Directors’ Deals: Telecom Plus rings up value

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Discount utility supplier Telecom Plus was one of the few winners from the cost of living crisis. The company bundles energy, internet and insurance deals, offering them collectively at a lower price. Unsurprisingly, these bundles have been in high demand. 

In the year to March, Telecom Plus’s revenue more than doubled to £2.5bn, while adjusted earnings per share rose by 57 per cent. Promisingly, a lot of this growth came from new customers who the company hopes will stick with it even as energy prices fade. Its customer base grew by 22 per cent to 886,579, and the medium-term aim is to add 1mn more. 

The concern for Telecom Plus investors, to be blunt, is that the worst of the consumer price spikes seem to have passed. European gas prices are down around 80 per cent from their peak last year and UK shop price inflation was down to 6.9 per cent in August, its lowest level in a year. 

This has a dual impact. First, Ofgem is bringing down the energy price cap, which will mean less revenue per customer for Telecom Plus. Revenue per customer jumped from £1,340 to £3,025 last year but will now slip back. Second, as pointed out by the broker Peel Hunt, there will be less media coverage of energy prices, so customers won’t be reminded as often to look for cheaper suppliers. 

This year, Telecom Plus’s share price has fallen back 25 per cent, which has brought them back to a more reasonable valuation of 14-times forecast earnings. This might be why Rebecca Burnett, wife of the co-chief executive Stuart Burnett, has decided to buy £100,000 worth of shares. 

Last year was exceptional, but Telecom Plus still expects to deliver double-digit customer and profit growth in the coming year, which is not to be scoffed at. Meanwhile, its strong cash flow and 5 per cent dividend yield should keep its investors well rewarded.

Pryce is right for RS chief

It hasn’t been the easiest of starts at RS Group for Simon Pryce, former head of Ultra Electronics.

Within three weeks of his appointment at the company formerly known as Electrocomponents, the company reported a marked slowdown in trading in the quarter to March 31. Then, longstanding finance chief David Egan stood down after divulging a relationship with a colleague and in July the company blamed tougher conditions in the electronics sector and a “weakening industrial market” for a 7 per cent slide in like-for-like sales in its June quarter. 

Pryce put on a brave face, saying the company was “reacting well” to the more challenging trading environment, and that it was still investings to stand it in good stead for the future — it recently completed a buyout of competitor Distrelec from private equity firm Aurelius Group for €365mn (£325mn).

Not everyone is as bullish, though. UBS analysts noted last month that after enjoying “abnormal” growth over the past three years, the company will now have to contend with declining end markets and falling prices, meaning organic growth is likely to be negative into 2025. UBS expects a 19 per cent decline in earnings per share this year to 51p. 

Some may view this negative outlook as already being factored in, given that the company’s share price has fallen by more than a third over the past 12 months. The shares are now valued at 14 times UBS’s forecast earnings – well below their five-year average of 19 times. 

Pryce is expected to build a shareholding equating to 400 per cent of his base salary of £750,191. Following the recent slide, he seems to think that now may be as good a time as any to add to his position. He picked up almost £100,000 worth of shares on August 18.