REG - Telecom Plus PLC - Final Results for the year ended 31 March 2024
18/06/2024 07:00
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RNS Number : 7711S Telecom Plus PLC 18 June 2024
Embargoed until 07.00 18 June 2024
Telecom Plus PLC
Final Results for the year ended 31 March 2024
"Continuing strong customer growth with record profits and dividend"
Telecom Plus PLC (trading as Utility Warehouse and UW), the UK's only
supplier of bundled household utility services, today issues its final results
for the year ended 31 March 2024.
Financial Highlights
● Revenues of £2,039.1 million (2023: £2,475.2m)
● Gross profit up 16.0% to £355.2 million (2023: £306.2m)
● Adjusted pre-tax profit up 21.5% to £116.9 million, slightly above
market expectations (2023: £96.2m)
● Adjusted EPS up 9.9% to 109.0p (2023: 99.2p)
● Statutory pre-tax profit up 17.6% to £100.5
million (2023: £85.5m)
● Statutory EPS up 3.8% to 89.9p (2023: 86.6p)
● Net debt to adjusted EBITDA ratio at 0.9x
● Full year dividend up 3p to 83p (2023: 80p) per share
Operational Highlights
● The business continues to perform strongly against the backdrop of a
normalised energy market, passing the 1 million customer milestone in Q4
● Organic customer growth of 14.1%, taking our total base to 1,011,489
(2023: 886,579)
● Service numbers increased by 328,949 to 3,127,097 (2023: 2,798,148)
● Insurance policies up 38% to 139,109 (2023: 100,590)
● Ranked "Best Value for Money" and ""Most Likely to be Recommended"
in Uswitch 2023 Energy Awards; rated "Excellent" on Trustpilot
● Increase in Partner numbers to 68,251 (2023: 59,842) reflecting
ongoing strong demand for our income opportunity as cost of living pressures
continue
Outlook
● With our recent strong rate of customer growth continuing into FY25,
we are confident of delivering organic net customer growth between 12-14% in
FY25
● Adjusted pre-tax profit for FY25 is expected to be between
£124m-£128m
● Ongoing favourable environment for recruitment of new Partners,
supported by both short and long-term drivers
● Recently strengthened multiservice customer proposition and
continuing rational marketplace underpin our confidence in doubling the
business to two million customers over the medium term
Stuart Burnett, Co-CEO, said:
"We are delighted to have delivered another year of record customer numbers,
record profits and record returns to shareholders - all through helping
households to stop wasting time and money. Our unique multiservice model
means we can continue to provide market-leading savings and sustainably
outcompete within each of our core markets. At the same time, the additional
income opportunity we provide to Partners for recommending UW to their friends
and family has never been more in demand.
With the business in such good health, and having passed through the 1 million
customer milestone, our current rate of growth places us firmly on track to
double the size of the business to two million customers over the medium term,
with a commensurate increase in profitability and shareholder returns."
There will be a virtual meeting for analysts today at 9.00am, accessible via
https://brrmedia.news/TEP_FY24
For more information please contact:
Telecom Plus PLC
Stuart Burnett,
Co-CEO
020 8955 5000
Nick Schoenfeld, CFO
Peel Hunt
Dan Webster / Andrew
Clark 020
7418 8900
Deutsche Numis
Mark Lander / Joshua
Hughes
020 7260 1000
For investor relations:
CEN Advisory
Matthew
Walker 07557
224386
matthew.walker@uw.co.uk
For media relations:
Lansons
Ed
Hooper
07783 387713
utilitywarehouse@lansons.com
About Telecom Plus PLC ("Telecom Plus"):
Telecom Plus, which owns and operates Utility Warehouse (UW), is the UK's
leading multiservice utility provider, offering a wide range of essential
household services - energy, broadband, mobile and insurance.
Customers benefit from the convenience of a single monthly bill, consistently
good value across all their utilities and exceptional service levels.
Customers sign up through a national network of local UW Partners, who
recommend UW's services to friends, family and people they know by
word-of-mouth.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP LN). For
further information please visit telecomplus.co.uk
LEI code: 549300QGHDX5UKE58G86
Cautionary statement regarding forward-looking statements
This Announcement may contain "forward-looking statements" with respect to
certain of the Company's plans and its current goals and expectations relating
to its future financial condition, performance, strategic initiatives,
objectives and results. Forward-looking statements sometimes use words such as
"aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal",
"believe", "seek", "may", "could", "outlook" or other words of similar
meaning. By their nature, all forward-looking statements involve risk and
uncertainty because they are based on numerous assumptions regarding the
Company's present and future business strategies, relate to future events and
depend on circumstances which are or may be beyond the control of the Company
which could cause actual results or trends to differ materially from those
made in or suggested by the forward-looking statements in this Announcement,
including, but not limited to, domestic and global economic business
conditions; market-related risks such as fluctuations in interest rates; the
policies and actions of governmental and regulatory authorities; the effect of
competition, inflation and deflation; the effect of legislative, fiscal, tax
and regulatory developments in the jurisdictions in which the Company and its
respective affiliates operate; the effect of volatility in the equity, capital
and credit markets on profitability and ability to access capital and credit;
a decline in credit ratings of the Company; the effect of operational risks;
an unexpected decline in sales for the Company; any limitations of internal
financial reporting controls; and the loss of key personnel. Any
forward-looking statements made in this Announcement by or on behalf of the
Company speak only as of the date they are made. Save as required by the
Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the
Listing Rules or by law, the Company undertakes no obligation to update these
forward-looking statements and will not publicly release any revisions it may
make to these forward-looking statements that may occur due to any change in
its expectations or to reflect events or circumstances after the date of this
Announcement.
Chairman's Statement
I am pleased to report another exceptional performance during FY24 with
customer and service numbers continuing to show strong organic growth, and
with record profits and dividends.
Adjusted pre-tax profits increased by 21.5% to £116.9m (2023: £96.2m),
slightly above market expectations, reflecting the continuing double-digit
growth in our customer and service numbers, and a modest tailwind from higher
energy prices in Q1 (compared with the remainder of FY24).
The Ofgem energy price cap during FY24 averaged £2,140 (2023: £3,100). This
significant reduction led to a fall in overall revenues for the business to
£2,039.1m (2023: £2,475.2m) notwithstanding a significant increase in
service numbers and higher revenues from non-energy services. These factors
were also responsible for our higher gross profit margin, which at 17.4%
(2023: 12.4%) is returning towards historically normal levels, and the 16.0%
increase in our gross profit to £355.2m (2023: £306.2m). Adjusted earnings
per share for the year rose by 9.9% to 109.0p (2023: 99.2p). Statutory pre-tax
profits rose by 17.6% to £100.5m (2023: £85.5m), and statutory EPS rose by
3.8% to 89.9p (2023: 86.6p).
Our strong organic growth continued during the year, with customer numbers
increasing by 14.1% to 1,011,489 (2023: 886,579) and service numbers rising by
328,949 to 3,127,097 (2023: 2,798,148).
Families across the UK faced strong inflationary pressures throughout the
year, and we remain proud of the role we played in helping both customers and
Partners navigate the challenges this created. Our unique business model
shares the benefits we derive as an integrated multiservice supplier with our
customers (by giving them sustainable long-term savings on their essential
household services), whilst our Partner opportunity offers hard-working
people, from all walks of life, the ability to earn an additional long-term
income (which helps offset their rising cost of living whilst building
financial freedom). As a result we are seeing ongoing strong demand in both
these areas, with our total Partner numbers increasing by 14.1% to 68,251.
I am very proud of the commitment and achievements of our employees without
which this record Company performance could not have been achieved. Amongst
other accolades, we were awarded "Best Value for Money" and "Most likely to be
Recommended" by Uswitch in their 2023 Energy Awards, came out top in the
latest Which? league table of Energy Suppliers, were rated 5 stars for
customer service by Uswitch in their 2024 Broadband Rankings, and achieved an
"Excellent" rating on Trustpilot. This positive recognition reflects the
outstanding customer service delivered by our colleagues, as well as the great
value for money of our customer offering and the dedication of our Partners.
Sustainability
Our people and the communities we serve are at the heart of our strategy. As a
company, we are culturally focussed on our sustainability - not just in our
approach to building long-term relationships with our customers and Partners
and supporting our employees, but also in ensuring that we are doing business
responsibly. This includes considering our wider impact on the environment
around us and supporting the UK's transition to net zero.
I am pleased with the further progress we have made this year towards
improving our sustainability, including leveraging our updated E.ON contract,
which enables UW to develop products that will better serve our customers as
the UK moves towards net zero.
On our diversity and inclusion agenda, not only have we exceeded our targets
for management roles held by women and employees from ethnically diverse
backgrounds, we have also developed and launched our UW Belonging groups, with
six such groups created during FY24. We also conducted a Diversity &
Inclusion audit, the findings of which will help us shape the future of this
agenda at UW, ensuring we create an environment where everyone feels they
belong and can develop to their full potential.
As families across the UK continue to face ongoing cost of living challenges,
we are proud of the role we play in helping our customers and Partners
navigate these sustainably, through a combination of savings on their
household services (for customers) and an additional income to help offset the
rising cost of living (for Partners). I am delighted that we have been able to
quantify the positive socio-economic impact of the UW Partner opportunity,
with 86% of the Partners who responded to our survey saying that being able to
earn flexibly through UW had improved their quality of life.
Looking ahead, our FY25 ESG objectives demonstrate the Company's continued
commitment to improving its sustainability and I look forward to delivering
further progress over the year ahead. Further detail of the Company's
sustainability agenda and ongoing progress is set out in our ESG and
Sustainability Reports.
Corporate Governance
The UK Corporate Governance Code (the "Code") encourages the Chairman to
report personally on how the principles in the Code relating to the role and
effectiveness of the Board have been applied.
As a board we are responsible to the Company's shareholders for delivering
sustainable shareholder value over the long term through effective management
and good governance. A key role of mine, as Non-Executive Chairman, is to
provide strong leadership to enable the Board to operate effectively.
We believe that open and rigorous debate around key strategic issues, risks,
and opportunities faced by the Company is important in achieving our
objectives and the Company is fortunate to have non-executive directors with
diverse and extensive business experience who actively contribute to these
discussions.
Further detail of the Company's governance processes and compliance with the
Code is set out in the Corporate Governance Statement in the Annual Report.
Dividend and Capital Allocation
The Company continues to deliver strong underlying cash generation,
notwithstanding our ongoing double-digit organic customer growth.
