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RNS Number:7514P TeleCity PLC 15 September 2003 15 September 2003 TeleCity plc Interim Results - Half year to 30 June 2003 Key Points * Eight consecutive quarters of EBITDA improvement. * Second consecutive quarter of positive EBITDA. * Customer numbers now totalling over 360 - a 30% increase since last year end. * Operational cash consumption of #2.3m, a 50% decrease compared to #4.8m in the same period last year. * Sales orders 90% up on the same period in 2002. * Services increased to over 43% of new sales order by value. Michael Hepher, Chairman, said: "TeleCity has continued to build the foundations of a solid long-term business. The first half of 2003 has demonstrated its ability to diversify successfully its customer base, winning business from a wider range of sectors including finance, health, media and corporate enterprise. TeleCity is well positioned to benefit substantially from an upturn in the general market demand for outsourced data centre services. Albeit slow, the market is showing evidence of improvement, aiding, in turn, the momentum of the turnaround at TeleCity. The Board remains confident that 2003 will be a good year for the Company and will provide a solid platform for 2004." For further information: TeleCity 020 7512 3500 Rick Hudson, Chief Executive Josh Joshi, Finance Director Citigate Dewe Rogerson 020 7638 9571 Sue Pemberton/Freida Davidson 2003 Interim Results Overview The first half of 2003 has seen TeleCity pass a number of critical milestones. With the announcement of the first quarter results the Company became the first carrier-diverse, European colocation provider to report profitability at the EBITDA level. With the second quarter's results also reporting a positive EBITDA, this profitability has been maintained and represents the eighth consecutive quarter of EBITDA improvement. Despite difficult market conditions over the last two years, the Company has, quarter on quarter, continued to build the foundations of a solid long-term business. Whilst reducing cost and exiting from surplus properties have played a crucial part in delivering this turnaround, maintaining revenues and diversifying the customer base have played an equal role. In the first half of 2003 more customers chose TeleCity as their data centre provider than during the whole of 2002. Since the beginning of the year the customer base has grown by nearly 30% to 360 customers and, equally importantly, this growth has seen the Company make significant inroads into new markets. 2003 started well and has continued in a similar vein. The Board remains confident that the Company will maintain this performance for the rest of the year. Interim Results to 30 June 2003 Turnover for the quarter ended 30 June 2003 was #5.9m, unchanged from the first quarter, resulting in #11.8m for the half-year compared to #12.2m during the corresponding period last year. As anticipated in the Company's first quarterly announcement, during the second quarter some customers reduced their space commitment as part of the contract renewal process, but in each case the resulting agreements were an improvement on the Company's conservative forecasts for the negotiations. These reductions have masked revenue gains achieved through increased business from existing customers and contracts signed with new customers which have resulted in turnover remaining flat quarter on quarter. The positive EBITDA of #0.5m for the half-year compares to a loss of #3.3m in the corresponding period last year (prior period stated before exceptional items). EBITDA during the second quarter, increased to #0.3m from #0.2m in Q1 and compares to a loss of #1.5m in Q2 2002. The cash balance of #4.1m at 30 June 2003 is in line with the Company's forecasts. Cash outflow from operations for the half-year was #2.3m compared to #4.8m in the corresponding period last year, an improvement of #2.5m. The cash effect of exceptional items, such as residual payments incurred in exiting surplus lease commitments, accounted for #1.3m of the cash outflow from operations. The cash outflow from operations before these exceptional items was just #1.0m in the half year, compared to #4.8m in the corresponding period last year. Sales and Marketing Total sales order value (annualised) for the six months showed a 90% improvement on the same period in 2002. 