Light Reading

Colt Reports Q1, Restructuring Plans

Light Reading
News Wire Feed
Light Reading
4/22/2014
50%
50%

LONDON -- Colt Group S.A. (London Stock Exchange: COLT) today issued its Interim Management Statement for the three months ended 31 March 2014.

Group revenue for the quarter amounted to €399.8 million (Q1 ‘13: €392.1 million). This reflects year on year revenue growth of 2.0% (Q1 ‘13: declined 1.3%). On a constant currency basis Group revenue grew 1.2% (Q1 ’13: declined 0.7%) with contributions from all four lines of business:

  • Network Services revenue grew 0.4% (Q1 ’13: 1.9%). Managed networking revenues grew 9.8%, while bandwidth services and other revenues declined by 6.5%. Legacy (SDH low speed connections) revenues accounted for the majority of the decline at €5.5m.
  • Voice Services revenue grew 0.8% (Q1 ’13: declined 4.6%). Enterprise voice declined by 11.4% (Q1 ’13: 12.0%) driven by regulatory driven price declines and contraction of certain lower margin customer accounts. Growth in Carrier voice offset the decline in Enterprise voice albeit at low margins. The impact of regulatory driven price changes amounted to €6.1m negative impact in the quarter compared with €10.8m in Q1 ’13.
  • Data Centre Services revenue (excluding modular product sales) grew 8.1% (Q1 ’13: declined 3.4%). Growth in colocation revenue was offset by the timing of sales of our modular ftec halls which are not recurring in nature. As a result, total data centre revenue grew 0.5% (Q1 ’13: declined 1.0%).
  • IT Services revenue grew 15.0% (Q1 ’13: 4.3%) largely due to increased levels of equipment sales.

    Group EBITDA of €74.1 million (Q1 ‘13: €80.5 million) represented a year on year decline of €6.4 million (8.0%). The decline in EBITDA resulted from margin compression due to product mix changes, the continued churn and pricing pressures in our bandwidth products and the flow through of previous year rate declines to our Enterprise voice customers. In bandwidth products, highly profitable legacy products are being replaced with lower margin managed networking services. In voice products, the impact of termination rate declines have affected both overall revenue and margin on enterprise and wholesale business. We would expect this pressure on margins to continue through the year.

    Net funds as at 31 March 2014 amounted to €157.0 million (31 December 2013: €195.6 million). The cash outflow of €38.6 million for the quarter (Q1 ’13: outflow of €54.2m) reflected normal seasonal outflows, including annual prepayments and staff incentives. Capital expenditure for the first quarter of 2014 decreased to €74.5 million (Q1 ‘13: €81.2 million).

    Colt is currently completing a strategic review of its performance by lines of business with a focus on operational and financial improvement. We are moving forward with the reorganisation of our business into four lines of business as previously announced: network services, IT services, data centre services and voice services. These new business units will be supported by our existing go to market and shared service organisations. Business plans for each of these units have been formalised and organisational change is in process. The underlying plans are aimed to facilitate the prioritisation of investments and opportunities that are of the greatest strategic and commercial value to our Group with a goal to improve revenue growth, margin and cash flow in 2015 and beyond.

    As part of this process, we are announcing today a planned reduction in our Carrier voice business. We will withdraw from approximately 85% of our Carrier voice trading contracts over the next few months. Our objective is to liberate approximately five billion minutes per annum of voice network capacity to pursue more profitable enterprise voice business. This decision will result in the loss of approximately €175m of annualised revenue (total 2013 Carrier voice revenue was €250.4m), with roughly half the reduction evident in FY 2014. We expect that the rationalisation of the voice trading operations will improve Group profit margins over the next few years and have an immaterial impact on absolute EBITDA in 2014.

    We expect that execution of all of the business plans will result in certain workforce restructuring actions during the second half of 2014 as the Company aligns its cost structure to improve profitability. Payback on the restructuring will typically be in the range of 9 to 12 months and for the most part occur in 2015.

    Outlook
    As a result of margin compression due to product mix changes, the continued churn and pricing pressures in our bandwidth products and the flow through of previous year rate declines to our Enterprise voice customers, we expect 2014 EBITDA (before restructuring charges) to range c.5% to 10% below current consensus estimates of €325m. In addition we expect to incur restructuring charges in the second half of 2014 of approximately €30m relating to the execution of the plans laid out above.

