Telecom Plus PLC (LON:TEP) (trading as Utility Warehouse and UW), the UK’s only supplier of bundled household utility services, today issued its final results for the year ended 31 March 2023.
Financial Highlights
● Revenues increased to £2,475.2 million (2022: £967.4m)
● Adjusted pre-tax profit up 55% to £96.2 million (2022: £61.9m)
● Adjusted EPS up 57% to 99.2p (2022: 63.2p)
● Statutory pre-tax profit up 81% to £85.5 million (2022: £47.2m)
● Statutory EPS up 92% to 86.6p (2022: 45.1p)
● Full year dividend of 80p (2022: 57p) per share
Operational Highlights
● Record organic growth
○ 22% increase in customers, taking our total base to 886,579 (2022: 728,680)
○ 24% increase in number of services supplied to 2.8 million (2022: 2.3 million)
● Sustainable multiservice cost advantage enabled us to save our customers over £30m on their energy bills alone during the year
● Insurance business more than doubled to over 100,000 policies
● Ranked top supplier in Uswitch Energy Awards for ‘Best Customer Service’ and ‘Most Likely to Recommend’; 3rd in Which? Broadband Satisfaction survey
● 25% increase in Partner numbers to almost 60,000 (2022: 48,000) reflecting ongoing strong interest in our income opportunity as cost of living pressures continue to be felt by UK households
Outlook
● Comfortable double-digit annual percentage customer growth, leading to a broadly corresponding increase in adjusted pre-tax profits
● Ongoing investment in our services, people and technology with new specialist customer support hubs in Burnley and Selkirk
● Positioned to scale our insurance business with establishment of in-house broker and insurer
Andrew Lindsay & Stuart Burnett, Telecom Plus Co-CEOs, said:
“This has been an outstanding year for the company: the fundamental strengths of our business model have reasserted themselves and delivered a strong outcome for all our stakeholders – particularly for our customers who benefitted from the lowest energy prices in the country throughout the year, saving over £30m on their bills.
The recent fall in the Ofgem Price Cap is welcome news for UK households, although energy prices remain substantially above historical levels. When this challenge is combined with reduced government support, rising mortgage costs and continuing high inflation, the need for households to make savings across all their essential utilities has never assumed such high importance. As the UK’s only multiservice utility provider, UW remains uniquely positioned to help households to do exactly that, and we have seen a strong start to the current year, with recent customer growth putting us firmly on track to meet our goals.
However, we seek to go further than simply helping customers to save time and money on their household bills: through the UW Partner opportunity, thousands of people across the UK are earning a much-needed additional income every month. We expect the ongoing pressure on household budgets to continue to drive significant growth in the number of Partners recommending our market-leading services to their friends and family.
This unique combination of offering consumers both meaningful savings and additional earnings in the current economic environment underpins our target of welcoming an additional million customers to UW over the medium term.”
Telecom Plus, which owns and operates Utility Warehouse (UW), is the UK’s leading multiservice utility provider, offering bundled household services – energy, broadband, mobile and insurance – through one account.
Customers benefit from the convenience of a single monthly bill, consistently good value across all their utilities and exceptional levels of service.
Customers sign up through a network of local UW Partners all across the country. These Partners recommend UW’s services to friends, family and people they know by word of mouth.
Chairman’s Statement
I am pleased to report an exceptional performance during FY23 with record revenues, record profits, and record organic growth in both customer and service numbers.
Adjusted pre-tax profits increased by 55% to £96.2m (2022: £61.9m) reflecting both the strong double-digit growth we achieved in our customer and service numbers over the last 18 months, and the significant rises in the Ofgem Energy Price Cap over the period, partially offset by extra growth related costs and an increase in the value of the energy savings we gave our customers to a record level of over £30m.
Revenues grew by more than £1.5bn to £2,475.2m (2022: £967.4m) reflecting both the strong organic growth achieved in customer and service numbers, and the impact from progressively higher energy prices during the year.
Adjusted earnings per share for the year rose by 57% to 99.2p (2022: 63.2p). Statutory pre-tax profits rose by 81% to £85.5m (2022: £47.2m), and statutory EPS rose by 92% to 86.6p (2022: 45.1p).
We comfortably exceeded our internal growth targets for the year, with customer numbers increasing by 157,899 (2022: 71,269) to 886,579 and service numbers rising by 533,239 (2022: 191,112) to 2,798,148. The difference between our growth in service numbers of 23.5% and customer numbers of 21.7% demonstrates the strong appeal of our differentiated bundled proposition, even during a year when energy prices dominated the domestic media agenda.
Our strong customer demographic (skewing towards multiservice homeowners), competitive market positioning (where we are consistently offering the UK’s lowest energy prices to both new and existing customers), and limited appetite amongst other suppliers to attract new customers during a period of rising prices, resulted in our energy customer churn for the year remaining below 3%, although in recent months it has ticked up modestly to around 5% on an annualised basis.
Interest in the income opportunity we offer to our Partners continued to grow, particularly during the second half, reflecting increased levels of confidence in recommending the UW customer proposition and the growing demand for an additional income as the cost of living continued to rise. This resulted in total Partner numbers increasing to almost 60,000 by the end of the year.
