5th Jun 2007 07:02
Telecom Plus PLC05 June 2007 TELECOM plus PLC5 June 2007 Preliminary results for the year ended 31 March 2007 Telecom plus PLC, the UK's leading low-cost multi-utility supplier (gas,electricity, telephony, internet), announces preliminary results for the yearended 31 March 2007. Financial and business highlights: • Turnover up 29% to £176m (2006: £136m) • Profit before tax of £11.6m (2006: loss £1.6m) • Net cash balance increased by £19.9m to £25.8m (2006: £5.9m) • Final dividend of 6.0p (2006: 1.0p) • Number of services provided increased 9% during the year to 542,039 (2006: 495,679) • Number of independent distributors up 4% to 16,600 • Significant growth in Business Club customers to 6,388 (2006: 2,200) Peter Nutting, Chairman, said: "We are still the UK's only fully integrated provider of a wide range ofattractively priced utility services, with a distribution channel of provenability in cost effectively gathering high quality new customers each month,which gives us a considerable competitive advantage in the domestic market. Wealso now have good earnings visibility following the elimination of our previousexposure to price fluctuations in the wholesale energy markets. "We therefore remain confident that the current year will see further progressin the development of our business, and in the continuing delivery ofsatisfactory results." For press enquiries, please contact: Charles Wigoder/ Richard Hateley Neil BoomTelecom plus PLC Gresham PR Ltd.020 8955 5000 020 7404 9000 CHAIRMAN'S STATEMENT I am delighted to report a year of record turnover and profits for the Company. We achieved pre-tax profits of £11.6m (2006: £1.6m loss) on turnover whichincreased by 29% to £176m (2006: £136m). This substantial increase in turnoverwas driven by the favourable combination of higher energy prices together withan increase in the number of services provided to our customers. Our cash balances increased by almost £20m during the year to just under £26m, alevel which is substantially greater than we need to meet our forecast workingcapital requirements. Shareholders may recall that we raised approximately £10mthrough a share placing in May 2005, when we needed a stronger balance sheet tosupport our wholesale energy commitments during a period of rising prices andgreater volatility in the wholesale markets. As a result of the transaction weannounced in February 2006, these requirements are now substantially theresponsibility of npower. We are therefore seeking authority at the forthcomingAGM to reduce our share premium account, in order to increase our distributablereserves and enable us to repurchase our shares in the market. The directorsintend to consider making such purchases if, in the light of market conditionsprevailing at that time, the directors believe that such purchases wouldincrease earnings per share and would be for the benefit of the shareholdersgenerally. We have made good progress in developing our distribution channel, with a netincrease of around 600 new independent distributors over the year, taking thetotal to around 16,600. We anticipate a further steady increase during thecurrent year as we continue to invest significant resources in supporting ourchannel. An important development during the year was the launch of a newrecruitment DVD "What's it all about?" We also improved and simplified the bonusstructure for new distributors in the Autumn, and this has clearly been a factor(together with the new DVD) behind the increased recruitment activity we haveseen over the last 6 months. Customer numbers overall remained broadly stable over the year; however thisheadline figure masks several important trends. Firstly, although the number ofresidential customers fell slightly to 208,444, the quality of the customer basehas continued to improve, with the average number of services taken by eachmember increasing to 2.95 (2006: 2.76). Secondly, our Business Club (which welaunched about 18 months ago) has seen significant growth over the year, withcustomer numbers increasing to 6,388 (2006: 2,200). It is particularlyencouraging that members of our Business Club not only take multiple services,but also have higher average revenues and lower churn than domestic customers.Thirdly, the proportion of our residential customers who are now members of ourDiscount Club (and are thus eligible to take advantage of our new "Free UK Calls" multi-service discount) has increased to 72% (2006: 66%). The lack of growth in residential customer numbers during the year was partlydue to our decision to wait until the latest technology for supporting highspeed low cost broadband ("LLU") had been installed in sufficient BT localexchanges, and the inevitable teething problems associated with the introductionof any new