Telecom plus - preliminary results for the year ended 31 March 2005

Telecom plus PLC, the UK’s leading integrated multi- utility (gas, electricity, telephony,
internet), announces preliminary results for the year ended 31 March 2005.

Financial and business highlights:

• Turnover up 25% to £102.5m (2004: £81.8m)
• Profit before tax of £10.1m (2004: £10.6m)
• Final dividend of 6.0p, total of 11.0p for the full year (2004: 10.0p)
• Earnings per share of 11.7p (2004: 12.2p)
• Subscriber base increased 15% to 205,000 (2004: 178,000)
• Number of services provided increased 29% to 401,000 (2004: 312,000)

Peter Nutting, Chairman, said:

"We ended the financial year with over 205,000 customers (2004: 178,000), subscribing for
over 401,000 services (2004: 312,000), an increase in services provided of 29% during the year. This steady increase in the average number of services being taken reflects the continued
success of our "Club" concept, where over half our total customers are now members.

"Whilst each of the markets in which we operate remains extremely competitive, we retain our
unique position as the only fully integrated multi- utility supplier. Our low operating costs and
efficient systems enable our customers to benefit from good value across our entire range of
services, with the additional benefit of receiving just a single bill each month.

"We are anticipating a significant increase in turnover during the current year as both our
customer base and the number of services taken by each customer continue to grow. Profits
however are expected to be slightly lower due to the continuing impact of losses in our gas
business and increased customer acquisition costs. Nevertheless we remain committed to
growing our energy business and are confident that we will earn significant profits from this
sector in due course."

Chairman's statement

I am pleased to report further growth across all areas of our business.
Turnover has increased by 25% to £102m (2004: £82m), and although in line with market
expectations, pre-tax profits for the year have fallen slightly to £10.1m (2004: £10.6m) due to
losses in our gas supply business. The Board however remain confident in the prospects for the
Company and have therefore increased the final dividend to 6p (2004: 5.5p) making a total of
11p (2004: 10p) for the year.

We ended the financial year with over 205,000 customers (2004: 178,000), subscribing for over 401,000 services (2004: 312,000), an increase in services provided of 29% during the year.

This steady increase in the average number of services being taken reflects the continued
success of our "Club" concept, where over half our total customers are now members.
We experienced a number of customer service issues during the first few months of 2005,
primarily as a result of technical problems with our new Broadband service, which adversely
affected the confidence of our distribution channel, and hence their activity. These issues have
now been resolved and the activity of our distribution channel has begun to pick up over the last
few weeks. Following a major overhaul of working practices, performance measurement
criteria and incentives, and the recruitment of key additional members of the team, our
customer service has returned to, and indeed exceeded, its previously high standards.
As a result of this renewed confidence we are seeing record levels of customers signing up for
our Broadband service, which we regard as strategically important for our future growth.
Indeed, our Broadband business has more than doubled over the last 6 months, albeit from a
relatively small starting point.

Our Distributor base has also experienced steady growth to around 15,500 during the year
(2004: 13,000) and I would like to thank all our Distributors, and indeed our staff as well, for
their important contribution to the continuing growth and success of the Company.

The supply of domestic gas and electricity now represents a substantial proportion of group
turnover, accounting for 40% of our Virtual Network Business during the year (2004: 19%).
As explained in my statement which accompanied our interim figures, this growth from a low
base during a period of rising wholesale gas prices has meant we incurred a gross loss of over
£3m in our gas business during the year.

I am delighted we were able to raise £12.1m recently (net of expenses) through the issue of new
shares to a small number of leading City Institutions. That we were able to do so at a difficult
time for equity markets, and at a very small discount to the market price, was a significant
achievement. This fundraising was necessary to support the greater working capital
requirements associated with our fast growing energy supply business, together with the need
for a larger capital base to undertake systematic hedging activities in order to align our long-run
average commodity costs with our principal competitors. It will however take some time
before this process can be completed.

Our two investments, TML (a wholly owned subsidiary) and Oxford Power Holdings (trading
as Opus, and in which we hold an effective 20% equity interest) continue to perform in line
with expectations. In particular, Opus is trading profitably and continuing to grow
notwithstanding the difficult wholesale market conditions, and we are becoming increasingly
confident in their future prospects.

We have substantially strengthened our management team over the last few months with the
appointment of Stephen Davis as Group Finance Director (who joined us from BDO Stoy
Hayward where he was managing partner of their London office), Andy McWilliams as Sales
Director responsible for our Independent Distribution Channel (who joined us from Ocado) and
Ravi Khanna as Customer Service Director. We have also filled several other key senior
management posts.

The final dividend will be paid on 14 July 2005 to shareholders on the register on 24 June 2005
and is subject to approval by shareholders at the Company’s Annual General Meeting which is
being held on 13 July 2005.

Outlook

Whilst each of the markets in which we operate remains extremely competitive, we retain our
unique positio n as the only fully integrated multi- utility supplier. Our low operating costs and
efficient systems enable our customers to benefit from good value across our entire range of
services, with the additional benefit of receiving just a single bill each month.

We have recently begun to provide line rental to our domestic customers, removing the need for
them to maintain any direct billing relationship with BT. Around 6,000 customers are already
benefiting from this enhancement to our standard Home Phone service. We believe this is an
important strategic development for the business, which will further reduce churn and improve
customer satisfaction over the medium term, as well as contributing to group profits in due
course.

We will shortly be launching a new range of services and tariffs specifically targeted at the
SME market under the umbrella "The Utility Warehouse Discount Club for Business". This
area has obvious attractions due to our large base of Independent Distributors and the many
personal relationships they typically have with this segment of the business market.

The wholesale forward price of gas for the coming winter remains close to record highs, and
our average cost price for the commodity will therefore again be substantially greater this year
than our competitors (who will be reaping the benefit from historical hedging activity carried
out when prices were substantially lower). Although Centrica recently announced their
domestic customers could expect a further price increase of around 13% this year, and we will
be increasing our prices later this year as well, we still anticipate significant losses within our
gas supply business during the second half of this year.

We are anticipating a significant increase in turnover during the current year as both our
customer base and the number of services taken by each customer continue to grow. Profits
however are expected to be slightly lower due to the continuing impact of losses in our gas
business and increased customer acquisition costs. Nevertheless we remain committed to
growing our energy business and are confident that we will earn significant profits from this
sector in due course.

We remain focused on the profitable long term growth of the business and intend to maintain a
progressive dividend policy which reflects the Company’s anticipated growth in earnings.
Dividend increases over the next few years will however need to be considered carefully, given
the need to build our retained earnings in line with the greater working capital requirements of
the business as it continues to grow.

Finally, as was announced some two months ago, Richard Michell is retiring as a full-time
executive director at the end of August. Richard joined the company in April 1997, was part of
the birth of the business, and has been a key member of the management team. I am delighted
he will remain on the Board as a non-executive director.

Peter Nutting
Chairman
9 June 2005

https://www.utilitywarehouse.co.uk/store/PreliminaryResultsjune2005.pdf

posted by Jeremy Tromans at 6/09/2005 11:02:00 AM