I am exceptionally proud of the vital roles played by everyone in our business, in enabling us to deliver this record Company performance, against a background of repeated sizeable increases in the cost of energy alongside considerable government and regulatory intervention. To have been ranked as top supplier during such a challenging period by USwitch in their 2022 Energy Awards for ‘Best Customer Service’ and ‘Most Likely to Recommend’ is a huge achievement, and testament to both the value we offer and the considerable efforts by all of our teams to deliver the best possible customer service.
In addition to supporting our customers with the UK’s cheapest energy throughout this challenging period, we also supported our employees in managing the rising costs that they themselves were facing, by providing them with £800 in one-off payments over the winter, and a company-wide CPI-linked 10.1% increase in salary from 1 April 2023.
Our people and the communities we serve are at the heart of our strategy. As a Company, we are culturally very focussed on our sustainability as a business – not just in our approach to building long-term relationships with our customers and Partners and supporting our employees, but also ensuring that we are doing business responsibly and considering our wider impact on the environment around us and supporting the UK’s transition to net zero. I am pleased with the further progress we have made this year towards improving our sustainability, in particular by having delivered on our commitment to publish a net zero transition plan and to further develop our Climate-related Financial Disclosures.
As families across the UK continue to face high inflation and a rising cost of living, we are very proud of the role we play in helping our customers and Partners navigate those challenges: by sharing the benefits we derive as an integrated multiservice supplier with our customers by giving them sustainable long-term savings on their essential household services. Our Partner opportunity offers hard-working people, from all walks of life, the ability to earn an additional income to help offset the rising cost of living.
Looking ahead, our FY24 ESG objectives demonstrate the Company’s continued commitment to improving its sustainability and I look forward to delivering further progress over the year ahead.
Corporate Governance
The UK Corporate Governance Code (the “Code”) encourages the Chairman to report personally on how the principles in the Code relating to the role and effectiveness of the Board have been applied.
As a board we are responsible to the Company’s shareholders for delivering sustainable shareholder value over the long term through effective management and good governance. A key role of mine, as Non-Executive Chairman, is to provide strong leadership to enable the Board to operate effectively.
We believe that open and rigorous debate around key strategic issues, risks and opportunities faced by the Company is important in achieving our objectives and the Company is fortunate to have non-executive directors with diverse and extensive business experience who actively contribute to these discussions.
Dividend and Capital Allocation
The Company continues to be highly cash generative whilst delivering rapid growth. We are proposing a final dividend of 46p (2022: 30p), bringing the total for the year to 80p (2022: 57p). This will be paid on 11 August 2023 to shareholders on the register at the close of business on 21 July 2023 subject to approval by shareholders at the Company’s AGM which will be held on 4 August 2023.
The Board adopts a disciplined approach to the allocation of capital, with the overriding objective being to enhance long-term shareholder value. Our primary objective when allocating capital is to fund sustainable organic growth. Beyond that we have followed a long-standing progressive dividend policy in order to return surplus capital to our shareholders.
Going forward, the Board intends to also consider the appropriateness of using surplus cash to return capital to shareholders through share buy backs, any such amounts being determined by what is available after funding organic growth, modestly growing our current dividend payout, and maintaining an appropriate level of gearing.
Outlook
As the only fully-integrated supplier in the UK spanning four essential household markets (energy, broadband, mobile and insurance), our one-stop-shop proposition delivers long-term savings funded by the inherent efficiency of our bundled multiservice proposition, and has significant and growing appeal. It gives us a sustainable cost advantage which sets us apart from our competitors who are focussed on each individual market: and with 97 out of every 100 UK households taking their essential home services from one of these other suppliers, our organic growth opportunity has barely been tapped.
Since autumn 2021 we have grown our customer numbers at an annualised compound rate of over 20%, spanning a period during which energy commodity prices rose strongly for the first 12 months, before falling sharply over the subsequent and most recent eight month period. That we have been able to deliver such strong double-digit growth during both a rising and falling environment for energy prices gives us considerable confidence in our ability to continue doing so in future.
The strength of our competitive position is further supported by the more responsible regulatory environment in which demanding new capital adequacy requirements are being imposed upon suppliers, and the low regulatory margin allowed on energy which makes it extremely challenging for any standalone energy supplier to sell below the level of the price cap and earn an acceptable return on capital – something we have uniquely and consistently done throughout the current cost of living crisis and anticipate continuing to do in future.
There was a marginal increase in customer churn towards the end of the year as we saw a number of suppliers tentatively re-starting their customer retention programmes, but there has yet to be any meaningful return to proactive customer acquisition activity – reflecting the regulatory focus on ensuring a sustainable retail energy marketplace, the ongoing impact of the Ofgem Market Stabilisation charge, and the low margins available to energy suppliers.
The welcome fall in the Ofgem Price Cap to £2,074 creates a modest headwind for us over the coming year in terms of lowering our average revenue per customer, and potentially reducing the feeling of urgency amongst people to switch their supplier. However, in a more stable retail market, and with energy prices looking likely to remain at around these levels for the foreseeable future, we are confident that our unique multiservice proposition will continue to underpin our competitive position and support further strong organic growth.
