Electric car maker is back in fashion as investors return to growth stocks

Utility services supplier Telecom Plus (TEP), which trades as Utility Warehouse, has seen its share price plunge nearly 30% since the start of December.

There have been unhelpful headlines for the industry around Centrica (CNA) owned British Gas using bailiffs to fit pre-payment meters and an ill-advised expenses-paid trip to the Maldives for Utility Warehouse partners was crass.

However there is a another more complex reason for the share price weakness as Numis analyst John Karidis explains: ‘Ofgem sets the price cap quarterly and suppliers must now fully hedge the cost of customers’ projected energy use. Thus, a supplier will make a big loss if the spot price falls steeply versus that assumed in the price cap, and a customer churns early in the quarter.

‘In this scenario only, which may happen whilst spot prices remain volatile, the ‘acquiring supplier’ must pay the ‘losing supplier’ a material MSC (Market Stabilisation Charge).’

Numis estimates the MSC per typical household recruited averaged pretty much zero in 2022 but hit £424 in January. It now thinks Telecom Plus will hit rather than beat guidance for around 20% customer and pre-tax profit growth in the March 2023 financial year.




Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo