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RNS Number:1125S TeleCity PLC 17 November 2003 17 November 2003 TeleCity plc 2003 Third Quarter Results for the quarter ended 30 September 2003 Key Points * Q3 EBITDA of #0.3m - the 9th consecutive quarter of improvement * EBITDA profit of #0.8m for the nine months, compared to #4.5m loss for the same period last year * Customer numbers in excess of 420 - a 70% increase over last year * Some significant and strategic customer wins such as the DE-CIX German Internet Exchange in Frankfurt * #2.5m overdraft facility for working capital purposes now in place * Operational cash consumption of #3.4m for the nine months, a 56% decrease compared to #7.8m for the same period last year Michael Hepher, Chairman, said: "TeleCity has seen a continuing turnaround in performance during the 3rd quarter. Our customer numbers have continued to increase and there have been some significant wins, particularly in the corporate and enterprise markets. "The Board expects that trading for the remainder of the year will remain stable and that the Company remains well positioned to benefit substantially from an upturn in general market demand." For further information: TeleCity 020 7519 4886 Rick Hudson, Chief Executive Josh Joshi, Finance Director Citigate Dewe Rogerson 020 7638 9571 Sue Pemberton/Anthony Kennaway 2003 Third Quarter Results for the quarter ended 30 September 2003 Overview The turnaround in performance at TeleCity continued into the third quarter. Revenues have been maintained; profitability at the EBITDA level has improved; operating cash outflows have reduced significantly; and the customer base continues to grow and diversify. As a pan-European provider of colocation and related managed services, TeleCity is emerging as a market leader within Europe and remains well positioned to benefit substantially from an upturn in general market demand. Results Turnover for the third quarter was #5.9m, unchanged from the second quarter but slightly increased from #5.8m in the same period last year. Turnover for the nine months ended 30 September 2003 was #17.7m, just below the #17.9m in the same period last year. This stable trend in revenues masks two opposing factors affecting the Company's financial performance. First, during the nine months to 30 September 2003 nearly #6m of business was won through the acquisition of new customers and the renewal of existing contracts. All contracts are for a minimum of a year, and on average are for approximately 2.5 years. Over 80% of this new business is recurring revenues, and has an annualised revenue impact in excess of #4.7m per annum. Second, in annualised revenue terms, the success in signing new customers has been tempered in almost equal measure by the planned reduction by some customers who over-committed for space at the peak of the market. This realignment is now largely complete, and as space reductions become less of a feature of the business mix, the positive growth from new business can start to lift overall revenues. The positive EBITDA of #0.8m for the nine months compares to a loss of #4.5m in the corresponding period last year (prior period stated before exceptional items). EBITDA for the three months to 30 September 2003 was #291,000, improved from #276,000 in Q2. Cash continues to track expectations. Cash outflow from operations for the nine months was #3.4m compared to #7.8m for the same period last year, an improvement of #4.4m. Included within cash outflow from operations is the cash outflow of exceptional items, such as residual payments incurred in exiting surplus leases. Cash outflow from operations before these exceptional cash items was #1.7m in the period, compared to #6.4m in the same period last year. Sales and Marketing Customers numbered 420 at the end of the quarter having passed the 400 mark for the first time. This represents a 70% increase over the last year, and the Company continues to win approximately 20 new customers each month. Of particular importance was the agreement to house the DE-CIX German Internet Exchange in Frankfurt. This significantly enhances the attractiveness of the Frankfurt facility and is the result of a continued strategy by the Company to achieve prominence in housing peering exchanges. We are also pleased to announce that, after the close of the third quarter, the Company was chosen by Nexagent to host one of their peering points in Frankfurt. We believe that this could deliver significant business for TeleCity in Germany, and hope to further extend our relationship with Nexagent to other locations in 2004. Our traditional markets of Telecommunications and Internet Service Providers show positive signs of recovery. We were delighted to add ESB Telecoms and DataPipe to our client list in the period and to extend or renew agreements with T-Systems, Real Data Services and LambdaNet. Our diversification into the corporate and enterprise markets continues steadily, with 32% of new sales by order value in the nine months coming from these sectors, examples being our support of G&V Associates in Paris, Synstar in Frankfurt and Skyways in Stockholm. Additionally, 18% of new sales were to ASP, Content and Hosting businesses. We are particularly pleased that two important new customers announced in the first quarter, Sony Computer Entertainment Europe and Tullett Liberty, have both augmented their contractual agreements with TeleCity in the period. Our managed IP platforms continue to add value to our core data centre services, with over 40% of new customer contracts in the period including the provision and management of IP. Other managed services added to the portfolio more recently (back-up, storage, monitoring and security) have all been positively received, but have yet to make a material contribution to our revenues. Overall, the services portion of new sales in Q3 was over 45%. Overdraft Facility In October, the Company entered into a #2.5m overdraft facility with its bankers. This facility is for working capital purposes and is supported by a secured guarantee from 3i Group plc. The security for this guarantee required shareholder approval, which was obtained at an Extraordinary General Meeting on 6th November 2003. Outlook The Board expects that trading for the remainder of the year will remain stable and that overall 2003 will be a good year for the Company with the improvements in the business continuing as planned which will provide a solid platform for 2004. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the nine months ended 30 September 2003 Nine months Nine months Year 30 September 30 September 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Continuing operations Turnover -- before exceptional item 17,705 17,933 23,750 -- exceptional item -- -- 1,204 17,705 17,933 24,954 Operating loss -- EBITDA before exceptional items 775 (4,493) (5,258) -- depreciation (5,084) (7,044) (9,223) -- exceptional items 2 -- (9,742) (26,207) (4,309) (21,279) (40,688) Net interest (payable)/receivable (225) 216 84 Loss on ordinary activities before taxation (4,534) (21,063) (40,604) Taxation -- -- -- Retained loss for the period attributable to ordinary shareholders (4,534) (21,063) (40,604) Loss per ordinary share - basic and diluted 3 (2.2)p (10.5)p (20.2)p CONSOLIDATED BALANCE SHEET at 30 September 2003 30 September 30 September 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Fixed assets Tangible assets 44,512 64,749 47,130 Current assets Stocks 24 38 21 Debtors 6,856 6,894 6,635 Cash at bank and in hand 4 2,765 7,079 6,476 9,645 14,011 13,132 Creditors - amounts falling due within one year Borrowings (151) (10) (84) Other (12,354) (15,526) (14,305) Net current liabilities (2,860) (1,525) (1,257) Total assets less current liabilities 41,652 63,224 45,873 Creditors - amounts falling due after more than one year Borrowings (1,429) (98) (1,334) Provisions for liabilities and charges (4,532) (6,406) (5,991) Net assets 35,691 56,720 38,548 Capital and reserves Called up share capital 203 201 201 Share premium account 111,735 111,735 111,735 Merger reserve 17,862 17,862 17,862 Profit and loss account (94,109) (73,078) (91,250) Equity shareholders' funds 35,691 56,720 38,548 Movement in shareholders' funds Opening shareholders' funds 38,548 76,455 76,455 Translation differences 1,675 1,328 2,697 Loss for the financial period (4,534) (21,063) (40,604) Shares issued 2 -- -- Closing shareholders' funds 35,691 56,720 38,548 CASH FLOW STATEMENT for the nine months ended 30 September 2003 Nine months Nine months Year 30 September 30 September 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Net cash outflow from operations 5 (3,424) (7,769) (8,066) Returns on investment and servicing of finance Net interest (paid)/received (61) 273 231 Taxation paid -- -- -- Capital expenditure and financial investment Net purchase of tangible fixed assets (517) (2,496) (2,885) Net cash outflow before financing and management of liquid resources (4,002) (9,992) (10,720) Management of liquid resources 42 9,292 11,794 Financing Proceeds of issue of share capital 2 -- -- Repayment of loan (9) (7) (10) Capital element of finance lease payments -- (55) (87) Expenses paid in connection with finance raised -- (706) (706) (7) (768) (803) (Decrease)/increase in cash in period (3,967) (1,468) 271 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in period (3,967) (1,468) 271 Management of liquid resources (42) (9,292) (11,794) (4,009) (10,760) (11,523) Repayment of loan 9 7 10 Capital element of finance lease payments --- 55 87 Change in net funds arising from cash flows (4,000) (10,698) (11,426) New finance leases --- --- (1,295) Translation differences 127 42 152 Movement in net funds in period (3,873) (10,656) (12,569) Opening net funds 5,058 17,627 17,627 Closing net funds 1,185 6,971 5,058 Net funds analysed as follows: Cash at bank and in hand 2,765 7,079 6,476 Borrowings repayable within one year (151) (10) (84) Borrowings repayable after more than one year (1,429) (98) (1,334) 1,185 6,971 5,058 Notes to the accounts 1 Basis of preparation The Directors consider that the Company has adequate resources to continue in operation for the foreseeable future. Accordingly, the accounts for the period ended 30 September 2003 have been prepared on the going concern basis. The accounts to 30 September 2003 are unaudited. They have been prepared using accounting policies consistent with those used in the statutory accounts for the year ended 31 December 2002. These accounts do not comprise full financial statements within the meaning of the Companies Act 1985. The full accounts of TeleCity plc for the year ended 31 December 2002, on which the auditors gave an unqualified audit report, have been delivered to Companies House. 2 Exceptional items The exceptional items in prior periods are analysed as follows: Nine months Year 30 September 31 December 2002 2002 #'000 #'000 Exceptional revenue --- 1,204 Provision against fixed assets (6,750) (24,939) Costs and provisions in respect of exiting property (1,625) (870) lease contracts Redundancy costs incurred (1,367) (1,880) Other --- 278 (9,742) (26,207) 3 Loss per ordinary share The loss per ordinary share is based on the loss attributable to ordinary shareholders of #4,534,000 (30 September 2002 - #21,063,000, 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 201,816,839 (30 September 2002 - 200,583,766, 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 30 September 2003 include #1,933,000 (30 September 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 Nine months Nine months Year 30 September 30 September 31 December 2003 2002 2002 #'000 #'000 #'000 Operating loss (4,309) (21,279) (40,688) Depreciation including profit/loss on disposal 5,084 7,044 9,223 Provision against fixed assets --- 6,750 24,939 Movement in provision for liabilities and charges (1,750) 1,852 1,326 Movement in working capital (2,449) (2,136) (2,866) (3,424) (7,769) (8,066) This information is provided by RNS The company news service from the London Stock Exchange END QRTUSSNROVRAAAA
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