We remain focussed on our target of welcoming an additional one million customers to UW, with the following medium-term internal base case planning assumptions:
· annual percentage customer growth is expected to remain comfortably in double-digits, albeit below the record level we achieved last year
· adjusted pre-tax profits are expected to increase broadly in line with customer growth
· excess capital will be returned to shareholders through a combination of modestly increasing dividends and share buy-backs, as deemed appropriate.
Both our people and our technology are vital to delivering an exceptional UW experience to our customers, and as we scale, we continue to invest heavily in strengthening our teams at all levels, and evolving and improving our systems. As we increase the size of our team in response to the ongoing rapid growth in the number of customers we support, a key area of focus for the year ahead is to codify our distinct UW culture and embed it throughout our increasingly widespread employee base.
It has been exciting to see our Partners once again demonstrating their ability to recommend our strong and differentiated consumer proposition to a record number of households, delivering significant and high quality organic growth. With UK households facing continuing challenges and uncertainties over the coming year, particularly for those coming to the end of a cheap fixed-rate period on their mortgage, we anticipate that demand from new Partners joining UW to earn an additional income will remain strong.
I would like to thank my boardroom colleagues for their support and all our staff and Partners for their energy, drive and hard work through a challenging but exciting year of growth, and the contribution they are making to the ongoing strong performance of the business.
The last twelve months have put us firmly on track to achieve our medium-term target of welcoming an additional one million customers to UW, and we look forward to making significant further progress over the year ahead.
Charles Wigoder
Non-Executive Chairman
27 June 2023
Co-Chief Executives’ Review
The year in summary: meeting consumer demand through multiservice bundles
Throughout our 25-year history, we have consistently helped UK households reduce the cost and hassle of running their homes. And 2023 was no different. As the rising cost of living has been felt by the nation, we have helped families bolster their finances through savings on their home services and earnings through the UW Partner opportunity. This has resulted in a year of record growth for the business, as we remain on track to deliver our medium-term goal of welcoming one million additional customers to UW.
2023 marked the first full year since sustainable pricing practices returned to the energy market. And with the return to a rational marketplace our business model has demonstrated its strength.
During the financial year, our multiservice bundles have provided real value to UW customers across all their home services, not only in delivering over £30 million of savings on their energy bills, but also a further £8m of Cashback card savings. The demonstrable ongoing value that we offer households on services they were previously buying from other suppliers is a clear ongoing driver of our growth and was a key factor in attracting nearly 160,000 net additional customers during the year.
Whilst the dynamics in each of our markets constantly vary, we continually focus our efforts on strengthening our core multiservice customer proposition and supporting our Partner community.
In the immediate aftermath of the energy crisis and following the failure of around 30 suppliers in autumn 2021, we experienced a marked increase in the proportion of new customers applying for just energy services from UW. To address this, we simplified our application journey, incorporated insurance into our multiservice bundles, and introduced tiered savings ‘Boosts’ to encourage multiservice take up amongst new customers. These initiatives have yielded strong results, particularly during a year in which there was near constant media coverage of high energy prices, with the growth in the number of services we supply (+24%) pleasingly outstripping the strong underlying growth in customers (+22%) during the year.
By integrating insurance into our multiservice bundles in April 2022, we made this service part of our core proposition, and saw an immediate acceleration in the rate of take up by new customers, leading to an increase in the number of policies from 44,834 to 100,590 over the course of the year. This is an encouraging trend for our future multiservice growth strategy.
As confidence in the strength of our customer proposition progressively increased amongst our Partners, and as interest in the income opportunity we offer grew in response to the rising cost of living faced by UK households, we saw more and more people turning to UW to bolster their incomes. The total number of UW Partners increased by over 25% during the year, reaching almost 60,000 for the first time. This reflects the appeal of our income opportunity in the current economic climate, and underpins the sustainability of our current high-quality growth with our Partners continuing to demonstrate their unique capability to introduce high-value customers (i.e. multiservice homeowners) to UW in significant volumes.
Rather than seeking growth at any cost, we take pride in the consistent disciplined approach we have adopted to building a long-term, sustainable business. In a year characterised by the demands of rapid customer growth, inflated levels of contact from our customers in response to high energy prices, and unprecedented regulatory and Government intervention, we have concentrated our efforts on delivering our three key business priorities:
· Building a great culture and environment for our people
· Looking after our customers as we grow
· Maximising high-quality customer growth
Through focussing all our people on these priorities, we are pleased to have made significant progress on each front:
· increasing our employee Net Promoter Score (eNPS) to +39
· increasing our post-contact Customer Effort Score (CES), that measures the ease with which customers can use our services, resolve a support issue, or find the information they need, by 19% to 75 in March 2023
· delivering a 20% improvement in the proportion of new customers taking a multiservice bundle.
All of these have contributed to our double-digit organic growth for the year and lay the foundation for further progress in the years ahead.
This is an exciting time for the business. After several years of modest progress, we saw a return to strong growth in autumn 2021, which continued throughout last year. This demonstrates our ability to respond to the challenges created by rapid customer growth and strengthens our confidence in successfully scaling the company over the medium term.
