23 October 2014: Colt Group S.A. (London Stock Exchange: COLT) issued today its Interim Management Statement for the three months ended 30 September 2014.
|Three months to 30 September|
For the third quarter Colt Group revenue declined 8.4% from Q3 ‘13, principally as a result of the previously announced decision to withdraw from certain low margin carrier voice trading business. Network Services and Data Centre Services both grew revenues, while Information Technology revenues declined due to lower equipment sales. From a currency perspective the Sterling’s strength against the Euro contributed to revenue performance by c.€8 million.
On a constant currency basis Group revenue declined 10.2%, explained by the following line of business movements:
• Network Services revenue grew 0.8% to €209.5 million, similar to the growth in Q3 ‘13. Managed networking revenue increased 12.6% to €77.2 million whilst bandwidth services and other revenue declined 5.0% to €132.3 million. Legacy SDH (low speed connections) continued to account for the majority of the bandwidth decline at €4.5 million.
• Data Centre Services revenue increased 15.5% to €33.2 million (Q3 ’13: 5.1%). There was growth in both colocation revenue and sales of our modular ftec halls (not recurring in nature) in the period. Revenue excluding sales of modular ftec halls increased 1.0% to €28.7 million (Q3 ’13: 3.9%).
• IT Services revenue declined 15.1% to €18.1 million (Q3 ’13: increased 44.5%) due mainly to a fall in equipment sales.
• Voice Services revenue decreased 31.6% to €93.4 million (Q3 ’13: 2.9%). Enterprise Voice revenue fell by 9.4% to €67.9 million primarily due to regulatory driven price reductions, whilst Carrier Voice revenue dropped 58.6% to €25.5 million as a result of our exit from low margin carrier voice trading business.
Group EBITDA of €73.7 million increased from Q2 ‘14 (€71.3 million) as cost reduction programmes, which are in line with plan, began to deliver results. Compared with Q3 ‘13, Group EBITDA declined by €4.3 million (5.5%) mainly due to margin compression and non recurring benefits realised in Q3 ‘13.
Net funds2 as at 30 September 2014 amounted to €185.2 million (30 June 2014: €167.1 million). Net cash flows improved by €77.0 million with an inflow of €16.9 million in Q3 ‘14 compared to an outflow of €60.1 million in Q3 ‘13. The primary difference in cash flows between the quarters relates to the purchase of a strategic London based facility in Q3 ‘13 in the amount of €41.0 million. Q3 ‘14 cash inflow also reflects improved customer collections in the year and non-recurring prepayments made in Q3 ‘13. Capital expenditure for the third quarter of 2014 decreased to €50.4 million (Q3 ’13: €71.2 million - excluding the above key site acquisition) due to the completion of internal IT and product development projects and the timing of Data Centre capacity investments. Restructuring payments during the quarter totalled €5.9 million and the programme is on track to deliver targeted savings.
1 EBITDA reflects profit before net finance costs and related foreign exchange, tax, depreciation, amortisation and exceptional items
2 Net funds includes deposits classified as current asset investments
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Rakesh Bhasin, Chief Executive Officer, said:
“Our lines of business established in May are enabling a more focused approach on customers, sales propositions and efficiency of operations. We have realigned our IT Services propositions and operating structure to meet the growing demand for cloud services. We have also made progress on expanding our sales resources with a view towards consistent growth. Our execution on the restructuring programmes is progressing well. We look forward to continued progression of the business and reaffirm our 2014 EBITDA guidance issued in Q1 ’14.”
FORWARD LOOKING STATEMENTS
This report contains ‘forward looking statements’ including statements concerning plans, future events or performance and underlying assumptions and other statements which are other than statements of historical fact. Colt Group S.A., ‘the Group’, wishes to caution readers that any such forward looking statements are not guarantees of future performance and certain important factors could in the future affect the Group’s actual results and could cause the Group’s actual results for future periods to differ materially from those expressed in any forward looking statement made by or on behalf of the Group. These include, among others, the following: (i) any adverse change in regulations and technology within the IT services and communications industries, (ii) the Group’s ability to manage its growth, (iii) the nature of the competition that the Group will encounter and wider economic conditions including economic downturns, (iv) unforeseen operational or technical problems and (v) the Group’s ability to raise capital. The Group undertakes no obligation to release publicly the results of any revision to these forward looking statements that may be made to reflect errors or circumstances that occur after the date hereof.
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