TIDMTEP
RNS Number : 9655D
Telecom Plus PLC
27 June 2023
Embargoed until 07.00 27 June 2023
Telecom Plus PLC
Final Results for the year ended 31 March 2023
"An exceptional performance with record revenues, profits and
customer growth"
Telecom Plus PLC (trading as Utility Warehouse and UW), the UK's
only supplier of bundled household utility services, today issues
its final results for the year ended 31 March 2023.
Financial Highlights
-- Revenues increased to GBP2,475.2 million (2022: GBP967.4m)
-- Adjusted pre-tax profit up 55% to GBP96.2 million (2022: GBP61.9m)
-- Adjusted EPS up 57% to 99.2p (2022: 63.2p)
-- Statutory pre-tax profit up 81% to GBP85.5 million (2022: GBP47.2m)
-- Statutory EPS up 92% to 86.6p (2022: 45.1p)
-- Full year dividend of 80p (2022: 57p) per share
Operational Highlights
-- Record organic growth
-- 22% increase in customers, taking our total base to 886,579 (2022: 728,680)
-- 24% increase in number of services supplied to 2.8 million (2022: 2.3 million)
-- Sustainable multiservice cost advantage enabled us to save
our customers over GBP30m on their energy bills alone during the
year
-- Insurance business more than doubled to over 100,000 policies
-- Ranked top supplier in Uswitch Energy Awards for 'Best
Customer Service' and 'Most Likely to Recommend'; 3rd in Which?
Broadband Satisfaction survey
-- 25% increase in Partner numbers to almost 60,000 (2022:
48,000) reflecting ongoing strong interest in our income
opportunity as cost of living pressures continue to be felt by UK
households
Outlook
-- Comfortable double-digit annual percentage customer growth,
leading to a broadly corresponding increase in adjusted pre-tax
profits
-- Ongoing investment in our services, people and technology
with new specialist customer support hubs in Burnley and
Selkirk
-- Positioned to scale our insurance business with establishment of in-house broker and insurer
Andrew Lindsay & Stuart Burnett, Co-CEOs, said:
"This has been an outstanding year for the company: the
fundamental strengths of our business model have reasserted
themselves and delivered a strong outcome for all our stakeholders
- particularly for our customers who benefitted from the lowest
energy prices in the country throughout the year, saving over
GBP30m on their bills.
The recent fall in the Ofgem Price Cap is welcome news for UK
households, although energy prices remain substantially above
historical levels. When this challenge is combined with reduced
government support, rising mortgage costs and continuing high
inflation, the need for households to make savings across all their
essential utilities has never assumed such high importance. As the
UK's only multiservice utility provider, UW remains uniquely
positioned to help households to do exactly that, and we have seen
a strong start to the current year, with recent customer growth
putting us firmly on track to meet our goals.
However, we seek to go further than simply helping customers to
save time and money on their household bills: through the UW
Partner opportunity, thousands of people across the UK are earning
a much-needed additional income every month. We expect the ongoing
pressure on household budgets to continue to drive significant
growth in the number of Partners recommending our market-leading
services to their friends and family.
This unique combination of offering consumers both meaningful
savings and additional earnings in the current economic environment
underpins our target of welcoming an additional million customers
to UW over the medium term."
There will be a virtual meeting for analysts today at 9.00am.
Please contact CEN Advisory at: julian@cenadvisory.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
For investor relations:
CEN Advisory
Julian Wais
07720 999764
For media relations:
Lansons Communications LLP
Tom Baldock / Ed Hooper 07860 101715 / 07783387713
utilitywarehouse@lansons.com
About Telecom Plus PLC ("Telecom Plus"):
Telecom Plus, which owns and operates Utility Warehouse (UW), is
the UK's leading multiservice utility provider, offering bundled
household services - energy, broadband, mobile and insurance -
through one account.
Customers benefit from the convenience of a single monthly bill,
consistently good value across all their utilities and exceptional
levels of service.
Customers sign up through a network of local UW Partners all
across the country. These Partners recommend UW's services to
friends, family and people they know by word of mouth.
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 an exceptional performance during FY23
with record revenues, record profits, and record organic growth in
both customer and service numbers.
Adjusted pre-tax profits increased by 55% to GBP96.2m (2022:
GBP61.9m) reflecting both the strong double-digit growth we
achieved in our customer and service numbers over the last 18
months, and the significant rises in the Ofgem Energy Price Cap
over the period, partially offset by extra growth related costs and
an increase in the value of the energy savings we gave our
customers to a record level of over GBP30m.
Revenues grew by more than GBP1.5bn to GBP2,475.2m (2022:
GBP967.4m) reflecting both the strong organic growth achieved in
customer and service numbers, and the impact from progressively
higher energy prices during the year.
Adjusted earnings per share for the year rose by 57% to 99.2p
(2022: 63.2p). Statutory pre-tax profits rose by 81% to GBP85.5m
(2022: GBP47.2m), and statutory EPS rose by 92% to 86.6p (2022:
45.1p).
We comfortably exceeded our internal growth targets for the
year, with customer numbers increasing by 157,899 (2022: 71,269) to
886,579 and service numbers rising by 533,239 (2022: 191,112) to
2,798,148. The difference between our growth in service numbers of
23.5% and customer numbers of 21.7% demonstrates the strong appeal
of our differentiated bundled proposition, even during a year when
energy prices dominated the domestic media agenda.
Our strong customer demographic (skewing towards multiservice
homeowners), competitive market positioning (where we are
consistently offering the UK's lowest energy prices to both new and
existing customers), and limited appetite amongst other suppliers
to attract new customers during a period of rising prices, resulted
in our energy customer churn for the year remaining below 3%,
although in recent months it has ticked up modestly to around 5% on
an annualised basis.
Interest in the income opportunity we offer to our Partners
continued to grow, particularly during the second half, reflecting
increased levels of confidence in recommending the UW customer
proposition and the growing demand for an additional income as the
cost of living continued to rise. This resulted in total Partner
numbers increasing to almost 60,000 by the end of the year.
I am exceptionally proud of the vital roles played by everyone
in our business, in enabling us to deliver this record Company
performance, against a background of repeated sizeable increases in
the cost of energy alongside considerable government and regulatory
intervention. To have been ranked as top supplier during such a
challenging period by USwitch in their 2022 Energy Awards for 'Best
Customer Service' and 'Most Likely to Recommend' is a huge
achievement, and testament to both the value we offer and the
considerable efforts by all of our teams to deliver the best
possible customer service.
In addition to supporting our customers with the UK's cheapest
energy throughout this challenging period, we also supported our
employees in managing the rising costs that they themselves were
facing, by providing them with GBP800 in one-off payments over the
winter, and a company-wide CPI-linked 10.1% increase in salary from
1 April 2023.
Sustainability
Our people and the communities we serve are at the heart of our
strategy. As a Company, we are culturally very focussed on our
sustainability as a business - not just in our approach to building
long-term relationships with our customers and Partners and
supporting our employees, but also ensuring that we are doing
business responsibly and considering our wider impact on the
environment around us and supporting the UK's transition to net
zero. I am pleased with the further progress we have made this year
towards improving our sustainability, in particular by having
delivered on our commitment to publish a net zero transition plan
and to further develop our Climate-related Financial
Disclosures.
A s families across the UK continue to face high inflation and a
rising cost of living, we are very proud of the role we play in
helping our customers and Partners navigate those challenges: by
sharing the benefits we derive as an integrated multiservice
supplier with our customers by giving them sustainable long-term
savings on their essential household services. Our Partner
opportunity offers hard-working people, from all walks of life, the
ability to earn an additional income to help offset the rising cost
of living.
Looking ahead, our FY24 ESG objectives demonstrate the Company's
continued commitment to improving its sustainability and I look
forward to delivering further progress over the year ahead.
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
Non-Executive Chairman, is to provide strong leadership to enable
the Board to operate effectively.
We believe that open and rigorous debate around key strategic
issues, risks and opportunities 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.
Dividend and Capital Allocation
The Company continues to be highly cash generative whilst
delivering rapid growth. We are proposing a final dividend of 46p
(2022: 30p), bringing the total for the year to 80p (2022: 57p).
This will be paid on 11 August 2023 to shareholders on the register
at the close of business on 21 July 2023 subject to approval by
shareholders at the Company's AGM which will be held on 4 August
2023.
