LONDON, Feb. 24, 2004 (PRIMEZONE) -- COLT:
HIGHLIGHTS (1)
* Turnover up 14% to GBP1,166.3 million for year, (constant currency growth of 6%)
* Turnover up 16% to GBP306.3 million in fourth quarter, (constant currency growth of 8%)
* Corporate customer turnover up 18% for year and 16% in fourth quarter
* Wholesale customer turnover up 7% for year and 17% in fourth quarter
Gross margin before depreciation and exceptional items improved from 30.5% to 34.2% for year and from 33.2% to 35.5% in fourth quarter
* EBITDA(2) up 128% to GBP163.4 million for year and up 74% to GBP48.2 million in fourth quarter
* Capital expenditure of GBP141.0 million for year and GBP32.7 million in fourth quarter
* Free cash outflow (3) reduced from GBP300.0 million in 2002 to GBP30.4 million in 2003
* Strong liquidity position with cash and liquid resources of GBP802.4 million
* Staff levels including temporary and contract workers reduced by 17% during the year to 4,044
(1) All comparisons are with the equivalent period of the prior year.
(2) EBITDA (earnings before interest, tax, depreciation, amortisation, foreign exchange, infrastructure sales and exceptional items) is viewed by management as an operating cash flow measure. Refer to note 5b for a reconciliation from EBITDA to net cash inflow from operating activities.
(3) Free cash flow is the sum of net cash inflow from operating activities less net cash outflows from returns on investments and servicing of finance and from capital expenditure and financial investment.
(4) All comparisons are with the equivalent period of the prior year.
(5) EBITDA (earnings before interest, tax, depreciation, amortisation, foreign exchange, infrastructure sales and exceptional items) is viewed by management as an operating cash flow measure. Refer to note 5b for a reconciliation from EBITDA to net cash inflow from operating activities.
(6) Free cash flow is the sum of net cash inflow from operating activities less net cash outflows from returns on investments and servicing of finance and from capital expenditure and financial investment.
Commenting on the results for the year COLT Telecom Group Chairman Barry Bateman said:
"In a continuing difficult trading environment it is encouraging that COLT managed to deliver further improvement in its key operating results. Turnover grew by 14% to GBP1,166.3 million in 2003 with EBITDA up 128% to GBP163.4 million.
"COLT remains strong financially. We reduced operating cash consumption from GBP300.0 million in 2002 to GBP30.4 million in 2003. Taking into account the repurchase and redemption of some of our bonds for a cash consideration of GBP144.5 million we ended the year with cash and liquid resources of GBP802.4 million. We remain confident in achieving our goal of being free cash flow positive on a sustainable basis during 2005.
"2004 is likely to be another challenging year. Nevertheless our reputation for world class customer service, expanding product range and financial stability positions us well for another year of progress."
Commenting on the results for the fourth quarter Steve Akin, COLT's President and Chief Executive Officer said:
"Fourth quarter turnover and EBITDA have continued to improve with turnover growing by 16% to GBP306.3 million and EBITDA by 74% to GBP48.2 million. Not only has turnover continued to grow but we have achieved an accelerating rate of constant currency turnover growth from 3% in the first quarter to 8% in the fourth quarter.
"Turnover growth and improved turnover mix combined with continuing tight management of operating costs have contributed to the improvement in gross margin before depreciation to 35.5% in the fourth quarter compared with 33.2% in the comparable quarter of 2002 with EBITDA margin expanding to 16% from 11%.
"COLT continues to be recognised for its outstanding customer service and the contribution made to the communities in which we operate. In Germany, for the second time, we won the IT-Elite award for customer service. We won the Greenfield prize in recognition of our contribution in providing Turin with one of the most advanced technology infrastructures in Italy and in the UK COLT was the only telecommunications company to win the Westminster Gold Award for considerate contracting.
"Underpinning our financial performance has been our success in selling more to existing customers as well as winning new customers. At the end of the quarter we had 19,565 network and data solutions customers, an increase of 26% over the position at the end of 2002. Corporate customer revenues grew by 16% with wholesale customer revenue growth of 17%. We further reinforced our longstanding relationship with Deutsche Bank. Among the more significant new business wins during the quarter were ToldSkat, the Danish taxation authority where COLT will be providing service in Copenhagen and 29 regional offices. In Rome, new contracts have been awarded by the Department of Education and La Sapienza University for high bandwith data services and in Germany we have continued to expand the level of business we do with Commerzbank and EDS.