As we look at the external macro-economic environment around us, it seems clear that demand will remain high for the sustainable savings we offer our multiservice customers, and for the meaningful additional income opportunity we provide our Partners. And with 97 out of 100 UK households not yet with UW, there is scope for considerable further growth ahead.
Looking ahead, we are confident in delivering profitable double-digit % annual growth as we progress towards our medium-term goal of welcoming an additional one million customers to UW.
A unique business model in the UK – Our sustainable cost advantage
As the UK’s only multiservice utility provider, we receive revenue streams from each of the services we supply to our customers, which we manage with a single set of central overheads. This gives us significant operating efficiencies relative to our competitors in each of our markets, and creates a sustainable, structural cost advantage.
This ongoing cost advantage enables us to price competitively across each of the individual services we supply, bundling them together into a unique multiservice proposition.
By bundling their home services together, UW customers receive sustainable long-term savings and the simplicity of a single monthly bill, whilst being supported by our award-winning customer services team.
This differentiated UW experience delivers market-leading levels of customer loyalty and creates a highly referable proposition that we harness through the most powerful form of marketing being – word-of-mouth.
This word-of-mouth marketing, led by our community of UW Partners, is the key to unlocking high levels of multiservice take-up by new customers, which in turn, strengthens our structural cost advantage.
This self-reinforcing cycle is the core of our business model.
Bundles that reduce the cost and hassle of running a home
We supply households throughout the UK with a wide range of essential services – energy, broadband, mobile and insurance – all under the UW brand.
Our customers bundle together the services they want, and benefit from a unique multiservice proposition that offers them:
· Simplicity – just one, simple bill for all their home services;
· Savings – compared with the prices they were previously paying; and
· Service – an easy to use customer app backed up by award-winning support teams.
We believe that one supplier offering a single place for consumers to manage all their essential home services, and a single monthly bill for all of them together, is logically the easiest and most cost-effective way to deal with bills. And in genuinely delivering on this multiservice proposition, we create something that is truly referable.
Loyal customers creating sustainable, long-term value
We help our customers to get on with more important things in their lives than managing their bills by delivering consistently fair value and great service, ensuring they never need to think about switching their utilities again.
We also seek to maximise their expected lifetime with us, by earning their trust and loyalty in a number of ways:
· Treating our customers fairly
o We offer long-term, ongoing savings across our services, in preference to shorter-term pricing tactics that inevitably undermine customer trust, loyalty and longevity.
· Providing outstanding service
o We provide our customers with award-winning customer service online, on our app and through our dedicated customer service teams, adopting a mantra of ‘looking after every customer as though they were our own mum’.
· Offering customers incrementally better value with each additional service they take
o Given the clear correlation between the number of services a customer takes and their expected lifetime as a UW customer, it is beneficial to both the customer and ourselves to provide additional savings to those who take multiple services from us.
· Encouraging customers that own their home to choose UW
o Changes in who is occupying a property often leads to higher administrative costs, greater churn and bad debt, and thus pose particular challenges to suppliers of broadband and energy. By targeting homeowners who are less likely to move property, we underpin the long-term value of the business.
· Creating additional saving opportunities for our customers
o For example, through our Cashback offering (which allows customers to further reduce their monthly bills through their everyday shopping) or through our Customer Referral scheme.
We want UW customers to have such a positive overall experience with us that they won’t want to switch away from it, encouraging them to stay with us longer generating sustainable, long-term returns, and recommending us to their family and friends.
A unique Word of Mouth model that creates earning opportunities
Conventional advertising is ineffective at acquiring individual customers who take multiple services – the proposition is too complicated, and the perceived effort of switching is too high.
In contrast, a word of mouth recommendation from a trusted person will overcome the natural inertia to switching multiple services simultaneously, and deliver higher levels of multiservice take up by new customers.
We rely primarily on our community of Partners to provide these trusted personal recommendations, and it is their word-of-mouth marketing of UW that enables us to unlock the inherent value of a multiservice customer.
This word-of-mouth approach creates a genuine alignment of interests that is in stark contrast to the traditional advertising strategies of our competitors: these typically reach only a minority of highly engaged UK consumers who are prone to serial switching and therefore unlikely to generate long term returns.
Our Partners are paid for showing people they know how bundling their home services with UW can save them time and money. Each time they introduce a new customer they receive a one-off payment followed by an ongoing monthly commission stream which continues for as long as the customer remains with UW, and which grows as they build a team and acquire more customers.
At a time when the rising cost of living is applying increasing pressure to households across the country, our word-of-mouth marketing model is not only helping more and more families to benefit from much needed savings on their bills, but is also providing an opportunity for increasing numbers of people to more than offset the increased costs they are facing by earning a meaningful additional income. We are seeing more and more people turning to UW to do exactly that.
An inherently long-term business
Our multiservice proposition – delivered through our word-of-mouth route to market – drives the ongoing acquisition of loyal customers, thereby building long-term value for all parties:
· Our customers benefit from our lowest prices for longer in return for switching all their services to UW.
· Our Partners receive a long-term recurring income stream from a longer-lasting customer.
· Our shareholders access a growing earnings stream from an inherently sustainable business.
