Telecom
plus Directors have expressed great confidence in the future prospects for the company now that the wholesale energy issues have been permanently resolved, together with their intention to remain competitive in the broadband market with new service(s) to be launched later this year once the necessary supporting infrastructure has been built.
Financial & business highlights- Turnover up 33% to £136.3m (2005: £102.5m)
- Loss before tax of £1.6m (2005: profit £10.5m)
- Final dividend of 1.0p (2005: 6.0p)
- Elimination of exposure to wholesale energy prices
- Number of services provided increased 23% to 496,000 (2005: 402,000)
- Significant increase in value of investment in Oxford Power Holdings
Peter Nutting, Chairman, said:
"We are still the UK’s only fully- integrated supplier of a wide range of attractivelypriced
utility services, combined with a distribution channel of proven ability in cost
effectively gathering significant numbers of high quality new customers each month.
This combination continues to give us a considerable competitive advantage in the
domestic market. With the recent elimination of our exposure to wholesale energy
prices, the directors are confident that the current year will see a return to overall
profitability and a resumption of growth in our dividend payments to shareholders."
Chairman's statement
As you will already be aware, we experienced very difficult trading conditions last
year due to the extreme volatility and record prices in the wholesale energy markets
during November and December. Indeed, the losses we experienced in our gas
business alone during those two months reached almost £8m, more than off- setting
the satisfactory profits of £5.5m achieved during the first half- year.
This led to our decision to enter into the transaction with npower which we announced
in February 2006. Although not completed until 31 March 2006, it became effective
retrospectively from 1 January 2006 in all financial respects, and enabled our energy
business to return to profitability during the last quarter of the financial year. The
structure of the transaction preserves our unique business model from a customer
perspective as a fully integrated multi- utility supplier, whilst passing the substantive
risks and rewards of hedging and buying energy to a larger business partner. In
future, we expect to make a small positive margin from supplying energy to our
customers, albeit at a lower level than anticipated when we entered the energy
business some years ago, irrespective of the level (or volatility) of wholesale energy
prices, or fluctuations in demand caused by unseasonably cold or warm weather.
Notwithstanding these issues, I am pleased to report that we achieved considerable
growth during the year, with turnover increasing by 33% to £136m (2005: £102m).
This was due to a combination of higher retail energy prices and growth of over 23%
to 496,000 (2005: 402,000) in the number of services being provided to our
customers.
However, as a result of the losses in our gas business during November and
December, combined with exceptional costs of around £1.9m associated with entering
into the new npower arrangements, we incurred an overall pre-tax loss for the year of
£1.6m (2005: profit £10.5m). Notwithstanding this small loss, we are proposing a
final dividend of 1p for the year, reflecting our strong balance sheet and confidence in
the future prospects for the business.
The final dividend will be paid on 4 August 2006 to shareholders on the register at the
close of business on 7 July 2006 and is subject to approval by shareholders at the
Company’s Annual General Meeting which is being held on 12 July 2006.
Important highlights during the year included the successful launch of our new
Business Club in August 2005, which we anticipate will become an increasingly
important growth area for the Company over the coming years; substantial growth in
the number of broadband customers we supply; and the extremely encouraging takeup
by both existing and new customers of the opportunity to transfer their home
phone line rental to us.
Since the year-end, International Power Plc has announced the purchase from existing
shareholders (other than Telecom plus) of a 30% stake in Oxford Power Holdings Ltd
("OPH"). This transaction places an implicit value of £4.8m on our 20% investment
in OPH compared with a total cost of £1m.
At the AGM we will be saying good-bye to John Levin who is not standing for reelection
as a Director. He was one of the original founders of the business and made a
significant contribution to the management of the Company during its start- up period.
I would also like to take this opportunity to thank all the people involved with
Telecom plus who have played such an important role in developing the business this
year, in particular our extremely hard-working head office team and our network of
Independent Distributors, who display great skill and determination in continuing to
grow our business.
Outlook
Since the year end, Carphone Warehouse (through their Talk Talk brand) have been
attracting considerable publicity for their new combined broadband and telephony
package. Although it is still early days, we have seen little effect from this offer on
our own business, either in relation to growth in our own broadband base or on churn.
We are committed to maintaining a competitive position in this sector, and expect to
be launching a new range of broadband packages later this year once the proportion of
local exchanges which are unbundled has increased. We are confident the
competitive advantages provided by our integrated business model and low-cost route
to market will enable us to generate an acceptable return from supplying this service
in future.
Within our telephony business, margins have started to edge upwards recently as we
negotiate lower wholesale prices with our partners. Our position has been helped by
consolidation within the sector, which has made the call volumes under our control
increasingly sought after.
We are still the UK’s only fully integrated supplier of a wide range of attractivelypriced
utility services, combined with a distribution channel of proven ability in cost
effectively gathering significant numbers of high quality new cus tomers each month.
This combination continues to give us a considerable competitive advantage in the
domestic market. With the recent elimination of our exposure to wholesale energy
prices, the directors are confident that the current year will see a retur n to overall
profitability and a resumption of progressive growth in our dividend payments to
shareholders.
Peter Nutting
Chairman
6 June 2006
Labels: corporate-news
posted by Jeremy Tromans at 6/06/2006 10:25:00 AM
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