TIDMTEP
RNS Number : 3165C
Telecom Plus PLC
18 June 2021
Embargoed until 07.00 18 June 2021
Telecom Plus PLC
Final Results for the year ended 31 March 2021
Telecom Plus PLC (trading as Utility Warehouse), which supplies
a wide range of utility services focussed on domestic customers ,
today announces its final results for the year ended 31 March
2021.
Financial Highlights:
-- Results in line with expectations
-- Revenue of GBP861.2m (2020: GBP875.8m)
-- Adjusted profit before tax of GBP56.1m (2020: GBP60.8m)
-- Statutory profit before tax of GBP43.5m (2020: GBP48.1m)
-- Adjusted EPS of 57.4p (2020: 61.8p)
-- Statutory EPS of 41.5p (2020: 45.9p)
-- Full year dividend maintained at 57p per share
Operating Highlights:
-- Resilient performance across all aspects of the business
despite covid challenges
-- Continued growth in both customers and Partners
-- Number of services supplied up 2.5%
-- Good progress in digital transformation project
-- Which? Utilities Brand of the Year 2020
Outlook:
-- Anticipate adjusted current year profit before tax increasing
to around GBP60m, with a maintained dividend of 57p
Andrew Lindsay, CEO, commented:
"Against the challenging backdrop of the past year, I am very
pleased with the resilient performance of the business, and
incredibly proud of the spirit that our staff and Team Purple - our
48,000 Partners - have demonstrated throughout the period.
"We are emerging from the pandemic with considerable optimism
about the future: as millions prepare to return to their workplaces
after prolonged periods of working from home, the alternative
flexible income opportunity that we offer our Partners has never
held such appeal.
"We are hugely excited by the prospect of helping many more
people to get on in life and achieve their goals in partnership
with UW over the months and years ahead, and are investing in both
our customer and Partner propositions to meet the rising demand
that we anticipate."
There will be a virtual meeting for analysts today at 9.00am.
Please contact MHP Communications at: telecomplus@mhpc.com for dial
in details.
For more information please contact:
Telecom Plus PLC
Andrew Lindsay, CEO 020 8955 5000
Nick Schoenfeld, CFO
Peel Hunt
Dan Webster / Andrew Clark 020 7418 8900
Numis
Mark Lander / Simon Willis 020 7260 1000
MHP Communications
Reg Hoare / Catherine Chapman / Amy O'Sullivan 020 3128 8778
About Telecom Plus PLC ("Telecom Plus"):
Telecom Plus, which owns and operates the Utility Warehouse
brand, is the UK's only fully integrated provider of a wide range
of competitively priced utility services spanning the
Communications, Energy and Insurance markets.
Customers benefit from the convenience of a single monthly
statement, consistently good value across all their utilities and
exceptional levels of service. Telecom Plus does not advertise,
relying instead on 'word of mouth' recommendation by existing
satisfied customers and Partners in order to grow its market
share.
Telecom Plus is listed on the London Stock Exchange (Ticker: TEP
LN). For further information please visit telecomplus.co.uk
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 a resilient performance by the Company
during some of the most challenging conditions that we, in common
with most other businesses, have ever faced. Against this backdrop,
we are delighted to have achieved modest growth in both customer
and service numbers, with profitability remaining close to last
year's record level, and are proposing to pay a maintained
full-year dividend.
Adjusted pre-tax profits fell by 7.7% to GBP56.1m (2020:
GBP60.8m) reflecting higher admin expenses (including covid-related
factors), on revenue down by 1.7% to GBP861.2m (2020: GBP875.8m)
largely due to lower energy prices during the peak winter period.
Adjusted earnings per share for the year declined by 7.1% to 57.4p
(2020: 61.8p). Statutory pre-tax profits fell by 9.6% to GBP43.5m
(2020: GBP48.1m), and statutory EPS fell by 9.6% to 41.5p (2020:
45.9p).
Customer numbers increased by 0.8% to 657,411 (2020: 652,237)
with service numbers growing by 2.5% to 2,073,797 (2020:
2,022,716). These reflect a modest pick-up in activity during the
second half as Partners became increasingly confident in the
competitiveness of our proposition, and more proficient at using
the remote sign-up tools we introduced during last spring.
We received a number of awards during the year recognising both
the value we offer and the quality of service provided by our
UK-based support teams; these are testament to our customer-centric
approach, our commitment to treating our customers fairly, our
ongoing mission to be the Nation's most trusted utility provider,
and the significant resources invested in delivering the best
possible customer service.
Dividend
We are proposing a final dividend of 30p (2020: 30p), bringing
the total for the year to 57p (2020: 57p), reflecting our strong
balance sheet and confidence in the outlook for the coming year. It
will be paid on 30 July 2021 to shareholders on the register at the
close of business on 9 July 2021 subject to approval by
shareholders at the Company's AGM which will be held on 22 July
2021.
We remain committed to a progressive dividend policy consistent
with the underlying strong cash generation of our business.
Our environmental, social and governance strategy
We have undertaken a comprehensive review of our Environmental,
Social & Governance ('ESG') strategy and the initiatives which
support our efforts. Engaging with our key stakeholders and
conducting a materiality assessment has helped clarify the priority
issues for our business going forwards, which are set out in detail
in our ESG Report.
This Report sets out the commitments we are making for this year
and the years to come, and how they align with the ambitions of the
UN Sustainable Development Goals ('SDGs').
Whilst we have limited scope to influence how much electricity
from each type of generation enters the National Grid each year, we
particularly acknowledge that as an organisation supplying energy
to consumers, we have a responsibility to help to protect our
environment and continue to play our part in the UK transition to
Net Zero.
We are pleased with the steps we have taken this year to define
and implement our ESG strategy, albeit acknowledging that, like all
businesses, there is always more we can do.
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
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 and risks 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.
Recent Trading and Outlook
Recent Trading
With partial lockdown restrictions still in place, it is taking
longer than expected for Partner activity to return to pre-covid
levels; we anticipate this will happen progressively over the
coming months as the remaining restrictions on social distancing
are lifted, and the economy weans itself off the unprecedented
government financial support which is still being provided.
We have seen a reduction in churn over recent weeks compared
with the same period last year and are also starting to see
improved penetration of our financial services products amongst new
customers following their recent incorporation into the customer
initial sign-up journey.
Energy Prices
The level of the energy price cap increased by almost GBP100 at
the start of April, a substantial rise that reflects both rising
wholesale prices and higher covid-related costs. Since then,
wholesale costs have remained at an elevated level, which makes the
switching market particularly challenging for all market
participants.
Despite this, many independent suppliers are still setting their
retail prices at whatever level is required to attract new
customers on price comparison sites, irrespective of the impact it
will inevitably have on their profitability and cashflow; as a
result, we continue to see them reporting significant and
unsustainable losses in their latest published accounts. A number
of further suppliers have left the market over the last 12 months,
with further insolvencies likely in the event that the current
Ofgem consultation (designed to prevent suppliers using customer
deposits as a substitute for shareholder capital) becomes
effective.
Outlook
We remain well positioned to build shareholder value over both
the near term and the years ahead, with a diverse portfolio of
essential household services, a motivated distribution channel, a
unique integrated multi-utility business model, market leading
levels of customer retention, and a strong balance sheet. These
attributes have enabled us to build an exceptionally high-quality
customer base and provide significant confidence over our future
earnings stream.
Whilst our business model benefits from enormous financial
resilience - as clearly demonstrated last year - over the shorter
term the levels of Partner activity (and hence our net growth) can
be impacted by the wider macroeconomic climate. Currently, and over
the last year, the combination of higher household savings and
unprecedented government support resulted in lower Partner activity
and a corresponding reduction in net growth; at other times, such
as during the aftermath of the Global Financial Crisis of 2007, we
saw an environment where reducing household expenditure became much
more important to consumers, and the need to make money (addressed
by our Partner opportunity) became far more urgent - combining to
deliver sharply higher net growth.
