TIDMTEP
RNS Number : 5526P
Telecom Plus PLC
21 June 2022
Embargoed until 07.00 21 June 2022
Telecom Plus PLC
Final Results for the year ended 31 March 2022
"Record results ahead of expectations... and a return to 20%
sustainable growth"
Telecom Plus PLC (trading as Utility Warehouse), which supplies
a wide range of utility services focussed on domestic customers ,
today announces its final results for the year ended 31 March
2022.
Financial Highlights:
-- Record results, ahead of expectations
-- Revenue up 12.3% to GBP967.4 million (2021: GBP861.2m)
-- Adjusted pre-tax profit up 10.3% to GBP61.9 million (2021: GBP56.1m)
-- Statutory pre-tax profit up 8.5% to GBP47.2 million (2021: GBP43.5m)
-- Adjusted EPS up 10.1% to 63.2p (2021: 57.4p)
-- Statutory EPS up 8.7% to 45.1p (2021: 41.5p)
-- Full year dividend maintained at 57p per share
Operating Highlights:
-- Number of customers up 10.8% to c. 729,000 (an annualised
rate of over 20% during H2), equal to the previous five years of
growth combined
-- Notable improvement in customer retention levels, as
customers benefit from higher savings on their UW services
-- Return to rational pricing environment following permanent energy retail market reset
Current trading and outlook:
-- Continuing strong new customer volumes in line with guidance of 20% net growth for FY23
-- Subject to unforeseen circumstances, adjusted PBT for FY23
expected to be around GBP75m, above consensus expectations,
enabling an increase in our dividend to not less than 65p for the
full year
-- Our new medium-term goal is to sign-up at least 1,000,000
additional customers over the next four to five years
Andrew Lindsay, Co-CEO, said:
"The business is performing extremely well, delivering record
results ahead of expectations. Demand for the long term savings we
offer remains high, and underlying organic customer growth is
continuing at an annualised rate of around 20% in the new financial
year.
"It is now inevitable that energy prices will rise significantly
again in October and are likely to remain high for the foreseeable
future. Thanks to our multiservice proposition we expect to
continue offering our customers the lowest energy prices in the
country this winter, giving every household the opportunity to make
significant savings at a time when they need them the most."
Stuart Burnett, Co-CEO, added:
"Our multiservice business model enables us to sustainably offer
the lowest energy tariffs in the country, with a typical household
taking three UW services expected to save around GBP140 a year
relative to the Government price cap from October on their energy
alone - with significant additional savings available on their
other UW services - making us the best value supplier in the
country by far.
"Our Partners are growing more and more confident in the value
we offer, and as a result are recommending UW to their friends and
families in increasing volumes. By doing so, they are earning
meaningful additional incomes that are helping them meet the
growing pressures on their personal finances. Working together, we
have already seen a return to sustainable 20% growth, and we look
forward to signing up a million additional customers over the next
4-5 years."
There will be a virtual meeting for analysts today at 9.00am.
Please contact MHP Communications at: telecomplus@mhpc.com for dial
in details.
For more information please contact:
Telecom Plus PLC
Andrew Lindsay, Co-CEO 020 8955 5000
Stuart Burnett, Co-CEO
Nick Schoenfeld, CFO
Peel Hunt
Dan Webster / Andrew Clark 020 7418 8900
Numis
Mark Lander / Joshua Hughes 020 7260 1000
MHP Communications
Reg Hoare / Catherine Chapman 020 3128 8339
About Telecom Plus PLC ("Telecom Plus"):
Telecom Plus, which owns and operates the Utility Warehouse
brand, is the UK's only fully integrated provider of a wide range
of competitively priced utility services spanning the
Communications, Energy and Insurance markets.
Customers benefit from the convenience of a single monthly
statement, consistently good value across all their utilities and
exceptional levels of service. Telecom Plus does not advertise,
relying instead on 'word of mouth' recommendation by existing
satisfied customers and Partners in order to grow its market
share.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP
LN). For further information please visit telecomplus.co.uk
LEI code: 549300QGHDX5UKE58G86
Cautionary statement regarding forward-looking statements
This Announcement may contain "forward-looking statements" with
respect to certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they are based on numerous
assumptions regarding the Company's present and future business
strategies, relate to future events and depend on circumstances
which are or may be beyond the control of the Company which could
cause actual results or trends to differ materially from those made
in or suggested by the forward-looking statements in this
Announcement, including, but not limited to, domestic and global
economic business conditions; market-related risks such as
fluctuations in interest rates; the policies and actions of
governmental and regulatory authorities; the effect of competition,
inflation and deflation; the effect of legislative, fiscal, tax and
regulatory developments in the jurisdictions in which the Company
and its respective affiliates operate; the effect of volatility in
the equity, capital and credit markets on profitability and ability
to access capital and credit; a decline in credit ratings of the
Company; the effect of operational risks; an unexpected decline in
sales for the Company; any limitations of internal financial
reporting controls; and the loss of key personnel. Any
forward-looking statements made in this Announcement by or on
behalf of the Company speak only as of the date they are made. Save
as required by the Market Abuse Regulation, the Disclosure Guidance
and Transparency Rules, the Listing Rules or by law, the Company
undertakes no obligation to update these forward-looking statements
and will not publicly release any revisions it may make to these
forward-looking statements that may occur due to any change in its
expectations or to reflect events or circumstances after the date
of this Announcement.
Chairman's Statement
I am pleased to report a strong performance by the Company
during a period of exceptional market turbulence, with turnover,
profit, customer and service numbers all reaching record highs.
Adjusted pre-tax profits increased by 10.3% to GBP61.9m (2021:
GBP56.1m) mainly reflecting higher customer numbers during H2, on
revenue up by 12.3% to GBP967.4m (2021: GBP861.2m) largely due to
higher energy prices and a growing customer base. Adjusted earnings
per share for the year rose by 10.1% to 63.2p (2021: 57.4p).
Statutory pre-tax profits rose by 8.5% to GBP47.2m (2021:
GBP43.5m), and statutory EPS rose by 8.7% to 45.1p (2021:
41.5p).
Customer numbers for the year increased by 71,269 (2021: 5,174)
to 728,680 and core service numbers grew by 191,112 (2021: 51,081)
to 2,264,909, representing growth of 10.8% and 9.2% respectively.
All this growth was achieved organically, and predominantly during
H2, representing an annualised customer growth rate for H2 of
slightly over 20%. This was achieved despite our decision not to
participate in the multiple opportunities which arose to acquire
customer bases from insolvent suppliers during the autumn.
Churn within our energy customer base is continuing to run at an
annualised rate of less than 3%, and in the absence of a return to
heavily discounted introductory fixed tariffs from other suppliers
- which now seems unlikely given the current regulatory focus on
ensuring a sustainable retail energy marketplace - we would expect
our churn rate to remain well below historical levels for the
foreseeable future.
Interest in our income opportunity for UW Partners accelerated
over the course of the year, particularly during the second half,
as people focussed on the impending cost of living crisis. We
progressively improved both our customer and Partner propositions;
of particular importance was the simplification of our bundling
structure in March, enabling customers to lock-in guaranteed
savings of up to 5% below the Government's energy price cap when
they take any combination of our other core services.
We received a number of awards during the year recognising both
the value we offer and the quality of service provided by our
UK-based support teams; these are testament to our customer-centric
approach, our commitment to treating our customers fairly, and the
significant efforts by our teams to deliver the best possible
customer service.
Dividend
We are proposing a final dividend of 30p (2021: 30p), bringing
the total for the year to 57p (2021: 57p); this will be paid on 5
August 2022 to shareholders on the register at the close of
business on 15 July 2022 subject to approval by shareholders at the
Company's AGM which will be held on 26 July 2022.
We remain committed to a progressive dividend policy consistent
with the underlying strong cash generation of our business, with a
significant increase to at least 65p expected for the current
year.
Our ESG strategy
As a Company, we remain focussed on delivering against our ESG
strategy. Never before has sustainability been so relevant. The
challenges of collectively achieving net zero, the energy crisis of
last autumn - and now the sharply increasing cost of living faced
by families throughout the UK - have brought into sharper focus the
importance of helping our communities thrive, supporting a more
sustainable future and doing business responsibly. These three
pillars underpin our ESG strategy and I am pleased to report that
we have made good progress over the last year, as set out in our
ESG Report and in our Sustainability Report in the 2022 Annual
Report.
We recognise the importance of a low carbon future and are
actively developing a detailed Net Zero transition plan. We are
committed to implementing the recommendations of the Task Force on
Climate-related Financial Disclosures ("TCFD") and our TCFD
disclosures, consistent with the TCFD framework, can be found in
the 2022 Annual Report.
Our ESG targets and goals for the year ahead are set out in our
ESG Report and Sustainability Report and demonstrate the Company's
continued engagement and focus on its ESG agenda.
Corporate Governance
The UK Corporate Governance Code (the "Code") encourages the
Chairman to report personally on how the principles in the Code
relating to the role and effectiveness of the Board have been
applied.
As a board we are responsible to the Company's shareholders for
delivering sustainable shareholder value over the long term through
effective management and good governance. A key role of mine, as
Chairman, is to provide strong leadership to enable the Board to
operate effectively.
We believe that open and rigorous debate around key strategic
issues and risks faced by the Company is important in achieving our
objectives and the Company is fortunate to have non-executive
directors with diverse and extensive business experience who
actively contribute to these discussions.
Further detail of the Company's governance processes and
compliance with the Code is set out in the Corporate Governance
Statement.
Board changes
As previously announced, non-executive directors Julian Schild
and Melvin Lawson will be retiring from the Board after the AGM in
July. Melvin and Julian have each made significant contributions to
the success of the business and will leave with our sincere
thanks.
We are delighted to welcome Carla Stent to the Board as a
Non-Executive Director with effect from the AGM in July. Carla
brings a broad range of skills and experience at large and fast
growing businesses, and demonstrates the importance we place on
meeting the highest possible standards of corporate governance. She
will immediately assume the role of chairing our Audit
Committee.
Outlook
We have now entered what seems likely to be an extended period
of normal and sustainable competition across the various essential
household services we provide - an environment in which our clearly
differentiated and effective route to market can be expected to
thrive. It is hugely exciting to see our community of Partners once
again demonstrating their ability to deliver rapid and high quality
organic growth.
In helping UK households to manage and reduce their bills, we
are a business of its time. Consumer demand to reduce bills has
never been higher, and is likely to continue to grow over the
coming months. Our multiservice model enables us to offer consumers
some of the cheapest energy tariffs in the market - with guaranteed
savings of up to 5% below the Government energy price cap - in an
entirely sustainable way.
And we are actively increasing our investment in staff and
technology to further improve the already strong customer
experience and service levels that earned us top position in the
May 2022 survey carried out by Uswitch.
