UK 20:26 Friday, 9 October 2026
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Since raising a few questions over a new £150 million loan facility which fully-listed Telecom Plus (TEP) has not yet announced but is filed at Companies House (see HERE), I had a Broker note and some comments from an analyst (see HERE) drop into my inbox. But some more numbers arrived the other day.
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Comments
filthy lucre
I suggest that you leave the analysis of accounts to those that ARE accountants, Nigel.
dmacd
We were Telecom Plus customers for many years but changed recently as they have gone from being the cheapest utility suppliers to being nowhere near the cheapest, and seem unwilling or unable to do anything about it. Writing on the wall?
filthy lucre
They are tied to NPower I believe and are unable therefore to be the cheapest at the moment? If that is true, it is a proper criticism. But to pretend to do forensic accounting whilst admitting that you don’t know what you are talking about, is silly.
Nigel Somerville
Filthy – telling me to leave the analysis to the accountants is not really very helpful. How about telling me where I’ve mis-interpreted the data, or got it just plain wrong? There may be valid points ot make there, even if I can;t see where they are at the moment.
Point about the Npower deal is very valid, and looks to be a source of deeper problems. As far as I can see TEP has locked itself into high prices. How does it get out of that?.
THE CORNISHMAN
Under IFRS dividends to shareholders are recorded when paid not when declared and this is a standard IFRS accounting treatment. The theory is that until shareholders have approved the payment of the dividend it isn’t a liability. So not a technical accounting issue.
I do think that consistently increasing your divided faster than basic earnings per share is asking for trouble. Especially so when your adjusted earnings per share are after excluding the amortization of a 20 license agreement After 20 years the license will be written down to nil. You have paid 221 m for an asset that is depreciated over time. If Telecom Plus had been able to pay say 10 million per annum each year they would have a lot smaller balance sheet on asset and liability side but wouldn’t I suggest be excluding the annual license fee from operating profit.
Warren Buffett’s longtime business partner, Charlie Munger, expressed Berkshire Hathaway’s position on EBITDA formula best: “I think that, every time you see the word EBITDA, you should substitute the word ‘bullshit’ earnings.”
The other cash flow challenge that Telecom Plus is in respect of unbilled income. This was worth 44.7 million at 31 December 2014 accounts and relates according to the company to estimated revenue between date of last statement and year end. As company noted they wrote off some 11.7 m as a prior year adjustment. Clearly if you only bill when there is a new reading (and this may be a number of years as indicated by prior year adjustment) then there will be a lag between recognition of revenue based on estimate (and receipt of cash when billed). Unbilled revenue is flagged as a key audit risk by the auditors in their report and also the Audit Committee. The last year balance sheet number is worth circa 1 year’s profit.
My conclusion is that at some stage, Telecom Plus will unless its business profitability grows very fast will either have to cut its dividend (it won’t be able to keep growing its dividend faster than basic earnings per share) or borrow to finance its dividend or find a way to bill “unbilled customers” more frequently.
lol
Strange because I have just looked at changing my supplier and NPower were the cheapest bar one.