We are proposing a final dividend of 47p (2023: 46p), bringing the total for
the year to 83p (2023: 80p). This will be paid on 25 August 2024 to
shareholders on the register at the close of business on 2 August 2024 subject
to approval by shareholders at the Company's AGM which will be held on 13
August 2024. The Company also completed a share buyback of £10.2 million
during the year, bringing the total return to shareholders for FY24 to 87.1%
of adjusted net income.
The Board adopts a disciplined approach to the allocation of capital, with the
overriding objective being to enhance long-term shareholder value, whilst
maintaining an appropriate level of gearing; this means retaining sufficient
resources within the business to ensure that our organic growth is not
constrained by lack of capital. We intend to continue following a progressive
distribution policy, returning 80%-90% of adjusted net income to shareholders
over the medium term, with the dividend growing in line with inflation, and
with the balance being allocated to buying back shares.
Board Changes
As previously announced last autumn, Andrew Lindsay is stepping down as Co-CEO
and from the Board after 16 years with the company. The current Co-CEO
structure that has been in place for the past two years provides a clear
succession path, and Stuart Burnett will assume overall responsibility for the
business as sole CEO from our forthcoming AGM in August. Andrew will remain
with the business on a part-time basis over the medium term, with a focus on
supporting and further growing our Partner community.
We are delighted to welcome Bindi Karia as a new independent non-executive
director to the Board. Ms Karia will join the Board immediately following the
AGM. We expect her extensive experience, particularly in technology and
innovation (where she has held senior board, investment, and advisory roles
across the technology sector in Europe), to be of considerable value over the
coming years.
Outlook
Sustainable Growth
As the only fully-integrated supplier in the UK spanning four essential
household markets (energy, broadband, mobile and insurance), our one-stop-shop
proposition delivers long-term savings funded by the inherent efficiency of
our bundled multiservice proposition, with significant and growing appeal.
This sustainable cost advantage sets us apart from our competitors, each of
whom are focussed on individual market segments; and with 97 out of every 100
UK households taking their essential home services from these other suppliers,
our organic growth opportunity has barely been tapped.
Since autumn 2021, over two and a half years ago, we have grown our customer
numbers at an annualised compound rate of over 18%, spanning a period during
which energy commodity prices increased steeply and then fell sharply, before
stabilising at or around current levels. During the period of steeply rising
energy prices, our annualised customer growth rate was in excess of 20%
(albeit on a smaller opening customer base), whilst during the periods of both
falling and now broadly stable prices our annualised growth rate has been
consistently around 14%. That we have been able to deliver such strong
double-digit growth during a rising, falling and stable environment for energy
prices gives us considerable confidence in our ability to continue doing so in
future.
Regulatory Environment
We fully endorse the more responsible regulatory environment for retail energy
suppliers now in force, an outcome which we spent many years lobbying for. The
combination of new capital adequacy requirements being imposed upon suppliers
and the low regulatory EBIT margin allowed by Ofgem, make it extremely
challenging for any standalone energy supplier to sell below the level of the
price cap and earn an acceptable return on capital. As a result, we are
uniquely positioned to outcompete over the longer term increasing our market
share both sustainably and profitably.
Against that backdrop, and with energy prices having fallen significantly from
their peak, rational competition has returned. All the major energy suppliers
are actively seeking to acquire new customers, with a marked increase in
advertising but, critically, based upon sensible pricing strategies. In this
competitive marketplace, it has been encouraging to see our recent growth rate
continuing into the new financial year, consistent with our guidance range set
out below.
Energy Prices
The average energy price this year is expected to fall by around 20% during
the current year compared with FY24 (from £2,140 to around £1,650); this
creates a modest headwind by reducing our average revenue per customer.
However, the negative impact on our profitability from these lower energy
prices will be offset by improving our operating leverage and selectively
increasing our non-energy pricing, whilst maintaining a market-leading
competitive position across all our services.
Looking forward, we retain significant levers to grow our EBITDA per customer
over time, including further multiservice pricing optimisation, higher service
penetration, and improved operating leverage.
Guidance
We remain focussed on doubling the size of the business to over two million
customers, with the following medium-term internal base case planning
assumptions:
* annual percentage customer growth is expected to remain within the 10-15%
range, with 12-14% organic customer growth expected during FY25;
* adjusted pre-tax profits are expected to increase broadly in line with
customer growth, with Adjusted PBT for FY25 expected to be within a range of
£124m to £128m; and
* excess capital will be returned to shareholders through a combination of
steadily increasing dividends and buying back shares.
Both our people and our technology are vital to delivering an exceptional UW
experience to our customers, and we will continue to invest in strengthening
our teams at all levels as we scale, whilst evolving and improving our
systems. It has been exciting to see our Partners recommending our strong and
differentiated consumer proposition to a record number of households,
delivering significant and high quality organic growth. With UK households
facing continuing challenges and uncertainties over the coming year, and with
continuing uncertainty around the ability of households to effectively fund a
comfortable retirement, we anticipate that demand from new Partners joining UW
to earn a valuable and secure residual income stream will remain strong.
I would like to thank my boardroom colleagues for their support and all our
staff and Partners for their energy, drive and hard work through another
exciting year of growth, and the contribution they are making to the ongoing
strong performance of the business.
Having broken through the one million customer milestone during FY24, we are
now firmly on track to achieve our next milestone of two million customers
over the medium term, and we look forward to making significant further
progress towards this over the current year.
Charles Wigoder
Non-Executive Chairman
18 June 2024
Co-Chief Executives' Review
The year in summary: record customers and profits
Throughout our 25-year history, we have consistently helped UK households to
stop wasting time and money on their essential services, which now encompass
energy, broadband, mobile and insurance. Our unique multi-service proposition
continues to demonstrate its inherent ability to deliver exactly what
financially stretched and time-poor households are looking for, namely
savings, simplicity and service. At the same time, our word of mouth Partner
model is increasingly 'of its time', enabling people to earn a part-time
income which solves their short-term cost pressures whilst building
longer-term financial freedom. Together, these provide the sustainable
competitive advantage which enabled us to deliver 14.1% customer growth in
FY24 and pass the one million customer milestone, putting us firmly on track
to double the size of the business to two million customers over the medium
term.
We are now back in a normalised energy market, with rational competition
returning and robust regulation ensuring all suppliers are operating
sustainably. Falling wholesale energy prices throughout the year resulted in
the Ofgem SVT price cap reducing from Q2 onwards, providing some relief for
households. It is testament to the strength of our multiservice model that,
despite these falling prices, we were able to deliver a 14.1% increase in
customer numbers and a commensurate increase in profits, demonstrating the
ability of our business model to deliver in all environments.
Whilst the dynamics in each of our markets constantly vary, we continually
focus our efforts on strengthening our core multiservice proposition and
supporting our Partner community.
During the year, we continued to innovate and evolve our multiservice customer
offering, launching our first Fixed energy tariff for 2 service customers
(alongside our market-leading 3 service Fixed energy tariff), improving our
mobile offering through the launch of our first 5G tariff, building out
CityFibre as a full fibre broadband partner, and further developing our
insurance product offering and sales journeys, with the number of customers
taking insurance increasing by 38.3% to 139,109 (2023: 100,590).
Confidence in the sustainable strength of our customer proposition continues
to build amongst our Partners which, combined with ongoing cost of living
pressures, is resulting in more and more people turning to UW to bolster their
incomes. There are now over 20 million people in the UK with a second or third
part-time income - a trend which is driven by changing societal attitudes
towards work, plus long-term macro-economic developments around the need to
build a sustainable retirement income. The total number of UW Partners
increased by over 14% during the year to 68,251, underpinning the
sustainability of our current high-quality growth with our Partners being a
unique route-to-market for signing-up high quality customers (i.e.
multiservice homeowners) in significant volumes.
Rather than seeking growth at any cost, we take pride in the consistent
disciplined approach we have adopted to building a long-term, sustainable and
consistently profitable business. In a year characterised by falling energy
prices and the return of normalised energy competition, alongside
inflation-beating price rises in our other core markets, we have concentrated
our efforts on delivering our three key business priorities:
● Evolving our distinct company culture
● Delivering a seamless multiservice customer experience
● Bringing more multiservice homeowner customers on board
We are delighted to have made significant progress against these priorities,
laying the foundations for further progress in the years ahead.
Company culture
● We codified our culture and invested in developing our leaders
through the leadership fundamentals programme, coaching, and team
effectiveness courses. Our leadership engagement score is above target at 82%.
We also enhanced the working environment for our customer-facing teams by
introducing a new workforce management system allowing us to better predict
call volumes and resource requirements, decreasing the number of people
needing to work on Saturdays and allowing dynamic shift swaps.
Customer experience
● Market leading customer service is vital to our success and the
confidence our customers and Partners place in us. We invested in digital
self-service and "right first time" query resolution through our WhatsApp
channel which effectively uses AI. As well as continuing to invest in our
Customer Relationship Management (CRM) systems we significantly improved our
customer support capability by introducing 'one-way' video, allowing our
advisors to understand and resolve energy and broadband queries faster by
enabling them to see the problem the customer is experiencing in their home
first hand.
Multiservice customers
● We continued our focus on acquiring multiservice homeowner
customers, including through our Fixed energy tariffs, which are only
available to customers taking two or more services. Our customer numbers grew
by over 14%, enabling us to achieve the historic milestone of reaching one
million customers. Overall service numbers increased by 11.8% to 3.1 million.
This is an incredibly exciting time for the business. The marketplaces in
which we are operating have now matured, enabling our unique business model to
sustainably outcompete and build market share through offering households what
they want - long-term savings on their essential household services, and an
additional income from recommending those savings to their friends and family.
As we look ahead, we remain confident of delivering another year of profitable
double-digit customer growth as we work towards doubling the size of the
business to two million customers over the medium term.
Our business model
We have a unique, self-reinforcing and long-term business model. As the UK's
only multiservice utility provider, we offer energy, broadband, mobile and
insurance services, as well as a cashback card which provides extra savings at
a wide range of retailers. The cashback available to our customers increases
with the number of services taken.
We bundle essential home services together to give UW customers peace of mind,
sustainable long-term savings, a simple single monthly bill, and award-winning
customer service; these ensure our customers stay with UW for far longer than
our competitors. The combination of higher revenues per customer (from taking
multiple services) and lower churn generate a significantly higher average
customer lifetime value.
By having a single set of central overheads for our multiple revenue streams,
we are able to make substantial cost savings due to operating efficiencies.
Therefore we have a sustainable, structural cost advantage which enables us to
offer the best value across our range of services and offer significant
savings year after year.
