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Telecom Plus profits up despite pandemic disruption

The utility services group highlighted a “resilient performance” across all aspects of its business in the period, adding that a drop in customer numbers due to the UK’s lockdown in the spring has largely reversed by the end of September

Telecom Plus - Telecom Plus profits up despite pandemic disruption

Telecom Plus PLC (LON:TEP) shares rose on Tuesday after the utility services provider reported slightly higher profits in its half-year despite disruption from the coronavirus pandemic.

In its results for the six months to September 30, the FTSE 250 group reported an adjusted pre-tax profit of £27.7mln, up slightly from the £27.5mln last year and despite a 1% fall in revenue to £349mln due to lower energy prices. The interim dividend was also maintained at 27p per share.

READ: Telecom Plus hikes dividend as it posts record sales in final results

Telecom Plus highlighted a “resilient performance” across all aspects of its business in the period, adding that a drop in customer numbers due to the UK’s lockdown in the spring has largely reversed, with customer numbers down just 0.3% at 650,497 by the end of the period. Total services supplied in the half-year also rose by 15,004 to 2.04mln.

Looking ahead, the firm said it has seen a “strong start” to its second half, with a net increase in customer numbers of around 2,200 during October, more than offsetting the slight reduction in the first half.

Telecom also said that as a result of the “more challenging macro-economic background”, it was seeing record numbers of new partners joining the business, which it said is a “good lead-indicator to future levels of customer growth once the current social distancing restrictions are lifted”.

As a result, the company said it is “increasingly confident” in its previous guidance that full-=year adjusted pre-tax profits will be marginally below the record level for the previous year, however the range of outcomes remained wider than usual due to uncertainty around the scope and duration of lockdowns in the second half. Dividend guidance was also maintained at 57p per share for the full year.

"We delivered a resilient performance during the first half of the financial year, successfully adapting to the challenges created by [coronavirus]. Our competitive position improved following the reduction in the energy price cap from 1 October 2020, which has contributed to a recent marked uptick in Partner activity and a return to customer growth”, chief executive Andrew Lindsay said in a statement.

"Over the last seven weeks we have seen a significant increase in the number of new Partners joining the business; this is an encouraging lead-indicator for the rate of future customer growth over the coming months. We anticipate low single-digit percentage growth in customer and service numbers for the year to March, and look forward to delivering full-year adjusted profits in line with our previous guidance", he added.

In a note, analysts at house broker Peel Hunt retained their ‘buy’ rating and 1,450p target price, saying the half-year results were “as expected” and the company was on track to exceed their forecasts for the full year.

“We see increased optimism on potential growth given the economic environment, competitive positioning and operational gearing”, the broker said, adding that “medium-term profit opportunities” could add £30mln of profit by 2025.

Shares in Telecom Plus rose 2.4% to 1,398p in mid-morning trading.

Quick facts: Telecom Plus

Price: 1250 GBX

LSE:TEP
Market: LSE
Market Cap: £989.39 m
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