technology had been resolved. We feel this decision has beenvindicated by the highly publicised problems experienced by those companies wholaunched their services earlier in the year. Our new BroadCall service (whichcombines Line rental, Calls and High Speed Broadband in a single package) waslaunched last Autumn and we expect this to account for an increasing proportionof our turnover in coming years. Our infrastructure and systems were originally developed to enable us to managea significantly larger number of customers than currently use our services,which means we have the potential to benefit from considerable economies ofscale by growing our customer numbers. This is one of our key priorities for thecoming year. Recent published surveys show we are generally held in high esteem by ourcustomers. We therefore intend to capitalise on this goodwill by encouragingthem to recommend us, through launching a "friend get friend" programme laterthis year. However before we can do so effectively we need to establish aninbound tele-sales fulfilment team, so that potential new customers can sign upfor our services with the minimum of effort or inconvenience. We are also establishing a specialist Home Movers team to help us retain ahigher proportion of those potential new customers who have moved into aproperty where we were supplying the previous occupant. I would like to thank our staff and distributors for the loyalty they have shownand the considerable contribution they have made to the continued success of thebusiness. Dividend We are proposing a final dividend of 6p for the year (2006: 1p) making a totalfor the year of 8p (2006:1p), which will be paid on 10 August 2007 toshareholders on the register at the close of business on 13 July 2007 and issubject to approval by shareholders at the Company's Annual General Meetingwhich is being held on 11 July 2007. We intend to maintain a progressivedividend policy in future. Segmental reporting There are two fundamentally different business activities carried out by theCompany. The first is the acquisition of new customers through our distributionchannel. The second is the administration, management and billing of all theservices we supply to our customer base. Historically we have referred to these(perhaps somewhat confusingly) as our Distribution business and our VirtualNetwork business respectively. In future, these will be referred to as ourCustomer Acquisition business and our Customer Management business. Last year, for the first time, we further subdivided our Customer Managementbusiness between the supply of energy and telephony services, primarily inrecognition of the substantially different risk profiles associated with theseactivities. In telephony, margins have always been highly predictable because ofthe close association between the retail prices we charge and the wholesalecosts we incur, whereas in energy the margins are extremely volatile becausethere is no relationship in the short term between prices in the wholesale andretail markets. Following the transaction with npower which completed in March2006, this difference no longer exists. The highly integrated nature of our business, where we have a single billing andcustomer service platform supporting all the services we provide, means it isimpossible to provide a meaningful result for each service as any allocation ofoverhead between our energy and telephony supplies is wholly arbitrary. We havetherefore decided to present the figures for our Customer Management business infuture as a single segment, in line with the way in which the business isactually managed internally. A breakdown of our turnover, split between thedifferent services we supply, is included in the Financial Review section ofthese accounts. Board of Directors During the year under review we said goodbye to John Levin and Stephen Davis.Richard Hateley was appointed Finance Director in addition to hisresponsibilities as Company Secretary, and I am delighted to welcome MelvinLawson and Michael Pavia who have joined the Board as non executive directors.They both bring very considerable commercial experience to our deliberations andI am pleased Michael Pavia agreed to take over from me the chairmanship of theAudit Committee. Outlook The current forward price curves for gas and electricity indicate that it isunlikely there will be any further material reductions in retail energy pricesthis Autumn, although our recently announced price reductions (in common withall the other major energy suppliers) will have a small adverse impact on ourturnover for the coming year. Our gross energy margin (in percentage terms) isexpected to remain broadly unchanged, and we look forward to continuing to earna satisfactory contribution from supplying energy in future. We