Our Partner network gives us a unique way of acquiring hard-to-reach
multiservice homeowner customers. The perceived effort of switching multiple
services can be high amongst consumers, resulting in conventional advertising
approaches typically failing to successfully convert customers to a
multiservice proposition. In contrast, a conversation with a trusted Partner
can provide first-hand reassurance and explanation of the switching process -
often based on the Partner's personal experience - thus helping to overcome
the natural inertia associated with switching multiple essential household
services simultaneously. As well as being trusted, our Partners benefit from
referring their friends and families to UW's truly compelling customer
proposition comprising market leading savings, award-winning customer service
and the simplicity of a single bill and app.
This approach enables us to successfully grow our multiservice customer base
in a way that other customer acquisition strategies cannot replicate.
Delivering higher profits and double digit customer growth in rising, falling
and/or stable energy price environments
When energy prices are rising/higher, we have additional margin available to
deploy in acquiring new customers, making our new customer proposition
relatively stronger, and our growth rate correspondingly higher - with our
competitiveness further helped by the fact that during these periods it is
more expensive for other suppliers to offer attractive fixed acquisition
tariffs. As a result, we would expect to see faster organic customer growth
during such periods (as achieved in FY23).
And of course, when energy prices are falling/lower, as has been the case over
the last year, the converse is true, but with customer growth in FY24 still
comfortably in double digits.
Unique Multiservice Bundle
We enable customers to choose the essential services they want and bundle them
together to create a unique multiservice proposition. These include energy,
broadband, mobile and insurance services as well as a pre-paid cashback card.
These bundles provide:
- Simplicity: a single simple bill for all their home services;
- Savings: compared with the prices they were previously paying; and
- Service: an easy to use customer app backed up by award-winning
support teams.
By offering customers the ability to receive all their essential home services
on a single monthly bill, and manage them on a single app, we deliver a
straightforward and cost-effective experience. The more services customers
take from us, the more they save. Annual savings average over £300 for
customers taking all four services, with additional average savings of over
£160 per year available to regular users of the cashback card.
A key component of our model is securing high quality and reliable wholesale
services from established providers, which we then bundle together for our
customers' benefit. We source our energy from E.ON, access Openreach and
CityFibre broadband via PXC, and we utilise the EE network for mobile
services. We have also established insurance relationships with major insurers
alongside with our own insurance company, UWI.
Unique structural cost advantage
Our unique multiservice customer proposition allows customers to bundle many
of their essential household services together with us. As a result, we
receive up to four revenue streams from each of our customers but have just
one single back office supporting all the services we provide to them. This
gives us an inbuilt and enduring cost advantage that our competitors have been
unable to replicate and which we share with our customers year-on-year through
competitive prices.
This long-term, fair pricing approach, enhanced by top-rated customer service
and the convenience of having one bill, one account, and one app to manage all
their household services, builds loyalty amongst our customers to our brand;
as a result, our typical homeowning customers display below-market rates of
churn and bad debt, compounding our cost advantage.
A unique word-of-mouth model that creates earning opportunities
The key to acquiring new multiservice customers is our unique and
hard-to-replicate word-of-mouth acquisition model. Our network of over 68,000
Partners is motivated by the opportunity to earn additional income in the
context of continuing cost of living pressures, the satisfaction of helping
people to save money on their essential services, the need to save for
retirement, and a long term structural trend towards multiple incomes which
now comprises over 20 million individuals in the UK.
Our Partners receive a monthly commission based on the services being used by
the customers they have referred, with the opportunity in some cases to choose
to receive a prepayment of some of this future commission as a lump sum. As
Partners refer more people to UW who then sign-up as customers and as more new
Partners are added to their teams, their income stream can continue to grow,
creating truly life-changing potential earnings opportunities. As customers
benefit from exceptional value, great service, and a more convenient way of
buying their essential household services, and Partners can build a valuable
residual income stream, there is a genuine alignment of interests between our
Partners, customers and UW.
Improvements to our multiservice bundles
During the year we continued to make important improvements to our bundles to
ensure our loyal customers continued to receive a high quality and simple
service:
i) We re-launched fixed tariffs as part of our energy proposition and made a
new fixed tariff available to customers taking 2 services (in addition to our
existing fixed tariff offering for customers taking 3 or more services).
ii)We improved our mobile offering by launching a new mobile tariff bringing
5G to our customers for the first time.
iii) We improved our fibre broadband proposition by adding CityFibre, via
their existing relationship with PXC, as the largest independent full fibre
network in the UK covering over 3 million homes.
iv) We made on-going improvements to our unique Cashback Card proposition,
including offering Google Pay functionality and adding major new retailers
including Aldi, a leading budget supermarket, and IKEA, one of the nation's
favourite furniture stores.
Energy
After the turmoil seen in the energy market a few years ago, we have now seen
stability return, allowing the removal of most government interventions by the
end of the year, including the Energy Price Guarantee and the Market
Stabilisation Charge. In this more stable environment we continued to grow
strongly, increasing the number of energy services we supply from 1,522,350 to
1,678,404 over the year.
The Ofgem Price Cap was set at £3,280 at the start of the year, with the EPG
reducing the cost to residential customers to £2,500. The cap fell to a low
of £1,834 for the Oct - Dec price cap period, rising slightly to end the year
at £1,928.
During this period, we have seen a gradual return of fixed price acquisition
tariffs to the market and switching increase steadily. As a multiservice
supplier, we have been able to offer extremely competitive fixed energy
tariffs as part of our multiservice bundles funded by a combination of
re-investing some of the margin we earn from supplying the broadband, mobile
and/or insurance services that our customers also take from us, and the
operational cost advantage we enjoy as an integrated multi-utility supplier.
We were pleased to receive the highest overall total score on the Which?
Energy Satisfaction Survey.
In October, we refined our Wholesale Services and Supply Agreement with E.ON,
ensuring UW is in a strong position to compete effectively over the years
ahead. Importantly, the updated agreement provides us with greater
flexibility, enabling us to develop and launch a wider range of energy
products - for example a broader set of attractively priced fixed tariffs to
both the residential and small business markets. The amended contract also
provides a framework for UW to develop innovative 'time of use' tariffs
(suitable for EV charging and home generation and storage).
We maintained our position at the forefront of the smart meter rollout
programme, working with Calisen to deliver our Ofgem target. We are now at
over 70% penetration against a market average of 60% and we remain fully
committed to delivering further progress on this vital element of the UK's
transition to net zero.
Ofgem remains focussed on its programme of retail market reform: through a
series of market compliance reviews, it is tightening up on unsustainable
supplier practices, and is currently consulting on numerous topics relating to
Price Cap allowances and debt to ensure supplier sustainability. In lifting
the ban on acquisition tariffs later this year Ofgem are seeking to strike a
balance between ensuring market sustainability and encouraging rational
competition between suppliers. We do not expect this to significantly change
the overall competitive market dynamics, and expect our innovative,
sustainable multiservice proposition to continue to benefit.
Broadband
The broadband market remains highly competitive although switching levels
remain low. With many people still working from home at least part-time,
there remains an added reliance on broadband and WiFi making many consumers
fear switching. This reluctance to switch has tempered our broadband growth,
although we are pleased to have increased our broadband service numbers to
374,792 over the course of the year.
We are optimistic that the imminent retirement of old legacy copper broadband
services in favour of full fibre broadband will give many consumers a reason
to switch, and we are already seeing around 48% of new customers now taking a
full fibre service.
At our Amplify event in September, we announced the launch of CityFibre which
added an additional 3 million properties to our addressable full fibre
market. To support this launch we organised a number of 'town takeovers'
where Partners worked together in areas where full fibre had recently been
made available, with more localised campaigns being planned.
Unlike most major broadband providers, we do not impose 'in contract price
rises' for broadband customers, and we applied a lower price increase to those
who are not in contract compared with most other leading suppliers, increasing
our relative competitive position. With consumers still focused on a reliable
service, we were pleased to be voted 4th in Which? 2024 Best Broadband Survey,
and with our WiFi home hub retaining its Which? Best Buy status.
Mobile
The trend in the mobile market continues to be led by 'SIM only' plans with
many customers choosing to keep their handsets for longer, making our simple
sim only offering very attractive. Our competitive and straightforward
proposition has led to further strong growth in our mobile business of over
18%, ending the year with 466,216 services.
We introduced 5G on our new Unlimited+ tariff making it one of the best value
unlimited deals in the UK, delivering 99.6% population coverage on the EE
network. We also increased the amount of data on our Essentials tariff from
5GB to 8GB making it more suitable and competitive for many less intensive
mobile users. Customers now also benefit from coverage on some of the London
Underground as well as WiFi calling when they are connected to broadband.
We expect mobile service growth to further accelerate during FY25, as we
evolve our multiservice offering to give customers access to our multi-service
discounts when they take a second mobile sim in their bundles, whereas
previously only the first sim counted.
Insurance
This year saw continued strong growth, with our policy book growing by 38.3%
from 100,590 to 139,109. Our strategy remains clear: to deliver high quality
cover, best-in-market customer service and exceptional value.
Following the approval by the Gibraltar Financial Services Commission for UW
Insurance Limited ("UWI"), our wholly owned insurance company subsidiary, to
commence operations in March 2023, it has successfully completed its first
full year of trading. Through reinsurance arrangements with leading
reinsurers, UWI has successfully achieved a suitable level of risk exposure
that enables it to contribute to our strategic goals around growth and
profitability, whilst limiting downside risk.
With just 12% of UW customers currently taking an insurance service as part of
their UW bundle, we have a significant runway to scale this business through
increased penetration of our existing product set, alongside launching
additional insurance products in due course.
We anticipate the rate of Insurance service growth during FY25 will be
slightly lower than FY24 (albeit offset by faster growth in other services)
reflecting our recent decision to temporarily pause sales of our Insurance
products to new customers whilst we review them with the FCA.
Cashback card
Our Cashback card continues to go from strength to strength, with UW customers
earning a record £10m in cashback off their bills this year (up 23% YoY).
This unique proposition continues to strongly resonate with UW customers,
enhancing customer loyalty and lifetime values, and giving our customers a
meaningful way to offset recent increases in the cost of living.
This year we also inked major new brand partnerships, with leading brands
including ALDI, IKEA and Merlin Group (Legoland, Thorpe Park, Chessington and
others). We have a pipeline of new retailer partnership opportunities and are
excited for how our unique Cashback card continues to provide a point of major
differentiation for UW compared to other providers.
We will shortly be launching Pay by Bank, for our customers to top up their
Cashback cards. This initiative is expected to deliver cost savings as well as
pave the way for new commercial opportunities.
