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Business is in good shape

During the last week, both The Investors Chronicle and The Independent have picked up on the upturn with key financials at Telecom plus Plc (the Utility Warehouse), with The Investors Chronicle declaring “business is in good shape, with the potential to tap into a massive market helped by the trend to bundle utility services” and The Independent stating that Telecom plus is “worth a punt”.

The Independent – 14 August 2006
Small Talk: Time to ring up Telecom plus for a bargain buy

In this article, Michael Jivkov of The Independent highlighted that during the last two years Telecom plus shares have lost 70% of their value and that following the Company’s deal with nPower back in February, the Company has returned to profitability, with a dividend being announced at its full-year results in June.

“A recovery is on the cards for Telecom plus. Chris Mills, the shrewd small-cap specialist who runs Atlantic Value LLP fund, certainly thinks so. He has quietly built up a 4 per cent stake in the company. Telecom plus, which provides electricity and gas as well and mobile, fixed-line and broadband services, has seen its shares drop from 400p in 2004 to close at 121p on Friday because of losses from the energy side of the business. It had failed to hedge its supply contracts and when prices soared, it was locked into contracts to supply gas at too cheap a price.”

Also highlighted was the Company’s unique referral system for attracting new customers which is much less expensive than traditional advertising and marketing models. Telecom plus also has a fully integrated customer services billing system, which means lower admin costs, and boasts a low “churn” rate of just 1.5 per cent compared with an industry average of 5 per cent.

According to Michael Jivkov, KBC Peel Hunt, the group’s broker, expects it to make a profit of £8.3m this year. By 2008, this should have risen to more than £10m, leaving Telecom plus trading at just 10 times earnings, and making its stock worth a punt.

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