And in the meantime, prolonged periods of working from home have
led many to reconsider their work-life choices, and the growing
attractiveness of the meaningful near-term income opportunity we
offer, which requires no previous qualifications and has no
geographic limitations. This is expected to drive increased Partner
recruitment and activity in the months and years ahead; and as
macroeconomic conditions start to swing back in our favour this
autumn, we are increasingly confident that the pent-up demand for
our flexible income opportunity will deliver a return to
pre-pandemic levels of net service growth, and provide a solid
platform from which to deliver our medium term goals.
We intend to capitalise on these favourable market trends by
investing further in both our customer and Partner propositions, as
illustrated by the improvements we made at our recent 'Power Up'
event. We now expect full-year organic service growth at a similar
level to last year, weighted towards the second-half, as our
Partners get back into their stride.
From a financial perspective, and in the absence of unforeseen
circumstances, we anticipate adjusted full year profit before tax
increasing to around GBP60m, with a maintained dividend of 57p.
Our medium-term growth objectives beyond the current year, of
taking our customer numbers to one million (and beyond) remain
unchanged, and I look forward to the opportunities and value that
achieving them will create for all stakeholders.
Once again, I would like to thank my boardroom colleagues for
their support and all our staff and Partners for their loyalty and
hard work, in helping us achieve such a strong performance this
year against a background of such challenging conditions.
Charles Wigoder
Executive Chairman
18 June 2021
Chief Executive's Review
Against the backdrop of extraordinary disruption over the last
year, our business has demonstrated its inherent strength and
sustainability.
We continue to supply over half a million households with a
growing range of essential services, which have assumed an even
greater importance in people's lives whilst they have been
restricted to their homes. On all fronts, I am extremely proud of
the resilience of the underlying services we supply, the service
levels we continue to offer, and the performance of our teams in
supporting our customers and Partners so well during this uniquely
challenging period.
General public perception of our markets is changing, and
switching suppliers to achieve short-term savings has become just
one factor to be considered, alongside the stability and continuity
of supply (especially in relation to broadband), and the quality of
customer service and personal care being provided.
As a business with a marketing model built on spreading the
word, one neighbour at a time, the restrictions of the last year
which we have largely all spent in lockdown have been hugely
challenging, preventing our Partners from following their usual
modus operandi of informal networking as part of their day-to-day
social interactions. Like everyone else, they have had to adapt to
a new remote world, learning new skills and promoting UW via Zoom
from their kitchen tables.
As covid-related government stimulus packages are progressively
withdrawn, and the prospect of inflation looms, it is clear that
household budgets will come under increasing pressure - an
environment in which our business has historically thrived, with
people looking to either save money on their bills or make money.
We cater for both.
The most notable impact of covid on our business, however, has
been the seismic shift in both employer and employee perceptions of
working from home. Historically an exception, more recently a theme
in the 'gig' economy, flexible home-based working has of necessity
become entirely mainstream over the last twelve months.
Many people are reconsidering their work-life choices, and the
meaningful near-term income opportunity we offer, that requires no
previous qualifications and has no geographic limitations, is
becoming increasingly attractive. This, along with the longer-term
potential to build a truly sustainable residual income, is expected
to drive increased demand for our proven income opportunity, and we
are working to ensure our business is positioned to capitalise on
this exciting new dynamic.
Our Business model
Our overall purpose as a business is to help our Partners
achieve their personal goals, whatever they may be, through their
involvement with UW.
They do this by successfully encouraging their friends and
family to switch just once onto our 'all your home services in one'
fair, long-term pricing proposition, then spending the time and
money they save on things that actually matter to them, rather than
worrying each year whether their utility pricing is still
competitive.
It is our genuinely differentiated multiservice customer
proposition combined with this highly efficient route to market
(that in itself represents an attractive proposition to many
consumers), that lies at the heart of our business model.
All your home services in one
We supply households and small businesses throughout the UK with
a wide range of essential services under the UW brand - broadband,
mobile, energy and insurance. Our multiservice proposition offers
our customers:
-- Simplicity - just one, simple bill for all their home services;
-- Savings - compared with the prices they were previously paying; and
-- Service - delivered by our award-winning UK-based support teams.
As the UK's only fully integrated multiservice provider, we
derive significant ongoing operating efficiencies by spreading a
single set of overheads across the multiple revenue streams we
receive from each of our customers.
A smarter way to earn
We offer our Partners a highly flexible opportunity to make
money by telling their friends and family about UW, helping them
switch essential services, that they are already taking from other
suppliers, to us. In return, they can receive a share of the
revenues generated by those customers, into perpetuity.
Between them, our 48,000 Partners have introduced virtually
every one of our 650,000 customers to us. They are inherently local
and trusted brand advocates who spread the word about UW, one
neighbour at a time.
The clear alignment of interests that underpins our Partner
revenue-sharing model enables us to build a uniquely high-quality
customer demographic, in an effective and cost-efficient
fashion.
Our markets
The broadband, mobile, energy and insurance markets are each
individually significant; combined, they represent a vast
opportunity. With a market share of under 2%, there are few
practical constraints on the size of business we can build
organically.
We do not seek to persuade consumers to buy something they don't
already have and may not need: we simply offer them an easier and
better solution for services they are already using. And whilst
each of the markets is constantly evolving, our business is built
on the inherent long-term stability of these non-discretionary
revenue streams, and the attractive niche we have identified where
we benefit from the efficiencies of combining multiple services
within an integrated cost-base, with a clearly differentiated route
to market.
Each individual market is typically dominated by a relatively
small group of former monopoly suppliers or key infrastructure
owners, with a number of independent suppliers competing for market
share with varying degrees of success. As largely commoditised
services, however, there is little scope for genuine long-term
differentiation in consumer propositions for individual services,
and customer acquisition across all of these marketplaces is
largely driven by exploitative price-walking tactics, or by
incurring deep financial losses in an attempt to achieve scale.
As a consequence, the markets have become polarised, with the
majority of UK consumers being exploited on price by their
suppliers. In turn, a minority are exploiting the pricing practices
of their suppliers to secure their services at unsustainable
pricing levels.
Market-wide 'racing to the bottom' on price inevitably
undermines consumer trust and ultimately reduces customer
engagement. Accordingly, there is significant media scrutiny and
increasing regulatory intervention across all the markets for
essential household services. First were Ofgem, following the CMA
investigation into the energy markets, with a price cap implemented
in 2019; this was quickly followed by Ofcom announcing new codes of
practice covering the broadband market in 2019, and now an ongoing
FCA investigation into price walking in the insurance markets is
expected to result in significant market intervention later this
year. We welcome this focus on the unfair pricing practices
prevalent in our markets, and the desire to address the resultant
consumer detriment.
Our Customers
Ultimately our aim is to help our customers to get on with their
lives by delivering consistently fair value and great service,
ensuring they never need to think about switching their utilities
again.
We must compete toe-to-toe for their custom in each of the
individual markets we operate in, but our 'all your home services
in one' proposition, combined with the trusted recommendation of UW
from a Partner who is a neighbour or friend, offers our customers a
highly attractive alternative way to purchase their essential
household services.
Each of the personal recommendations made by our Partners is
based on trust. Our business is therefore founded on an absolute
commitment to live up to that recommendation, and trust and
fairness lie at the heart of our proposition. We are well aware
that our customers have plenty of alternative choices and if they
switch away from UW not only do we lose their custom, but our
Partner does too.
We therefore seek to maximise the length of time that customers
stay with UW, encouraging them to increase the number of services
they take from us by offering incrementally better value with each
additional service they apply for.
We also target new customers who move home less often (i.e.
homeowners), as occupancy changes pose particular challenges to
broadband and energy suppliers, and represent a prime source of
churn and bad debt.