Investing for growth
Supporting our customers
To gain our customers' trust and ensure their loyalty for the long term we
give them an excellent standard of service, fair treatment, and swiftly
resolve any issues they might have. This is also important in delivering to
our Partners a proposition which they can confidently refer to people they
know, and this is one of the key goals for our customer service and operations
teams.
We continued to make significant advancement in our customer service across
all sectors and this was highlighted externally including the top ranking in
the 2024 Which? Energy Supplier survey and achieving an Excellent rating on
Trustpilot.
Over the last year we began to experience a more normalised environment for
customer contact, compared to the previous year in which call and email
volumes almost doubled in response to concern about higher energy prices in
the market. This has allowed us to start reducing some of the temporary
resources we had put in place to deal with the increased level of contact
demand from customers.
To ensure that customers joining UW have a great experience we have a
dedicated Welcome team who can assist customers in their first few weeks
across our Energy, Mobile, Broadband and Insurance services, whilst our
advanced routing technology allows us to route new customer calls
automatically to our specialist welcome advisors.
We are continuing to invest in digital self-service and resolving customer
queries the first time a customer calls us. We significantly improved our
customer support capability by introducing 'one-way' video, allowing advisors
to understand and resolve energy and broadband queries faster by enabling them
to see the problem first hand. We also invested in modern AI tools such as
full and accurate note recording to assist advisors with future interactions
and are exploring other AI use-cases which will increase speed and efficiency
over time. We also rolled out a customer support WhatsApp channel which
provides service through a virtual assistant.
We also increased support for our vulnerable customers with the opening of a
dedicated energy prepayment customer service hub in Selkirk, Scotland in June
2023, where we now have over 65 colleagues trained to provide support to those
in greatest need. We continued our support of customers who need assistance
with their bills through the Ability to Pay teams and through the UW Hardship
Fund, which is administered in partnership with the Citizens Advice Bureau.
As well as improving our training through advisor feedback we also launched
live support for advisors where they can access dedicated support on calls
through a chat platform to assist with more complex customer queries,
improving our ability to resolve customer queries at the first point of
contact.
As a result of our continued focus on providing market-leading savings and
service, we were awarded "Best Value for Money" and "Most likely to be
Recommended" by Uswitch in their 2023 Energy Awards, came out top in the
latest Which? league table of Energy Suppliers, received a 5 star rating for
customer service from Uswitch in their 2024 Broadband Rankings, and achieved
an "Excellent" rating on Trustpilot.
Supporting our Partners
We continue to expand the range and quality of our customer proposition with
market leading savings on our bundled packages combined with best in class
service. This has increased the confidence of our Partners to refer UW to
people they know , leading to growing enthusiasm, and higher activity levels.
As a result, we have experienced continued success in acquiring high quality
homeowner customers.
There are now over 20 million people in the UK earning an additional part-time
income, a number we believe is only set to rise further due to continued
pressure from the day to day cost of living, increased mortgage interest
costs, the trend to work flexibly from home and the need to generate
sufficient income in retirement. Our Partner opportunity is perfectly
positioned to capitalise on these significant and long-term trends, which we
believe will continue to fuel demand for our Partner offer which will in turn
generate strong growth in customers for the company.
Given the key role our Partners play in unlocking our highest value customers
- multiservice homeowners - the ongoing growth of our Partner community puts
us in a strong position for continued high-quality customer acquisition. We
attract Partners from all walks of life including health workers, retirees,
teachers, local government employees, students and the self-employed. We are
hugely proud of the positive societal impact our Partner business model is
having by generating additional income and flexible work opportunities, while
at the same time lowering customer bills and providing outstanding customer
service. We continue to invest in our Partners, not only by providing them
with an excellent proposition to refer to people they know but also through
digital tools and training, as well as the ability to work flexibly. We want
to provide our Partners with a great experience which will lead to more
referrals and greater Partner satisfaction, as we continue to succeed
together.
Operational performance and non-financial KPIs
We exceeded our growth targets for the year with customer numbers rising by
14.1% (2023: 21.7%) to 1,011,489.
As in 2023, our customer acquisition efforts were focused on residential
customers, with our business offering remaining closed to new customers.
During the course of FY25, we expect to relaunch our offering to new business
customers.
Customers 2024 2023
Residential 995,892 866,403
Business 15,597 20,176
Total 1,011,489 886,579
The total number of services we supply to our customers grew by 11.8% (2023:
23.5%) to 3,127,097.
Services 2024 2023
Core services
Energy 1,678,404 1,522,350
Broadband 374,792 354,118
Mobile 466,216 394,145
Insurance 139,109 100,590
Other services
Cashback card 448,529 405,118
Legacy telephony 20,047 21,827
Total 3,127,097 2,798,148
Note: the table above sets out the individual services supplied to
customers. Legacy telephony comprises non-geographic numbers (08xx) and
landline only (no broadband) services provided.
Customers can take any combination of services - energy, broadband, mobile or
insurance - they wish from us. The more services a customer takes, the greater
the savings they make. There is also a clear correlation between the number of
services taken and the customers' expected lifetime value to the business.
All our core services saw good rates of growth, although we are particularly
pleased with the 38.3% growth in Insurance, on top of the 125% growth
delivered in FY23.
Average number of Core services taken by new residential customers signed up
by Partners
Q1 FY23 2.24
Q2 FY23 2.53
Q3 FY23 2.24
Q4 FY23 2.38
Q1 FY24 2.31
Q2 FY24 2.34
Q3 FY24 2.37
Q4 FY24 2.31
The average number of Core services taken by new customers is a key metric
that underpins the long-term sustainability of the business: customers taking
two or more Core services from us are benefitting from a genuinely
differentiated proposition, as well as greater ongoing savings, meaning that
they are less likely to leave us.
Our focus on having a strong customer proposition and award-winning service
pays off in our market-leading levels of customer loyalty, and with rational
competition now firmly entrenched within the energy market, our annualised
energy churn increased in line with expectations to 8.7% (2023: 2.8%), still
significantly below historic levels.
Average revenue per customer remains well above historic levels at £2,117,
albeit below the level reached in FY23 (£3,025) when energy prices were at
their peak.
The year ahead: our three FY25 business priorities
We have set our business priorities in order to sustain a level of growth
which will allow us to reach our target of adding an additional million
customers over the medium term. Our priorities reflect the importance of
delivering high growth, improving customer service and maximizing efficiency.
This will be supported by a continued evolution in our internal culture that
will embed a performance-led approach more deeply, combined with a higher
level of efficiency and cost-competitiveness.
1. Supporting strong customer growth
We aim to drive continuing high levels of customer growth through enhancing
the performance of our greatest asset: our unique word of mouth Partner
network. We will look to grow the number of new Partners, and increase the
activity levels of existing Partners, through building our purpose within the
UW brand, aligning incentives to improve consistency, earning the confidence
of our Partners by delivering the best possible customer proposition and
accelerating the leadership of our most talented Partners.
We aim to expand the use of digital and social media tools to support the
primary word of mouth model, as well as securing important new partnerships.
We will redouble our focus on customer retention and increasing penetration of
high quality multiservice customers, including incentives for customers to add
additional services during their customer journey.
2. Improving customer service
We will improve our customer service to enhance the customer and advisor
experience, while at the same time driving a meaningful reduction in call
volumes. This includes focusing on processes which deliver an improvement in
our rate of "first time resolution".
We will create additional capacity for our customer service teams by speeding
up internal systems, matching customer demand with agent levels and
significantly increasing usage of faster digital service channels including
our UW app, AI and WhatsApp. The improvement in customer service will be
supported by advancements in agent performance measurement and training.
3. Transforming efficiency
Modernising and transforming our UW platform is a key priority which will
lower the cost of doing business. This includes improving visibility for
customers so they will adopt more digital tools, simplifying our adviser
experience and accelerating smart meter measurement. It also means delivering
changes to our customer proposition with minimal cost and complexity and
lowering costs by adopting a greater use of straight-through processing. We
also aim to focus our build versus buy decisions on long term business
benefits, which will increase flexibility to focus on our core growth drivers.
Ensuring we are efficiently delivering a competitive proposition and
award-winning service is key to maintaining our structural cost advantage and
the sustainability of our long-term growth trajectory as we double the size of
the business to two million customers over the medium term.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
18 June 2024
Financial Review
Overview of Results
Adjusted Statutory
2024 2023 Change 2024 2023 Change
Revenue £2,039.1m £2,475.2m (17.6)% £2,039.1m £2,475.2m (17.6)%
Gross profit £355.2m £306.2m 16.0% £355.2m £306.2m 16.0%
Profit before tax £116.9m £96.2m 21.5% £100.5m £85.5m 17.6%
Basic EPS 109.0p 99.2p 9.9% 89.9p 86.6p 3.8%
Dividend per share 83.0p 80.0p 3.8% 83.0p 80.0p 3.8%
Throughout this report the Group presents various alternative performance
measures ('APMs') in addition to those reported under IFRS. The measures
presented are those adopted by the Chief Operating Decision Makers ('CODMs',
deemed to be the Co-Chief Executive Officers), together with the main Board,
and analysts who follow us in assessing the performance of the business. In
order to provide a presentation of the underlying performance of the group,
adjusted profit before tax and adjusted basic EPS exclude share incentive
scheme charges of £5.2m (2023: £2.8m) and the amortisation of the intangible
asset of £11.2m (2023: £11.2m) arising from entering into the energy supply
arrangements with E.ON (formerly npower) in December 2013; this decision
reflects both the relative size and non-cash nature of these charges. In
FY23 adjusted profit before tax excludes the Group profit on disposal of Glow
Green of £3.6m. The reconciliations for adjusted profit before tax and
adjusted EPS are set out in notes 2 and 3 respectively of the financial
statements.
Summary
Adjusted profit before tax increased by 21.5% to £116.9m (2023: £96.2m) on
lower revenues of £2,039.1m (2023: £2,475.2m). Statutory profit before tax
increased 17.6% to £100.5m (2023: £85.5m). The fall in revenues primarily
reflects significantly lower energy prices in the second half of the year.
The increase in adjusted profit before tax reflects the continued impact of
strong organic growth in both customer and service numbers, and higher
non-energy profits following industry-wide price rises.
Distribution expenses increased to £51.3m (2023: £49.7m), mainly reflecting
the continued growth in customers and services, partially offset by the fall
in revenues.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year to £151.9m (2023: £129.0m), largely due to higher staff, technology and
infrastructure costs as a result of inflationary pay rises, increased
resources to manage strong growth, and the continued impact on customer
services from higher energy prices in the first half.
