(Alliance News) - Telecom Plus PLC has issued a "reassuring and encouraging" update that shows it taking advantage of its rivals' failures and looks set to continue delivering growth despite the potential impact of lower energy prices, according to analysts on Tuesday.
Shares in Telecom Plus, the parent company of multi-service provider Utility Warehouse, were up 8.2% at 1,634.00 pence in London on Tuesday afternoon.
Telecom Plus said its pretax profit was GBP85.5 million for the year ended March 31, up 81% from GBP47.2 million for the previous year. Revenue, meanwhile, more than doubled to GBP2.48 billion from GBP967.4 million.
Telecom Plus also reported "record organic growth" with total customers increasing by 22% to 886,579 from 728,680.
Neil Shah, analyst at Edison, commented: "Offering fixed-tariff bills at competitive prices, Telecom Plus's business model has found fertile soil in this current period of high inflation. High levels of customer growth reflect not only strategic operational tactics, but also a business model fundamentally suited to attract consumers when costs are high."
AJ Bell's Russ Mould said Telecom Plus was able to benefit from rivals' losses, with "many" households turning to Utility Warehouse when other suppliers failed. Consequently, he said, Telecom Plus "is looking forward to healthy further customer and profit increases in the year to April 2024, even after a record twelve months just ended."
However, Mould said that "It is not all plain sailing" due to decreased profit margins and customers shifting towards lower-margin energy services.
"Nevertheless, customer churn looks low and acquisition rates impressive...and the profit and dividend forecast upgrades suggest that Telecom Plus feels it is well positioned to help consumers through this extraordinarily difficult period, while keeping regulators sweet at the same time," Mould added.
Telecom Plus had said that it expects "a modest headwind" this year due to the lowering Ofgem Price Cap.
However, Peel Hunt analyst Charles Hall said: "The noise around the drop in energy prices should now be in the rear-view mirror." This noise, he said, "has deflected from the underlying strengths of the business as well as the consistency of the model."
Peel Hunt rates Telecom Plus shares at 'buy', with a 2,600p target price.
Edison's Shah meanwhile said that although the recent "high inflationary period" had doubtless benefitted Telecom Plus's business model, "the widening consumer base and brand recognition secured over this time will likely serve to benefit Telecom Plus when prices do, eventually, settle down."
By Emma Curzon, Alliance News reporter
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