Whilst we expect our customer base to grow by around 20% during
FY23, the fundamental strengths of our business model mean there is
much more to aim for. Indeed, with 98 out of every 100 households
in the UK taking their essential home services from suppliers other
than UW, our organic growth opportunity is, for all practical
purposes, unlimited.
Our new medium-term goal is to sign-up at least 1,000,000
additional customers over the next four to five years - a target we
believe is comfortably achievable against an economic background
where our ability to help families both save on their bills and
earn a meaningful additional income have never been so needed or so
valuable.
In the absence of unforeseen circumstances, and with growing
visibility over the level of the Government price cap for the
coming winter period, we expect that full-year adjusted profit
before tax for FY23 will be around GBP75m, ahead of current
consensus market expectations; this would enable an increase in our
dividend to not less than 65p for the full year in line with our
progressive dividend policy.
Once again, I would like to thank my boardroom colleagues for
their support and all our staff and Partners for their loyalty and
hard work throughout a difficult and challenging few years, and the
contribution they are making to the strong performance we are
currently seeing.
Charles Wigoder
Executive Chairman
21 June 2022
Co-Chief Executives' Review
THE YEAR IN SUMMARY
The business has experienced a dramatic turnaround in the past
12 months, delivering a very strong performance that exceeded our
expectations at the start of the year.
We have regained our long term competitive edge, are offering
some of the best value services in the country, and starting to
fire on all cylinders again.
A continuation of the long-running and value-destructive price
war in the energy retail market, combined with the after-effects of
social distancing restrictions associated with the pandemic, led to
a slow first six months until September 2021.
Since then, our trading environment and long-term outlook have
significantly improved, as shown by the 10% growth in both
customers and service numbers in the second half of the year -
equal to the previous five years of growth combined.
The end of the energy price war was a huge contributor to this
rapid improvement in performance: prior to September 2021, our
long-term cost advantage and multiservice approach had struggled to
compete against the irresponsible, below-cost pricing models of
many now-failed energy competitors. As wholesale energy prices rose
last year, it exposed these short-termist, unsustainable business
models, resetting the energy market and enabling the core strengths
of our business model to come back to the fore.
Our disciplined refusal to engage in the value destructive fray
of the energy price war, instead remaining focused on long term
value creation, has paid off. Today, we are operating in a much
smaller market with only 15 remaining suppliers and ongoing
regulatory intervention that will prevent any possible recurrence
of unsustainable pricing practices.
But it is not simply the reset of the energy markets that has
enabled the business to return to growth and deliver a strong
second half. The macro-economic outlook for the UK is worsening,
household budgets are coming under increasing pressure, and demand
for what we offer is clearly rising.
An inflationary environment is one that has historically suited
our business model, as we cater for both those looking to save
money on their bills, and those seeking to earn an additional
income.
Households across the country are experiencing price rises for
all their essential home services - be it energy, broadband or
mobile - and are increasingly focussed on managing their monthly
outgoings and interested in hearing about ways to save.
At the same time, more and more people are looking to supplement
their earnings, and turning to the near-term income opportunity we
offer our Partners. It is hugely rewarding to see record numbers of
Partners joining UW and being active in recommending UW to their
friends, families and colleagues, helping them reduce their bills
whilst earning a meaningful additional income in the process. After
several years of challenging conditions, the path ahead for us to
deliver sustainable and profitable double-digit annual growth is
clear.
The strong performance of the business over the last six months
is exciting, but with the cost of living squeeze driving increased
consumer demand for what we offer, and with 98 out of every 100
households across the UK using suppliers other than UW, we believe
there is much further to go. The business is perfectly positioned
to capitalise on these very positive dynamics, and we continue to
invest to ensure we maximise our growth prospects over the years
ahead.
A UNIQUE BUSINESS
All your home services in one
We supply households and small businesses throughout the UK with
a wide range of essential services under the UW brand - energy,
broadband, mobile and insurance. Our customers bundle together the
services they want, and benefit from a unique multiservice
proposition that offers them:
-- Simplicity - just one, simple bill for all their home services;
-- Savings - compared with the prices they were previously paying; and
-- Service - an award-winning customer app backed up by UK-based support teams.
We help our customers to get on with more important things in
their lives than managing their bills, by delivering consistently
fair value and great service, ensuring they never need to think
about switching their utilities again.
We believe that one supplier offering a single place to manage
all your essential home services, and a single monthly bill for all
of them together, is logically the easiest and most cost-effective
way to deal with your bills.
Our ultimate objective is that by fully delivering on our 'all
your home services in one' customer proposition, we create
something that is truly referable.
Word-of-Mouth
The power of a personal recommendation from someone you know and
trust is as great today as it ever has been, and delivers real
impact. This is increasingly apparent in a world of ubiquitous
online reviews and relentless digital marketing campaigns hitting
consumers from all angles.
Almost every one of our 729,000 customers has been introduced to
us by word of mouth. Central to this differentiated marketing
approach is our community of UW Partners: they are local, trusted
brand advocates who spread the word about UW, one neighbour at a
time.
In return for successfully recommending us to their friends and
family, and helping them switch their essential home services to
UW, we offer our Partners the opportunity to earn a meaningful
additional income.
Our sustainable cost advantage
It is the combination of our unique 'all your home services in
one' customer proposition with our powerful 'word of mouth' route
to market (that in itself represents an attractive proposition to
many consumers), that lies at the heart of our business model.
These are underpinned by strong wholesale supply agreements for
each of our services and a fully-integrated technology stack that
we've built in-house.
As the UK's only genuine multiservice provider, we derive
significant ongoing operating efficiencies relative to our
competitors by spreading a single set of overheads across the
multiple individual service-related revenue streams we receive from
each of our customers.
->This creates a sustainable, structural cost advantage that
enables us to consistently price competitively across each of the
services we supply.
->This in turn creates a highly attractive and referable
customer proposition that enables us to harness the most powerful
form of marketing - word of mouth.
->Our Partner-led word of mouth route to market enables us to
achieve high levels of multiservice take-up by new customers,
maintaining our sustainable cost advantage
OUR FOCUS
The energy, broadband, mobile and insurance markets are each
individually significant; combined, they present us with a vast
opportunity. Further, with a market share of around 2.5%, there are
few practical constraints on the size of business we can build
organically.
However, we have never pursued growth at all costs. We take
pride in building an ever more robust and sustainable business that
serves the interests of all our key audiences: our customers,
Partners, employees and our shareholders.
The underlying strength of our business and the conviction in
our approach is founded on two key areas of focus:
Loyal customers creating long-term value
We believe sustainable value can only come from long-term
relationships with our customers. We must compete toe-to-toe in
each of the competitive markets we operate in, but we're not trying
to persuade people to buy something they don't already have or may
not need. We simply offer a better solution for the essential
household services they're already using, and one that's
recommended by a trusted friend or neighbour.
We seek to generate loyalty amongst our customers in a number of
key ways:
-- Incentivising them to take more services from UW
There's a clear correlation between the number of services a
customer takes and their lifetime as a UW customer, and so we offer
incrementally better value with each additional service they take
from us.
-- Providing outstanding service and treating them fairly
Above and beyond our award-winning customer app and telephone
support, we offer a promise of great value for as long as a
customer stays with us, eschewing the short-term 'tease and
squeeze' pricing tactics that inevitably undermine customer trust
and loyalty.
-- Encouraging homeowners to sign up to UW
Changes in occupancy pose particular challenges to broadband and
energy suppliers, leading to higher administrative costs and acting
as a prime source of both churn and bad debt. Our propositions are
therefore weighted towards homeowners as they tend to move less
frequently.
Only a minority of UK consumers actively engage with the
expensive advertising strategies of our competitors; these are
typically serial switchers and are therefore unlikely to generate
long-term returns. The majority of people are considerably less
engaged with switching, and it is this personal recommendation from
someone they know that overcomes this natural inertia and then
leads to longer lifetimes with us once they've switched. Moreover,
these 'hard to reach' customers are where our less formal 'word of
mouth' route to market really comes to the fore, accessing people
who are not actively considering switching.
Our unique multiservice proposition delivered through our
word-of-mouth route to market drives the ongoing acquisition of
loyal customers, thereby building long term value for all
parties:
-- Our customers benefit from consistently lower prices in
return for switching all their services, and stay with us
longer.
-- Our Partners receive a long-term residual income stream from a longer-lasting customer.
-- Our shareholders receive a sustainable earnings stream from
an inherently sustainable business.
Word-of-mouth as a sustainable route to market
We believe attracting multiservice customers at scale is best
achieved through word of mouth. This is a core tenet of our
business model and gives us a significant competitive advantage,
with a direct ability to communicate the benefits of our unique
multiservice retail proposition to high quality customers, many of
whom may never have previously switched supplier. This is in stark
contrast to the traditional and costly routes to market -
billboards and digital banner ads to name a few - that are adopted
by most other suppliers.
Moreover, and also unlike other routes to market, this
word-of-mouth model creates a genuine alignment of interests. Our
Partners can earn meaningful short-term financial rewards for
introducing new customers to UW, as well as a long-term residual
income for as long as their customers remain with us.
As an opportunity to earn a meaningful additional income it
offers genuine flexibility, as Partners earn in their own time and
on their own terms, and it's highly accessible, as anyone can
become a UW Partner, recommend UW from anywhere and no previous
experience is needed.
Almost all of our customers have signed up to UW following a
recommendation from a UW Partner. In some cases this only generates
a one-off income, but in most cases Partners can generate real
financial security for themselves and their families - something
that has once again started to strike a real chord around the
country in recent years.
The pandemic reinforced the appeal of the UW Partner
opportunity, with rising demand for an alternative, flexible income
stream to supplement earnings. More recently with the inexorably
rising cost of living, we're experiencing a further surge in
interest as UK consumers increasingly look for additional ways to
bolster their household finances.
OUR CORE SERVICES
We help UK households to save time and money by bundling
together all their essential home services into one. Whilst a
number of price comparison sites seek to provide an
all-encompassing home services proposition on a brokerage basis, we
are unique in doing this on a genuinely integrated basis, as the
actual retail supplier across each of our core services. We believe
this is the only way to earn the trust and loyalty of our
customers, as we can manage their end-to-end experience.
Yet we are essentially a virtual business. Instead of owning any
of the underlying infrastructure assets necessary to provide our
services, we rely on the investments made by others, and resell
their services. This approach is founded on strong, long-term
commercial relationships with the wholesale suppliers of the core
services we supply. It is also capital-light, ensures access to
emerging technologies, avoids any obsolescence risk, whilst
enabling us to retain full control of our retail proposition.
