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Telecom plus PLC - Preliminary results for the year ended 31 March 2004

Telecom plus plc, the UK's leading integrated multi-utility (gas, electricity, telephony, internet), announces preliminary results for the year ended 31 March 2004. [To view the full report click here]

Financial and business highlights:

• Turnover up 41% to £81.8m (2003: £58.0m)
• Profits before tax up 90% to £10.6m (2003: £5.6m)
• Final dividend of 5.5p, total of 10.00p for the full year (2003: 5.75p)
• Earnings per share of 12.2p (2003: 6.8p)
• Subscriber base increased 33% to 178,000 (2003: 134,000)
• Number of services provided increased 39% to 312,000 (2003: 225,000)

Peter Nutting, Chairman, said:

'We have now successfully transformed ourselves from an alternative supplier of fixed-line telephony services into the UK's first low-cost integrated multi-utility offering gas, electricity, fixed telephony, mobile telephony and internet services.'

'We are particularly encouraged by the initial response to our introduction of the Utility Warehouse Discount Club concept during October 2003 (a refinement of the new brand we had launched a year earlier), which has led to a marked increase in the average number of services being taken by each new member.'

'The combination of our unique multi-service utility proposition, the successful introduction of our new 'Club' concept and the exceptional value we are providing to our customers give us great confidence in our ability to deliver sustained growth over the coming years.'

CHAIRMAN'S STATEMENT

I am pleased to report a further strong set of results, reflecting significant progress across all areas of our business. We have now successfully transformed ourselves from an alternative supplier of fixed-line telephony services into the UK's first low-cost integrated multi-utility offering gas, electricity, fixed telephony, mobile telephony and internet services.

Pre-tax profits for the year rose by 90% to £10.6m (2003: £5.6m) on turnover which was ahead 41% to £81.8m (2003: £58.0m). This reflected another strong performance from our Virtual Network business where operating profits increased by 65% to £13.8m (2003: £8.4m), partially offset by a higher investment within our Distribution business of £3.5m (2003: £3.1m).

We ended the financial year with 178,000 customers (2003: 134,000), subscribing for over 312,000 services (2003: 225,000), an increase in services provided of almost 40% during the year. We are particularly encouraged by the initial response to our introduction of the Utility Warehouse Discount Club concept during October 2003 (a refinement of the new brand we had launched a year earlier), which has led to a marked increase in the average number of services being taken by each new member.

The supply of gas and electricity is beginning to represent a material proportion of group turnover, accounting for 19% of our Virtual Network business during the year (2003: 11%). Due to the strong demand for energy from new customers, we anticipate this will increase further to around 30% of group turnover during the current year.

The two investments which we made during 2002, TML (our wholly owned subsidiary) and Oxford Power Holdings (trading as Opus, and in which we hold a 15.8% equity interest), continue to perform in line with expectations. TML generated a contribution of around £1.2m to group profits (after goodwill amortisation of £0.5m), and Opus has recently achieved profitability at the Operating Profit Level (before direct costs relating to growing their customer base).

Confidence within our distribution channel remains high, with a steady increase in the number of new distributors joining the business. During the last quarter alone, more than 1,500 new distributors joined the Company, taking the total at the year end to almost 13,000 (2003: 10,000). I would like to thank all of them for their important contribution to the continuing growth and success of the Company.

We continue to invest heavily in our call centre facilities. This has produced a significant improvement in the levels of service provided to our customers, with over 90% of all calls being answered within 15 seconds. This is a testament to the commitment and hard work of everyone involved in this important area of our activities.

In view of our solid balance sheet and continued cash generation, your Board is recommending a 69% increase in the final dividend to 5.5p (2003: 3.25p) making a total of 10p (2003: 5.75p) for the full year. This will be paid on 16 July 2004 to shareholders on the register on the 25 June 2004. The final dividend is subject to approval by shareholders at the Company's Annual General Meeting which is to be held on 15 July 2004. We remain committed to the continued profitable long term growth of the business and to maintaining a progressive dividend policy that reflects the Company's anticipated growth in earnings.

Outlook

Our recent decision to introduce free fixed-line calls between Club members has already resulted in a substantial uplift in Club membership, both from amongst our existing customers (who had not previously joined the Club), as well as from many new customers who are being referred to the Club in steadily increasing numbers by existing members. We believe this kind of promotional activity is ideally suited to the distribution channel we use, and that the costs of providing these free calls will be substantially off-set by the increased growth and resultant economies of scale within our Virtual Network business.

The combination of our unique multi-service utility proposition, the successful introduction of our new 'Club' concept and the exceptional value we are providing to our customers give us great confidence in our ability to deliver sustained growth over the coming years.

Margins in fixed telephony, mobile telephony, internet and electricity all remain extremely satisfactory, however our gas supply business is suffering from severe margin pressure as a result of the sharp increase in wholesale prices which have not yet been fully reflected in end-user tariffs.

Although there are many competitors in each of our principal markets, the barriers to entry preventing others from emulating our integrated business model remain high. My Board colleagues and I continue to look forward with considerable optimism.

Peter Nutting
Chairman 8 June 2004

To view the full report click here

The Utility Warehouse (Telecom plus) is a lucrative career option, which unlike most traditional careers, offers anyone the opportunity to generate an unlimited and secure residual income.

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