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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Manx Telecom | LSE:MANX | London | Ordinary Share | IM00BHY3RF70 | ORD 0.2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 215.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMANX
RNS Number : 4796Z
Manx Telecom PLC
15 March 2017
15 March 2017
Manx Telecom Plc
Results for the year ended 31 December 2016
Manx Telecom Plc (AIM:MANX), ("Manx Telecom" or the "Company") the leading communication solutions provider on the Isle of Man, announces its results for the year ended 31 December 2016.
Financial Highlights
-- Revenues up 1.5% to GBP80.8m (2015: GBP79.6m)
- Fixed Line, Broadband and Data revenues were broadly stable at GBP31.6m (2015: GBP32.0m), with good take-up of high speed broadband
- Mobile revenues up 0.5%, with H2 revenues up 4.5% on H1 levels
- As anticipated, Data Centre revenues fell due to a decline in low margin kit sales and the impact of customer consolidation that occurred in H1
- Global Solutions revenues up 10.2% year on year, driven by Strongest Signal Mobile and international traveller SIMs
-- Underlying EBITDA* maintained at GBP27.7m (2015: GBP27.7m). Reported EBITDA at GBP22.7m (2015: GBP27.7m), primarily reflecting GBP4.3m costs relating to the Transformation Programme
-- Underlying Profit Before Tax of GBP16.3m (2015: GBP16.2m). Reported Profit Before Tax of GBP8.8m (GBP16.6m)
-- Underlying free cash flow** up 5.1% at GBP16.4m (2015: GBP15.6m). Reported free cash flow of GBP14.1m (2015: GBP15.6m)
-- Net debt at the period end of GBP52.4m (2015: GBP52.2m), maintaining net debt/EBITDA ratio of 1.9x
-- Final dividend of 7.2p (2015: 6.9p) making 10.9p for the full year (2015: 10.4p), in line with the Company's progressive dividend policy
Operational Highlights
-- Launch of Vannin Ventures, a 100% owned subsidiary to identify new business opportunities
o Acquisition of Partitionware in December to support development of innovative products and services
-- Launch of Transformation Programme aimed at improving competitiveness and the customer experience
-- Good traction with international traveller market:
o Launch of 4G roaming to our customers travelling off the Isle of Man and those visiting
o Agreement signed with China Unicom to provide connectivity for its UK mobile and roaming product
-- World's first medical technology trial to help those with hearing loss through the use of software to fine tune phone calls
-- Continued investment in the network and operational systems:
o Additional infrastructure for VDSL high speed broadband network
o Investment in mobile network for 4G roaming and LTE
o Upgraded CRM, billing and charging platform
Gary Lamb, Chief Executive Officer, said:
"2016 has been another solid year for Manx Telecom and is in line with the Board's expectations. The core business remains highly cash generative and we continue to see growth across many parts of the Company. Operationally it was a strong year with good take up of our broadband products; mobile returning to growth in H2 and strong growth in Global Solutions offsetting the expected declines in the Data Centre business.
"We have undertaken a number of initiatives in the year aimed at generating future growth. We launched a business designed to identify new opportunities, we commenced a Transformation Programme to reshape the Company and, finally, we have continued to invest in our infrastructure and operational systems. Combined, these steps put us in a better place to grow Manx Telecom in the future.
"Looking ahead, we remain confident in the outlook for the group, reflected in our commitment to maintain our progressive dividend policy. We continue to generate strong cash flow, which enables us to create value for shareholders and support our ongoing investment in the Isle of Man."
Hot Features
Premium
Underlying results Reported
results
------------------------ --------------
2016***^ 2015^ Change 2016 2015
GBPm GBPm GBPm GBPm
Revenue 80.8 79.6 1.5% 80.8 79.6
EBITDA 27.7 27.7 - 22.7 27.7
Margin 34.2% 34.7% 28.1% 34.7%
Operating Profit 18.5 18.6 (0.1%) 13.6 18.6
Margin 22.9% 23.3% 16.8% 23.3%
Cash generated from
operations 22.6 25.4 (11%) 22.0 25.4
Capital Expenditure
(excl intangibles) 6.0 7.9 6.0 7.9
Free cash flow 16.4 15.6 5.1% 14.1 15.6
Profit before and
after tax 16.3 16.2 0.6% 8.8 16.6
Basic earnings per
share 14.44p 14.38p 0.4% 7.82p 14.65p
Diluted earnings
per share 14.26p 14.25p 0.1% 7.72p 14.53p
Final dividend per
share 7.20p 6.90p 4.3% 7.20p 6.90p
Total dividend per
share 10.90p 10.40p 4.8% 10.90p 10.40p
*Underlying EBITDA is defined as the group profit or loss before depreciation, amortisation, net finance expense and taxation, adjusted for the items specified below
**Underlying free cash flow is defined as net cash generated from operating activities less net cash used in investing activities, adjusted for the acquisition or disposal of subsidiaries and the cash impact of the items specified below
^ Underlying profits are before GBP1.2m loss (2015: GBP0.3m profit) on revaluation of interest rate swaps
*** The Underlying profits for 2016 are additionally before GBP4.3m Transformation Programme costs, GBP1.3m property revaluation, GBP0.2m acquisition costs and GBP0.5m impairment of equipment
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/ 2014.