Our suppliers recognise the value of our unique approach to each
of the markets we operate in, and the importance of ensuring we
maintain a competitive and attractive customer proposition so our
word-of-mouth model continues to thrive. In return, they benefit
from a complementary and clearly differentiated route to market
which increases their market share, whilst the proven
sustainability of our business model, the strength of our balance
sheet, and the longevity of our multiservice customers means we
benefit from long term competitive terms.
We believe these are genuinely mutually beneficial
relationships, and the average tenure for suppliers - typically
over 15 years - is testament to their strength, and the value that
both sides attribute to them.
None of this would be possible without our in-house technology
platform, which is managed by a team of engineers who are
innovating daily to deliver seamless customer and Partner
experiences. By fully integrating all the household services we
supply into a single monthly bill, supported by a single set of
central overheads, our technology gives us the fundamental,
long-term cost advantage that enables us to sustainably compete
with other suppliers in each of the markets we operate in.
Energy
The Energy market landscape has experienced an unprecedented
upheaval since the energy crisis began in October last year.
Unsustainable pricing and hedging practices have resulted in 30
companies supplying over four million customers going into
administration in the last year.
The customer impact has gone well beyond a change of supplier.
The rapid inflation in wholesale prices have led to two consecutive
significant increases in the Government price cap - a key driver of
the cost of living crisis. And with most suppliers not currently
accepting new customers unless onto a very expensive fixed deal,
more than 22 million households are now on standard variable
tariffs, priced at the Government price cap, and switching across
the market has dramatically reduced.
Our long term, sustainable approach to pricing, giving customers
a guaranteed discount to the Government price cap, led to us being
consistently the most competitively priced supplier since October.
The combination of this attractive pricing and record low churn,
resulted in our energy service base growing by 13% in the last
year, heavily skewed towards the second half.
We have continued to focus our growth in this period on high
quality customers. We chose not to participate in the multiple
opportunities to acquire customer bases from insolvent suppliers
during the autumn (through the Supplier of Last Resort ("SOLR")
process) and have maintained our focus on acquiring multi-service
home-owners through our unique word of mouth route to market.
Despite our rapid return to growth, our customer service quality
has remained market leading, and we were delighted to have won
three awards in the Uswitch energy awards 2022 including 'Best
Customer Service', 'Most Likely to Recommend' and 'Best Rewards' in
addition to coming runner-up for 'Best App'. More recently, we
topped the Citizens Advice Bureau ("CAB") rankings - a testament to
our focus and investment in this area, and the exceptional work of
our teams providing the support.
Ofgem continues to run multiple concurrent consultations on
interventions to prevent any recurrence of unsustainable practices,
including, but not restricted to pricing, hedging, consumer credit
balance management, direct debit management, price cap review
timeframes etc. We welcome this increased scrutiny, and Ofgem's
desire to ensure a sustainable energy market. Equally we are
constantly alert to the risk of unintended consequences of highly
prescriptive regulatory intervention, not least the significant
administrative burden that this puts on suppliers.
Consumer engagement with the transition to net zero may have
waned somewhat in the face of rising bills, but remains on a longer
term upward trend. Whilst we view ourselves as a multiservice
provider, not simply an energy supplier, we have both a direct role
to play in the transition, and also an indirect role, by helping
our customers to do likewise. The key priority for the energy
retail industry is the smart meter roll-out programme. Not only is
this vital to the broader transition to net zero, it also improves
billing accuracy and customer satisfaction, and critically, it
helps customers actively monitor in real time how much energy they
are using.
We maintain our belief that Government intervention is required
if the smart rollout is to achieve its full potential - namely the
introduction of legislation to remove the ability for customers to
opt-out from the national rollout programme by refusing to have a
new smart meter installed.
We continue to move ahead of the wider market in our smart meter
rollout programme, with penetration now at 65% (up from 57% at the
start of the year) despite our recent acceleration in growth. In
order to focus on our core multiservice customer proposition, and
to ensure the continued cost-effective rollout of smart meters to
our customers, we took the decision to divest UWHS, our smart meter
installation business, in March. The new owners will continue to
fulfil our smart rollout obligations in line with our growth.
Our boiler installation business (Glow Green) made a loss of
GBP1.9m during the year. This disappointing performance resulted
from a combination of labour and supply chain issues, a more
competitive post-pandemic environment, and start-up costs
associated with entering the solar panel and battery installation
market. In order to focus on our core multiservice proposition, we
took the decision to divest the business in March to Charles
Wigoder, Executive Chairman of the Group, for cash consideration of
GBP1 .
Wholesale energy markets remain volatile. We have just seen the
Government price cap increase by 54% from April, and it is now
inevitable that prices will rise significantly again in October. In
addition, the ramifications of the additional SOLR processes are
yet to be fully seen, with costs still to be absorbed by the market
and new requirements on existing and new market entrants expected.
Energy prices are therefore likely to remain high for the
foreseeable future.
We have already seen early indications of customers actively
taking steps to reduce their energy consumption in response to
higher prices, and it seems increasingly likely that additional
Government support will be provided for those most at risk of fuel
poverty this winter. The combination of these two factors suggest
that any increase in bad debts across the energy industry this year
will be more manageable than had previously been feared, although
uncertainty remains over the eventual impact.
In any event, we expect to be sheltered to a degree from these
pressures by our customer demographic which skews towards more
mature, creditworthy, and multi-service homeowners.
Broadband
Consumer expectations for broadband services have never been
higher with demands for faster speeds and better in-home Wi-Fi
coverage as a result of the pandemic continuing to impact consumer
behaviour.
In H1 we saw a dip in our Broadband service numbers following a
period of heavy re-contracting during the pandemic as people sought
faster speeds; this resulted in many of our prospects being locked
into their existing suppliers last summer with large termination
fees and being cautious about disrupting their service.
As the national full fibre roll-out gathers pace, the quality of
the in-home Wi-Fi experience is increasingly the important factor
for customers, and a focus for us. In April last year we launched
our Whole Home Wi-Fi solution, powered by the Amazon Eero mesh
system, and we are pleased that a significant number of new
customers now benefit from this chargeable option. In September we
upgraded the router we offer at no additional cost to all new
customers and we're delighted that in February Which? awarded it
Best Buy status.
This February, responding to increasing budgetary pressures on
household finances, and in stark contrast to the CPI+ annual price
increases forced on their customers by the majority of large
broadband providers, we launched a competitive pricing structure
for new customers alongside a guarantee that we will not increase
prices mid-contract. At the same time, we introduced a new, faster
Full Fibre 500mb product to meet growing consumer demand at the top
of the market. Combined with faster overall customer growth, these
improvements have resulted in a return to growth for our broadband
service and we expect this improved trajectory to continue.
Mobile
The UK mobile market continues to be split between the big four
Mobile Network Operators ("MNOs") focussed on coupled airtime and
handset contracts and tied closely to a handset refresh cycle, and
the largely SIM-only Mobile Virtual Network Operators ("MVNOs")
offering more flexibility and more data at lower prices. SIM-only
demand continues to grow and with more customers turning away from
expensive handset contracts, our focus remains on a SIM-first
strategy.
We continue to improve the quality of service for our new and
existing customers with the roll-out of 4G and Wi-Fi calling during
the year. Additionally, we have been proactively migrating some of
our customers from legacy tariffs onto our current proposition to
improve their experience at low or no additional cost.
In September we launched a new tariff structure to reflect the
wider market demand for increased data allowances. At the same time
we improved the pricing of our Unlimited data SIM - a change which
has allowed us to offer one of the best value Unlimited tariffs in
the market with additional value for households taking multiple
SIMs.
In the second half of the year, the majority of mobile providers
began to charge again for EU roaming. Along with a handful of other
MVNOs we have continued to offer this to our customers at no
additional cost as a key customer benefit and differentiator of our
proposition.
Our mobile base has grown by over 7% in the last year. We look
forward to accelerating this rate of growth over the year ahead on
the back of the additional energy discounts customers can now
receive by taking a UW mobile service in our new bundle structure,
and as we continue to deliver feature improvements such as 5G.
Insurance
Insurance is increasingly proving itself a natural fit for our
brand and business model, and we are pleased to have grown the
number of insurance services by 36% over the year, and with the
pace of growth now accelerating.
We have invested in building an insurance platform that can
scale rapidly with high operating leverage, and are very excited by
the growth opportunity that insurance represents for UW as our
fourth core service: it is a key pillar of our future growth
strategy.
We have been directly authorised by the FCA as an insurance
broker since October 2020. We welcome their intervention to ban
dual pricing in the home and motor insurance markets during the
year, as well as the increased scrutiny of pricing practices more
broadly, which we believe improves customer outcomes and
strengthens our competitive position.
Across our Home Insurance and Boiler & Home Cover products,
we continue to achieve very strong renewal retention rates of over
90%, demonstrating our focus on delivering excellent value combined
with a best-in-class experience.
In March 2022 we integrated insurance into our bundle
proposition, which has resulted in an increased propensity amongst
new customers to take an insurance service at sign-up, and is an
important step towards further scaling our insurance business.
We are committed to taking significant market share in the
insurance markets, and are continuing to invest significantly in
order to achieve this aim. Over the coming year we therefore will
be focussed on further accelerating our insurance service growth,
securing and, where possible, increasing our margins, and
evaluating opportunities to expand our range of insurance products
in the future.
Cashback card
Our unique Cashback card proposition enables our customers to
save up to 10% at a range of participating retailers, and 1% on all
their other spend, applied automatically as a credit to their next
UW bill.
It materially increases the savings opportunity we offer our
customers, from four essential household services to all their
everyday spending - groceries, fuel, travel, clothing etc.
We launched the Cashback card in 2008 following the global
financial crash and subsequent rise in cost of living. Petrol had
just reached the GBP1/litre mark, and demand was high. As we enter
a further period of considerably greater pressure on household
budgets, we believe the Cashback card has a significant role to
play in supporting our customers and accelerating our growth.
During the year we paid out GBP5.8m of cashback to our
customers, and spend on the programme has grown to over GBP368m
annually, making it one of the largest prepaid card programmes in
the UK. In January we migrated over 300,000 cards to Mastercard, a
move that, combined with our investment in the full stack
infrastructure, will enable us to accelerate our innovation-led
product roadmap in order to fully capitalise on the growth stimulus
we believe the Cashback card represents.
OPERATIONAL PERFORMANCE AND NON-FINANCIAL KPIs
The number of customers we supply increased during the year by
over 10% to 728,680, and the number of services they take to
2,264,909. All of this growth was achieved organically, and
predominantly during H2, in spite of our decision not to
participate in the multiple opportunities which arose to acquire
customer bases from insolvent suppliers during the autumn.
Our primary focus is the residential market, and in this segment
our customer base increased by over 11% during the year. With 29
million households across the UK, we have just 2.5% market
share.