The Board adopts a disciplined approach to the allocation of
capital, with the overriding objective being to enhance long-term
shareholder value. Our primary objective when allocating capital is
to fund sustainable organic growth. Beyond that we have followed a
long-standing progressive dividend policy in order to return
surplus capital to our shareholders.
Going forward, the Board intends to also consider the
appropriateness of using surplus cash to return capital to
shareholders through share buy backs, any such amounts being
determined by what is available after funding organic growth,
modestly growing our current dividend payout, and maintaining an
appropriate level of gearing.
Outlook
As the only fully-integrated supplier in the UK spanning four
essential household markets (energy, broadband, mobile and
insurance), our one-stop-shop proposition delivers long-term
savings funded by the inherent efficiency of our bundled
multiservice proposition, and has significant and growing appeal.
It gives us a sustainable cost advantage which sets us apart from
our competitors who are focussed on each individual market: and
with 97 out of every 100 UK households taking their essential home
services from one of these other suppliers, our organic growth
opportunity has barely been tapped.
Since autumn 2021 we have grown our customer numbers at an
annualised compound rate of over 20%, spanning a period during
which energy commodity prices rose strongly for the first 12
months, before falling sharply over the subsequent and most recent
eight month period. That we have been able to deliver such strong
double-digit growth during both a rising and falling environment
for energy prices gives us considerable confidence in our ability
to continue doing so in future.
The strength of our competitive position is further supported by
the more responsible regulatory environment in which demanding new
capital adequacy requirements are being imposed upon suppliers, and
the low regulatory margin allowed on energy which makes it
extremely challenging for any standalone energy supplier to sell
below the level of the price cap and earn an acceptable return on
capital - something we have uniquely and consistently done
throughout the current cost of living crisis and anticipate
continuing to do in future.
There was a marginal increase in customer churn towards the end
of the year as we saw a number of suppliers tentatively re-starting
their customer retention programmes, but there has yet to be any
meaningful return to proactive customer acquisition activity -
reflecting the regulatory focus on ensuring a sustainable retail
energy marketplace, the ongoing impact of the Ofgem Market
Stabilisation charge, and the low margins available to energy
suppliers.
The welcome fall in the Ofgem Price Cap to GBP2,074 creates a
modest headwind for us over the coming year in terms of lowering
our average revenue per customer, and potentially reducing the
feeling of urgency amongst people to switch their supplier.
However, in a more stable retail market, and with energy prices
looking likely to remain at around these levels for the foreseeable
future, we are confident that our unique multiservice proposition
will continue to underpin our competitive position and support
further strong organic growth.
We remain focussed on our target of welcoming an additional one
million customers to UW, with the following medium-term internal
base case planning assumptions:
-- annual percentage customer growth is expected to remain
comfortably in double-digits, albeit below the record level we
achieved last year
-- adjusted pre-tax profits are expected to increase broadly in line with customer growth
-- excess capital will be returned to shareholders through a
combination of modestly increasing dividends and share buy-backs,
as deemed appropriate.
Both our people and our technology are vital to delivering an
exceptional UW experience to our customers, and as we scale, we
continue to invest heavily in strengthening our teams at all
levels, and evolving and improving our systems. As we increase the
size of our team in response to the ongoing rapid growth in the
number of customers we support, a key area of focus for the year
ahead is to codify our distinct UW culture and embed it throughout
our increasingly widespread employee base.
It has been exciting to see our Partners once again
demonstrating their ability to recommend our strong and
differentiated consumer proposition to a record number of
households, delivering significant and high quality organic growth.
With UK households facing continuing challenges and uncertainties
over the coming year, particularly for those coming to the end of a
cheap fixed-rate period on their mortgage, we anticipate that
demand from new Partners joining UW to earn an additional income
will remain strong.
I would like to thank my boardroom colleagues for their support
and all our staff and Partners for their energy, drive and hard
work through a challenging but exciting year of growth, and the
contribution they are making to the ongoing strong performance of
the business.
The last twelve months have put us firmly on track to achieve
our medium-term target of welcoming an additional one million
customers to UW, and we look forward to making significant further
progress over the year ahead.
Charles Wigoder
Non-Executive Chairman
27 June 2023
Co-Chief Executives' Review
The year in summary: meeting consumer demand through
multiservice bundles
Throughout our 25-year history, we have consistently helped UK
households reduce the cost and hassle of running their homes. And
2023 was no different. As the rising cost of living has been felt
by the nation, we have helped families bolster their finances
through savings on their home services and earnings through the UW
Partner opportunity. This has resulted in a year of record growth
for the business, as we remain on track to deliver our medium-term
goal of welcoming one million additional customers to UW.
2023 marked the first full year since sustainable pricing
practices returned to the energy market. And with the return to a
rational marketplace our business model has demonstrated its
strength.
During the financial year, our multiservice bundles have
provided real value to UW customers across all their home services,
not only in delivering over GBP30 million of savings on their
energy bills, but also a further GBP8m of Cashback card savings.
The demonstrable ongoing value that we offer households on services
they were previously buying from other suppliers is a clear ongoing
driver of our growth and was a key factor in attracting nearly
160,000 net additional customers during the year.
Whilst the dynamics in each of our markets constantly vary, we
continually focus our efforts on strengthening our core
multiservice customer proposition and supporting our Partner
community.
In the immediate aftermath of the energy crisis and following
the failure of around 30 suppliers in autumn 2021, we experienced a
marked increase in the proportion of new customers applying for
just energy services from UW. To address this, we simplified our
application journey, incorporated insurance into our multiservice
bundles, and introduced tiered savings 'Boosts' to encourage
multiservice take up amongst new customers. These initiatives have
yielded strong results, particularly during a year in which there
was near constant media coverage of high energy prices, with the
growth in the number of services we supply (+24%) pleasingly
outstripping the strong underlying growth in customers (+22%)
during the year.
By integrating insurance into our multiservice bundles in April
2022, we made this service part of our core proposition, and saw an
immediate acceleration in the rate of take up by new customers,
leading to an increase in the number of policies from 44,834 to
100,590 over the course of the year. This is an encouraging trend
for our future multiservice growth strategy.
As confidence in the strength of our customer proposition
progressively increased amongst our Partners, and as interest in
the income opportunity we offer grew in response to the rising cost
of living faced by UK households, we saw more and more people
turning to UW to bolster their incomes. The total number of UW
Partners increased by over 25% during the year, reaching almost
60,000 for the first time. This reflects the appeal of our income
opportunity in the current economic climate, and underpins the
sustainability of our current high-quality growth with our Partners
continuing to demonstrate their unique capability to introduce
high-value customers (i.e. multiservice homeowners) to UW in
significant volumes.
Rather than seeking growth at any cost, we take pride in the
consistent disciplined approach we have adopted to building a
long-term, sustainable business. In a year characterised by the
demands of rapid customer growth, inflated levels of contact from
our customers in response to high energy prices, and unprecedented
regulatory and Government intervention, we have concentrated our
efforts on delivering our three key business priorities:
-- Building a great culture and environment for our people
-- Looking after our customers as we grow
-- Maximising high-quality customer growth
Through focussing all our people on these priorities, we are
pleased to have made significant progress on each front:
-- increasing our employee Net Promoter Score (eNPS) to +39
-- increasing our post-contact Customer Effort Score (CES), that
measures the ease with which customers can use our services,
resolve a support issue, or find the information they need, by 19%
to 75 in March 2023
-- delivering a 20% improvement in the proportion of new
customers taking a multiservice bundle.
All of these have contributed to our double-digit organic growth
for the year and lay the foundation for further progress in the
years ahead.
This is an exciting time for the business. After several years
of modest progress, we saw a return to strong growth in autumn
2021, which continued throughout last year. This demonstrates our
ability to respond to the challenges created by rapid customer
growth and strengthens our confidence in successfully scaling the
company over the medium term.
As we look at the external macro-economic environment around us,
it seems clear that demand will remain high for the sustainable
savings we offer our multiservice customers, and for the meaningful
additional income opportunity we provide our Partners. And with 97
out of 100 UK households not yet with UW, there is scope for
considerable further growth ahead.
Looking ahead, we are confident in delivering profitable
double-digit % annual growth as we progress towards our medium-term
goal of welcoming an additional one million customers to UW.
A unique business model in the UK - Our sustainable cost
advantage
As the UK's only multiservice utility provider, we receive
revenue streams from each of the services we supply to our
customers, which we manage with a single set of central overheads.