are still the UK's only fully integrated provider of a wide range ofattractively priced utility services, with a distribution channel of provenability in cost effectively gathering high quality new customers each month,which gives us a considerable competitive advantage in the domestic market. Wealso now have good earnings visibility following the elimination of our previousexposure to price fluctuations in the wholesale energy markets. We therefore remain confident that the current year will see further progress inthe development of our business, and in the continuing delivery of satisfactoryresults. Peter NuttingChairman 5 June 2007 BUSINESS REVIEW Performance Overall performance for the year has been extremely encouraging in a number ofkey respects: • substantial growth in turnover;• record Group profits;• cash generation of £19.9m;• growth in the number of distributors promoting our services;• 9% increase in the number of services we provide;• the successful launch of a new combined fixed telephony and internet package ("BroadCall");• 300% increase in membership of our Business Club. In addition, the business has now been substantially de-risked following thetransaction with npower, which has ensured we can focus on our core strengths ofbuilding and managing our customer base without the distraction of worryingabout seasonal weather variations or volatile wholesale energy markets. We arenow making a consistent positive margin from supplying energy, which is in linewith our expectations at the time the npower transaction was signed. The overall number of domestic customers is little changed from the level we hadreached 12 months ago. This is partly due to our decision last Spring to delayintroducing our new BroadCall service, but also a result of the many confusingoffers being heavily promoted by our competitors, especially by a number of newentrants to the telephony and internet markets, who are targeting customers withpromotions offering varying subsets of the range of services we provide together(in some cases) with entertainment. The Market Our focus is on supplying a wide range of essential utility services (gas,electricity, fixed telephony, mobile telephony and internet) to both domesticand small business customers. These are substantial markets and represent aconsiderable organic growth opportunity. We remain however a small operator in a market dominated by the former monopolysuppliers. Our unique position as the only integrated multi-utility supplierprovides us with a highly efficient cost-base, and enables us to combine goodservice and competitive pricing with a single monthly bill for each customer. The approximate size of the UK domestic market for the principal services weprovide is estimated at around £36.9bn as follows: Number of Households Retail Market Value Gas 20m £11.4bnElectricity 25m £13.3bnHome Phone - Calls 24m £3.7bnHome Phone - Line Rental (Lines) 24m £2.7bnMobile (Excluding Pre-Pay) 15m £3.9bnBroadband 10m £1.9bn Retail market values based on average prices charged by us to customers for eachservice during the year ended 31 March 2007. We also provide a similar range of services to small and medium sized businesscustomers following the introduction of a new Business Club (the UtilityWarehouse Discount Club for Business) in August 2005. Our Customers The majority of our customers choose to take advantage of our multi-serviceproposition, with over 72% having joined our Discount Club since its launch inOctober 2003. On average each member takes 2.95 services (2006: 2.76) with 80% taking 2 ormore services, and 52% taking 3 or more services. These figures are illustratedby the analysis below, which demonstrates the effectiveness of our Club conceptin encouraging customers to subscribe for additional services:- Members Non-Members 1 Service 20% 63%2 Services 28% 25%3 Services 19% 8%4 Services 17% 3%5 Services 13% 1%6 Services 2% -7 Services 1% - Non-members relate to customers gathered prior to the launch of our DiscountClub in October 2003 who have not subsequently joined the Discount Club. This growth in services has led to a further increase in average revenue percustomer, notwithstanding considerable price deflation in the fixed telephonymarkets over the last 9 years. Average RevenueYear per Customer 1999 £1902000 £2862001 £3162002 £3292003 £4592004 £4822005 £5052006 £6342007 £801 We enjoy high levels of overall customer satisfaction, as evidenced by therelatively low churn we experience. For example, our energy churn of around 2%per month compares with an industry average of around 5% per month amongstcustomers who have switched away from their original supplier. 