I know there's an existing thread for TEP, but I'm blowed if I can find it.
Anyway, things aren't looking too good for this share at the moment. Been on a downward spiral for some weeks, after hitting over 4.
Very low volume today, and sells seem to equal buys, so why the continuing drop? Seriously thinking of getting rid, and taking what is now a very small (and I mean small!) profit.

Any experts on TEP like to add their two pennorth?

Princess

Good thing didn't get back in now down 13%.

Telecom Plus PLC
14 December 2004


TELECOM plus PLC

14 December 2004

Interim results for the six months ended 30 September 2004

Telecom plus PLC, the UK's leading low-cost integrated multi-utility (gas,
electricity, telephony, internet), announces interim results for the six months
ended 30 September 2004.

Financial and business highlights:

Profit before tax up 31% to 6.4 m (2003: 4.9m)

Turnover up 15% to 42.8m (2003: 37.2m)

Interim dividend up 11% to 5p (2003: 4.5p)

New mobile and broadband services launched

Peter Nutting, Chairman, said:

'We are a highly focused business and expect to see continuing
organic growth by providing more utility services to a growing
customer base. Our unique business model gives us a strong
competitive edge over our much larger competitors, and despite the
short-term losses

decent enough results.

Gas blasts Telecom Plus
MoneyAM
Telecom Plus, a low-cost integrated multi-utility, reported a 31% increase in pretax profit in the first half but warned of substantial losses to come in the second half of the year from the group's gas business.

Pretax profit rose to 6.4m for the six months ended September 30th 2004 from 4.9m a year earlier, despite losses within the domestic gas supply business and greater competition in fixed line telephony.

Turnover for the first half was up 15% to 42.8m from 37.2m.

The board raised the interim dividend by 11% to 5p from 4.5p to reflect its confidence in the future.

Chairman Peter Nutting said the group expects to see continuing organic growth by providing more utility services to a growing customer base.

'Our unique business model gives us a strong competitive edge over our much larger competitors, and despite the short-term losses within our gas business, we face the future with great confidence,' he said.

However, he said gas continues to present the group with a margin problem in the short term. Nutting explained that rapid growth in energy turnover from a low base has presented some short-term challenges. The wholesale cost of gas has continued to rise, with particularly high volatility during a period when the group was changing shippers and thus unable to hedge forward its requirements.

In addition, as a new energy supplier growing market share during a period of rising prices, the group faces an innate disadvantage due to the lower average commodity cost being paid by competitors as a result of their historic hedging activities.

The result is an anticipated loss approaching 4m within the gas business during the second half of the current financial year, based on current market prices, in addition to losses of around 450,000 which were incurred in this area during the period under review.

Nutting said the group has now begun to hedge forward its requirements to protect against future volatility in the wholesale market and strategy will be to maintain a hedging profile broadly in line with the industry.

Nevertheless, the group sees continuing losses in the gas business in the 12 months to the end of March 2006, after which it expects to see the benefits from the substantial gas supply business it will have created.

'An examination of overhead costs within our main competitors suggests that in the medium term we could expect gross margins within our energy business of around 12% whilst retaining a competitive pricing proposition for our customers.' By contrast, benefiting from the investment in Oxford Power Holdings, Telecom Plus had hedged forward the majority of its electricity requirements in a similar rising market and the electricity business is providing an acceptable return, Nutting said.

In telephony the group has been able to increase margins despite the price reductions made for some types of calls.

Short term this doesn't look so good but this now has to be in the share price - I see more upside than down now. Looks a solid enough case for continued growth in the longer term. Just my opinion...

Does anyone here use their Broadband offering? Seems to be being slagged off on the ADVFN thread (and that's by their distributors!!!).


.

Yes, brianboro, I use the TEP broadband offering: seems OK and just 15.99 per month. Remember that TEP can move easily to use another carrier, so the announcement this morning of the "first alternative to BT's broadband network" is very significant. Easynet (clever name!) have already opened up 25% of homes and 50% of businesses, installing their equipment in BT exchanges and operating at 8 times as fast as BT. Cable & Wireless and Wanadoo are expected to offer rival services next year.

It will be easy for TEP to switch broadband suppliers but they have made a right cock-up in the gas field. This is the first really depressing announcement I have heard from them; they failed to hedge their gas contracts. Yes, they have apporpriately hedged their electricity contracts but why not gas? - I can see no valid explanation, other than the rather facile one of changing their suppliers.

I bought back into TEP last week at 245p and rose bright and early to see the results. There on the header page was the headline "gas blasts Telecom Plus". In the finals Nutting had played down the significance of gas but it seems that British Gas customers have been switching in droves. 4m loss on gas in the second half and continued losses next year before the situation is worked out. So out of TEP at 223p at a loss - could have been worse!

Where the price from here? I think the balance will be with the bears in the short-term and the price might ease further. Then the fundamentals might start to work in TEPs favour. The yield is some 5% and the interim dividend has been increased, although there may not be much room to increase, or even maintain, the final dividend. The business plan remains very good as a low cost integrated service supplier. So once the investor can see the light at the end of the gas tunnel, he/she will start looking beyond the current blip, which is what it is. The turning point may be when and if the final dividend is maintained or slightly increased. I remain a long-term fan of TEP and may put some shares away when and if I guage the fall is overdone.

You win some and lose some. The world keeps rotating and Christmas is coming! Cheers!

