financial Reporting Standards The Group has adopted International Financial Reporting Standards (IFRSs) inthis annual report for the first time. A full explanation of the effects oftransition to IFRS is detailed in the notes to the financial statements, but themain impacts from adopting IFRS are set out below: Goodwill amortisationUnder IFRS, goodwill is not subject to annual amortisation but there is arequirement for an annual impairment review. Any impairment identified ischarged immediately to the income statement. Share optionsUnder UK GAAP, there was no profit and loss account charge in respect of shareoptions granted at market value. IFRS requires the fair value of the options tobe charged to the income statement. The charge is spread over the vestingperiod, and is calculated using the binomial model. An exemption applies tooptions granted prior to 7 November 2002. Associated CompaniesUnder IFRS the Group exercises significant influence over its investment inOxford Power Holding Limited, and as such, the investment is classified as anassociate. This investment is accounted for using the equity method. Dividend accrualIFRS does not recognise a dividend until it is declared, usually after theaccounting period to which it relates. Going Concern The Directors, having made appropriate enquiries, consider it reasonable toassume that the Group and the Company have adequate resources to continue forthe foreseeable future and, for this reason, have continued to adopt the goingconcern basis in preparing the financial statements. Stephen DavisFinance Director 6 June 2006 TELECOM plus PLC Consolidated income statement For the year ended 31 March 2006 Notes 2006 2005 £'000 £'000 Revenue 136,343 102,467Cost of sales 117,603 77,747 ------- -------Gross profit 18,740 24,720 Distribution expenses 7,810 6,157Administrative expenses 11,659 8,876 ------- -------Operating (loss)/profit before exceptional costs (729) 9,687Exceptional costs in respect of restructuring theenergy (1,860) -business ------- -------Operating (loss)/profit (2,589) 9,687 ------- -------Financial income 641 533Financial expenses 39 14 ------- -------Net financial income 602 519 ------- -------Share of profit of associates 343 251 ------- -------(Loss)/profit before taxation (1,644) 10,457 Taxation 263 (2,809) ------- -------(Loss)/profit for the period (1,381) 7,648 ======= ======= Basic (loss)/earnings per share 2 (2.1p) 12.4p ======= =======Diluted (loss)/earnings per share 2 (2.1p) 12.1p ======= ======= TELECOM plus PLC Consolidated statement of recognised income and expense For the year ended 31 March 2006 2006 2005 £'000 £'000 (Loss)/profit for the period (1,381) 7,648Transfer of deferred tax on share options against equity (11) (378) ----------- --------Total recognised income and expense for the period (1,392) 7,270 =========== ======== TELECOM plus PLC Consolidated Balance Sheet As at 31 March 2006 2006 2005 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 1,016 1,723Goodwill and intangible assets 3,894 4,025Investments 940 597in associatesDeferred tax 509 236Other receivables 2,954 2,912 ---------- ---------Total non-current assets 9,313 9,493 ---------- --------- Current assetsInventories 512 1,134Trade and other receivables 4,951 2,939Prepayments and accrued income 25,078 12,866Cash and cash equivalents 5,888 6,275 ---------- ---------Total current assets 36,429 23,214 ---------- ---------Total assets 45,742 32,707 ---------- --------- Current liabilitiesTrade and other payables 5,906 5,832Current tax payable 12 1,592Accrued expenses and deferred income 14,869 7,504 ---------- ---------Total current liabilities 20,787 14,928 ---------- --------- ---------- ---------Total assets less total liabilities 24,955 17,779 ========== ========= EquityShare capital 3,421 3,108Share premium 19,065 7,145Retained earnings 2,469 7,526 ---------- ---------Total equity 24,955 17,779 ========== ========= These accounts were approved and authorised for issue by the Board on 6 June2006. TELECOM plus PLC Consolidated Cash Flow Statement Year ended 31 March 2006 2006 2005 £'000 £'000Operating activitiesOperating (loss)/profit (2,589) 9,687Depreciation of property, plant and equipment 445 407Amortisation of intangible assets 131 131Profit on disposal of property, plant and equipment (282) (25)Decrease in inventories 622 12Increase in trade and other receivables (14,266) (6,887)Increase in trade and other payables 7,439 2,122Amortisation of loan stock issue costs - 6Costs attributed to the issue of share options 434 