News that British Gas owner Centrica (CNA) is set to scrap standard variable tariffs, the energy contracts at the heart of the government’s price cap debate, sent shares in Telecom Plus (TEP) down 4 per cent on the day before its interim results announcement. Consumer-friendly moves by the big energy providers undermine Telecom Plus's pitch as a provider of fair and consistent prices. Price cap or not, the company is making progress. In the six months to September 2017, electricity customer churn fell to just 1 per cent a month, despite much greater switching in the wider industry.
Telecom Plus is encouraging customers to sign up to its full suite of services (energy, phone/broadband and mobile) by offering to install homes with LED light bulbs. This helped send the proportion of these ‘double gold’ customers to 22 per cent in the reported period, from 18 per cent 12 months ago. However, customer acquisition costs were below expectations at £9.2m, which could mean these premium customers are not arriving as fast as hoped. The number of new members gained was down from 5,450 in the prior comparable period to 5,265.
Gross margins have risen due to the lower-than-expected new customer costs, meaning pre-tax profit came in ahead of expectations. Broker finnCap now expects pre-tax profit of £55m in the year to March 2018, giving EPS of 54.8p (from £53.2m and 53p in FY2017).
| TELECOM PLUS (TEP) | ||||
| ORD PRICE: | 1,214p | MARKET VALUE: | £952m | |
| TOUCH: | 1212-1216p | 12-MONTH HIGH: | 1,342p | LOW: 1,035p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 291p* | NET DEBT: | 26% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 291 | 17.8 | 16.7 | 23.0 |
| 2017 | 299 | 19.1 | 17.7 | 24.0 |
| % change | +3 | +7 | +6 | +4 |
| Ex-div: | 30 Nov | |||
| Payment: | 15 Dec | |||
| *Includes intangible assets of £190, or 242p a share | ||||