This gives us significant operating efficiencies relative to our
competitors in each of our markets, and creates a sustainable,
structural cost advantage.
This ongoing cost advantage enables us to price competitively
across each of the individual services we supply, bundling them
together into a unique multiservice proposition.
By bundling their home services together, UW customers receive
sustainable long-term savings and the simplicity of a single
monthly bill, whilst being supported by our award-winning customer
services team.
This differentiated UW experience delivers market-leading levels
of customer loyalty and creates a highly referable proposition that
we harness through the most powerful form of marketing being -
word-of-mouth.
This word-of-mouth marketing, led by our community of UW
Partners, is the key to unlocking high levels of multiservice
take-up by new customers, which in turn, strengthens our structural
cost advantage.
This self-reinforcing cycle is the core of our business
model.
Bundles that reduce the cost and hassle of running a home
We supply households throughout the UK with a wide range of
essential services - energy, broadband, mobile and insurance - all
under the UW brand.
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 easy to use customer app backed up by award-winning support teams.
We believe that one supplier offering a single place for
consumers to manage all their 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 bills. And in genuinely
delivering on this multiservice proposition, we create something
that is truly referable.
Loyal customers creating sustainable, long-term value
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 also seek to maximise their expected lifetime with us, by
earning their trust and loyalty in a number of ways:
-- Treating our customers fairly
o We offer long-term, ongoing savings across our services, in
preference to shorter-term pricing tactics that inevitably
undermine customer trust, loyalty and longevity.
-- Providing outstanding service
o We provide our customers with award-winning customer service
online, on our app and through our dedicated customer service
teams, adopting a mantra of 'looking after every customer as though
they were our own mum'.
-- Offering customers incrementally better value with each additional service they take
o Given the clear correlation between the number of services a
customer takes and their expected lifetime as a UW customer, it is
beneficial to both the customer and ourselves to provide additional
savings to those who take multiple services from us.
-- Encouraging customers that own their home to choose UW
o Changes in who is occupying a property often leads to higher
administrative costs, greater churn and bad debt, and thus pose
particular challenges to suppliers of broadband and energy. By
targeting homeowners who are less likely to move property, we
underpin the long-term value of the business.
-- Creating additional saving opportunities for our customers
o For example, through our Cashback offering (which allows
customers to further reduce their monthly bills through their
everyday shopping) or through our Customer Referral scheme.
We want UW customers to have such a positive overall experience
with us that they won't want to switch away from it, encouraging
them to stay with us longer generating sustainable, long-term
returns, and recommending us to their family and friends.
A unique Word of Mouth model that creates earning
opportunities
Conventional advertising is ineffective at acquiring individual
customers who take multiple services - the proposition is too
complicated, and the perceived effort of switching is too high.
In contrast, a word of mouth recommendation from a trusted
person will overcome the natural inertia to switching multiple
services simultaneously, and deliver higher levels of multiservice
take up by new customers.
We rely primarily on our community of Partners to provide these
trusted personal recommendations, and it is their word-of-mouth
marketing of UW that enables us to unlock the inherent value of a
multiservice customer.
This word-of-mouth approach creates a genuine alignment of
interests that is in stark contrast to the traditional advertising
strategies of our competitors: these typically reach only a
minority of highly engaged UK consumers who are prone to serial
switching and therefore unlikely to generate long term returns.
Our Partners are paid for showing people they know how bundling
their home services with UW can save them time and money. Each time
they introduce a new customer they receive a one-off payment
followed by an ongoing monthly commission stream which continues
for as long as the customer remains with UW, and which grows as
they build a team and acquire more customers.
At a time when the rising cost of living is applying increasing
pressure to households across the country, our word-of-mouth
marketing model is not only helping more and more families to
benefit from much needed savings on their bills, but is also
providing an opportunity for increasing numbers of people to more
than offset the increased costs they are facing by earning a
meaningful additional income. We are seeing more and more people
turning to UW to do exactly that.
An inherently long-term business
Our 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 our lowest prices for longer in
return for switching all their services to UW.
-- Our Partners receive a long-term recurring income stream from a longer-lasting customer.
-- Our shareholders access a growing earnings stream from an inherently sustainable business.
Our bundles: best-in-class core services
Our multiservice bundles
We made a number of important improvements to our multiservice
customer proposition during the year:
i) We launched a new bundle structure centred on our 4 core
services: energy, broadband, mobile and insurance. The evolved
proposition expanded the qualifying services to include all our
core products and gave customers greater flexibility to tailor
their personal bundle.
ii) We refined our customer acquisition investment in order to
better attract multiservice homeowners through the launch of our
Boost incentive.
iii) We re-launched our customer referral programme with a
traditional "give a reward / get a reward" mechanic, designing
these incentives to similarly attract multiservice homeowners, as
well revamping the digital referral and onboarding experiences. We
are excited by the potential for this logical extension of our word
of mouth marketing model but were frustrated to have to postpone
the planned marketing campaigns for the new referral programme in
response to the higher Ofgem Market Stabilisation Charges which we
faced during the final quarter of the financial year; we look
forward to seeing a marked increase in referral activity over the
coming months.
As a result of this series of improvements, the last 12 months
has seen a 20% improvement in the proportion of new customers
taking a multiservice bundle.
In March 2023, in response to the new quarterly Ofgem Price Cap,
we simplified the structure of our ongoing multiservice energy
discounts, moving from a percentage-based discount to a consistent
pounds-based discount. Importantly, this change creates a clear and
simple price promise that suits our word of mouth marketing model
whilst holding true to our 'take more, save more' value
proposition.
Energy
In a market characterised by unprecedented levels of commodity
price inflation and government intervention during the year, we
were the fastest growing retail supplier in the country, increasing
the number of energy services we supply by 24.8% from 1,219,836 to
1,522,350.
Whilst the Ofgem Price Cap increased sharply at the start of the
year from GBP1,277 to GBP1,971, underlying wholesale energy prices
continued to climb, driving retail prices to unsustainable levels
with the Ofgem Price Cap soaring to GBP3,549 in October. In
response, the government implemented several new schemes; the
Energy Bill Support Scheme and Energy Price Guarantee supported
residential customers by bringing the effective customer cost down
to GBP2,100 over the winter, while the Energy Bill Relief Scheme
supported non-domestic customers. Meanwhile the Ofgem Price Cap
moved to a quarterly basis.
During this period the majority of energy suppliers withdrew
their acquisition tariffs and the switching market slowed
dramatically. As a multiservice supplier, we were uniquely
positioned to continue acquiring customers throughout this period,
offering sustainable and market leading energy savings funded by
our margins from supplying the broadband, mobile or insurance
services that our customers also take from us, and the operational
cost advantage we enjoy as an integrated multi-utility supplier. We
were pleased to be ranked third in the Which? 2023 Energy Supplier
Survey, and ended the year replacing Utilita as the 8th largest
energy supplier in the country.
In addition to implementing the numerous government support
schemes, we maintained our position at the forefront of the smart
meter rollout programme, successfully migrating our metering
arrangements to Calisen group following the divestment of UWHS in
March 2022. We are delighted to have recently passed the 1m smart
meter milestone and remain fully committed to delivering further
progress on this vital element of the UK's transition to net
zero.
Over the course of last winter, forward wholesale prices fell
significantly, triggering the Ofgem Market Stabilisation Charge,
whereby a supplier who gains a customer is obliged to compensate
the losing supplier for a proportion of their costs associated with
hedging energy for that customer. This additional acquisition cost
resulted in us further increasing our focus on acquiring
multiservice customers during Q4, which reduced our overall growth
rate during this period.
Retail prices currently look set to stabilise at around the
GBP2,000 level for the rest of the year: whilst this is a
significant reduction compared to recent months, it is roughly
twice the level of the past decade. This ongoing additional
pressure on household budgets can be expected to drive continued
high demand for the long-term energy savings that we offer.
Ofgem remains focussed on its programme of retail market reform:
through a series of market compliance reviews, it is tightening up
on unsustainable supplier practices, and is currently consulting on
numerous topics relating to Price Cap allowances - notably debt and
EBIT margins - to ensure supplier sustainability. In so doing,
Ofgem are ensuring a level playing field exists between suppliers
and creating a market in which an innovative, sustainable
multiservice proposition like ours stands to benefit. Further
reform is expected as the immediate energy crisis recedes and Ofgem
returns its focus to the transition to net zero.
