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Telecom Plus – mixed messages on customer churn

The group says it remains profitable and cash generative, unlike other energy suppliers
November 19, 2019

Telecom Plus (TEP) says that its competitive position has improved since the reduction in energy regulator Ofgem’s price cap on 1 October 2019. The group – an integrated provider of utilities, trading as Utilities Warehouse – is unusual in that it has a supply agreement with nPower, whereby it has a wholesale price for the energy it sells that is pegged to said price cap.

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For the first half to September, customer numbers climbed by 3.9 per cent to 645,306, while total services supplied rose by 8 per cent to 2.6m. True, annualised churn (the rate at which customers have said goodbye) crept up from 11.9 per cent to 12.5 per cent – something attributed to higher energy prices, after Ofgem lifted the price cap back in April. But churn for the broader domestic energy market sits at over 20 per cent. And the group expects its own churn to decline as more customers use it for all of their services. Chief executive Andrew Lindsay says that over 25 per cent of Telecom Plus’s customers currently take all its five core services, with over 40 per cent taking four or more.

Numis expects adjusted pre-tax EPS of 65.5p for the March 2020 year-end, up from 58.7p in FY2019.

TELECOM PLUS (TEP)   
ORD PRICE:1,312pMARKET VALUE:£1.03bn
TOUCH:1,306-1,314p12-MONTH HIGH:1,542pLOW: 1,094p
DIVIDEND YIELD:4.1%PE RATIO:30
NET ASSET VALUE:281p*NET DEBT**:15%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201831119.318.525.0
201935321.119.427.0
% change+14+9+5+8
Ex-div:28 Nov   
Payment:13 Dec   

*Includes intangible assets of £175m, or 224p a share

**Excludes lease liabilities of £6.6m