Customers 2022 2021
Residential 705,634 633,613
Business 23,046 23,798
Total 728,680 657,411
We offer our customers four core services: broadband, mobile,
energy and insurance, with many also taking our Cashback card.
Customers can take any combination of services they wish from us,
but given the clear correlation between the number of services they
take and their expected lifetime value to us, we encourage new
customers to switch as many services to us as they can in order to
secure our best prices.
Services 2022 2021
Core services
Energy 1,219,836 1,079,044
Broadband 323,623 324,499
Mobile 324,773 302,654
Insurance 44,834 32,928
Other services
Cashback card 327,949 308,439
Legacy telephony 23,894 26,233
Total 2,264,909 2,073,797
Note: The table above sets out the individual services supplied
to customers. Legacy telephony comprises non-geographic numbers
(08xx) and landline only (no broadband) services provided.
The average number of services taken by new residential
customers signed up by Partners fell slightly during FY22 compared
with the preceding year, mainly due to an influx of customers over
the autumn who were only looking to replace their previous energy
supplier who had ceased trading. This temporary bias towards new
customers seeking to switch only their energy to UW was still
visible, albeit less pronounced, in March 2022 on the back of 22
million households across the UK receiving price increase
notifications from their energy suppliers in advance of the
significant increase in the Government price cap on 1 April
2022.
Average number of core service types
taken by new
residential customers signed up by
Partners
Q1 FY22 2.28
Q2 FY22 2.16
Q3 FY22 1.84
Q4 FY22 2.09
In late March we launched a simpler bundle proposition for our
customers, in order to give them greater flexibility in accessing
our lowest energy pricing. We expect this to have a positive impact
on the average number of services taken per customer, whilst also
reducing the proportion of new customers taking just energy from
us, and leading to a greater proportion benefitting from a
genuinely differentiated multiservice UW proposition: by taking two
or more core services from us, customers are receiving a
proposition that they cannot get from any other provider, rendering
them less likely to leave us.
We have long benefitted from market-leading customer loyalty,
and use our electricity supply point churn (the percentage of
supply points leaving during the period) as a proxy for overall
churn. This important measure of customer value fell significantly
during the year to around 6% (2021: 13%) for the full year, with
churn continuing at historic levels of around 10% during H1
followed by a rapid reduction to an annualised rate of 3% during H2
as all the remaining energy suppliers withdrew their 'below cost'
acquisition tariffs in October. Whilst we do not anticipate that
churn will remain at this very subdued level indefinitely, the
ending of the energy price war and the increasing regulatory
scrutiny on the sustainability of suppliers and their pricing
strategies should ensure our churn rate remains considerably below
historical levels for the foreseeable future.
Average revenue per customer from providing Core and Other
services increased to GBP1,340 (2021: GBP1,254) primarily due to
higher energy prices during the winter following the Government
price cap increase in October.
Supporting our customers
In order to maximise the expected lifetimes of our customers,
and to earn the trusted personal recommendations of our Partners,
we must deliver a consistently high standard of service to our
customers, treat them fairly, and live up to our promise of letting
them get on with their lives and forget about their utilities.
We rely on the efforts of our colleagues in our unified support
centre to look after all the services that our customers choose to
take from us. Historically based in north London, these teams now
increasingly support our customers from their homes throughout the
UK: in offering our colleagues a more flexible approach to working
hours, and through accessing a greater pool of talent nationwide,
we believe we are well positioned to meet the needs of our
customers as we grow. During the year we invested heavily in
improving the support we offer our remote colleagues, providing
them with improved home office systems and quicker and easier
access to expert knowledge that is held within the business.
We continue to invest heavily in offering the digital experience
that our customers increasingly expect from us - enabling them to
self-serve without having to speak to one of our team if they wish.
We further improved our UW customer app and online My Account
functionality, increasing the range of self-service capabilities.
We continue to employ numerous qualitative and quantitative
performance measurement tools to monitor all aspects of our
customers' interactions with us.
We are pleased to have been recognised as providing the Best
Customer Service in the Uswitch Energy Awards 2022, and to have
been identified as the supplier that customers are most likely to
recommend. With numerous energy suppliers collapsing in the autumn,
inflationary trends becoming apparent across all the markets in
which we operate, and our growth rate accelerating, we have
received significantly greater levels of contact from our customers
in recent months; these endorsements are vital to our word of mouth
marketing model, and are a testament to the positive attitudes and
hard work of our support teams.
Supporting our Partners
The significant acceleration in our organic growth which started
during the autumn was driven by an enthusiastic response from our
Partners to the improved competitive landscape and the demand for a
sustainable, secure and good value energy supplier.
As the energy market dynamics shifted in the autumn and our
Partners began to understand how much more referable the UW
customer proposition had become, and grow in confidence,
we re-prioritised elements of our product roadmap
accordingly.
Following the removal of social distancing restrictions,
Partners continued to consistently sign up around 40% of new
customers and Partners remotely, realising the ability to conduct
their referrals nationally as opposed to locally, accessing a
broader range of their friends and family and in a more convenient
and efficient fashion.
We are pleased with the impact of the Customer Bonus that we
launched last April, simplifying the structure, and acting as a key
driver of the high recruitment and customer gathering levels we saw
throughout the second half of the year. The Customer Bonus was
originally conceived in the aftermath of the last inflationary
cycle in 2008-2010, during which we were unable to offer new
Partners a sufficient near-term income. We believe we are now
exceptionally well placed to meet increasing demand for an
additional near-term income, offering up to GBP300 in Customer
Bonus for signing-up a home owner taking all four core services
from us.
We are hugely encouraged by the number of new Partners who
joined during the second half of the year, and believe that we can
play an important role in helping thousands of families more than
offset the increased cost of living they are facing, simply by
recommending UW.
Our community of Partners is in a very different mode from 12
months ago. Confidence is returning, momentum is building, and
whilst an informal word of mouth route to market will never respond
instantaneously to improved market conditions, there has been an
encouraging uptick in activity. The number of Partners actively
referring customers, the value of Customer Bonuses earned, and the
number of new and existing Partners earning them, all reached
record levels towards the end of FY22.
OUR PRIORITIES FOR THE YEAR AHEAD
Having delivered 10% growth in customer and service numbers in
the second half of the year alone, and with a high degree of
confidence over our continued growth trajectory, we have set three
key business priorities for the year ahead.
Building a great culture and environment for our people
We aim to create a working environment - at home and in the
office - that attracts great people, keeps great people and gets
everyone talking proudly about UW.
The acceleration in the number of customers joining UW, combined
with the severe squeeze on household incomes leading to heightened
concern from our customers over their monthly outgoings, means our
teams are extremely busy.
This, set against relatively recent adoption of entirely new
ways of working, with the majority of our colleagues working from
home all or most of the time, means we must redouble our efforts to
create a working environment and culture that enables our people to
grow as we grow, that values and respects the commitment and hard
work of our teams, all of whom contribute to delivering our 'all
your home services in one' proposition day in, day out.
Looking after our customers as we grow
We aim to deliver a multiservice customer experience that
customers will increasingly refer to their friends and families,
and view this as a key metric of our success.
We seek to reduce the need for customers joining UW to contact
us directly by providing easier means to help themselves faster;
this includes streamlining our onboarding processes and proactively
providing them with timely information on each of the services they
take from us.
We will continue to invest in delivering best in class service
and support to all our customers, through growing our technology
and customer support teams and improving the systems they use to do
so.
Maximising high-quality customer growth
More and more people are turning to UW to earn an additional
income, and we see considerable value in broadening the appeal of
our Partner opportunity, making it more accessible and easier to
make a success of, but still highly rewarding.
With the aim of helping tens of thousands of people, from all
backgrounds, to meet the challenges of the rising cost of living we
will continue to invest in making it easier for our Partners to
successfully refer UW and earn in the process - be it improving the
competitiveness of our customer offer, or the support and tools we
provide to our Partners.
Ultimately we want all our customers to become genuine brand
advocates, and to make additional savings on their bills simply by
recommending UW to people they know.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
21 June 2022
Financial Review
Overview of Results
Adjusted Statutory
2022 2021 Change 2022 2021 Change
---------- ---------- ------- ---------- ---------- -------
Revenue GBP967.4m GBP861.2m 12.3% GBP967.4m GBP861.2m 12.3%
Profit before
tax GBP61.9m GBP56.1m 10.3% GBP47.2m GBP43.5m 8.5%
Basic EPS 63.2p 57.4p 10.1% 45.1p 41.5p 8.7%
Dividend per share 57.0p 57.0p 0.0% 57.0p 57.0p 0.0%
In order to provide a clearer presentation of the underlying
performance of the group, adjusted profit before tax and adjusted
basic EPS exclude share incentive scheme charges of GBP1.0m (2021:
GBP1.4m) and the amortisation of the intangible asset of GBP11.2m
(2021: GBP11.2m) arising from entering into the energy supply
arrangements with npower in December 2013; this decision reflects
both the relative size and non-cash nature of these charges. In
FY22 adjusted profit before tax and adjusted basic EPS also
exclude: (i) the loss on the disposal of UWHS (GBP1.1m), (ii) the
write-off of goodwill associated with the conditional disposal of
Glow Green of (GBP1.5m); and (iii) the profit on disposal of a
freehold property of (GBP0.6m). The reconciliations for adjusted
profit before tax and adjusted EPS are set out in notes 2 and 3
respectively.
Summary
Adjusted profit before tax increased by 10.3% to GBP61.9m (2021:
GBP56.1m) on higher revenues of GBP967.4m (2021: GBP861.2m).
Statutory profit before tax increased 8.5% to GBP47.2m (2021:
GBP43.5m). These increases mainly reflect the impact of customer
growth and higher retail energy prices from 1 October 2021 (in line
with an increase in the Government price cap).
Distribution expenses increased to GBP29.7m (2021: GBP27.8m),
mainly reflecting increased Partner activity during the second
half.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP7.6m to GBP84.4m (2021: GBP76.8m),
mainly as a result of higher staff, technology and infrastructure
costs as we responded to the rapid increase in the rate of customer
growth during the autumn.
The bad debt charge for the year (separately identified on the
income statement as impairment loss on trade receivables) increased
to GBP11.6m (2021: GBP11.2m) representing 1.2% of revenues (2021:
1.3%).
Adjusted earnings per share increased by 10.1% to 63.2p (2021:
57.4p), with statutory EPS increasing by 8.7% to 45.1p (2021:
41.5p). In accordance with previous guidance and our strong cash
position, the Board is proposing to pay a final dividend of 30p per
share (2021: 30p), making a total dividend of 57p per share (2021:
57p) for the year.
Revenues
The growth in the number of services we are supplying
significantly accelerated, with an increase of 191,000 services
(2021: 51,000) during the course of the year, taking the total
number of services provided to our customers to a little under 2.3
million (2021: 2.1 million).