For further enquiries, please contact:
+44 (0) 1624
Manx Telecom plc 636400
Gary Lamb, CEO
Danny Bakhshi, CFO
Liberum Capital (Nominated Adviser +44 (0)20 3100
and Corporate Broker) 2000
Steve Pearce
Josh Hughes
Dominik Götzenberger
+44 (0) 20 7766
Oakley Capital (Financial Adviser) 6900
Christian Maher
Victoria Boxall
+44 (0) 20 7250
Powerscourt Group (Public Relations) 1446
Juliet Callaghan
Simon Compton
Chairman's Statement
The Group's operations delivered a solid performance in 2016 with full year results in line with the Board's expectations. Revenues increased to GBP80.8m (2015: GBP79.6m). Our underlying EBITDA was maintained at GBP27.7m (2015: GBP27.7m) and our underlying profit after tax marginally increased to GBP16.3m (2015: GBP16.2m). Underlying cash flow improved to GBP16.4m (2015: GBP15.6m).
We invested GBP4.3m on the first stage of the Transformation Programme aimed at improving competitiveness and the customer experience. After also making fair value adjustments of GBP3.0m (2015: GBP0.3m gain) and charging GBP0.2m acquisition costs, our full year reported profit after tax was GBP8.8m (2015: GBP16.6m). Net debt was little changed at GBP52.4m (2015: GBP52.2m).
The Company continues to provide a wide range of telecommunications services to consumers, businesses and the public sector on the Isle of Man, and we pride ourselves on our investment in the island. Our core domestic business performance in Fixed Line, Broadband, Data and Mobile remained solid during the year. Availability and take up of high speed broadband services continues to grow, our 4G network is performing well and mobile subscriber numbers are up year on year.
As anticipated by management and communicated in the interim results, revenue levels in our Data Centre business were lower than 2015 due to a decline in low margin kit sales and data centre usage following customer consolidation. This revenue reduction was largely offset by a return to good levels of growth in our Global Solutions business, driven by our Strongest Signal Mobile solution, machine to machine ("M2M") and international traveller propositions. Our unique position as a smaller telecom player with good links to the UK means that we are well placed to help the international traveller market, where we are seeing a number of encouraging opportunities.
As part of a continual search for ways to deliver innovative products to our customers, we launched Vannin Ventures in H2 to act as an incubator for new products and services which we will offer existing and prospective customers across multiple territories. We made our first acquisition, Partitionware, in December 2016, to support our endeavours in this area.
The Isle of Man economy continues to perform well, with unemployment at 1.3%, 32 years of unbroken GDP growth and economic growth forecast to continue. We look to support the Isle of Man Government in attracting business to the Island, and our telecommunications infrastructure, plus the services we provide form an important part of the Island's continued success.
Our people
The Company performance in 2016 is once again underpinned by the dedication and professionalism of our people. We are encouraged by the positive response from our colleagues to the Transformation Programme, which has been launched to improve our competitiveness and customer experience.
Danny Bakhshi joined us as Chief Financial Officer on 1 February 2016. Danny has an excellent track record in the industry and has proved to be a valuable addition to the Board.
Sir Miles Walker retired from our board at our Annual General Meeting in 2016. He served the business for 13 years, initially as a director and then as Chairman of Manx Telecom Holdings Ltd and subsequently as a Non-Executive Director after the IPO of Manx Telecom PLC in 2014. In June 2015 we were pleased that Christopher Hall, who was Managing Director of Manx Telecom Ltd until April 2011, agreed to join us as an Independent Non-Executive Director. He brings strong local relations and an extensive and deep knowledge of telecommunications together with a broader knowledge of the technology and software sector.
Dividend
The Board has declared a final dividend of 7.2p per share to be paid on 30 June 2017. This will bring the full year dividend to 10.9p (2015: 10.4p). The shares will trade ex-dividend on 25 May 2017 and will have a record date of 26 May 2017.
Outlook
With our heightened focus on innovation and the Transformation Programme, we are building on our joint strategy of strengthening our position in our core market on the Isle of Man through high quality customer service and value for money offerings, whilst looking for growth on and off island by leveraging our mobile technology platform and exploring new products and services for existing and future customers.
We expect the trends experienced in the core domestic business (fixed line, broadband and data) and mobile to continue, resulting in overall stable revenues. Our Data Centre business faces some short term challenges due to the customer consolidation which occurred in 2016, however, we remain positive about our longer-term prospects in this area. We expect to make further progress in our Global Solutions business, building upon the successes of 2016.
Whilst the uncertainty over future Brexit negotiations may affect some external decision making, we take confidence in the Isle of Man's economy as it has remained remarkably resilient over the years. We are well capitalised with a net debt/underlying EBITDA ratio at year end of 1.9 times and GBP10m unutilised committed facilities.
Consequently, we remain confident in the outlook for the group, reflected in our commitment to maintain our progressive dividend policy. We continue to generate strong cash flow from our core business, which enables us to support our ongoing investment programme and to create further value for shareholders.
