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COLT Telecom Group plc announces results for the quarter and year ended 31 December 2005 and its intention to raise GBP300m of new equity
COLT Telecom Group plc announces results for the quarter and year ended 31 December 2005 and its intention to raise GBP300m of n
By: Marketwire .
Feb. 23, 2006 07:01 AM
London -- (MARKET WIRE) -- 02/23/06 -- COLT Telecom Group plc announces results for the quarter and year ended 31 December 2005 and its intention to raise GBP300m of new equity COLT Telecom Group plc (COLT), a leading European provider of business communications, today reported increased revenue, margins and EBITDA(1) for 2005 as well as positive free cash flow(2) for the full year. As part of our 2005 year end accounts and recognising the current state of the European telecoms market, COLT has made a GBP247.2m impairment charge so that the carrying value of its assets more closely reflects the present reality of doing business in the telecoms sector. COLT today also announced a substantial programme to strengthen the foundations of its corporate structure with its intention to create a new holding company for the group based in mainland Europe and for the company to raise GBP300m (or its currency equivalent) of new equity. COLT also intends to suspend its US registration and cancel its NASDAQ listing. The new holding company for COLT will retain a listing on the London Stock Exchange. FINANCIAL RESULTS Overview of the year
- Revenue increased by 2.2% to GBP1,245.5m. On a constant
currency basis, revenue increased by 1.6% and by 4.0% after also
excluding reductions in fixed to mobile prices
- Non-switched revenues grew by 4.5% to GBP489.7m
- Gross margin before depreciation increased by 1.4% to 34.6%
- EBITDA increased by 11% to GBP173.4m
- Exceptional impairment charge of GBP247.2m
- Loss before taxation and exceptional items decreased by 19.3%
to GBP88.7m
- Net capital expenditure was GBP124.9m compared with GBP124.7m
- Free cash flow improved by GBP16.5m to an inflow of GBP7.0m
- India headcount increased by 344 to 545 employees
Fourth quarter highlights
Compared with Q4 2004:
- Revenue increased by 0.5% to GBP309.9m. On a constant
currency basis, revenue increased by 2.4% and by 4.8% after
also excluding reductions in fixed to mobile prices
- Non-switched revenues grew by 2.7% to GBP123.8m
- Gross margin before depreciation increased by 2.1% to 36.3%
- EBITDA improved by GBP14.2m to GBP49.6m
Compared with Q3 2005:
- Revenue decreased by 0.6% to GBP309.9m. On a constant
currency basis, revenue decreased by 0.2% but increased by
0.5% after also excluding reductions in fixed to mobile prices
- Non-switched revenues grew by 0.4% to GBP123.8m
- Gross margin before depreciation increased by 1.7% to 36.3%
- EBITDA increased by GBP3.7m to GBP49.6m
- Free cash inflow of GBP7.3m, compared with GBP25.3m.
The Company's financial position continues to be strong, with cash
and cash equivalents of GBP225.3m at the end of the quarter.
(1) EBITDA is earnings before interest, tax, depreciation,
amortisation, foreign exchange, exceptional items and profit
on repurchase of debt
(2) Free cash flow is net cash generated from operating activities
less net cash used in investing activities and net interest
paid
Impairment COLT reviews its assets each year to make sure that their historic book value matches their value in use to the business. As a result, in 2005, COLT made a GBP247.2m impairment charge so that the carrying value of its assets more closely reflects the present reality of doing business in the telecoms sector. There is no cash or tax cost to COLT or its shareholders from this charge and COLT's projections of its underlying future cash flows are broadly consistent with current market expectations. CORPORATE STRUCTURE COLT today also announced a substantial programme to strengthen the foundations of its corporate structure with its intention to create a new holding company for the group based in mainland Europe and for the company to raise GBP300m (or its currency equivalent) of new equity. COLT also intends to suspend its US registration and cancel its NASDAQ listing. Domicile Over the years COLT's business has transformed from a UK-centric business to a truly pan-European and multi national business. Today, with over 80% of its business and 90% of its network assets in mainland Europe and an opportunity to materially reduce its costs by a change of domicile, COLT has concluded that its business would be better served with a holding company domiciled in mainland Europe. COLT intends to retain its London listing as its sole listing and there will be no change to the level of disclosure to, or communication with, shareholders. There will be no change to the composition of the board of directors as a result of this new holding company. COLT will also consider changing its reporting currency to the Euro. The change of domicile will be effected through a scheme of arrangement under which COLT will become a wholly owned subsidiary of a new group holding company. All COLT shareholders will have all of their shares in COLT exchanged for shares in the new holding company. Shareholders, including Fidelity, will be asked to approve the scheme of