"We continue to tightly manage costs and have further reduced staff numbers. At the end of the quarter employee numbers were 4,044, including temporary and contract staff compared with 4,855 at the end of 2002. We also sold our Fitec subsidiary during the quarter, which accounted for 103 of the reduction in staff numbers.
"We are looking at further opportunities to improve customer service and achieve further operating efficiencies. In particular we are examining the possibility of establishing a new support organisation in India.
"COLT is continuing to move in the right direction and as we go through 2004 we will continue to focus on profitable revenue growth and tight management of operating costs and capital expenditure. I believe we will continue to grow and be successful."
KEY FINANCIAL Three months ended Twelve months ended
DATA 31 December 31 December
2002 2003 2002 2003
GBP m GBP m GBP m GBP m
Turnover 263.2 306.3 1,027.2 1,166.3
Interconnect and (175.7) (197.7) (713.6) (766.9)
network costs
before
exceptional
items
Gross profit 87.5 108.6 313.6 399.4
before
depreciation and
exceptional
items
Gross profit 33.2% 35.5% 30.5% 34.2%
before
depreciation and
exceptional
items %
Network (50.8) (50.4) (212.0) (204.4)
depreciation
Exceptional -- -- (526.3) --
interconnect and
network costs
Gross profit 36.7 58.2 (424.7) 195.0
(loss)
Loss for the (44.8) (23.5) (236.1) (134.7)
period (before
exceptional
items)
Loss for the (45.2) (21.1) (718.3) (124.6)
period (after
exceptional
items)
EBITDA (1) 27.7 48.2 71.5 163.4
(1) EBITDA (earnings before interest, tax, depreciation,
amortisation, foreign exchange, infrastructure sales and exceptional
items) is viewed by management as an operating cash flow measure.
Refer to note 5b for reconciliation from EBITDA to net cash inflow
from operating activities.
OPERATING STATISTICS
Q4 02 Q4 03 Growth
Customers (at end of period)
North Region 4,578 5,708 25%
Central Region 5,716 6,838 20%
South Region 5,229 7,019 34%
15,523 19,565 26%
Customers (at end of period)
Corporate 14,603 18,581 27%
Wholesale 920 984 7%
15,523 19,565 26%
Switched Minutes (million) (for quarter)
North Region 1,354 1,541 14%
Central Region 2,682 3,480 30%
South Region 967 1,041 8%
5,003 6,062 21%
Private Wire VGEs (000) (at end of quarter)
North Region 8,749 10,433 19%
Central Region 8,541 11,274 32%
South Region 3,133 4,906 57%
20,423 26,613 30%
Headcount (at end of quarter)
North Region 1,511 1,236 (18%)
Central Region 1,641 1,393 (15%)
South Region 1,243 932 (25%)
Group / Other 289 305 6%
4,684 3,866 (17%)
North Region comprises Belgium, Denmark, Ireland, The Netherlands, Sweden and UK. Central Region comprises Austria, Germany and Switzerland. South Region comprises France, Italy, Portugal and Spain.
Customers represent the number of customers who purchase network and data solutions products. The categorisation of some customers between corporate and wholesale is reviewed periodically and may change. Where possible changes are reflected in prior period comparatives.
Headcount comprises active employees excluding temporary and contract workers.
FINANCIAL REVIEW
Turnover
Turnover increased from GBP263.2 million and GBP1,027.2 million for the three and twelve months ended 31 December 2002 to GBP306.3 million and GBP1,166.3 million for the three and twelve months ended 31 December 2003, increases of GBP43.1 million and GBP139.1 million or 16% and 14% respectively. Turnover also benefited from the weakness of the British pound relative to the Euro. At constant exchange rates growth over the three and twelve months ended 31 December 2002 was 8% and 6% respectively. The increase in turnover was driven by continued demand for COLT's services from existing and new customers and new service introductions. However, the rates of growth have been affected by weak economic growth across Europe generally.
Turnover from corporate customers increased from GBP156.4 million and GBP584.8 million for the three and twelve months ended 31 December 2002 to GBP181.4 million and GBP692.7 million for the three and twelve months ended 31 December 2003, increases of 16% and 18%. Turnover from corporate customers represented 59% of total turnover in the three and twelve months ended 31 December 2003 compared with 59% and 57% in the comparable periods of 2002. Switched turnover from corporate customers for the three and twelve months ended 31 December 2003 was GBP88.2 million and GBP337.0 million, increases of 16% and 14% respectively. Non-switched and other turnover from corporate customers for the three and twelve months ended 31 December 2003 was GBP93.2 million and GBP355.7 million, increases of 16% and 23%, respectively.
