OFGEM Price Cap Hit: Telecom Plus Plc (TEP) Warns on the Yearly Profit

  • Apr 17, 2019 BST
  • Team Kalkine
OFGEM Price Cap Hit: Telecom Plus Plc (TEP) Warns on the Yearly Profit

Telecom Plus Plc (TEP) is a provider of IT infrastructure to the Industrial and Enterprise customers. The company design and install the network infrastructure for their clients. The company provides services related to IT consulting, Infrastructure and Architecture, Network Integration, Network rollout and Managed services etc. The company was incorporated in the year 1995. Telecom Plus Plc provides its services to companies like PG&E Corp, T-Mobile US, Verizon, Sprint Corp and Google etc.

On 17th April 2019, the Telecom Plus Plc released fourth-quarter results and further warned that the full year profits would be lower than the expectations due to price cap put in by Ofgem (Office of Gas and Electricity Markets) Britain's energy regulator with a higher acquisition cost. Due to the price cap, the quarterly results for the company was hampered. As per the company’s statement, adjusted pre-tax profit ending March 31 for the financial year 2019 is expected to be on the lower side of its earlier estimate of 56 million pounds ($73.14 million). The company posted 54.3 million pounds as adjusted profit before tax in the same period for last year.

Share Price Performance

Daily Chart as at April-17-19, before the market close (Source: Thomson Reuters)

On 17th April 2019, at the time of writing (before the market close, GMT 12:25 AM), Telecom Plus Plc shares were trading at GBX 1,434.00, down by 3.75 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,538.49.00/GBX 995.00. The outstanding market capitalisation was around £1.13 billion with a dividend yield of 3.54 per cent.

The company is expected to rebound in the year 2020 as it increases its customer base and as a result, will be able to generate good gross margins due to revised supply arrangements with npower. The company provides services related to mobile, gas, electricity, landline and broadband as well to its customer. There was an increase of 4 per cent of annual customers for 2019 and is further expected to increase by 5 per cent in the next year. Telecom Plus Plc is expecting its adjusted profit before tax for the year 2020 to be in between 60 million pounds to 65 million pounds. Due to the price cap by Ofgem in February, there was a hit on the utility industry as it allowed suppliers to increase their billings by over 10 per cent from 1st April 2019. The suppliers complained about the lower cap set by the regulatory authority.

The net debt of the company increased more than triple to approximately 38 million pounds at the end of the current financial year as compared to the last year. As per the company, this increase was mainly because of an increase in one-off costs such as installing smart meters and payments related to the phasing of the energy industry.

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