RNS Number : 2657K
Telecom Plus PLC
21 April 2020
21 April 2020
Telecom Plus PLC
Trading Update and Notice of Results
Telecom Plus PLC (trading as Utility Warehouse), which supplies
a wide range of utility services focussed on domestic customers,
today issues a trading update for its financial year ended 31 March
2020 and a preliminary assessment of the impact from COVID-19.
-- Record revenues and profits
-- Further organic growth delivered in challenging market conditions:
- Customer numbers: +2.7% (2019: 4.0%)
- Service numbers: +6.2% (2019: 8.2%)
-- Quality of customer base continues to improve
-- Strong growth in new Partners joining the business
-- No change to previous dividend guidance of 57p (2019: 52p) per share for the year
COVID-19 impact summary
-- Business currently demonstrating high levels of resilience,
with a robust balance sheet; sufficient liquidity available to meet
any likely scenario
-- Seamless transition achieved to home working by staff
-- New remote signup tool developed and released to Partners to
enable them to gather customers despite social distancing
restrictions, following lower levels of activity during the first
few weeks of the lockdown
-- Creating a highly favourable environment for Partner
recruitment as people adjust to working from home and seek
-- Customer churn has started to fall , primarily reflecting
lower activity in the housing market
-- Bad debt outlook uncertain; March invoice payments from
customers broadly in line with historic trends
-- Falling wholesale energy costs will be reflected in the new
Ofgem price cap level from 1 October, reducing current large gap
between Standard Variable Tariffs and introductory deals
We expect full year adjusted pre-tax profits towards the lower
end of previous guidance at around GBP60m (2019: GBP56.3m). This
reflects the impact of lower retail energy prices from 1 October
2019 (in line with a reduction in the Ofgem price cap) on our
energy revenues, higher regulatory costs, and initial extra costs
associated with COVID-19.
Our balance sheet is robust. W e have sufficient liquidity to
meet any likely scenario, with a year-end net debt position of
around GBP50m (excluding finance leases) and undrawn facilities of
GBP55m. We renewed our bank facilities in January 2020; these
consist of a committed GBP150m revolving credit facility and run
until early 2023, with an option (subject to bank consent) to
extend for up to a further two years.
Customer numbers for the year increased by 2.7% to 652,237
(2019: 635,039) and service numbers grew by 6.2% to 2,689,639
(2019: 2,532,024) reflecting a further improvement in the quality
of our customer base, with around two-thirds of new customers
switching all their core services to us.
The consistently strong levels of customer gathering activity by
our Partners that we had seen throughout the year came to a near
standstill during March, as the country went into lockdown in
response to the spread of COVID-19; this reduction in Partner
activity had a disproportionate impact on our net customer and
service growth for the second half of the year, as we continued to
churn the expected volume of customers during the latter part of
March who had initiated the change of supplier process during the
previous few weeks.
The overall number of domestic customers switching suppliers
across the energy industry rose to record levels during the year,
reflecting the widening gap between the introductory deals at the
bottom of the market and the Ofgem price cap. Our own churn was not
immune to this rising trend, although it remains significantly
lower than the level being seen amongst our competitors. Since the
year end, the number of customers leaving us has fallen, primarily
due to fewer people moving home during the lockdown.
The vast majority of our employees are now working from home
using the secure and robust technology infrastructure we have
built, which has enabled the business to continue very much 'as
usual' from a customer perspective.
We have recently provided our Partners with the facility to
sign-up new customers remotely; whilst overall customer gathering
activity is currently running below the levels previously being
achieved, we are encouraged by the positive response of Partners to
this initiative and are continuing to invest in this as a
significant enhancement to their existing toolkit.
Notwithstanding the disruption being caused by COVID-19, we
remain uniquely well positioned to continue to build shareholder
value over both the near term and the years ahead, with a diverse
portfolio of essential household services, a motivated distribution
channel, a unique integrated multi-utility business model, market
leading levels of customer retention, and a strong balance sheet.
These attributes have enabled us to build an exceptionally high
quality customer base, and provide significant confidence over our
future earnings stream.
This is in stark contrast to a number of undercapitalised energy
suppliers who sell below cost, are reliant upon advance payments
from their customers for their cashflow, and have adopted a less
selective approach to acquiring customers. The current challenges
are likely to take a further toll on these independent suppliers,
leaving a more responsible and sustainable energy marketplace.
Our assessment of the main risks and uncertainties currently
facing us are as follows:
1. Risk: Customers' ability to pay for the UW services they are
Assessment: Early indications, based on the high proportion of
customer payments falling due at the end of March which have
already been received, the modest increase in the number of direct
debits being cancelled since the lockdown, and the considerable
support being provided directly to consumers by the Government, are
that this will remain at a manageable level.
We draw comfort from the essential nature of the services we
provide and the quality of our customer base which skews towards
demographic groups such as retired households and homeowners who
are generally most likely to continue paying for their
2. Risk: Social distancing regulations temporarily reduce
activity by our Partners.
