TIDMTEP
RNS Number : 8150T
Telecom Plus PLC
19 November 2019
19 November 2019
Telecom Plus PLC
Half-Year Results for the Six Months ended 30 September 2019
Telecom Plus PLC (trading as the Utility Warehouse), the UK's
only fully integrated provider of a wide range of competitively
priced utility services spanning both the communications and energy
markets, today announces its half-year results for the six months
ended 30 September 2019.
Financial highlights:
-- Revenue up 13.6% to GBP353m (2018: GBP311m)
-- Adjusted profit before tax up 5.9% to GBP27.5m (2018: GBP26.0m)
-- Statutory profit before tax up 9.2% to GBP21.1m (2018: GBP19.3m)
-- Interim dividend increased by 8% to 27p per share (2018: 25p)
Operating highlights:
-- Encouraging organic growth in line with expectations
-- Customer numbers for the period up by 10,267 (2018: 10,479) to 645,306
-- Total services supplied for the period up by 92,519 (2018: 86,372) to 2,624,543
-- Glow Green (boilers) and UWHS (smart meters) rapidly gaining momentum
Commenting on today's results, Andrew Lindsay, Chief Executive,
said:
"Growth during the first half of the financial year saw a
continuation of the encouraging performance we achieved during the
corresponding period last year, with similar increases in both
customer and service numbers. Our competitive position has recently
improved following the reduction in the energy price cap from 1
October 2019, which will help drive an acceleration in growth
during H2.
"In contrast to the majority of other energy suppliers, we
remain both profitable and cash generative; revenues and profits
have both reached record levels, and our balance sheet remains
robust.
"I am particularly pleased at the progress within two of our
most recent business initiatives, Glow Green and UWHS; each of
these is delivering accelerating growth in the number of boilers
and smart meters they are installing respectively.
"Over the last 10 weeks we have seen a significant increase in
the number of new Partners joining the business; this is an
encouraging lead indicator for the rate of future customer growth
over the coming months. We look forward to building on the current
strong momentum, and delivering full-year adjusted profits of
GBP60m-GBP65m in line with the guidance previously provided."
For more information, please contact:
Telecom Plus PLC
Andrew Lindsay, Chief Executive 020 8955 5000
Nick Schoenfeld, Chief Financial Officer
Peel Hunt
Dan Webster / George Sellar 020 7418 8900
JPMorgan Cazenove
Chris Wood / Hugo Baring 020 7742 4000
MHP Communications
Reg Hoare / Katie Hunt / Amy O'Sullivan 020 3128 8778
Analyst presentation
Telecom Plus will host an analyst presentation at 9.00 a.m.
today at Peel Hunt's offices, Moor House, 120 London Wall, London,
EC2Y 5ET. Please contact MHP Communications for details at
telecomplus@mhpc.com
About Telecom Plus PLC ('Telecom Plus'):
Telecom Plus, which owns and operates the Utility Warehouse
brand, is the UK's only fully integrated provider of a wide range
of competitively priced utility services spanning the
communications, energy and insurance markets.
Members benefit from the convenience of a single monthly bill,
consistently good value across all their utilities and exceptional
levels of service. The Company does not advertise, relying instead
on "word of mouth" recommendation by existing satisfied Members and
Partners in order to grow its market share.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP
LN). For further information please visit:
www.utilitywarehouse.co.uk.
LEI code: 549300QGHDX5UKE58G86
Interim Management Report
Financial and Operating Review
Results
Adjusted Statutory
--------------------------- ---------------------------
Half year to 30 September 2019 2018 Change 2019 2018 Change
Revenue 353,207 310,809 13.6% 353,207 310,809 13.6%
Profit before tax 27,523 25,983 5.9% 21,074 19,300 9.2%
Basic earnings (per
share) 27.5p 26.9p 2.2% 19.4p 18.5p 4.9%
Interim dividend
(per share) 27.0p 25.0p 8.0% 27.0p 25.0p 8.0%
In order to provide a clearer understanding of the underlying
trading performance of the Group, adjusted profit before tax and
adjusted basic EPS exclude: (i) share incentive scheme charges; and
(ii) the amortisation of intangible assets arising on entering into
the new energy supply arrangements with npower in December 2013.
The amortisation of intangible assets has been excluded on the
basis that it represents a non-cash accounting charge that does not
impact the amount of profits available for distribution to
shareholders. Adjusted profit before tax also excludes the share of
the loss for the period attributable to the 25% non-controlling
interest in Glow Green.
We have seen a strong start to the current year, with revenues,
profits, customer and service numbers all increasing in line with
expectations.
Adjusted profit before tax increased by GBP1.5m to GBP27.5m
(2018: GBP26.0m) on higher revenues of GBP353.2m (2018: GBP310.8m).
Adjusted earnings per share increased by 2.2% to 27.5p (2018:
26.9p). Statutory profit before tax increased by 9.2% to GBP21.1m
(2018: GBP19.3m), after intangible amortisation of GBP5.6m (2018:
GBP5.6m) and share incentive scheme charges of GBP0.7m (2018:
GBP1.0m).
The interim dividend is being increased by 8% to 27p per share
(2018: 25p) and will be paid on 13 December 2019 to shareholders on
the register on 29 November 2019; the Company's shares will go
ex-dividend on 28 November 2019.
We maintain our dividend guidance for the full year of 57p
(2018: 52p) per share.
Revenues
The growth in revenue exceeded the increase in service numbers,
due mainly to seasonally normal gas consumption and higher energy
prices during the period (the corresponding period in the prior
year was anomalously mild).
Gross margin fell slightly to 22.4% (2018: 23.0%), which
primarily reflects a change in our service mix, with an increasing
proportion of revenue derived from supplying lower margin energy
services due to a rise in the Ofgem price cap on 1 April 2019. This
was partly offset by a modest contribution from our revised energy
supply agreement with npower which took effect at the start of the
period.
Costs
Distribution expenses increased to GBP13.2m (2018: GBP12.7m),
reflecting continuing organic growth and rising service
numbers.
Overall administrative expenses before amortisation rose by
GBP5.5m to GBP38.4m (2018: GBP32.9m) due to a combination of
factors including: (i) growth in the volume and range of services
we are providing; (ii) higher technology costs relating to updating
our core CRM systems, developing new tools to support our Partner
network, and enhancing information security; (iii) the acceleration
of our smart meter rollout programme; (iv) higher regulatory costs;
and (v) annual inflation-linked increases in staff pay. In
addition, we continue to invest in strengthening the senior
management team to support an acceleration in our current organic
growth.
Cash Flow
Our operating cash flow increased to GBP27.2m (2018: GBP24.0m),
broadly reflecting the level of adjusted profit during the period.
The working capital inflow was largely offset by increased
corporation tax payments reflecting the changes introduced by HMRC
to the quarterly instalment payments regime for large companies.
Capital expenditure of GBP3.8m (2018: GBP3.0m) related primarily to
our ongoing technology investment programme. Net debt during the
period increased marginally to GBP40.7m (31 March 2019: GBP37.0m),
in part reflecting the GBP3.6m adjustment to liabilities required
under the new lease accounting standard (IFRS 16). At this level,
the ratio of net debt to EBITDA (on a 12-month rolling basis)
remains low at around 0.6x, underpinning our progressive dividend
policy.
