Utility Warehouse owner Telecom Plus (LON:TEP) posted an upbeat AGM statement saying its new five-year plan had made ‘an encouraging start’. As a result, the firm reiterated its adjusted pre-tax profit guidance for the year to March 2027.
Telecom Plus keeps guidance
When the new plan was announced in June, it prompted heavy selling of the shares as investors baulked at the investment involved. The company said it would spend around £55 million annually for five years to improve its multiservice offering.
It therefore cut its earnings target for current financial year to £80 million to £90 million against £132 million last year. Today the firm reiterated that target and its aim to raise adjusted pre-tax profit to £175 million in FY31.
The firm said in today’s announcement annualised multiservice customer growth was running ahead of its 10% target in the first four months of FY27. That growth equates to more than 2.5 times the growth registered in FY26.
The number of active Partners is running at record levels, while New Partner recruitment is also performing strongly. The company’s business model relies on its Partner network to refer families and friends and convert them to mulitservice customers.
‘Encouraging start’ to FY27
‘We have made an encouraging start to FY27, with early momentum from our new five-year plan clearly visible across the business’, commented chairman Charles Wigoder. ‘Multiservice customer growth is tracking ahead of our FY27 target, driven by the initial investments we have made in our customer proposition and the resulting strong performance of our Partner network, where both activity and recruitment are running at record levels.
‘As we continue our targeted investments in our customer proposition, Partner network, brand awareness and digitalisation, we are building robust foundations for sustained double-digit percentage growth in multiservice customers and high quality earnings’, added the chairman.
Telecom Plus shares haven’t exactly soared on today’s AGM update, and we’re not too surprised. It comes back to the economics of the five-year plan, which to us don’t look that attractive.
The firm is investing £275 million to increase adjusted pre-tax profit from £132 million in FY26 to £175 million in FY31. That’s a five years return of just 15.6%, yet the company says its aim is to genertate a return on capital of over 30%.
In FY31, the plan is to make shareholder distributions of £100 million, or around 80% of post-tax earnings. At least half of this will come through dividends, with the rest from buybacks.
The question for shareholders is, do they want to wait that long? Also, Telecom Plus was historically a growth story, not an income story. From 2008 to 2014 the stock was a 10-bagger, then it traded sideways before making a new high in 2022.
It came off the rails last year, when 1H26 profit fell despite double-digit customer growth. The firm blamed high customer acquisition costs and operating costs and FY earnings were ultimately at the low end of the range.