This inherently long-term approach to building value, with a
focus on acquiring high quality customers in a cost-effective way,
represents a uniquely sustainable approach to the markets in which
we operate, and creates significantly greater value to all
stakeholders:
- our customers receive the most competitive prices over the
long term in return for switching all their services
- our Partners have the confidence that they will receive a
long-term residual income stream from a longer-lasting customer
- our shareholders receive a sustainable earnings stream from an
inherently sustainable business.
The quality of our customer base, as measured against the
metrics of multiservice penetration and owner-occupancy, has been a
key focus for many years.
The proportion of new residential customers who are homeowners,
or are taking at least three core services (broadband, mobile,
energy and insurance) at the point of sign-up, are both
consistently above 50%, and the latter metric for our existing
residential customer base is now over 31%. These high-value
customers generate higher revenues, display the lowest churn, and
have a lifetime value many times greater than those taking fewer
services from us.
In commoditised markets dominated by headline prices, we believe
that sustainable value can only be derived from long-term
relationships with our customers - as those who have chosen to
switch on a comparison site will have a high propensity to do so
again when their introductory deal expires. Our alternative
approach of earning the trust of our customers, by rewarding
loyalty and commitment, is a key point of differentiation that will
enable us to achieve our medium-term growth objectives, and help us
maximise long-term shareholder value.
Our tech
A key enabler of our multiservice proposition is our technology.
By fully integrating all the household services we supply into a
single monthly bill, supported by a single set of central
overheads, our technology gives us a fundamental, long-term cost
advantage relative to other suppliers in each of the markets we
operate in.
With a cost to serve our customers that is materially and
sustainably lower than any of our competitors, we are able to offer
attractive pricing over the long term, combined with best-in-class
service levels to our customers.
We continue to make good progress on our digital transformation
project. Whilst this ongoing investment represents a short-term
drag, it is the right long-term decision for the business: we are
increasingly seeing the operating efficiencies and performance
improvements come through, both in terms of delivering the tools
and support our Partners need to achieve their goals through UW,
and in providing improved service levels to our customers.
Our suppliers
We have strong commercial relationships with our key suppliers,
who recognise the value of our unique approach to each of the
markets we operate in, and the importance that we maintain a
competitive and attractive customer proposition for our Partners to
recommend.
Our suppliers benefit from a complementary and clearly
differentiated way of growing their market share, as our
multiservice customer proposition and unique distribution channel
mean we are largely taking market share from their competitors
rather than their own retail arms. Moreover, the sustainability of
our business model (as evidenced by the strength of our balance
sheet, and the longevity of our customers) enhances our appeal and
enables us to access highly competitive terms.
We meet regularly with each of them to discuss how the market
dynamics for each of our services are changing, and the best way to
ensure we can harness these to our mutual benefit, including (where
appropriate) by making amendments to our supply agreements.
We believe these are genuinely mutually beneficial
relationships, and their average tenure - typically over 15 years -
is testament to their strength, and the value that both sides
attribute to them.
Our Partners
We offer our Partners a smarter way to earn: in their own time
and on their own terms. They are one of the key strengths of our
business, and certainly our greatest point of differentiation.
Through UW, they can create real financial security for
themselves and their families by signing up new customers and
introducing our flexible income opportunity to other like-minded
people; in doing so, they can earn meaningful short-term financial
rewards combined with a long-term residual income.
They are at the core of our business model and give us a
significant competitive advantage through their ability to
communicate the benefits of our unique multiservice retail
proposition to high quality customers, who in many cases have never
previously switched supplier; this is in stark contrast to the
traditional routes to market (i.e. broadcast advertising and price
comparison sites) adopted by most other suppliers.
The pandemic has highlighted the attractiveness of our Partner
opportunity, with rising demand for our alternative and highly
flexible income stream to replace or supplement their previous
income sources.
Our Strategy
We seek to increase our share of the markets in which we
operate, improving the value, range, and quality of service we
provide, to build an ever more robust and sustainable business
serving the interests of all our stakeholders - our Partners,
customers, employees and shareholders.
We aim to achieve this primarily through organic growth, by
leveraging our greatest asset - our Partners. In return for
recommending UW to their friends and family, we offer people of any
age, gender, location or educational background an alternative and
highly flexible way to earn an additional income and achieve their
personal goals.
Our Partner model is underpinned by our highly referable UW
customer proposition: by supplying households and small businesses
with a wide range of essential services - broadband, mobile, energy
and insurance - we enable our customers to get on with their lives,
and to spend the time and money they save through UW on things that
actually matter to them, rather than worrying about whether they
are being overcharged by their existing suppliers.
By effectively combining this unique route to market with the
defensive revenue streams generated by the essential services we
supply, we aim to deliver a robust, growing and sustainable
business.
At the heart of this strategy is the clear alignment of
interests between us and our Partners. Put simply, their success is
our success; so our focus is therefore on growing the number of
successful UW Partners.
Increasing the number of Partners actively recommending UW
Becoming a UW Partner is, in itself, a highly marketable
consumer proposition whose attractiveness has been highlighted
during the pandemic, when prolonged periods of working from home
have altered perceptions of the traditional work/life balance; and
the flexible and sustainable opportunity we offer our Partners adds
up to much more than just an income.
We aim to empower tens of thousands of people, from all
backgrounds, to get on in life through UW, in their own time, and
on their own terms; we believe the UW Partner model is ideally
suited to meet the rising demand for new ways of working, so
raising awareness of our opportunity, and positioning it for mass
appeal is a key priority.
Making it easier for our Partners to achieve their goals through
UW
At the heart of our strategy is the clear objective of making it
easier for our Partners to promote UW. We break this down into
three distinct areas of focus:
1. Investing in tools for our Partners
Continuing to deploy significant resources to identify the
challenges our Partners face on a day-to-day basis, then developing
solutions which address them. In the past year this work was
heavily focused on enabling them to gather customers and sign up
new Partners remotely.
2. Simplifying and developing our multiservice customer proposition to improve its referability
Maintaining a relentless focus on delivering best-in-class
service and support to our customers, always treating them fairly,
and investing in our technology and support teams to achieve this.
To these ends, we have significantly improved access for our
customers through longer call-centre opening hours, introducing
online chat, and enhancing our mobile app.
Equally importantly, continually seeking to simplify and improve
the competitiveness of our proposition, and innovating where
necessary. And further evolving our customer proposition to reflect
consumer demand in each of the markets we operate in - for example
full fibre broadband, EV charging points and in-home smart energy
services.
3. Opening up significant additional markets
Expanding our current range of services into related areas -
such as our progressive move into the insurance market with the
introduction Home Insurance and Boiler and Home Cover. Similarly
the success we have had in increasing the number of boiler
installations through Glow Green.
And broadening the appeal of our customer proposition to
segments of the market we currently do not target - notably
tenanted properties (potentially via a 'take control' PAYG
proposition), and in due course relaunching our proposition for
SMEs, an attractive and underserved segment of market in which we
have historically enjoyed success.
Supplementing the success of our Partners
Our Partners offer a route to market that is unparalleled in its
ability to promote a complex multiservice proposition at a
sustainable cost, and to target desirable market segments.
However, we see considerable further value in supplementing
their successes: as we evolve our customer proposition and
introduce additional services, we want our existing customers to
benefit from the improvements we deliver, increase the number of
services they take from us, and thereby extend their lifetime with
us.
In order to build on the original recommendation made by our
Partners, we are investing heavily in our cross-selling
capabilities, sharing the benefits of any additional services taken
by customers with our Partners.
We are always looking for opportunities to strengthen our
business in parallel with our Partners, such as expanding UW Home
Services to install smart meters for other energy suppliers, or
replicating our model in other countries whose utility markets have
been opened to competition.