Assessment: The number of new customers being gathered is
currently running at under half the volume we were seeing
immediately before the lockdown occurred, although we are
encouraged by the resilience that Partners are showing whilst they
adopt the new remote sign-up tools. This may result in slower
growth during the current year, and it is uncertain how long it
will take after the social distancing regulations are lifted for
their performance to return to historic levels.
The part-time income opportunity we offer Partners remains
highly attractive to people looking to replace or supplement their
previous full-time incomes, and we are encouraged that Partner
recruitment is currently running considerably ahead of the
comparable period last year, despite social distancing
restrictions. We anticipate a considerable increase in Partner
recruitment over the coming months, and this has historically been
a good lead indicator to the future rate of customer growth.
3. Risk: COVID-19 has a detrimental effect on the financial
performance of our wholly-owned meter operator subsidiary, UW Home
Assessment: We had scaled up this new business over the course
of 2019 to a level where it was successfully and cost-effectively
installing over 20,000 smart meters a month; this activity came to
a complete standstill in late March when the lockdown took effect,
and we had to cancel over 20,000 future appointments; these will be
challenging, time consuming and costly to reschedule.
In the meantime, UWHS continues to carry out emergency meter
works for customers on a national basis, but is now significantly
sub-scale notwithstanding that many engineers have been furloughed.
It is unclear how long it will take after the lock-down is lifted
before UWHS returns to its previous level of operational
Despite these risks, and reflecting the confidence we have in
the fundamental strength and underlying resilience of our business
model, we intend to take advantage of the considerable pool of
talent that is emerging from less sustainable businesses, by
strengthening our technology team.
On the assumption that the social distancing limitations imposed
on our Partners and UWHS field engineers have largely been lifted
by the end of the summer, and we do not see a significant increase
in bad debts, we regard a profit outturn for FY21 marginally below
the expected outcome for FY20 as a reasonable base case for our
However, the Board emphasises that uncertainty over the bad debt
outlook, the duration of social distancing restrictions, and the
impact COVID-19 will have on the broader economy, make the range of
possible outcomes for FY21 much wider than usual.
We anticipate having greater visibility when we release our
annual results, and we look forward to updating and expanding on
this initial guidance at that time.
Since the impact of COVID-19 started to manifest itself, we have
taken exceptional steps to support our customers, Partners and
staff. At the same time, we recognise that dividends are an
important income stream for the pension funds, charities, ordinary
savers and pensioners who hold our shares, delivering significant
direct and indirect benefits to the economy.
The Company has previously stated that it intends to pay a total
dividend of 57p per share for the year just ended; this would
require a final dividend of 30p per share, equating to an outflow
of GBP23.6m. We confirm that this remains our intention in the
absence of a significant increase in the level of non-payment by
customers over the coming months.
In relation to forward guidance, we anticipate that achievement
of the profit outturn in the Outlook section above for FY21 will
enable us to maintain our dividend this year at the same level as
Notice of results
The Company is planning to issue its final results for the year
ended 31 March 2020 on 16 June 2020.
Appointment of joint corporate broker
We are delighted to announce the appointment of Numis Securities
Ltd ("Numis") as joint corporate broker with immediate effect.
Numis will work alongside our existing corporate broker Peel
Andrew Lindsay, CEO, said:
"Over the last month the business has successfully pivoted
virtually all its activities to a new paradigm in which the
previously normal direct social contact between staff, Partners
and/or customers is no longer possible. Whilst this has not been
without challenges, I would like to thank everyone who has worked
so tirelessly to make this transition possible.
"Our robust balance sheet, clearly differentiated business
model, and strong underlying profitability put us in a uniquely
strong position relative to our competitors, particularly those
independent energy suppliers that are insufficiently capitalised,
to ride out the current storm.
"We are entering a period during which our home-based income
opportunity, which is reliant on providing essential recurring
services, can be expected to flourish. Despite the inevitable
challenges of the months ahead, I look forward to welcoming
thousands of new Partners to the UW opportunity, and helping them
earn much-needed additional monthly incomes for their
For further information, please contact:
Telecom Plus PLC
Andrew Lindsay, CEO 020 8955 5000
Nick Schoenfeld, CFO
Dan Webster / George Sellar 020 7418 8900
Mark Lander / Simon Willis 020 7260 1000
Reg Hoare / Catherine Chapman / Amy O'Sullivan 07711 191 518
About Telecom Plus PLC ("Telecom Plus"): www.uw.co.uk
Telecom Plus, which owns and operates the Utility Warehouse
brand, is the UK's only fully integrated provider of a wide range
of competitively priced utility services spanning the
Communications, Energy and Insurance markets.
Members benefit from the convenience of a single monthly
statement, consistently good value across all their utilities and
exceptional levels of service. Telecom Plus does not advertise,
relying instead on 'word of mouth' recommendation by existing
satisfied Members and Partners in order to grow its market
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP
LN). For further information please visit www.uw.co.uk
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(END) Dow Jones Newswires
April 21, 2020 02:00 ET (06:00 GMT)
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