Broadband
The broadband market continued to be highly competitive during
the year, albeit market-wide switching rates remain lower than
pre-pandemic levels due to greater concern over broadband
disruption given the increased reliance many consumers place on
connectivity when working from home. This reluctance to switch has
tempered our broadband growth, albeit we still saw a near 10%
increase in service numbers to 354,118 over the course of the
year.
In response to highly competitive market dynamics, we reduced
our broadband margins 18 months ago by offering introductory prices
to new customers. Whilst we would prefer not to offer these
tariffs, they make us one of the most competitively priced
suppliers, particularly for our multiservice customers. In the past
few months many broadband providers have increased their back-book
prices by CPI+, and there are some early signs of a welcome upward
market-wide trend emerging in introductory tariffs. Thanks to our
multiservice model, we were able to keep our price increases below
CPI and maintain our introductory tariffs unchanged.
With consumers increasingly focused on speed and reliance, we
were pleased to be ranked 3rd in the 2023 Which? Broadband
Satisfaction Survey, behind Zen and Hyperoptic. Our broadband
router retained its Best Buy status from Which? and is supplemented
by our whole home wifi Amazon eero proposition for larger
households. Together, these demonstrate our focus on offering our
customers what they value - quality services at affordable prices,
as part of a multiservice bundle.
We extended our long-term partnership with TalkTalk for a
further five years, gaining improved terms and access to their
favourable agreements with alternative fibre networks. With 25% of
new customers already taking full fibre services from us, this will
enable us to accelerate our full fibre rollout, and we are pleased
to be adding CityFibre's footprint this summer, increasing our
addressable full fibre market to over 12.5m properties
nationwide.
Mobile
The trend in the mobile market towards sim-only contracts and
higher average data consumption continued through the year, with
consumers now typically paying between GBP15 and GBP20 per month.
Both our GBP20 unlimited data mobile plan, and our family bundle of
four unlimited data sims for GBP59 per month, are market leading,
particularly given they are on the EE network which provides the
highest (99.6%) population coverage in the UK.
Our competitive and straightforward proposition has led to
further strong growth of over 20% in our mobile business, ending
the year with 394,145 services. With over half of our new customers
benefiting from the peace of mind and value offered by our
unlimited data plan, our mobile proposition epitomises what UW
stands for.
We extended our long running partnership with EE giving us the
additional flexibility to grow our base whilst continuing to offer
market leading products and data allowances. UW customers will soon
start to benefit from mobile coverage on the London Underground,
and we expect to commence our preparation for launching 5G services
in the coming months.
Insurance
This year was transformative for our insurance business, with
our policy book more than doubling from 44,834 to 100,590. In
focussing on delivering high quality cover and excellent value to
our customers, we continue to benefit from strong retention rates
of around 95%, and as our overall customer growth has increased, we
have seen demand from new and existing customers remain strong for
our insurance services. We are seeing the early benefits of this
growth on our unit economics, and expect this emergent trend to
accelerate as we achieve further economies of scale.
A key driver behind the marked acceleration in growth this year
was the incorporation of insurance into our multiservice bundles
and new customer onboarding journey at the start of the year. This
has validated our strategy of further embedding insurance into our
core proposition, and we were pleased that the Gibraltar insurance
regulator ('GFSC') approved our insurer licence for UWI Limited
('UWI') in March 2023 (see below).
By combining our platform of 100,000+ insurance policies with
end-to-end vertical integration through ownership of our own
in-house broker and insurer, we are now positioned to genuinely
scale our insurance business and become one of the UK's major
personal lines insurance businesses over the coming years.
Cashback card
Our Cashback card saw significant growth this year with UW
customers spending over GBP500m (2022: GBP368m) and earning
Cashback on everyday spending of GBP8.2m (2022: GBP5.8m), an
increase of over 40%. With households across the UK facing
significant increases in the cost of living, our Cashback card
offers a unique and valuable additional way of helping to reduce
monthly outgoings.
Whilst not a material profit centre in its own right, our
Cashback card adds huge value to our business, generating regular
positive touchpoints with active cardholders through real time
alerts of cashback earned, and creating genuine loyalty amongst
customers who benefit from reductions in their monthly bills.
During the year we further strengthened our portfolio of
retailer relationships and launched Cashback Insights, our first
step in leveraging our new app platform to show our customers how
much they have saved to date, and to help them maximise their
future cashback earnings.
Given the ongoing high demand we are seeing for the savings that
our Cashback card offers, we continue to seek additional retailer
relationships and invest in improving the customer experience
further, confident that this will translate into higher customer
satisfaction and continued market-leading retention rates across
all of our services.
Set up of UWI Limited
As part of our long-term insurance strategy, we were pleased
that our application to the GFSC for authorisation for our own
in-house insurer ("UWI") was successful. UWI has been authorised to
operate across six classes of personal lines insurance, and has
been approved to passport and write business into the UK, and we
started writing our first policies in April 2023.
In order to enable us to run our own in-house Insurer
effectively, we have hired an executive team of industry veterans,
alongside a highly experienced board, chaired by Andrew Blowers
OBE. Our UWI CEO Austyn Tusler, has worked in the insurance
industry for over 25 years, including at AIG and Hiscox, and most
recently as CUO of UK General. He is supported by a talented and
capable team with deep experience of Personal Lines Insurance at
leading names including the AA, Canopius and Direct Line Group, and
decades of experience operating insurers in Gibraltar.
We believe that the launch of UWI will further accelerate
scalable and profitable growth of our insurance business, by
enabling us to:
-- Further integrate our insurance products into our
multiservice customer journeys, significantly improving
penetration
-- Improve our range of products
-- Drive stronger claims management to protect our brand &
better oversee the customer experience we deliver
-- Operate more efficiently through end-to-end integration and
control of our supply chain, enabling us to deliver greater value
to our customers and shareholders
-- Secure our supply-chain and provide cover for our customers
throughout the underwriting cycle as we grow our insurance policy
book
Investing for growth
Supporting our customers
In order to ensure our customers remain with us for the long
term, and to earn the trusted personal recommendations of our
Partners, we must consistently deliver a high standard of service,
treat them fairly, and live up to our promise of letting them get
on with their lives and forget about their utilities.
The rapid growth we have experienced over the last year, coupled
with widespread concern and uncertainty amongst consumers about
energy prices, resulted in a more-than-doubling in the number of
calls and emails that we received from our customers. In response,
we not only significantly increased the size of our internal
customer service teams, but also developed relationships with two
UK-based outsource partners who specialise in the energy sector in
anticipation of a further uplift in contact over the winter months.
By the end of the financial year we had started tapering down this
temporary resource, and were very pleased with the flexibility that
it offered, and the service levels we delivered to our customers as
a result.
We rely on the efforts of our colleagues in our customer support
teams to look after all the services that our customers take from
us. Through their hard work and commitment, we not only managed the
increased number of contacts we received from our customers, but
further improved the level of service we delivered, particularly
during the winter, and were delighted that our post-call Customer
Effort Score (CES) increased 19% over the course of the year.
We expanded our customer support capabilities through the
opening of our first "centre of excellence" in Burnley with a focus
on supporting new customers joining UW and specialising in the
first 60 days of their journey with us: this new team complements
those already working remotely and in our Colindale offices to meet
the needs of our customers as we grow.
Given the increasing inflationary pressures on household budgets
this year, supporting our most vulnerable customers has been a key
priority. We significantly expanded our Ability to Pay teams to
ensure that customers who need further assistance with their bills
are treated sensitively by highly trained staff. Through our work
with the Citizens Advice Bureau, we have also implemented a UW
hardship fund to build upon existing means of help - such as the
Warm Home Discount - and to create a pool of money that can be used
to help customers on a discretionary basis.
To ensure our growing customer base is properly protected, we
continue to invest in our cybersecurity and anti-fraud
infrastructure. Over the last twelve months, we have increased the
size of our privacy team and implemented additional data privacy
training for employees. Our security operations centre is FIRST.Org
accredited and our Data & Record Management is governed by
Data, Security and Data Privacy teams with comprehensive processes
and practices.
Investing in our customer experience continues to be a key
business priority, both as a way of supporting our word-of-mouth
marketing model and also our underlying operational efficiency.