Our operational performance and non-financial KPIs
The combination of lockdowns and social distancing restrictions
that were in place for much of the year created a challenging
environment for Partners to grow their businesses. Against this
backdrop we were extremely pleased that so many succeeded in doing
so, and were encouraged by the resilience of the business and
overall performance for the year:
-- new Partner recruitment up 40% year on year
-- further organic growth with service numbers up by 51,000 (2020: 121,000)
-- continued low churn
-- further strong progress in our smart meter rollout - 57% of
our customers now have a smart meter in their property
-- Which? Utilities Brand of the Year 2020
Our Partners
We are wholly committed to helping 'Team Purple' - our
48,000-strong community of Partners - to achieve their goals
through UW, whatever they may be. Our continued organic growth,
despite the challenges that covid has presented during the year, is
testament to their resilience and adaptability. Their confidence in
our brand and financial strength, the good value we provide through
our fair pricing policies, and our commitment to delivering
best-in-class service and support to our customers resulted in them
defying the odds and continuing to successfully recommend UW from
their kitchen tables.
More than ever, 2020 has made it clear that being a UW Partner
is about much more than just earning an income. With all personal
appointments, meetings and social events cancelled, we have worked
to replace the traditional lines of communication between our
Partners and the business. This has included fortnightly Zoom
sessions to team leaders to announce news and key updates, monthly
'all hands' sessions to recognise strong performers and drive
engagement, as well as the introduction of numerous short-term
home-based incentives, mental and physical wellbeing sessions, and
remote personal development training.
In response to the initial lockdown in spring 2020, we
accelerated elements of our product roadmap to enable Partners to
sign up both new customers and new Partners remotely. Having
embraced and adapted to using these tools during the first half,
they were responsible for the vast majority of new customer and
Partner applications we received during the second half of the
year. We anticipate that they will remain an important new channel
for our Partners in future, allowing them to conduct their
referrals nationally as opposed to locally, accessing a broader
market and in a more convenient and efficient fashion.
We have continued to develop this remote capability, enabling
more experienced Partners to support less confident Partners
remotely, thus encouraging 'in the field' training.
In anticipation of the ending of the Government furlough scheme
in October 2020, and in order to make the UW Partner opportunity
more accessible to those affected, we reduced the registration fee
to GBP10 (previously GBP50). This resulted in a significant
increase in the number of new Partners joining us during the second
half of the year, despite the furlough scheme being extended.
Whilst productivity of these new Partners has been below historic
averages, largely due to the ongoing social distancing
restrictions, the level of demand we saw demonstrates the appeal of
the flexible and long-term income stream we offer.
We also adjusted our product roadmap in order to further adapt
our Partner income opportunity to meet this rising demand, and make
it easier for new Partners to succeed. This included overhauling
the new Partner onboarding journey (making it an entirely digital
app-based experience), developing our Planner tool (to
automatically identify the most attractive prospects amongst a new
Partner's existing contacts), paying experienced Partners to help
others (primarily new Partners) gain the confidence to sign up
customers unaided in future, and introducing a simplified Customer
Bonus that strengthens the appeal of our opportunity for those
seeking an immediate income.
We are hugely encouraged by the number of new Partners who
joined during the year, and believe that as we enter the
post-pandemic environment, we stand to benefit from the increased
demand for an alternative and highly flexible income stream to
replace or supplement people's previous source of income.
Our customers & services
Our primary focus for many years has been the residential
market, where we now offer four core services: broadband, mobile,
energy and insurance, with many of these customers also taking our
Cashback card.
Customers 2021 2020
Residential 633,616 627,058
Business 23,798 25,179
-------- --------
Total 657,411 652,237
There is a significant difference in average expected customer
lifetimes between customers (and therefore in the revenues and
profits they will generate) depending on whether they own their own
home, and on the number of services we are providing to them. Hence
our ongoing focus on encouraging new customers to switch all their
core services to us, leveraging our multiservice proposition as a
key point of differentiation.
Services 2021 2020
Core services
Energy 1,079,044 1,071,665
Broadband 324,499 323,901
Mobile 302,654 280,220
Insurance 32,928 28,550
Other services
Cashback card 308,439 288,043
Legacy telephony 26,233 30,337
Total 2,073,797 2,022,716
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.
All our core services grew during the year, with a 15% increase
in insurance, an 8% increase in mobile, and a 7% increase in the
number of Cashback cards.
The most attractive customer segment are homeowners taking all
their services from us. The proportion of new customers gathered by
Partners who chose to switch all their services to us through our
Double Gold bundle reached a record high during the first half of
the year before falling back slightly; this reflects concerns by
customers about switching their broadband services during lockdown
(due to the perceived risk of losing continuity of internet
access), and also the impact of steep inflation in energy wholesale
markets which reduced the savings available to a customer switching
all their services to us.
Percentage of new customers
taking 'Double Gold'
bundle
-------------------------------
Q1 FY19 55.3%
Q2 FY19 57.0%
Q3 FY19 57.6%
Q4 FY19 55.4%
Q1 FY20 59.0%
Q2 FY20 63.4%
Q3 FY20 60.9%
Q4 FY20 60.4%
Q1 FY21 66.6%
Q2 FY21 68.1%
Q3 FY21 58.6%
Q4 FY21 55.0%
We continue to benefit from market-leading rates of customer
loyalty, and our electricity supply point churn (the percentage of
supply points leaving during the period) - which we view as a proxy
for overall churn - fell during the year to a little under 13%
(2020: 14%); although we saw a brief spike in early April following
the substantial increase announced to the Ofgem price cap, it has
since more than reversed this rise, and remains significantly below
industry levels.
We attribute our low levels of churn to our fair approach to
pricing, high standards of customer service, and the increasing
proportion of our customer base who are taking multiple services
from us.
Average revenue per customer from providing Core and Other
services fell slightly to GBP1,254 (2020: GBP1,305) primarily due
to lower energy prices during last winter following the Ofgem price
cap reduction in October.
Supporting our customers
In order to earn the trusted personal recommendations of our
Partners, we must deliver a consistently high standard of service
to our customers, treat them fairly, and live up to our promise of
letting them get on with their lives and forget about their
utilities.
We rely on the efforts of our colleagues in our unified support
centre to look after all the services that our customers choose to
take from us. Historically based in north London, these teams have
maintained our high levels of customer support despite being
home-based for the entire year. We were very pleased with the rapid
and successful transition to home working in response to the first
covid lockdown last year, and it is a testament to both the secure
and robust technology infrastructure we have built, and positive
attitudes of everyone involved, that this was achieved within a
fortnight and with negligible impact on our service levels.
These teams are still mostly working from home, and whilst this
has enabled us to maintain our service levels from a customer
perspective, it has come at considerable cost. Not just the
additional financial costs we have incurred as a business resulting
from a modest fall in overall productivity during the period, but
even more importantly in the additional stresses and pressures
faced by our teams working from their homes. We anticipate both of
these will start to reverse over the coming months, as colleagues
spend increasing amounts of their time back at the office.
Going forward, we see real value in adopting a hybrid structure,
with growing numbers of customer-facing roles being fulfilled by
colleagues who are employed on a permanent work-from-home basis.
This flexible approach will better enable us to meet the needs of
our customers, as demonstrated by the recent extension of our call
centre opening hours.
We continue to invest heavily in offering the digital support
and experience that our customers increasingly expect from us -
enabling them to self-serve without having to speak to one of our
team. During the year we refreshed our UW customer app and online
account, offering increased self-service capabilities, and we
continue to employ numerous qualitative and quantitative
performance measurement tools to monitor all aspects of our
customers' interactions with us.
We are proud to receive consistently high ratings and
recognition from Moneyfacts, USwitch and Which? for the quality of
the service, support and value we provide to our customers, and the
overwhelmingly positive feedback we receive from customers in our
own surveys.
