Telecom Plus buys Npower supply businesses as H1 in-line - UPDATE

20th Nov 2013 07:05

- Buys back gas and electricity supply units- Price agreed of 218m pounds- Placing and open offer to raise 130m pounds at discount priceUtilities reseller Telecom Plus has agreed to pay 218m pounds to buy back two gas and electricity supply businesses from Npower which it sold in 2006. The FTSE 250 company, which operates via the Utility Warehouse brand and uses its own customers as distributors, will fund the deal via a £130m share placing and open offer at a discounted price of 1,475p, together with £100m of new debt.The announcement meant the group brought forward the release of some well-flagged interim results that were in-line with expectations thanks to significant acceleration in organic growth, Executive Chairman Charles Wigoder maintained the acquisition was a "transformational deal", buying back the energy business it originally sold to Npower as supplying 180,000 services and that had since risen to roughly 800,000.RWE Npower's Chief Executive Paul Massara described the deal as helping to create the "biggest independent competitor in Britain's household energy supply market" and showed the country was "well on the way to having a Big 7 rather than a Big 6".The deal will "significantly" enhance earnings for Telecom Plus from the 2015 financial year as the company agreed a revised and improved 20-year wholesale supply agreement with Npower that it said would substantially increase potential energy margins and enable it to offer more competitive tariffs.The funding for the deal will be completed via an initial £196.5m on completion and £21.5m deferred for three years. The open offer portion of the deal will be available to qualifying existing shareholders. Telecom Plus also released its first-half results that showed revenues up 17% to £245.8m and profit before tax and share incentive scheme charges rising 10.1% to £13.7m. The interim dividend was hiked 23% to 16p per share and stated its intention to pay a total dividend of 35p for the full year. Total services supplied rose 18.7% to 1.77m, with customer numbers up 13% to almost 495,000.Management confirmed their confidence of delivering record turnover, profits and earnings per share for the full year, excluding any impact of the acquisition.Broker FinnCap noted that the acquisition increases competitiveness and significantly raises TEP's margins for its energy revenue, which constitutes over 80% of group revenue, and would have allowed a proforma margin expansion of £9.3m adjusted pre-tax profit in the current full year. Shares in Telecom Plus were up 15.2% to 1,736p at 11:15 on Wednesday.OH