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

Doesn't seem to be any news. I have sold some at 277p but hold quite a few still. Moved some cash into BPRG. Hope I am right. W/S

Why the fall?
Is there some bad news in the results on 14th Dec ?
Hope not

it may be because profit margins are expected to be lower when results are published next tuesday or the fact that this always happens with TEP just before results are published.

Looking at TEP for an investment prior to the results. The price movement indicates a level of pessimism. The PE is down to 20. Last year turnover was up 41% and pbt 90%. The only indicated negative at final results was the pressure on gas prices; TEP have since put an embargo on new custormers for energy only. However, I believe the margin problem was short-term and will have gone now. I can't see turnover growth slowing down at present - partly due to the business model with an increasing number of new distributors who fund their own activity and the success of the 'Utilities warehouse' concept which means that more customers are taking multiple services. 40% pbt growth would bring prospective PE to 14; even 30% implies 16 and a PEG factor of about 0.6.

Can any of those closer to the company give further insights? Tplus Guy?

Eric

The market is clearly looking for a slow-down

EWRobson,

yes I think a "slowdown" is inevitable now that there is so much competition for telecom services.

IMHO you cannot ignore the competition, and the Carphone Warehouse has hoovered up many customers in a short space of time, and whilst the distributor method has it's merits, it also has it's limitations, ie lack of saturation coverage due to selected customer targeting.

I believe they have taken the correct action in not allowing energy only customers, as margins are wafer thin and they make the bulk of their margin on telephony.

I am a telephony customer, and about to switch my energy.

Andy

Thanks for comments. It would be good to hear from Tplus Guy or another distributor about trading conditions. Nothing was said, I gather, at Express Day in September which was shortly before end of half year. Obviously, the key to price movement from next week will be expectations for trading for balance of year. Looking back at the preliminary report published in June there were some strong indicators: "The combination of our unique multi-service utility proposition, the successful introduction of out new 'Club' concept and teh exceptional value we are providing to our customers gives us great confidence in our ability to deliver sustained growth over the coming years." Chairman-speak, yes. But this would hardly lead you to anticipate a significant slow-down in revenue and profit growth this year, yet that seems to be assumed in the price. The dividend yield is now 4.5% for heaven's sake.

I think I have talked myself into that cfd tomorrow (money is there anyway, because of teh rise of ASOS). Downside potential is very low, certainly not more than 10% or so. Upside potential must be nearer 40% to recover the stock to the level at which the directors were buying early this year. 4:1 probability. That's worth a flutter, wouldn't you say?

Eric

Nice to hear ur comments again Eric. I ended up selling I'm afraid and made some profit :)

Now back to the same price when i previously bought. My gut feeling says it may still go down a bit more before a decent rise (agree 40%). Don't know when, after the results or b4?

azhar

Results are next Tuesday. A general lack of anticipation reflected in the dwindling share price. My own feeling is that the sp is anticipating a slow down. Yet comments in June were quite bullish. We know that they being cautious about the energy side but this is not a major part of profit. Wigoder added 100,000 shares in July but no director action since. My plan, unless persuaded otherwise, is to take a position before the results because continued progress seems bound to lead to a reappraisal. For instance, the dividend is likely to be increased in line with improved profits. We would then have the virtuous position of a stock being attractive for its yield but with a super growth record which is being projected forward.

Eric

Hoy! Where are you, folk? Results tomorrow! TEP up 18.5% today! Times repeated their final results this morning to whet the appetite! My cfd at 245p is looking good but I will be up early tomorrow to chech the results! I beleive that the share has been marked down because of gas prices, but part of centrica's problem is that british gas have been losing share, including to TEP. Utilities are not a large part of business at moment and I see no reason why telecom business should not have been motoring ahead. The extra constraints on BT will have been helping.

Eric

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