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 542,039 services (2006: 495,679), representing an increaseof over 9% during the course of the year. 2007 2006Services:Gas 98,095 86,379Electricity 115,643 101,710Home phone 158,896 169,990Fixed line rental 71,557 40,519Freephone 10,670 11,056Mobile 40,418 45,197Internet 46,760 40,828 Total 542,039 495,679 As can be seen from the above table, we experienced steady growth during theyear in the number of customers to whom we supply gas, electricity, internet andfixed line rental. Our home phone and mobile services however experienced amodest fall in customer numbers, reflecting increasing competition in theseareas of our business and our decision to delay responding to the prematurelaunch of new combined service packages by certain competitors last Spring. Included within the above figures are over 6,300 members of our Business Club,who are taking in aggregate almost 18,000 services and contributing £5.8m (2006:£0.6m) to Group turnover. We are extremely encouraged by this strongperformance, and the continuing enthusiastic response of our DistributionChannel to this opportunity. The substantial size of this market (there are over1m home-based, small and medium sized businesses in the UK) gives usconsiderable confidence that this will make a significant contribution to theGroup 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 their issues, irrespective ofhow many different services we are providing to them. We continue to invest in improving our customer service resources, and havedeveloped specialist teams capable of dealing with some of the more complicatedproblems which can arise due to inefficiencies in the industry standardprocesses for switching customers between suppliers. We are also developing ourrange of qualitative and quantitative performance measurement tools for our CallCentre, so that we can continue to improve the overall quality of our members'customer service experience. Our People We rely on the combined efforts of around 265 employees to manage relationshipswith both our customers and distributors, and deliver a consistently highquality of service at all times. We pay considerable attention to recruiting andretaining 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 2007, there were outstanding options over 1,110,500 shares which hadbeen granted to staff, representing approximately 2% of the issued share capitalof the Company. During the coming year, the Company intends to introduce an employee ShareIncentive Plan ("SIP") which will enable all employees to build a shareholdingin the Company in a tax effective manner. Employees will be able to contributeup to £1,500 per year to the SIP and the Company will purchase matching shareson a 2:1 basis, which participating employees will receive free of chargeprovided they remain a member of the SIP for the period designated by the rulesof the scheme. The introduction of the SIP is subject to the approval ofshareholders at the forthcoming AGM. The Company has also recently created space at its premises for a creche, whichis subsidised by the Company, and intended to make it easier for mothers withvery young children to resume their careers. 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. In contrast to other utilitysuppliers, the alignment of financial interests provided by our revenue sharingmodel ensures that our distributors focus their activities on findingcredit-worthy and high spending customers who will reap the maximum savings fromusing our services, and will thus be least likely to churn. By doing so, theymaximise their own long-term returns. During the Autumn, we simplified the payment structure covering the bonusesavailable to new distributors, giving them the opportunity to earn a bonus of£200 (equal to their original joining fee) by gathering a minimum of 12 newcustomers within their first 90 days. Our Car Plan, which provides eligible distributors with a subsidisedfully-branded Mini remains extremely popular, and we have now supplied almost 70cars. Owners find these helpful in raising their local profile, resulting inenquiries from both potential new customers and distributors, and we arecurrently considering how we can extend this programme to bring it within reachof a substantially larger number of distributors. Distributors have seen a considerable increase in their average earnings fromeach customer during the last 2 years as a result of the growth in the number ofservices taken combined with sharply higher energy prices. Whilst there remainsscope for some further modest rises as the average number of services takencontinues to increase, distributors will now need to achieve consistent growthin their personal and Group customer numbers in order to obtain a meaningfulincrease in their current earnings as a distributor. Our unique market positioncontinues to make this predominantly part-time