This year we were pleased to have been the sole British company
to be recognised in the European Contact Centre and Customer
Service Awards for supporting our customers in response to the
covid crisis.
We were named by Which? as their 2020 Recommended Provider for
both our Broadband services and our Mobile services, and as their
overall Utilities Brand of the Year in their 2020 annual awards.
This resounding endorsement of our services from the UK's leading
independent consumer champion is primarily a testament to the
consistent hard work of our support teams in North London, but also
reflects our commitment to genuinely earning the trust of our
customers, and provides huge confidence to our Partners when
recommending UW to their friends and families.
Broadband
The nationwide rollout of full fibre and the impending switch
off of the legacy copper network poses a significant upheaval to
the broadband market.
There is considerable demand for full fibre broadband,
particularly on the back of a year of working and schooling from
home when there has been increased reliance on a stable and fast
broadband connection. Whilst speed has historically been the
critical factor for consumers, we increasingly believe that as full
fibre penetration increases across the country, in-home wireless
coverage is likely to become the key point of differentiation
between suppliers.
We launched our full fibre offering towards the end of the year
and are excited to have partnered with Amazon to launch their Eero
mesh WiFi system to our customers. This offers them unparalleled
broadband coverage throughout their home.
Mobile
We were delighted to be recognised by Which? as their
Recommended Mobile Provider for the first time. To receive this
endorsement for both of our core communications services provides
huge confidence for our Partners when recommending UW.
In August we extended our MVNO agreement with EE for a further 5
years. This allowed us to launch a significantly more competitive
mobile proposition (particularly in relation to data) and to gain
comfort over our long-term ability to compete, whilst providing
clarity on our future product roadmap.
For a number of years mobile has been our fastest growing
service, and we believe that with the impending introduction of
WiFi calling (improving 'in building' mobile coverage) and the
forthcoming addition of 5G, we are well positioned to see this
trend continue, in what is becoming an increasingly essential
market.
Energy
The energy retail markets have now been in a state of flux for
almost a decade, with the flood of new entrants now firmly
receding. The key challenge facing the industry as a whole is now
the transition to a sustainable energy market - not only in terms
of decarbonisation, but also in relation to the financial stability
of suppliers.
Consumer engagement with the transition to net zero is
inexorably rising - a trend that we welcome and support. Whilst we
view ourselves principally as a multiservice provider, not simply
an energy supplier, it is clear that we have both a direct role to
play in the transition, and also an indirect role, by helping our
customers to do likewise.
We were pleased to introduce a certificated green electricity
tariff for customers switching all their services to us during the
year. Further to this, we have seen significant interest in the
first UW Woodland that was planted over the winter, demonstrating
the appetite from our customers and Partners alike to play their
part in offsetting their carbon footprints and contributing to
fighting the climate crisis.
The impact of covid on the energy retail markets was immediate,
with many suppliers aggressively reducing investment in customer
acquisition in response to concerns that bad debt levels would
significantly increase. Whilst bad debt and delinquency levels have
undoubtedly increased across the industry, the increase does not
look to have been as bad as many first feared and we expect these
to return to pre-covid levels over the near-term.
Following a reduction in the Ofgem price cap in October 2020,
the gap between the top and bottom of the market narrowed. This was
followed by a period of steep wholesale market inflation, which
caused the gap to narrow further during the second half of the
year, although this in turn then partially fed through into the
price cap being increased by almost GBP100 to GBP1,138 in April
2021.
Given historic trends, with the vast majority of retail energy
suppliers consistently reporting significant and unsustainable
financial losses for a number of years, the impact of covid and
recent energy price inflation has resulted in a challenging
environment for many suppliers, creating cause for optimism that we
will begin to see a more rational approach to pricing across the
market.
We welcome Ofgem's current consultation on consumer credit
balances. This seeks to reduce the risk of mutualisation across the
industry of any credit balances held by a supplier that fails, and
to limit the ability of suppliers to fund their businesses by
billing their customers monthly in advance and using the resultant
credit balances as a source of working capital.
Insurance
We have barely scratched the surface of the opportunity that the
insurance markets represent, and continue to see exciting potential
to accelerate our growth in this sector over the coming years.
We believe this market is well suited to our core brand values
of offering consistently low monthly prices, and by doing so we
believe we will build an additional, significant and sustainable
new revenue stream which will contribute meaningfully to the bottom
line over time.
We received FCA authorisation as an insurance broker in the
autumn, which is a key milestone towards achieving our longer-term
ambitions, as it provides us with greater flexibility in the way we
sell our policies. We have recently included Boiler and Home Cover
within the initial UW application journey, and are seeing a
pleasing proportion of new customers signing up to this market
leading policy.
We welcome the FCA's recently published remedies to address the
loyalty penalties that are prevalent in the insurance markets. With
implementation dates due at the end of 2021, we believe the
proposed interventions will make our pricing approach appear
significantly more attractive, as other insurers have to revise
their current 'bait and switch' approach to acquiring new
customers.
We remain focussed on steadily building scale for our current
product range, expanding our existing home insurance panel, and
increasing the conversion ratio amongst customers who have shown
interest in these products, whilst maintaining robust margins. In
the longer term we expect to launch further complementary insurance
products.
Cashback card
By using their UW Cashback card for everyday spending, our
customers benefit from the opportunity to receive additional
savings of between 3% and 7% at a range of participating retailers,
and 1% on other spend, as an automatic credit on their next monthly
bill from us.
During the year our customers earned almost GBP6m by using this
unique benefit, and it continues to prove itself as a strong point
of differentiation, and an attractive customer acquisition and
retention tool.
We believe the Cashback card plays an important role in both
giving our Partners confidence when recommending UW, and in
building the loyalty of our customers - as seen in their low rates
of churn.
UW Home Services
UW Home Services has enabled us to move significantly ahead of
the wider market in our smart meter rollout programme.
Despite the numerous challenges that continue to hinder the
national smart meter programme, UW Home Services successfully
navigated a path through endlessly changing social distancing
restrictions during the year, and installed over 5% of all smart
meters in the UK, substantially ahead of our 2% energy market
share. They installed approximately 145,000 (2020: 135,000) largely
dual fuel meters during the year, taking the penetration of smart
meters within our residential meter portfolio to 57%, comfortably
ahead of the average for the industry as a whole, and making us the
second smartest medium or large supplier in the industry - a huge
achievement.
We are strongly supportive of the smart meter roll-out
programme, which plays a key role in the broader transition to net
zero, improves billing accuracy and customer satisfaction, reduces
unbilled energy losses (a cost which is ultimately borne by all
consumers as part of their charges) and critically, helps customers
monitor in real time how much energy they are using.
However, we believe that strong Government intervention is now
required if this initiative is to achieve its full potential for
improving customer service, grid management, and cost reduction -
namely the introduction of legislation to remove the ability for
customers to opt-out from the national smart meter rollout
programme, by refusing to have a new smart meter installed.
We continue to explore options for UW Home Services to act as a
Meter Operator for third party suppliers, and/or move into the
emergent market of installing EV charge points.
Boiler Installation
Our boiler installation business (Glow Green) made substantial
further progress during the year, despite the impact of the
pandemic, increasing the number of boilers installed to 8,100
(2020: 5,700), despite social distancing restrictions, with our
share of their full year losses reducing to GBP0.1m (2020: GBP0.5m
loss).
We maintain our confidence in Glow Green as a standalone
profitable business unit, and anticipate a positive contribution to
group profits for the current financial year.
We are encouraged by the emergent demand for heat pump
installations and Glow Green has been accredited as an EV
charge-point installer.
