- Multi-utility provider shows further strong growth in customers, services and profits
- Management predicts more of the same for the new financial year
- Dividend grows for the third straight year and a fourth increase on the cards
- Lukewarm share price reaction likely the result of the stock’s valuation
“Multi-utility provider Telecom Plus can look back on the twelve months to March with satisfaction, given the good progress in customer numbers, services sold, profits and the dividend, and management seems confident that another strong year lies ahead on all fronts,” says AJ Bell investment director Russ Mould.
“The share price seems less interested, but it does stand near its highest mark since early 2023 and the stock already trades on a premium valuation relative to the wider UK market, so that may the reason why, rather than any concerns about the underlying business.
“Telecom Plus’ day-to-day operations work under the banner of Utility Warehouse. The company offers broadband, mobile and insurance, as well as energy and it is successfully cross-selling to new customers, too, as they seek savings wherever they can get them.
“The FTSE 250 index member was particularly well placed to help in 2022 and 2023 when Russia’s invasion of Ukraine caused gas and energy prices to spike and many rival energy providers failed, including Bulb, Ampower, Igloo and Hub Energy.
“Telecom Plus added 158,000 customers in that financial year and chief executive Stuart Burnett and team will be pleased to see the company almost match that in the year just ended. Even though Ofgem’s energy price cap and a calmer oil price have taken a lot of the heat out of that market, the firm still added more than 152,000 customers in the year just ended. That represented a double-digit percentage underlying increase, once the inbound transfer of some 25,000 customers from broadband provider TalkTalk is taken into account.
Source: Company accounts. Financial year to March.
“The Ofgem price cap and lower energy prices have given consumers scope to switch around to grab lower, introductory tariffs, and that has increased customer churn at Telecom Plus and perhaps kept growth in the number of services provided below growth in new customers. However, any period of price stability (or even increases in oil prices and the cap) could yet enable Telecom Plus to make the most of the competitive advantage provided by its longstanding, long-term energy supply deal with E.ON (npower, back in the day), whereby the German utility carries the risk of buying and sourcing energy.
Source: Company accounts. Financial year to March.
“Sales are done by Partners and word of mouth, with nothing spent on advertising, so a 5% increase in Partner numbers to nearly 72,000 also provides a good base for future growth.
“Mr Burnett and the board expect 15% total customer growth in the year to March 2026, including the final 75,000 of those customers who are coming in from TalkTalk as part of a cross-selling agreement, and underlying growth to exceed 10% once more.
“That helps to set the scene for another year of increased profits. Earnings growth lagged customer growth in the past year, due to the dynamics of the energy market, where the lower price cap may have limited revenue per customer, and that increase in churn, but still reached 8% on management’s preferred metric of underlying pre-tax income. A further increase of 7% is the board’s current expectation for the year to March 2026.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts. Financial year to March.
“That in turn should help to underpin a fourth consecutive increase in the dividend in the coming year.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts. Financial year to March.
“Consensus analysts’ forecasts for a dividend north of 100p per share for the year to March 2026 put the stock on a forward dividend yield of 5%, which may be enough to keep income-seekers interested.
“Value-hunters may be less enthused by the forward price-to-earnings multiple of around 17 times, as this represents a premium of around a fifth relative to the wider UK equity market, which currently trades on around 14 times. In this respect, Telecom Plus’ virtues feel well-known, although if earnings continue to increase in line with their current trajectory, then the stock has the potential to grow into that multiple over time and reward patient, long-term investors.”