arrangement during the first half of 2006. Refinancing With COLT's three outstanding bond issues maturing in 2007, 2008 and 2009 respectively, it is proposed that the proposed new holding company will make an open offer of equity during the first half of 2006 to raise GBP300m solely to fund the redemption of some of these maturing bonds. By issuing new equity, COLT will further reduce its interest costs and strengthen its balance sheet, reducing net debt to less than GBP100m. A combined proposal will be sent to shareholders covering both the change of domicile and the offer of new equity. The new shares to be offered by the proposed new group holding company will be priced at the prevailing market price for COLT shares and will be offered to COLT shareholders on a pre-emptive basis. Fidelity has indicated to the Board that it would be prepared to subscribe on a stand-by basis for any shares offered not subscribed by other eligible COLT shareholders, subject to Board approvals from Fidelity and there being no material change in circumstances. US Registration and listing With a business strategy focused on Europe, COLT has decided to cancel its NASDAQ listing and associated ADR programme and to suspend its SEC registration. COLT considers that the financial burden of parallel regulatory compliance and other costs of its US registration and listing outweigh the benefits conferred. Other than Fidelity, COLT's US shareholders own approximately 2% of COLT's equity. In order to suspend its SEC registration COLT must ensure that there are fewer than 300 US holders of its ADRs and ordinary shares. COLT will therefore propose a change of its articles to give it the power to require sufficient US shareholders to sell their shares in order to achieve this objective. In addition a scheme of arrangement will be proposed to cancel COLT's small number of outstanding warrants in return for an issue of shares. Circulars to convene the necessary meetings of shareholders and warrant holders will be despatched shortly. COLT will begin the process of requiring relevant US shareholders to sell their shares once these proposals have been adopted. COLT expects to have completed this process within the first half of 2006. COLT Chairman Barry Bateman said: "2005 was, in many ways, a better year than the results show. Although revenue growth was not as fast as expected, reflecting general pricing pressure, slow introduction of new products and a disappointing reduction of churn, we made substantial progress in controlling costs, improving productivity, streamlining business processes and transitioning work to India. COLT not only grew EBITDA but also passed a key financial milestone during the year by becoming free cash flow positive on a sustainable annual basis. As we move forward in 2006, we will continue to work hard to deliver improved revenues and further reduce cost. "Following the progress made on the operational front, we are announcing today a series of substantial initiatives to strengthen the foundations for COLT's future growth by raising new long-term capital of GBP300m and creating a more appropriate corporate structure. With an improved financial performance in 2005 and these corporate structure initiatives, COLT is not only well on track to become one of the first alternative operators in Europe to deliver true profitability but is increasingly developing the characteristics needed to become a strong telecommunications provider for business customers across Europe." Commenting on the results for the quarter, Jean-Yves Charlier, Chief Executive, said: "During this quarter, we delivered our highest ever level of EBITDA in the history of COLT and turned cash flow positive for the year as a whole. Our underlying progress is reflected in five straight quarters of growing EBITDA and by COLT becoming free cash flow positive on a sustainable annual basis. "Whilst we continue to accelerate the growth of our non-switched revenues, our overall revenues in the quarter fell short of our expectations with market pressures offsetting the underlying improvement. Nonetheless, we are confident that all the initiatives are in place to accelerate the growth rates of COLT in spite of the difficult market conditions. In Q4, in addition to winning our largest ever contract, worth over EUR80m with AOK in Germany, we also won six other EUR1m-plus contracts. In November we launched COLT Total, our new DSL-based converged voice/data product for the midsize corporate market, and have already signed several hundred new customers across Europe. "During the quarter, we also won the Metro Ethernet Forum "European Service Provider, Best in Business" award demonstrating our leadership position in the emerging Ethernet services marketplace in Europe and announced in the past few days an enhancement to our VoIP service with a strategic partnership with Avaya. "With these sales and marketing initiatives in place, continued focus to improve our cost base and productivity, and our programme to strengthen the foundations of our corporate structure, COLT enters 2006 with a stronger business than ever." Financial Review Results for the quarter are reported under International Financial Reporting Standards (IFRS). Results for comparative periods