Andrew Lindsay MBE
Chief Executive Officer
18 June 2021
Financial Review
Overview of Results
Adjusted Statutory
2021 2020 Change 2021 2020 Change
---------- ---------- ------- ---------- ---------- -------
Revenue GBP861.2m GBP875.8m (1.7)% GBP861.2m GBP875.8m (1.7)%
Profit before
tax GBP56.1m GBP60.8m (7.7)% GBP43.5m GBP48.1m (9.6)%
Basic EPS 57.4p 61.8p (7.1)% 41.5p 45.9p (9.6)%
Dividend per share 57.0p 57.0p 0.0% 57.0p 57.0p 0.0%
In order to provide a clearer presentation of the underlying
performance of the group, adjusted profit before tax and adjusted
basic EPS exclude share incentive scheme charges of GBP1.4m (2020:
GBP1.3m) and the amortisation of the intangible asset of GBP11.2m
(2020: GBP11.2m) 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. The
reconciliation for adjusted EPS is set out in note 2 of the
financial statements.
Summary
Adjusted profit before tax decreased by 7.7% to GBP56.1m (2020:
GBP60.8m) on lower revenues of GBP861.2m (2020: GBP875.8m). These
decreases mainly reflect the impact of lower retail energy prices
from 1 October 2020 (in line with a reduction in the Ofgem price
cap), with the fall in adjusted pre-tax profit also reflecting
higher regulatory costs and extra operating costs largely
associated with covid.
Distribution expenses remained broadly flat at GBP27.8m (2020:
GBP27.7m), mainly reflecting increased activity at our boiler
installation business ('Glow Green'), partially offset by the
impact of lower growth, and lower Partner training and event
costs.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP8.6m to GBP76.8m (2020: GBP68.2m),
mainly as a result of higher staff, technology and regulatory
costs.
The bad debt charge for the year (now separately identified on
the income statement as impairment loss on trade receivables)
increased to GBP11.2m (2020: GBP10.4m) representing 1.3% of
revenues (2020: 1.2%).
Adjusted earnings per share decreased by 7.1% to 57.4p (2020:
61.8p), with statutory EPS decreasing by 9.6% to 41.5p (2020:
45.9p). In accordance with previous guidance and our strong cash
position, the Board is proposing to pay a final dividend of 30p per
share (2020: 30p), making a total dividend of 57p per share (2020:
57p) for the year.
Revenues
We continued to grow the number of services we are supplying,
with an increase of 51,000 services (2020: 121,000) during the
course of the year, taking the total number of services provided to
our customers to a little under 2.1 million (2020: 2.0
million).
The decrease in revenues mainly reflects lower energy prices
during the period, partially offset by higher revenues on telephony
and at Glow Green (included in 'Other' below):
Revenues GBPm 2021 2020
Electricity 391.8 384.2
Gas 248.0 284.8
Landline and Broadband 132.2 125.4
Mobile 40.6 37.4
Other 48.6 44.0
------ ------
861.2 875.8
Margins
Our overall gross margin for the year was 20.1% (2020: 19.1%)
mainly reflecting the lower proportion of energy sales during the
period.
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 remained broadly
flat at GBP27.8m (2020: GBP27.7m), reflecting increased activity at
Glow Green and higher commissions paid to Partners; partially
offset by the impact of lower growth, and lower Partner training
and event costs.
Administrative expenses (excluding share incentive scheme
charges and amortisation of the energy supply agreement intangible)
increased during the year by GBP8.6m to GBP76.8m (2020: GBP68.2m),
mainly as a result of higher staff, technology and regulatory
costs. The increase in staff costs mainly reflects the investment
in strengthening our technology, regulatory, HR, marketing, and
management teams.
The bad debt charge for the year (now no longer included within
administrative expenses) increased to GBP11.2m (2020: GBP10.4m)
representing 1.3% of revenues (2020: 1.2%). This reflects a higher
proportion of customers with at least two energy bills outstanding,
which rose to 2.08% (2020: 1.76%), principally reflecting a
reduction in enforcement activity during the period due to covid
restrictions. The investigation into the Group's debt management
processes announced by Ofgem in June 2018 remains ongoing, with any
potential exposure considered unlikely to be material.
Cash, Capital Expenditure, Working Capital and Borrowings
We ended the period with a net debt position including lease
liabilities of GBP71.4m (comprising bank loans of GBP89.4m and
lease liabilities of GBP7.1m, less cash of GBP25.1m; 2020:
GBP59.4m). The underlying increase mainly reflects an increase in
working capital. The Group's Net Debt/adjusted EBITDA ratio remains
low at around 1.1x (adjusted EBITDA of GBP66.5m used in this ratio
represents operating profit of GBP45.8m plus depreciation and
amortisation of GBP19.3m and share incentive scheme charges of
GBP1.4m).
Our net working capital position showed a broadly flat year on
year cash outflow of GBP12.5m (2020: cash outflow of GBP13.3m);
this primarily reflects the investment made in supplying higher
quality broadband routers to customers, increased trade debtors
reflecting reduced enforcement activity during the period due to
covid restrictions, and the continuing success of the Quick Income
Plan for Partners. Capital expenditure of GBP10.0m (2020: GBP10.3m)
related primarily to our continuing digital transformation
programme.
Dividend
The final dividend of 30p per share (2020: 30p) will be paid on
30 July 2021 to shareholders on the register at the close of
business on 9 July 2021 and is subject to approval by shareholders
at the Company's Annual General Meeting which will be held on 22
July 2021. This makes a total dividend payable for the year of 57p
(2020: 57p).
Our medium-term intention remains to achieve a dividend pay-out
ratio of around 85% of adjusted EPS, whilst maintaining our
long-standing progressive dividend policy.
Share Incentive Scheme Charges
Operating profit is stated after share incentive scheme charges
of GBP1.4m (2020: GBP1.3m). 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, and the
fluctuations in the amount of this charge from one year to another,
we are separately disclosing 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. Our current adjusted earnings per share have
also therefore been adjusted to eliminate these share incentive
scheme charges.
Taxation
A full analysis of the taxation charge for the year is set out
in note 5 to the financial statements in the Annual Report. The tax
charge for the year is GBP11.0m (2020: GBP12.4m).
The effective tax rate for the year was 25.2% (2020: 25.7%),
this remains higher than the underlying rate of corporation tax due
mainly to the ongoing amortisation charge on our energy supply
contract intangible asset (which is not an allowable deduction for
tax purposes).
Nick Schoenfeld
Chief Financial Officer
18 June 2021
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 Committee. No new principal
risks have been identified during the period, and save as set out
below, nor has the magnitude of any risks previously identified
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's services are promoted using 'word of mouth' by 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.
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 either provided through cloud-based infrastructure
as a service, 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 security 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 security strategy, providing effective control
to mitigate the relevant threats and risks. 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 the Group is a data
controller registered with the ICO. If the Group fails to comply
with all the relevant legislation and industry specific regulations
concerning data protection and information security, it could be
subject to enforcement action, significant fines and the potential
loss of its operating licence.
Information security risks are overseen by the Group's
Information Security and Legal and Compliance team.
Legislative and regulatory risk
The Group is subject to various laws and regulations. The
energy, communications 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.
Further regulatory changes relating to retail energy price caps,
faster switching, the impact of covid on bad debt, the rollout
programme of smart energy meters, and the development of existing
environmental and social policies, could all have a potentially
significant impact on the sector, and the net profit margins
available to energy suppliers.
The Group is also a supplier of telecoms 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. Regulatory changes relating to the
European Electronic Communications Code could have an impact on the
telecoms sector with increased regulatory burden and on the Group's
product offering.
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"). If the Group fails to comply
with FCA regulations, it could be exposed to fines and risk losing
its authorised status, severely restricting its ability to offer
insurance services to customers.
In general, the majority of the Group's services are supplied
into highly regulated markets, and 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 UK regulators for the
energy and communications markets respectively), the Department for
Business, Energy and Industrial Strategy ('BEIS'), and the FCA. 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 or if there are
competition issues the Group needs to raise with them. An
investigation into the Group's debt management processes announced
by Ofgem in June 2018 remains ongoing, and any potential exposure
is not considered likely to be material.
