Half-year results from utility group Telecom Plus (TEP) were overshadowed by news that it's acquiring two energy supply businesses from Npower for £218m. The group - which provides gas, electricity, fixed-line telephony, mobile and broadband internet services - saw its shares soar by a quarter on the news.
The deal will be funded by a £100m debt drawdown and a £130m fund raising (a placing and open offer, priced at 1,475p a share). The move should be materially earnings enhancing in the first full year - on a pro forma basis it would have added £9.3m to 2013's £34.6m pre-tax profit - and will boost margins in the energy services division, which generates more than 80 per cent of group revenue. Npower’s chief executive, Paul Massara, said it will mean “Britain is well on the way to having a Big seven rather than a Big six” group of energy suppliers
Operationally, Telecom Plus has benefited from the negative publicity arising from big energy hikes at the big six players - it kept its price rises below the average and customer growth continued to accelerate, with more than 12,000 net new customers in October. A final dividend of 19p a share is also proposed, which would bringing the total full-year dividend to 35p.
Brokers' estimates are set for significant revision although, prior to the Npower deal, Peel Hunt was expecting full-year EPS of 44.9p (2013: 38.5p).
TELECOM PLUS (TEP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,900p | MARKET VALUE: | £1.35bn | |
| TOUCH: | 1,896-1,900p | 12-MONTH HIGH: | 1,959p | LOW: 855p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 48 | |
| NET ASSET VALUE: | 98p | NET DEBT: | 2% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 210 | 12.1 | 13.5 | 13.0 |
| 2013 | 246 | 12.6 | 14.3 | 16.0 |
| % change | +17 | +4 | +6 | +23 |
Ex-div:27 Nov Payment:16 Dec | ||||