Tax
Our effective tax rate for the first half was 28.4% (2018:
25.6%); this remains higher than the underlying rate of corporation
tax due mainly to the ongoing amortisation charge on our energy
supply contract intangible asset (which is not an allowable
deduction for tax purposes), and a reduction in the deferred tax
asset associated with unexercised employee share options.
Our Multi-Service Retail Proposition
We remain the only fully integrated multi-utility provider in
the UK, offering consumers the simplicity and convenience of having
all their core household services on a single bill. Members taking
multiple utilities from us receive a differentiated solution that
they cannot get from any other provider.
We are committed to being the Nation's most trusted utility
supplier, as evidenced by our longstanding policy of not charging a
'loyalty penalty' on any of our services - a practice that is
endemic amongst our competitors and which has now started to catch
the attention of regulators. This approach, combined with the
growing proportion of Members taking all our core services, creates
significantly greater shareholder value over the medium term
through lower churn and longer average customer lifetimes.
The number of Members and services for the period increased by
10,267 (2018: 10,479) and 92,519 (2018: 86,372) respectively; both
Member and service numbers were marginally impacted during the
period by the one-off migration of our CashBack card base from
MasterCard to Visa.
H1 H1
FY 2020 FY2019 FY 2019
---------- ----------
Partners 43,111 41,797 40,116
Members
Residential Club 619,336 608,371 594,220
Business Club 25,970 26,668 26,998
Total 645,306 635,039 621,218
Services
Electricity 588,138 579,603 565,463
Gas 477,499 470,227 458,071
Fixed Telephony (calls
and NGN) 349,136 338,439 329,186
Fixed Telephony (line
rental) 338,368 326,766 316,594
Broadband 317,320 304,678 293,462
Mobile 267,427 252,206 236,698
CashBack Card 264,823 245,620 218,913
Insurance services 21,832 14,485 8,704
Total 2,624,543 2,532,024 2,427,091
Residential Club 2,551,545 2,455,698 2,349,630
Business Club 72,998 76,326 77,461
Total 2,624,543 2,532,024 2,427,091
The table above excludes the customer and service numbers of
TML; Insurance services includes Home Insurance and Home &
Boiler Care policies
The quality of our membership base continued to improve during
the period, with a further rise in the proportion of new members
taking all our core services (energy, broadband and mobile) at the
point of sign up; these high value Members now represent over 25%
of our residential membership base. Not only do these Members
generate the highest revenues, but more importantly they have the
lowest churn, meaning that their lifetime value is many times
higher than those taking fewer services from us.
Service
We remain focussed on delivering consistently high standards of
service, as evidenced by our rating on Trust Pilot and the regular
endorsements we receive from independent consumer organisations
such as Which? and Moneywise.
Recent awards have included being ranked as one of the best
suppliers by Which? for broadband and mobile in their latest
reports into these markets, and winning four categories in the
MoneyWise Home Finance Awards for 2019 as 'Best Value for Money',
'Best Customer Service', 'Best for Clarity of Bills' and 'Best
Money Saving Tips and Gadgets'.
Churn
Our annualised churn for the period increased marginally to
12.5% (2018: 11.9%). This reflects higher energy prices from 1
April 2019 in line with the prevailing price cap level set by
Ofgem, partially offset by the steadily improving quality of our
membership base.
Notwithstanding record levels of switching within the domestic
energy market as a whole, where annualised churn is now running at
over 20%, we expect our own churn to fall over the coming years as
the proportion of members taking all their core services from us
continues to grow.
Our Partners - a unique route to market
We have created an exciting business opportunity, which combines
meaningful short-term financial rewards with a secure and growing
long-term residual income. This enables people from every
background and walk of life (our 'Partners') to create real
financial security for themselves and their families by using their
spare time to sign up new Members and introduce our business to
other like-minded people.
This unique route to market gives us a significant competitive
advantage, enabling us to effectively communicate the benefits of
our multi-utility proposition to high quality customers who in many
cases have never previously switched their supplier(s).
Around 4,000 of our Partners joined us on the 7(th) and 8(th)
September at motivational sales conferences in Harrogate and
Cheltenham. Key announcements included further steps to make our
customer proposition more attractive, enhancing the compensation
plan to encourage Partners to work more closely with their new
recruits, and new incentives to reward higher levels of
productivity. These initiatives were well received and have
resulted in a significant increase in the number of new Partners
joining the business over the last 10 weeks; this is an encouraging
lead indicator for the rate of future customer growth over the
coming months.
Our Car Plan remains extremely popular, with 49 new vehicles
supplied during the period; since introducing the scheme, over
1,100 Partners have now taken delivery of a Utility Warehouse
branded BMW Mini or X5.
Energy
A further nine independent energy suppliers exited the market
this year, taking the total to over 25 since the start of 2018. The
most surprising aspect of this is how long it has taken for the
providers of capital, the regulator and the press to recognise the
inherent unsustainability of a marketplace increasingly populated
by near identical, sub-scale, high-churning, undercapitalised and
unprofitable independent energy suppliers.
In the face of this rising tide of failures, Ofgem introduced
tougher requirements for new entrants over the summer, and is
currently consulting on appropriate new measures of financial
resilience and customer service that could be imposed upon existing
suppliers. Despite this representing yet another regulatory burden,
we are broadly supportive of this initiative as the hidden cost to
the energy industry (and therefore ultimately on customers through
higher prices) of the mutualisation of debts left behind by
repeated independent energy companies exiting the market is
significant.
Both the government and Ofgem should be commended for their
roles in introducing and managing the Price Cap, which has created
a fairer energy market, reduced the loyalty penalty faced by those
who have better things to do with their time than switch
supplier(s) on an annual basis, and reduced predatory pricing
activity by the former 'Big 6' suppliers which was distorting
competition.
In contrast to the uncertain futures of many other energy
suppliers, our strong balance sheet, profitable multi-service
business model and unique route to market, place us in a strong
position to continue growing our market share.
Smart meter rollout programme
We established our own licensed Meter Operator under the 'UW
Home Services' brand last autumn, with the objective of
implementing our smart meter rollout programme more efficiently,
and providing a better experience to our members.
We are delighted with the progress that they have made over the
course of the year, and the way they successfully navigated the
transition from installing first generation meters to second
generation meters over the course of the summer.
We successfully installed 44,000 meters during H1, taking our
installed base of smart meters to over 40% of our residential meter
portfolio, comfortably ahead of the average level achieved across
the industry.
UW Home Services is rapidly gathering momentum: the number of
trained engineers has doubled to around 120 over the last six
months, and is on track to reach over 300 by the end of March; this
will enable us to accelerate our rollout during H2.
Glow Green - our boiler installation division
We are excited by the momentum which has been building within
Glow Green this year. Although the business was loss-making during
the period, its financial performance has been improving steadily,
and it is on track to make a modest positive contribution for the
full year.