It should be noted that the regulatory environment for the
various markets in which the Group operates is generally focussed
on promoting competition; it therefore seems reasonable to expect
that most potential changes will broadly be beneficial to the
Group, given the Group's relatively small size compared to the
former monopoly incumbents with whom it competes. However, these
changes and their actual impact will always remain uncertain and
could include, in extremis, the re-nationalisation of the energy
supply industry.
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 telecoms
markets which could result in further consumer protection
legislation being introduced. In addition, political and regulatory
developments affecting the energy and telecoms 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 legal and compliance challenges in
relation to climate change and managing climate-related risk.
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.
Fraud and bad debt risk
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.
Fraud and 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.
More generally, the Group is also exposed to payment card fraud,
where customers use stolen cards to obtain credit (e.g. on their
CashBack card) or goods (e.g. Smartphones) from the Group; the
Group regularly reviews and refines its fraud protection systems to
reduce its potential exposure to such risks.
Wholesale price risk
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 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 telephony and broadband).
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
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,
transportation, distribution, agreed metering, regulatory and
certain other associated supply costs is set by reference to the
average of the standard variable tariffs charged by the 'Big 6' to
their domestic customers less an agreed discount, 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. In addition, the timing of any quarterly price changes
under the E.ON (formerly npower) arrangement may not align with
changes in retail prices, creating temporary short-term
fluctuations in the underlying margins earned by the Group from
supplying energy. 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 or increased price competition could impact
future profit margins. In order to maintain its competitive
position, there is a consistent focus on ways of improving
operational efficiency. New service innovations are monitored
closely by senior management and the Group is generally able to
respond within an acceptable timeframe by offering any new services
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, is considered
likely to materially reduce 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. In the event that smaller independent
energy suppliers were to experience financial difficulties as a
result of increasing wholesale prices for instance, it is possible
that customers could also have a loss of confidence in the Group,
given that it is also an independent energy supplier. 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 in part 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
having established their own meter operator (UW Home Services
Limited) and ensuring that all employees receive appropriate
training and proper supervision.
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 rapid anticipated growth in the installed base of smart meters
resulting from the national rollout programme.
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.
Key man risk
The Group is dependent on its key management for the successful
development and operation of its business. In the event that any or
all of the customers of the key management team were to leave the
business, it could have a material adverse effect on the Group's
operations. The Group seeks to mitigate this risk through its
remuneration policy.
Single site risk
The Group operates from one principal site and, in the event of
significant damage to that site through fire or other issues, the
operations of the Group could be adversely affected. In order to
mitigate, where possible, the impact of this risk the Group has in
place appropriate disaster recovery arrangements.
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.
Virus outbreak risk
In the absence of a vaccine or effective treatment, the Company
faces a number of risks from any highly infectious virus or disease
which causes serious incapacity amongst those infected, including:
(i) staff may be unable to attend their normal place of work and
fulfil their normal duties due to falling ill or being required to
self-isolate (either due to exposure to carriers of the virus, or
to reduce the likelihood of being so exposed); (ii) the Company may
be required to shut Network HQ to prevent transmission of the virus
in the workplace; (iii) the efficiency of our operations may be
reduced; (iv) we may be unable to recruit and train new members of
staff; (v) customers may find it more difficult to contact the
company; (vi) we may be unable to resolve faults and challenges
faced by customers which require a visit to their home or other
engineering works to be carried out; (vii) customers may stop
paying their bills, or we may be required by the Government to
offer payment holidays to customers in respect of their utilities
(in a similar fashion to the mortgage payment provisions), putting
pressure on the Company's working capital; (viii) we may be
restricted from carrying out normal debt enforcement procedures
including suspension of telephony services and installation of
smart meters; (ix) the Company's Partners may find it more
difficult to grow their businesses during a period when
restrictions on movement are imposed by the Government; (x) we may
be unable to visit customers' homes to install smart meters and/or
our free lightbulb replacement service; (xi) the various providers
of third party infrastructure used to supply our services may be
unable to cope with the increased demands placed upon them; and
(xii) churn could increase during periods when customers are
isolated at home.
These are mitigated by: (i) the Company has proven technology to
enable most employees to carry out their duties remotely; (ii) the
demographic mix of our customer base is heavily skewed towards
homeowners and older/retired customers; this means we are
significantly less exposed to payment issues than most other
providers of similar services; (iii) the Company has a strong
balance sheet with modest gearing, and access to significant,
recently refinanced, additional debt facilities (if required) to
cover any temporary pressure on working capital; in extremis, these
could be enhanced by a temporary suspension of the dividend; (iv)
the Company has developed tools which are now in widespread use,
enabling Partners to sign-up new customers, recruit new Partners,
and to help existing Partners support new Partners remotely to
teach them how to build their own successful UW business; and (v)
the wide range of services provided to customers gives us
significant resilience from a revenue and profit perspective
against an external event which affects any individual revenue
stream.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2021
Note 2021 2020*
GBP'000 GBP'000
Revenue 1 861,204 875,774
Cost of sales (688,104) (708,077)
---------- ----------
Gross profit 173,100 167,697
Distribution expenses (27,849) (27,662)
Share incentive scheme credits - 1
--------------------------------------------------- ------- ---------- ----------
Total distribution expenses (27,849) (27,661)
Administrative expenses (76,820) (68,239)
Share incentive scheme charges (1,377) (1,285)
Amortisation of energy supply contract
intangible (11,228) (11,228)
Total administrative expenses (89,425) (80,752)
Impairment loss on trade receivables (11,213) (10,444)
Other income 1,175 1,328
---------- ----------
Operating profit 45,788 50,168
Financial income 84 280
Financial expenses (2,358) (2,336)
---------- ----------
Net financial expense (2,274) (2,056)
Profit before taxation 43,514 48,112
Taxation (10,955) (12,352)
Profit for the period 32,559 35,760
Profit and other comprehensive income for
the year attributable to owners of the
parent 32,577 35,911
Loss for the year attributable to non-controlling
interest (18) (151)
Profit for the period 32,559 35,760
---------- ----------
Basic earnings per share 2 41.5p 45.9p
---------- ----------
Diluted earnings per share 2 41.4p 45.7p
---------- ----------
* The presentation of the income statement has been changed to
separately disclose the impairment loss on trade receivables on the
face of the Consolidated Statement of Comprehensive Income (refer
to the Presentation of financial statements section of the Notes to
the consolidated financial statements in the Annual Report).
