There is no doubt that fixed-price, multi-utility provider Telecom Plus (TEP) is good for consumers. Low churn, a 95 per cent renewal rate and the Which? Utilities Provider of the Year award are all evidence that customers like what they get. But following a 14 per cent 12-month share price decline one question looms: is this as good an investment as it is a service?
Judging by numbers for the year to March 2018, the answer would be no. Customer numbers rose slowly in the first half of the year before declining in the second half as the pace of energy switching in the wider market picked up. Meanwhile, the high cost of attracting new full-service customers meant decent revenue growth failed to translate to the bottom line.
That said, customer growth has started to tick up again in the current quarter while market trends are moving in Telecom Plus’s favour. The prospect of an energy price cap is likely to increase the speed of customer growth, while the group’s contract with NPower means its margins will be protected. That’s what broker Peel Hunt expects to accelerate pre-tax profits and EPS in the 2019 financial year to £57m and 58.3p respectively (from £54.3m and 55.3p in 2018).
| TELECOM PLUS (TEP) | ||||
| ORD PRICE: | 1,032p | MARKET VALUE: | £809m | |
| TOUCH: | 1030-1034p | 12-MONTH HIGH: | 1,292p | LOW: 1,008p |
| DIVIDEND YIELD: | 4.8% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 290p* | NET DEBT: | 5% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 660 | 34.7 | 37.7 | 35.0 |
| 2015 | 729 | 42.1 | 40.6 | 40.0 |
| 2016 | 745 | 35.1 | 32.8 | 46.0 |
| 2017 | 740 | 40.9 | 38.0 | 48.0 |
| 2018 | 793 | 41.0 | 38.8 | 50.0 |
| % change | +7 | +0.3 | +2 | +4 |
| Ex-div: | 12 Jul | |||
| Payment: | 3 Aug | |||
| *Includes intangible assets of £185m, or 236p a share | ||||