Major progress has been made on our new customer onboarding, bill
payment and home-mover digital journeys, as well as the development
of multiple new mobile and broadband self-serve capabilities. Our
customer service advisor experience has seen similar further
improvements, enabling faster and more efficient query resolution
for our customers.
The strength of our customer service was recognised in our win
for 'Best Customer Service' at the Uswitch Energy Awards 2022, and
our highly commended award for 'Best Customer Support' in the
Expert Reviews Energy Awards. Considering the rise in customer
calls triggered by inflationary pressures, government intervention
in the energy sector, and our rapid customer growth, these
endorsements are a testament to effective policies and the hard
work and commitment of our support teams.
Supporting our Partners
As our multiservice bundles have become increasingly compelling,
so the confidence, enthusiasm and activity levels of our Partners
have increased. Armed with a highly referrable customer
proposition, and invigorated by the increased demand for the
savings and earnings they can offer to people they know, momentum
has built amongst our Partners, and they have played a key role in
delivering the record levels of customer growth we have achieved
this year.
In the face of rising living costs, people from all walks of
life across the UK - nurses, teachers, students, retirees - have
been joining UW in record numbers to earn an additional income as
UW Partners. As higher energy prices evolved into a broader
inflationary trend during the year, many found that they could not
balance their household finances through savings alone. The
opportunity to earn a secondary income that could more than offset
the rising costs they are facing has proven a popular
proposition.
To capitalise on this increased demand for the UW Partner
opportunity, and to help more Partners succeed and earn, we took a
number of steps to strengthen both our customer and Partner
propositions during the year:
-- Through implementing the market-wide energy 'Faster
Switching' in the summer we significantly reduced the delay between
customer sign up and commission payment, resulting in faster
earnings for Partners
-- In introducing our multiservice savings Boost in the autumn,
we increased the referability of our customer proposition and
therefore the earnings opportunity for Partners
-- In January we extended the full Customer Bonus to new
Partners, enabling them to start earning sooner, and helping more
experienced Partners to accelerate the building of their teams and
their long-term residual income
-- To support our growing Partner community, we were excited to
launch our inaugural 'Save a Bundle' billboard, radio and digital
marketing campaign towards the end of the year - seeking to raise
consumer awareness of UW, add credibility to the UW proposition and
facilitate our Partners when recommending us to people they
know
Given the key role our Partners play in unlocking our highest
value customers - multiservice homeowners - the ongoing growth of
our Partner community puts us in a strong position for continued
high-quality customer acquisition.
We are hugely proud of the positive societal impact the business
is having in helping our Partners to earn an additional income and
to meet the current rising cost of living; and we will continue to
invest in supporting our Partners and helping them to achieve their
goals through UW.
Operational performance and non-financial KPIs
We exceeded our growth targets for the year with customer
numbers rising by 21.7% (2022: 10.8%) to 886,579.
Customers 2023 2022
Residential 866,403 705,634
-------- --------
Business 20,176 23,046
-------- --------
Total 886,579 728,680
-------- --------
This growth was slightly skewed towards the first half due to
the adverse impact of the Ofgem Market Stabilisation Charge in the
second half of the year.
The total number of services we supply to our customers grew by
23.5% (2022: 9.2%) to 2,798,148.
Services 2023 2022
Core services
----------- ----------
Energy 1,522,350 1,219,836
----------- ----------
Broadband 354,118 323,623
----------- ----------
Mobile 394,145 324,773
----------- ----------
Insurance 100,590 44,834
----------- ----------
Other services
----------- ----------
Cashback card 405,118 327,949
----------- ----------
Legacy telephony 21,827 23,894
----------- ----------
Total 2,798,148 2,264,909
----------- ----------
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.
Customers can take any combination of services - energy,
broadband, mobile or insurance - they wish from us. The more
services a customer takes, the greater the savings they make, and
there is a clear correlation between the number of services taken
and the customers' expected lifetime value to the business.
We saw healthy growth across all our core services, especially
in energy which has clearly been the focal point of media attention
and widespread consumer interest. However we were particularly
pleased with the significant acceleration in the uptake of
insurance, and the 125% growth in this service since it was
incorporated into our multiservice bundles at the start of the
year.
Average number of Core services
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
-------------
Q1 FY23 2.24
-------------
Q2 FY23 2.53
-------------
Q3 FY23 2.24
-------------
Q4 FY23 2.38
-------------
Following the launch of our simpler multiservice bundles at the
start of the year we saw a solid improvement in the average number
of service types being taken by new customers. As concerns over the
future upward trajectory of energy retail prices increased during
the summer months, we saw a temporary surge in the proportion of
customers switching three or more services to us in order to access
our competitive fixed price energy tariff. This returned to more
normalised levels over the autumn, but increased again in the final
quarter as we sharpened our focus on attracting our highest value
customers - multiservice homeowners - in response to the
incremental cost of acquiring new customers that resulted from the
increased Ofgem Market Stabilisation Charge since January 2023.
The average number of Core services taken by new customers is a
key metric that underpins the long-term sustainability of the
business: customers taking two or more Core services from us are
benefitting from a genuinely differentiated proposition, as well as
greater ongoing savings, meaning that they are less likely to leave
us.
Our long-term focus on winning our customers' loyalty and
maximising their lifetimes with us continues to pay dividends, and
our electricity supply point churn (the percentage of supply points
leaving during the period, which we use as a proxy for overall
churn) was extremely low at just 2.8% for the year (2022: 6%).
There was a marginal increase towards the end of the year as we saw
a number of suppliers tentatively re-starting their customer
retention programmes, but there has yet to be any meaningful return
to proactive customer acquisition activity - reflecting both the
regulatory focus on ensuring a sustainable retail energy
marketplace, the impact of the Ofgem Market Stabilisation charge,
and the low margins available to energy only suppliers. Whilst
churn is unlikely to remain at these record low levels, we are
confident that our differentiated multiservice proposition and
sustainable competitive pricing strategy mean that our churn will
remain below the levels we were experiencing during the energy
price war.
Average revenue per customer increased significantly to GBP3,025
(2022: GBP1,340). This was primarily due to materially higher
energy prices, particularly in the second half of the year.
The year ahead: our three FY24 Business priorities
Having exceeded our internal 20% growth target for 2023, we are
firmly on track to achieve our medium-term growth target of
welcoming an additional one million customers to UW. As the
immediate challenges of a year characterised by a return to rapid
growth, heightened concern about energy prices, and significant
regulatory and Government intervention are left behind, we have
taken the opportunity to revisit our business priorities and adjust
them to reflect the growth trajectory for the year ahead:
1. Evolving our distinct company culture
Our goal is to motivate and empower our people to deliver an
excellent customer experience and ultimately, continue to drive
growth. With a significantly larger and growing team, this year we
will be focussing on evolving our distinct UW culture to help
attract, develop and keep great people. And as a result, create the
type of working environment, mindset and talent needed to deliver
our growth targets.
To do this, we will focus on three core objectives:
-- We will define, develop and start to embed our distinct
culture across all aspects of the experience that our people have
with UW.
-- We will develop and grow our People Leaders to become culture and career builders.
-- Lastly, we want to create an environment where our
customer-facing teams feel empowered and engaged, and want to stay
with UW.
2. Delivering a seamless multiservice customer experience
Our multiservice customer experience is key to our success and
following the opening of our first customer service hub in Burnley
in autumn 2022, we will shortly be opening our second hub in the
Scottish borders town of Selkirk: this new centre of excellence
will be focussed on ensuring our prepayment energy customers are
fully supported against the wider backdrop of increasing
affordability challenges.
Within this business priority, we are also focussed on
delivering a streamlined digital experience for both new and
existing customers, to enable our customers to access and make
changes to their UW services without having to contact us.
For those that do want to contact us, we will continue to focus
on providing our customer service advisors with the latest
technical systems to support the delivery of award winning
service.
3. Bringing more multiservice homeowner customers on board
The current climate offers a unique opportunity for UW to
continue to help UK households both save and earn in the face of
the increased cost of living; maximising the number of services our
home owning customers take maximises their savings and delivers the
most valuable long-term customer relationships for UW. And our
word-of-mouth route to market remains at the heart of our ongoing
growth strategy as the best route to acquiring these, our highest
value customers.
To this end our primary goal is to significantly grow our
existing Partner community, but also to continue to innovate around
and extend our word-of-mouth model to appeal to new audiences such
as through our rapidly growing Customer Referral programme.