The supply, installation and servicing of domestic boilers is a
highly fragmented GBP1bn-a-year business in the UK, dominated by
British Gas; this creates a significant medium-term opportunity for
us to build a material new revenue stream.
Project Daffodil - a valuable and unique environmental
initiative
This initiative enables Members switching all their services to
us, to have all their light bulbs replaced with the latest LED
equivalent, reducing their energy bills and generating a
significant environmental benefit. It also helps our Partners to
gather high quality customers in significant quantities, with an
increase in expected customer lifetime that more than compensates
for the marginal extra cost of providing this benefit.
We are proud to have physically installed over 3.5m low energy
light bulbs in over 120,000 homes throughout the UK over the last
four years, and the substantial positive ongoing impact this is
having on the environment.
Telephony and Broadband
We are pleased that in a broadly flat overall market, and
against a continuing highly competitive background, our market
share for all the communication services we provide continues to
increase.
A key focus over the last year has been promoting the benefits
of fibre broadband to our members, ensuring they receive a fast and
reliable high-quality service, commensurate with their needs. As a
result, the proportion of our broadband base taking one of our
Ultra services had risen to over 40% by the end of H1.
The penetration of Mobile telephony within our membership base
now exceeds 40% for the first time, reflecting a doubling in the
number of Members choosing us as their mobile supplier over the
last five years. Given the ubiquitous nature of this service, we
believe there is scope to achieve significant further growth in our
mobile numbers over the coming years.
We were pleased to receive further recognition from Which?
during 2019, being ranked as one of the top three suppliers in both
their Mobile and Broadband surveys.
Insurance
We are steadily building a high-quality home insurance book,
with renewal rates consistently running at around 95%. This is an
unprecedented level within the sector, reflecting our approach of
providing 'everyday low prices' rather than discounted introductory
deals, and giving us confidence that over time this new service
will generate significant shareholder value.
Overall policy numbers increased by 50% during H1 to almost
22,000, assisted by the launch of a new Home and Boiler Care
product in March; we anticipate adding a similar number of policies
during H2.
We remain focussed on steadily building scale for our current
product range, expanding our existing home insurance panel, and
increasing the conversion ratio amongst those showing interest in
these products, whilst maintaining the robust margins we are
generating from this new business area. In the longer term we
expect to launch further complementary insurance products to our
membership base.
Outlook
We are starting to see an increasing focus by regulators (Ofgem,
Ofcom and the FCA) on the so-called 'loyalty penalty' - the
practice adopted by many other suppliers of broadband, mobile,
insurance and energy services of charging their loyal existing
customers significantly higher prices than the introductory deals
they offer to new customers.
The regulators' clear agenda is to make these markets fairer,
which is likely to result in progressively higher prices being
charged to the relatively small proportion of consumers switching
regularly, and lower prices being paid by those who don't. As these
changes take effect, we expect our own proposition (which is based
on long-term fair pricing) to become even more competitive, driving
confidence amongst our Partners, and a further acceleration in our
growth.
Uniquely amongst larger energy suppliers, we have continued to
grow both profits and customer numbers following the announcement
of the Ofgem price cap; over the same period, a steady stream of
small and medium sized independent suppliers have ceased trading,
having grown their customer numbers rapidly but with high churn and
escalating financial losses.
We are pleased that the encouraging trends in the number and
quality of new Members being gathered that we reported in June have
continued, with the proportion switching their energy, broadband
and mobile services to us continuing to run at record levels.
We are on track to deliver growth in customer and service
numbers ahead of last year's stronger performance, and re-iterate
our full year guidance for adjusted profit before tax and dividends
of GBP60m-GBP65m and 57p respectively.
Principal Risks and Uncertainties
The Group faces various risk factors, both internal and
external, which could have a material impact on long-term
performance. However, the Group's underlying business model is
considered relatively low-risk, with no need for management to take
any disproportionate risks in order to preserve or generate
shareholder value.
The Group continues to develop and operate a consistent and
systematic risk management process, which involves risk ranking,
prioritisation and subsequent evaluation, with a view to ensuring
all significant risks have been identified, prioritised and (where
possible) eliminated, and that systems of control are in place to
manage any remaining risks.
A formal document is prepared by the executive directors and
senior management team on a regular basis detailing the key risks
faced by the Group and the operational controls in place to
mitigate those risks; this document is then reviewed by the Audit
Committee. No new principal risks have been identified during the
period, and save as set out below, nor has the magnitude of any
risks previously identified significantly changed during the
period.
Business model
The principal risks outlined below should be viewed in the
context of the Group's business model as a reseller of utility
services (gas, electricity, fixed line telephony, mobile telephony,
broadband and insurance services) under the Utility Warehouse and
TML brands. As a reseller, the Group does not own any of the
network infrastructure required to deliver these services to its
membership base. This means that while the Group is heavily reliant
on third party providers, it is insulated from all the direct risks
associated with owning and/or operating such capital-intensive
infrastructure itself.
The Group's services are promoted using 'word of mouth' by a
large network of independent Partners, who are paid predominantly
on a commission basis. This means that the Group has limited fixed
costs associated with acquiring new Members.
The principal specific risks arising from the Group's business
model, and the measures taken to mitigate those risks, are set out
below.
Reputational risk
The Group's reputation amongst its Members, suppliers and
Partners is believed to be fundamental to the future success of the
Group. Failure to meet expectations in terms of the services
provided by the Group, the way the Group does business or in the
Group's financial performance could have a material negative impact
on the Group's performance.
In developing new services, and in enhancing current ones,
careful consideration is given to the likely impact of such changes
on existing Members.
In relation to the service provided to its membership base,
reputational risk is principally mitigated through the Group's
recruitment processes, a focus on closely monitoring staff
performance, including the use of direct feedback surveys from
Members (Net Promoter Score), and through the provision of rigorous
staff training.
Responsibility for maintaining effective relationships with
suppliers and Partners rests primarily with the appropriate member
of the Group's senior management team with responsibility for the
relevant area. Any material changes to supplier agreements and
Partner commission arrangements which could impact the Group's
relationships are generally negotiated by the executive Directors
and ultimately approved by the full Board.
Information technology risk
The Group is reliant on its in-house developed and supported
systems for the successful operation of its business model. Any
failure in the operation of these systems could negatively impact
service to Members, undermine Partner confidence, and potentially
be damaging to the Group's brand. Application software is developed
and maintained by the Group's Technology team to support the
changing needs of the business using the best 'fit for purpose'
tools and infrastructure. The Technology team is made up of highly
skilled, motivated and experienced individuals.
Changes made to the systems are prioritised by business 'Product
Managers' who clarify system needs. They work with the Technology
teams undertaking the change to ensure a proper understanding and
successful outcome. Changes are tested as extensively as reasonably
practicable before deployment. Review and testing are carried out
at various stages of the development by both the Technology team
and the operational department who ultimately take ownership of the
system.
The Group has strategic control over the core Member and Partner
platforms including the software development frameworks and source
code behind these key applications. The Group also uses strategic
third-party vendors to deliver solutions outside of our core
competency. This largely restricts our counterparty risks to
services that can be replaced with alternative vendors if required,
albeit this could lead to temporary disruption to the day-to-day
operations of the business.