CEO's review
Overview
It gives me great pleasure to present the annual results following my first full year as CEO of Manx Telecom. It has been another solid 12-month period for the business, with the overall financial performance of the group in line with our expectations. A number of developments and initiatives implemented towards the end of the year have positioned the group for future growth. These initiatives include the launch of Vannin Ventures and the acquisition of Partitionware and the implementation of the Transformation Programme to reshape the business.
Results overview
The Company's performance for the period was in line with the Board's expectations. Revenue was up slightly in part due to growth in Global Solutions, Broadband and Other revenue, which offset a reduction in Data Centre revenue.
Underlying EBITDA remained stable, with a minor reduction in margin following an increase in the lower margin Global Solutions business and a reduction in higher margin Data Centre revenue. Reported EBITDA was down due to the costs relating to the Transformation Programme and an impairment charge for obsolete assets following continued investment in the Group's mobile network and equipment and platforms used to support Data Centre services.
Underlying profit after tax increased marginally as a result of stable depreciation and marginally lower financing costs. This resulted in an incremental increase in underlying diluted earnings per share. Reported profit after tax reduced year on year, primarily due to transformation costs relating to the Transformation Programme, an unrealised loss on interest rate swaps used to hedge interest rate risk, and a loss on revaluation of certain land and building assets.
We continue to generate strong cash flows, which support our investment in the Isle of Man and a progressive dividend for 2016.
In 2016 we continued to invest in the island, including the roll out of additional infrastructure to increase the reach of our VDSL high speed broadband network, investment in our mobile network for 4G roaming and LTE, as well as an upgrade of our CRM billing and charging platform.
% %
2016 Total 2015 Total Y-o-Y
Revenue GBPm revenue GBPm revenue %
----------------- ----- -------- ----- -------- ------
Fixed, Broadband
and Data 31.6 39.1% 32.0 40.2% -1.2%
----------------- ----- -------- ----- -------- ------
Mobile 20.2 24.9% 20.1 25.2% 0.5%
----------------- ----- -------- ----- -------- ------
Data Centre 5.9 7.3% 8.0 10.0% -26.3%
----------------- ----- -------- ----- -------- ------
Global Solutions 15.6 19.3% 14.1 17.7% 10.2%
----------------- ----- -------- ----- -------- ------
Other 7.6 9.4% 5.4 6.8% 39.9%
----------------- ----- -------- ----- -------- ------
Total Revenue 80.8 79.6 1.5%
----------------- ----- -------- ----- -------- ------
Fixed, Broadband and Data services
Fixed, Broadband and Data Services provide fixed line voice, broadband and connectivity services for customers, connecting approximately 37,000 homes and 4,000 businesses on the Isle of Man. Fixed, Broadband and Data is our largest business, representing 39% of all Company revenues. In 2016 revenue decreased by 1.2% to GBP31.6m (2014: GBP32m), driven by reductions in fixed line voice revenues.
Investments in fibre rollout, vectoring and capacity underpinned increased high speed broadband revenue. Take up of these services, known as Ultima and Ultima plus, has grown broadband revenues by 4.6% during 2016 to GBP9.1m.
On 1 September 2015 we opened up our fixed network, providing a wholesale fixed line product to our competitors. To date, we have not experienced a significant loss of retail customers to competitors and our market share remains at 95% as at year end.
In September 2016, we continued a rebalancing of our wholesale fixed line and broadband tariffs, with fixed line tariffs increasing and VDSL broadband tariffs reducing, providing further incentives for customers to move to our higher speed broadband products. Fixed line revenues declined in the year, as increased revenue from line rental was more than offset by reductions in call revenue.
Mobile
Our Mobile business performed well in the face of reducing roaming revenues, which were unusually high last year on the back of increased demand at the time of the TT motorcycle race. Revenue for the year was up slightly at GBP20.2m (2015: GBP20.1m) supported by increased post-paid contract revenue and pre-paid revenue. We were pleased to note an improved performance in the second half of the year, with revenues up 4.5% compared to H1, or 2.9% compared to H2 2015.
Our 4G network, which provides 99% population coverage at speeds of up to ten times faster than 3G services, continued to perform well and mobile subscriber numbers are up year on year, with our promotions in the lead up to the Christmas period proving particularly successful.
The trend of increasing 4G adoption rates and general up-selling of data packages has continued in the past year, leading to a 13.3% increase in combined post-paid and prepaid revenue.
In May 2016 we launched 4G roaming to our customers so that our 4G service can be enjoyed by our customers travelling off the Isle of Man and those visiting. We continue to partner with global operators to increase our 4G roaming footprint around the world.
During the year we also trialled 4G+, a service which provides download speeds up to 40% faster than 4G. The trial was a resounding success, and a staged rollout of service to selected areas commenced in 2016 and will continue in 2017.
Data Centre
The Data Centre business offers co-location, managed hosting, cloud and disaster recovery services to an international and local corporate client base. These services are supplied by three data centres at Douglas North, Douglas Central and Greenhill Data Centre ("GDC"). The data centres at GDC and Douglas North are Tier 3 designed data centres providing high standards of data security, resilience, and expandable hosting capacity, including business continuity and distributed denial of service protection ('DDoS').