Delivering exceptional value and service remains at the heart of
our core multiservice proposition and we will continue to invest in
each of our individual services, as well as our multiservice
bundled benefits, with the goal of maximising customer lifetimes
and increasing customer advocacy to further fuel our future
growth.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
27 June 2023
Financial Review
Overview of Results
Adjusted Statutory
2023 2022 Change 2023 2022 Change
------------ ---------- ------- ------------ ---------- -------
Revenue GBP2,475.2m GBP967.4m 155.9% GBP2,475.2m GBP967.4m 155.9%
Profit before
tax GBP96.2m GBP61.9m 55.4% GBP85.5m GBP47.2m 81.1%
Basic EPS 99.2p 63.2p 57.0% 86.6p 45.1p 92.0%
Dividend per
share 80.0p 57.0p 40.4% 80.0p 57.0p 40.4%
Throughout this report the Group presents various alternative
performance measures ('APMs') in addition to those reported under
IFRS. The measures presented are those adopted by the Chief
Operating Decision Makers ('CODMs', deemed to be the Co-Chief
Executive Officers), together with the main Board, and analysts who
follow us in assessing the performance of the business. In order to
provide a presentation of the underlying performance of the group,
adjusted profit before tax and adjusted basic EPS exclude share
incentive scheme charges of GBP2.8m (2022: GBP1.0m) and the
amortisation of the intangible asset of GBP11.2m (2022: 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). In FY23 adjusted profit before tax excludes the Group
profit on disposal of Glow Green of GBP3.6m. The reconciliations
for adjusted profit before tax and adjusted EPS are set out in
notes 2 and 3 respectively of the financial statements.
Summary
Adjusted profit before tax increased by 55.4% to GBP96.2m (2022:
GBP61.9m) on higher revenues of GBP2,475.2m (2022: GBP967.4m).
Statutory profit before tax increased 81.1% to GBP85.5m (2022:
GBP47.2m). These increases reflect the impact of strong organic
growth in both customer and service numbers, combined with higher
retail energy prices. Within revenues, payments from the Government
EPG and EBRS energy support schemes amounted to GBP681.6m.
Distribution expenses increased to GBP49.7m (2022: GBP29.7m),
reflecting our growth in customers, services, and average revenues
per customer during the year.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP44.6m to GBP129.0m (2022:
GBP84.4m), largely due to higher staff, technology and
infrastructure costs as we responded to the faster rate of customer
growth, and to increased customer contact relating to higher energy
bills and the multiple Government schemes introduced to help shield
customers from the full impact of higher energy commodity
prices.
The bad debt charge for the year (which is separately identified
on the income statement as impairment loss on trade receivables)
increased to GBP28.7m (2022: GBP11.6m), representing 1.6% of
revenues for the year (2022: 1.2%) excluding amounts paid directly
to us by government (included in revenues) under their various
support schemes.
Adjusted earnings per share increased by 57.0% to 99.2p (2022:
63.2p), with statutory EPS increasing by 92.0% to 86.6p (2022:
45.1p). In accordance with previous guidance and our strong cash
position, the Board is proposing to pay a final dividend of 46p per
share (2022: 30p), making a total dividend of 80p per share (2022:
57p) for the year.
Revenues
The growth in the number of services we are supplying
accelerated significantly, increasing by 533,239 services (2022:
191,112) during the course of the year, and taking the total number
of services provided to our customers to 2,798,148 (2022:
2,264,909).
The increase in revenues reflects this increase in service
numbers, strong organic customer growth since autumn 2022, and much
higher energy prices during the period:
Revenues GBPm 2023 2022
Electricity 1,214.7 450.5
Gas 1,028.3 295.7
Landline and broadband 132.7 129.7
Mobile 56.8 44.7
Other 42.7 46.8
-------- ------
2,475.2 967.4
Margins
Our overall gross margin for the year was 12.4% (2022: 19.5%)
predominantly due to the big increase in the proportion of lower
margin energy sales during the period, resulting from strong
customer growth and higher retail 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
GBP49.7m (2022: GBP29.7m), mainly reflecting higher Partner
commissions and incentive costs associated with our increased
growth in the year.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP44.6m to GBP129.0m (2022:
GBP84.4m), mainly as a result of higher staff, technology and
infrastructure costs. The increase in staff costs mainly reflects
inflation-linked salary increases and cost of living support
payments, and the continued investment in strengthening our
customer service and management teams in order to ensure we
continue to deliver outstanding support across all of our services
given our increased growth. In anticipation of materially higher
levels of contact from our customers over the winter period, we
also temporarily boosted our energy customer service capacity with
additional outsourced teams, which we have since scaled back.
The bad debt charge for the year increased to GBP28.7m (2022:
GBP11.6m), mainly as a result of the impact of higher energy
prices, and a consequent increase in the number of customers having
difficulty paying their bills. The proportion of customers with at
least two energy bills outstanding increased to 2.34% (2022:
2.04%). We have invested in our Payment Solutions Team during the
period to help customers in payment difficulties. We have also
established a hardship fund to assist vulnerable customers.
Accrued Income and Accrued Expenses
The increases in accrued income to GBP267.6m (2022: GBP134.9m),
and accrued expenses to GBP417.4m (2022: GBP113.5m), at the
year-end were mainly as a result of the significant increases in
energy retail prices and wholesale costs, and the increase in the
customer base.
Disposals
During the period, the Group received the necessary FCA change
of control approval and completed the previously agreed sale of its
75% shareholdings in Glow Green Limited and Cofield Limited on 31
July 2022. This sale resulted in a profit on disposal of GBP3.6m
shown on a separate line in the Consolidated Statement of
Comprehensive Income, which has been excluded in calculating the
adjusted profit before tax of GBP96.2m in order to more accurately
reflect the underlying performance of the business.
Cash, Capital Expenditure, Working Capital and Borrowings
We ended the period with a reported net cash position including
lease liabilities of GBP103.4m (2022: net debt of GBP70.4m),
comprising cash of GBP193.8m less bank loans of GBP89.7m and lease
liabilities of GBP0.7m. The cash position includes GBP120.8m of
funds received in advance associated with the government energy
support schemes, and which will diminish during the current year as
the schemes cease to apply.
The Group's underlying Net Debt/adjusted EBITDA ratio (excluding
advanced funds associated with the government energy support
schemes) remains low at around 0.2x (adjusted EBITDA of GBP110.1m
used in this ratio represents operating profit of GBP85.9m, plus
depreciation and amortisation of GBP21.4m and share incentive
scheme charges of GBP2.8m).
Our net working capital position showed a year-on-year cash
inflow of GBP146.3m (2022: cash outflow of GBP10.4m), mainly
reflecting the impact of the government energy support schemes
advance payments of GBP120.8m. Capital expenditure of GBP11.0m
(2022: GBP9.9m) related primarily to our ongoing investment in our
technology platform and software, to support our ability to
continue delivering a market leading customer experience as our
multiservice bundled customer base continues to grow.
Dividend
The final dividend of 46p per share (2022: 30p) will be paid on
11 August 2023 to shareholders on the register at the close of
business on 21 July 2023 and is subject to approval by shareholders
at the Company's Annual General Meeting which will be held on 4
August 2023. This makes a total dividend payable for the year of
80p (2022: 57p).
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges
of GBP2.8m (2022: GBP1.0m). 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 historically, and the fluctuations in the
amount of this charge from one year to another, we are continuing
to separately disclose 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 in a consistent manner to that adopted during
previous periods. 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 of the 2023 Annual Report.
The tax charge for the year is GBP17.3m (2022: GBP12.2m). The
effective tax rate for the year was 20.2% (2022: 25.9%).
Nick Schoenfeld
Chief Financial Officer
27 June 2023
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 and Risk Committee. 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. The Group
has a dedicated information security team which provides governance
and oversight ensuring the confidentiality, availability and
integrity of the Group's systems and operations whilst ensuring
that any risks and vulnerabilities that arise are managed and
mitigated.