have been restated to conform to IFRS. Total revenue Revenue for the quarter was GBP309.9m (Q3 2005: GBP311.8m; Q4 2004: GBP308.3m) a decrease of 0.2% over the third quarter of 2005 and an increase of 2.4% over the fourth quarter of 2004 on a constant currency basis. Excluding the impact of reductions in fixed to mobile prices, constant currency revenue increased by 0.5% over the third quarter of 2005 and 4.8% over the fourth quarter of 2004. Non-switched revenue as a percentage of total revenue was 39.9% (Q3 2005: 39.5%; Q4 2004: 39.1%). Revenue for the year was GBP1,245.5m (2004: GBP1,218.6m), an increase of 1.6% on a constant currency basis. Excluding the impact of reductions in fixed to mobile prices, constant currency revenue increased by 4.0%. Non-switched revenue as a percentage of total revenue increased to 39.3% (2004: 38.4%). Switched revenue Switched revenue for the quarter decreased by 1.1% to GBP185.9m (Q3 2005: GBP188.0m) and decreased by 0.7% over the fourth quarter of 2004 (Q4 2004: GBP187.2m). Within switched revenue the proportion of carrier was 34.6% (Q3 2005: 35.3%; Q4 2004: 34.1%). Switched revenue from corporate customers decreased by 0.4% to GBP79.0m (Q3 2005: GBP79.3m) and decreased by 7.3% over the fourth quarter of 2004 (Q4 2004: GBP85.2m). Switched revenue from wholesale customers decreased by 1.7% to GBP 106.9m (Q3 2005: GBP108.7m) and increased by 4.8% over the fourth quarter of 2004 (Q4 2004: GBP102.0m). Switched revenue for the year increased by 1.0% to GBP754.5m (2004: GBP747.1m). Within switched revenue the proportion of carrier was 34.7% (2004: 35.4%). Switched revenue from corporate customers decreased by 3.1% to GBP325.6m (2004: GBP 336.1m). Switched revenue from wholesale customers increased by 4.4% to GBP428.9m (2004: GBP411.0m). Non-switched revenue Non-switched revenue for the quarter increased by 0.4% to GBP123.8m (Q3 2005: GBP123.3m) and increased by 2.7% over the fourth quarter of 2004 (Q4 2004: GBP120.6 m). Non-switched revenue from corporate customers decreased by 1.2% to GBP98.4m (Q3 2005: GBP99.6m) and increased by 4.1% over the fourth quarter of 2004 (Q4 2004: GBP94.5m). Non-switched revenue from wholesale customers increased by 7.1% to GBP25.4m (Q3 2005: GBP23.7m) and decreased by 2.7% over the fourth quarter of 2004 (Q4 2004: GBP26.1m). Non-switched revenue for the year increased by 4.5% to GBP489.7m (2004: GBP468.5m). Non-switched revenue from corporate customers increased by 7.6% to GBP390.7m (2004: GBP363.0m). Non-switched revenue from wholesale customers decreased by 6.2% to GBP99.0m (2004: GBP105.5m). Cost of sales Cost of sales before exceptional items for the quarter decreased by 1.9% to GBP247.2m (Q3 2005: GBP251.9m) and decreased by 3.3% over the fourth quarter of 2004 (Q4 2004: GBP255.6m). Interconnect and network costs decreased by 3.2% to GBP197.4m (Q3 2005: GBP204.0m) and decreased by 2.7% over the fourth quarter of 2004 (Q4 2004: GBP202.8m). Network depreciation before exceptional items increased by 4.0% to GBP49.8m (Q3 2005: GBP47.9m) and decreased by 5.7% over the fourth quarter of 2004 (Q4 2004: GBP52.8m). Cost of sales before exceptional items for the year increased by 0.4% to GBP 1,009.4m (2004: GBP1,005.7m). Interconnection and network costs increased by 0.1% to GBP814.2m (2004: GBP813.7m). Network depreciation before exceptional items increased by 1.7% to GBP195.2m (2004: GBP192.0m). Operating expenses Operating expenses before exceptional items for the quarter increased by 3.6% to GBP72.1m (Q3 2005: GBP69.6m) and decreased by 7.6% over the fourth quarter of 2004 (Q4 2004: GBP78.0m). Selling, general and administrative (SG&A) expenses increased by 1.6% to GBP62.9m (Q3 2005: GBP61.9m) and decreased by 10.3% over the fourth quarter of 2004 (Q4 2004: GBP70.1m). SG&A expenses as a proportion of revenue were 20.3% (Q3 2005: 19.9%; Q4 2004: 22.7%). Other depreciation before exceptional items increased by GBP1.5m to GBP9.2m (Q3 2005: GBP7.7m) and increased by GBP1.3m over the fourth quarter of 2004 (Q4 2004: GBP7.9m). Operating expenses before exceptional items for the year increased by 4.7% to GBP 290.2m (2004: GBP277.2m). SG&A expenses increased by 3.7% to GBP257.9m (2004: GBP248.7 m). SG&A expenses as a proportion of revenue were 20.7% (2004: 20.4%). Other depreciation before exceptional items increased by GBP3.8m to GBP32.3m (2004: GBP28.5 m). Exceptional items - Impairment During 2005, in accordance with IAS 36 "Impairment of Assets", we reviewed the book value of our fixed asset base against the future cash flows that we expect those assets to earn. We have therefore determined that an impairment charge of GBP247.2m is required. The impairment charge has been shown as an exceptional item in the income statement, allocated between network depreciation (GBP229.7m) and other depreciation (GBP17.5m). The charge has arisen across COLT, with a charge of GBPnil in Germany, GBP99.9m in Strategic Markets, GBP46.8m in the UK and GBP100.5m in France. The impairment charge was arrived at by looking at each operating country as a separate cash generating unit. The recoverable value of each country's net assets, which is also considered to be its value in use, was computed as the present value of forecast future pre tax cash flows