Our bundles: best-in-class core services
Our multiservice bundles
We made a number of important improvements to our multiservice customer proposition during the year:
i) We launched a new bundle structure centred on our 4 core services: energy, broadband, mobile and insurance. The evolved proposition expanded the qualifying services to include all our core products and gave customers greater flexibility to tailor their personal bundle.
ii) We refined our customer acquisition investment in order to better attract multiservice homeowners through the launch of our Boost incentive.
iii) We re-launched our customer referral programme with a traditional “give a reward / get a reward” mechanic, designing these incentives to similarly attract multiservice homeowners, as well revamping the digital referral and onboarding experiences. We are excited by the potential for this logical extension of our word of mouth marketing model but were frustrated to have to postpone the planned marketing campaigns for the new referral programme in response to the higher Ofgem Market Stabilisation Charges which we faced during the final quarter of the financial year; we look forward to seeing a marked increase in referral activity over the coming months.
As a result of this series of improvements, the last 12 months has seen a 20% improvement in the proportion of new customers taking a multiservice bundle.
In March 2023, in response to the new quarterly Ofgem Price Cap, we simplified the structure of our ongoing multiservice energy discounts, moving from a percentage-based discount to a consistent pounds-based discount. Importantly, this change creates a clear and simple price promise that suits our word of mouth marketing model whilst holding true to our ‘take more, save more’ value proposition.
Energy
In a market characterised by unprecedented levels of commodity price inflation and government intervention during the year, we were the fastest growing retail supplier in the country, increasing the number of energy services we supply by 24.8% from 1,219,836 to 1,522,350.
Whilst the Ofgem Price Cap increased sharply at the start of the year from £1,277 to £1,971, underlying wholesale energy prices continued to climb, driving retail prices to unsustainable levels with the Ofgem Price Cap soaring to £3,549 in October. In response, the government implemented several new schemes; the Energy Bill Support Scheme and Energy Price Guarantee supported residential customers by bringing the effective customer cost down to £2,100 over the winter, while the Energy Bill Relief Scheme supported non-domestic customers. Meanwhile the Ofgem Price Cap moved to a quarterly basis.
During this period the majority of energy suppliers withdrew their acquisition tariffs and the switching market slowed dramatically. As a multiservice supplier, we were uniquely positioned to continue acquiring customers throughout this period, offering sustainable and market leading energy savings funded by our margins from supplying the broadband, mobile or insurance services that our customers also take from us, and the operational cost advantage we enjoy as an integrated multi-utility supplier. We were pleased to be ranked third in the Which? 2023 Energy Supplier Survey, and ended the year replacing Utilita as the 8th largest energy supplier in the country.
In addition to implementing the numerous government support schemes, we maintained our position at the forefront of the smart meter rollout programme, successfully migrating our metering arrangements to Calisen group following the divestment of UWHS in March 2022. We are delighted to have recently passed the 1m smart meter milestone and remain fully committed to delivering further progress on this vital element of the UK’s transition to net zero.
Over the course of last winter, forward wholesale prices fell significantly, triggering the Ofgem Market Stabilisation Charge, whereby a supplier who gains a customer is obliged to compensate the losing supplier for a proportion of their costs associated with hedging energy for that customer. This additional acquisition cost resulted in us further increasing our focus on acquiring multiservice customers during Q4, which reduced our overall growth rate during this period.
Retail prices currently look set to stabilise at around the £2,000 level for the rest of the year: whilst this is a significant reduction compared to recent months, it is roughly twice the level of the past decade. This ongoing additional pressure on household budgets can be expected to drive continued high demand for the long-term energy savings that we offer.
Ofgem remains focussed on its programme of retail market reform: through a series of market compliance reviews, it is tightening up on unsustainable supplier practices, and is currently consulting on numerous topics relating to Price Cap allowances – notably debt and EBIT margins – to ensure supplier sustainability. In so doing, Ofgem are ensuring a level playing field exists between suppliers and creating a market in which an innovative, sustainable multiservice proposition like ours stands to benefit. Further reform is expected as the immediate energy crisis recedes and Ofgem returns its focus to the transition to net zero.
Broadband
The broadband market continued to be highly competitive during the year, albeit market-wide switching rates remain lower than pre-pandemic levels due to greater concern over broadband disruption given the increased reliance many consumers place on connectivity when working from home. This reluctance to switch has tempered our broadband growth, albeit we still saw a near 10% increase in service numbers to 354,118 over the course of the year.
In response to highly competitive market dynamics, we reduced our broadband margins 18 months ago by offering introductory prices to new customers. Whilst we would prefer not to offer these tariffs, they make us one of the most competitively priced suppliers, particularly for our multiservice customers. In the past few months many broadband providers have increased their back-book prices by CPI+, and there are some early signs of a welcome upward market-wide trend emerging in introductory tariffs. Thanks to our multiservice model, we were able to keep our price increases below CPI and maintain our introductory tariffs unchanged.
With consumers increasingly focused on speed and reliance, we were pleased to be ranked 3rd in the 2023 Which? Broadband Satisfaction Survey, behind Zen and Hyperoptic. Our broadband router retained its Best Buy status from Which? and is supplemented by our whole home wifi Amazon eero proposition for larger households. Together, these demonstrate our focus on offering our customers what they value – quality services at affordable prices, as part of a multiservice bundle.