As previously flagged, during H12016, one of our customers informed us they would be rationalising their data centre usage and moving away from the Isle of Man in order to capitalise on acquisition synergies following recent consolidation. This has resulted in the release of some capacity in our data centre portfolio, reducing the combined occupancy rates of our data centres to 70.5% (2015: 78.5%). As expected, Data Centre revenue declined during the period by 26.3% to GBP5.9m (2015: GBP8.0m). It should also be noted that in 2015 there were higher than normal levels of one off low margin kit sales as new data centre customers arrived and, as expected, this revenue stream declined during the year.
We are actively seeking to re-populate capacity in our data centres, with a focus on managed service business to better utilise our investment.
Global Solutions
The Global Solutions business generates revenue from services which run on our domestic mobile technology platform and utilise our international roaming agreements. This enables us to offer a variety of products to UK and international partners who use our Global Solutions SIM cards. There are four key revenue areas: wholesale SMS and voice, international traveller market, M2M and strongest signal mobile (branded Chameleon).
Global Solutions has performed well this year following a re-organisation in 2015 and increased investment, particularly in the sales team. Revenues increased by 10.2% during the year to GBP15.6m (2015: GBP14.1m) with growth across much of the product portfolio.
In December we signed an agreement with China Unicom Global Limited, a subsidiary of China Unicom Group, the world's fourth largest mobile service provider by subscriber base. Manx Telecom will provide the connectivity to facilitate China Unicom's 'CUniq' UK mobile and roaming product: a service that will provide outbound travellers from China, diaspora communities living in the UK and enterprise customers, with one SIM card that allows them to have a UK, China and Hong Kong local service along with global roaming across 45 countries and regions. Manx Telecom is providing local UK connectivity via its relationship with Telefonica.
Our pipeline of opportunities in this area remains strong, and we are positive regarding growth opportunities in this area of the business in 2017.
Other revenues
Other revenues include the advertising revenue from our telephone directory, hardware equipment sales, interconnection fees and managed services.
Other revenue increased by 39.9% during the year to GBP7.6m (2015: GBP5.4m), primarily due to a resurgence in hardware equipment sales and realignment of Directory revenues such that these will now be recognised in Q4 of each financial year.
Vannin Ventures
In August 2016, we launched Vannin Ventures, a new standalone business which has been established to support the Company's long term growth strategy. Wholly owned by Manx Telecom, its purpose is to identify new and promising business opportunities in the telecoms and technology sectors, acting as an incubator to bring innovative products and services to market. There is an autonomous team behind the new business with a view to fostering a creative environment and entrepreneurial ethos.
In December, Vannin Ventures announced the acquisition of Partitionware, an Isle of Man software developer specialising in telecommunication platforms, and will be supporting Vannin Ventures' development of new products for our various markets. Combined with our network expertise we will be able to offer enhanced innovation and flexibility to our Global Solutions customers, and the business is already working with Manx Telecom on and the business is already working with Manx Telecom to provide China Unicom Group's UK mobile and roaming solution.
Transformation Programme
In October 2016 the Company launched a programme aimed at improving competitiveness and the customer experience.
The first stage of the programme is to undertake a review of our business processes and organisational structure. The programme is expected to last for up to two years as we reshape the business and make a significant investment in technology to aid this transformation. We expect to incur transformation costs of approximately GBP10m over a two year period with GBP4.3m charged to profit before tax in 2016 and the balance expected to be charged in 2017 financial year. Most of the financial benefits are expected to start accruing in 2018. In 2016, cash of GBP0.5m was spent on the Transformation Programme.
Financial review
I was delighted to be appointed CFO of Manx Telecom on 1 February 2016 and am pleased to present my first financial review to shareholders following a full year in role.
Revenue
The Fixed Line, Broadband and Data business had a solid performance, with a marginal reduction in revenue of 1.2% to GBP31.6m (2015: GBP32.0m). As anticipated by management, the Data Centre business saw a decrease in revenue to GBP5.9m (2015: GBP8.0m), due to a decline in low margin kit sales and data centre usage driven by some customer consolidation. Mobile revenues were up marginally year on year at GBP20.2m (2015: GBP20.1m) as increased post-paid contract revenue and pre-paid revenue offset a reduction in roaming revenues. Global Solutions had a successful 2016, with full year revenue of GBP15.6m (2015: GBP14.1m), an increase of 10.2%, driven by growth in our Strongest Signal Mobile solution, branded Chameleon, M2M and international traveller propositions. Other revenues were up 39.9% to GBP7.6m (2015: GBP5.4m) due to additional one-off revenues for hardware equipment sales and as we also brought forward the date on which we delivered the 2017 directory.
The Group generated underlying EBITDA of GBP27.7m (2015: GBP27.7m), in line with expectations. Underlying EBITDA is defined as the group profit or loss before depreciation, amortisation, net finance expense and taxation, adjusted for specific items including Transformation Programme costs, acquisition costs and impairment charges. Reported EBITDA for the year was GBP22.7m (2015: GBP27.7m). The Group's underlying EBITDA margin was slightly lower at 34.2% (2015: 34.7%) due to an increase in the lower margin Global Solutions business and a reduction in higher margin Data Centre revenue.
Depreciation and amortisation was stable at GBP9.1m (2015: GBP9.1m).
