RNS Number:1127M
TeleCity PLC
10 June 2003
10 June 2003
TeleCity plc
lst Quarter Results
Key Points
* Q1 EBITDA positive #0.2m (Q1 2002: #1.8m loss).
* Healthy sales pipeline.
* 45 new customers in Q1. Customer base now totals 325.
* Key wins across a number of sectors.
* Bridgewell Securities appointed broker.
Michael Hepher, Chairman, said:
"During the first quarter of 2003 TeleCity achieved a number of important
milestones as the effects of 2002's Company-wide restructuring started to be
seen. The Company saw substantial customer wins across a number of sectors and,
for the first time, achieved a positive EBITDA, the level of which we expect to
be maintained throughout 2003.
"2003 has started well for TeleCity, although we are not complacent and
recognise that this is a turnaround year for the Company. With profitability at
EBITDA level, the continued sales focus, growth in customer acquisitions and
diversity, together with more stable market conditions the Company is
well-positioned for a good year."
For further information:
TeleCity 020 7519 4887
Rick Hudson, Chief Executive
Josh Joshi, Finance Director
Citigate Dewe Rogerson 020 7638 9571
Sue Pemberton/Freida Davidson
First Quarter 2003 Results
Overview
During the first quarter of 2003 TeleCity achieved a number of important
milestones as the effects of 2002's Company-wide restructuring started being
seen.
The Company, for the first time, achieved a positive EBITDA of #0.2m in the
first quarter (Q1 2002: #1.8m loss), and is the first amongst its peers in the
European colocation sector to report EBITDA profitability.
This financial performance has been due partially to a scaling down of the
Company's cost base, which has been reduced by 28% compared with the first
quarter of 2002, and partially to the successful results of an initiative to
acquire new customers outside of the traditional telecommunications service
provider sector.
When the reductions in the cost base were implemented, great care was taken to
ensure that the Company's high standards of operational performance and customer
service were not compromised. The Company's success in achieving this objective
was best illustrated in February 2003 when it won the ISPA 2003 Award for Best
Colocation Provider.
Under the new country management structure, local management focus continues to
bring immediate benefits to the business performance of the Company's European
locations. During the first quarter, TeleCity added 45 new customers to its
customer base, with the number of customers standing at 325 at the quarter end.
Results
Turnover during the first quarter stood at #5.9m (Q1 2002: #6.2m), which is in
line with that reported for the last quarter of 2002. There were no exceptional
items during the period (Q1 2002: #2.5m). The positive EBITDA of #0.2m compares
to a loss of #0.8m during the last quarter of 2002 and a loss of #1.8m during
the corresponding period of 2002 (both comparatives before exceptional items).
This improvement in profitability has been achieved through increased
productivity, reduced headcount and the completion of the exit from all surplus
properties. The provisions previously made to cover the cost of termination
premiums and rent-free periods for surplus properties are expected to be
sufficient to ensure that such payments will not impact the Company's ongoing
EBITDA performance. Of the remaining cash outflow in respect of these
properties, which totals #2.4m, #2.3m will be paid before the end of this
financial year.
The cash balance of #4.9m is ahead of budget, reflecting active working capital
management across the Group.
Management expects the level of first quarter EBITDA performance to be broadly
maintained throughout 2003, the pace of improvement being tempered by the expiry
of a small number of significant contracts secured during 2000 which are not
expected to be renewed on the same terms. This 'churn' of the contract bank has
been accounted for in the 2003 budget, and is forecast to be more than offset by
new business.
Sales and Marketing
The first quarter saw substantial customer wins for the business. Sales order
intake exceeded budget following the significant increases seen in the last
quarter of 2002, with enquiry levels and the pipeline of potential contracts
both continuing to increase. A further milestone in the first quarter, which
demonstrates the success of the country management structure, was the winning of
new business in each of the six countries in which TeleCity operates. This was
achieved in January, the first time in the Company's history, and was then
repeated again in February and March.
Building on the industry recognition for high levels of customer service,
TeleCity receives growing levels of enquiries from businesses unhappy with their
existing datacentre providers. This has resulted in a number of agreements
being secured from customers migrating their infrastructure to TeleCity
facilities.
TeleCity has enhanced its ability to deliver managed services and corporate
solutions, rather than just suited colocation space, and this has directly
influenced customer choices during the quarter. With the increase in the number
of customers at the end of the period, the diversification of the customer base
has continued to increase, thereby reducing the Company's reliance upon a small
number of large telecommunications customers and providing a solid foundation
for the Company's long-term prospects. Highlights during the first quarter
included securing contracts in the media sector with a major hosting contract
for Sony Computer Entertainment Europe and, in the public sector, with
Karolinska, one of Sweden's largest teaching hospitals, who chose TeleCity in
Stockholm to host their critical IT platform.
Since the end of March key wins have included Vodafone Global Content Services
for managed maintenance and support services and, in the finance sector, a
significant contract was agreed with Tullett plc, a leading global brokerage
firm.
Corporate Broker
The Board is pleased to announce that Bridgewell Securities Ltd has been
appointed as financial adviser and stockbroker to the Company with immediate
effect.
Outlook
2003 has started well for TeleCity, although we are not complacent, and
recognise that this is a turnaround year for the Company. We continue to budget
prudently, and anticipate that there will be reductions in the amount of space
taken by some of TeleCity's traditional client base as contracts come up for
renewal. The phasing of contract renewals during the second quarter may cause a
slight dip in that quarter's EBITDA, but if this is the case it should reverse
quickly during the second half of the year. The lack of any material customer
failures in the last three quarters has been encouraging and, as we look
forward, the increasing numbers of small to medium enterprises and corporate
customers signals a return to top-line growth for the Company.