Monitoring, backing up and restoring of the software and
underlying data are made on a regular basis. Backups are securely
stored or replicated to different locations. Disaster recovery
facilities are either provided through third-party hosting services
or in certain cases maintained in a warm standby state in the event
of a failure of the main system. These facilities are designed to
ensure a near-seamless service can be maintained for Members.
Data security risk
The Group processes sensitive personal and commercial data and
in doing so is required by law to protect customer and corporate
information and data, as well as to keep its infrastructure secure.
A breach of security could result in the Group facing prosecution
and fines as well as loss of business from damage to the Group's
reputation. Recovery could be hampered due to any extended period
necessary to identify and recover a loss of sensitive information
and financial losses could arise from fraud and theft. Unplanned
costs could be incurred to restore the Group's security.
The Group has deployed both a consumer-facing and enterprise
layered security strategy, providing effective control to mitigate
the relevant threats and risks. External consultants conduct
regular penetration testing of the Group's internal and external
systems and network infrastructure.
The Information Commissioner's Office ('ICO') upholds
information rights in the public interest and the Group is a data
controller registered with the ICO. If the Group fails to comply
with all the relevant legislation concerning information security,
it could be subject to enforcement action and significant
fines.
Information security risks are overseen by the Group's Legal and
Compliance team who are supported by security specialists.
Legislative and regulatory risk
The Group is subject to varying laws and regulations, including
possible adverse effects from European regulatory intervention. The
energy and communications markets in the UK and Continental Europe
are subject to comprehensive operating requirements as defined by
the relevant sector regulators and/or government departments.
Amendments to the regulatory regime could have an impact on the
Group's ability to achieve its financial goals and any failure to
comply may result in the Group being fined and lead to reputational
damage which could impact the Group's brand. Furthermore, the Group
is obliged to comply with retail supply procedures, amendments to
which could have an impact on operating costs.
The Group is a licensed gas and electricity supplier, and
therefore has a direct regulatory relationship with Ofgem. If the
Group fails to comply with its licence obligations, it could be
subject to fines or to the removal of its respective licences.
Proposed regulatory changes such as the imposition of retail
energy price caps, the rapid rollout programme of smart energy
meters (with the potential for additional costs if existing meters
must be replaced prior to the end of their planned lives), and the
replacement of existing environmental and social policies, could
all have a potentially significant impact on the sector, and the
net profit margins available to energy suppliers.
The Group is also a licensed supplier of telephony services and
therefore has a direct regulatory relationship with Ofcom. If the
Group fails to comply with its licence obligations, it could be
subject to fines or to the removal of its licences.
The Group is an Appointed Representative of a Financial Conduct
Authority ('FCA') authorised and regulated insurance broker for the
purposes of providing insurance services to Members. If the Group
fails to comply with FCA regulations, it could be indirectly
exposed to fines and risk losing its status as an Appointed
Representative severely restricting its ability to offer insurance
services to Members.
In general, the majority of the Group's services are supplied
into highly regulated markets, and this could restrict the
operational flexibility of the Group's business. In order to
mitigate this risk, the Group seeks to maintain appropriate
relations with both Ofgem and Ofcom (the UK regulators for the
energy and communications markets respectively), the Department for
Business, Energy and Industrial Strategy ('BEIS'), and the FCA. The
Group engages with officials from all these organisations on a
periodic basis to ensure they are aware of the Group's views when
they are consulting on proposed regulatory changes or if there are
competition issues the Group needs to raise with them. An
investigation into the Group's debt management processes announced
by Ofgem in June 2018 remains ongoing, and any potential exposure
is not considered likely to be material.
It should be noted that the regulatory environment for the
various markets in which the Group operates is generally focussed
on promoting competition; it therefore seems reasonable to expect
that most potential changes will broadly be beneficial to the
Group, given the Group's relatively small size compared to the
former monopoly incumbents with whom it competes. However, these
changes and their actual impact will always remain uncertain and
could include, in extremis, the re-nationalisation of the energy
supply industry.
Political and consumer concern over energy prices, vulnerable
customers and fuel poverty may lead to further reviews of the
energy market which could result in further consumer protection
legislation being introduced through energy supply licences with
price controls for certain customer segments currently being
proposed. In addition, political and regulatory developments
affecting the energy and telecoms markets within which the Group
operates may have a material adverse effect on the Group's
business, results of operations and overall financial
condition.
Financing risk
The Group has debt service obligations which may place operating
and financial restrictions on the Group. This debt could have
adverse consequences insofar as it: (a) requires the Group to
dedicate a proportion of its cash flows from operations to fund
payments in respect of the debt, thereby reducing the flexibility
of the Group to utilise its cash to invest in and/or grow the
business; (b) increases the Group's vulnerability to adverse
general economic and/or industry conditions; (c) may limit the
Group's flexibility in planning for, or reacting to, changes in its
business or the industry in which it operates; (d) may limit the
Group's ability to raise additional debt in the long term; and (e)
could restrict the Group from making larger strategic acquisitions
or exploiting business opportunities.
Each of these prospective adverse consequences (or a combination
of some or all of them) could result in the potential growth of the
Group being at a slower rate than may otherwise be achieved.
Fraud and bad debt risk
The Group has a universal supply obligation in relation to the
provision of energy to domestic customers. This means that although
the Group is entitled to request a reasonable deposit from
potential new Members who are not considered creditworthy, the
Group is obliged to supply domestic energy to everyone who submits
a properly completed application form. Where Members subsequently
fail to pay for the energy they have used, there is likely to be a
considerable delay before the Group is able to control its exposure
to future bad debt from them by either switching their smart meters
to pre-payment mode, installing a pre-payment meter or
disconnecting their supply, and the costs associated with
preventing such Members from increasing their indebtedness are not
always fully recovered.
Fraud and bad debt within the telephony industry may arise from
Members using the services, or being provided with a mobile
handset, without intending to pay their supplier. The amounts
involved are generally relatively small as the Group has
sophisticated call traffic monitoring systems to identify material
occurrences of usage fraud. The Group is able to immediately
eliminate any further usage bad debt exposure by disconnecting any
telephony service that demonstrates a suspicious usage profile, or
falls into arrears on payments.
More generally, the Group is also exposed to payment card fraud,
where Members use stolen cards to obtain credit (e.g. on their
CashBack card) or goods (e.g. Smartphones and Tablets) from the
Group; the Group regularly reviews and refines its fraud protection
systems to reduce its potential exposure to such risks.
Wholesale price risk
The Group does not own or operate any utility network
infrastructure itself, choosing instead to purchase the capacity
needed from third parties. The advantage of this approach is that
the Group is largely protected from technological risk, capacity
risk or the risk of obsolescence, as it can purchase the amount of
each service required to meet its Members' needs.
Whilst there is a theoretical risk that in some of the areas in
which the Group operates it may be unable to secure access to the
necessary infrastructure on commercially attractive terms, in
practice the pricing of access to such infrastructure is typically
either regulated (as in the energy market) or subject to
significant competitive pressures (as in telephony and broadband).
