Discount utility provider Telecom Plus has beaten City forecasts by reporting record pre-tax profits of £30.7m, and chief executive Andrew Lindsay is expecting double-digit earnings growth this year, too. And, with the company's strong cash flow wiping out debt, the board has lifted dividends by 23 per cent and is committing to a payout ratio of between 75 and 80 per cent of net earnings in the future.
Profits were driven up by an 18 per cent rise in the number of services provided by Telecom Plus to its 415,000 customers, a trend that is expected to continue. And more customers are now taking up more services with the average number of services per customer rising from 3.43 to 3.63. In fact, gold members – those who take up at least four services – now account for a third of all customers, and Mr Lindsay expects this segment to account for almost half of all customers by 2014. Gold members are less likely to take their business elsewhere, which has reduced churn and improved the quality of the revenue base.
Analysts at Brewin Dolphin have left 2013 pre-tax profits forecasts unchanged at £33.5m, giving EPS of 36.8p, although 2014 estimates have been raised by 10 per cent to £40m and 44.4p, respectively.
TELECOM PLUS (TEP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 695p | MARKET VALUE: | £488m | |
| TOUCH: | 695-698p | 12-MONTH HIGH: | 804p | LOW: 472p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 89p* | NET CASH: | £0.9m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 186 | 16.8 | 17.7 | 14.0 |
| 2009 | 278 | 22.5 | 24.2 | 17.5 |
| 2010 | 369 | 18.2 | 19.7 | 22.0 |
| 2011 | 419 | 27.5 | 30.1 | 22.0 |
| 2012 | 472 | 30.7 | 33.8 | 27.0 |
| % change | +13 | +12 | +12 | +23 |
Ex-div: 18 Jul Payment: 3 Aug *Includes intangible assets of £6.7m, or 10p a share | ||||