Consolidated Balance Sheet
As at 31 March 2021
2021 2020
Assets GBP'000 GBP'000
Non-current assets
Property, plant and equipment 34,865 37,767
Investment property 8,575 8,432
Intangible assets 160,626 167,719
Goodwill 5,324 5,324
Other non-current assets 28,595 25,185
--------- ---------
Total non-current assets 237,985 244,427
--------- ---------
Current assets
Inventories 6,325 4,633
Trade and other receivables 61,706 57,012
Current tax receivable 726 706
Accrued income 120,395 120,285
Prepayments 10,471 11,985
Cash 25,056 43,611
--------- ---------
Total current assets 224,679 238,232
--------- ---------
Total assets 462,664 482,659
--------- ---------
Current liabilities
Trade and other payables (30,374) (35,291)
Accrued expenses and deferred income (122,295) (121,323)
--------- ---------
Total current liabilities (152,669) (156,614)
--------- ---------
Non-current liabilities
Long term borrowings (89,376) (94,020)
Lease liabilities (7,096) (8,969)
Deferred tax (1,145) (1,104)
Total non-current liabilities (97,617) (104,093)
Total assets less total liabilities 212,378 221,952
--------- ---------
Equity attributable to equity holders of
the parent
Share capital 3,970 3,962
Share premium 145,094 143,896
Capital redemption reserve 107 107
Treasury shares (5,502) (5,502)
JSOP reserve (1,150) (1,150)
Retained earnings 70,306 81,068
--------- ---------
212,825 222,381
Non-controlling interest (447) (429)
--------- ---------
Total equity 212,378 221,952
--------- ---------
Consolidated Cash Flow Statement
For the year ended 31 March 2021
2021 2020
GBP'000 GBP'000
Operating activities
Profit before taxation 43,514 48,112
Adjustments for:
Net financial expense 2,274 2,056
Depreciation of property, plant and
equipment 4,731 4,142
Profit on disposal of fixed assets (47) (51)
Amortisation of intangible assets 14,550 13,345
Amortisation of debt arrangement fees 356 491
(Increase)/decrease in inventories (1,694) 148
Increase in trade and other receivables (6,713) (27,821)
(Decrease)/increase in trade and other
payables (4,046) 14,410
Share incentive scheme charges 1,377 1,284
Corporation tax paid (10,945) (17,097)
-------- ---------
Net cash flow from operating activities 43,357 39,019
-------- ---------
Investing activities
Purchase of property, plant and equipment (2,582) (2,910)
Purchase of intangible assets (7,457) (7,409)
Disposal of property, plant and equipment 100 87
Interest received 98 295
Cash flow from investing activities (9,841) (9,937)
-------- ---------
Financing activities
Dividends paid (44,708) (42,214)
Interest paid (2,002) (2,412)
Interest paid on lease liabilities (246) (170)
Drawdown of long term borrowing facilities 30,000 145,000
Repayment of long term borrowing facilities (35,000) (110,000)
Fees associated with borrowing facilities - (1,069)
Repayment of lease liabilities (1,321) (948)
Issue of new ordinary shares 1,206 2,176
Cash flow from financing activities (52,071) (9,637)
-------- ---------
(Decrease)/increase in cash and cash
equivalents (18,555) 19,445
Net cash and cash equivalents at the
beginning of the year 43,611 24,166
Net cash and cash equivalents at the
year end 25,056 43,611
-------- ---------
Consolidated Statement of Changes in Equity
For the year ended 31 March 2021
Capital Non-controlling
Share Share redemption Treasury JSOP Retained interest
capital premium reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 April
2019 3,950 141,732 107 (5,502) (1,150) 86,230 (278) 225,089
Opening balance
adjustments - - - - - (26) - (26)
Revised opening balances 3,950 141,732 107 (5,502) (1,150) 86,204 (278) 225,063
Profit and total
comprehensive income - - - - - 35,911 (151) 35,760
Dividends - - - - - (42,214) - (42,214)
Credit arising on
share options - - - - - 1,284 - 1,284
Deferred tax on share
options - - - - - (125) - (125)
Retained earnings
tax adjustments - - - - - 8 - 8
Issue of new ordinary
shares 12 2,164 - - - - - 2,176
Balance at 31 March
2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
-------- -------- ----------- ---------- --------- --------- --------------- --------
Balance at 1 April
2020 3,962 143,896 107 (5,502) (1,150) 81,068 (429) 221,952
Profit and total
comprehensive income - - - - - 32,577 (18) 32,559
Dividends - - - - - (44,708) - (44,708)
Credit arising on
share options - - - - - 1,377 - 1,377
Deferred tax on share
options - - - - - (8) - (8)
Issue of new ordinary
shares 8 1,198 - - - - - 1,206
Balance at 31 March
2021 3,970 145,094 107 (5,502) (1,150) 70,306 (447) 212,378
-------- -------- ----------- ---------- --------- --------- --------------- --------
Notes
1. Revenue
Revenue by service
2021 2020
GBP'000 GBP'000
Electricity 391,813 384,246
Gas 248,008 284,748
Fixed communications 132,241 125,394
Mobile 40,580 37,393
Other 48,562 43,993
861,204 875,774
------- -------
The Group operates solely in the United Kingdom.
2. Earnings per share
The calculation of basic and diluted earnings per share ("EPS")
is based on the following data:
2021 2020
GBP'000 GBP'000
Earnings for the purpose of basic and
diluted EPS 32,577 35,911
Share incentive scheme charges (net of
tax) 1,194 1,203
Amortisation of energy supply contract
intangible assets 11,228 11,228
------------- -----------
Earnings excluding share incentive scheme
charges and amortisation of intangibles
for the purpose of adjusted basic and
diluted EPS 44,999 48,342
------------- -----------
Number Number
('000s) ('000s)
Weighted average number of ordinary shares
for the purpose of basic EPS 78,433 78,205
Effect of dilutive potential ordinary
shares (share incentive awards) 273 401
------------- -----------
Weighted average number of ordinary shares
for the purpose of diluted EPS 78,706 78,606
Adjusted basic EPS [1] 57.4p 61.8p
Basic EPS 41.5p 45.9p
Adjusted diluted EPS1 57.2p 61.5p
Diluted EPS 41.4p 45.7p
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 npower has also been adjusted.
3. Dividends
2021 2020
GBP'000 GBP'000
Prior year final paid 30p (2020: 27p) per
share 23,524 21,100
Interim paid 27p (2020: 27p) per share 21,184 21,114
-------- --------
The Directors have proposed a final dividend of 30p per ordinary
share totalling approximately GBP23.6 million, payable on 30 July
2021, to shareholders on the register at the close of business on 9
July 2021. In accordance with the Group's accounting policies the
dividend has not been included as a liability as at 31 March 2021.
This dividend will be subject to income tax at each recipient's
individual marginal income tax rate.
4. 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 19.7% 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:
2021 2020
GBP'000 GBP'000
Short-term employee benefits 2,882 1,765
Deferred shares bonus 383 -
Social security costs 386 233
Post-employment benefits 11 20
3,662 2,018
Share incentive scheme charges 139 56
------- -------
3,801 2,074
------- -------
During the year, the Group acquired goods and services worth
GBPNil (2020: GBP367) from companies in which directors have a
beneficial interest. No amounts were owed to these companies by the
Group as at 31 March 2021. During the year, the Group sold goods
and services worth GBPNil (2020: GBPNil) to companies in which
directors have a beneficial interest.
During the year directors purchased goods and services on behalf
of the Group worth GBP145,000 (2020: GBP835,000). The directors
were fully reimbursed for the purchases and no amounts were owing
to the directors by the Group as at 31 March 2021. During the year
the directors purchased goods and services from the Group worth
approximately GBP27,000 (2020: GBP29,000) and persons closely
connected with the directors earned commissions as Partners for the
Group of approximately GBP7,000 (2020: GBP7,000).
Subsidiary companies
During the year ended 31 March 2021, the Company purchased goods
and services from the subsidiaries in the amount of GBP153,000
(2020: GBP102 ,000 purchased by the Company from the
subsidiaries).
During the year ended 31 March 2021 the Company also received
distributions from subsidiaries of GBP50,000,000 (2020:
GBP50,000,000). At 31 March 2021 the Company owed the subsidiaries
GBP61,204,000 which is recognised within trade payables (2020:
GBP67,348,000 owed by the Company to the subsidiaries).
5. Basis of preparation
The financial information set out above does not constitute the
Group's statutory information for the years ended 31 March 2021 or
2020, 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 2020 . Statutory accounts for 2020 have been
delivered to the Registrar of Companies and those for 2021 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).
6. Directors' responsibility statement
The directors confirm, to the best of their knowledge:
(a) the financial statements, prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union, 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, Chief Executive's 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 - Executive Chairman
Andrew Lindsay - Chief Executive Officer
Nick Schoenfeld - Chief Financial Officer
Stuart Burnett - Chief Operating Officer
Beatrice Hollond - Senior Non Executive Director
Andrew Blowers - Non Executive Director
Melvin Lawson - Non Executive Director
Julian Schild - 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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END
FR UBUARARUNAUR
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