Telecom Plus PLC (LSE:TEP) shares jumped to a new all-time high after the Utility Warehouse operator hiked its dividend and full-year guidance on the back of record growth fueled by the collapse of various energy suppliers in recent years.
The FTSE 250 group, which offers a range of household services from energy and broadband to mobile and insurance, reported revenue for the six months to 30 September 2022 up 51.5% to £562.4mln, with adjusted profit before tax up 22.5% to £32.1mln and statutory profit before tax up 46.2% to £29.1mln.
The company hiked its interim dividend by 26% to 34p per share and also its full-year guidance.
Management said a full-year adjusted profit before tax of at least £95mln is now expected, up from previous guidance for at least £75mln, which is seen leading to a full-year dividend of at least 80p per share compared to 57p last time out.
Utility Warehouse, which saves on marketing by making its sales by 'Partners' and word of mouth, enjoyed a customer growth rate of almost 24%, with customer numbers rising to 814,684 from just below 729,000 in March and total services supplied were up by 292,343 to almost 2.6mln.
The company said its management believes the business is on track to deliver an additional 1mln customers in the next four to five years, driven by high inflation and the recession expected by the Bank of England and Office for Budget Responsibility.
In a statement, the company's co-chief executive Andrew Lindsay said: "As the pressures on household budgets mount, we continue to offer UK families what they want: the lowest priced energy on the market, savings on their mobile, broadband and insurance bills, cashback on their daily spend, and additional earnings for recommending UW to their friends and families."
Fellow co-CEO Stuart Burnett noted that Utility Warehouse is "now the only meaningful energy switching option in the UK, with the rest of the market offering customers little to no difference in price or service", meaning its multiservice proposition enables it to provide households with energy savings "sustainably and profitably".
Energy suppliers such as Bulb, Ampower, Igloo, Hub Energy, Pure Planet and many more have failed in recent years, which has sent thousands of new customers to Utility Warehouse, as well as big operators British Gas, EDF and Octopus Energy.
Analysts at AJ Bell noted that energy was the key driver in UW's customer growth, but customers also signed up for mobile, insurance and broadband, while only the legacy wireline telecoms business showed a drop.
“[The] boost to profits is driving cash flow and cash flow pays dividends, especially at firms like Telecom Plus where net debt is very limited at barely £20 million, and profits cover interest payments many times over," the analysts said.
They noted that profit margins fell, however, to reflect the increase in energy prices and also the shift in customers toward lower-margin energy services.
Bad debts also rose to £8.5mln from £5.1mln and though this represents a modest 1.5% of sales, "the company will be on the alert for signs that customers are struggling to pay, or at least cutting consumption of power in order to save money, as they wait to discover what the next stage of the government’s Energy Price Guarantee will look like".
The company was given a fairly clean bill of health from regulator Ofgem in its latest review, with results published today.
Shares in TEP rose over 5% in early trading to top 1,2450p for the first time, up almost 90% over the past 12 months.
** UPDATE: adds broker comments and updates share prices **