The increase in revenues mainly reflects higher customer numbers
and energy prices during the period:
Revenues GBPm 2022 2021
Electricity 450.5 391.8
Gas 295.7 248.0
Landline and broadband 129.7 132.2
Mobile 44.7 40.6
Other 46.8 48.6
------ ------
967.4 861.2
Margins
Our overall gross margin for the year was 19.5% (2021: 20.1%)
mainly reflecting the higher proportion of energy sales during the
period resulting from higher customer growth and increased
prices.
Distribution and Administrative Expenses
Distribution expenses include the share of our revenues that we
pay as commission to Partners, together with other direct costs
associated with gathering new customers. These increased to
GBP29.7m (2021: GBP27.8m), mainly reflecting higher Partner
commissions and incentive costs associated with our rapid return to
sustainable growth in the second half of the year.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP7.6m to GBP84.4m (2021: GBP76.8m),
mainly as a result of higher staff, technology and infrastructure
costs. The increase in staff costs mainly reflects the investment
in strengthening our customer service and management teams in order
to ensure we continue to deliver outstanding service levels across
all of our services as our growth accelerates.
The bad debt charge for the year increased to GBP11.6m (2021:
GBP11.2m) representing 1.2% of revenues (2021: 1.3%). The
proportion of customers with at least two energy bills outstanding,
fell marginally to 2.04% (2021: 2.08%).
Disposals
During the period the Group disposed of its shareholding in UW
Home Services Limited ("UWHS") on 31 March 2022 for a consideration
of GBP1 to Lowri Beck Holdings Limited, a specialist meter operator
owned by the Calisen Group. The net assets of UWHS at the point of
disposal were GBP1.1m and the loss on disposal for the Group was
GBP1.1m. This has been shown separately on the face of the
Consolidated Statement of Comprehensive Income.
The Group also agreed to sell, subject to the necessary FCA
change of control approval, its 75% shareholdings in Glow Green
Limited and Cofield Limited ("Glow Green") for a cash consideration
of GBP1 to Charles Wigoder, Executive Chairman of the Group. As a
result, the goodwill associated with Glow Green of GBP1.5m has been
impaired in the current period, and this has been reflected in the
'Goodwill impairment' line in the Consolidated Statement of
Comprehensive Income.
Since acquiring Glow Green in 2018, the business has been
consistently loss-making; this has contributed to a cumulative
funding requirement of over GBP6m that will remain with Glow Green
as a debt to the Group and be repaid over time. The repayment of
the loan has been personally guaranteed by Charles Wigoder. The
Board believe that the disposal of Glow Green is in the best
interests of the Group given the significant management resource it
would otherwise require, particularly at a time when the growth
opportunities within the core business are so exciting.
As a smaller related party transaction, this disposal fell
within the requirements of section 11.1.10R of the Listing Rules
and the Board obtained written confirmation from its sponsor (Peel
Hunt) that the terms of the proposed transaction were fair and
reasonable as far as the shareholders of the Group are
concerned.
The Group also disposed of a freehold building during the period
which realised a profit on disposal of GBP0.6m. This has been
reflected in the Other income line in the Consolidated Statement of
Comprehensive Income.
In order to show the underlying performance of the business, the
loss on disposal of UWHS, impairment of goodwill associated with
the conditional disposal of Glow Green, and the profit on disposal
of the freehold building, have been excluded in calculating the
adjusted profit before tax of GBP61.9m.
Cash, Capital Expenditure, Working Capital and Borrowings
We ended the period with a net debt position including lease
liabilities of GBP70.4m (2021: GBP71.4m), comprising bank loans of
GBP99.2m and lease liabilities of GBP0.8m, less cash of GBP29.6m.
This slight decrease mainly reflects a reduction in lease
liabilities due to the disposal of UWHS, offset by increases in
working capital. The Group's Net Debt/adjusted EBITDA ratio remains
low at around 1.0x (adjusted EBITDA of GBP73.7m used in this ratio
represents operating profit of GBP50.9m plus impairment of goodwill
of GBP1.5m, depreciation and amortisation of GBP20.3m and share
incentive scheme charges of GBP1.0m).
Our net working capital position showed a lower year-on-year
cash outflow of GBP10.4m (2021: cash outflow of GBP12.5m); this
reflects the ongoing investment we make in supplying broadband
routers to customers and increased trade debtors. Capital
expenditure of GBP9.9m (2021: GBP10.0m) related primarily to our
continuing digital transformation programme.
Dividend
The final dividend of 30p per share (2021: 30p) will be paid on
5 August 2022 to shareholders on the register at the close of
business on 15 July 2022 and is subject to approval by shareholders
at the Company's Annual General Meeting which will be held on 26
July 2022. This makes a total dividend payable for the year of 57p
(2021: 57p).
Our medium-term intention remains to gradually return to a
dividend pay-out ratio of around 85% of adjusted EPS, whilst
maintaining our long-standing progressive dividend policy with
reference to profit evolution.
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges
of GBP1.0m (2021: GBP1.4m). These relate to an accounting charge
under IFRS 2 Share Based Payments ('IFRS 2').
As a result of the relative size of share incentive scheme
charges as a proportion of our pre-tax profits, and the
fluctuations in the amount of this charge from one year to another,
we are separately disclosing this amount within the Consolidated
Statement of Comprehensive Income for the period (and excluding
these charges from our calculation of adjusted profits and
earnings) so that the underlying performance of the business can be
clearly identified. Our current adjusted earnings per share have
also therefore been adjusted to eliminate these share incentive
scheme charges.
Taxation
A full analysis of the taxation charge for the year is set out
in note 5 to the financial statements in the 2022 Annual Report.
The tax charge for the year is GBP12.2m (2021: GBP11.0m).
The effective tax rate for the year was 25.9% (2021: 25.2%),
this remains higher than the underlying rate of corporation tax due
mainly to the ongoing amortisation charge on our energy supply
contract intangible asset (which is not an allowable deduction for
tax purposes).
Nick Schoenfeld
Chief Financial Officer
21 June 2022
Principal Risks and Uncertainties
Background
The Group faces various risk factors, both internal and
external, which could have a material impact on long-term
performance. However, the Group's underlying business model is
considered relatively low-risk, with no need for management to take
any disproportionate risks in order to preserve or generate
shareholder value.
The Group continues to develop and operate a consistent and
systematic risk management process, which involves risk ranking,
prioritisation and subsequent evaluation, with a view to ensuring
all significant risks have been identified, prioritised and (where
possible) eliminated, and that systems of control are in place to
manage any remaining risks.
The directors have carried out a robust assessment of the
Company's emerging and principal risks. A formal document is
prepared by the executive directors and senior management team on a
regular basis detailing the key risks faced by the Group and the
operational controls in place to mitigate those risks; this
document is then reviewed by the Audit Committee. A risk relating
to climate change has been added during the period. Save as set out
below the magnitude of any risks previously identified has not
significantly changed during the period.
Business model
The principal risks outlined below should be viewed in the
context of the Group's business model as a reseller of utility
services (gas, electricity, fixed line telephony, mobile telephony,
broadband and insurance services) under the Utility Warehouse and
TML brands. As a reseller, the Group does not own any of the
network infrastructure required to deliver these services to its
customer base. This means that while the Group is heavily reliant
on third party providers, it is insulated from all the direct risks
associated with owning and/or operating such capital-intensive
infrastructure itself.
The Group is able to secure the wholesale supply of all the
services it offers at competitive rates, enabling it to generate a
consistently fair level of profitability from delivering a great
value bundled proposition to its customers. There is an alignment
of interests between the Group and its wholesale suppliers which
means that it is in the interests of the suppliers to ensure that
the Group remains competitive, driving growth and maximising their
benefit from our complementary route to market. Furthermore, the
group benefits from a structural cost advantage, due to the
multiple revenue streams it receives from customers who take more
than one service-type, and only having one set of overheads. The
Group has alternative sources of wholesale supply should an
existing supplier become uncompetitive or no longer available.
In relation to energy specifically, the Group's wholesale costs
are calculated by reference to a discount to the prevailing
standard variable retail tariffs offered by the 'Big 6' to their
domestic customers (effectively the Government price cap), which
gives the Group considerable visibility over profit margins.
The Group's services are promoted using 'word of mouth' by a
large network of independent Partners, who are paid predominantly
on a commission basis. This means that the Group has limited fixed
costs associated with acquiring new customers.
The principal specific risks arising from the Group's business
model, and the measures taken to mitigate those risks, are set out
below.
Reputational risk
The Group's reputation amongst its customers, suppliers and
Partners is believed to be fundamental to the future success of the
Group. Failure to meet expectations in terms of the services
provided by the Group, the way the Group does business or in the
Group's financial performance could have a material negative impact
on the Group's performance.
In developing new services, and in enhancing current ones,
careful consideration is given to the likely impact of such changes
on existing customers.
In relation to the service provided to its customer base,
reputational risk is principally mitigated through the Group's
recruitment processes, a focus on closely monitoring staff
performance, including the use of direct feedback surveys from
customers (Net Promoter Score), and through the provision of
rigorous staff training.
Responsibility for maintaining effective relationships with
suppliers and Partners rests primarily with the appropriate member
of the Group's senior management team with responsibility for the
relevant area. Any material changes to supplier agreements and
Partner commission arrangements which could impact the Group's
relationships are generally negotiated by the executive directors
and ultimately approved by the full Board.
Information technology risk
The Group is reliant on its in-house developed and supported
systems for the successful operation of its business model. Any
failure in the operation of these systems could negatively impact
service to customers, undermine Partner confidence, and potentially
be damaging to the Group's brand. Application software is developed
and maintained by the Group's Technology team to support the
changing needs of the business using the best 'fit for purpose'
tools and infrastructure. The Technology team is made up of
highly-skilled, motivated and experienced individuals.
Changes made to the systems are prioritised by business, Product
Managers work with their stakeholders to refine application and
systems requirements. They work with the Technology teams
undertaking the change to ensure a proper understanding and
successful outcome. Changes are tested as extensively as reasonably
practicable before deployment. Review and testing are carried out
at various stages of the development by both the Technology team
and the operational department who ultimately take ownership of the
system.
The Group has strategic control over the core customer and
Partner platforms including the software development frameworks and
source code behind these key applications. The Group also uses
strategic third-party vendors to deliver solutions outside of our
core competency. This largely restricts our counterparty risks to
services that can be replaced with alternative vendors if required,
albeit this could lead to temporary disruption to the day-to-day
operations of the business.
