Following last month's decent trading update, these solid half-year figures from Telecom Plus (TEP) - which provides bundled utility services - held few surprises. Indeed, the group clocked up five consecutive quarters in which the number of services sold to customers grew by more than 50,000.
Telecom Plus, which trades under the Utility Warehouse brand, tends to generate higher margins from customers that take more than one service. And, significantly, the average number of services per residential customer rose from 3.53 to 3.72. That was boosted by persuading over 55 per cent of new customers to take at least four major services, compared with 37 per cent last year. "We've focused on getting our distributors to sell bundles, which is beginning to reap benefits," says Andrew Lindsay, chief executive.
Still, the group's most popular service, energy, also generates the thinnest margin and that, says Mr Lindsay, has hit the overall gross margin. He's confident, however, that a ratchet agreement that's in place with nPower, its wholesale energy supplier, will improve margins in the next fiscal year. The group also lowered its bad debt levels through targeting better-quality customers, although savings there were partially offset by costs from employing more customer service staff.
Broker Peel Hunt expects full-year adjusted pre-tax profit of £34m, giving EPS of 37.7p (from £30.7m and 34.1p in 2012).
TELECOM PLUS (TEP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 866p | MARKET VALUE: | £619m | |
| TOUCH: | 864-866p | 12-MONTH HIGH: | 902p | LOW: 604p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 87p | NET CASH: | £0.7m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 162 | 11.1 | 12.3 | 10.0 |
| 2012 | 210 | 12.1 | 13.5 | 13.0 |
| % change | +30 | +9 | +10 | +30 |
Ex-div: 28 Nov Payment: 17 Dec | ||||