The profile of the Group's Members, the significant quantities of
each service they consume in aggregate, and the Group's clearly
differentiated route to market has historically proven attractive
to infrastructure owners, who compete aggressively to secure a
share of the Group's growing business.
The supply of energy has different risks associated with it. The
wholesale price can be extremely volatile, and Member demand can be
subject to considerable short-term fluctuations depending on the
weather. The Group has a long-standing supply relationship with
npower under which the latter assumes the substantive risks and
rewards of buying and hedging energy for the Group's Members, and
where the price paid by the Group to cover commodity, balancing,
transportation, distribution, agreed metering, regulatory and
certain other associated supply costs is set by reference to the
average of the standard variable tariffs charged by the 'Big 6' to
their domestic customers less an agreed discount, which is set at
the start of each quarter; this may not be competitive against the
equivalent supply costs incurred by new and/or other independent
suppliers. In addition, the timing of any quarterly price changes
under the npower arrangement may not align with changes in retail
prices, creating temporary short-term fluctuations in the
underlying margins earned by the Group from supplying energy.
However, if the Group did not have the benefit of this long-term
supply agreement it would need to find alternative means of
protecting itself from the pricing risk of securing access to the
necessary energy on the open market and the costs of balancing.
Competitive risk
The Group operates in highly competitive markets and significant
service innovations or increased price competition could impact
future profit margins. In order to maintain its competitive
position, there is a consistent focus on ways of improving
operational efficiency. New service innovations are monitored
closely by senior management and the Group is generally able to
respond within an acceptable timeframe by offering any new services
using the infrastructure of its existing suppliers. The increasing
proportion of Members who are benefiting from the genuinely unique
multi-utility solution that is offered by the Group, and which is
unavailable from any other known supplier, is considered likely to
materially reduce any competitive threat.
The Directors anticipate that the Group will face continued
competition in the future as new companies enter the market and
alternative technologies and services become available. The Group's
services and expertise may be rendered obsolete or uneconomic by
technological advances or novel approaches developed by one or more
of the Group's competitors. In the event that smaller independent
energy suppliers were to experience financial difficulties as a
result of increasing wholesale prices for instance, it is possible
that customers could also have a loss of confidence in the Group,
given that it is also an independent energy supplier. The existing
approaches of the Group's competitors or new approaches or
technologies developed by such competitors may be more effective or
affordable than those available to the Group. There can be no
assurance that the Group will be able to compete successfully with
existing or potential competitors or that competitive factors will
not have a material adverse effect on the Group's business,
financial condition or results of operations. However, as the
Group's membership base continues to rise, competition amongst
suppliers of services to the Group is expected to increase. This
has already been evidenced by various volume-related growth
incentives which have been agreed with some of the Group's largest
wholesale suppliers. This should also ensure that the Group has
direct access to new technologies and services available to the
market.
Infrastructure risk
The provision of services to the Group's Members is reliant on
the efficient operation of third party physical infrastructure.
There is a risk of disruption to the supply of services to Members
through any failure in the infrastructure e.g. gas shortages, power
cuts or damage to communications networks. However, as the
infrastructure is generally shared with other suppliers, any
material disruption to the supply of services is likely to impact a
large part of the market as a whole and it is unlikely that the
Group would be disproportionately affected. In the event of any
prolonged disruption isolated to the Group's principal supplier
within a particular market, services required by Members could in
due course be sourced from another provider.
The development of localised energy generation and distribution
technology may lead to increased peer-to-peer energy trading,
thereby reducing the volume of energy provided by nationwide
suppliers. As a nationwide retail supplier, the Group's results
from the sale of energy could therefore be adversely affected.
Similarly, the construction of 'local monopoly' fibre telephony
networks to which the Group's access may be limited as a reseller
could restrict the Group's ability to compete effectively for
customers in certain areas.
Smart meter rollout risk
The Group is in part reliant on third party suppliers to fully
deliver its smart meter rollout programme effectively. In the event
that the Group suffers delays to its smart meter rollout programme
the Group may be in breach of its regulatory obligations and
therefore become subject to fines from Ofgem. In order to mitigate
this risk the Group regularly monitors the performance of third
party meter operators and addresses any issues as they arise.
The Group may also be indirectly exposed to reputational damage
and litigation from the risk of technical complications arising
from the installation of smart meters or other acts or omissions of
meter operators, e.g. the escape of gas in a Member's property
causing injury or death. The Group mitigates this risk through
using reputable third party meter operators and through the
establishment of the Group's own meter operator UW Home Services
Limited.
Energy industry estimation risk
A significant degree of judgement and estimation is required in
order to determine the actual level of energy used by Members and
hence that should be recognised by the Group as sales. There is an
inherent risk that the estimation routines used by the Group do not
in all instances fully reflect the actual usage of Members.
However, this risk is mitigated by the relatively high proportion
of Members who provide meter readings on a periodic basis, and the
rapid anticipated growth in the installed base of smart meters
resulting from the national rollout programme.
Gas leakage within the national gas distribution network
The operational management of the national gas distribution
network is outside the control of the Group, and in common with all
other licensed domestic gas suppliers the Group is responsible for
meeting its pro-rata share of the total leakage cost. There is a
risk that the level of leakage in future could be higher than
historically experienced, and above the level currently
expected.
Key man risk
The Group is dependent on its key management for the successful
development and operation of its business. In the event that any or
all of the members of the key management team were to leave the
business, it could have a material adverse effect on the Group's
operations. The Group seeks to mitigate this risk through its
remuneration policy.
Single site risk
The Group operates from one principal site and, in the event of
significant damage to that site through fire or other issues, the
operations of the Group could be adversely affected. In order to
mitigate, where possible, the impact of this risk the Group has in
place appropriate disaster recovery arrangements.
Acquisition risk
The Group may invest in other businesses, taking a minority,
majority or 100% equity shareholding, or through a joint venture
partnership. Such investments may not deliver the anticipated
returns, and may require additional funding in future. This risk is
mitigated through conducting appropriate pre-acquisition due
diligence where relevant.
UK withdrawal from the EU risk
The Directors do not anticipate that, as a UK centric business
supplying core household services (where any increases in costs
tend to be passed through into retail prices), the UK's potential
withdrawal from the EU ("Brexit") will have any material negative
impact on the Group's earnings or growth. It is not expected that
Brexit will have a significant impact on the security of supply of
the services the Group provides given its arrangements with key
suppliers.
It is possible that if Brexit has a meaningful negative impact
on the UK economy in the short term, certain consumers may face
temporary hardship. However, as a supplier of essential
non-discretionary household services to a large and diverse
customer base, it is not expected that this will have a material
overall impact on the Company's sales levels and exposure to credit
risk. Nonetheless the situation is being kept under review.
Going concern
Recent developments in the Group's business activities, together
with the factors likely to affect its future development,
performance and financial position are set out above.
The Group has from Barclays Bank PLC and Lloyds Bank PLC total
revolving credit facilities of GBP150m for the period to 14
December 2020, of which only GBP70m was drawn down at the period
end. The Group has recently commenced discussions on refinancing
these facilities and expects to complete this process by March
2020.