Monitoring, backing up and restoring of the software and
underlying data are made on a regular basis. Backups are securely
stored or replicated to different locations. Disaster recovery
facilities are either provided through cloud-based infrastructure
as a service, and in critical cases maintained in a warm standby or
active-active state to mitigate risk in the event of a failure of
the production systems.
Data security risk
The Group processes sensitive personal and commercial data and
in doing so is required by law to protect customer and corporate
information and data, as well as to keep its infrastructure secure.
A breach of security could result in the Group facing prosecution
and fines as well as loss of business from damage to the Group's
reputation. Recovery could be hampered due to any extended period
necessary to identify and recover a loss of sensitive information
and financial losses could arise from fraud and theft. Unplanned
costs could be incurred to restore the Group's security.
The Group has deployed a robust and industry-appropriate
Group-wide layered security strategy, providing effective control
to mitigate the relevant threats and risks. The Group is PCI
compliant and external consultants conduct regular penetration
testing of the Group's internal and external systems and network
infrastructure.
The Information Commissioner's Office ('ICO') upholds
information rights in the public interest and, where required,
companies within the Group are registered as data controllers with
the ICO. If the Group fails to comply with all the relevant
legislation and industry specific regulations concerning data
protection and information security, it could be subject to
enforcement action, significant fines and the potential loss of its
operating licence.
Information security risks are overseen by the Group's
Information Security and Legal & Compliance teams.
Legislative and regulatory risk
The Group is subject to various laws and regulations. The
energy, communications and financial services markets in the UK are
subject to comprehensive operating requirements as defined by the
relevant sector regulators and/or government departments.
Amendments to the regulatory regime could have an impact on the
Group's ability to achieve its financial goals and any material
failure to comply may result in the Group being fined and lead to
reputational damage which could impact the Group's brand and
ability to attract and retain customers. Furthermore, the Group is
obliged to comply with retail supply procedures, amendments to
which could have an impact on operating costs.
The Group is a licensed gas and electricity supplier, and
therefore has a direct regulatory relationship with Ofgem. If the
Group fails to comply with its licence obligations, it could be
subject to fines or to the removal of its respective licences.
The regulatory framework for the UK's energy retail market, as
overseen by Ofgem, is subject to continuous development. Any
regulatory change decision could potentially lead to a significant
impact on the sector, and the net profit margins available to
energy suppliers. The current pace and extent of regulatory change
is more substantial than in previous years. In addition to the
industry-wide programmes of work, such as the rollout of smart
meters, and a growing range of environmental and social
obligations, Ofgem has been implementing a special package of
reform measures. These special reforms have arisen in response to
the 'energy crisis', which emerged in the autumn of 2021 and is
associated with high wholesale energy costs and a consolidation of
competition, with many new-entrant suppliers having ceased trading.
The reforms cover the future of the price cap, assessing suppliers'
financial resilience and compliance performance, and temporary
interventions, in part, to protect suppliers from their financial
exposures to the wholesale market. The Group tracks this changing
landscape closely, to identify risks and opportunities, to prepare
for any subsequent operational changes, and also to input directly
into Ofgem's work.
The Group is also a supplier of telecoms services and therefore
has a direct regulatory relationship with Ofcom. If the Group fails
to comply with its obligations, it could be subject to fines or
lose its ability to operate. The implementation of the European
Electronic Communications Code will result in an increased
regulatory burden and an even stronger Ofcom focus on compliance
monitoring. Regulatory changes to the fixed line and broadband
switching processes for next year are substantial and require
cooperation from all fixed telecom providers. The Group is closely
engaged in the relevant forums and industry groups to both
influence and prepare for the changes.
The Group is authorised and regulated as an insurance broker for
the purposes of providing insurance services to customers by the
Financial Conduct Authority ("FCA"). In addition, the Group holds
consumer credit permissions related to the provision of staff and
Partner loans and hire purchases. If the Group fails to comply with
FCA regulations, it could be exposed to fines and risk losing its
authorised status, severely restricting its ability to offer
insurance services to customers and consumer credit services to
staff and Partners.
Recent regulatory changes relating to insurance pricing and
future expected changes around increased consumer protections could
have a significant impact on the financial services sector as a
whole and will need to be implemented across the business. The
Group is closely monitoring and keeping abreast of these regulatory
developments in order to prepare the business for the upcoming
changes in this sector.
In general, the majority of the Group's services are supplied to
consumers in highly regulated markets, and this could restrict the
operational flexibility of the Group's business. In order to
mitigate this risk, the Group seeks to maintain appropriate
relations with both Ofgem and Ofcom (the UK regulators for the
energy and telecommunications markets respectively), the Department
for Business, Energy and Industrial Strategy ('BEIS'), and the FCA.
The Group engages with officials from all these organisations on a
periodic basis to ensure they are aware of the Group's views when
they are consulting on proposed regulatory changes.
Political and consumer concern over energy prices, broadband
availability and affordability, vulnerable customers and fuel
poverty may lead to further reviews of the energy and telecoms
markets which could result in further consumer protection
legislation being introduced. Political and regulatory developments
affecting the energy and telecoms markets within which the Group
operates may have a material adverse effect on the Group's
business, results of operations and overall financial
condition.
The Group is also aware of and managing the impact of a
developing regulatory landscape in relation to climate change and
the Net Zero transition. We have recently appointed a new Head of
Sustainability role to support us in implementing developments in
relation to the environment and climate change.
To mitigate the risks from failure to comply with legislative
requirements in an increasingly active regulatory landscape, the
Group's Legal & Compliance team has developed and rolled out
robust policies and procedures, undertakes regular training across
the business, continually monitors legal and regulatory
developments and has recently recruited additional members into the
Legal & Compliance team in order to increase available capacity
and expertise.
Financing risk
The Group has debt service obligations which may place operating
and financial restrictions on the Group. This debt could have
adverse consequences insofar as it: (a) requires the Group to
dedicate a proportion of its cash flows from operations to fund
payments in respect of the debt, thereby reducing the flexibility
of the Group to utilise its cash to invest in and/or grow the
business; (b) increases the Group's vulnerability to adverse
general economic and/or industry conditions; (c) may limit the
Group's flexibility in planning for, or reacting to, changes in its
business or the industry in which it operates; (d) may limit the
Group's ability to raise additional debt in the long-term; and (e)
could restrict the Group from making larger strategic acquisitions
or exploiting business opportunities.
Each of these prospective adverse consequences (or a combination
of some or all of them) could result in the potential growth of the
Group being at a slower rate than may otherwise be achieved.
Bad debt risk
The Group has a universal supply obligation in relation to the
provision of energy to domestic customers. This means that although
the Group is entitled to request a reasonable deposit from
potential new customers who are not considered creditworthy, the
Group is obliged to supply domestic energy to everyone who submits
a properly completed application form. Where customers subsequently
fail to pay for the energy they have used, there is likely to be a
considerable delay before the Group is able to control its exposure
to future bad debt from them by either switching their smart meters
to pre-payment mode, installing a pre-payment meter or
disconnecting their supply, and the costs associated with
preventing such customers from increasing their indebtedness are
not always fully recovered.
Bad debt within the telephony industry may arise from customers
using the services, or being provided with a mobile handset,
without intending to pay their supplier. The amounts involved are
generally relatively small as the Group has sophisticated call
traffic monitoring systems to identify material occurrences of
usage fraud. The Group is able to immediately eliminate any further
usage bad debt exposure by disconnecting any telephony service that
demonstrates a suspicious usage profile, or falls into arrears on
payments.
Wholesale price risk
Whilst the Group acts as principal in most of the services it
supplies to customers, the Group does not own or operate any
utility network infrastructure itself, choosing instead to purchase
the capacity needed from third parties. The advantage of this
approach is that the Group is largely protected from technological
risk, capacity risk or the risk of obsolescence, as it can purchase
the precise amount of each service required to meet its customers'
needs.
Whilst there is a theoretical risk that in some of the areas in
which the Group operates it may be unable to secure access to the
necessary infrastructure on commercially attractive terms, in
practice the pricing of access to such infrastructure is typically
either regulated (as in the energy market) or subject to
significant competitive pressures (as in telephony and broadband).
The profile of the Group's customers, the significant quantities of
each service they consume in aggregate, and the Group's clearly
differentiated route to market has historically proven attractive
to infrastructure owners, who compete aggressively to secure a
share of the Group's growing business.
The supply of energy has different risks associated with it. The
wholesale price can be extremely volatile, and customer demand can
be subject to considerable short-term fluctuations depending on the
weather. The Group has a long-standing supply relationship with Eon
(formerly npower) under which the latter assumes the substantive
risks and rewards of buying and hedging energy for the Group's
customers, and where the price paid by the Group to cover
commodity, balancing, transportation, distribution, agreed
metering, regulatory and certain other associated supply costs is
set by reference to the average of the standard variable tariffs
charged by the 'Big 6' to their domestic customers less an agreed
discount, which is set at the start of each quarter; this may not
be competitive against the equivalent supply costs incurred by new
and/or other independent suppliers. However, if the Group did not
have the benefit of this long-term supply agreement it would need
to find alternative means of protecting itself from the pricing
risk of securing access to the necessary energy on the open market
and the costs of balancing.
Competitive risk
The Group operates in highly competitive markets and significant
service innovations by others or increased price competition, could
impact future profit margins and growth rates. In order to maintain
its competitive position, there is a consistent focus on improving
operational efficiency. New service innovations are monitored
closely by senior management and the Group is generally able to
respond within an acceptable timeframe where it is considered
desirable to do so, by sourcing comparable features and benefits
using the infrastructure of its existing suppliers. The increasing
proportion of customers who are benefiting from the genuinely
unique multi-utility solution that is offered by the Group, and
which is unavailable from any other known supplier, further reduces
any competitive threat.
The Directors anticipate that the Group will face continued
competition in the future as new companies enter the market and
alternative technologies and services become available. The Group's
services and expertise may be rendered obsolete or uneconomic by
technological advances or novel approaches developed by one or more
of the Group's competitors. The existing approaches of the Group's
competitors or new approaches or technologies developed by such
competitors may be more effective or affordable than those
available to the Group. There can be no assurance that the Group
will be able to compete successfully with existing or potential
competitors or that competitive factors will not have a material
adverse effect on the Group's business, financial condition or
results of operations. However, as the Group's customer base
continues to rise, competition amongst suppliers of services to the
Group is expected to increase. This has already been evidenced by
various volume-related growth incentives which have been agreed
with some of the Group's largest wholesale suppliers. This should
also ensure that the Group has direct access to new technologies
and services available to the market.
Infrastructure risk
The provision of services to the Group's customers is reliant on
the efficient operation of third party physical infrastructure.
There is a risk of disruption to the supply of services to
customers through any failure in the infrastructure e.g. gas
shortages, power cuts or damage to communications networks.