career extremely attractive topotential new recruits. Our national training programme has been further enhanced during the year, withthe introduction of a full-day training course for new distributors, whichreplaced the previous two half-day sessions. We also have training modules tosupport our Business Club (including the supply of Commercial Energy and theincreasing popularity of BlackBerrys), and a Personal Development Programme toprovide our next generation of leaders with the additional skills they willneed. The Environment The environment is becoming an increasingly important concern and we participatein programmes to help reduce the environmental impact of our activities. We operate an energy efficiency helpline to provide advice on how customers canreduce their energy usage, and we also participate actively in the "Shred-it"recycling programme, with a certificated saving of 70 trees during 2006. Principal Risks The Group faces various risk factors, both internal and external, which couldhave a material impact on long-term performance. Reputation risk Telecom 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 prices The 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 itscustomers' needs. Whilst there is a theoretical risk that in some of the areas in which theCompany operates it may be unable to secure access to the necessaryinfrastructure on commercially attractive terms, in practice the pricing ofaccess to such infrastructure is either regulated (as in the energy market) orsubject to significant competitive pressures (as in telephony). The profile ofour customers 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 Autumn of 2005, hence ourdecision to seek a relationship with a larger energy supplier which preservedour integrated multi-utility business model whilst passing the substantive risksand rewards of hedging and buying energy to them. The transaction with npowerwhich was completed on 31 March 2006 achieved these objectives, and has enabledthe Company to earn a positive contribution from providing energy since thatdate. It also removed the need for the Company to tie up valuable capital tosupport forward positions in the wholesale energy markets which would otherwisehave been required. Bad Debt Risk on Energy Customers The Company has a universal supply obligation in relation to the provision ofenergy to domestic customers. This means that although the Company is entitledto request a reasonable deposit from potential new customers who are notconsidered credit worthy, the Company is obliged to supply domestic energy toeveryone who submits a properly completed application form. Where customerssubsequently fail to pay for the energy they have used ("Delinquent Customers"),there is likely to be a considerable delay before the Company is able toeliminate its exposure to future bad debt from them by either installing apre-payment meter or disconnecting their supply, and the costs associated withpreventing such Delinquent Customers from increasing their indebtedness are notalways recoverable. Bad Debt Risk on Telephony Customers There is regular fraud within the telephony industry which arises from customersusing the services without intending to pay their supplier for the calls theyhave made. Although the amounts involved are generally small, larger scale fraudis sometimes attempted involving calls to premium rate and/or internationaldestinations. The Company has sophisticated systems to prevent material lossesarising as a result of such fraud by processing all call traffic on an hourly ordaily basis, and promptly disconnecting any number whose usage profile appearsto be suspicious, although there can occasionally be a delay in receiving thenecessary information from our network partners. Competitive risk The 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 risk The Group is subject to varying laws and regulations, including possible adverseeffects from European regulatory intervention. Risk management The 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 5 June 2007 FINANCIAL REVIEW OVERVIEW Revenues of £176m (2006: £136m) were 29% higher than in the previous financialyear to 31 March 2006. The pre-tax profit was £11.6 compared with £0.2m (beforethe exceptional charge of £1.9m in respect of reorganising the energy business)in the last financial year. This increase in profitability together with thefinal unwinding of our historic energy purchasing commitments following thetransfer of buying responsibility to npower created a net cash inflow fromoperating activities of £20.8m. Our year end net cash position increased by£19.9 million from £5.9m to £25.8m. The increase in operating profits (from a loss in 2006 of £0.7m beforeexceptional costs to a profit of £10m this year) was primarily