The bad debt charge for the year (which is separately identified on the income
statement as impairment loss on trade receivables) increased to £30.7m (2023:
£28.7m), representing 1.6% of underlying revenues for the year (2023:
underlying 1.6% excluding amounts paid directly to us by government (included
in revenues) under their various support schemes).
Adjusted earnings per share increased by 9.9% to 109.0p (2023: 99.2p), with
statutory EPS increasing by 3.8% to 89.9p (2023: 86.6p); these were impacted
by the increase in the corporation tax rate from 19% to 25% for the period.
In accordance with previous guidance, the Board is proposing to pay a final
dividend of 47p per share (2023: 46p), making a total dividend of 83p per
share (2023: 80p) for the year.
Revenues
The strong growth in the number of services we are supplying continued,
increasing by 328,949 over the course of the year (2023: 533,239), taking the
total number of services provided to our customers to 3,127,097 (2023:
2,798,148).
The overall decrease in revenues mainly reflects the significantly lower
energy prices during the year, partially offset by the increase in the number
of services being supplied:
Revenues £m 2024 2023 Change
Electricity 1,066.6 1,214.7 (12.2)%
Gas 708.0 1,028.3 (31.1)%
Broadband 141.9 132.7 6.9%
Mobile 70.9 56.8 24.8%
Other 51.7 42.7 21.1%
2,039.1 2,475.2 (17.6)%
Gross Profit
Gross profit for the year increased to £355.2m (2023: £306.2m), primarily
driven by the growth in the number of services we supply, with industry-wide
non-energy price increases offsetting energy price decreases. Our overall
gross margin for the year rose to 17.4% (2023: 12.4%) due primarily to lower
energy prices and the resulting reduced proportion of lower margin energy
revenue, together with the previously mentioned industry-wide price increases
in non-energy services.
Distribution and Administrative Expenses
Distribution expenses include the share of our revenues that we pay as
commission to Partners, together with other direct costs associated with
gathering new customers. These increased to £51.3m (2023: £49.7m),
reflecting higher Partner commissions associated with our continued growth,
partially offset by lower revenues.
Administrative expenses (excluding share incentive scheme charges and
amortisation of the energy supply agreement intangible) increased during the
year to £151.9m (2023: £129.0m), mainly as a result of higher staff,
technology and infrastructure costs. The increase in staff costs mainly
reflects inflation-linked salary increases, increased resources to manage
strong growth, and the continued impact on customer services from higher
energy prices in the first half. Administrative expenses are expected to
increase below the rate of customer growth in the coming year.
The bad debt charge for the year increased to £30.7m or 1.6% of underlying
sales (2023: £28.7m, 1.6% underlying), mainly due to an increase in the
number of customers having difficulty paying their bills in an environment of
higher inflation. The proportion of customers with at least two energy bills
outstanding increased to 3.32% (2023: 2.34%) across the year. The level has
mainly been driven by the temporary moratorium imposed by Ofgem in February
2023 on the involuntary installation of prepayment meters for customers who
refuse to pay for their energy. This moratorium was in place for longer than
had been initially expected, although it has now been lifted, thus enabling a
progressive ramp up of this debt recovery process. Furthermore, any
movements in bad debt levels across the industry are recovered through
increases in the relevant Ofgem price cap allowance, all of which accrue to
the Group.
Cash, Capital Expenditure, Working Capital and Borrowings
2024 2023 2022 2021 2020
Adjusted EBITDA (£'000)
133,251 110,118 73,760 66,446 68,939
Net debt (£'000) (122,501) 103,424 (70,334) (71,416) (59,378)
Net debt/adjusted EBITDA ratio
0.9x -0.9x 1.0x 1.1x 0.9x
As set out above, historically the Group's underlying Net Debt/adjusted EBITDA
ratio has remained at around 1.0x. At the prior year end, 31 March 2023, the
Group was in a net cash position. This unusual position arose as the Group
benefitted from substantial one-off cash timing differences resulting from the
Government's energy support schemes (where the Government stepped in to pay
suppliers a proportion of their customers' energy bills, with such payments
being received earlier by the Group compared to its conservative approach of
billing customers monthly in arrears). The Group also benefitted from
one-off timing differences relating to wholesale energy supply payments due to
higher energy prices. As expected, these one-off cash timing benefits
reversed during the current year as energy prices returned to more normal
levels, and the Government energy support schemes ended. This resulted in a
meaningful cash outflow during 2024, with Net Debt/adjusted EBITDA
consequently returning to more normal historical levels at around 0.9x.
As expected, the Group ended the period with a reported net debt position
including lease liabilities of £122.5m (2023: net cash of £103.4m -
including £120.8m of funds received in advance associated with the government
energy support schemes), comprising cash of £57.8m (2023: £193.8m) less bank
loans of £176.5m (2023: £89.7m) and lease liabilities of £3.8m (2023:
£0.7m). The Group's underlying Net Debt/adjusted EBITDA ratio of 0.9x is
calculated using adjusted EBITDA of £133.3m (representing operating profit of
£106.3m, plus depreciation and amortisation of £21.8m and share incentive
scheme charges of £5.2m).
The Group's net working capital position showed a year-on-year cash outflow of
£239.8m (2023: cash inflow of £146.3m), mainly reflecting the expected
unwinding of funds associated with the government's energy support scheme that
were received in advance of the year end in the prior year (and which
previously led to a significant inflow in FY23 as outlined above). The
decrease in accrued expenses and deferred income to £181.3m (2023: £417.4m)
mainly relates to lower wholesale supplier cost accruals for energy given the
significant decrease in energy prices year-on-year. The Group also
benefitted from one-off timing differences relating to wholesale energy supply
payments due to higher energy prices in the prior year which reversed in 2024.
The increase in trade and other receivables to £104.1m (2023: £58.9m) has
mainly been driven by the lingering impact of high energy prices over the last
two years. Trade receivables reflect the amounts invoiced to customers, which
for most is based on their fixed monthly direct debits under a 'budget plan',
and not based on actual energy used in that month. The significant price
increases in FY23, which peaked in the winter of H2 FY23 at the time of
highest seasonal energy usage, were not fully observed in the trade
receivables balance in FY23. Instead, in FY23 the impact of prices is
primarily seen through the increased accrued income balance (offset by
government energy support scheme advance payments of £120.8m). In FY24, we
now see the price increases fully come through into the invoicing, and
therefore the trade receivables balance. In addition to high energy prices,
there was an impact from the delayed installation of prepayment meters as a
result of a temporary moratorium imposed by Ofgem, which has now ended.
As at 31 March 2024 the Group also had pending residual government Energy
Price Guarantee payments that are due to be received after the year end.
Capital expenditure of £12.5m (2023: £11.0m) related primarily to our
ongoing investment in our technology platform and software, to support our
ability to continue delivering a market leading customer experience as our
multiservice bundled customer base continues to grow.
Dividend
The final dividend of 47p per share (2023: 46p) will be paid on 25 August 2024
to shareholders on the register at the close of business on 2 August 2024 and
is subject to approval by shareholders at the Company's Annual General Meeting
which will be held on 13 August 2024. This makes a total dividend payable for
the year of 83p (2023: 80p).
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges of £5.2m
(2023: £2.8m). These relate to an accounting charge under IFRS 2 Share Based
Payments ('IFRS 2'). As a result of the relative size of share incentive
scheme charges as a proportion of our pre-tax profits historically, and the
fluctuations in the amount of this charge from one year to another, we are
continuing to separately disclose this amount within the Consolidated
Statement of Comprehensive Income for the period (and excluding these charges
from our calculation of adjusted profits and earnings) so that the underlying
performance of the business can be clearly identified in a consistent manner
to that adopted during previous periods. Our current adjusted earnings per
share have also therefore been adjusted to eliminate these share incentive
scheme charges.
Taxation
The tax charge for the year is £29.4m (2023: £17.3m). The effective tax rate
for the year was 29.3% (2023: 20.2%), primarily reflecting the increase in the
corporation tax rate from 19% to 25%, the ongoing amortisation charge on our
energy supply contract intangible asset (which is not an allowable deduction
for tax purposes), and tax adjustments in relation to share options charges.
Nick Schoenfeld
Chief Financial Officer
18 June 2024
Principal Risks and Uncertainties
Background
The Group faces various risk factors, both internal and external, which could
have a material impact on long-term performance. However, the Group's
underlying business model is considered relatively low-risk, with no need for
management to take any disproportionate risks in order to preserve or generate
shareholder value.
The Group continues to develop and operate a consistent and systematic risk
management process, which involves risk ranking, prioritisation and subsequent
evaluation, with a view to ensuring all significant risks have been
identified, prioritised and (where possible) eliminated, and that systems of
control are in place to manage any remaining risks.
The directors have carried out a robust assessment of the Company's emerging
and principal risks. A formal document is prepared by the executive
directors and senior management team on a regular basis detailing the key
risks faced by the Group and the operational controls in place to mitigate
those risks; this document is then reviewed by the Audit and Risk Committee.
Save as set out below, the magnitude of any risks previously identified has
not significantly changed during the period.
Business model
The principal risks outlined below should be viewed in the context of the
Group's business model as a reseller of utility services (gas, electricity,
fixed line telephony, mobile telephony, broadband and insurance services)
under the Utility Warehouse and TML brands. As a reseller, the Group does not
own any of the network infrastructure required to deliver these services to
its customer base. This means that while the Group is heavily reliant on third
party providers, it is insulated from all the direct risks associated with
owning and/or operating such capital-intensive infrastructure itself.
The Group is able to secure the wholesale supply of all the services it offers
at competitive rates, enabling it to generate a consistently fair level of
profitability from delivering a great value bundled proposition to its
customers. There is an alignment of interests between the Group and its
wholesale suppliers which means that it is in the interests of the suppliers
to ensure that the Group remains competitive, driving growth and maximising
their benefit from our complementary route to market. Furthermore, the group
benefits from a structural cost advantage, due to the multiple revenue streams
it receives from customers who take more than one service-type, and only
having one set of overheads. The Group has alternative sources of wholesale
supply should an existing supplier become uncompetitive or no longer
available.
In relation to energy specifically, the Group's wholesale costs are calculated
by reference to a discount to the prevailing standard variable retail tariffs
offered by the 'Big 6' to their domestic customers (effectively the Government
price cap), which gives the Group considerable visibility over profit margins.
The Group mainly acquires new customers via word-of-mouth referrals from a
large network of independent Partners, who are paid predominantly on a
commission basis. This means that the Group has limited fixed costs associated
with acquiring new customers.
The principal specific risks arising from the Group's business model, and the
measures taken to mitigate those risks, are set out below.