However, as the infrastructure is generally shared with other
suppliers, any material disruption to the supply of services is
likely to impact a large part of the market as a whole and it is
unlikely that the Group would be disproportionately affected. In
the event of any prolonged disruption isolated to the Group's
principal supplier within a particular market, services required by
customers could in due course be sourced from another provider.
The development of localised energy generation and distribution
technology may lead to increased peer-to-peer energy trading,
thereby reducing the volume of energy provided by nationwide
suppliers. As a nationwide retail supplier, the Group's results
from the sale of energy could therefore be adversely affected.
Similarly, the construction of 'local monopoly' fibre telephony
networks to which the Group's access may be limited as a reseller
could restrict the Group's ability to compete effectively for
customers in certain areas.
Smart meter rollout risk
The Group is in part reliant on third party suppliers to fully
deliver its smart meter rollout programme effectively. In the event
that the Group suffers delays to its smart meter rollout programme
the Group may be in breach of its regulatory obligations and
therefore become subject to fines from Ofgem. In order to mitigate
this risk the Group dual-sources (where practicable) the third
party metering and related equipment they use.
The Group may also be indirectly exposed to reputational damage
and litigation from the risk of technical complications arising
from the installation of smart meters or other acts or omissions of
meter operators, e.g. the escape of gas in a customer's property
causing injury or death. The Group mitigates this risk through
using established reputable third party suppliers.
Energy industry estimation risk
A significant degree of estimation is required in order to
determine the actual level of energy used by customers and hence
that should be recognised by the Group as sales. There is an
inherent risk that the estimation routines used by the Group do not
in all instances fully reflect the actual usage of customers.
However, this risk is mitigated by the relatively high proportion
of customers who provide meter readings on a periodic basis, and
the high level of penetration the Group has achieved in its
installed base of smart meters.
Gas leakage within the national gas distribution network
The operational management of the national gas distribution
network is outside the control of the Group, and in common with all
other licensed domestic gas suppliers the Group is responsible for
meeting its pro-rata share of the total leakage cost. There is a
risk that the level of leakage in future could be higher than
historically experienced, and above the level currently
expected.
Acquisition risk
The Group may invest in other businesses, taking a minority,
majority or 100% equity shareholding, or through a joint venture
partnership. Such investments may not deliver the anticipated
returns, and may require additional funding in future. This risk is
mitigated through conducting appropriate pre-acquisition due
diligence where relevant.
Virus outbreak risk
In the event of a disease or virus outbreak (or different
variants of an existing disease or virus emerging) which are
resistant to vaccinations and/or treatments, and which causes
serious incapacity amongst those infected, the Company faces a
number of risks including: (i) staff may be unable to attend their
normal place of work and fulfil their normal duties due to falling
ill or being required to self-isolate (either due to exposure to
carriers of the virus/disease, or to reduce the likelihood of being
so exposed); (ii) the Company may be required to shut Network HQ to
prevent transmission of the virus/disease in the workplace; (iii)
the efficiency of our operations may be reduced; (iv) we may be
unable to recruit and train new members of staff; (v) customers may
find it more difficult to contact the company; (vi) we may be
unable to resolve faults and challenges faced by customers which
require a visit to their home or other engineering works to be
carried out; (vii) customers may stop paying their bills, or we may
be required by the Government to offer payment holidays to
customers in respect of their utilities (in a similar fashion to
the mortgage payment provisions), putting pressure on the Company's
working capital; (viii) we may be restricted from carrying out
normal debt enforcement procedures including suspension of
telephony services and installation of smart meters; (ix) the
Company's Partners may find it more difficult to grow their
businesses during a period when restrictions on movement are
imposed by the Government; (x) we may be unable to visit customers'
homes to install smart meters; (xi) the various providers of third
party infrastructure used to supply our services may be unable to
cope with the increased demands placed upon them; and (xii) churn
could increase during periods when customers are isolated at
home.
These are mitigated by: (i) the Company has proven technology to
enable most employees to carry out their duties remotely; (ii) the
demographic mix of our customer base is heavily skewed towards
homeowners and older/retired customers; this means we are
significantly less exposed to payment issues than most other
providers of similar services; (iii) the Company has a strong
balance sheet with modest gearing, and access to significant,
recently refinanced, additional debt facilities (if required) to
cover any temporary pressure on working capital; in extremis, these
could be enhanced by a temporary suspension of the dividend; (iv)
the Company has developed tools which are now in widespread use,
enabling Partners to sign-up new customers, recruit new Partners,
and to help existing Partners support new Partners remotely to
teach them how to build their own successful UW business; and (v)
the wide range of services provided to customers gives us
significant resilience from a revenue and profit perspective
against an external event which affects any individual revenue
stream.
Climate change risk
Climate change has the potential to significantly impact the
future of our planet. Everyone has a role to play in reducing the
effects of harmful GHG emissions in our atmosphere and ensuring
that we meet a 1.5degC target in line with the Paris Agreement. No
business is immune from the risks associated with climate change as
it acts as a driver of other risks and affects government
decision-making, consumer demand and supply chains. In recognition
of this, the Group has designated climate change as a standalone
principal risk for our business and has assigned the Legal &
Compliance Director as the owner for managing climate change
risk.
We are committed to implementing the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD) and this
year, we have made our first set of disclosures consistent with the
TCFD framework in our 2022 Annual Report including our
considerations of the specific risk implications to the Group
arising from climate change.
We are developing our metrics and planning our targets to
achieve Net Zero by 2040 in line with SBTi. To assist with this, we
are working with third parties and have invested in software to
develop and manage progress against our targets.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2022
Note 2022 2021
GBP'000 GBP'000
Revenue 1 967,433 861,204
Cost of sales (778,958) (688,104)
---------- ----------
Gross profit 188,475 173,100
Distribution expenses (29,686) (27,849)
Administrative expenses (84,423) (76,820)
Share incentive scheme charges (960) (1,377)
Amortisation of energy supply contract
intangible (11,228) (11,228)
Total administrative expenses (96,611) (89,425)
Impairment loss on trade receivables (11,566) (11,213)
Impairment of goodwill (1,536) -
Other income 1,844 1,175
---------- ----------
Operating profit 50,920 45,788
Financial income 136 84
Financial expenses (2,709) (2,358)
---------- ----------
Net financial expense (2,573) (2,274)
Loss on disposal of subsidiary (1,139) -
Profit before taxation 47,208 43,514
Taxation (12,205) (10,955)
Profit for the period 35,003 32,559
Profit and other comprehensive income for
the year attributable to owners of the
parent 35,467 32,577
Loss for the year attributable to non-controlling
interest (464) (18)
Profit for the period 35,003 32,559
---------- ----------
Basic earnings per share 3 45.1p 41.5p
---------- ----------
Diluted earnings per share 3 45.0p 41.4p
---------- ----------
Consolidated Balance Sheet
As at 31 March 2022
Assets 2022 2021*
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 26,180 34,865
Investment property 8,345 8,575
Intangible assets 152,418 160,626
Goodwill 3,742 5,324
Other non-current assets 32,855 28,595
--------- ---------
Total non-current assets 223,540 237,985
--------- ---------
Current assets
Inventories 4,152 6,325
Trade and other receivables 50,463 51,666
Current tax receivable - 726
Accrued income 134,917 120,395
Prepayments 4,077 4,809
Costs to obtain contracts 15,151 15,702
Cash 29,647 25,056
Assets classified as held for sale 3,838 -
--------- ---------
Total current assets 242,245 224,679
--------- ---------
Total assets 465,785 462,664
--------- ---------
Current liabilities
Trade and other payables (38,101) (30,374)
Accrued expenses and deferred income (113,493) (122,295)
Current tax payable (8) -
Liabilities classified as held for sale (7,551) -
--------- ---------
Total current liabilities (159,153) (152,669)
--------- ---------
Non-current liabilities
Long term borrowings (99,215) (89,376)
Lease liabilities (766) (7,096)
Deferred tax (1,078) (1,145)
Total non-current liabilities (101,059) (97,617)
Total assets less total liabilities 205,573 212,378
--------- ---------
Equity attributable to equity holders
of the parent
Share capital 3,982 3,970
Share premium 147,112 145,094
Capital redemption reserve 107 107
Treasury shares (5,502) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 61,935 70,306
--------- ---------
206,484 212,825
Non-controlling interest (911) (447)
--------- ---------
Total equity 205,573 212,378
--------- ---------
* The presentation of the balance sheet has been re-stated to
reclassify the Costs to obtain contracts on the face of the
statement, previously these were included in Trade and other
receivables and Prepayments (refer to the Presentation of financial
statements section of the Notes to the consolidated financial
statements in the Annual Report).
Consolidated Cash Flow Statement
For the year ended 31 March 2022
2022 2021
GBP'000 GBP'000
Operating activities
Profit before taxation 47,208 43,514
Adjustments for:
Net financial expense 2,573 2,274
Impairment of goodwill 1,536 -
Loss on disposal of subsidiary 1,139 -
Depreciation of property, plant and equipment 4,558 4,731
Profit on disposal of fixed assets (940) (47)
Amortisation of intangible assets 15,786 14,550
Amortisation of debt arrangement fees 436 356
Decrease/(increase) in inventories 2,173 (1,694)
Increase in trade and other receivables (including
Costs to obtain contracts) (18,750) (6,713)
Increase/(decrease) in trade and other payables 6,144 (4,046)
Share incentive scheme charges 960 1,377
Corporation tax paid (11,528) (10,945)
-------- --------
Net cash flow from operating activities 51,295 43,357
-------- --------
Investing activities
Purchase of property, plant and equipment (2,196) (2,582)
Purchase of intangible assets (7,747) (7,457)
Disposal of property, plant and equipment 1,567 100
Interest received 136 98
Cash flow from investing activities (8,240) (9,841)
-------- --------
Financing activities
Dividends paid (44,787) (44,708)
Interest paid (2,630) (2,002)
Interest paid on lease liabilities (238) (246)
Drawdown of long term borrowing facilities 65,000 30,000
Repayment of long term borrowing facilities (55,000) (35,000)
Fees associated with borrowing facilities (597) -
Repayment of lease liabilities (1,530) (1,321)
Issue of new ordinary shares 2,032 1,206
Cancellation of B shares in subsidiary (2) -
Cash flow from financing activities (37,752) (52,071)
-------- --------
Increase/(decrease) in cash and cash equivalents 5,303 (18,555)
Net cash and cash equivalents at the beginning
of the year 25,056 43,611
-------- --------
Net cash and cash equivalents at the year end 30,359 25,056
-------- --------
Cash and cash equivalents per balance sheet 29,647 25,056
Cash and cash equivalents included within assets
classified as held for sale 712 -
-------- --------
Net cash and cash equivalents at the year end 30,359 25,056
-------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Capital Non-controlling
Share Share redemption Treasury JSOP Retained interest
capital premium reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 April
2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
Profit and total
comprehensive income - - - - - 32,577 (18) 32,559
Dividends - - - - - (44,708) - (44,708)
Credit arising on
share options - - - - - 1,377 - 1,377
Deferred tax on share
options - - - - - (8) - (8)
Issue of new ordinary
shares 8 1,198 - - - - - 1,206
Balance at 31 March
2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
-------- -------- ----------- ---------- --------- --------- --------------- --------
Balance at 1 April
2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
Profit and total
comprehensive income - - - - - 35,467 (464) 35,003
Dividends - - - - - (44,787) - (44,787)
Credit arising on
share options - - - - - 960 - 960
Deferred tax on share
options - - - - - (11) - (11)
Issue of new ordinary
shares 14 2,018 - - - - - 2,032
Cancellation of B
shares in subsidiary (2) - - - - - - (2)
Balance at 31 March
2022 3,982 147,112 107 (5,502) (1,150) 61,935 (911) 205,573
-------- -------- ----------- ---------- --------- --------- --------------- --------
Notes
1. Revenue
Revenue by service
2022 2021
GBP'000 GBP'000
Electricity 450,544 391,813
Gas 295,696 248,008
Fixed communications 129,703 132,241
Mobile 44,673 40,580
Other 46,817 48,562
967,433 861,204
------- -------
The Group operates solely in the United Kingdom.
