ii view: growth plan at Telecom Plus off to a flying start

AGM early year trading update to 31 July

• Achieving growth in multi-service customer growth
• Continues to expect full-year 2027 adjusted pre-tax profit of between £80 million to £90 million, potentially down from last year’s £132 million
• On track to deliver long-term goal of £175 million of adjusted profit before tax by full-year 2031

Chair Charles Wigoder said: “We have made an encouraging start to FY27, with early momentum from our new five-year plan clearly visible across the business.”

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ii round-up:

Telecom Plus (LSE:TEP) today detailed customer growth slightly ahead of target with the multi-utility provider maintaining expectations for full-year profits.

For the four months to late July, annualised growth in multi-service customers is running at more than 2.5 times the 3.9% rate of growth it achieved for such customers over its last 2026 financial year.

Shares in the FTSE 250 company rose 5% in UK trading having come into this latest news down by just over a third so far in 2026. The FTSE 250 index is up almost 11% during that time, similar to renewable power generator SSE (LSE:SSE).

Operating under the Utility Warehouse brand, Telecom Plus supplies UK households and businesses with services ranging from electricity and gas to broadband internet, mobile phone contracts, and even insurance policies.

In June, the group announced a new five-year strategy aimed at doubling its multi-service customers to over one million by 2031, supported by annual investment costs of around £55 million.

Group personnel or partners, used to sell its products, rose to a monthly average of 4,900 during the period, up from 4,200 in the second half of the last financial year.

The five-year plan aims to generate adjusted pre-tax profits of around £175 million by the fiscal year 2031. Profits on the same basis for this 2027 financial year, and weighed by new investment costs, continue to be predicted at between £80-£90 million. That’s potentially down from 2026’s £132 million.

The group’s September partner sales conference in Birmingham is on track to achieve a record level of attendance, with over 5,500 bookings received to date.

Other initiatives under the five-year plan include building brand recognition and enhancing the group’s digital experience through AI adoption.

A first-half trading update is likely to be announced in early to mid-October.

ii view:

Founded in Henley-on-Thames in 1996, Telecom Plus today uses commission-paid partners to sell services to new and existing customers, as opposed to advertising or using price comparison sites like rivals. Electricity supply accounted for its biggest slug of revenues over its last financial year at 49%. That was followed by gas supply at 31%, broadband and landlines 11%, mobile phones 5%, and other services including insurance the balance of 4%.  

For investors, investment in a recently announced five-year growth plan is now expected to weigh on profits near-term. Customer bad debts of £41.2 million, or 2.1% of sales as of late March, require monitoring, with any major upturn in UK unemployment having an impact. Investment costs are expected to mean a temporary rise in the group’s net debt to adjusted profit ratio to around 1.5 times at the year-end and up from 1.0 times in late March, while geographical exposure is limited to the UK.

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On the upside, early progress on the recently implemented five-year growth plan appear favourable. The company’s differentiated business model sets it apart from rival suppliers such as Centrica (LSE:CNA) and SSE. A tough economic backdrop is considered favourable by management given consumers increased focus on bill savings, while climate change and energy transition may keep energy prices volatile, fuelling demand for its cost-saving services.

On balance, and while risks remain, a consensus analyst estimate of fair value sat at over £12 per share and a forecast dividend yield of close to 4% look to give grounds for continued investor optimism.

Positives:

• Differentiated business model
• New five-year growth plan

Negatives:

• Elevated costs
• Potential rise in customer bad debts

The average rating of stock market analysts:

Buy