1 September 2014

Telecom Plus

HOLD

04/06/2003 Leslie Copeland

Cheap-rate telecoms, gas and electricity reseller Telecom Plus delivered another sterling set of results for the year to March, showing pre-tax profits raised 38% to £5.6m for the year to March, on turnover raised 78% to £58m. Total dividends of 5.75p for the year came from 7.5p of earnings, reiterating the company's welcome policy of returning the bulk of its extremely healthy cashflows to shareholders. It has such a good cash profile because of a historical business model that incentivises customers to act as its sales force, thereby incurring few fixed costs on those sales. This model has been changed somewhat through the acquisition of Sussex-based Telecommunications Management Limited (TML), a business-focused telecoms supplier that contributed £600,000 of profits during the year, and Oxford-based Opus Power, a budding supplier of electricity to businesses. But during the year 77% of revenues came from the traditional distribution channel, in which there are 10,000 active individuals making sales out of a customer base totalling 134,000, many of which take more than one service. 'Significantly higher profits' are expected this year as high growth is continuing apace. Max Royde of house broker KBC Peel Hunt forecasts pre-tax profits of £8.6m and EPS of 9.6p this year and £10.8m in 2005, noting the 'relatively high rating', though adding that 'TEP remains our core pick in the telecoms sector'.

Sector: Mobile Telecommunications

Companies: Telecom Plus

Market cap: £128.1m

PE Forecast: 22.2

Share price: 213.5p

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