2. Alternative performance measures
In order to provide a clearer presentation of the underlying
performance of the group, adjusted profit before tax and adjusted
basic EPS exclude share incentive scheme charges and the
amortisation of the intangible asset arising from entering into the
energy supply arrangements with npower in December 2013; this
decision reflects both the relative size and non-cash nature of
these charges. The loss for the period attributable to the
non-controlling interest is excluded as these losses are not
attributable to shareholders of the Company. In FY22 adjusted
profit before tax also excludes: (i) the loss on the disposal of
UWHS, (ii) the write-off of goodwill associated with the
conditional disposal of Glow Green; and (iii) the profit on
disposal of a freehold property; this decision reflects the one-off
non-operating nature of these items.
2022 2021
GBP'000 GBP'000
Statutory profit before tax 47,208 43,514
Adjusted for:
Loss for period attributable to non-controlling
interest 464 18
Amortisation of energy supply contract intangible
assets 11,228 11,228
Share incentive scheme charges 960 1,377
Loss on disposal of subsidiary - UWHS 1,139 -
Impairment of goodwill - Glow Green 1,536 -
Profit on sale of freehold property (603) -
Adjusted profit before tax 61,932 56,137
------- -------
3. Earnings per share
The calculation of basic and diluted earnings per share ("EPS")
is based on the following data:
2022 2021
GBP'000 GBP'000
Earnings for the purpose of basic and
diluted EPS 35,467 32,577
Share incentive scheme charges (net of
tax) 793 1,194
Amortisation of energy supply contract
intangible assets 11,228 11,228
Loss on disposal of subsidiary - UWHS 1,139 -
Impairment of goodwill - Glow Green 1,536 -
Profit on disposal of freehold office
building (net of tax) (488) -
--------- ---------
Earnings excluding share incentive scheme
charges and amortisation of intangibles
for the purpose of adjusted basic and
diluted EPS 49,675 44,999
--------- ---------
Number Number
('000s) ('000s)
Weighted average number of ordinary shares
for the purpose of basic EPS 78,601 78,433
Effect of dilutive potential ordinary
shares (share incentive awards) 286 273
--------- ---------
Weighted average number of ordinary shares
for the purpose of diluted EPS 78,887 78,706
Adjusted basic EPS [1] 63.2p 57.4p
Basic EPS 45.1p 41.5p
Adjusted diluted EPS1 63.0p 57.2p
Diluted EPS 45.0p 41.4p
It has been deemed appropriate to present the analysis of
adjusted EPS excluding share incentive scheme charges due to the
relative size and historical volatility of the charges. In view of
the size and nature of the charge as a non-cash item the
amortisation of intangible assets arising from the energy supply
agreement with npower has also been adjusted.
4. Dividends
2022 2021
GBP'000 GBP'000
Prior year final paid 30p (2021: 30p) per
share 23,559 23,524
Interim paid 27p (2021: 27p) per share 21,228 21,184
-------- --------
The Directors have proposed a final dividend of 30p per ordinary
share totalling approximately GBP23.6 million, payable on 5 August
2022, to shareholders on the register at the close of business on
15 July 2022. In accordance with the Group's accounting policies
the dividend has not been included as a liability as at 31 March
2022. This dividend will be subject to income tax at each
recipient's individual marginal income tax rate.
5. Related parties
Identity of related parties
The Company has related party relationships with its
subsidiaries and with its directors and executive officers. Related
party transactions are conducted on an arm's length basis.
Transactions with key management personnel
Directors of the Company and their immediate relatives control
approximately 16.3% of the voting shares of the Company. No other
employees are considered to meet the definition of key management
personnel other than those disclosed in the Directors' Remuneration
Report.
Details of the total remuneration paid to the directors of the
Company as key management personnel for qualifying services are set
out below:
2022 2021
GBP'000 GBP'000
Short-term employee benefits 3,200 2,882
Deferred shares bonus 443 383
Social security costs 428 386
Post-employment benefits 12 11
4,083 3,662
Share incentive scheme charges 42 139
------- -------
4,125 3,801
------- -------
During the year, the Group acquired goods and services worth
GBPNil (2021: GBPNil) from companies in which directors have a
beneficial interest. No amounts were owed to these companies by the
Group as at 31 March 2022. During the year, the Group sold goods
and services worth GBPNil (2021: GBPNil) to companies in which
directors have a beneficial interest.
During the year directors purchased goods and services on behalf
of the Group worth GBP306,000 (2021: GBP145,000). The directors
were fully reimbursed for the purchases and no amounts were owing
to the directors by the Group as at 31 March 2022. During the year
the directors purchased goods and services from the Group worth
approximately GBP28,000 (2021: GBP27,000) and persons closely
connected with the directors earned commissions as Partners for the
Group of approximately GBP6,000 (2021: GBP7,000).
As set out in note 6, the Group has agreed to sell, subject to
the necessary FCA change of control approval, its 75% interests in
Glow Green Limited and Cofield Limited to Executive Chairman
Charles Wigoder.
Subsidiary companies
During the year ended 31 March 2022, the Company purchased goods
and services from the subsidiaries in the amount of GBP96,000
(2021: GBP153,000 purchased by the Company from the
subsidiaries).
During the year ended 31 March 2022 the Company also received
distributions from subsidiaries of GBP50,000,000 (2021:
GBP50,000,000). At 31 March 2022 the Company owed the subsidiaries
GBP55,257,000 which is recognised within trade payables (2021:
GBP61,204,000 owed by the Company to the subsidiaries).
6. Disposals
The Group disposed of its shareholding in UW Home Services
Limited ("UWHS") on 31 March 2022 for consideration of GBP1 to
Lowri Beck Holdings Limited, a specialist meter operator owned by
the Calisen Group. The net assets of UWHS at the point of disposal
were GBP1.1m and the loss on disposal for the Group was GBP1.1m.
This has been shown in a separate line on the face of the
Consolidated Statement of Comprehensive Income.
The Group has also agreed to sell, subject to the necessary FCA
change of control approval, its 75% shareholdings in Glow Green
Limited and Cofield Limited ("Glow Green") for cash consideration
of GBP1 to Charles Wigoder, Executive Chairman of the Group.
Since acquiring Glow Green in 2018, the business has been
consistently loss-making; this has contributed to a cumulative
funding requirement of over GBP6m that will remain with Glow Green
as a debt to the Group and be repaid over time. The repayment of
the loan has been personally guaranteed by Charles Wigoder. The
Board believe that the disposal of Glow Green is in the best
interests of the Group given the significant management resource it
would otherwise require, particularly at a time when the growth
opportunities within the core business are so exciting.
As a smaller related party transaction, this disposal fell
within the requirements of section 11.1.10R of the Listing Rules
and the Board obtained written confirmation from its sponsor that
the terms of the proposed transaction were fair and reasonable as
far as the shareholders of the Group are concerned. In the light of
the consideration level the goodwill associated with Glow Green of
GBP1.5m has been impaired in the current period. This has been
reflected in the goodwill impairment line in the Consolidated
Statement of Comprehensive Income.
The assets and liabilities of Glow Green have been reclassified
as held for sale on the balance sheet. A summary of these assets
and liabilities is shown below.
2022 2021
GBP'000 GBP'000
Assets classified as held for sale
Property, plant and equipment 673 -
Inventories 934 -
Trade and other receivables 1,519 -
Cash and cash equivalents 712
------- -------
3,838 -
------- -------
Liabilities classified as held for sale
Trade and other payables (7,064) -
Accrued expenses and deferred income (101) -
Finance lease liabilities (386) -
------- -------
(7,551) -
------- -------
7. Basis of preparation
The financial information set out above does not constitute the
Group's statutory information for the years ended 31 March 2022 or
2021, but is derived from those accounts. The Group's consolidated
financial information has been prepared in accordance with
accounting policies consistent with those adopted for the year
ended 31 March 2021 . Statutory accounts for 2021 have been
delivered to the Registrar of Companies and those for 2022 will be
delivered following the Company's annual general meeting. The
auditor has reported on these accounts, their reports were
unqualified and did not contain statements under the Companies Act
2006, s498(2) or (3).
8. Directors' responsibility statement
The directors confirm, to the best of their knowledge:
(a) the financial statements, prepared in accordance with
UK-adopted international accounting standards in conformity with
the requirements of the Companies Act 2006, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Group and the undertakings included in the
consolidation taken as a whole; and
(b) the Chairman's Statement, Co-Chief Executives' Review,
Financial Review and Principal Risks and Uncertainties include a
fair review of the development and performance of the business and
the position of the Group and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The directors of Telecom Plus PLC and their functions are listed
below:
Charles Wigoder - Executive Chairman
Andrew Lindsay - Co-Chief Executive Officer
Stuart Burnett - Co-Chief Executive Officer
Nick Schoenfeld - Chief Financial Officer
Beatrice Hollond - Senior Non Executive Director
Andrew Blowers - Non Executive Director
Melvin Lawson - Non Executive Director
Julian Schild - Non Executive Director
Suzi Williams - Non Executive Director
By order of the Board
[1] Adjusted basic and diluted EPS exclude share incentive
scheme charges and the amortisation of the intangible asset
recognised as a result of the new energy supply arrangements
entered into with npower in December 2013.
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END
FR EAPKEADEAEFA
(END) Dow Jones Newswires
June 21, 2022 02:00 ET (06:00 GMT)
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