Underlying operating profit was also steady at GBP18.5m (2015: GBP18.6m) due to the year on year consistency in EBITDA and depreciation and amortisation. Reported operating profit was GBP13.6m (2015: GBP18.6m).
Underlying profit before tax increased slightly to GBP16.3m (2015: GBP16.2m) due to steady EBITDA and depreciation, and lower interest charges following a full year of benefit of improved terms following the renegotiation of the lending facility effective from 30 June 2015. Underlying profit before tax is before a GBP1.2m loss (2015: GBP0.3m profit) on revaluation of interest rate swaps as well as the specific adjustments to EBITDA above. Reported profit before tax was GBP8.8m (2015:GBP16.6m).
Underlying diluted EPS was level at 14.26p (2015: 14.25p). Reported diluted EPS was 7.72p (2015: 14.54p).
The Company paid an interim dividend of 3.7p per share in November 2016 and declared a final dividend for 2016 of 7.2p per share on 15 March 2017 resulting in a full year dividend for 2016 of 10.9p per share, a 4.8% increase from 2015.
Costs
Costs of sales increased by 0.9% in the year as a result of increased Global Solutions revenue and an associated increase in roaming and interconnect costs, together with an increase in maintenance costs.
Energy costs were down 0.5% during 2016, as increased energy use from running our GDC phase 2 facility for a full year was offset by reductions arising from customer consolidation. Mobile handset costs were 7% higher following a successful Christmas trading period, driven by an increase in post-paid contract subscribers and upsell of customers on legacy tariffs to smartphone tariffs.
Administrative expenses increased by 20.5% to GBP35.0m (2015: GBP29.1m), however a significant proportion of this increase is due to Transformation Programme costs of GBP4.3m, an impairment charge of GBP0.5m and acquisition costs of GBP0.2m. Excluding these items, administrative expenses were up 3.4%. The main component of administrative costs is staff, the cost of which increased by 6.9% in the period, but which will reduce in 2017 following voluntary redundancy as part of the Transformation Programme.
Net finance costs
Net finance costs reduced to GBP2.3m (2015: GBP2.4m). Included in this figure is the cost of interest at GBP2.1m (2015: GBP2.3m), the reduction being due to a full year of benefit from lower interest rates secured from the renegotiation of external lending facilities in June 2015.
We recorded an unrealised loss of GBP1.2m on interest rate swaps (2015: GBP0.3m gain), primarily due to decreases in market interest rates following the BREXIT referendum. No swaps have been exited during the year, therefore there are no realised gains or losses. This charge does not form part of the underlying results and had no impact on cash.
Taxation
There is no corporate taxation payable on our profits for either 2016 or the comparative year. We have the benefit of an Isle of Man 0% corporate tax rate.
Cash flow
Underlying operating cash flow decreased by 11.3% to GBP22.6m (2015: GBP25.4m) due to a combination of lower reported profit together with a larger year end debtor balance due to timing differences. These balances have since reversed in the early part of the current financial year. Underlying cash flow includes adjustments for the following specific items:
2016 2015
Cash flow GBP'000 GBP'000
--------------------- -------- --------
Operating cash
flow 21,963 25,449
Transformation
Programme costs 495 -
Acquisition costs 110 -
Underlying operating
cash flow 22,568 25,449
--------------------- -------- --------
Our reported free cash flow after investing activities was 9.4% lower at GBP14.1m (2015: GBP15.6m), out of which we serviced our borrowings and paid our dividend to shareholders. Underlying free cash flow, defined as net cash generated from operating activities less cash used in investing activities and adjusted for specific items, was up 5.2% at GBP16.4m. Underlying free cash flow excluded the following specific items:
2016 2015
Cash flow GBP'000 GBP'000
-------------------------- -------- --------
Free cash flow 14,120 15,590
Transformation Programme
costs 495 -
Acquisition of subsidiary 1,668 -
Acquisition costs 110 -
Underlying free cash flow 16,393 15,590
-------------------------- -------- --------
Our solid underlying levels of cash generation enabled us to maintain our net debt at comparable levels year on year, with net debt at GBP52.4m (2015: GBP52.2m), equivalent to 1.9 times underlying EBITDA in both 2016 and 2015.
Capital expenditure
The 2016 capital expenditure, including intangibles, was GBP6.7m (2015: GBP8.0m). In addition to this, the Group acquired a subsidiary, Partitionware, in December 2016.
Significant capital expenditure in the period included a GBP1.1m investment in upgrading our CRM billing and charging platform which went live in 2016, GBP1.4m in the roll out of additional infrastructure to increase the reach of our VDSL high speed broadband network and investment in our mobile network for 4G roaming and LTE of GBP0.6m.
The remaining capital expenditure was spread across a number of business areas including network development for our Global Solutions products, off-island connectivity and Data Centre maintenance capital spend.
Balance sheet
Property, plant and equipment decreased during the year by GBP3.6m to GBP60.3m. Capital additions were GBP6.0m (2015: GBP7.9m), as described above. Depreciation was level year on year at GBP8.9m.
We retain goodwill of GBP84.3m on the balance sheet arising from the purchase of Manx Telecom from Telefónica in 2010, which is robustly supported by current valuations.