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, telecommunications 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 could potentially lead to a significant impact on
the sector, and the net profit margins available to energy
suppliers. The pace and extent of regulatory change continues to be
more substantial than in previous years. In addition to the
industry-wide programmes of work, such as the continuing rollout of
smart meters, and a growing range of environmental and social
obligations, Ofgem has been implementing a special package of
reform measures. These specific reforms emerged in response to the
'energy crisis': the period since the autumn 2021 associated with
high wholesale energy costs, supplier failures and a consolidation
of competition. The reforms cover development of the price cap,
intensive assessment of suppliers' financial resilience and
compliance performance, and temporary interventions 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 telecommunications 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 ongoing implementation of
the European Electronic Communications Code has resulted in an
increased regulatory burden and an even stronger Ofcom focus on
compliance monitoring. Regulatory changes to the fixed line and
broadband switching processes effective this calendar 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 and has recently become authorised
for insurance underwriting in Gibraltar by the Gibraltar Financial
Services Commission ("GFSC"). If the Group fails to comply with
FCA/GFSC 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
practices and the FCA's new Consumer Duty will have a significant
impact on the financial services sector as a whole. The business
has prepared and the Board has approved an implementation plan
which will continue to be informed by any clarifications and
additional guidance issued.
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 Energy Security and Net Zero ("DESNZ"), the FCA and the GFSC.
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, such as the Digital Markets,
Competition and Consumers Bill which is being monitored. Political
and regulatory developments affecting the energy and
telecommunications 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.
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, and continually monitors legal and regulatory
developments. The team also conducts compliance and assurance tests
on the policies and procedures.
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
Whilst the Group's focus on multiservice home-owners acts as a
mitigating factor against bad debt, 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 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.
Underwriting risk
Whilst operating our own in-house insurer will require taking on
some underwriting risk, we will largely mitigate these risks
through: (i) migrating highly predictable existing lines of
business, for which we have several years of trading history, and
have already achieved sufficient scale to maintain low volatility
and predictable returns; (ii) targeting conservative returns on
capital through a risk-averse investment strategy; (iii) where
appropriate, using conservative levels of reinsurance, including
protection for catastrophe risks such as storm, flood and freeze;
(iv) using real-time and proprietary data, such that we are aware
of all risks incepted in real time, and are able to price risks
accurately, and manage overall portfolio exposure; and (v)
maintaining and growing our existing home insurance panel, such
that our in-house insurer can selectively target risk profiles that
are suitable for our balance sheet (e.g. houses with lower rebuild
cost and not adversely exposed to catastrophe (CAT) perils).
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.
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 greenhouse gas 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 impacts
government decision-making, consumer demand and supply chains.
Development of climate-related policy and regulatory change as well
as shifts in consumer sentiment could impact on the Group's ability
to achieve its financial goals and result in increased compliance
costs or reputational damage.
In recognition of this, climate change risk is integrated into
the Group's risk management framework. Climate change is designated
as a standalone principal risk for the business and the Legal &
Compliance Director is assigned as the owner for managing this
risk. It is designated as a controlled risk due to the Group's
agile reseller business model which means the business is
strategically resilient as it is able to respond quickly to climate
change developments and is insulated from more severe physical
risks. The risk is further mitigated through the Group's approach
to understanding and monitoring the developments and the impacts
from climate change. The ESG Strategy Committee, consisting of
co-CEOs, CFO, Company Secretary, Executive Leadership Team and
senior management is updated by the ESG Working Group on climate
issues. Climate issues are then assessed and used to inform the
Group's strategy as needed. To bolster our understanding of climate
change in FY23 we created a new Head of Sustainability role and
continued to use external specialists as needed.
The Group is committed to achieving net zero greenhouse gas
emissions. In line with our commitment to develop a detailed net
zero transition plan and carbon target plan in FY23 we evaluated
our emissions and target against recognised standards including
Science Based Targets initiative ("SBTi") Corporate Net Zero
Standard, the gold standard framework for emissions target-setting.
We modelled our emissions trajectory and used credible assumptions
on external factors that, as a reseller, will strongly influence
the Group's decarbonisation ability including our key suppliers'
decarbonisation plans and the UK government's published projections
about the decarbonisation trajectory of the UK energy grid. We have
adjusted our target to be Net Zero on or before 2050, across scopes
1,2 and 3 to allow us to implement a credible science-based plan by
aligning with the UK government and our key suppliers. We will use
an FY22 emissions baseline, and we will set an interim target to
reduce emissions by 63% across Scopes 1, 2, and 3 by 2035. The
Group will have its targets validated by the SBTi, the leading body
on emissions target setting. Once targets are validated to SBTi we
will begin tracking and disclosing progress against them.
The Group is committed to continuing to implement the
recommendations of the Task Force on Climate-related Financial
Disclosures ("TCFD").
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
Note 2023 2022
GBP'000 GBP'000
Revenue 1 2,475,160 967,433
Cost of sales (2,168,964) (778,958)
------------ ----------
Gross profit 306,196 188,475
Distribution expenses (49,692) (29,686)
Administrative expenses (129,014) (84,423)
Share incentive scheme charges (2,849) (960)
Amortisation of energy supply contract
intangible (11,228) (11,228)
Total administrative expenses (143,091) (96,611)
Impairment loss on trade receivables (28,675) (11,566)
Impairment of goodwill - (1,536)
Other income 1,156 1,844
------------ ----------
Operating profit 85,894 50,920
Financial income 1,016 136
Financial expenses (5,051) (2,709)
------------ ----------
Net financial expense (4,035) (2,573)
Profit / (Loss) on disposal of subsidiary 3,595 (1,139)
Profit before taxation 85,454 47,208
Taxation (17,293) (12,205)
Profit for the period 68,161 35,003
Profit and other comprehensive income for
the year attributable to owners of the
parent 68,426 35,467
Loss for the year attributable to non-controlling
interest (265) (464)
Profit for the period 68,161 35,003
------------ ----------
Basic earnings per share 3 86.6p 45.1p
------------ ----------
Diluted earnings per share 3 85.2p 45.0p
------------ ----------
Consolidated Balance Sheet
As at 31 March 2023
Assets 2023 2022
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 25,816 26,180
Investment property 8,271 8,345
Intangible assets 142,491 152,418
Goodwill 3,742 3,742
Other non-current assets 47,529 32,855
--------- ---------
Total non-current assets 227,849 223,540
--------- ---------
Current assets
Inventories 5,698 4,152
Trade and other receivables 58,863 50,463
Current tax receivable 3,083 -
Accrued income 267,576 134,917
Prepayments 16,954 4,077
Costs to obtain contracts 20,912 15,151
Cash 193,804 29,647
Assets classified as held for sale - 3,838
--------- ---------
Total current assets 566,890 242,245
--------- ---------
Total assets 794,739 465,785
--------- ---------
Current liabilities
Trade and other payables (55,396) (38,101)
Accrued expenses and deferred income (417,354) (113,493)
Current tax payable - (8)
Liabilities classified as held for sale - (7,551)
--------- ---------
Total current liabilities (472,750) (159,153)
--------- ---------
Non-current liabilities
Long term borrowings (89,721) (99,215)
Lease liabilities (659) (766)
Deferred tax (901) (1,078)
Total non-current liabilities (91,281) (101,059)
Total assets less total liabilities 230,708 205,573
--------- ---------
Equity attributable to equity holders
of the parent
Share capital 4,003 3,982
Share premium 150,652 147,112
Capital redemption reserve 107 107
Treasury shares (5,502) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 82,598 61,935
--------- ---------
230,708 206,484
Non-controlling interest - (911)
--------- ---------
Total equity 230,708 205,573
--------- ---------
Consolidated Cash Flow Statement
For the year ended 31 March 2023
2023 2022
GBP'000 GBP'000
Operating activities
Profit before taxation 85,454 47,208
Adjustments for:
Net financial expense 4,035 2,573
Impairment of goodwill - 1,536
(Profit) / Loss on disposal of subsidiaries (3,595) 1,139
Depreciation of property, plant and equipment 3,968 4,558
Profit on disposal of fixed assets (85) (940)
Amortisation of intangible assets 17,407 15,786
Amortisation of debt arrangement fees 506 436
(Increase)/decrease in inventories (1,546) 2,173
Increase in trade and other receivables (including
Costs to obtain contracts) (176,146) (18,750)
Increase in trade and other payables 323,974 6,144
Share incentive scheme charges 2,849 960
Corporation tax paid (20,605) (11,528)
--------- --------
Net cash flow from operating activities 236,216 51,295
--------- --------
Investing activities
Purchase of property, plant and equipment (3,535) (2,196)
Purchase of intangible assets (7,480) (7,747)
Disposal of property, plant and equipment 91 1,567
Cash held in subsidiaries at disposal (596) -
Interest received 847 136
Cash flow from investing activities (10,673) (8,240)
--------- --------
Financing activities
Dividends paid (50,601) (44,787)
Interest paid (4,934) (2,630)
Interest paid on lease liabilities (17) (238)
Drawdown of long term borrowing facilities 55,000 65,000
Repayment of long term borrowing facilities (65,000) (55,000)
Fees associated with borrowing facilities - (597)
Repayment of lease liabilities (107) (1,530)
Issue of new ordinary shares 3,561 2,032
Cancellation of B shares in subsidiary - (2)
Cash flow from financing activities (62,098) (37,752)
--------- --------
Increase in cash and cash equivalents 163,445 5,303
Net cash and cash equivalents at the beginning
of the year 30,359 25,056
--------- --------
Net cash and cash equivalents at the year end 193,804 30,359
--------- --------
Cash and cash equivalents per balance sheet 193,804 29,647
Cash and cash equivalents included within assets
classified as held for sale - 712
--------- --------
Net cash and cash equivalents at the year end 193,804 30,359
--------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
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 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
-------- -------- ----------- ---------- --------- --------- --------------- --------
Balance at 1 April
2022 3,982 147,112 107 (5,502) (1,150) 61,935 (911) 205,573
Profit and total
comprehensive income - - - - - 68,426 (265) 68,161
Dividends - - - - - (50,601) - (50,601)
Credit arising on
share options - - - - - 2,849 - 2,849
Deferred tax on share
options - - - - - (11) - (11)
Issue of new ordinary
shares 21 3,540 - - - - - 3,561
Disposal of
non-controlling
interest - - - - - - 1,176 1,176
Balance at 31 March
2023 4,003 150,652 107 (5,502) (1,150) 82,598 - 230,708
-------- -------- ----------- ---------- --------- --------- --------------- --------
Notes
1. Revenue
Revenue by service
2023 2022
GBP'000 GBP'000
Electricity 1,214,683 450,544
Gas 1,028,267 295,696
Landline and broadband 132,678 129,703
Mobile 56,777 44,673
Other 42,755 46,817
2,475,160 967,433
--------- -------
The Group operates solely in the United Kingdom. During the
current period, revenue includes payments received from the
Government energy support schemes of GBP367.8m in respect of
electricity and GBP313.8m in respect of gas.