We extended our long-term partnership with TalkTalk for a further five years, gaining improved terms and access to their favourable agreements with alternative fibre networks. With 25% of new customers already taking full fibre services from us, this will enable us to accelerate our full fibre rollout, and we are pleased to be adding CityFibre’s footprint this summer, increasing our addressable full fibre market to over 12.5m properties nationwide.
Mobile
The trend in the mobile market towards sim-only contracts and higher average data consumption continued through the year, with consumers now typically paying between £15 and £20 per month. Both our £20 unlimited data mobile plan, and our family bundle of four unlimited data sims for £59 per month, are market leading, particularly given they are on the EE network which provides the highest (99.6%) population coverage in the UK.
Our competitive and straightforward proposition has led to further strong growth of over 20% in our mobile business, ending the year with 394,145 services. With over half of our new customers benefiting from the peace of mind and value offered by our unlimited data plan, our mobile proposition epitomises what UW stands for.
We extended our long running partnership with EE giving us the additional flexibility to grow our base whilst continuing to offer market leading products and data allowances. UW customers will soon start to benefit from mobile coverage on the London Underground, and we expect to commence our preparation for launching 5G services in the coming months.
Insurance
This year was transformative for our insurance business, with our policy book more than doubling from 44,834 to 100,590. In focussing on delivering high quality cover and excellent value to our customers, we continue to benefit from strong retention rates of around 95%, and as our overall customer growth has increased, we have seen demand from new and existing customers remain strong for our insurance services. We are seeing the early benefits of this growth on our unit economics, and expect this emergent trend to accelerate as we achieve further economies of scale.
A key driver behind the marked acceleration in growth this year was the incorporation of insurance into our multiservice bundles and new customer onboarding journey at the start of the year. This has validated our strategy of further embedding insurance into our core proposition, and we were pleased that the Gibraltar insurance regulator (‘GFSC’) approved our insurer licence for UWI Limited (‘UWI’) in March 2023 (see below).
By combining our platform of 100,000+ insurance policies with end-to-end vertical integration through ownership of our own in-house broker and insurer, we are now positioned to genuinely scale our insurance business and become one of the UK’s major personal lines insurance businesses over the coming years.
Cashback card
Our Cashback card saw significant growth this year with UW customers spending over £500m (2022: £368m) and earning Cashback on everyday spending of £8.2m (2022: £5.8m), an increase of over 40%. With households across the UK facing significant increases in the cost of living, our Cashback card offers a unique and valuable additional way of helping to reduce monthly outgoings.
Whilst not a material profit centre in its own right, our Cashback card adds huge value to our business, generating regular positive touchpoints with active cardholders through real time alerts of cashback earned, and creating genuine loyalty amongst customers who benefit from reductions in their monthly bills.
During the year we further strengthened our portfolio of retailer relationships and launched Cashback Insights, our first step in leveraging our new app platform to show our customers how much they have saved to date, and to help them maximise their future cashback earnings.
Given the ongoing high demand we are seeing for the savings that our Cashback card offers, we continue to seek additional retailer relationships and invest in improving the customer experience further, confident that this will translate into higher customer satisfaction and continued market-leading retention rates across all of our services.
Set up of UWI Limited
As part of our long-term insurance strategy, we were pleased that our application to the GFSC for authorisation for our own in-house insurer (“UWI”) was successful. UWI has been authorised to operate across six classes of personal lines insurance, and has been approved to passport and write business into the UK, and we started writing our first policies in April 2023.
In order to enable us to run our own in-house Insurer effectively, we have hired an executive team of industry veterans, alongside a highly experienced board, chaired by Andrew Blowers OBE. Our UWI CEO Austyn Tusler, has worked in the insurance industry for over 25 years, including at AIG and Hiscox, and most recently as CUO of UK General. He is supported by a talented and capable team with deep experience of Personal Lines Insurance at leading names including the AA, Canopius and Direct Line Group, and decades of experience operating insurers in Gibraltar.
We believe that the launch of UWI will further accelerate scalable and profitable growth of our insurance business, by enabling us to:
· Further integrate our insurance products into our multiservice customer journeys, significantly improving penetration
· Improve our range of products
· Drive stronger claims management to protect our brand & better oversee the customer experience we deliver
· Operate more efficiently through end-to-end integration and control of our supply chain, enabling us to deliver greater value to our customers and shareholders
· Secure our supply-chain and provide cover for our customers throughout the underwriting cycle as we grow our insurance policy book
Investing for growth
Supporting our customers
In order to ensure our customers remain with us for the long term, and to earn the trusted personal recommendations of our Partners, we must consistently deliver a high standard of service, treat them fairly, and live up to our promise of letting them get on with their lives and forget about their utilities.
The rapid growth we have experienced over the last year, coupled with widespread concern and uncertainty amongst consumers about energy prices, resulted in a more-than-doubling in the number of calls and emails that we received from our customers. In response, we not only significantly increased the size of our internal customer service teams, but also developed relationships with two UK-based outsource partners who specialise in the energy sector in anticipation of a further uplift in contact over the winter months. By the end of the financial year we had started tapering down this temporary resource, and were very pleased with the flexibility that it offered, and the service levels we delivered to our customers as a result.