The Group operates two pension schemes, a defined benefit scheme, and a defined contribution plan. During 2014 the defined benefit scheme was closed to future accruals, and all current members transferred to a defined contributions scheme. In 2016, the Group completed a triennial revaluation of the scheme and as part of this process agreed reduced annual funding obligations to the scheme for 2017 onwards, down from GBP1.2m per annum to GBP0.6m per annum. Under accounting standard IAS 19 the defined benefit scheme is shown as a liability of GBP5.4m (2015: GBP0.4m asset), despite a GBP14.5m increase in scheme assets. Scheme liabilities increased by GBP21.5m mainly due to a reduction in the discount rate tied to deteriorating corporate bond yields.
Current assets increased to GBP40.8m (2015: GBP36.4m). Cash held at the end of the period increased to GBP16.7m (2015: GBP16.6m). Trade and other receivables increased by GBP3.9m, of which other receivables increased by GBP3.6m, due an increase in roaming discount receivables compared to prior year. A large outstanding amount of the roaming discount receivables was settled in January 2017.
Current liabilities increased to GBP30.6m (2015: GBP24.9m), largely due to provisions for transformation costs of GBP3.8m.
Non-current liabilities increased to GBP76.3m (2015: GBP69.6m), largely due to the movement in the defined benefit pension scheme asset to a liability of GBP5.4m. Interest bearing loans and borrowings were relatively unchanged at GBP69.0m (2015: GBP68.8m), the movement due to the amortisation of borrowing costs. Our loan facility matures on 30 June 2020. The Group has entered into two interest rate swaps, one maturing in June 2018 and one maturing in June 2020. As at 31 December 2016, the fair value of the interest rate swap maturing in June 2018 was a GBP0.9m liability (2015: GBP0.8m), while fair value of the interest rate swap maturing in June 2020 was a GBP1.0m liability (2015: GBP0.1m asset).
Net debt at the period end was GBP52.4m (2015: GBP52.2m), resulting in net debt to underlying EBITDA being maintained at 1.9 times (2015: 1.9 times).
consolidated statement of comprehensive income
for the year ended 31 december 2016
2016 2015
Note GBP'000 GBP'000
---------------------------------------------- ---- -------- --------
Revenue 1 80,823 79,598
Cost of sales (32,229) (31,943)
-------- --------
Gross profit 48,594 47,655
Administrative expenses (35,027) (29,080)
-------- --------
Operating profit 2 13,567 18,575
Underlying EBITDA 27,669 27,654
Depreciation and amortisation (9,142) (9,079)
-------- --------
Underlying operating profit 18,527 18,575
Impairment of equipment 2 (464) -
Transformation Programme 2 (4,335) -
Acquisition costs 2 (161) -
-------- --------
Operating profit 13,567 18,575
---------------------------------------------- ---- -------- --------
Other income 36 50
Financial income 72 170
Finance costs 3 (2,342) (2,576)
Loss on property revaluation (1,274) -
Net (loss)/profit on interest rate swaps (1,238) 334
-------- --------
Profit before tax 8,821 16,553
Taxation - -
---------------------------------------------- ---- -------- --------
Profit for the year attributable to the
owners of the Group 8,821 16,553
---------------------------------------------- ---- -------- --------
Underlying Profit before Tax 16,293 16,219
Impairment of equipment 2 (464) -
Transformation Programme 2 (4,335) -
Acquisition costs 2 (161) -
Loss on property revaluation 2 (1,274) -
Net (loss)/profit on interest rate swaps 2 (1,238) 334
Profit before tax 8,821 16,553
---------------------------------------------- ---- -------- --------
Other comprehensive income - items that
will never be reclassified to profit or
loss
Remeasurement of defined benefit pension
scheme asset (7,000) (3,100)
Gains on property revaluation 1,159 -
---------------------------------------------- ---- -------- --------
Total comprehensive profit for the year
attributable to the owners of the Group 2,980 13,453
---------------------------------------------- ---- -------- --------
Earnings per share from continuing operations
Basic 4 7.82p 14.65p
Diluted 4 7.72p 14.53p
Underlying basic 4 14.44p 14.38p
Underlying diluted 4 14.26p 14.25p
---------------------------------------------- ---- -------- --------
The Directors consider that all results are derived from continuing operations.