Under the Group's energy supply arrangements, the Group benefits
from its relationship with npower who fund the principal seasonal
working capital requirements relating to the supply of energy to
the Group's Members.
The Group has considerable financial resources together with a
large and diverse retail and small business membership base and
long-term contracts with a number of key suppliers. As a
consequence, the directors believe that the Group is well placed to
manage its business risks.
On this basis the directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. The interim financial
statements have therefore been prepared on a going concern basis in
accordance with the FRC's Going Concern and Liquidity Risk:
Guidance for Directors of UK Companies 2009 issued in October
2009.
Directors' responsibilities
The Directors are responsible for the preparation of the
condensed set of financial statements and interim management report
comprising this set of Half-Yearly Results for the six months ended
30 September 2019, each of whom accordingly confirms that to the
best of his knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" and
provides a true and fair view of the assets, liabilities, financial
position and profit of the Group as a whole;
-- the interim management report includes a fair review of the
information required by the Financial Statements Disclosure
Guidance and Transparency Rules (DTR) 4.2.7R (indication of
important events during the first six months and their impact on
the financial statements and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosures of related party
transactions and changes therein).
The Directors of Telecom Plus PLC are:
Charles Wigoder Executive Chairman
Julian Schild Non-Executive Deputy Chairman
Andrew Lindsay Chief Executive
Nick Schoenfeld Chief Financial Officer
Andrew Blowers Non-Executive Director
Beatrice Hollond Non-Executive Director
Melvin Lawson Non-Executive Director
Given on behalf of the Board
ANDREW LINDSAY NICK SCHOENFELD
Chief Executive Chief Financial Officer
18 November 2019
Independent Review Report to Telecom Plus PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2019 which comprises the condensed
consolidated interim statement of comprehensive income, the
condensed consolidated interim statement of financial position, the
condensed consolidated interim statement of cash flows, the
condensed consolidated interim statement of changes in
shareholders' equity and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2019 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. The annual financial statements of the group
are prepared in accordance with International Financial Reporting
Standards as adopted by the EU. The directors are responsible for
preparing the condensed set of financial statements included in the
half-yearly financial report in accordance with IAS 34 as adopted
by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Robert Seale
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
United Kingdom 18 November 2019
Condensed Consolidated Interim Statement of Comprehensive
Income
Note 6 months 6 months Year
ended 30 ended 30 ended
September September 31 March
2019 (unaudited) 2018 (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Revenue 353,207 310,809 804,438
Cost of sales (273,914) (239,240) (654,874)
------------------- ------------------- -----------------
Gross profit 79,293 71,569 149,564
Distribution expenses (13,224) (12,741) (25,981)
Share incentive scheme charges (3) (6) (10)
------------------------------------- ------- ------------------- ------------------- -----------------
Total distribution expenses (13,227) (12,747) (25,991)
Administrative expenses (38,442) (32,890) (67,916)
Share incentive scheme charges (721) (957) (1,772)
Amortisation of energy supply
contract intangible 5 (5,614) (5,614) (11,228)
------------------------------------- ------- ------------------- ------------------- -----------------
Total administrative expenses (44,777) (39,461) (80,916)
Other income 617 524 1,656
------------------- ------------------- -----------------
Operating profit 21,906 19,885 44,313
Financial income 164 79 206
Financial expenses (996) (664) (1,520)
------------------- ------------------- -----------------
Net financial expense (832) (585) (1,314)
Profit before taxation 21,074 19,300 42,999
Taxation (5,994) (4,945) (10,174)
Profit for the period 15,080 14,355 32,825
Profit and other comprehensive
income for the period attributable
to owners of the parent 15,191 14,461 33,103
Loss for the period attributable
to non-controlling interest (111) (106) (278)
Profit for the period 15,080 14,355 32,825
------------------- ------------------- -----------------
Basic earnings per share 9 19.4p 18.5p 42.5p
Diluted earnings per share 9 19.3p 18.5p 42.3p
Interim dividend per share 27.0p 25.0p
Condensed Consolidated Interim Balance Sheet
Note
As at As at As at
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 34,917 28,726 30,579
Investment property 4 8,530 8,649 8,621
Intangible assets 5 170,089 177,351 173,655
Goodwill 5,324 5,245 5,324
Other non-current assets 21,939 16,069 19,052
Total non-current assets 240,799 236,040 237,231
--------------- -------------------- ------------
Current assets
Inventories 4,914 3,928 4,781
Trade and other receivables 48,089 42,236 48,450
Prepayments and accrued income 80,779 79,367 119,190
Cash 35,588 32,771 24,166
Total current assets 169,370 158,302 196,587
Total assets 410,169 394,342 433,818
--------------- -------------------- ------------
Current liabilities
Trade and other payables (36,039) (31,399) (31,064)
Current tax payable 765 (6,085) (5,065)
Accrued expenses and deferred
income (77,414) (83,873) (111,386)
Total current liabilities (112,688) (121,357) (147,515)
--------------- -------------------- ------------
Non-current liabilities
Long term borrowings 6 (69,712) (49,484) (59,598)
Finance leases and other financial
liabilities (6,599) (188) (1,616)
Deferred tax (844) (797) -
Total non-current liabilities (77,155) (50,469) (61,214)
Total assets less total liabilities 220,326 222,516 225,089
--------------- -------------------- ------------
Equity
Share capital 3,954 3,934 3,950
Share premium 142,405 139,165 141,732
Capital redemption reserve 107 107 107
Treasury shares (5,502) (5,502) (5,502)
JSOP reserve (1,150) (1,150) (1,150)
Retained earnings 80,901 86,068 86,230
Non-controlling interest (389) (106) (278)
Total equity 220,326 222,516 225,089
--------------- -------------------- ------------
Condensed Consolidated Interim Cash Flow Statement
Note
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Profit before taxation 21,074 19,300 42,999
Adjustments for:
Net financial expense 832 585 1,314
Depreciation of property, plant and
equipment 1,978 1,497 3,100
(Profit)/loss on disposal of fixed assets (18) - 1
Amortisation of intangible assets 6,597 6,175 12,509
Amortisation of debt arrangement fees 114 114 229
Decrease / (increase) in inventories (133) 2,173 1,320
Decrease / (increase) in trade and other
receivables 35,815 43,269 (5,695)
(Decrease) / increase in trade and other
payables (28,702) (50,348) (23,457)
Non-cash adjustments arising from IFRS
9 and 15 - 6,348 6,348
Non-cash adjustments arising from acquisitions - (859) (834)
Share incentive scheme charges 724 963 1,783
Corporation tax paid (11,057) (5,197) (12,148)
--------------- ---------------- ------------
Net cash flow from operating activities 27,224 24,020 27,469
--------------- ---------------- ------------
Investing activities
Purchase of property, plant and equipment (794) (619) (2,495)
Purchase of assets under finance leases (1,637) - (1,557)
Purchase of intangible assets (3,031) (2,416) (5,054)
Disposal of property, plant and equipment 36 - 5
Purchase of shares in subsidiaries acquired
(net of cash acquired) - (663) (709)
Interest received 193 61 167
--------------- ---------------- ------------
