ii view: Telecom Plus customer numbers swell

First-half trading update to 30 September

• Customer numbers up 223,000 to 1.386 million

Chief executive Stuart Burnett said:

"We are pleased to have maintained our compound double digit customer growth rate for a further six months, simply by helping households to save time and money on their essential household bills, and demonstrating the ability of our unique multiservice model to provide market-leading savings in a wide range of market conditions.”

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ii round-up:

Telecom Plus (LSE:TEP) today detailed swelling customer numbers, leaving the multi-utility provider firmly on track to achieve its medium-term target of two million customers.  

The group, which trades under the ‘Utility Warehouse’ brand, gained around 223,000 customers or a 19% addition during the first half to late September, to give a total of 1.386 million. Stripping out customers previously acquired from TalkTalk for an undisclosed sum, customer growth came in at 5.5%, or 11% on an annualised basis.

Shares in the FTSE 250 company rose 1% in UK trading having come into this latest news up around 6% so far in 2025. That’s in line with the FTSE 250 index year-to-date. Fellow energy supplier and nuclear power operator Centrica (LSE:CNA) is up by around a quarter over that time. 

Telecom Plus supplies households and businesses throughout the UK with services from electricity and gas to broadband internet, mobile phone contracts, and even insurance policies, all under one monthly bill. Over 70,000 so called ‘partners’ or individuals help sell its services.

Management highlighted a successful cross-sell of products to acquired TalkTalk broadband customers, with around 5,000 customers upgraded and sold products so far. 

The group remains on track to deliver previously forecast annual adjusted pre-tax profit of between £132 million and £138 million versus £126 million last year.  

Changes in metering costs across the industry are now expected to see the company’s balance of profit over the year change to a ratio of 25%/75% for H1/H2 going forward, adjusted from a previous 35%/65%. 

First-half results are scheduled for 25 November.  

ii view:

Started in Henley-on-Thames in 1996, Telecom Plus today uses commission paid partners to sell services to new 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 supplied at 34%, broadband 8%, mobile phones 4.5%, and other services including insurance the balance of 4.5%.   

For investors, customer growth adjusted for acquisitions slowed to 12.6% during the group’s last year, down from 14.1% over the previous financial year, and likely slowed due to falling energy prices. Customer bad debts of £33.4 million, or 1.8% of sales as of late March, require monitoring, with any major upturn in UK unemployment likely influencing the outcome. Increased government taxes and a raised minimum wage now feed into group costs, while geographical exposure is limited to the UK only.

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To the upside, a differentiated business model sets it apart from rival suppliers such as Centrica and SSE (LSE:SSE). Customer numbers continue to grow, with any tough economic backdrop considered favourable by management given consumers are heavily focused on bill savings. Group net debt fell 5% to £116 million as of late March, while climate change and required energy transition may keep energy prices volatile, fuelling demand for its cost saving services.   

For now, and despite ongoing risks, a consensus analyst fair value estimate above £25 per share and forecast dividend yield of more than 5% look to give grounds for continued investor optimism. 

Positives: 

• Differentiated business model
• Targeting two million customers over the medium term

Negatives:

• Elevated costs
• Potential rising customer bad debts

The average rating of stock market analysts:

Buy