    Rakesh Bhasin, Chief Executive Officer, said: “We are moving forward with our reorganisation into four lines of business. I believe this structure will provide the focus we need to address challenges in the marketplace. It will also allow us to prioritise investments that are of greatest strategic and commercial value to our Group. I am confident that these changes will help us grow the business and improve profit margins in future years.”

    Colt Technology Services Group Ltd (London: COLT)

    (0)  | 
    Comment  | 
    Print  | 
  • Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
    Flash Poll
    From The Founder
    Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
    LRTV Documentaries
    Verizon's Emmons: SDN Key to Cost-Effective Scaling

    5|22|15   |   03:53   |   (0) comments


    For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
    LRTV Documentaries
    Lack of Universal SDN a Challenge

    5|21|15   |   04:51   |   (3) comments


    Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
    LRTV Custom TV
    Steve Vogelsang Interview: Carrier SDN

    5|20|15   |   05:02   |   (0) comments


    Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
    LRTV Custom TV
    Carrier SDN: On-Demand Networks for an On-Demand World

    5|20|15   |   20:52   |   (0) comments


    Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
    LRTV Documentaries
    The Security Challenge of SDN

    5|19|15   |   02:52   |   (0) comments


    CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
    LRTV Custom TV
    NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

    5|18|15   |   5:50   |   (0) comments


    Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
    LRTV Huawei Video Resource Center
    Bay Area Spark Meetup 2015

    5|14|15   |   3:54   |   (0) comments


    Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
    LRTV Custom TV
    The Transport SDN Buzz

    5|12|15   |   06:01   |   (1) comment


    Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
    LRTV Custom TV
    Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

    5|5|15   |   04:49   |   (0) comments


    John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
    LRTV Custom TV
    Meeting the Demands of Bandwidth & Service Group Growth

    5|1|15   |   5:35   |   (0) comments


    Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
    LRTV Custom TV
    DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

    4|29|15   |   03:48   |   (0) comments


    John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
    LRTV Huawei Video Resource Center
    Predicting Traffic Patterns for Quality Mobile Broadband

    4|29|15   |   6:45   |   (0) comments


    Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
    Upcoming Live Events
    June 8, 2015, Chicago, IL
    June 9, 2015, Chicago, IL
    June 9-10, 2015, Chicago, IL
    June 10, 2015, Chicago, IL
    September 29-30, 2015, The Westin Grand Mόchen, Munich, Germany
    October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
    October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
    All Upcoming Live Events
    Infographics
    Network functions virtualization (NFV) is not the easiest of topics to take on board, so here's a Light Reading infographic, developed following conversations with the folks at HP, that helps make sense of where NFV is taking the industry.
    Hot Topics
    10 Alternate Uses for Tablets
    Eryn Leavens, Copy Desk Editor, 5/22/2015
    Verizon Saves 60% Swapping Copper for Fiber
    Sarah Thomas, Editorial Operations Director, 5/19/2015
    Choosing a Technology Supplier? Consider Changing Your Selection Criteria
    Steve Saunders, CEO and founder, Light Reading, 5/18/2015
    Chattanooga Charts Killer Gigabit Apps
    Mari Silbey, Senior Editor, Cable/Video, 5/20/2015
    Bidding War for TWC Looks Likelier
    Alan Breznick, Cable/Video Practice Leader, 5/22/2015
    Like Us on Facebook
    Twitter Feed
    Webinar Archive
    BETWEEN THE CEOs - Executive Interviews
    With 200 customers in 60 countries, Stockholm-based Net Insight has carved out a solid leadership position in one of the hottest vertical markets going in comms right now: helping service providers and broadcasters deliver video and other multimedia traffic over IP networks. How has Net Insight managed to achieve this success in the face of immense competition from the industry giants?
    My ongoing interview tour of the leading minds of the telecom industry recently took me to Richardson, Texas, where I met with Rod Naphan, CTO and SVP, Solutions, ...
    I recently popped down to Texas to chat with CEO Eric L. Pratt about his company, Taqua.
    Cats with Phones