Reputational risk
The Group's reputation amongst its customers, suppliers and Partners is
believed to be fundamental to the future success of the Group. Failure to meet
expectations in terms of the services provided by the Group, the way the Group
does business or in the Group's financial performance could have a material
negative impact on the Group's performance.
In developing new services, and in enhancing current ones, careful
consideration is given to the likely impact of such changes on existing
customers.
In relation to the service provided to its customer base, reputational risk is
principally mitigated through the Group's recruitment processes, a focus on
closely monitoring staff performance, including the use of direct feedback
surveys from customers (Net Promoter Score), and through the provision of
rigorous staff training.
Responsibility for maintaining effective relationships with suppliers and
Partners rests primarily with the appropriate member of the Group's senior
management team with responsibility for the relevant area. Any material
changes to supplier agreements and Partner commission arrangements which could
impact the Group's relationships are generally negotiated by the executive
directors and ultimately approved by the full Board.
Information technology risk
The Group is reliant on its in-house developed and supported systems for the
successful operation of its business model. Any failure in the operation of
these systems could negatively impact service to customers, undermine Partner
confidence, and potentially be damaging to the Group's brand. Application
software is developed and maintained by the Group's Technology team to support
the changing needs of the business using the best 'fit for purpose' tools and
infrastructure. The Technology team is made up of highly-skilled, motivated
and experienced individuals. The Group has a dedicated information security
team which provides governance and oversight ensuring the confidentiality,
availability and integrity of the Group's systems and operations whilst
ensuring that any risks and vulnerabilities that arise are managed and
mitigated.
Changes made to the systems are prioritised by business, Product Managers work
with their stakeholders to refine application and systems requirements. They
work with the Technology teams undertaking the change to ensure a proper
understanding and successful outcome. Changes are tested as extensively as
reasonably practicable before deployment. Review and testing are carried out
at various stages of the development by both the Technology team and the
operational department who ultimately take ownership of the system.
The Group has strategic control over the core customer and Partner platforms
including the software development frameworks and source code behind these key
applications. The Group also uses strategic third-party vendors to deliver
solutions outside of our core competency. This largely restricts our
counterparty risks to services that can be replaced with alternative vendors
if required, albeit this could lead to temporary disruption to the day-to-day
operations of the business.
Monitoring, backing up and restoring of the software and underlying data are
made on a regular basis. Backups are securely stored or replicated to
different locations. Disaster recovery facilities are provided through
cloud-based infrastructure as a service, and in critical cases, maintained in
a warm standby or active-active state to mitigate risk in the event of a
failure of the production systems.
Data privacy, information security, cyber security and fraud risk
The Group processes sensitive personal and commercial data and in doing so is
required by law to protect customer and corporate information and data, as
well as to keep its infrastructure secure. A breach of security could result
in the Group facing prosecution and fines as well as loss of business from
damage to the Group's reputation. Recovery could be hampered due to any
extended period necessary to identify and recover a loss of sensitive
information and financial losses could arise from fraud and theft. Unplanned
costs could be incurred to restore the Group's security.
The Group has deployed a robust and industry-appropriate Group-wide layered
data privacy and information/cyber security strategy, providing effective
control to mitigate the relevant threats and risks. The Group is PCI compliant
and external consultants conduct regular penetration testing of the Group's
internal and external systems and network infrastructure.
The Information Commissioner's Office ("ICO") upholds information rights in
the public interest and, where required, companies within the Group are
registered as data controllers with the ICO. If any of the companies within
the Group fail to comply with privacy or data protection legislation or
regulations, then such Group company could be subject to ICO enforcement
action (which could include significant fines).
Information, data and cyber security risks are overseen by the Group's
Information Security and Legal & Compliance teams.
Fraud has the potential to impact the Group from a financial, regulatory and
reputational perspective. To mitigate and control the risk of fraud effective
controls are in place to identify and reduce incidents of fraud, actively
investigate potential fraud, and report on fraud activity and trends both
internally and to our industry partners. Fraud risks are overseen by the
Group's Fraud Team which sits within Legal & Compliance.
Legislative and regulatory risk
The Group is subject to various laws and regulations. The energy,
telecommunications and financial services markets in the UK are subject to
comprehensive operating requirements as defined by the relevant sector
regulators and/or government departments.
Amendments to the regulatory regime could have an impact on the Group's
ability to achieve its financial goals and any material failure to comply may
result in the Group being fined and lead to reputational damage which could
impact the Group's brand and ability to attract and retain customers.
Furthermore, the Group is obliged to comply with retail supply procedures,
amendments to which could have an impact on operating costs.
The Group is a licensed gas and electricity supplier, and therefore has a
direct regulatory relationship with Ofgem. If the Group fails to comply with
its licence obligations, it could be subject to fines or to the removal of its
respective licences.
The regulatory framework for the UK's energy retail market, as overseen by
Ofgem, is subject to continuous development. Any regulatory change could
potentially lead to a significant impact on the sector, and the net profit
margins available to energy suppliers. The pace and extent of regulatory
change continues to be more substantial than in previous years. In addition to
the industry-wide programmes of work, such as the continuing rollout of smart
meters, and an increasingly prescribed approach to social obligations, Ofgem
has completed its 'Financial Resilience' reforms, significantly increasing its
oversight of suppliers' financial health and operational sustainability. The
primary impact of this regulatory change environment is more frequent and
detailed reporting to Ofgem, typically in the form of mandatory Requests for
Information.
The Group is also a supplier of telecommunications services and therefore has
a direct regulatory relationship with Ofcom. If the Group fails to comply with
its obligations, it could be subject to fines or lose its ability to operate.
The ongoing implementation of the European Electronic Communications Code has
resulted in an increased regulatory burden and an even stronger Ofcom focus on
compliance monitoring. Regulatory changes to the fixed line and broadband
switching processes effective this calendar year are substantial and require
cooperation from all fixed telecommunications providers. The Group is closely
engaged in the relevant forums and industry groups to both influence and
prepare for the changes.
The Group is authorised and regulated as an insurance broker for the purposes
of providing insurance services to customers by the Financial Conduct
Authority ("FCA"). In addition, the Group holds consumer credit permissions
related to the provision of Partner loans and hire purchase agreements.
Further, in 2023 UWI became authorised for insurance underwriting in Gibraltar
by the Gibraltar Financial Services Commission ("GFSC"). If the Group fails to
comply with FCA/GFSC regulations, it could be exposed to fines, customer
redress and risk losing its authorised status, severely restricting its
ability to offer insurance services to customers and consumer credit services
to Partners.
Regulatory changes relating to insurance pricing practices and the FCA's
Consumer Duty have had a significant impact on the financial services sector
as a whole. The business has worked to deliver the Board-approved
implementation plan and will continue to be informed by any clarifications and
additional guidance issued.
In general, as the majority of the Group's services are supplied to consumers
in highly regulated markets this could restrict the operational flexibility of
the Group's business. In order to mitigate this risk, the Group seeks to
maintain appropriate relations with both Ofgem and Ofcom, the Department for
Energy Security and Net Zero, the FCA and the GFSC. The Group engages with
officials from all these organisations on a periodic basis to ensure they are
aware of the Group's views when they are consulting on proposed regulatory
changes.
Political and consumer concern over energy prices, broadband availability and
affordability, vulnerable customers and fuel poverty may lead to further
reviews of the energy and telecommunications markets which could result in
further consumer protection legislation being introduced, such as the Digital
Markets, Competition and Consumers Bill which is being monitored. Political
and regulatory developments affecting the energy and telecommunications
markets within which the Group operates may have a material adverse effect on
the Group's business, results of operations and overall financial condition.
The Group is also aware of and managing the impact of a developing regulatory
landscape in relation to climate change and the net zero transition.
To mitigate the risks from failure to comply with legislative requirements, in
an increasingly active regulatory landscape, the Group's Legal &
Compliance team has developed and rolled out robust policies and procedures,
undertakes regular training across the business, and continually monitors
legal and regulatory developments. The team also conducts compliance and
assurance tests on the policies and procedures.
Financing risk
The Group has debt service obligations which may place operating and financial
restrictions on the Group. This debt could have adverse consequences insofar
as it: (a) requires the Group to dedicate a proportion of its cash flows from
operations to fund payments in respect of the debt, thereby reducing the
flexibility of the Group to utilise its cash to invest in and/or grow the
business; (b) increases the Group's vulnerability to adverse general economic
and/or industry conditions; (c) may limit the Group's flexibility in planning
for, or reacting to, changes in its business or the industry in which it
operates; (d) may limit the Group's ability to raise additional debt in the
long-term; and (e) could restrict the Group from making larger strategic
acquisitions or exploiting business opportunities.
Each of these prospective adverse consequences (or a combination of some or
all of them) could result in the potential growth of the Group being at a
slower rate than may otherwise be achieved.
Bad debt risk
Whilst the Group's focus on multiservice home-owners acts as a mitigating
factor against bad debt, the Group has a universal supply obligation in
relation to the provision of energy to domestic customers. This means that
although the Group is entitled to request a reasonable deposit from potential
new customers who are not considered creditworthy, the Group is obliged to
supply domestic energy to everyone who submits a properly completed
application form. Where customers subsequently fail to pay for the energy they
have used, there is likely to be a considerable delay before the Group is able
to control its exposure to future bad debt from them by either switching their
smart meters to pre-payment mode, installing a pre-payment meter or
disconnecting their supply, and the costs associated with preventing such
customers from increasing their indebtedness are not always fully recovered.
Bad debt within the telephony industry may arise from customers using the
services, or being provided with a mobile handset, without intending to pay
their supplier. The amounts involved are generally relatively small as the
Group has sophisticated call traffic monitoring systems to identify material
occurrences of usage fraud. The Group is able to immediately eliminate any
further usage bad debt exposure by disconnecting any telephony service that
demonstrates a suspicious usage profile, or falls into arrears on payments.
Wholesale price risk
Whilst the Group acts as principal in most of the services it supplies to
customers, the Group does not own or operate any utility network
infrastructure itself, choosing instead to purchase the capacity needed from
third parties. The advantage of this approach is that the Group is largely
protected from technological risk, capacity risk or the risk of obsolescence,
as it can purchase the precise amount of each service required to meet its
customers' needs.
Whilst there is a theoretical risk that in some of the areas in which the
Group operates it may be unable to secure access to the necessary
infrastructure on commercially attractive terms, in practice the pricing of
access to such infrastructure is typically either regulated (as in the energy
market) or subject to significant competitive pressures (as in the telephony
and broadband markets). The profile of the Group's customers, the significant
quantities of each service they consume in aggregate, and the Group's clearly
differentiated route to market has historically proven attractive to
infrastructure owners, who compete aggressively to secure a share of the
Group's growing business.