due to theelimination of the losses we incurred in our gas business during the Winter of2005/06, which resulted from unprecedented volatility and record prices in thewholesale energy markets during the late Autumn of that year. Customer Management The growth in revenue during the year was due mainly to an increase in thenumber of services supplied to customers combined with increases in the energyprices we charged. Margins in our Customer Management business improved from 2% to 7.5% due to theabsence of the exceptional gas losses incurred during our last financial year.As expected, this margin is substantially lower than the 12% operating marginachieved during 2005, due to the substantial change in our sales mix, where agrowing proportion of our turnover now relates to energy, internet and linerental, all of which have significantly lower margins than fixed and mobile callrevenues. Customer Acquisition The net cost in respect of our Customer Acquisition business reduced during theyear to £3.1m (2006: £3.5m). This was mainly due to a small reduction in thenumber of new customers joining us during the year, combined with a reduction insome of the third party charges we incur (e.g. Broadband connection charges fromBT) when we connect new customers to our services. Operating Expenses Operating expenses before exceptional items have increased during the year from£19.5m to £24.9m. The principal elements of this are higher commission paymentsto our distributors, an increase in our bad debt charge (in line with the growthin turnover), and the costs associated with supplying energy to DelinquentCustomers. There have also been extra costs resulting from our decision toincrease the number of staff we employ to an average of 241 during the year(2006: 211), which has enabled us to improve the quality of our customer serviceand enhance the strength of the management team. Share Option Costs The operating loss is stated after share option expenses of £425,000 (2006:£434,000). These expenses relate to an accounting charge under IFRS 2 'Sharebased payments'. Taxation The amount of corporation tax payable in respect of the year is £3.6m (2006:£13,000). Cash Flow This pre-tax profit of £11.6m together with the final unwinding of our historicenergy purchasing commitments following the transfer of buying responsibility tonpower, resulted in a net cash inflow from operating activities of £20.8m (2006outflow £9.7m) and our net cash position increased at the year end by £19.9million from £5.9m to £25.8m. The March cash position is also (and will continue to be) adversely affected byenergy customers who pay by Budget Plan, where the high proportion of annualenergy consumption used during the Winter period means that our energy debtorsreach a peak at the end of each Winter before falling as we move through theSpring and Summer months. It should, however, be noted that following aparticularly mild Winter this year, customer budget plan deficits were onaverage significantly below the levels which would normally be expected at thistime of year, which has had a positive impact of around £10m on the Company'scash position at the year end. The current year will benefit from the repayment of the £2m loan to Oxford PowerHoldings Ltd, which is due to be received on 31 December 2007. The Group does not have a policy with respect to interest rate management as itcurrently has no debt funding requirements. Cash surpluses are placed ondeposit. Richard HateleyFinance Director5 June 2007 TELECOM plus PLC Consolidated income statement For the year ended 31 March 2007 2007 2006 Note £'000 £'000 Revenue 1 176,065 136,343Cost of sales 141,136 117,603Gross profit 34,929 18,740 Distribution expenses 8,327 7,810Administrative expenses 16,584 11,659Operating profit/(loss) before exceptional costs 10,018 (729)Exceptional costs in respect of restructuring the energy business - (1,860)Operating profit/(loss) 10,018 (2,589) Financial income 1,105 641Financial expenses 6 39Net financial income 1,099 602 Share of profit of associates 473 343Profit/(loss) before taxation 11,590 (1,644) Taxation (2,982) 263 Profit/(loss) for the year 8,608 (1,381) Basic earnings/(loss) per share 2 12.5p (2.1p)Diluted earnings/(loss) per share 2 12.5p (2.1p) TELECOM plus PLC Statement of recognised income and expense For the year ended 31 March 2007 Group 2007 2006 £'000 £'000 Profit/(loss) for the year 8,608 (1,381)Deferred tax on share options recognised directly in equity 18 (11) Total recognised income and expense for the year 8,626 (1,392) TELECOM plus PLC Balance Sheet As at 31 March 2007 Group 2007 2006 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 884 1,016Goodwill and intangible assets 3,761 3,894Investments in associates 1,422 940Deferred tax 904 509Other receivables 858 