COLT Reports Q2, H1

LONDON -- COLT Telecom Group plc (COLT), a leading pan-European provider of business communications solutions and services said today that its second quarter results were in line with the position indicated in the Trading Update of 1 July.

Highlights of the quarter compared with the corresponding period of the prior year include:

(1) Excluding Fitec, which was disposed of in December 2003.
(2) EBITDA is earnings before interest, tax, depreciation, amortisation, foreign exchange and exceptional items.
(3) Before exceptional items.
(4) Free cash flow is the net cash inflow from operating activities less net cash outflows from returns on investments and servicing of finance and from capital expenditure and financial investment.

Since the publication of its first quarter results on 21 April, COLT has experienced tougher than expected trading conditions. In addition, there has been slower than anticipated uptake of its data products and the performance of some higher margin voice products has been disappointing. During the second quarter, revenue growth has therefore come mainly from the lower margin segments of the business. As a result, even though costs continued to be under tight control, overall margins were under pressure. COLT has taken action to improve revenues and is continuing to improve its sales capability and develop new products, particularly in the higher margin data segments. These initiatives are expected to have a positive impact in the longer term.

Commenting on the results, Chairman of COLT, Barry Bateman, said: "Whilst we grew revenue, EBITDA and free cash flow compared to the same quarter last year, the overall results were disappointing. This was partly due to the continuous pricing pressure within the industry but we also made less progress than we would have liked in growing higher margin data services whilst much of our growth in voice revenues was from lower margin products.

"Nevertheless much progress has been made in the last two years in positioning the company for the future. Costs have been reduced, capital expenditure is well controlled and success driven, and free cash flow is consistently improving. We are well on track to achieve our goal of being free cash flow positive on a sustainable basis during 2005. Additionally, many of the building blocks are in place in terms of development of new products and services that should positively impact revenue in the medium and longer term.

"We are announcing today the appointment of Jean-Yves Charlier as President, Chief Executive Officer and Director of COLT, with effect from 30 August, succeeding Steve Akin who is returning to Fidelity in Boston. On behalf of the Board I would like to thank Steve for the exceptional job he has done in leading COLT through a period of great change in a challenging operating environment and to add my personal thanks for his wholehearted support and commitment to COLT.

"The appointment of Jean-Yves Charlier and plans we have in place to further strengthen the senior management of our sales organisation should, I believe, help position COLT well to meet the challenges going forward in building higher margin revenue streams."

Colt Telecom Group plc