Turnover from wholesale customers increased from GBP106.8 million and GBP442.5 million for the three and twelve months ended 31 December 2002 to GBP124.9 million and GBP473.6 million for the three and twelve months ended 31 December 2003, increases of 17% and 7% respectively and represented 41% of total turnover compared with 41% and 43% in the comparable periods of 2002. Switched turnover from wholesale customers for the three and twelve months ended 31 December 2003 was GBP99.8 million and GBP365.7 million, increases of 26% and 11% respectively. Non-switched and other turnover from wholesale customers for the three and twelve months ended 31 December 2003 was GBP25.1million and GBP108.0 million, decreases of 9% and 5% respectively.
For the three and twelve months ended 31 December 2003 6.1 billion and 21.9 billion switched minutes were carried compared with 5.0 billion and 20.0 billion in the equivalent periods of 2002. Average switched revenue per minute was flat for the three months and increased 3% for the twelve months ended December 2003 compared to the equivalent periods in 2002.
At 31 December 2003 COLT had 26.6 million voice grade equivalent private wires in service, an increase of 30% compared to 31 December 2002. Growth in non-switched services reflected the growth in demand for local, national and international bandwidth services, partially offset by circuit cancellations, and to a lesser extent, the disposal of Fitec towards the end of the quarter. The growth in non-switched services also reflects the growing success COLT is achieving in the provision of IPVPN services.
Cost of Sales
Cost of sales, before exceptional items, increased from GBP226.5 million and GBP925.6 million for the three and twelve months ended 31 December 2002 to GBP248.1 million and GBP971.4 million for the three and twelve months ended 31 December 2003, increases of GBP21.6 million and GBP45.8 million or 10% and 5% respectively.
Interconnection and network costs, before exceptional items, increased from GBP175.7 million and GBP713.6 million for the three and twelve months ended 31 December 2002 to GBP197.7 million and GBP766.9 million for the three and twelve months ended 31 December 2003 as a result of the overall increase in business partially offset by ongoing cost containment measures.
Network depreciation, before exceptional items, decreased from GBP50.8 million for the three months ended 31 December 2002 to GBP50.4 million and for the three months ended 31 December 2003 and decreased from GBP212.0 million for the twelve months ended December 2002 to GBP204.4 million for the 12 months ended 31 December 2003. The decrease was primarily attributable to the impairment provisions recorded in September 2002, partially offset by further investment in fixed assets to support the growth in demand for services and new service developments.
In 2002, an exceptional charge of GBP18.3 million was recognised for severance provisions related to the staff reduction programmes announced in February and September 2002 and an impairment charge of GBP508.0 million was recognised to ensure that the asset base remained aligned with the realities of the market place. There were no exceptional charges in 2003.
Operating Expenses
Operating expenses, before exceptional items, increased from GBP69.0 million for the three months ended 31 December 2002 to GBP69.6 million for the three months ended 31 December 2003 and decreased from GBP292.0 million for the 12 months ended 31 December 2002 to GBP274.5 million for the comparable period in 2003.
Selling, general and administrative (SG&A) expenses, before exceptional items, increased from GBP59.8 million for the three months ended 31 December 2002 to GBP60.3 million for the three months ended 31 December 2003 and decreased from GBP242.1 million for the 12 months ended 31 December 2002 to GBP235.9 million for the comparable period in 2003. The reduction in 2003 reflected ongoing cost containment measures. SG&A before exceptional items as a proportion of turnover in the three and twelve months ended 31 December 2003 was 20% compared with 23% and 24% in the comparable periods of 2002.
Other depreciation and amortisation, before exceptional items, increased from GBP9.1 million for the three months ended 31 December 2002 to GBP9.3 million for the three months ended 31 December 2003 and decreased from GBP49.9 million for the 12 months ended 31 December 2002 to GBP38.5 million for the comparable period in 2003. The reduction in 2003 reflected the effect of the impairment provisions recorded in September 2002 and other assets being fully depreciated, partially offset by increased investment in customer service and support systems.
In 2002, an exceptional charge of GBP18.9 million was recognised for severance provisions related to the staff reduction programmes announced in February and September 2002 and an impairment charge of GBP43.0 million was recognised to ensure that the asset base remained aligned with the realities of the market place.
In 2003 an exceptional profit of GBP2.5 million was recognised on the disposal of COLT eCustomer Solutions France SAS ('Fitec') and COLT Internet AB (Sweden Internet).