consolidated statement
of financial position
as at 31 december 2016
2016 2015
Note GBP'000 GBP'000
-------------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 60,328 63,968
Goodwill 87,911 84,277
Intangible assets 881 364
Retirement benefit asset - 400
Interest rate swaps - 103
149,120 149,112
-------------------------------------------- -------- --------
Current assets
Inventories 905 594
Trade and other receivables 23,230 19,235
Cash and cash equivalents 16,674 16,601
--------------------------------------------- -------- --------
40,809 36,430
-------------------------------------------- -------- --------
Current liabilities
Trade and other payables (26,784) (24,933)
Provisions (3,840) -
--------------------------------------------- -------- --------
(30,624) (24,933)
-------------------------------------------- -------- --------
Net current assets 10,185 11,497
--------------------------------------------- -------- --------
Non-current liabilities
Non-current liabilities
Interest-bearing loans and borrowings (69,036) (68,785)
Interest rate swaps (1,912) (777)
Retirement benefit liability (5,400) -
--------------------------------------------- -------- --------
(76,348) (69,562)
-------------------------------------------- -------- --------
Net assets 82,957 91,047
--------------------------------------------- -------- --------
Equity attributable to the owners
of the Group
Equity attributable to the owners
of the Group and Company
Share capital 226 226
Share premium 84,366 84,347
Revaluation reserve 1,159 -
Retained (losses)/earnings (2,794) 6,474
--------------------------------------------- -------- --------
Total equity 82,957 91,047
--------------------------------------------- -------- --------
consolidated statement of
changes in equity
for the year ended 31 december 2016
Share Share Revaluation Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- ----------- --------- --------
Balance at 1 January
2015 226 84,343 - 3,749 88,318
Total comprehensive
profit for the year
Profit for the year - - - 16,553 16,553
Other comprehensive
(loss) - - - (3,100) (3,100)
------------------------- -------- -------- ----------- --------- --------
Total comprehensive
profit for the year - - - 13,453 13,453
------------------------- -------- -------- ----------- --------- --------
Transactions with owners
of the Group, recorded
directly in equity
Share-based payment
transactions - - - 681 681
Issue of shares - 4 - - 4
Dividend paid - - - (11,409) (11,409)
------------------------- -------- -------- ----------- --------- --------
Total contributions
by and distributions
to the owners of the
Group - 4 - (10,728) (10,724)
------------------------- -------- -------- ----------- --------- --------
Balance at 31 December
2015 226 84,347 - 6,474 91,047
------------------------- -------- -------- ----------- --------- --------
Balance at 1 January
2016 226 84,347 - 6,474 91,047
Total comprehensive
profit for the year
Profit for the year - - - 8,821 8,821
Other comprehensive
(loss) - - 1,159 (7,000) (5,841)
------------------------- -------- -------- ----------- --------- --------
Total comprehensive
profit for the year - - 1,159 1,821 2,980
------------------------- -------- -------- ----------- --------- --------
Transactions with owners
of the Group, recorded
directly in equity
Share-based payment
transactions - - - 887 887
Issue of shares - 19 - - 19
Dividend paid - - - (11,976) (11,976)
------------------------- -------- -------- ----------- --------- --------
Total contributions
by and distributions
to the owners of the
Group - 19 - (11,089) (11,070)
------------------------- -------- -------- ----------- --------- --------
Balance at 31 December
2016 226 84,366 1,159 (2,794) 82,957
------------------------- -------- -------- ----------- --------- --------
consolidated statement of cash flows
for the year ended 31 december 2016
Note 2016 2015
GBP'000 GBP'000
-------------------------------------- ------ --------- --------- --------- ---------
Cash flows from operating activities
Profit for the year 8,821 16,553
Adjustments for:
Depreciation of property,
plant and equipment 8,934 8,886
Amortisation of intangibles 208 193
Impairment of property, plant 464 -
and equipment
Profit on disposal of property,
plant and equipment (36) (50)
Finance income (72) (170)
Finance costs 2,342 2,576
Loss on property revaluation 1,274
Net loss/(profit) on interest
rate swaps 1,238 (334)
Equity-settled share-based
payments transactions 887 681
Pension contributions (1,200) (1,200)
Changes in:
Inventories (311) 200
Trade and other receivables (3,709) (2,527)
Trade and other payables (717) 641
Provisions 3,840 -
-------------------------------------- ------ --------- --------- --------- ---------
13,142 8,896
--------------------------------------------- --------- --------- --------- ---------
Net cash generated from operating
activities 21,963 25,449
---------------------------------------------- --------- --------- --------- ---------
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 178 228
Purchase of property, plant
and equipment (5,700) (10,116)
Purchase of intangible assets (725) (41)
Acquisition of subsidiary (1,668) -
Interest received 72 70
---------------------------------------------- --------- --------- --------- ---------
Net cash used in investing
activities (7,843) (9,859)
---------------------------------------------- --------- --------- --------- ---------
Cash flows from financing activities
Proceeds on issue of shares 19 4
Transaction costs related to
loans and borrowings - (438)
Repayment of borrowings (40) (40)
Interest paid (2,050) (2,262)
Dividends paid (11,976) (11,409)
---------------------------------------------- --------- --------- --------- ---------
Net cash used in financing
activities (14,047) (14,145)
---------------------------------------------- --------- --------- --------- ---------
Net increase in cash and cash
equivalents 73 1,445
Cash and cash equivalents brought
forward 16,601 15,156
---------------------------------------------- --------- --------- --------- ---------
Cash and cash equivalents at
31 December 16,674 16,601
---------------------------------------------- --------- --------- --------- ---------
notes
1 Operating segments
The Group has five reportable revenue segments which management report on and base their strategic decisions on:
Group Group
2016 2015
GBP'000 GBP'000
------------------------------- -------- --------
Fixed Line, Broadband and Data 31,633 32,027
Mobile 20,155 20,058
Global Solutions 15,565 14,122
Data Centre 5,862 7,951
Other 7,608 5,440
------------------------------- -------- --------
80,823 79,598
------------------------------- -------- --------
The segmental analysis shows revenue classified according to market source. However, the Group is not structured on a divisional basis and has functional departments, processes, assets and obligations which serve each of these revenue streams. These are not allocated in the financial reports received by the Board and its decisions are not routinely based on any such identification. Consequently the analysis shown above does not extend to any segmentation of profits and net assets.