discounted at 13.7%. This discount rate is consistent with the rate which we used in our last impairment review. The impairment charge is the difference between the recoverable value and the book value of the assets in each country. Interest receivable, interest payable and similar charges Interest receivable for the quarter decreased by GBP0.4m to GBP2.5m (Q3 2005: GBP2.9m) and decreased by GBP1.8m over the fourth quarter of 2004 (Q4 2004: GBP4.3m). Interest payable and similar charges decreased by GBP1.3m to GBP10.4m (Q3 2005: GBP11.7m) and decreased by GBP4.9m over the fourth quarter of 2004 (Q4 2004: GBP15.3 m). These decreases are due to the reduction in cash and cash equivalents and debt levels following the redemption of some of the Company's outstanding loan notes during 2004 and 2005. Tax on loss on ordinary activities COLT had no taxable profits in the quarter or year nor in 2004. At 31 December 2005, total tax losses carried forward amounted to GBP957.6m (2004 GBP1,050.9m). At 31 December 2005, GBP760.4m (2004 GBP858.1m) of these losses are not time limited and GBP197.2m (2004 GBP192.8m) are time limited. The majority of the time limited losses must be utilised by 31 December 2009. All losses must be utilised in the country in which they arose. They remain subject to legislative provisions and to agreements with the various tax authorities in jurisdictions where the Group operates. Cash flow Net movement in cash and cash equivalents for the quarter was an outflow of GBP114.8m (Q3 2005: inflow of GBP1.1m; Q4 2004: outflow of GBP348.8m). There was a free cash inflow of GBP7.3m (Q3 2005: GBP25.3m; Q4 2004: outflow of GBP26.8m). Net movement in cash and cash equivalents for the year was an outflow of GBP220.0m (2004: outflow of GBP344.2m). There was a free cash inflow of GBP7.0m (2004: outflow of GBP9.5m). During the year all of the outstanding 10.125% Senior Notes due 2007 and the 8.875% Senior Notes due 2007 were redeemed at par for GBP80.9m and all of the 2% Senior Convertible Notes due 2006 were redeemed early for GBP132.7m. In addition, some of the 2% Senior Convertible Notes due 2007 were redeemed early for GBP24.7m. COLT had balances of cash and cash equivalents at 31 December 2005 of GBP225.3m compared with GBP452.7m at 31 December 2004. The decreases are primarily as a result of bond redemptions. Restatement As detailed in COLT's announcement of 14 February 2006, the International Accounting Standards Board has clarified the accounting treatment of foreign currency convertible debt which had the effect of revising the interpretation of IFRS in this area. Interest paid, profit on repurchase of debt, the carrying value of debt and other reserves in the comparative periods have therefore been restated. The financial information for 2005 is presented under the new interpretation.
Financial Information
Consolidated income statement
Three months ended 31 December
2005 2005 2005 2004
Before After
exceptional Exceptional exceptional (restated)
items items items
GBPm GBPm GBPm GBPm
Revenue 309.9 -- 309.9 308.3
Cost of sales
Interconnect
and network (197.4) -- (197.4) (202.8)
Network
depreciation (49.8) (229.7) (279.5) (52.8)
(247.2) (229.7) (476.9) (255.6)
Gross profit
(loss) 62.7 (229.7) (167.0) 52.7
Operating
expenses
Selling,
general and
administrative (62.9) -- (62.9) (70.1)
Other
depreciation (9.2) (17.5) (26.7) (7.9)
(72.1) (17.5) (89.6) (78.0)
Operating loss (9.4) (247.2) (256.6) (25.3)
Other income
(expense)
Interest
receivable 2.5 -- 2.5 4.3
Interest
payable and
similar
charges (10.4) -- (10.4) (15.3)
Profit on
repurchase of
debt 0.3 -- 0.3 --
Exchange loss (0.1) -- (0.1) (0.2)
(7.7) -- (7.7) (11.2)
Loss on
ordinary
activities
before
taxation (17.1) (247.2) (264.3) (36.5)
Taxation -- -- -- --
Loss for
period (17.1) (247.2) (264.3) (36.5)
Basic and
diluted loss
per share GBP(0.01) GBP(0.16) GBP(0.17) GBP(0.02)
All of the Group's activities are continuing. The basis on which this
information has been prepared is described in Note 1 to this financial
information.
Financial Information
Consolidated income statement
Twelve months ended 31 December
2005 2005 2005 2004
Before After
exceptional Exceptional exceptional (restated)
items items items
GBPm GBPm GBPm GBPm
Revenue 1,245.5 -- 1,245.5 1,218.6
Cost of sales
Interconnect
and network (814.2) -- (814.2) (813.7)
Network
depreciation (195.2) (229.7) (424.9) (192.0)
(1,009.4) (229.7) (1,239.1) (1,005.7)
Gross profit
(loss) 236.1 (229.7) 6.4 212.9
Operating
expenses
Selling,
general and
administrative (257.9) -- (257.9) (248.7)
Other
depreciation (32.3) (17.5) (49.8) (28.5)
(290.2) (17.5) (307.7) (277.2)
Operating loss (54.1) (247.2) (301.3) (64.3)
Other income
(expense)
Interest
receivable 11.6 -- 11.6 21.0
Interest
payable and
similar
charges (46.2) -- (46.2) (66.8)
Profit on
repurchase of
debt 0.3 -- 0.3 0.2
Exchange loss (0.3) -- (0.3) --
(34.6) -- (34.6) (45.6)
Loss on
ordinary
activities
before
taxation (88.7) (247.2) (335.9) (109.9)
Taxation -- -- -- --
Loss for
period (88.7) (247.2) (335.9) (109.9)
Basic and
diluted loss
per share GBP(0.06) GBP(0.16) GBP(0.22) GBP(0.07)
All of the Group's activities are continuing. The basis on which this
information has been prepared is described in Note 1 to this financial
information.