Interest Receivable, Interest Payable and Similar Charges
Interest receivable decreased from GBP8.4 million and GBP38.1 million for the three and twelve months ended 31 December 2002 to GBP6.5 million and GBP26.7 million for the three and twelve months ended 31 December 2003 due to reduced average balances of cash and investments in liquid resources and lower rates of return during the period.
Interest payable and similar charges decreased from GBP23.6 million and GBP96.3 million for the three and twelve months ended 31 December 2002 to GBP21.0 million and GBP88.3 million for the equivalent periods in 2003. The decrease was due primarily to a reduction in debt levels reflecting the purchase and redemption of some of the Company's outstanding notes, during 2002 and 2003.
Interest payable and similar charges for the three and twelve months ended 31 December 2003 included: GBP8.6 million and GBP34.4 million respectively of interest and accretion on convertible debt; GBP12.3 million and GBP51.7 million respectively of interest and accretion on non-convertible debt; and GBP0.1 million and GBP2.2 million respectively of other interest and unwinding of discounts on provisions. Interest payable and similar charges for the three months ended 31 December 2003 comprised GBP15.2 million and GBP5.8 million of interest and accretion respectively.
Gain on Purchase of Debt
There were no gains on purchases of debt in the three months ended 31 December 2003. Gains arising on the purchase of debt during the twelve months ended 31 December 2003 amounted to GBP7.6 million. Gains arising on the purchase of debt for the three and twelve months ended 31 December 2002 were nil and GBP101.7 million respectively.
On 22 December 2003 all of the outstanding U.S. dollar 12% Senior Discount Notes due 2006 were redeemed early at the principal amount of the Notes for a cash consideration of GBP120.7 million.
Exchange Gain
For the three and twelve months ended 31 December 2003 there were exchange gains of GBP2.3 million and GBP6.4 million compared with exchange gains of GBP2.6 million and GBP12.4 million in the equivalent periods in 2002. These gains were due primarily to movements in the British pound relative to the U.S. dollar on cash and debt balances denominated in U.S. dollars. In the twelve months ended 31 December 2002 there was an exceptional exchange gain of GBP4.8 million from the unwinding of the forward foreign currency contracts previously held as a condition of a bank facility which COLT terminated in June 2002.
Tax on Loss on Ordinary Activities
For the three and twelve months ended 31 December 2002 and 2003, COLT generated losses on ordinary activities of GBP45.2 million and GBP718.3 million and GBP21.1 million and GBP124.6 million, respectively and had no taxable profits.
Financial Needs and Resources
The costs associated with the construction and expansion of COLT's networks, including development, installation and operating expenses have resulted in cumulative negative cash flows. COLT does not expect to achieve sustainable positive free cash flow until some time during 2005.
Net cash inflow from operating activities was GBP26.9 million and GBP139.3 million for the three and twelve months ended 31 December 2002 and GBP34.9 million and GBP147.9 million for the three and twelve months ended 31 December 2003. Changes to cash flow from operations include the effect of the timing of stage billings and payments with telecommunications operators associated with the construction of the Company's inter-city network and the effects of movements in provisions. Net cash outflow from returns on investments and servicing of finance and from capital expenditure and financial investment decreased from GBP88.2 million and GBP439.3 million in the three and twelve months ended 31 December 2002 to GBP48.7 million and GBP178.3 million for the three and twelve months ended 31 December 2003.
Free cash outflow, the sum of net cash inflow from operating activities less net cash outflows from returns on investments and servicing of finance and from capital expenditure and financial investment, improved from outflows of GBP61.3 million and GBP300.0 million in the three and twelve months ended 31 December 2002 to outflows of GBP13.8 million and GBP30.4 million in the three and twelve months ended 31 December 2003.
The decrease in net cash outflow was primarily a result of reduced purchases of tangible fixed assets, which decreased from GBP72.4 million and GBP412.1 million for the three and twelve months ended 31 December 2002 to GBP32.7 million and GBP141.0 million for the equivalent periods in 2003.
Net cash outflow from financing for the three and twelve months ended 2002 was nil and GBP97.2 million compared with GBP119.5 million and GBP142.8 million in the comparable periods of 2003. The changes were primarily as a result of the redemption of the U.S. dollar 12% Senior Discount Notes on 22 December 2003 for GBP120.7 million partially offset by reduced bond purchases, which decreased from GBP97.2 million in 2002 to GBP23.8 million in 2003. There were no bond purchases during the three months ended 31 December 2002 and 2003. COLT had balances of cash and investments in liquid resources at 31 December 2003 of GBP802.4 million compared with GBP934.9 million at 31 December 2002.
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