EBITDA in Q4 was £35.6M, compared with £33.4M in the third quarter, on revenues of £308M

February 24, 2005

3 Min Read

LONDON -- COLT Telecom Group plc (COLT), a leading pan-European provider of businesscommunications solutions and services said today that in the fourth quarterit had delivered a solid financial performance, had refocused the businessand had begun the implementation of its new strategic plan.

HIGHLIGHTS OF THE QUARTER

  • Turnover was £308.0 million compared with £303.7 million in the thirdquarter, an increase of 1.4%. Turnover decreased by 1.4% on a constantcurrency basis (0.5% excluding reductions in fixed to mobile prices)

  • Gross margin before depreciation was 34.2% compared with 31.6% in thethird quarter reflecting improved mix

  • EBITDA (1) was £35.6 million compared with £33.4 million in thethird quarter

  • Net capital expenditure was £35.3 million

  • Strong year end financial position with cash and liquid resources of£452.7 million

  • Early redemption of £322.0 million of bonds with a further £80.9million in January 2005 resulting in net interest saving of £31.1 millionover the next three years

  • New strategic plan defined and implementation commenced

  • Further successful expansion of presence in India – 5% of workforcenow in India



OVERVIEW OF THE YEAR

Turnover increased by 7% to £1,214.0 million on a constant currency basisand excluding Fitec which was disposed of in December 2003. Gross marginbefore depreciation declined slightly from 34.2% to 33.0%. EBITDA was£153.7 million compared with £163.4 million and pre-tax losses beforeexceptional items reduced by 15% to £114.6 million. Net capital expenditurewas £124.7 million compared with £141.0 million. There was a free cashoutflow of £9.5 million in 2004, reduced from an outflow of £30.4 millionin 2003.

COLT Chairman Barry Bateman said:

“2004 was a tough year for the telecommunications industry and COLT.Nevertheless, turnover was up, losses were down and cash flow improved. Wehave entered 2005 in a stronger position having put in place the managementteam and strategic initiatives to move COLT forward to long termprofitability.

“We do not anticipate any significant improvement in market conditionsduring 2005 but by building on the recent momentum established by the newmanagement team we expect further progress and remain on track to be freecash flow positive on a sustainable basis during the year."

(1) EBITDA is earnings before interest, tax, depreciation, amortisation,foreign exchange and exceptional items

Commenting on progress made during the quarter Jean–Yves Charlier, ChiefExecutive Officer, said:

“We have delivered a solid fourth quarter performance. Whilst revenuegrowth between the third and fourth quarters was adversely affected byreductions in fixed to mobile prices, revenue mix improved as a result ofthe action we have taken to reduce the proportion of lower margin carrierrevenues. This resulted in pre-depreciation gross margin improving from31.6% to 34.2%. Whilst EBITDA rose from £33.4 million in the third quarterto £35.6 million, the improvement was tempered by an increase in SG&A costsdue mainly to the further investment in our platform in India, increasedpersonnel costs and costs associated with Sarbanes Oxley compliance.

“The business was refocused during the quarter as we put in place anenhanced set of strategic initiatives designed to re-establish COLT as aninnovator and as one of the top three players in each of the metropolitanmarkets in which it operates across Europe. This is a three year programmeand our challenge for 2005 is to begin to deliver against those initiativesby accelerating revenue growth, improving mix, improving productivity andbeing free cash flow positive on a sustainable basis.

“It is still early days but we have made a good start. We put in place anorganisation designed to deliver our strategic objectives including afurther significant move of activity to India. We launched three newEthernet services for the corporate market, including the first SwitchedEthernet VPN service in Europe, and our Secure IT service designed to meetthe specific needs of the SME market. Planning is well advanced for thelaunch of our Voice IP service early in the second quarter.”

Colt Telecom Group plc

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