Telecom plus PLC, the UK’s leading low-cost integrated multi- utility (gas, electricity, fixed
telephony, mobile telephony, broadband), announces interim results for the six months ended
30 September 2005.
Financial and business highlights:
- Turnover up 21% to £51.9m (2004: £42.8m)
- Profit before tax of £5.1m (2004: £6.6m)
- Subscriber base increased to 213,000 customers, taking 460,000 services
- Significant progress in providing fixed telephony line rental and broadband
- Distributor base has continued to grow steadily, and now exceeds 16,000
- Directors exploring alternative strategies to control losses in gas business
Peter Nutting, Chairman, said:
"We remain focused on organic growth, providing a range of competitively priced utility
services to a steadily growing customer base. Despite much talk by other utility and media
companies of the advantages of so-called triple and quadruple "Plays", we remain the only
organisation thus far to have successfully implemented this strategy to the benefit of both
ourselves and our customers."
CHAIRMAN’S STATEMENT
I am able to report further growth across all areas of our business, in the first set of interim
results we have presented under the new International Financial Reporting Standards
("IFRS").
Turnover for the six months to 30 September 2005 has increased by 21% to £51.9m
(2004: £42.8m), our subscriber base has increased to 213,000 customers, and the number of
services we supply to them has risen to over 460,000. This is equivalent to an average of 2.16
services per customer (2004: 1.85), and reflects the continuing success of our "Discount Club"
concept in which 60% of our customers are now members. The principal benefits of this
unique multi-service approach are clearly demonstrated by our levels of churn and bad debt,
both of which are believed to be significantly below those typically achieved by our
competitors.
Pre-tax profits during the first six months of this financial year fell to £5.1m compared with
the same period last year (2004: £6.6m). There were three principal reasons for this reduction:
first, an increase to around £1.9m (2004: £1.0m) in customer acquisition costs during the
period, mainly due to the doubling in size of our broadband base to around 25,000
connections; secondly, a one-off increase in our underlying administration costs associated
with a significant strengthening of our senior management team; and finally, the fact that fixed
telephony revenues from calling mobile phones were significantly higher during the
comparative period last year, before industry wide price reductions which took effect in
September 2004.
Our Distributor base has also continued to experience steady growth, and now exceeds 16,000
(2004: 14,300). Their continuing contribution and commitment to the growth and success of
the business remains invaluable.
We have made considerable further progress in taking greater control of our customers’
telephony services, by assuming responsibility for providing the phone line as well as cheaper
calls. The elimination of the historic BT relationship has been warmly welcomed by our
customers, who now benefit from lower prices, simpler billing and better customer service
than they had previously experienced, with around 75% of eligible new fixed telephony
customers now choosing the complete service package.
Although margins from providing Broadband and Line Rental to residential customers are
currently unsatisfactory due to the uncompetitive wholesale prices available from BT, this is
expected to improve over the next 18 months as Local Loop Unbundling gathers pace. This is
anticipated to reduce costs significantly from their current level, particularly for companies
such as our own which are providing both line rental and broadband to the same domestic
premises.
Within our mobile business, we have recently simplified our tariffs and handset proposition.
We now have a straightforward and extremely competitive mobile offer, which will deliver
continuing savings and excellent value to our customers, whilst enabling us to maintain an
acceptable margin.
In August, we launched the Utility Warehouse Discount Club for Business, offering a range of
services specifically tailored towards small and medium sized businesses. This was well
received by our Distributors, over 2,500 of whom have since attended training courses to
enable them to promote these new services. The strong early take- up of these services gives
us considerable confidence that this new Club will make a material contribution to our
business over the coming years, as it builds on the experience of this sector we gained through
purchasing TML some three years ago. TML continues to generate a satisfactory return on
our investment.
Oxford Power Holdings (trading as Opus, and in which we hold an effective 20% equity
interest) continues to experience considerable success in growing its market share,
notwithstanding challenging market conditions. Indeed, it is now profitable and in accordance
with the new IFRS requirements, we have consolidated our share of these profits (amounting
to £112,000) within our figures for the first time.
In my last statement I reported we had raised £12.1m (net of expenses) to strengthen our
capital base, which took our cash reserves as at 30 September 2005 to £21m, with no external
debt. We also recently concluded a long term working capital facility with Barclays Bank plc.
Together, these should enable us to implement a systematic hedging programme to
progressively align our wholesale gas costs with those of our main competitors, although this
process has not yet started due to the forward cost of gas remaining unacceptably high.
Outlook and the current state of the gas market
We substantially increased our retail prices for both gas and electricity at the beginning of
October 2005, repositioning ourselves with a "best value" rather than "cheapest" price
promise. This resulted in only a small loss of customers, providing further evidence of the
commercial logic behind our unique multi- utility business model.
These price rises (of around 30% for gas cus tomers) were expected to substantially reduce our
gas losses this winter. However the increasing volatility and unprecedented prices seen
recently in the wholesale gas markets (where by way of example the "December" and "Day-
Ahead" commodity prices doubled and trebled respectively in the space of less than two
weeks during November) is having a significant impact on our business.
On 23 November 2005, the Company therefore issued a trading statement drawing attention to
this development, making shareholders aware of the effect it would have on our results for the
full year. Profits are now expected to be significantly lower than last year and are also subject
to considerable uncertainty. Although wholesale gas prices have since started to ease slightly,
that uncertainty remains, as we are currently purchasing the majority of our gas for this winter
on a short-term basis.
The directors are therefore actively exploring alternative strategies to control the level of
losses arising from our gas business. Our preferred outcome would be one which enabled us to
achieve a consistent margin in future on what remains an important part of our multi-service
proposition. We will provide shareholders with further information about this as soon as
possible.
In the circumstances, the directors believe it would therefore be prudent to defer a decision on
the payment of an interim dividend until the outlook for the full year has become more clear.
In the meantime we remain focused on organic growth, providing a range of competitively
priced utility services to a steadily growing customer base. Despite much talk by other utility
and media companies of the advantages of so-called triple and quadruple "Plays", we remain
the only organisation thus far to have successfully implemented this strategy to the benefit of
both ourselves and our customers.
Peter Nutting
Chairman
13 December 2005
https://www.utilitywarehouse.co.uk/store/Gresham_Interim_051213.pdf
Labels: corporate-news
posted by Jeremy Tromans at 12/13/2005 10:53:00 AM