Financial Information
Consolidated reconciliation of changes in equity shareholders' funds
Three months ended 31 Twelve months ended 31
December December
2005 2004 2005 2004
(restated) (restated)
GBPm GBPm GBPm GBPm
Loss for period (264.3) (36.5) (335.9) (109.9)
Issue of share capital 0.3 -- 1.0 0.6
Shares to be issued under
share option plans 0.7 0.5 2.7 2.1
Revaluation of warrants -- 0.3 (0.1) (0.7)
Grant of shares from Group
Quest -- 0.1 -- 0.1
Exchange differences 1.5 11.1 (9.6) (0.8)
Net changes in equity
shareholders' funds (261.8) (24.5) (341.9) (108.6)
Opening equity
shareholders' funds 601.7 706.3 681.8 790.4
Closing equity
shareholders' funds 339.9 681.8 339.9 681.8
Financial Information
Consolidated balance sheet
At 31 At 31
December 2005 December 2004
(restated)
GBPm GBPm
ASSETS
Non-current assets
Intangible assets 38.9 65.8
Property, plant and equipment 834.2 1,197.0
Total non-current assets 873.1 1,262.8
Current assets
Trade receivables 184.8 199.1
Prepaid expenses and other debtors 53.7 48.5
Cash and cash equivalents 225.3 452.7
Total current assets 463.8 700.3
Total assets 1,336.9 1,963.1
EQUITY
Capital and reserves
Share capital 2,355.7 2,354.4
Other reserves 23.7 31.0
Retained earnings (2,039.5) (1,703.6)
Total equity 339.9 681.8
LIABILITIES
Non-current liabilities
Convertible debt 224.0 382.3
Non-convertible debt 351.8 363.4
Provisions for liabilities and charges 35.7 48.7
Total non-current liabilities 611.5 794.4
Current liabilities
Non-convertible debt -- 81.7
Loan finance 10.3 --
Trade and other payables 375.2 405.2
Total current liabilities 385.5 486.9
Total liabilities 997.0 1,281.3
Total equity and liabilities 1,336.9 1,963.1
Financial Information
Consolidated cash flow statement
Three months ended 31 Twelve months ended 31
December December
2005 2004 2005 2004
GBPm GBPm GBPm GBPm
Net cash
generated from
operations 47.0 16.3 156.2 140.6
Cash flows from
investing
activities:
Purchase of
non-current
assets (34.5) (36.1) (126.3) (129.4)
Proceeds from
the disposal
of non-current
assets 0.4 0.8 1.4 4.7
Net cash used
in investing
activities (34.1) (35.3) (124.9) (124.7)
Cash flows from
financing
activities:
Interest paid,
finance costs
and similar
charges (8.1) (12.4) (35.5) (45.9)
Interest
received 2.5 4.6 11.2 20.5
Issue of
ordinary
shares 0.3 -- 1.0 0.6
Loan finance 10.3 -- 10.3 --
Redemption of
debt (132.7) (322.0) (238.3) (335.3)
Net cash used
in financing
activities (127.7) (329.8) (251.3) (360.1)
Net movement
in cash and
cash
equivalents (114.8) (348.8) (220.0) (344.2)
Cash and cash
equivalents at
beginning of
period 339.6 791.4 452.7 802.4
Effect of
exchange rate
changes on
cash and cash
equivalents 0.5 10.1 (7.4) (5.5)
Cash and cash
equivalents at
end of period 225.3 452.7 225.3 452.7
Notes to the Financial Information
1. Basis of presentation and principal accounting policies COLT Telecom Group plc ("COLT" or "the Company"), together with its subsidiaries, is referred to as "the Group". Consolidated financial information has been presented for the Group for the three and twelve months ended 31 December 2005. The financial information for the twelve months ended 31 December 2004 and 2005 and at 31 December 2004 and 2005 has been extracted from the Group's 2005 audited financial statements. The auditors have made a report on the Group's financial statements for the year ended 31 December 2005 under Section 235 of the Companies Act 1985 which does not contain a statement under sections 237 (2) or (3) of the Companies Act and is unqualified. The statutory accounts for the twelve months ended 31 December 2004 prepared under UK GAAP have been filed and the statutory accounts for the twelve months ended 31 December 2005 will be filed with the Registrar of Companies. The financial information for the three months ended 31 December 2005 is unaudited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the EU that had been published by 31 December 2004 and apply to accounting periods beginning on or after 1 January 2005. The standards used are those endorsed by the EU together with those standards and interpretations that have been issued by the IASB but had not been endorsed by the EU by 31 December 2005. The 2004 comparative information has, as permitted by IFRS 1, been prepared taking advantage of the following transitional exemptions:
(i) Business combinations prior to the transition date of
1 January 2004 have not been restated.
(ii) The Company has elected to only adopt recognition and
measurement criteria requirements to share based payments
granted after 7 November 2002 that had not vested by
1 January 2005.
(iii) The Company has reset the cumulative translation
differences for all foreign operations to GBPnil as at
1 January 2004.
The Company has elected to comply with IAS 32 "Financial Instruments: Disclosure and Presentation" and IAS 39 "Financial Instruments: Recognition and Measurement" with effect from 1 January 2004. Accounting policies and presentation applied are therefore not consistent with those applied in preparing the Group's financial statements for the year ended 31 December 2004 due to the transition from UK GAAP to IFRS. As detailed in COLT's announcement of 14 February 2006, the International Accounting Standards Board has clarified the accounting treatment of foreign currency convertible debt which had the effect of revising the interpretation of IFRS in this area. Interest paid, profit on repurchase of debt, the carrying value of debt and other reserves in the comparative periods have therefore been restated. The financial information for 2005 is presented under the new interpretation.
