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RNS Number:1127M TeleCity PLC 10 June 2003 10 June 2003 TeleCity plc lst Quarter Results Key Points * Q1 EBITDA positive #0.2m (Q1 2002: #1.8m loss). * Healthy sales pipeline. * 45 new customers in Q1. Customer base now totals 325. * Key wins across a number of sectors. * Bridgewell Securities appointed broker. Michael Hepher, Chairman, said: "During the first quarter of 2003 TeleCity achieved a number of important milestones as the effects of 2002's Company-wide restructuring started to be seen. The Company saw substantial customer wins across a number of sectors and, for the first time, achieved a positive EBITDA, the level of which we expect to be maintained throughout 2003. "2003 has started well for TeleCity, although we are not complacent and recognise that this is a turnaround year for the Company. With profitability at EBITDA level, the continued sales focus, growth in customer acquisitions and diversity, together with more stable market conditions the Company is well-positioned for a good year." For further information: TeleCity 020 7519 4887 Rick Hudson, Chief Executive Josh Joshi, Finance Director Citigate Dewe Rogerson 020 7638 9571 Sue Pemberton/Freida Davidson First Quarter 2003 Results Overview During the first quarter of 2003 TeleCity achieved a number of important milestones as the effects of 2002's Company-wide restructuring started being seen. The Company, for the first time, achieved a positive EBITDA of #0.2m in the first quarter (Q1 2002: #1.8m loss), and is the first amongst its peers in the European colocation sector to report EBITDA profitability. This financial performance has been due partially to a scaling down of the Company's cost base, which has been reduced by 28% compared with the first quarter of 2002, and partially to the successful results of an initiative to acquire new customers outside of the traditional telecommunications service provider sector. When the reductions in the cost base were implemented, great care was taken to ensure that the Company's high standards of operational performance and customer service were not compromised. The Company's success in achieving this objective was best illustrated in February 2003 when it won the ISPA 2003 Award for Best Colocation Provider. Under the new country management structure, local management focus continues to bring immediate benefits to the business performance of the Company's European locations. During the first quarter, TeleCity added 45 new customers to its customer base, with the number of customers standing at 325 at the quarter end. Results Turnover during the first quarter stood at #5.9m (Q1 2002: #6.2m), which is in line with that reported for the last quarter of 2002. There were no exceptional items during the period (Q1 2002: #2.5m). The positive EBITDA of #0.2m compares to a loss of #0.8m during the last quarter of 2002 and a loss of #1.8m during the corresponding period of 2002 (both comparatives before exceptional items). This improvement in profitability has been achieved through increased productivity, reduced headcount and the completion of the exit from all surplus properties. The provisions previously made to cover the cost of termination premiums and rent-free periods for surplus properties are expected to be sufficient to ensure that such payments will not impact the Company's ongoing EBITDA performance. Of the remaining cash outflow in respect of these properties, which totals #2.4m, #2.3m will be paid before the end of this financial year. The cash balance of #4.9m is ahead of budget, reflecting active working capital management across the Group. Management expects the level of first quarter EBITDA performance to be broadly maintained throughout 2003, the pace of improvement being tempered by the expiry of a small number of significant contracts secured during 2000 which are not expected to be renewed on the same terms. This 'churn' of the contract bank has been accounted for in the 2003 budget, and is forecast to be more than offset by new business. Sales and Marketing The first quarter saw substantial customer wins for the business. Sales order intake exceeded budget following the significant increases seen in the last quarter of 2002, with enquiry levels and the pipeline of potential contracts both continuing to increase. A further milestone in the first quarter, which demonstrates the success of the country management structure, was the winning of new business in each of the six countries in which TeleCity operates. This was achieved in January, the first time in the Company's history, and was then repeated again in February and March. Building on the industry recognition for high levels of customer service, TeleCity receives growing levels of enquiries from businesses unhappy with their existing datacentre providers. This has resulted in a number of agreements being secured from customers migrating their infrastructure to TeleCity facilities. TeleCity has enhanced its ability to deliver managed services and corporate solutions, rather than just suited colocation space, and this has directly influenced customer choices during the quarter. With the increase in the number of customers at the end of the period, the diversification of the customer base has continued to increase, thereby reducing the Company's reliance upon a small number of large telecommunications customers and providing a solid foundation for the Company's long-term prospects. Highlights during the first quarter included securing contracts in the media sector with a major hosting contract for Sony Computer Entertainment Europe and, in the public sector, with Karolinska, one of Sweden's largest teaching hospitals, who chose TeleCity in Stockholm to host their critical IT platform. Since the end of March key wins have included Vodafone Global Content Services for managed maintenance and support services and, in the finance sector, a significant contract was agreed with Tullett plc, a leading global brokerage firm. Corporate Broker The Board is pleased to announce that Bridgewell Securities Ltd has been appointed as financial adviser and stockbroker to the Company with immediate effect. Outlook 