RNS Number:7514P
TeleCity PLC
15 September 2003
15 September 2003
TeleCity plc
Interim Results - Half year to 30 June 2003
Key Points
* Eight consecutive quarters of EBITDA improvement.
* Second consecutive quarter of positive EBITDA.
* Customer numbers now totalling over 360 - a 30% increase since last year end.
* Operational cash consumption of #2.3m, a 50% decrease compared to #4.8m in the same period last year.
* Sales orders 90% up on the same period in 2002.
* Services increased to over 43% of new sales order by value.
Michael Hepher, Chairman, said:
"TeleCity has continued to build the foundations of a solid long-term business. The first half of 2003 has
demonstrated its ability to diversify successfully its customer base, winning business from a wider range of sectors
including finance, health, media and corporate enterprise. TeleCity is well positioned to benefit substantially from
an upturn in the general market demand for outsourced data centre services.
Albeit slow, the market is showing evidence of improvement, aiding, in turn, the momentum of the turnaround at
TeleCity. The Board remains confident that 2003 will be a good year for the Company and will provide a solid platform
for 2004."
For further information:
TeleCity 020 7512 3500
Rick Hudson, Chief Executive
Josh Joshi, Finance Director
Citigate Dewe Rogerson 020 7638 9571
Sue Pemberton/Freida Davidson
2003 Interim Results
Overview
The first half of 2003 has seen TeleCity pass a number of critical milestones. With the announcement of the first
quarter results the Company became the first carrier-diverse, European colocation provider to report profitability at
the EBITDA level. With the second quarter's results also reporting a positive EBITDA, this profitability has been
maintained and represents the eighth consecutive quarter of EBITDA improvement.
Despite difficult market conditions over the last two years, the Company has, quarter on quarter, continued to build
the foundations of a solid long-term business. Whilst reducing cost and exiting from surplus properties have played a
crucial part in delivering this turnaround, maintaining revenues and diversifying the customer base have played an
equal role. In the first half of 2003 more customers chose TeleCity as their data centre provider than during the
whole of 2002. Since the beginning of the year the customer base has grown by nearly 30% to 360 customers and,
equally importantly, this growth has seen the Company make significant inroads into new markets.
2003 started well and has continued in a similar vein. The Board remains confident that the Company will maintain
this performance for the rest of the year.
Interim Results to 30 June 2003
Turnover for the quarter ended 30 June 2003 was #5.9m, unchanged from the first quarter, resulting in #11.8m for the
half-year compared to #12.2m during the corresponding period last year. As anticipated in the Company's first
quarterly announcement, during the second quarter some customers reduced their space commitment as part of the
contract renewal process, but in each case the resulting agreements were an improvement on the Company's conservative
forecasts for the negotiations. These reductions have masked revenue gains achieved through increased business from
existing customers and contracts signed with new customers which have resulted in turnover remaining flat quarter on
quarter.
The positive EBITDA of #0.5m for the half-year compares to a loss of #3.3m in the corresponding period last year
(prior period stated before exceptional items). EBITDA during the second quarter, increased to #0.3m from #0.2m in Q1
and compares to a loss of #1.5m in Q2 2002.
The cash balance of #4.1m at 30 June 2003 is in line with the Company's forecasts. Cash outflow from operations for
the half-year was #2.3m compared to #4.8m in the corresponding period last year, an improvement of #2.5m. The cash
effect of exceptional items, such as residual payments incurred in exiting surplus lease commitments, accounted for
#1.3m of the cash outflow from operations. The cash outflow from operations before these exceptional items was just
#1.0m in the half year, compared to #4.8m in the corresponding period last year.
Sales and Marketing
Total sales order value (annualised) for the six months showed a 90% improvement on the same period in 2002. 80 new
customers are included in this sales order value, which represents over 100% improvement compared to the number of
new customers won during the same period last year.
In the media sector the Company has continued to secure a foothold in the rapidly expanding online gaming market,
with the addition of leading Dutch online provider Disec Consultancy this quarter and the signing of Sony Computer
Entertainment Europe, which was announced in Q1. In Paris, our most important broadcast client also extended their
existing contract significantly.
The Company's continued strength in the colocation market has been instrumental in encouraging customers to relocate
away from our competitors to a TeleCity site. In June it was announced that Positive Internet, one of the UK's
largest Internet Service Providers, had chosen to move to TeleCity.