2. Alternative performance measures
Throughout this document the Group presents various alternative
performance measures ('APMs') in addition to those reported under
IFRS. The measures presented are those adopted by the Chief
Operating Decision Makers ('CODMs', deemed to be the Co-Chief
Executive Officers), together with the main Board, and analysts who
follow us in assessing the performance of the business.
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 2023 adjusted profit before tax also excludes the loss
on the disposal of Glow Green; this decision reflects the one-off
non-operating nature of this item.
2023 2022
GBP'000 GBP'000
Statutory profit before tax 85,454 47,208
Adjusted for:
Loss for period attributable to non-controlling
interest 265 464
Amortisation of energy supply contract intangible
assets 11,228 11,228
Share incentive scheme charges 2,849 960
Loss on disposal of subsidiary - UWHS - 1,139
Profit on disposal of subsidiary - Glow Green (3,595) -
Impairment of goodwill - Glow Green - 1,536
Profit on sale of freehold property - (603)
Adjusted profit before tax 96,201 61,932
------- -------
3. Earnings per share
The calculation of basic and diluted earnings per share ("EPS")
is based on the following data:
2023 2022
GBP'000 GBP'000
Earnings for the purpose of basic and
diluted EPS 68,426 35,467
Share incentive scheme charges (net of
tax) 2,346 793
Amortisation of energy supply contract
intangible assets 11,228 11,228
(Profit) / Loss on disposal of subsidiary (3,595) 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 78,405 49,675
--------- ---------
Number Number
('000s) ('000s)
Weighted average number of ordinary shares
for the purpose of basic EPS 79,049 78,601
Effect of dilutive potential ordinary
shares (share incentive awards) 1,220 286
--------- ---------
Weighted average number of ordinary shares
for the purpose of diluted EPS 80,269 78,887
Adjusted basic EPS [1] 99.2p 63.2p
Basic EPS 86.6p 45.1p
Adjusted diluted EPS1 97.7p 63.0p
Diluted EPS 85.2p 45.0p
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 E.ON has also been adjusted. It has also been deemed
appropriate to exclude the impact of the disposal of Glow Green
Limited and Cofield Limited ("Glow Green"). The amortisation of the
energy supply contract intangible assets, the profit on the
disposal of Glow Green have not been adjusted for taxation as these
items do not impact the amount of corporation tax paid by the
Group.
4. Dividends
2023 2022
GBP'000 GBP'000
Prior year final paid 30p (2022: 30p) per
share 23,689 23,559
Interim paid 34p (2022: 27p) per share 26,912 21,228
-------- --------
The Directors have proposed a final dividend of 46p per ordinary
share totalling approximately GBP36.4 million, payable on 11 August
2023, to shareholders on the register at the close of business on
21 July 2023. In accordance with the Group's accounting policies
the dividend has not been included as a liability as at 31 March
2023. 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 11.1% 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 in the Annual Report.
Details of the total remuneration paid to the directors of the
Company as key management personnel for qualifying services are set
out below:
2023 2022
GBP'000 GBP'000
Short-term employee benefits 3,816 3,200
Deferred shares bonus 723 443
Social security costs 543 428
Post-employment benefits 12 12
5,094 4,083
Share incentive scheme charges 400 42
------- -------
5,494 4,125
------- -------
During the year, the Group acquired goods and services worth
GBPNil (2022: GBPNil) from companies in which directors have a
beneficial interest. No amounts were owed to these companies by the
Group as at 31 March 2023. During the year, the Group sold goods
and services worth GBPNil (2022: GBPNil) to companies in which
directors have a beneficial interest.
During the year directors purchased goods and services on behalf
of the Group worth GBP256,000 (2022: GBP306,000). The directors
were fully reimbursed for the purchases and no amounts were owing
to the directors by the Group as at 31 March 2023. During the year
ended 31 March 2023, the Group made sales to Glow Green worth
GBP159,300 and purchases worth GBP161,000. During the year the
directors purchased goods and services from the Group worth
approximately GBP109,000 (2022: GBP28,000) and persons closely
connected with the directors earned commissions as Partners for the
Group of approximately GBP9,000 (2022: GBP6,000).
As set out in note 6, during the period the Group completed the
sale of its 75% interests in Glow Green Limited and Cofield Limited
to Non-Executive Chairman Charles Wigoder.
Subsidiary companies
During the year ended 31 March 2023, the Company purchased goods
and services from the subsidiaries in the amount of GBP782,000
(2022: GBP96,000 purchased by the Company from the
subsidiaries).
During the year ended 31 March 2023 the Company also received
distributions from subsidiaries of GBP60,000,000 (2022:
GBP50,000,000). At 31 March 2023 the Company owed the subsidiaries
GBP104,376,000 which is recognised within trade payables (2022:
GBP55,257,000 owed by the Company to the subsidiaries).
6. Disposal
Having received FCA change of control approval, the Group
completed the disposals of its 75% shareholdings in Glow Green
Limited and Cofield Limited ("Glow Green") for cash consideration
of GBP1 to Charles Wigoder, Non-Executive Chairman of the Group on
31 July 2022.
Since acquiring Glow Green in 2018, the business was
consistently loss-making; this contributed to a cumulative funding
requirement of over GBP6m that remained with Glow Green as a debt
to the Group and will be repaid over time. The repayment of the
loan has been personally guaranteed by Charles Wigoder.
As a smaller related party transaction, the 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.
The net liabilities of Glow Green as at 31 July 2022 were
GBP(4.7)m and the profit on disposal of the Group's 75% share was
therefore GBP3.6m in the current period. This has been reflected in
the Profit on disposal of subsidiary line in the Consolidated
Statement of Comprehensive Income.
7. Basis of preparation
The financial information set out above does not constitute the
Group's statutory information for the years ended 31 March 2023 or
2022, 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 2022 . Statutory accounts for 2022 have been
delivered to the Registrar of Companies and those for 2023 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 - Non-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
Carla Stent - 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 EAPKKAAXDEFA
(END) Dow Jones Newswires
June 27, 2023 02:00 ET (06:00 GMT)
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