Cash flow from investing activities (5,233) (3,637) (9,643)
--------------- ---------------- ------------
Financing activities
Dividends paid 7 (21,100) (20,257) (39,739)
Interest paid (1,253) (735) (1,310)
Drawdown of long term borrowing facilities 10,000 10,000 20,000
Finance leases for the purchase of fixed
assets 1,637 - 1,557
Repayment of other borrowings (530) (143) (274)
Issue of new B shares in subsidiary - 1 1
Issue of new ordinary shares 8 677 113 2,696
Purchase of own shares - (4,742) (4,742)
Cash flow from financing activities (10,569) (15,763) (21,811)
--------------- ---------------- ------------
Increase/(decrease) in cash and cash
equivalents 11,422 4,620 (3,985)
Net cash and cash equivalents at the
beginning of the period 24,166 28,151 28,151
--------------- ---------------- ------------
Net cash and cash equivalents at the
end of the period 35,588 32,771 24,166
--------------- ---------------- ------------
Condensed Consolidated Interim Statement of Changes in
Equity
Capital Non-controlling
Share Share redemption Treasury JSOP Retained interest
capital premium reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 3,930 139,055 107 (760) (1,150) 85,833 - 227,015
Opening balance
adjustments - - - - - 5,068 - 5,068
Revised opening balances 3,930 139,055 107 (760) (1,150) 90,901 - 232,083
Profit and total
comprehensive
income for the period - - - - - 14,461 (106) 14,355
Dividends - - - - - (20,257) - (20,257)
Credit arising on share
options - - - - - 963 - 963
Issue of new ordinary
shares 3 110 - - - - - 113
Issue of B shares in
subsidiary 1 - - - - - - 1
Purchase of treasury
shares - - - (4,742) - - - (4,742)
Balance at 30 September
2018 3,934 139,165 107 (5,502) (1,150) 86,068 (106) 222,516
Balance at 1 October
2018 3,934 139,165 107 (5,502) (1,150) 86,068 (106) 222,516
Profit and total
comprehensive
income for the period - - - - - 18,642 (172) 18,470
Dividends - - - - - (19,482) - (19,482)
Credit arising on share
options - - - - - 820 - 820
Deferred tax on share
options - - - - - 182 - 182
Issue of new ordinary
shares 16 2,567 - - - - - 2,583
Balance at 31 March
2019 3,950 141,732 107 (5,502) (1,150) 86,230 (278) 225,089
Balance at 1 April
2019 3,950 141,732 107 (5,502) (1,150) 86,230 (278) 225,089
Opening balance
adjustments - - - - - (26) - (26)
Revised opening balances 3,950 141,732 107 (5,502) (1,150) 86,204 (278) 225,063
Profit and total
comprehensive
income - - - - - 15,191 (111) 15,080
Dividends - - - - - (21,100) - (21,100)
Credit arising on share
options - - - - - 724 - 724
Deferred tax on share
options - - - - - (126) - (126)
Retained earnings tax
adjustments - - - - - 8 - 8
Issue of new ordinary
shares 4 673 - - - - - 677
Balance at 30 September
2019 3,954 142,405 107 (5,502) (1,150) 80,901 (389) 220,326
-------- -------- ----------- ---------- --------- --------- --------------- --------
Notes to the condensed interim financial statements
1. General information
The condensed consolidated interim financial statements
presented in this half-year report ("the Half-Year Results") have
been prepared in accordance with IAS 34. The principal accounting
policies adopted in the preparation of the condensed consolidated
financial statements are unchanged from those used in the annual
report for the year ended 31 March 2019, other than the first time
adoption of new accounting standard IFRS 16 as detailed in Note 10,
and are consistent with those that the Company expects to apply in
its financial statements for the year ended 31 March 2020.
The condensed consolidated financial statements for the year
ended 31 March 2019 presented in this half-year report do not
constitute the Company's statutory accounts for that period. The
condensed consolidated financial statements for that period have
been derived from the Annual Report and Accounts of Telecom Plus
PLC. The Annual Report and Accounts of Telecom Plus PLC for the
year ended 31 March 2019 were audited and have been filed with the
Registrar of Companies.
The Independent Auditor's Report on the Annual Report and
Accounts of Telecom Plus PLC for the year ended 31 March 2019 was
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under s498(2) or (3) of the
Companies Act 2006. The financial information for the periods ended
30 September 2019 and 30 September 2018 is unaudited but has been
subject to a review by the Company's auditors.
Seasonality of business: in respect of the energy supplied by
the Group, approximately two thirds is consumed by customers in the
second half of the financial year.
The Half-Year Results were approved for issue by the Board of
Directors on 18 November 2019.
2. Judgements and estimates
The preparation of the condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in future periods
if applicable.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
March 2019.
3. Operating segments
6 months ended
6 months ended 30 30 September 2018 Year ended 31
September 2019 (unaudited) (unaudited) March 2019 (audited)
Segment Segment Segment
Revenue Result Revenue Result Revenue Result
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Customer Management 343,395 31,067 302,346 30,464 784,973 63,862
Customer Acquisition 9,812 (9,161) 8,463 (10,579) 19,465 (19,549)
Total 353,207 21,906 310,809 19,885 804,438 44,313
--------- ------------------- -------- -------------- ---------- ------------
As at 30
September
2018
As at
As at 30 31 March
September 2019
2019 (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Customer Management 402,580 386,949 421,312
Customer Acquisition 7,589 7,393 12,506
Total Assets 410,169 394,342 433,818
------------------- -------------- ------------
Customer Management (187,124) (168,768) (205,558)
Customer Acquisition (2,719) (3,058) (3,171)
Total Liabilities (189,843) (171,826) (208,729)
------------------- -------------- ------------
4. Investment property
Investment properties are properties which are held either to
earn rental income or for capital appreciation or for both.
Investment properties are stated at cost less accumulated
depreciation.
Rental income from investment properties is accounted for on an
accruals basis. The Company vacated its former head office, Southon
House, in 2015 and the property is now held as an investment
property.
An independent valuation of Southon House was conducted at 30
September 2015 in accordance with RICS Valuation - Professional
Standards UK January 2014 (revised April 2015) guidelines. The
independent market value of Southon House was determined to be
GBP10.2 million. The directors believe that there have not been any
material changes in circumstances that would lead to a significant
change in the market valuation of Southon House since 30 September
2015.
5. Intangible assets
Energy Supply IT Software
Contract & Web Development Total
GBP'000 GBP'000 GBP'000
Cost
At 31 March 2019 224,563 13,404 237,967
Additions - 3,031 3,031
---------------- -------------------- ---------
At 30 September 2019 224,563 16,435 240,998
Amortisation
At 31 March 2019 (59,883) (4,429) (64,312)
Charge for the period (5,614) (983) (6,597)
---------------- -------------------- ---------
At 30 September 2019 (65,497) (5,412) (70,909)
Net book amount at 30 September 2019
(unaudited) 159,066 11,023 170,089
---------------- -------------------- ---------
Net book amount at 31 March 2019
(audited) 164,680 8,975 173,655
---------------- -------------------- ---------
Net book amount at 30 September 2018
(unaudited) 170,294 7,057 177,351
---------------- -------------------- ---------
The Energy Supply Contract intangible asset relates to the
entering into of the energy supply arrangements with npower on
improved commercial terms through the acquisition of Electricity
Plus Supply Limited and Gas Plus Supply Limited from Npower Limited
having effect from 1 December 2013. The intangible asset is being
amortised evenly over the 20-year life of the energy supply
agreement.