Profitability at the EBITDA level, continued sales focus, growth in customer
acquisition and diversity together with a more stable market will provide a
platform for a good year at TeleCity.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the three months ended 31 March 2003
Three months Three months Year
31 March 31 March 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Continuing operations
Turnover
-- before exceptional item 5,912 6,159 23,750
-- exceptional item --- --- 1,204
5,912 6,159 24,954
Operating loss
-- EBITDA before exceptional items 208 (1,762) (5,258)
-- depreciation (1,654) (2,374) (9,223)
-- exceptional items 2 --- (2,485) (26,207)
(1,446) (6,621) (40,688)
Net interest (payable)/receivable (24) 99 84
Loss on ordinary activities
before taxation (1,470) (6,522) (40,604)
Taxation --- --- ---
Retained loss for the period
attributable to ordinary shareholders (1,470) (6,522) (40,604)
Loss per ordinary share
- basic and diluted 3 (0.7)p (3.3)p (20.2)p
CONSOLIDATED BALANCE SHEET
at 31 March 2003
31 March 31 March 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Fixed assets
Tangible assets 46,996 70,497 47,130
Current assets
Stocks 21 51 21
Debtors 7,323 5,715 6,635
Cash at bank and in hand 4 4,925 14,369 6,476
12,269 20,135 13,132
Creditors - amounts falling due
Within one year
Borrowings (89) (28) (84)
Other (14,098) (15,804) (14,305)
Net current (liabilities)/ assets (1,918) 4,303 (1,257)
Total assets less current liabilities 45,078 74,800 45,873
Creditors - amounts falling due
After more than one year
Borrowings (1,411) (102) (1,334)
Provisions for liabilities and charges (5,419) (4,480) (5,991)
Net assets 38,248 70,218 38,548
Capital and reserves
Called up share capital 201 201 201
Share premium account 111,735 111,735 111,735
Merger reserve 17,862 17,862 17,862
Profit and loss account (91,550) (59,580) (91,250)
Equity shareholders' funds 38,248 70,218 38,548
Movement in shareholders' funds
Opening shareholders' funds 38,548 76,455 76,455
Translation differences 1,170 285 2,697
Loss for the financial period (1,470) (6,522) (40,604)
Closing shareholders' funds 38,248 70,218 38,548
CASH FLOW STATEMENT
for the three months ended 31 March 2003
Three months Three months Year
31 March 31 March 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Net cash outflow from operations 5 (1,480) (1,878) (8,066)
Returns on investment and servicing
of finance
Net interest received 14 136 231
Taxation paid --- --- ---
Capital expenditure and financial investment
Net purchase of tangible fixed assets (303) (953) (2,885)
Net cash outflow before management of
liquid resources and financing (1,769) (2,695) (10,720)
Management of liquid resources --- 2,152 11,794
Financing
Repayment of loan --- --- (10)
Capital element of finance lease payments --- (37) (87)
Expenses paid in connection with
finance raised --- (706) (706)
--- (743) (803)
(Decrease)/increase in cash in period (1,769) (1,286) 271
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in period (1,769) (1,286) 271
Management of liquid resources --- (2,152) (11,794)
(1,769) (3,438) (11,523)
Repayment of loan --- --- 10
Capital element of finance lease payments --- 37 87
Change in net funds arising from cash flows (1,769) (3,401) (11,426)
New finance leases --- --- (1,295)
Translation differences 136 13 152
Movement in net funds in period (1,633) (3,388) (12,569)
Opening net funds 5,058 17,627 17,627
Closing net funds 3,425 14,239 5,058
Net funds analysed as follows:
Cash at bank and in hand 4,925 14,369 6,476
Borrowings repayable within one year (89) (28) (84)
Borrowings repayable after more than one year (1,411) (102) (1,334)
3,425 14,239 5,058
Notes to the accounts
1 Basis of preparation
2 Exceptional items
The exceptional items in prior periods are analysed as follows:
Three months Year
31 March 31 December
2002 2002
#'000 #'000
Exceptional revenue --- 1,204
Provision against fixed assets (2,485) (24,939)
Costs and provisions in respect of exiting property lease contracts --- (870)
Redundancy costs incurred --- (1,880)
Other --- 278
(2,485) (26,207)
3 Loss per ordinary share
The loss per ordinary share is based on the loss attributable to ordinary shareholders of #1,470,000 (31 March
2002 #6,522,000 31 December 2002 #40,604,000) and the weighted average number of shares in issue (as adjusted
for the effect of Rights and Bonus Issues) of 200,670,707 (31 March 2002 200,538,551, 31 December 2002
200,590,533). As the impact of issuing potential ordinary shares is anti-dilutive, the diluted loss per share
is equivalent to the basic loss per share.
4 Cash at bank and in hand
Cash balances at 31 March 2003 include #1,955,000 (31 March 2002 #1,821,000, 31 December 2002 #1,889,000) held
in deposit accounts which are pledged to the Bank of Scotland in respect of bank guarantees given on property
lease contracts.
5 Reconciliation of operating loss to net cash outflow from operations
Three months Three months Year
31 March 31 March 31 December
2003 2002 2002
#'000 #'000 #'000
Operating loss (1,446) (6,621) (40,688)
Depreciation including profit/loss on disposal 1,654 2,374 9,223
Provision against fixed assets --- 2,485 24,939
Movement in provision for liabilities and charges (731) --- 1,326
Movement in working capital (957) (116) (2,866)
(1,480) (1,878) (8,066)
END
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