Notes to the Financial Information
2. Segmental information The Group operates in a single business segment, telecommunications, and in the geographical areas shown below. The reported segments are Germany, Strategic Markets, UK and France. Strategic Markets comprises Austria, Belgium, Denmark, Ireland, Italy, The Netherlands, Portugal, Spain, Sweden and Switzerland. Switched revenue comprises services that involve the transmission of voice, data or video through a switching centre. Non-switched revenue includes managed and non-managed network services, bandwidth services and voice traffic which is delivered in a digital form (IP Voice). For the three months ended 31 December 2005, 30 September 2005 and 31 December 2004, revenue and result by segment were as follows:
Three months ended 31 December 2005
Strategic
Germany Markets UK France Total
GBPm GBPm GBPm GBPm GBPm
Carrier 26.3 21.9 10.3 5.9 64.4
Non-carrier 55.8 28.4 20.3 17.0 121.5
Total switched 82.1 50.3 30.6 22.9 185.9
Non-switched 33.6 42.4 29.7 18.1 123.8
Other -- 0.2 -- -- 0.2
Revenue by segment 115.7 92.9 60.3 41.0 309.9
Operating result by
segment before
exceptional items (6.3) (2.6) (2.0) 1.5 (9.4)
Exceptional items -- (99.9) (46.8) (100.5) (247.2)
Operating result by
segment after
exceptional items (6.3) (102.5) (48.8) (99.0) (256.6)
Three months ended 30 September 2005
Strategic
Germany Markets UK France Total
GBPm GBPm GBPm GBPm GBPm
Carrier 28.4 24.9 7.8 5.2 66.3
Non-carrier 57.3 28.4 20.2 15.8 121.7
Total switched 85.7 53.3 28.0 21.0 188.0
Non-switched 34.5 40.6 30.6 17.6 123.3
Other -- 0.5 -- -- 0.5
Revenue by segment 120.2 94.4 58.6 38.6 311.8
Operating result by
segment (4.4) (3.1) (1.5) (0.7) (9.7)
Three months ended 31 December 2004
Strategic
Germany Markets UK France Total
GBPm GBPm GBPm GBPm GBPm
Carrier 29.5 23.2 7.3 3.9 63.9
Non-carrier 60.2 25.7 21.1 16.3 123.3
Total switched 89.7 48.9 28.4 20.2 187.2
Non-switched 34.5 39.5 28.1 18.5 120.6
Other 0.2 0.3 -- -- 0.5
Revenue by segment 124.4 88.7 56.5 38.7 308.3
Operating result by
segment (7.4) (8.1) (6.9) (2.9) (25.3)
Notes to the Financial Information
2. Segmental information (continued)
For the year ended 31 December 2005 and 31 December 2004, revenue and
result by segment was as follows:
Year ended 31 December 2005
Strategic
Germany Markets UK France Total
GBPm GBPm GBPm GBPm GBPm
Carrier 106.8 98.8 34.8 21.2 261.6
Non-carrier 229.4 111.9 84.8 66.8 492.9
Total switched 336.2 210.7 119.6 88.0 754.5
Non-switched 136.0 162.9 119.6 71.2 489.7
Other -- 1.3 -- -- 1.3
Revenue by segment 472.2 374.9 239.2 159.2 1,245.5
Operating result by
segment before
exceptional items (21.2) (12.8) (17.7) (2.4) (54.1)
Exceptional items -- (99.9) (46.8) (100.5) (247.2)
Operating result by
segment after
exceptional items (21.2) (112.7) (64.5) (102.9) (301.3)
Year ended 31 December 2004
Strategic
Germany Markets UK France Total
GBPm GBPm GBPm GBPm GBPm
Carrier 121.7 100.0 30.3 12.1 264.1
Non-carrier 219.6 96.3 103.0 64.1 483.0
Total switched 341.3 196.3 133.3 76.2 747.1
Non-switched 132.3 152.6 113.3 70.3 468.5
Other 1.3 1.6 0.1 -- 3.0
Revenue by segment 474.9 350.5 246.7 146.5 1,218.6
Operating result by
segment (23.0) (19.7) (18.5) (3.1) (64.3)
In addition, for the three months ended 31 December 2005, 30 September 2005 and 31 December 2004, revenue by customer type is presented below. Corporate revenue includes services to corporate and government accounts. Wholesale revenue includes services to other telecommunications carriers, resellers and internet service providers.