We rely on the efforts of our colleagues in our customer support teams to look after all the services that our customers take from us. Through their hard work and commitment, we not only managed the increased number of contacts we received from our customers, but further improved the level of service we delivered, particularly during the winter, and were delighted that our post-call Customer Effort Score (CES) increased 19% over the course of the year.
We expanded our customer support capabilities through the opening of our first “centre of excellence” in Burnley with a focus on supporting new customers joining UW and specialising in the first 60 days of their journey with us: this new team complements those already working remotely and in our Colindale offices to meet the needs of our customers as we grow.
Given the increasing inflationary pressures on household budgets this year, supporting our most vulnerable customers has been a key priority. We significantly expanded our Ability to Pay teams to ensure that customers who need further assistance with their bills are treated sensitively by highly trained staff. Through our work with the Citizens Advice Bureau, we have also implemented a UW hardship fund to build upon existing means of help – such as the Warm Home Discount – and to create a pool of money that can be used to help customers on a discretionary basis.
To ensure our growing customer base is properly protected, we continue to invest in our cybersecurity and anti-fraud infrastructure. Over the last twelve months, we have increased the size of our privacy team and implemented additional data privacy training for employees. Our security operations centre is FIRST.Org accredited and our Data & Record Management is governed by Data, Security and Data Privacy teams with comprehensive processes and practices.
Investing in our customer experience continues to be a key business priority, both as a way of supporting our word-of-mouth marketing model and also our underlying operational efficiency. Major progress has been made on our new customer onboarding, bill payment and home-mover digital journeys, as well as the development of multiple new mobile and broadband self-serve capabilities. Our customer service advisor experience has seen similar further improvements, enabling faster and more efficient query resolution for our customers.
The strength of our customer service was recognised in our win for ‘Best Customer Service’ at the Uswitch Energy Awards 2022, and our highly commended award for ‘Best Customer Support’ in the Expert Reviews Energy Awards. Considering the rise in customer calls triggered by inflationary pressures, government intervention in the energy sector, and our rapid customer growth, these endorsements are a testament to effective policies and the hard work and commitment of our support teams.
Supporting our Partners
As our multiservice bundles have become increasingly compelling, so the confidence, enthusiasm and activity levels of our Partners have increased. Armed with a highly referrable customer proposition, and invigorated by the increased demand for the savings and earnings they can offer to people they know, momentum has built amongst our Partners, and they have played a key role in delivering the record levels of customer growth we have achieved this year.
In the face of rising living costs, people from all walks of life across the UK – nurses, teachers, students, retirees – have been joining UW in record numbers to earn an additional income as UW Partners. As higher energy prices evolved into a broader inflationary trend during the year, many found that they could not balance their household finances through savings alone. The opportunity to earn a secondary income that could more than offset the rising costs they are facing has proven a popular proposition.
To capitalise on this increased demand for the UW Partner opportunity, and to help more Partners succeed and earn, we took a number of steps to strengthen both our customer and Partner propositions during the year:
· Through implementing the market-wide energy ‘Faster Switching’ in the summer we significantly reduced the delay between customer sign up and commission payment, resulting in faster earnings for Partners
· In introducing our multiservice savings Boost in the autumn, we increased the referability of our customer proposition and therefore the earnings opportunity for Partners
· In January we extended the full Customer Bonus to new Partners, enabling them to start earning sooner, and helping more experienced Partners to accelerate the building of their teams and their long-term residual income
· To support our growing Partner community, we were excited to launch our inaugural ‘Save a Bundle’ billboard, radio and digital marketing campaign towards the end of the year – seeking to raise consumer awareness of UW, add credibility to the UW proposition and facilitate our Partners when recommending us to people they know
Given the key role our Partners play in unlocking our highest value customers – multiservice homeowners – the ongoing growth of our Partner community puts us in a strong position for continued high-quality customer acquisition.
We are hugely proud of the positive societal impact the business is having in helping our Partners to earn an additional income and to meet the current rising cost of living; and we will continue to invest in supporting our Partners and helping them to achieve their goals through UW.
Operational performance and non-financial KPIs
We exceeded our growth targets for the year with customer numbers rising by 21.7% (2022: 10.8%) to 886,579.
| Customers | 2023 | 2022 |
| Residential | 866,403 | 705,634 |
| Business | 20,176 | 23,046 |
| Total | 886,579 | 728,680 |
This growth was slightly skewed towards the first half due to the adverse impact of the Ofgem Market Stabilisation Charge in the second half of the year.
The total number of services we supply to our customers grew by 23.5% (2022: 9.2%) to 2,798,148.
| Services | 2023 | 2022 |
| Core services | ||
| Energy | 1,522,350 | 1,219,836 |
| Broadband | 354,118 | 323,623 |
| Mobile | 394,145 | 324,773 |
| Insurance | 100,590 | 44,834 |
| Other services | ||
| Cashback card | 405,118 | 327,949 |
| Legacy telephony | 21,827 | 23,894 |
| Total | 2,798,148 | 2,264,909 |
Note: the table above sets out the individual services supplied to customers. Legacy telephony comprises non-geographic numbers (08xx) and landline only (no broadband) services provided.