2003 has started well for TeleCity, although we are not complacent, and recognise that this is a turnaround year for the Company. We continue to budget prudently, and anticipate that there will be reductions in the amount of space taken by some of TeleCity's traditional client base as contracts come up for renewal. The phasing of contract renewals during the second quarter may cause a slight dip in that quarter's EBITDA, but if this is the case it should reverse quickly during the second half of the year. The lack of any material customer failures in the last three quarters has been encouraging and, as we look forward, the increasing numbers of small to medium enterprises and corporate customers signals a return to top-line growth for the Company. Profitability at the EBITDA level, continued sales focus, growth in customer acquisition and diversity together with a more stable market will provide a platform for a good year at TeleCity. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the three months ended 31 March 2003 Three months Three months Year 31 March 31 March 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Continuing operations Turnover -- before exceptional item 5,912 6,159 23,750 -- exceptional item --- --- 1,204 5,912 6,159 24,954 Operating loss -- EBITDA before exceptional items 208 (1,762) (5,258) -- depreciation (1,654) (2,374) (9,223) -- exceptional items 2 --- (2,485) (26,207) (1,446) (6,621) (40,688) Net interest (payable)/receivable (24) 99 84 Loss on ordinary activities before taxation (1,470) (6,522) (40,604) Taxation --- --- --- Retained loss for the period attributable to ordinary shareholders (1,470) (6,522) (40,604) Loss per ordinary share - basic and diluted 3 (0.7)p (3.3)p (20.2)p CONSOLIDATED BALANCE SHEET at 31 March 2003 31 March 31 March 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Fixed assets Tangible assets 46,996 70,497 47,130 Current assets Stocks 21 51 21 Debtors 7,323 5,715 6,635 Cash at bank and in hand 4 4,925 14,369 6,476 12,269 20,135 13,132 Creditors - amounts falling due Within one year Borrowings (89) (28) (84) Other (14,098) (15,804) (14,305) Net current (liabilities)/ assets (1,918) 4,303 (1,257) Total assets less current liabilities 45,078 74,800 45,873 Creditors - amounts falling due After more than one year Borrowings (1,411) (102) (1,334) Provisions for liabilities and charges (5,419) (4,480) (5,991) Net assets 38,248 70,218 38,548 Capital and reserves Called up share capital 201 201 201 Share premium account 111,735 111,735 111,735 Merger reserve 17,862 17,862 17,862 Profit and loss account (91,550) (59,580) (91,250) Equity shareholders' funds 38,248 70,218 38,548 Movement in shareholders' funds Opening shareholders' funds 38,548 76,455 76,455 Translation differences 1,170 285 2,697 Loss for the financial period (1,470) (6,522) (40,604) Closing shareholders' funds 38,248 70,218 38,548 CASH FLOW STATEMENT for the three months ended 31 March 2003 Three months Three months Year 31 March 31 March 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Net cash outflow from operations 5 (1,480) (1,878) (8,066) Returns on investment and servicing of finance Net interest received 14 136 231 Taxation paid --- --- --- Capital expenditure and financial investment Net purchase of tangible fixed assets (303) (953) (2,885) Net cash outflow before management of liquid resources and financing (1,769) (2,695) (10,720) Management of liquid resources --- 2,152 11,794 Financing Repayment of loan --- --- (10) Capital element of finance lease payments --- (37) (87) Expenses paid in connection with finance raised --- (706) (706) --- (743) (803) (Decrease)/increase in cash in period (1,769) (1,286) 271 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in period (1,769) (1,286) 271 Management of liquid resources --- (2,152) (11,794) (1,769) (3,438) (11,523) Repayment of loan --- --- 10 Capital element of finance lease payments --- 37 87 Change in net funds arising from cash flows (1,769) (3,401) (11,426) New finance leases --- --- (1,295) Translation differences 136 13 152 Movement in net funds in period (1,633) (3,388) (12,569) Opening net funds 5,058 17,627 17,627 Closing net funds 3,425 14,239 5,058 Net funds analysed as follows: Cash at bank and in hand 4,925 14,369 6,476 Borrowings repayable within one year (89) (28) (84) Borrowings repayable after more than one year (1,411) (102) (1,334) 3,425 14,239 5,058 Notes to the accounts 1 Basis of preparation 2 Exceptional items The exceptional items in prior periods are analysed as follows: Three months Year 31 March 31 December 2002 2002 #'000 #'000 Exceptional revenue --- 1,204 Provision against fixed assets (2,485) (24,939) Costs and provisions in respect of exiting property lease contracts --- (870) Redundancy costs incurred --- (1,880) Other --- 278 (2,485) (26,207) 3 Loss per ordinary share The loss per ordinary share is based on the loss attributable to ordinary shareholders of #1,470,000 (31 March 2002 #6,522,000 31 December 2002 #40,604,000) and the weighted average number of shares in issue (as adjusted for the effect of Rights and Bonus Issues) of 200,670,707 (31 March 2002 200,538,551, 31 December 2002 200,590,533). As the impact of issuing potential ordinary shares is anti-dilutive, the diluted loss per share is equivalent to the basic loss per share. 4 Cash at bank and in hand Cash balances at 31 March 2003 include #1,955,000 (31 March 2002 #1,821,000, 31 December 2002 #1,889,000) held in deposit accounts which are pledged to the Bank of Scotland in respect of bank guarantees given on property lease contracts. 5 Reconciliation of operating loss to net cash outflow from operations Three months Three months Year 31 March 31 March 31 December 2003 2002 2002 #'000 #'000 #'000 Operating loss (1,446) (6,621) (40,688) Depreciation including profit/loss on disposal 1,654 2,374 9,223 Provision against fixed assets --- 2,485 24,939 Movement in provision for liabilities and charges (731) --- 1,326 Movement in working capital (957) (116) (2,866) (1,480) (1,878) (8,066) END This information is provided by RNS The company news service from the London Stock Exchange END QRFUKUBROORNRAR
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