Telecom Plus executive chair Charles Wigoder clearly follows the doctrine of giving the people what they want. His £36m share sale last week, including 2m shares under his own name and 500,000 through his charitable trust, was “in response to strong institutional demand following the company’s capital markets day” on November 23.
This is equal to 3 per cent of Telecom Plus’s share count and the sale was big enough to be done through a placing.
Wigoder has agreed to not sell from his remaining 14 per cent stake in the company, including the holding of the Wigoder Family Foundation, for six months.
The company was looking very popular after the capital markets day presentation. Its share price climbed over a fifth and continued to rise above 1,500p even after a pullback when Wigoder’s sale was announced last week.
Telecom Plus also announced its interim numbers in the last week of November. The “plus” is key to its offering: the company sells mobile deals but also retails energy and insurance under the Utility Warehouse brand. The first half of its financial year only included a few weeks of the turmoil that has most recently sent major retailer Bulb Energy into special administration.
That was enough to prompt record trading levels, according to co-chief executive Andrew Lindsay, who expects more customers will need reliable suppliers as a “seven-year destructive price war” in energy markets comes to an end.
“We look forward to delivering around 10 per cent growth in our customer base during the second half, and double-digit annual percentage growth thereafter,” he said. The company said it added 15,000 customers (on a net basis) in October alone.
This growth already looks priced in, with a forward price/earnings ratio of 19 times, close to its five-year average. The electricity retail market is also not one to hang a growth story on, given recent events. Like Wigoder, we think now is the time to take profits.
HomeServe’s American dream
Shares in HomeServe have struggled over the past few months. The emergency home repair specialist’s UK division is lacklustre, as customer numbers shrink and income per customer continues to fall. Meanwhile, debt levels are rising and a forward rating of over 17 times adjusted consensus earnings doesn’t yell value.
However, HomeServe chair Tommy Breen seems to have spotted an opportunity. At the end of November, he bought 50,000 shares, costing him £455,000 in total. Breen also forked out £466,500 on 50,000 shares in May, a few months after joining HomeServe (Until 2017, he was chief executive of listed sales, marketing and support services group DCC.
Breen’s confidence may be linked to HomeServe’s US ambitions. While UK growth has stalled, the group says the US market is relatively untapped, and that American consumers tend to be more insurance minded than their UK counterparts.
Its investment is starting to bear fruit. In the six months to September 30, the group’s North American customer base increased by 8 per cent to 4.8m (compared with the UK’s 1.5m). Meanwhile, US retention rates and income per customer are also on the rise.
In the wake of the group’s half-year results, Liberum slightly increased its financial year 2023 earnings per share estimate, “helped by the strength of outlook in the US”.
The transition to electric vehicles (EVs) could also prove lucrative for HomeServe. In March, it announced it had teamed up with CenterPoint Energy to launch a product which will allow residential customers with EVs to add enhancement coverage for their home charging points. As the world begins to shun internal combustion engines, this seems like a shrewd move by the service and insurance group.
After a 25 per cent fall in the year to early October, HomeServe’s share price has shown signs of recovery over the past two months. Breen will be hoping this revival will last.