Customers can take any combination of services – energy, broadband, mobile or insurance – they wish from us. The more services a customer takes, the greater the savings they make, and there is a clear correlation between the number of services taken and the customers’ expected lifetime value to the business.
We saw healthy growth across all our core services, especially in energy which has clearly been the focal point of media attention and widespread consumer interest. However we were particularly pleased with the significant acceleration in the uptake of insurance, and the 125% growth in this service since it was incorporated into our multiservice bundles at the start of the year.
| Average number of Core services taken by new residential customers signed up by Partners | |
| Q1 FY22 | 2.28 |
| Q2 FY22 | 2.16 |
| Q3 FY22 | 1.84 |
| Q4 FY22 | 2.09 |
| Q1 FY23 | 2.24 |
| Q2 FY23 | 2.53 |
| Q3 FY23 | 2.24 |
| Q4 FY23 | 2.38 |
Following the launch of our simpler multiservice bundles at the start of the year we saw a solid improvement in the average number of service types being taken by new customers. As concerns over the future upward trajectory of energy retail prices increased during the summer months, we saw a temporary surge in the proportion of customers switching three or more services to us in order to access our competitive fixed price energy tariff. This returned to more normalised levels over the autumn, but increased again in the final quarter as we sharpened our focus on attracting our highest value customers – multiservice homeowners – in response to the incremental cost of acquiring new customers that resulted from the increased Ofgem Market Stabilisation Charge since January 2023.
The average number of Core services taken by new customers is a key metric that underpins the long-term sustainability of the business: customers taking two or more Core services from us are benefitting from a genuinely differentiated proposition, as well as greater ongoing savings, meaning that they are less likely to leave us.
Our long-term focus on winning our customers’ loyalty and maximising their lifetimes with us continues to pay dividends, and our electricity supply point churn (the percentage of supply points leaving during the period, which we use as a proxy for overall churn) was extremely low at just 2.8% for the year (2022: 6%). There was a marginal increase towards the end of the year as we saw a number of suppliers tentatively re-starting their customer retention programmes, but there has yet to be any meaningful return to proactive customer acquisition activity – reflecting both the regulatory focus on ensuring a sustainable retail energy marketplace, the impact of the Ofgem Market Stabilisation charge, and the low margins available to energy only suppliers. Whilst churn is unlikely to remain at these record low levels, we are confident that our differentiated multiservice proposition and sustainable competitive pricing strategy mean that our churn will remain below the levels we were experiencing during the energy price war.
Average revenue per customer increased significantly to £3,025 (2022: £1,340). This was primarily due to materially higher energy prices, particularly in the second half of the year.
The year ahead: our three FY24 Business priorities
Having exceeded our internal 20% growth target for 2023, we are firmly on track to achieve our medium-term growth target of welcoming an additional one million customers to UW. As the immediate challenges of a year characterised by a return to rapid growth, heightened concern about energy prices, and significant regulatory and Government intervention are left behind, we have taken the opportunity to revisit our business priorities and adjust them to reflect the growth trajectory for the year ahead:
1. Evolving our distinct company culture
Our goal is to motivate and empower our people to deliver an excellent customer experience and ultimately, continue to drive growth. With a significantly larger and growing team, this year we will be focussing on evolving our distinct UW culture to help attract, develop and keep great people. And as a result, create the type of working environment, mindset and talent needed to deliver our growth targets.
To do this, we will focus on three core objectives:
· We will define, develop and start to embed our distinct culture across all aspects of the experience that our people have with UW.
· We will develop and grow our People Leaders to become culture and career builders.
· Lastly, we want to create an environment where our customer-facing teams feel empowered and engaged, and want to stay with UW.
2. Delivering a seamless multiservice customer experience
Our multiservice customer experience is key to our success and following the opening of our first customer service hub in Burnley in autumn 2022, we will shortly be opening our second hub in the Scottish borders town of Selkirk: this new centre of excellence will be focussed on ensuring our prepayment energy customers are fully supported against the wider backdrop of increasing affordability challenges.
Within this business priority, we are also focussed on delivering a streamlined digital experience for both new and existing customers, to enable our customers to access and make changes to their UW services without having to contact us.
For those that do want to contact us, we will continue to focus on providing our customer service advisors with the latest technical systems to support the delivery of award winning service.
3. Bringing more multiservice homeowner customers on board
The current climate offers a unique opportunity for UW to continue to help UK households both save and earn in the face of the increased cost of living; maximising the number of services our home owning customers take maximises their savings and delivers the most valuable long-term customer relationships for UW. And our word-of-mouth route to market remains at the heart of our ongoing growth strategy as the best route to acquiring these, our highest value customers.
To this end our primary goal is to significantly grow our existing Partner community, but also to continue to innovate around and extend our word-of-mouth model to appeal to new audiences such as through our rapidly growing Customer Referral programme.
Delivering exceptional value and service remains at the heart of our core multiservice proposition and we will continue to invest in each of our individual services, as well as our multiservice bundled benefits, with the goal of maximising customer lifetimes and increasing customer advocacy to further fuel our future growth.
Stuart Burnett & Andrew Lindsay MBE
Co-Chief Executive Officers
27 June 2023
