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
    From The Founder
    Light Reading sits down at CES with the head of Cisco's service provider video business, Conrad Clemson, to discuss how NFV and cloud security relate to video, the challenge of managing 4K/8K traffic, the global expansion of Netflix and virtual reality.
    Flash Poll
    Live Streaming Video
    CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
    Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
    LRTV Custom TV
    Join Us at the Digital Operations Transformation Summit

    2|4|16   |   03:52   |   (0) comments


    The Digital Operations Transformation Summit on February 21, 2016 at the Crowne Plaza Barcelona Fira Centre will bring together 50 senior executives to engage in a unique debate on the opportunities and challenges presented by the transformative evolving digital landscape. RSVP now at events@lightreading.com.
    LRTV Custom TV
    Making the Test: ADVA Ensemble Connector vs. Open vSwitch

    2|4|16   |   01:28   |   (0) comments


    Light Reading, in partnership with EANTC, recently tested ADVA's Ensemble Connector, which replaces open vSwitch and offers carrier-grade capability and interoperability. The test results strengthen ADVA's credibility as a provider in the virtualization space.
    LRTV Custom TV
    Bridging the Gap Between PoCs & Deployment in NFV

    2|4|16   |   31:50   |   (0) comments


    Charlie Ashton of Wind River presents the keynote at Light Reading's 2020 Vision executive summit in Dublin.
    Between the CEOs
    CEO Chat With Mike Aquino

    2|3|16   |   17:34   |   (0) comments


    The former CEO of Overture Networks, Mike Aquino, discusses why truly open virtualization solutions provide service providers with the greatest choice.
    Shades of Ray
    MWC: Buckle Up for 5G & the IIoT

    2|2|16   |   02:28   |   (0) comments


    This year's Mobile World Congress looks set to be a 5G land grab and a chance to get down and dirty with the Industrial Internet of Things (IIoT) – but what will the 5G discussions actually be about?
    LRTV Custom TV
    Case Study: Building China's Next-Gen TV Networks

    2|2|16   |   5:01   |   (0) comments


    With over 2 billion viewers worldwide, Shenzhen Media Group is one of China's largest content producers. By partnering with Huawei and Sobey, SZMG was able to modernize media operations with the Converged News Center, a production studio that is a model for next-generation workflows.
    LRTV Custom TV
    Quad Channel Modulator Driver with 46 Gbaud Capability from MACOM

    1|28|16   |     |   (0) comments


    MACOM's MAOM-003427 is the industry's first surface-mount modulator driver with 46 Gbaud capability to support next generation 200G and 400G applications.
    LRTV Custom TV
    Video Infographic: Validating Cisco's NFV Infrastructure

    1|26|16   |   02:24   |   (1) comment


    We all know that the network of the future will be virtual, but when will virtual become a reality? This video infographic covers the four key areas in which Light Reading, in partnership with EANTC, tested Cisco's NFV infrastructure: performance, reliability, multi-service capabilities and single pane of glass management.

    For the full report, see

    Between the CEOs
    CEO Chat With Phil McKinney, CableLabs

    1|22|16   |   13:36   |   (1) comment


    At CES in Las Vegas, we met with Phil McKinney, CEO of CableLabs. Phil provides an update on the rollout of DOCSIS 3.1, his views on the future of open source and how consumer interest in virtual reality could affect network traffic.
    Between the CEOs
    Ericsson CTO on the Changing Telecom Market

    1|21|16   |   10:26   |   (0) comments


    At CES 2015, CTO of Ericsson, Ulf Ewaldsson, sits down with CEO of Light Reading, Steve Saunders, to discuss the changing telecom market, the new partnership with Cisco and the future of the telecom industry.
    LRTV Interviews
    Ireland's Data Dream

    1|21|16   |   14:31   |   (0) comments


    Host In Ireland president Gary Connolly tells Light Reading's Steve Saunders about the role Ireland is playing in hosting data for the world's largest organizations.
    LRTV Custom TV
    Brocade Keynote: Transitioning to the New IP

    1|20|16   |   27:23   |   (0) comments


    At 2020 Vision in Dublin, Andrew Coward, VP of Service Provider Strategy at Brocade, presents the transition to the New IP.
    Infographics
    Cisco's latest VNI numbers suggest the world will be using 366.8 exabytes of data on smartphones and Internet of Things devices, up from 44.2 exabytes, in 2015.
    Hot Topics
    Alphabet Is Serious About Google Fiber
    Mari Silbey, Senior Editor, Cable/Video, 2/1/2016
    Did Juniper Pay 'Peanuts' for BTI?
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 2/2/2016
    Google's 5G Radio Ambitions Are Expanding
    Dan Jones, Mobile Editor, 2/5/2016
    How Data Center Outsourcing Fuels AT&T NetBond Growth
    Carol Wilson, Editor-at-large, 2/3/2016
    3.5GHz Startup Gets $22M for Small Cells
    Dan Jones, Mobile Editor, 2/2/2016
    Like Us on Facebook
    Twitter Feed
    Webinar Archive
    BETWEEN THE CEOs - Executive Interviews
    The former CEO of Overture Networks, Mike Aquino, discusses why truly open virtualization solutions provide service providers with the greatest choice.
    As anyone who knows me will tell you, I like to think I know a fair bit about this next-gen-comms malarkey, but there's nothing like an interview with one of the ...
    Animals with Phones
    Happy Groundhogs for Technology Day! Click Here
    Live Digital Audio

    Broadband speeds are ramping up across Europe as the continent, at its own pace, follows North America towards a gigabit society. But there are many steps to take on the road to gigabit broadband availability and a number of technology options that can meet the various requirements of Europe’s high-speed fixed broadband network operators. During this radio show we will look at some of the catalysts for broadband network investments and examine the menu of technology options on offer, including vectoring and G.fast for copper plant evolution and the various deployment possibilities for FTTH/B.