Directors’ Deals: Telecom Plus chair rings up a big disposal

Telecom Plus offers relatively cheap deals on energy by bundling its core services with internet and house insurance. Low-cost energy is always appealing, but particularly so now as temperatures drop and wholesale energy prices rise.

Customers have flocked to Telecom Plus this year. In the six months to September 30, its revenue was up 52 per cent to £562mn against the previous year, while adjusted pre-tax profit increased 23 per cent to £32mn. This was driven by an annualised customer growth rate of about 24 per cent.

The company saves money on advertising by relying on word-of-mouth marketing. Payments are given to customers who recommend friends — and squeezed budgets will encourage an increase in recommendations.

The company looks well-placed during a cost of living crisis. However, attracting customers in desperate need of cheaper utilities is an issue. Self-selection could increase the number of customer defaults next year. Management says it has no more bad debt than other energy providers, but this could conceivably change.

Telecom Plus currently trades on a forward price-to-earnings ratio of 21. This is expensive for a utilities’ stock, and with its share price up 38 per cent year-to-date there is a chance it is reaching a valuation peak. This could have informed chair Charles Wigoder, his wife, and his family foundation in their decision to sell £62mn-worth of shares.

Post-merger share purchases at LXi Reit

LXi Reit insiders snapped up half a million pounds-worth of shares after the company swung to a pre-tax loss in its first results since merging with Secure Income.

Senior figures at the long-income real estate investment trust’s (Reit) investment adviser bought a combined £465,000-worth of shares in the days following the release of its interim results on 24 November.

LXi, now the seventh-largest UK Reit by market cap following the completion of the Secure Income merger in July, posted a £28mn pre-tax loss for the six months to September 30. This was chiefly due to a £80mn investment property valuation hit, which it pinned on higher interest rates depressing property values across the market.

The results also showed how the leverage needed for the merger has impacted LXi’s balance sheet. At the time of its last results, posted in June, the Reit had debt equivalent to 13 per cent of its total equity — that has since jumped to 58 per cent.

The deal has also increased LXi’s exposure to a handful of tenants. Pre-merger, no single tenant accounted for more than 6 per cent of rental income. Post-merger, Alton Towers and Thorpe Park owner Merlin Entertainment accounts for 19 per cent, while private hospital operator Ramsay Healthcare accounts and hotel operator Travelodge both account for 18 per cent.

However, the merger helped the company’s operating profit, which more than tripled from £21mn to £66mn as the portfolio increased its rental income threefold while not even doubling its operating costs. Meanwhile, the average length of the unexpired lease terms within its long income portfolio increased from 21 years before the merger to 26 years.