80 new customers are included in this sales order value, which represents over 100% improvement compared to the number of new customers won during the same period last year. In the media sector the Company has continued to secure a foothold in the rapidly expanding online gaming market, with the addition of leading Dutch online provider Disec Consultancy this quarter and the signing of Sony Computer Entertainment Europe, which was announced in Q1. In Paris, our most important broadcast client also extended their existing contract significantly. The Company's continued strength in the colocation market has been instrumental in encouraging customers to relocate away from our competitors to a TeleCity site. In June it was announced that Positive Internet, one of the UK's largest Internet Service Providers, had chosen to move to TeleCity. Evidence of recovery in the telecoms and ISP market is being demonstrated by new agreements with international businesses looking to expand into Europe. For example, in the first half of the year the Company has been successful in securing a number of agreements with Russian telecom service providers looking for a first footprint in Western Europe. New agreements with major service providers such as Infonet, LambdaNet and Neo Telecoms (formerly MFN France) also signal encouraging signs of growth in the Company's more traditional markets. The agreement with Neo Telecoms, signed in Paris, builds on an already strong year in France and is a major step towards taking the Paris facility EBITDA positive. Importantly, the Company is also retaining its existing customers. There were no significant bad debts from bankrupt companies during the six months, and all customers whose contracts ended during the period chose to renew. It is particularly gratifying that two global system integrators, including Fujitsu Services, chose to retain their platforms at the Company's sites, from which they each provide service to a number of major global customers. The customer base continues to diversify as a consequence of the growth in new business and the change of fortunes in the telecoms sector. After the recent Industry changes, "Alternative Carriers" now represent just 18% of the contract bank, although the somewhat resurgent PTT and other carrier markets has increased to 37%. The remainder of the Company's revenue base comprises ISPs (20%) and the rapidly growing enterprise sector (10%) and content and hosting companies (15%). Board changes Due to other business commitments, Josef Ellmauer resigned as a non-executive Director in June. The Board was particularly sorry to see him leave as Mr Ellmauer had made a valuable contribution to the Company and had been a source of wise counsel to the Board. Company Developments TeleCity's ability to deliver managed services and corporate solutions has contributed to revenue significantly during 2003. In the first six months of 2002, 30% of new sales order by value related to services, whereas in the first half of 2003 this figure increased to over 43%. In particular, the Company's managed bandwidth solutions are proving popular, with 34% of customers signing new contracts this year choosing to purchase IP services in addition to their data centre requirements. In 2003, the Company has widened and improved its market positioning and maintained its market share. Amongst its peers, TeleCity is emerging as a market leader in four of the seven cities in which it operates. In London, approximately 20% of publicly peered network traffic already flows through switches located in a TeleCity site. This figure is approximately 25% and 50% in the Amsterdam and Manchester facilities respectively. The Company's ambition is to create a similarly prominent position in all of the cities in which it operates. Outlook Whilst successful in both the local and pan-European markets, TeleCity's historical focus has been in winning customers in the telecommunications, technology and Internet sectors. The first half of 2003 has demonstrated the Company's ability to diversify successfully this customer base, winning business from a wider range of sectors including finance, health, media and corporate enterprise. TeleCity is well positioned to benefit substantially from an upturn in the general market demand for outsourced data centre services. Albeit slow, the market is showing evidence of improvement, aiding, in turn, the momentum of the turnaround at TeleCity. The Board remains confident that 2003 will be a good year for the Company and will provide a solid platform for 2004. