TelecomPlus IMS

TELECOMPLUSPLC

Trading as the Utility Warehouse, Telecom Plus PLC provides a range of services to households and small to medium sized businesses. The Company is engaged in the supply of fixed telephony, mobile telephony, gas, electricity and Internet services through independent distributors. I have a holding in my growth portfolio (epic code: TEP).

TelecomPlus issued their third quarter IMS today and stated that net growth during the period was 18,439 customers and 81,429 services, compared to 11,356 and 55,488 respectively for last year. 

They commented on the wet and mild winter weather, saying that whilst this will reduce the average amount of energy used by their members (thereby reported revenues), it will not have a material impact on profitability for the year.  Management are confident of reporting full year profits in line with consensus market expectations, which looks to be 46p.

They intend to recommend a final dividend of 19p per share that will bring the total dividend for the year to 35p, an increase of 13% over last year.

They also mentioned that due to the acquisition of Gas Plus Supply Ltd and Electricity Plus Supply Ltd for £218m (£21.5m deferred for three years) being funded by a combination of bank debt and a placing of new shares they expect to have significant net borrowings for the next few years.  My estimate is that it will take about 4-5 years for their free cash flow less their dividend payments to pay down this acquisition debt.  See here for details of the acquisition.

Despite the growth so far, this is a company with still substantial opportunities - although they are the largest independent supplier of energy to the domestic customer, their market share is still only 2%.  They are though priced for perfection on a 41x multiple on 2014 expected earnings.