Telecom plus

BUY

29/12/2007 James Crux

Residential and commercial utilities supplier Telecom Plus offers a defensive play in a time of economic and market uncertainty. In November, the company produced interim results that showed first-half pre-tax profits up 15% to £6.4m, with net cash balances increased by £11m between the end of March and 30 September.

The strong profit increase occurred despite Telecom Plus’s first-half revenues only growing by 4% to £71.1m, because of the continuing growth in the number of utility services the company offers the average customer. Meanwhile, the company said it was confident that pre-tax profits for the full year would be substantially ahead of the £11.6 million, and earnings per share of 12.5p, that it reported last year.

Operating in the utility market makes Telecom Plus a highly resilient company, since households and businesses will always need electricity, gas and telecoms. The company, which has a low-cost model, aims to be a one-stop shop for its customers for their utility needs and has a high yield.

House broker KBC Peel Hunt has raised its EPS forecast to 15.3p for 2008 and 17.2p in 2009, placing Telecom Plus on only 11.4 times earnings for the current year, and just over 10 times EPS in 2009. This low rating, combined with the healthy dividend yield, means Telecom Plus is still a buy as far as we are concerned. Buy.