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the six months ended 30 June 2003 Six months Six months Year 30 June 30 June 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Continuing operations Turnover -- before exceptional item 11,827 12,170 23,750 -- exceptional item --- --- 1,204 11,827 12,170 24,954 Operating loss -- EBITDA before exceptional items 484 (3,256) (5,258) -- depreciation (3,366) (4,687) (9,223) -- exceptional items 2 --- (9,152) (26,207) (2,882) (17,095) (40,688) Net interest (payable)/receivable (53) 177 84 Loss on ordinary activities before taxation (2,935) (16,918) (40,604) Taxation --- --- --- Retained loss for the period attributable to ordinary shareholders (2,935) (16,918) (40,604) Loss per ordinary share - basic and diluted 3 (1.5)p (8.4)p (20.2)p CONSOLIDATED BALANCE SHEET at 30 June 2003 30 June 30 June 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Fixed assets Tangible assets 45,707 67,602 47,130 Current assets Stocks 26 32 21 Debtors 6,998 7,415 6,635 Cash at bank and in hand 4 4,091 11,088 6,476 11,115 18,535 13,132 Creditors - amounts falling due within one year Borrowings (91) (10) (84) Other (13,346) (17,813) (14,305) Net current (liabilities)/assets (2,322) 712 (1,257) Total assets less current liabilities 43,385 68,314 45,873 Creditors - amounts falling due after more than one year Borrowings (1,419) (106) (1,334) Provisions for liabilities and charges (4,911) (6,092) (5,991) Net assets 37,055 62,116 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 (92,745) (67,682) (91,250) Equity shareholders' funds 37,055 62,116 38,548 Movement in shareholders' funds Opening shareholders' funds 38,548 76,455 76,455 Translation differences 1,440 2,579 2,697 Loss for the financial period (2,935) (16,918) (40,604) Shares issued 2 --- --- Closing shareholders' funds 37,055 62,116 38,548 CASH FLOW STATEMENT for the six months ended 30 June 2003 Six months Six months Year 30 June 30 June 31 December 2003 2002 2002 Notes #'000 #'000 #'000 Net cash outflow from operations 5 (2,342) (4,832) (8,066) Returns on investment and servicing of finance Net interest received 58 196 231 Taxation paid --- --- --- Capital expenditure and financial investment Net purchase of tangible fixed assets (340) (1,468) (2,885) Net cash outflow before financing and management of liquid resources (2,624) (6,104) (10,720) Management of liquid resources --- 4,967 11,794 Financing Proceeds of issue of share capital 2 --- --- Repayment of loan (5) (3) (10) Capital element of finance lease payments --- (55) (87) Expenses paid in connection with finance raised --- (706) (706) (3) (764) (803) (Decrease)/increase in cash in period (2,627) (1,901) 271 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in period (2,627) (1,901) 271 Management of liquid resources --- (4,967) (11,794) (2,627) (6,868) (11,523) Repayment of loan 5 3 10 Capital element of finance lease payments --- 55 87 Change in net funds arising from cash flows (2,622) (6,810) (11,426) New finance leases --- --- (1,295) Translation differences 145 155 152 Movement in net funds in period (2,477) (6,655) (12,569) Opening net funds 5,058 17,627 17,627 Closing net funds 2,581 10,972 5,058 Net funds analysed as follows: Cash at bank and in hand 4,091 11,088 6,476 Borrowings repayable within one year (91) (10) (84) Borrowings repayable after more than one year (1,419) (106) (1,334) 2,581 10,972 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 June 2003 have been prepared on the going concern basis. The accounts to 30 June 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: Six months Year 30 June 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 lease contracts (1,625) (870) Redundancy costs incurred (777) (1,880) Other --- 278 (9,152) (26,207) 3 Loss per ordinary share The loss per ordinary share is based on the loss attributable to ordinary shareholders of #2,935,000 (30 June 2002 - #16,918,000, 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 201,313,534 (30 June 2002 - 200,571,027, 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 June 2003 include #1,966,000 (30 June 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 Six months Six months Year 30 June 30 June 31 December 2003 2002 2002 #'000 #'000 #'000 Operating loss (2,882) (17,095) (40,688) Depreciation including profit/loss on disposal 3,366 4,687 9,223 Provision against fixed assets --- 6,750 24,939 Movement in provision for liabilities and charges (1,296) 1,575 1,326 Movement in working capital (1,530) (749) (2,866) (2,342) (4,832) (8,066) This information is provided by RNS The company news service from the London Stock Exchange END IR ZGGMLGKDGFZM
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