Three months ended 31 December 2005
Corporate Wholesale Total
GBPm GBPm GBPm
Carrier -- 64.4 64.4
Non-carrier 79.0 42.5 121.5
Total switched 79.0 106.9 185.9
Non-switched 98.4 25.4 123.8
Other 0.2 -- 0.2
Revenue 177.6 132.3 309.9
Notes to the Financial Information
2. Segmental information (continued)
Three months ended 30 September 2005
Corporate Wholesale Total
GBPm GBPm GBPm
Carrier -- 66.3 66.3
Non-carrier 79.3 42.4 121.7
Total switched 79.3 108.7 188.0
Non-switched 99.6 23.7 123.3
Other 0.4 0.1 0.5
Revenue 179.3 132.5 311.8
Three months ended 31 December 2004
Corporate Wholesale Total
GBPm GBPm GBPm
Carrier -- 63.9 63.9
Non-carrier 85.2 38.1 123.3
Total switched 85.2 102.0 187.2
Non-switched 94.5 26.1 120.6
Other 0.5 -- 0.5
Revenue 180.2 128.1 308.3
For the year ended 31 December 2005 and 31 December 2004, revenue by
customer type was as follows:
Year ended 31 December 2005
Corporate Wholesale Total
GBPm GBPm GBPm
Carrier -- 261.6 261.6
Non-carrier 325.6 167.3 492.9
Total switched 325.6 428.9 754.5
Non-switched 390.7 99.0 489.7
Other 1.1 0.2 1.3
Revenue 717.4 528.1 1,245.5
Year ended 31 December 2004
Corporate Wholesale Total
GBPm GBPm GBPm
Carrier -- 264.1 264.1
Non-carrier 336.1 146.9 483.0
Total switched 336.1 411.0 747.1
Non-switched 363.0 105.5 468.5
Other 2.9 0.1 3.0
Revenue 702.0 516.6 1,218.6
Notes to the Financial Information
2. Segmental information (continued) Revenue for the three months ended 31 December 2005, compared to the three months ended 30 September 2005 and 31 December 2004 and after excluding the impact of foreign exchange, is shown below:
Q4 Q4 Compared to Q3 Q4 Compared to Q4
2005 2005 2005 % Growth 2005 2004 % Growth
GBPm GBPm GBPm
Actual Adjusted Actual Adjusted Adjusted Actual Adjusted
(1) (1) (2) (2)
Corporate
Switched 79.0 79.5 (0.4) 0.3 80.6 (7.3) (5.4)
Non-switched 98.4 98.8 (1.2) (0.8) 100.2 4.1 6.0
Other 0.2 0.2 n/a n/a 0.2 n/a n/a
Total 177.6 178.5 (0.9) (0.4) 181.0 (1.4) 0.4
Wholesale
Carrier 64.4 64.6 (2.9) (2.6) 65.6 0.8 2.7
Non-carrier 42.5 42.7 0.2 0.7 43.3 11.5 13.6
Total switched 106.9 107.3 (1.7) (1.3) 108.9 4.8 6.8
Non-switched 25.4 25.4 7.1 7.2 25.8 (2.7) (1.1)
Total 132.3 132.7 (0.2) 0.2 134.7 3.3 5.2
Total
Carrier 64.4 64.6 (2.9) (2.6) 65.6 0.8 2.7
Non-carrier 121.5 122.2 (0.2) 0.4 123.9 (1.5) 0.5
Total switched 185.9 186.8 (1.1) (0.6) 189.5 (0.7) 1.2
Non-switched 123.8 124.2 0.4 0.7 126.0 2.7 4.5
Other 0.2 0.2 n/a n/a 0.2 n/a n/a
Total 309.9 311.2 (0.6) (0.2) 315.7 0.5 2.4
(1) Q4 2005 revenue has been restated using Q3 2005 exchange rates,
and compared to revenue which was reported in Q3 2005
(2) Q4 2005 revenue has been restated using Q4 2004 exchange rates,
and compared to revenue which was reported in Q4 2004
Notes to the Financial Information
3. Loss per share
Three months ended Twelve months ended
31 December 31 December
2005 2004 2005 2004
Loss for period (GBPm) (264.3) (36.5) (335.9) (109.9)
Weighted average number
of ordinary shares (m) 1,512.5 1,511.1 1,511.8 1,510.9
Basic and diluted loss
per share GBP(0.17) GBP(0.02) GBP(0.22) GBP(0.07)
4. Exceptional item - Impairment During 2005, in accordance with IAS 36 "Impairment of Assets", we reviewed the book value of our fixed asset base against the future cash flows that we expect those assets to earn. We have therefore determined that an impairment charge of GBP247.2m is required. The impairment charge has been shown as an exceptional item in the income statement, allocated between network depreciation (GBP229.7m) and other depreciation (GBP17.5m). The charge has arisen across COLT, with a charge of GBPnil in Germany, GBP99.9m in Strategic Markets, GBP46.8m in the UK and GBP100.5m in France. The impairment charge was arrived at by looking at each operating country as a separate cash generating unit. The recoverable value of each country's net assets, which is also considered to be its value in use, was computed as the present value of forecast future pre tax cash flows discounted at 13.7%. This discount rate is consistent with the rate which we used in our last impairment review. The impairment charge is the difference between the recoverable value and the book value of the assets in each country.