The IT Software & Web Development intangible asset relates
to the capitalisation of certain costs associated with the
development of new IT systems.
6. Interest bearing loans and borrowings
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
2019 (unaudited) 2018 (unaudited) 2019 (audited)
GBP'000 GBP'000 GBP'000
Bank loans 70,000 50,000 60,000
Unamortised loan arrangement
fees (288) (516) (402)
69,712 49,484 59,598
------------------ ------------------ -----------------
Due within one year - - -
Due after one year 70,000 50,000 60,000
------------------ ------------------ -----------------
70,000 50,000 60,000
------------------ ------------------ -----------------
7. Dividends
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Final dividend for the year
ended 31 March 2019 of 27p
per share 21,100 - -
Final dividend for the year
ended 31 March 2018 of 26p
per share - 20,257 20,257
Interim dividend for the
year ended 31 March 2019
of 25p per share (2018: 24p) - - 19,482
----------------- --------------- ------------
An interim dividend of 27.0p per share will be paid on 13
December 2019 to shareholders on the register at close of business
on 29 November 2019. The estimated amount of this dividend to be
paid is approximately GBP21.1m and, in accordance with IFRS
accounting requirements, has not been recognised in these
accounts.
8. Share capital
During the period the Company issued 76,862 new ordinary shares
to satisfy the exercise of employee and distributor share
options.
9. Earnings per share
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
The calculation of basic and diluted GBP'000 GBP'000 GBP'000
EPS is based on the following data:
Earnings for the purpose of basic and
diluted EPS 15,191 14,461 33,103
Share incentive scheme charges (net
of tax) 668 890 1,649
Amortisation of energy supply contract
intangible assets 5,614 5,614 11,228
--------------- --------------- ------------
Earnings excluding share incentive
scheme charges for the purpose of adjusted
basic and diluted EPS 21,473 20,965 45,980
--------------- --------------- ------------
Number Number Number
('000s) ('000s) ('000s)
Weighted average number of ordinary
shares for the purpose of basic EPS 78,152 77,988 77,975
Effect of dilutive potential ordinary
shares (share incentive awards) 452 252 335
--------------- --------------- ------------
Weighted average number of ordinary
shares for the purpose of diluted EPS 78,604 78,240 78,310
--------------- --------------- ------------
Adjusted basic EPS(1) 27.5p 26.9p 59.0p
Basic earnings per share 19.4p 18.5p 42.5p
--------------- --------------- ------------
Adjusted diluted earnings per share1 27.3p 26.8p 58.7p
Diluted earnings per share 19.3p 18.5p 42.3p
--------------- --------------- ------------
(1) In order to provide a clearer understanding of the
underlying trading performance of the Group, adjusted basic EPS
excludes: (i) share incentive scheme charges; and (ii) the
amortisation of intangible assets arising on entering into the
energy supply arrangements with npower in December 2013. The
amortisation of intangible assets and share incentive scheme
charges have been excluded on the basis that they represent
non-cash accounting charges. These balances can be derived directly
from amounts shown separately on the face of the condensed
consolidated interim statement of comprehensive income.
10. Financial reporting standards applied for the first time in
current year
Background
IFRS 16 (Leases) was applied for the first time as of 1 April
2019. The effects resulting from the first-time application are
detailed in this section. Details of the nature of the expected
impact of IFRS 16 was set out on pages 103 to 104 of the Company's
Annual Report for the year ended 31 March 2019.
The Company has decided to apply IFRS 16 in modified form
retrospectively for the first time as at 1 April 2019, without
restating the prior-year figures, accounting for the aggregate
amount of any transition effects by way of an adjustment to equity
and presenting the comparative period in line with previous
standards.
The effect that the first-time application of IFRS 16 had on
retained earnings and other comprehensive income in the statement
of comprehensive income in the current period are detailed in the
tables below.
Retained earnings reconciliation IFRS 16
GBP'000 GBP'000
Retained earnings as at 31 March 2019 86,230
--------
Effects of IFRS 16 (26)
of which increase in accumulated depreciation costs (330)
of which increase in accumulated interest costs (59)
of which decrease in accumulated property lease rental
costs 363
Retained earnings as at 1 April 2019 86,204
--------
Impact of IFRS 16 on the Balance Sheet as at 30 September
2019
As at Changes As at
in recognition
30 September 30 September
2019 2019
(unaudited) (unaudited)
Before accounting After accounting
changes changes
GBP'000 GBP'000 GBP'000
Property, plant and equipment 31,325 3,592 34,917
Lease liabilities (2,966) (3,633) (6,599)
Retained earnings 80,942 (41) 80,901
Impact of IFRS 16 on the Statement of Comprehensive Income for
the period ended 30 September 2019
6 months Changes 6 months
in recognition
ended ended
30 September 30 September
2019 2019
(unaudited) (unaudited)
Before accounting After accounting
changes changes
GBP'000 GBP'000 GBP'000
Depreciation (1,753) (225) (1,978)
Interest costs (958) (38) (996)
Property lease rental costs (246) 246 -
Reconciliation of finance lease liabilities to operating lease
commitments
A reconciliation of the operating lease commitments as at 31
March 2019 set out in note 17 of the Annual Report to the opening
finance lease liabilities under IFRS 16 as at 1 April 2019 is set
out below:
GBP'000 GBP'000
Operating lease commitments as at 31 March 2019 3,938
--------
Effects of IFRS 16 (96)
of which discounting (447)
of which other adjustments 351
Lease liabilities under IFRS 16 as at 1 April 2019 3,842
--------
Summary of accounting policy changes - IFRS 16
The adoption of IFRS 16 has resulted in several operating leases
relating to property being recognised on the balance sheet, as the
distinction between operating and finance leases has been
removed.
The Group has recognised right-of-use assets representing its
right to use underlying assets, and corresponding lease liabilities
representing its obligation to make lease payments. Right-of-use
assets have been valued as equal to lease liabilities.
The lease term has been calculated as the non-cancellable period
of the lease contract, except where the Group is reasonably certain
that it will exercise contractual extension options. Operating
lease expenses have been replaced by a depreciation expense on the
right-of-use assets recognised and an interest expense.
Where the interest rate implicit in the lease cannot be readily
determined, the Group's incremental borrowing rate has been
used.
Lease payments for contracts with a duration of 12 months or
less and/or contracts for which the underlying asset is of a low
value have, where appropriate, continued to be expensed to the
income statement on a straight-line basis over the lease term.
The Group has adopted IFRS 16 using the modified retrospective
approach. Consequently, comparatives for the period ended 30
September 2018, and the year-end position as at 31 March 2019, have
not been restated.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FFEFUAFUSEEF
(END) Dow Jones Newswires
November 19, 2019 02:00 ET (07:00 GMT)
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