Well, well, well. Telecom Plus PLC – or as you might know them, Utility Warehouse – has just dropped their FY25 results, and frankly, they’re the sort of numbers that make you want to stand up and applaud. Record profits? Check. A chunky dividend hike? Absolutely. Double-digit customer growth for the fourth consecutive year? Naturally. Let’s unpack why this isn’t just another set of results, but a masterclass in resilient, scalable business modelling.
The Headline Acts: Profit, Customers & Cash
First, the financial fireworks:
- Adjusted pre-tax profit jumped 8.1% to £126.3m – neatly in line with market expectations.
- Adjusted EPS climbed 9.4% to 119.2p – a clear signal of underlying earnings power.
- Revenue dipped to £1,838.2m (from £2,039.1m) – but don’t be fooled. This was purely down to lower energy prices (the Ofgem cap averaged £1,700 vs £2,140 last year). Crucially, gross profit actually ROSE 0.8% to £358.1m, and the margin expanded sharply to 19.5% (from 17.4%). Efficiency wins.
- The dividend gets a whopping 13.3% boost to 94p per share for the year. That’s serious shareholder love, returning 80% of adjusted post-tax profit.
Operationally, they’re firing on all cylinders:
- Customer numbers surged 15% to 1,163,608. Strip out the 25,000 acquired from TalkTalk, and organic growth was still a robust 12.6% – hitting guidance.
- Service numbers grew by 265,496 to 3,392,593. More services per customer = higher lifetime value.
- Partner network expanded to 71,710. This unique word-of-mouth salesforce is the engine room, thriving amid cost-of-living pressures and the looming pensions crisis.
- Awards galore: First company ever to be a Which? Recommended Provider for both Energy and Broadband simultaneously. Plus “Excellent” on Trustpilot. Service matters.
Why This Model Works (Especially Now)
CEO Stuart Burnett nailed it: Their unique, integrated multi-service platform (energy, broadband, mobile, insurance, cashback card) combined with the Partner network isn’t just successful – it’s resilient.
- Structural Cost Advantage: One back office supports multiple revenue streams per customer. Competitors (single-service specialists) simply can’t replicate this efficiency. They share these savings, creating a virtuous circle of value.
- Partner Power: 71,710 people, motivated by earning extra income, explaining the UW offer to friends/family. This overcomes the inertia of switching multiple services. It’s authentic, low-cost customer acquisition.
- Economic Shock Absorber: As Burnett notes, environments with economic uncertainty or cost pressures benefit UW. More people seek extra income (Partner opportunity) and look to cut essential bills (UW’s core proposition).
- Regulatory Tailwinds (in Energy): Stricter capital rules and low allowed margins make it tough for standalone energy suppliers to compete sustainably below the price cap. UW’s multi-service model lets them offer competitive energy as part of a bundle, funded by margins from other services.
The TalkTalk Deal & Growth Levers
That acquisition of ~25,000 TalkTalk broadband customers in Q4 (with ~70,000 more coming in FY26) isn’t just a number boost. It’s strategic:
- Provides a pool of customers ripe for UW Partners to cross-sell energy, mobile, and insurance to.
- Accelerates service growth per customer.
- Opens the door for future similar partnership/inorganic opportunities.
Looking Ahead: Confidence, Clarity & Cash Returns
The outlook is refreshingly clear and confident:
- FY26 Customer Growth: Around 15% total (including remaining TalkTalk transfers), with “low double-digit” organic growth continuing.
- FY26 Adjusted Pre-Tax Profit: Guided between £132m – £138m (slightly tempered by one-off operating cost headwinds, but still growth).
- The Big Hairy Audacious Goal (BHAG): Reaching 2 million+ customers medium-term. With a 15.3% annualised growth rate since FY21 through wildly different energy price environments, it looks eminently achievable.
- Dividend Policy: Committed to returning 80-90% of adjusted post-tax profit via a progressive dividend. The 13.3% hike this year is a strong signal of intent.
A Word on Churn & Service Mix
Energy churn rose to 13.7% (from 8.7%), driven by the gap between the Price Cap and cheaper introductory fixed tariffs elsewhere as wholesale prices fell. Crucially, management expects this to normalise downwards as the Price Cap stabilises through FY26. Service growth per new customer dipped slightly (Q4 average: 2.28 core services vs peaks of 2.37), attributed partly to the insurance sales pause and strong mobile-only uptake. With insurance back online and a focus on cross-selling (especially to TalkTalk migrants), expect this metric to regain momentum.
The Investment Case: Bundled Up for Success
Telecom Plus (TEP) presents a compelling proposition:
- Resilient Growth: Proven ability to deliver double-digit customer and profit growth across economic and commodity cycles.
- Unique & Scalable Model: The integrated multi-service platform + Partner network is a significant competitive moat. Scaling to 2m+ customers seems a question of “when”, not “if”.
- Shareholder Returns Focus: A clear, generous, and sustainable dividend policy delivering real cash returns (that 13.3% hike speaks volumes).
- Favourable Market Dynamics: Regulatory shifts in energy favour efficient, diversified players like UW. Societal trends (need for side incomes, bill savings) directly fuel their growth engines.
In essence, Utility Warehouse has built a subscription-style utility powerhouse that thrives when others might falter. These results aren’t a flash in the pan; they’re validation of a brilliantly executed model with serious runway ahead. One to keep firmly on the radar.