Evidence of recovery in the telecoms and ISP market is being demonstrated by new agreements with international
businesses looking to expand into Europe. For example, in the first half of the year the Company has been successful
in securing a number of agreements with Russian telecom service providers looking for a first footprint in Western
Europe. New agreements with major service providers such as Infonet, LambdaNet and Neo Telecoms (formerly MFN France)
also signal encouraging signs of growth in the Company's more traditional markets. The agreement with Neo Telecoms,
signed in Paris, builds on an already strong year in France and is a major step towards taking the Paris facility
EBITDA positive.
Importantly, the Company is also retaining its existing customers. There were no significant bad debts from bankrupt
companies during the six months, and all customers whose contracts ended during the period chose to renew. It is
particularly gratifying that two global system integrators, including Fujitsu Services, chose to retain their
platforms at the Company's sites, from which they each provide service to a number of major global customers.
The customer base continues to diversify as a consequence of the growth in new business and the change of fortunes in
the telecoms sector. After the recent Industry changes, "Alternative Carriers" now represent just 18% of the contract
bank, although the somewhat resurgent PTT and other carrier markets has increased to 37%. The remainder of the
Company's revenue base comprises ISPs (20%) and the rapidly growing enterprise sector (10%) and content and hosting
companies (15%).
Board changes
Due to other business commitments, Josef Ellmauer resigned as a non-executive Director in June. The Board was
particularly sorry to see him leave as Mr Ellmauer had made a valuable contribution to the Company and had been a
source of wise counsel to the Board.
Company Developments
TeleCity's ability to deliver managed services and corporate solutions has contributed to revenue significantly
during 2003. In the first six months of 2002, 30% of new sales order by value related to services, whereas in the
first half of 2003 this figure increased to over 43%. In particular, the Company's managed bandwidth solutions are
proving popular, with 34% of customers signing new contracts this year choosing to purchase IP services in addition
to their data centre requirements.
In 2003, the Company has widened and improved its market positioning and maintained its market share. Amongst its
peers, TeleCity is emerging as a market leader in four of the seven cities in which it operates. In London,
approximately 20% of publicly peered network traffic already flows through switches located in a TeleCity site. This
figure is approximately 25% and 50% in the Amsterdam and Manchester facilities respectively. The Company's ambition
is to create a similarly prominent position in all of the cities in which it operates.
Outlook
Whilst successful in both the local and pan-European markets, TeleCity's historical focus has been in winning
customers in the telecommunications, technology and Internet sectors. The first half of 2003 has demonstrated the
Company's ability to diversify successfully this customer base, winning business from a wider range of sectors
including finance, health, media and corporate enterprise. TeleCity is well positioned to benefit substantially from
an upturn in the general market demand for outsourced data centre services.
Albeit slow, the market is showing evidence of improvement, aiding, in turn, the momentum of the turnaround at
TeleCity. The Board remains confident that 2003 will be a good year for the Company and will provide a solid platform
for 2004.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003
Six months Six months Year
30 June 30 June 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Continuing operations
Turnover
-- before exceptional item 11,827 12,170 23,750
-- exceptional item --- --- 1,204
11,827 12,170 24,954
Operating loss
-- EBITDA before exceptional items 484 (3,256) (5,258)
-- depreciation (3,366) (4,687) (9,223)
-- exceptional items 2 --- (9,152) (26,207)
(2,882) (17,095) (40,688)
Net interest (payable)/receivable (53) 177 84
Loss on ordinary activities
before taxation (2,935) (16,918) (40,604)
Taxation --- --- ---
Retained loss for the period
attributable to ordinary shareholders (2,935) (16,918) (40,604)
Loss per ordinary share
- basic and diluted 3 (1.5)p (8.4)p (20.2)p
CONSOLIDATED BALANCE SHEET
at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Fixed assets
Tangible assets 45,707 67,602 47,130