2,954Total non-current assets 7,829 9,313 Current assetsInventories 202 512Trade and other receivables 3,258 4,951Prepayments and accrued income 28,649 25,078Cash and cash equivalents 25,801 5,888Total current assets 57,910 36,429Total assets 65,739 45,742 Current liabilitiesTrade and other payables 3,727 5,906Current tax payable 1,969 12Accrued expenses and deferred income 27,695 14,869Total current liabilities 33,391 20,787 Total assets less total liabilities 32,348 24,955 EquityShare capital 3,446 3,421Share premium 19,444 19,065Retained earnings 9,458 2,469 Total equity 32,348 24,955 These accounts were approved and authorised for issue by the Board on 5 June2007. Charles Wigoder Director Richard Hateley Director TELECOM plus PLC Cash Flow Statement Year ended 31 March 2007 Group 2007 2006 £'000 £'000Operating activitiesOperating profit/(loss) 10,018 (2,589)Depreciation of property, plant and equipment 447 445Amortisation of intangible assets 133 131Profit on disposal of property, plant and equipment (44) (282)Decrease in inventories 310 622Decrease/(increase) in trade and other receivables 218 (14,266)Increase in trade and other payables 10,647 7,439Repayment of inter-company receivable - -Costs attributed to the issue of share options 425 434Corporation tax paid (1,402) (1,601)Net cash flow from operating activities 20,752 (9,667) Investing activitiesInvestment in associates (9) -Purchase of property, plant and equipment (341) (484)Sale of property, plant and equipment 70 1,028 Cash flow from investing activities (280) 544 Financing activitiesDividends paid (2,062) (4,099)Interest received 1,105 641Interest paid (6) (39)Issue of ordinary shares 404 12,233 Cash flow from financing activities (559) 8,736 Increase/(decrease) in cash and cash equivalents 19,913 (387) Cash and cash equivalents at the beginning of the year 5,888 6,275 Cash and cash equivalents at the end of the year 25,801 5,888 TELECOM plus PLC NOTES 1. TURNOVER AND SEGMENTAL ANALYSIS For management reporting purposes, the Group is currently organised into twooperating divisions: Customer Management; andCustomer Acquisition. These divisions are the basis on which the Group reports its primary segmentalinformation. Business segments Year ended 31 March 2007 Year ended 31 March 2006 Customer Customer Total Customer Customer Total Management Acquisition Management Acquisition £'000 £'000 £'000 £'000 £'000 £'000Revenue:External sales 173,735 2,330 176,065 133,877 2,466 136,343 Segment result 13,107 (3,089) 10,018 2,762 (3,491) (729) Operating profit/(loss) before 10,018 (729)exceptional itemsExceptional costs in respect of - (1,860)restructuring the energy businessOperating profit/(loss) 10,018 (2,589)Net financing income 1,099 602Share of profit of associates 473 343Taxation (2,982) 263Profit/(loss) for the year 8,608 (1,381) Segment assets 63,008 1,309 64,317 43,600 1,202 44,802Investment in equity method associates 1,422 - 1,422 940 - 940Total assets 64,430 1,309 65,739 44,540 1,202 45,742Segment liabilities (33,079) (312) (33,391) (18,111) (2,676) (20,787) Capital expenditure 336 5 341 484 - 484Depreciation and amortisation 572 8 580 576 - 576 The share of profit of associates relates to the "Customer Management" businesssegment. All turnover is derived in the United Kingdom and substantially arises from theprovision of services. 2. BASIC EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share The calculation of basic earnings per share at 31 March 2007 was based on theprofit attributable to ordinary shareholders of £8,608,000 (2006: loss£1,381,000) and a weighted average number of ordinary shares outstanding duringthe year ended 31 March 2007 of 68,606,607 (2006 67,170,166). 2007 2006 Basic earnings/(loss) per share 12.5p (2.1)pDiluted earnings/(loss) per share 12.5p (2.1)p Diluted earnings/(loss) per share Diluted earnings/(loss) per share assumes dilutive options have been convertedinto ordinary shares. The calculations are as follows: 2007 2006 Profit Number of Profit Number of £'000 shares '000 £'000 shares '000Basic earnings/(loss) 8,608 68,607 (1,381) 67,170Dilutive effects - Options 171 - - Diluted earnings/(loss) 8,608 68,778 (1,381) 67,170 The share options may be dilutive in future periods. 3. The financial information set out above does not constitute the Group'sstatutory information for the years ended 31 March 2007 or 2006, but is derivedfrom these accounts. Statutory accounts for 2006 have been delivered to theRegistrar of Companies and those for 2007 will be delivered following theCompany's annual general meeting. The auditors have reported on theseaccounts, their reports were unqualified and did not contain statements underthe Companies Act 1985, s237(2) or (3). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Telecom Plus