302Corporation tax paid (1,601) (3,190) ---------- ---------Net cash flow from operating activities (9,667) 2,565 ---------- --------- Investing activitiesPurchase of property, plant and equipment (484) (629)Sale of property, plant and equipment 1,028 43Expenditure on intangible assets - (30) ---------- ---------Cash flow from investing activities 544 (616) ---------- --------- Financing activitiesDividends paid (4,099) (6,498)Interest received 641 533Interest paid (39) (14)Issue of ordinary shares 12,233 470Redemption of Loan stock - (22) ---------- ---------Cash flow from financing activities 8,736 (5,531) ---------- --------- Decrease in cash and cash equivalents (387) (3,582) Cash and cash equivalents at the beginning of the year 6,275 9,857 ---------- ---------Cash and cash equivalents at the end of the year 5,888 6,275 ========== ========= TELECOM plus PLC NOTES 1. The financial information set out above does not constitute the Group's statutory information for the years ended 31 March 2006 or 2005, but is derived from these accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies and those for 2006 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). Following a European Union Regulation issued in 2002, with effect from 1 April2005 the Group is reporting its results in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union and so itsAnnual Report and Accounts for the year ended 31 March 2006 are prepared underIFRS. Previous accounts were prepared under UK Generally Accepted AccountingPrinciples (UK GAAP) and reconciliations converting the group's results from UKGAAP to IFRS for the year ended 31 March 2005 and the balance sheet at 1 April2004 (the date of transition) have been previously presented. 2. BASIC (LOSS)/EARNINGS PER SHARE The calculation of basic loss per share at 31 March 2006 was based on the lossattributable to ordinary shareholders of £1,381,000 (2005: profit £7,648,000)and a weighted average number of ordinary shares outstanding during the yearended 31 March 2006 of 67,170,166 (2005: 61,921,044). 2006 2005 Basic (loss)/earnings per share (2.1)p 12.4pDiluted (loss)/earnings per share (2.1)p 12.1p ---------- --------- Diluted earnings per share Diluted (loss)/earnings per share assumes dilutive options have been convertedinto ordinary shares. The calculations are as follows: 2006 2005 Profit Number of shares Profit Number of shares £'000 '000 £'000 '000 Basic(loss)/earnings (1,381) 67,170 7,648 61,921Dilutive effects -Options - - - 1,409 ---------- --------- -------- -------Diluted(loss)/earnings (1,381) 67,170 7,648 63,330 ========== ========= ======== ======= The share options may be dilutive in future periods. 3. TURNOVER AND SEGMENTAL ANALYSIS For management reporting purposes, the Group is currently organised into threeoperating divisions: Virtual Network - Telephony;Virtual Network - Energy; andDistribution. These divisions are the basis on which the Group reports its primary segmentalinformation. Business segments Year ended 31 March 2006 Year ended 31 March 2005 Virtual Virtual Distribution Total Virtual Virtual Distribution Total Network Network Network Network -telephony -energy -telephony -energy £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Revenue:External sales 59,440 74,437 2,466 136,343 60,219 39,481 2,767 102,467 ======== ====== ======== ====== ======= ====== ======= ====== Segment result 13,538 (10,776) (3,491) (729) 16,252 (4,289) (2,276) 9,687) -------- ------ -------- ------ ------- ------ ------- ------ Operating (loss)/profit beforeexceptional items (729) 9,687Exceptional costs in respect ofrestructuring the energy business (1,860) - ------ ------Operating(loss)/profit (2,589) 9,687Net financingcosts 602 519Share of profitof Associates 343 251Taxation 263 (2,809)(Loss)/profitfor the ------ ------Year (1,381) 7,648 ====== ====== Segment assets 20,308 23,292 1,202 44,802 19,314 11,041 1,755 32,110Investment inequity methodassociates - 940 - 940 - 597 - 597Total assets 20,308 24,232 1,202 45,742 19,314 11,638 1,755 32,707Segmentliabilities (6,877) (11,234) (2,676) (20,787) (7,891) (5,072) (1,965) (14,928) Capitalexpenditure 193 291 - 484 347 282 - 629Depreciationandamortisation 230 346 - 576 297 241 - 538 ======== ====== ======== ====== ======= ====== ======= ====== The share of profit of associates relates to the "Virtual Network - energy"business segment. All turnover is derived in the United Kingdom and substantially arises from theprovision of services. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Telecom Plus