Eric

Thanks - maybe they gambled (and lost) on the gas hedging issue?

brianboru

Charles Wigoder doesn't strike you as a gambling man. I beleive he is basically a telecoms man and that may be part of the reason why he ahs passed the chairmanship over to Nutting. I suspect this problem blew up before they realised it was there. As I said, Nutting was stressing in the finals that gas was a small part of their business. It must be difficult when you are selling through thousands of self-employed people to stop them selling, particularly when part of their story is that they are the lowest cost provider. It seems from what you said above that some of their distributors are becoming disenchanted so that this is the time for effective management. Comments from those actively involved?

Eric

house broker KBC Peel Hunt cut its full-year to end-March pretax profit forecast to 10.2 million pounds from 14 million pounds following interim results.

That's just a little lower than last year and eps of almost 12p - IF they are correct then a share price around the 200p seems reasonable? However falling knives and all that!

All quiet! Everyone away licking their wounds! No, we didn't expect to see 2 again. A far cry from 4 in January. I'm still trying to weigh the future but would make the following points:
1. The dividend has been increased which should rule out any cut at the finals.
2. If you look at the financials the final results look a bit tight on the surface. 4m losses on gas have to be absorbed. A repeat of first half performance just about leaves enough to cover the dividend. Thus the confidence in management with the interim increase does say a lot.
3. Two negative points re the sp. (a) The closing price is down over 50p with less than 1% of shares sold, so there could well be selling volume in the wings. Why should buyers come back in at this stage? (b) Its all too common for a second lot of bad news to follow the first; TEP could be an exception, but most, including myself, will want to see evidence before climbing back in.
4. Two positive points re buying opportunity. (a) Take the financials at face value, the cap. is down to 124m; the pe is down to 16.5 (and should be maintained if dividend is to be covered); price to sales likely to be about 1.2 and peg still below 1; yield around 5%. We have a short-term problem (2 years, OK, but still short-term) against a backcloth of continued growth. (b) Given the sp continues to take a battering as those of a nervous disposition get out, together with bear selling, the price could drop further until there is a compelling case for getting back in.

My conclusion is that there is likely to be a really good buying opportunity fairly shortly, either for short-term gains or as a medium-term investment. The TEP sp over-reacted on the way up and is likely to over-react on the way down. In the end of the day, the business model is superb and this share is going places (and not just down to hades!). Other perspectives?

Eric

My sympathies are with you eric. Cheerup cos whether we like to admit or not not we have all been there. My classic example. is WLF. bought in @170+ topped up @185 and then bang they went to 99p. like u said u win some and u lose some.

On the TEP front where do you see it stopping. The main negative is that the gas issue is going to be an ongoing concern. Agree good for med/long term

Citywire Verdict:
We tipped the shares in May 2002 as a good buy at 109.5p and suggested taking a 'careful look' at whether to book some profits at 268p last November.

Todays news is clearly disappointing, although not entirely unforeseen. Operationally, everything else seems to be going to plan, and Wigoder, whose previous successes include founding The People's Phone Company, which he sold to Vodafone in 1996 for 77 million, is passionate about building a far bigger business still.

It is not surprising that investors have wanted to lock in some profit today, and that is always a wise move. However I do think this is a nasty short-term blip and one from which Telecom Plus should recover in good shape.


http://www.citywire.co.uk/News/NewsArticle.aspx?VersionID=70720&MenuKey=News.Home&NewsPage=2

azhar

Thanks for the sympathetic tone: I suspect that others need it just as me - got a windfall of about the same amount from shares I hadn't even paid for! The Citywire post is good; the phrasing puts the blip into perspective. Charles Wigoder, the Honourable no less, is a winner!

Eric

The underlying tone of the Citywire Verdict is positve and I see TEP as a good long-tern investment. As a trader, rather than an investor, the key question for me is: whither the gas hedging problem. Is it reasonable to understand the situation as follows:-

TEP's problem was failure to hedge gas prices. They are now hedging prices but are left with contract(s) with which they are exposed. There is a one-time hit of 4m pounds in the second half. The problem will also affect next year but will then be worked out. My question is whether therefore that is the sum pof the bad news. Can there be further bad news which could lead to another profit warning? I suspect and hope not but would apprecaite the view of someone who uinderstand better the whole process of hedging futures gas prices.

That is the fundamentalist's issue. What does the chartist say about the graph which looks as though it may need to go further down. How far does the RSI need to recover to give a BUY signal? Could we be returning to thte 2002 trend line?

Eric

Any idea on the slump now then boys! TEP are quality and surely this is a gross misjudgement of their value??

The fly in the ointment is the possibilities of losses on gas is part of their problems because the had not "hedged their purchases" (Check tis last statement but that was my understanding of bulletins) Looking at the TA I think you may see 215 p and if it breaks that resistance 202p beforeit bounces back. I think it hit 230p to-day for a short while on relatively small volumes before rebounding slightly.

I think I would take another gamble on it if it drop to about 200p as the dividend/yield if sustained as promised is good. But watch out if interest rates go up as suspected.

Back down below 200. looking interesting again. Any ideas to the next entry point?

If you had bought at 192 earlier to-day, you would have a profit, but might drop to 185p. Wouldn't touch it as a long hold unless the down trend breaks for 2-3 days. Interesting as it has a yield of about 6%.

customer service of this co is crap sent email they replyed it will take 5 working days for response,phoned after that waiting time to speak to someone was 18 mins i hang up.