There is no inter-segmental trading.
The products and services included within each of the five segments are as follows:
Fixed Line, Broadband and Data includes revenues from ADSL and VDSL rental and connection charges, fixed line call charges, fixed line rental and connection charges, and private circuit rental and connection charges.
Mobile includes revenues from mobile calls, SMS and data charges, mobile rental charges, mobile handset and accessory sales, and roaming.
Global solutions includes revenues from mobile termination, products such as Chameleon, strongest signal mobile and M2M (machine to machine).
Data Centre includes revenues from hosting services provided.
Other includes kit sales, directory revenues and managed service rental charges.
2 Operating profit
The operating profit is stated after charging the following:
2016 2015
GBP'000 GBP'000
------------------------------------------------- -------- --------
Staff costs 15,675 14,670
Depreciation of property, plant and equipment
- owned assets 8,934 8,886
Amortisation of software licences - intangibles 208 193
Impairment of property, plant and equipment 464 -
Net operating lease rentals payable - property 233 254
Acquisition costs 161 -
Transformation Programme 4,335 -
Trade receivables impairment 130 723
Audit services - statutory audit 129 106
- non-audit service fees 14 12
------------------------------------------------ -------- --------
Non-GAAP measures
The adjustments made to reported profit before tax and operating profit are income and charges that are one-off in nature, significant and distort the Group's underlying performance. For the year ended 31 December 2016 these adjustments included:
-- Transformation Programme. In 2016 the Group commenced a programme to transform the business, aimed at improving competitiveness and the customer experience by reshaping the organisation, streamlining processes and investing in supporting technology. As part of this programme, costs of GBP4,335,000 were incurred to 31 December 2016 relating to employee termination benefits, consulting fees and other programme related costs.
-- Acquisition costs. Costs of GBP161,000 were incurred in the acquisition of Partitionware Limited, see note 25 for further information.
-- Unrealised gains and losses on interest rate swaps. In 2016, the Group made an unrealised loss on interest rate swap fair value movements of GBP1,238,000, while in 2015 the Group made a gain of GBP334,000. See notes 14 and 17 for further information.
-- Other gains and losses. During the year the Group revalued land and buildings, with the revaluation of some properties resulting in a loss on revaluation of GBP1,274,000. See note 7 for further information.
-- Impairment of property, plant and equipment. Following continued investment in the Group's mobile network and equipment and platforms used to support Data Centre services, the Group made impairments of certain property, plant and equipment no longer in use, resulting in an expense of GBP464,000.
Additionally, there are the following adjustments to reported cash flows from operating activities and free cash flow that are one-off in nature, significant and distort the Group's underlying performance:
-- Transformation Programme. The Group made cash outflows of GBP495,000 in 2016 in relation to Transformation Programme costs described above.
-- Acquisition of subsidiary. The net cash outflow on acquisition of Partitionware Limited was GBP1,668,000 as detailed in note 25. In addition, the Group also made cash outflows of GBP110,000 in relation to acquisition costs.
3 Finance income and expense
Recognised in profit or loss
2016 2015
GBP'000 GBP'000
--------------------------------------- -------- --------
Finance income
Other interest receivable 72 70
Net interest on pension asset - 100
--------------------------------------- -------- --------
72 170
--------------------------------------- -------- --------
Finance costs
Interest on borrowings (2,044) (2,256)
Finance lease interest (6) (6)
Amortisation of loan transaction costs (292) (314)
Total financial expense (2,342) (2,576)
--------------------------------------- -------- --------
Net total finance expense (2,270) (2,406)
--------------------------------------- -------- --------
4 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
4.1 Reported earnings per share
The calculation of the reported earnings per share has been based on the weighted average number of shares outstanding during the period (as above) and the Profit/(loss) for the period after tax attributable to the owners of the Group ('Earnings').
Basic Diluted
Thousands earnings Thousands earnings
Earnings of shares per of shares per
GBP'000 (Basic) share (Diluted) share
----------------- -------- ---------- --------- ---------- ---------
31 December 2015 16,553 112,824 14.65p 113,829 14.53p
----------------- -------- ---------- --------- ---------- ---------
31 December 2016 8,821 112,841 7.82p 114,259 7.72p
----------------- -------- ---------- --------- ---------- ---------
4.2 Underlying earnings per share
The calculation of underlying earnings per share has also been included to enable shareholders to assess the results of the Group excluding income and charges detailed in note 2 that are one-off in nature, significant and distort the Group's underlying performance.
Basic Diluted
Thousands earnings Thousands earnings
Earnings of shares per of shares per
GBP'000 (Basic) share (Diluted) share
----------------- -------- ---------- --------- ---------- ---------
31 December 2015 16,219 112,824 14.38p 113,829 14.25p
----------------- -------- ---------- --------- ---------- ---------
31 December 2016 16,293 112,841 14.44p 114,259 14.26p
----------------- -------- ---------- --------- ---------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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