Current assets
Stocks 26 32 21
Debtors 6,998 7,415 6,635
Cash at bank and in hand 4 4,091 11,088 6,476
11,115 18,535 13,132
Creditors - amounts falling due
within one year
Borrowings (91) (10) (84)
Other (13,346) (17,813) (14,305)
Net current (liabilities)/assets (2,322) 712 (1,257)
Total assets less current liabilities 43,385 68,314 45,873
Creditors - amounts falling due
after more than one year
Borrowings (1,419) (106) (1,334)
Provisions for liabilities and charges (4,911) (6,092) (5,991)
Net assets 37,055 62,116 38,548
Capital and reserves
Called up share capital 203 201 201
Share premium account 111,735 111,735 111,735
Merger reserve 17,862 17,862 17,862
Profit and loss account (92,745) (67,682) (91,250)
Equity shareholders' funds 37,055 62,116 38,548
Movement in shareholders' funds
Opening shareholders' funds 38,548 76,455 76,455
Translation differences 1,440 2,579 2,697
Loss for the financial period (2,935) (16,918) (40,604)
Shares issued 2 --- ---
Closing shareholders' funds 37,055 62,116 38,548
CASH FLOW STATEMENT
for the six months ended 30 June 2003
Six months Six months Year
30 June 30 June 31 December
2003 2002 2002
Notes #'000 #'000 #'000
Net cash outflow from operations 5 (2,342) (4,832) (8,066)
Returns on investment and servicing
of finance
Net interest received 58 196 231
Taxation paid --- --- ---
Capital expenditure and financial investment
Net purchase of tangible fixed assets (340) (1,468) (2,885)
Net cash outflow before financing and
management of liquid resources (2,624) (6,104) (10,720)
Management of liquid resources --- 4,967 11,794
Financing
Proceeds of issue of share capital 2 --- ---
Repayment of loan (5) (3) (10)
Capital element of finance lease payments --- (55) (87)
Expenses paid in connection with
finance raised --- (706) (706)
(3) (764) (803)
(Decrease)/increase in cash in period (2,627) (1,901) 271
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in period (2,627) (1,901) 271
Management of liquid resources --- (4,967) (11,794)
(2,627) (6,868) (11,523)
Repayment of loan 5 3 10
Capital element of finance lease payments --- 55 87
Change in net funds arising from cash flows (2,622) (6,810) (11,426)
New finance leases --- --- (1,295)
Translation differences 145 155 152
Movement in net funds in period (2,477) (6,655) (12,569)
Opening net funds 5,058 17,627 17,627
Closing net funds 2,581 10,972 5,058
Net funds analysed as follows:
Cash at bank and in hand 4,091 11,088 6,476
Borrowings repayable within one year (91) (10) (84)
Borrowings repayable after more than one year (1,419) (106) (1,334)
2,581 10,972 5,058
Notes to the accounts
1 Basis of preparation
The Directors consider that the Company has adequate resources to continue in operation for the foreseeable
future. Accordingly, the accounts for the period ended 30 June 2003 have been prepared on the going concern
basis.
The accounts to 30 June 2003 are unaudited. They have been prepared using accounting policies consistent with
those used in the statutory accounts for the year ended 31 December 2002.
These accounts do not comprise full financial statements within the meaning of the Companies Act 1985. The
full accounts of TeleCity plc for the year ended 31 December 2002, on which the auditors gave an unqualified
audit report, have been delivered to Companies House.
2 Exceptional items
The exceptional items in prior periods are analysed as follows:
Six months Year
30 June 31 December
2002 2002
#'000 #'000
Exceptional revenue --- 1,204
Provision against fixed assets (6,750) (24,939)
Costs and provisions in respect of exiting property lease contracts (1,625) (870)
Redundancy costs incurred (777) (1,880)
Other --- 278
(9,152) (26,207)
3 Loss per ordinary share
The loss per ordinary share is based on the loss attributable to ordinary shareholders of #2,935,000 (30 June
2002 - #16,918,000, 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 201,313,534 (30 June 2002 - 200,571,027, 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 30 June 2003 include #1,966,000 (30 June 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
Six months Six months Year
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Operating loss (2,882) (17,095) (40,688)
Depreciation including profit/loss on disposal 3,366 4,687 9,223
Provision against fixed assets --- 6,750 24,939
Movement in provision for liabilities and charges (1,296) 1,575 1,326
Movement in working capital (1,530) (749) (2,866)
(2,342) (4,832) (8,066)
This information is provided by RNS
The company news service from the London Stock Exchange
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