The supply of energy has different risks associated with it. The wholesale
price can be extremely volatile, and customer demand can be subject to
considerable short-term fluctuations depending on the weather. The Group has a
long-standing supply relationship with E.ON (formerly npower) under which the
latter assumes the substantive risks and rewards of buying and hedging energy
for the Group's customers, and where the price paid by the Group to cover
commodity, balancing, and certain other associated supply costs is set by
reference to the Ofgem published energy price cap, which is set at the start
of each quarter; this may not be competitive against the equivalent supply
costs incurred by new and/or other independent suppliers. However, if the
Group did not have the benefit of this long-term supply agreement it would
need to find alternative means of protecting itself from the pricing risk of
securing access to the necessary energy on the open market and the costs of
balancing.
Competitive risk
The Group operates in highly competitive markets and significant service
innovations by others or increased price competition, could impact future
profit margins, growth rates and Partner productivity. In order to maintain
its competitive position, there is a consistent focus on improving operational
efficiency. New service innovations are monitored closely by senior
management and the Group is generally able to respond within an acceptable
timeframe where it is considered desirable to do so, by sourcing comparable
features and benefits using the infrastructure of its existing suppliers.
The increasing proportion of customers who are benefiting from the genuinely
unique multi-utility solution that is offered by the Group, and which is
unavailable from any other known supplier, further reduces any competitive
threat.
The Directors anticipate that the Group will face continued competition in the
future as new companies enter the market and alternative technologies and
services become available. The Group's services and expertise may be
rendered obsolete or uneconomic by technological advances or novel approaches
developed by one or more of the Group's competitors. The existing approaches
of the Group's competitors or new approaches or technologies developed by such
competitors may be more effective or affordable than those available to the
Group. There can be no assurance that the Group will be able to compete
successfully with existing or potential competitors or that competitive
factors will not have a material adverse effect on the Group's business,
financial condition or results of operations. However, as the Group's customer
base continues to rise, competition amongst suppliers of services to the Group
is expected to increase. This has already been evidenced by various
volume-related growth incentives which have been agreed with some of the
Group's largest wholesale suppliers. This should also ensure that the Group
has direct access to new technologies and services available to the market.
Infrastructure risk
The provision of services to the Group's customers is reliant on the efficient
operation of third party physical infrastructure. There is a risk of
disruption to the supply of services to customers through any failure in the
infrastructure e.g. gas shortages, power cuts or damage to communications
networks. However, as the infrastructure is generally shared with other
suppliers, any material disruption to the supply of services is likely to
impact a large part of the market as a whole and it is unlikely that the Group
would be disproportionately affected. In the event of any prolonged disruption
isolated to the Group's principal supplier within a particular market,
services required by customers could in due course be sourced from another
provider.
The development of localised energy generation and distribution technology may
lead to increased peer-to-peer energy trading, thereby reducing the volume of
energy provided by nationwide suppliers. As a nationwide retail supplier,
the Group's results from the sale of energy could therefore be adversely
affected.
Similarly, the construction of 'local monopoly' fibre telephony networks to
which the Group's access may be limited as a reseller could restrict the
Group's ability to compete effectively for customers in certain areas.
Smart meter rollout risk
The Group is reliant on third party suppliers to fully deliver its smart meter
rollout programme effectively. In the event that the Group suffers delays to
its smart meter rollout programme the Group may be in breach of its regulatory
obligations and therefore become subject to fines from Ofgem. In order to
mitigate this risk the Group dual-sources (where practicable) the third party
metering and related equipment they use.
The Group may also be indirectly exposed to reputational damage and litigation
from the risk of technical complications arising from the installation of
smart meters or other acts or omissions of meter operators, e.g. the escape of
gas in a customer's property causing injury or death. The Group mitigates
this risk through using established reputable third party suppliers.
Energy industry estimation risk
A significant degree of estimation is required in order to determine the
actual level of energy used by customers and hence that should be recognised
by the Group as sales. There is an inherent risk that the estimation
routines used by the Group do not in all instances fully reflect the actual
usage of customers. However, this risk is mitigated by the relatively high
proportion of customers who provide meter readings on a periodic basis, and
the high level of penetration the Group has achieved in its installed base of
smart meters.
Gas leakage within the national gas distribution network
The operational management of the national gas distribution network is outside
the control of the Group, and in common with all other licensed domestic gas
suppliers the Group is responsible for meeting its pro-rata share of the total
leakage cost. There is a risk that the level of leakage in future could be
higher than historically experienced, and above the level currently expected.
Underwriting risk
Operating our own in-house insurer requires taking on some underwriting risk,
we largely mitigate these risks through: (i) migrating highly predictable
existing lines of business, for which we have several years of trading
history, and have already achieved sufficient scale to maintain low volatility
and predictable returns; (ii) targeting conservative returns on capital
through a risk-averse investment strategy; (iii) where appropriate, using
conservative levels of reinsurance, including protection for catastrophe risks
such as storm, flood and freeze; (iv) using real-time and proprietary data,
such that we are aware of all risks incepted in real time, and are able to
price risks accurately, and manage overall portfolio exposure; and (v)
maintaining and growing our existing home insurance panel, such that our
in-house insurer can selectively target risk profiles that are suitable for
our balance sheet (e.g. houses with lower rebuild cost and not adversely
exposed to catastrophe (CAT) perils).
Acquisition risk
The Group may invest in other businesses, taking a minority, majority or 100%
equity shareholding, or through a joint venture partnership. Such investments
may not deliver the anticipated returns, and may require additional funding in
future. This risk is mitigated through conducting appropriate
pre-acquisition due diligence where relevant.
Climate change risk
Climate change has the potential to significantly impact the future of our
planet. Everyone has a role to play in reducing the effects of harmful
greenhouse gas emissions in our atmosphere and ensuring that we meet a 1.5°C
target in line with the Paris Agreement. No business is immune from the risks
associated with climate change as it acts as a driver of other risks and
impacts government decision-making, consumer demand and supply chains.
Development of climate-related policy, regulatory changes, and shifts in
consumer sentiment could impact on the Group's ability to achieve its
financial goals and result in increased compliance costs or reputational
damage.
In recognition of this, climate change risk is integrated into the Group's
risk management framework. Climate change is designated as a standalone
principal risk for the business and the Legal & Compliance Director is
assigned as the owner for managing this risk. It is designated as a controlled
risk due to the Group's agile reseller business model which means the business
is strategically resilient as it is able to respond quickly to climate change
developments and is insulated from more severe direct physical risks. The risk
is further mitigated through the Group's approach to understanding and
monitoring the developments and the impacts from climate change. The ESG
Strategy Committee, consisting of co-CEOs, CFO, Company Secretary, Executive
Leadership Team and senior management is updated by the ESG Working Group on
climate issues. Climate issues are then assessed and used to inform the
Group's strategy as needed. We have a dedicated Head of Sustainability and
continue to use external specialists as needed.
The Group is committed to achieving net zero greenhouse gas emissions. In FY23
we evaluated our emissions and target against recognised standards. We
modelled our emissions trajectory and used credible assumptions on external
factors that, as a reseller, will strongly influence the Group's
decarbonisation ability including our key suppliers' decarbonisation plans and
the UK government's published projections about the decarbonisation trajectory
of the UK energy grid.
Based on this analysis we committed to our target to be Net Zero on or before
2050, across scopes 1, 2 and 3 to allow us to implement a credible
science-based plan by aligning with the UK government and our key suppliers.
We will set an interim target to reduce emissions by 63% across Scopes 1, 2,
and 3 by 2035, from an FY22 emissions baseline, in line with a 1.5c world. The
Group will have its targets validated by the SBTi, the leading body on
emissions target setting, and will track and disclose progress against them.
The Group remains committed to continuing to implement the recommendations of
the Task Force on Climate-related Financial Disclosures ("TCFD"), as well as
the requirements of the Companies Act 2006 as amended by the Companies
(Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2024
Note 2024 2023
£'000 £'000
Revenue 1 2,039,131 2,475,160
Cost of sales (1,683,921) (2,168,964)
Gross profit 355,210 306,196
Distribution expenses (51,294) (49,692)
Administrative expenses - other (151,943) (129,014)
Share incentive scheme charges (5,160) (2,849)
Amortisation of energy supply contract intangible (11,228) (11,228)
Total administrative expenses (168,331) (143,091)
Impairment loss on trade receivables (30,712) (28,675)
Other income 1,377 1,156
Operating profit 106,250 85,894
Financial income 3,482 1,016
Financial expenses (9,255) (5,051)
Net financial expense (5,773) (4,035)
Profit on disposal of subsidiary - 3,595
Profit before taxation 100,477 85,454
Taxation (29,440) (17,293)
Profit for the period 71,037 68,161
Profit and other comprehensive income for the year attributable to owners of 71,037 68,426
the parent
Loss for the year attributable to non-controlling interest - (265)
Profit for the period 71,037 68,161
Basic earnings per share 3 89.9p 86.6p
Diluted earnings per share 3 88.8p 85.2p
Consolidated Balance Sheet
As at 31 March 2024
Assets 2024 2023
£'000 £'000
Non-current assets
Property, plant and equipment 26,773 25,816
Investment property 8,049 8,271
Intangible assets 135,785 142,491
Goodwill 3,742 3,742
Other non-current assets 55,892 47,529
Total non-current assets 230,241 227,849
Current assets
Inventories 3,749 5,698
Trade and other receivables 104,066 58,863
Current tax receivable 101 3,083
Accrued income 222,036 267,576
Prepayments 9,958 16,954
Costs to obtain contracts 23,411 20,912
Cash 57,829 193,804
Total current assets 421,150 566,890
Total assets 651,391 794,739
Current liabilities
Trade and other payables (56,016) (55,396)
Accrued expenses and deferred income (181,308) (417,354)
Total current liabilities (237,324) (472,750)
Non-current liabilities
Long term borrowings (176,509) (89,721)
Lease liabilities (3,821) (659)
Deferred tax (1,106) (901)
Total non-current liabilities (181,436) (91,281)
Total assets less total liabilities 232,631 230,708
Equity attributable to equity holders of the parent
Share capital 4,007 4,003
Share premium 151,553 150,652
Capital redemption reserve 107 107
Treasury shares (15,688) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 93,802 82,598
Total equity 232,631 230,708
Consolidated Cash Flow Statement
For the year ended 31 March 2024
2024 2023
£'000 £'000
Operating activities
Profit before taxation 100,477 85,454
Adjustments for:
Net financial expense 5,773 4,035
Profit on disposal of subsidiary - (3,595)
Depreciation of property, plant and equipment 3,561 3,968
Profit on disposal of fixed assets (129) (85)
Amortisation of intangible assets and impairment 18,280 17,407
Amortisation of debt arrangement fees 389 506
Decrease/(increase) in inventories 1,949 (1,546)
Increase in trade and other receivables (including Costs to obtain contracts) (4,239) (176,146)
(Decrease)/increase in trade and other payables (237,460) 323,974
Share incentive scheme charges 5,160 2,849
Corporation tax paid (26,248) (20,605)
Net cash flow from operating activities (132,487) 236,216
Investing activities
Purchase of property, plant and equipment (882) (3,535)
Purchase of intangible assets (11,614) (7,480)
Disposal of property, plant and equipment 129 91
Disposal of associated companies 681 (596)
Interest received 3,535 847
Cash flow from investing activities (8,151) (10,673)
Financing activities
Dividends paid (64,982) (50,601)
Interest paid (7,195) (4,934)
Interest paid on lease liabilities (26) (17)
Drawdown of long term borrowing facilities 183,550 55,000
Repayment of long term borrowing facilities (95,000) (65,000)
Fees associated with borrowing facilities (2,151) -
Repayment of lease liabilities (252) (107)
Issue of new ordinary shares 905 3,561
Purchase of own shares (10,186) -
Cash flow from financing activities 4,663 (62,098)
(Decrease)/increase in cash and cash equivalents (135,975) 163,445
Net cash and cash equivalents at the beginning of the year 193,804 30,359
Net cash and cash equivalents at the year end 57,829 193,804
Consolidated Statement of Changes in Equity
For the year ended 31 March 2024
Share Share premium Capital redemption reserve Retained earnings Non-controlling interest Total
capital
Treasury shares JSOP
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2022 3,982 147,112 107 (5,502) (1,150) 61,935 (911) 205,573
- - - - - 68,426 (265) 68,161
Profit and total comprehensive income
Dividends - - - - - (50,601) - (50,601)
Credit arising on share options - - - - - 2,849 - 2,849
Deferred tax on share options - - - - - (11) - (11)
Issue of new ordinary shares 21 3,540 - - - - - 3,561
Disposal of non-controlling interest - - - - - - 1,176 1,176
Balance at 31 March 2023 4,003 150,652 107 (5,502) (1,150) 82,598 - 230,708
Balance at 1 April 2023 4,003 150,652 107 (5,502) (1,150) 82,598 - 230,708
Profit and total comprehensive income - - - - - 71,037 - 71,037
Dividends - - - - - (64,982) - (64,982)
Credit arising on share options - - - - - 5,160 - 5,160
Deferred tax on share options - - - - - (11) - (11)
Issue of new ordinary shares 4 901 - - - - - 905
Purchase of treasury shares - - - (10,186) - - - (10,186)
Balance at 31 March 2024 4,007 151,553 107 (15,688) (1,150) 93,802 - 232,631
Notes
1. Revenue
Revenue by service
2024 2023
£'000 £'000
Electricity 1,066,661 1,214,683
Gas 708,013 1,028,267
Landline and broadband 141,867 132,678
Mobile 70,874 56,777
Other 51,716 42,755
2,039,131 2,475,160
The Group operates solely in the United Kingdom. During the current period,
revenue includes payments received from the Government energy support schemes
of £91.1m (2023: £367.8m) in respect of electricity and £18.7m (2023:
£313.8m) in respect of gas.
2. Alternative performance measures
Throughout this document the Group presents various alternative performance
measures ('APMs') in addition to those reported under IFRS. The measures
presented are those adopted by the Chief Operating Decision Makers ('CODMs',
deemed to be the Co-Chief Executive Officers), together with the main Board,
and analysts who follow us in assessing the performance of the business.
Adjusted profit before tax and adjusted basic EPS exclude share incentive
scheme charges and the amortisation of the intangible asset arising from
entering into the energy supply arrangements with npower in December 2013;
this decision reflects both the relative size and non-cash nature of these
charges. In 2023 the loss for the period attributable to the non-controlling
interest is excluded as these losses are not attributable to shareholders of
the Company. In 2023 adjusted profit before tax also excludes the loss on
the disposal of Glow Green; this decision reflects the one-off non-operating
nature of this item.
2024 2023
£'000 £'000
Statutory profit before tax 100,477 85,454
Adjusted for:
Loss for period attributable to non-controlling interest - 265
Amortisation of energy supply contract intangible assets 11,228 11,228
Share incentive scheme charges 5,160 2,849
Profit on disposal of subsidiary - Glow Green - (3,595)
Adjusted profit before tax 116,865 96,201
3. Earnings per share
The calculation of basic and diluted earnings per share ("EPS") is based on
the following data:
2024 2023
£'000 £'000
Earnings for the purpose of basic and diluted EPS 71,037 68,426
Share incentive scheme charges (net of tax) 3,901 2,346
Amortisation of energy supply contract intangible assets 11,228 11,228
Profit on disposal of subsidiary - (3,595)
Earnings excluding share incentive scheme charges and amortisation of 78,405
intangibles for the purpose of adjusted basic and diluted EPS
86,166
Number Number
('000s) ('000s)
Weighted average number of ordinary shares for the purpose of basic EPS 79,058 79,049
Effect of dilutive potential ordinary shares (share incentive awards) 963 1,220
Weighted average number of ordinary shares for the purpose of diluted EPS 80,021 80,269
Adjusted basic EPS 1 109.0p 99.2p
Basic EPS 89.9p 86.6p
Adjusted diluted EPS1 107.7p 97.7p
Diluted EPS 88.8p 85.2p
It has been deemed appropriate to present the analysis of adjusted EPS
excluding share incentive scheme charges due to the relative size and
historical volatility of the charges. In view of the size and nature of the
charge as a non-cash item the amortisation of intangible assets arising from
the energy supply agreement with E.ON has also been adjusted. In 2023 it was
also deemed appropriate to exclude the impact of the disposal of Glow Green
Limited and Cofield Limited ("Glow Green"). The amortisation of the energy
supply contract intangible assets, the profit on the disposal of Glow Green
have not been adjusted for taxation as these items do not impact the amount of
corporation tax paid by the Group.
4. Dividends
2024 2023
£'000 £'000
Prior year final paid 46p (2023: 30p) per share 36,445 23,689
Interim paid 36p (2023: 34p) per share 28,537 26,912
The Directors have proposed a final dividend of 47p per ordinary share
totalling approximately £36.4 million, payable on 25 August 2024, to
shareholders on the register at the close of business on 2 August 2024. In
accordance with the Group's accounting policies the dividend has not been
included as a liability as at 31 March 2024. This dividend will be subject to
income tax at each recipient's individual marginal income tax rate.
5. Related parties
Identity of related parties
The Company has related party relationships with its subsidiaries and with its
directors and executive officers. Related party transactions are conducted
on an arm's length basis.
Transactions with key management personnel
Directors of the Company and their immediate relatives control approximately
11.2% of the voting shares of the Company. No other employees are considered
to meet the definition of key management personnel other than those disclosed
in the Directors' Remuneration Report in the Annual Report.
Details of the total remuneration paid to the directors of the Company as key
management personnel for qualifying services are set out below:
2024 2023
£'000 £'000
Short-term employee benefits 3,804 3,816
Deferred shares bonus - 723
TPIP shares award 3,438 -
Social security costs 551 543
Post-employment benefits 12 12
7,805 5,094
Share incentive scheme charges 416 400
8,221 5,494
During the year ended 31 March 2024, the Group made sales to Glow Green worth
£874,000 (2023: £320,300). Glow Green is owned by the Non-Executive
Chairman of the Group.
During the year directors purchased goods and services on behalf of the Group
worth £36,000 (2023: £256,000). The directors were fully reimbursed for the
purchases and no amounts were owing to the directors by the Group as at 31
March 2024. During the year the directors purchased goods and services from
the Group worth approximately £71,000 (2023: £109,000) and persons closely
connected with the directors earned commissions as Partners for the Group of
approximately £11,000 (2023: £9,000).
Subsidiary companies
During the year ended 31 March 2024, the Company purchased goods and services
from the subsidiaries in the amount of £51,000 (2023: £782,000 purchased by
the Company from the subsidiaries).
During the year ended 31 March 2024 the Company also received distributions
from subsidiaries of £94,000,000 (2023: £60,000,000). At 31 March 2024 the
Company owed the subsidiaries £24,259,000 which is recognised within trade
payables (2023: £104,376,000 owed by the Company to the subsidiaries).
6. Basis of preparation
The financial information set out above does not constitute the Group's
statutory information for the years ended 31 March 2024 or 2023, but is
derived from those accounts. The Group's consolidated financial information
has been prepared in accordance with accounting policies consistent with those
adopted for the year ended 31 March 2023. Statutory accounts for 2023 have
been delivered to the Registrar of Companies and those for 2024 will be
delivered following the Company's annual general meeting. The auditor has
reported on these accounts, their reports were unqualified and did not contain
statements under the Companies Act 2006, s498(2) or (3).
The Group is currently in informal discussions with the FCA about certain
aspects of its insurance products and operations. As part of the response, we
have temporarily paused sales of Insurance products to new customers whilst we
review them with the FCA. Discussions began in April 2024, with the FCA
raising queries following an upheld individual customer complaint. The Group
is fully cooperating in these constructive discussions. As these are ongoing,
it is not possible to estimate the ultimate financial impact to the Group of
any further regulatory requirements should they arise.
7. Directors' responsibility statement
The directors confirm, to the best of their knowledge:
(a) the financial statements, prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole; and
(b) the Chairman's Statement, Co-Chief Executives' Review, Financial Review
and Principal Risks and Uncertainties include a fair review of the development
and performance of the business and the position of the Group and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
The directors of Telecom Plus PLC and their functions are listed below:
Charles Wigoder - Non-Executive Chairman
Andrew Lindsay - Co-Chief Executive Officer
Stuart Burnett - Co-Chief Executive Officer
Nick Schoenfeld - Chief Financial Officer
Beatrice Hollond - Senior Non-Executive Director
Andrew Blowers - Non-Executive Director
Carla Stent - Non-Executive Director
Suzi Williams - Non-Executive Director
By order of the Board
1 Adjusted basic and diluted EPS exclude share incentive scheme charges and
the amortisation of the intangible asset recognised as a result of the new
energy supply arrangements entered into with npower in December 2013.
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