Notes to the Financial Information
5. Reconciliation of net loss to cash generated from operations
Three months Twelve months
ended ended
31 December 31 December
2005 2004 2005 2004
GBPm GBPm GBPm GBPm
Loss for the period (264.3) (36.5) (335.9) (109.9)
Exchange differences 0.1 0.2 0.3 --
Interest payable and similar
charges 10.4 15.3 46.2 66.8
Interest receivable (2.5) (4.3) (11.6) (21.0)
Profit on repurchase of debt (0.3) -- (0.3) (0.2)
Depreciation and impairment 306.2 60.7 474.7 220.5
Share option charge 0.7 0.5 2.7 2.1
Movement in receivables 18.9 (0.6) 2.0 20.9
Movement in payables (19.9) (14.7) (8.1) (21.5)
Movement in provisions (2.2) (4.1) (13.5) (16.9)
Exchange differences (0.1) (0.2) (0.3) (0.2)
Net cash generated from operations 47.0 16.3 156.2 140.6
6. EBITDA reconciliation
Three months Twelve months
ended ended
31 December 31 December
2005 2004 2005 2004
GBPm GBPm GBPm GBPm
Net cash generated from operations 47.0 16.3 156.2 140.6
Movement in receivables (18.9) 0.6 (2.0) (20.9)
Movement in payables 19.9 14.7 8.1 21.5
Movement in provisions 2.2 4.1 13.5 16.9
Exchange differences 0.1 0.2 0.3 0.2
Share option charge (0.7) (0.5) (2.7) (2.1)
EBITDA 49.6 35.4 173.4 156.2
7. Free cash flow reconciliation
Three months Twelve months
ended ended
31 December 31 December
2005 2004 2005 2004
GBPm GBPm GBPm GBPm
EBITDA 49.6 35.4 173.4 156.2
Movement in
receivables 18.9 (0.6) 2.0 20.9
Movement in
payables (19.9) (14.7) (8.1) (21.5)
Movement in
provisions (2.2) (4.1) (13.5) (16.9)
Exchange
differences (0.1) (0.2) (0.3) (0.2)
Share option
charge 0.7 0.5 2.7 2.1
Interest (8.1) (12.4) (35.5) (45.9)
paid
Interest
received 2.5 4.6 11.2 20.5
Net cash used
in investing
activities (34.1) (35.3) (124.9) (124.7)
Free cash
inflow
(outflow) 7.3 (26.8) 7.0 (9.5)
Notes to the Financial Information
Additional Information
Operating statistics
Growth Growth
Q4 05 - Q4 05 -
Q4 05 Q3 05 Q4 04 Q3 05 Q4 04
Customers (at end of quarter)
Germany 7,741 7,749 7,649 -- 1%
Strategic Markets 9,295 8,872 8,199 5% 13%
UK 2,850 2,836 2,778 -- 3%
France 2,935 2,990 3,097 (2%) (5%)
22,821 22,447 21,723 2% 5%
Customers (at end of quarter)
Corporate 21,615 21,208 20,523 2% 5%
Wholesale 1,206 1,239 1,200 (3%) 1%
22,821 22,447 21,723 2% 5%
Switched Minutes (m) (for quarter)
Germany 3,773 3,377 3,587 12% 5%
Strategic Markets 1,508 1,448 1,222 4% 23%
UK 1,036 991 933 5% 11%
France 1,041 967 855 8% 22%
7,358 6,783 6,597 8% 12%
Private Wire VGEs (000) (at end of quarter)
Germany 13,920 13,860 12,201 -- 14%
Strategic Markets 13,543 12,184 10,299 11% 31%
UK 13,607 12,257 10,249 11% 33%
France 5,829 5,248 3,615 11% 61%
46,899 43,549 36,364 8% 29%
Headcount (at end of quarter)
Germany 899 921 1,034 (2%) (13%)
Strategic Markets 1,028 1,040 1,093 (1%) (6%)
UK 1,015 1,065 1,122 (5%) (10%)
France 384 396 419 (3%) (8%)
India 545 455 201 20% 171%
3,871 3,877 3,869 -- --
Strategic Markets comprises Austria, Belgium, Denmark, Ireland, Italy, Netherlands, Portugal, Spain, Sweden and Switzerland. Customers represent the number of customers who purchase network and data solutions products. VGEs are the comparable number of voice circuits, of 64 kilobytes per second, each approximately equivalent in capacity to the non-switched circuit being measured. Headcount comprises active employees excluding temporary and contract workers. Certain comparative figures for customer numbers for Germany and Strategic Markets have been restated due to changes in customer classifications. Advertisement This press announcement is not a prospectus. It is an advertisement for the purposes of PR 3.3.2R of the Prospectus Rules made by the UK Listing Authority. No person should subscribe for or purchase any shares referred to in this press announcement except on the basis of information set out in the Prospectus that will be published as described below. A prospectus will be published in connection with the proposed admission of ordinary shares to the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc's market for listed securities as part of the proposed equity fundraising (the "Prospectus"). Following publication of the Prospectus, a copy will be available for viewing only during normal business hours, free of charge, at The Document Viewing Facility, The Financial Services Authority, 25 North Colonnade, Canary Wharf, London E14 5HS. Copies will be available for collection, free of charge during normal business hours, from the registered office of the proposed new holding company and the Prospectus will be available in electronic form on the website of the proposed new holding company. 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 Telecom Group plc 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 the laws, regulations and policies governing the ownership of telecommunications licenses, (ii) the Group's ability to manage its growth, (iii) the nature of the competition that the Group will encounter and (iv) unforeseen operational or technical problems. 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. Enquiries: COLT Telecom Group plc Luke Glass Director Corporate Communications Email: luke.glass@colt.net Tel: +44 (0) 20 7390 3681 Gill Maclean Head of Corporate Communications Email: gill.maclean@colt.net Tel: +44 (0) 20 7863 5314 Registered in England No : 03232904 This information is provided by RNS The company news service from the London Stock Exchange
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