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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 May 2019 to May 2024
TIDMMANX
RNS Number : 7646H
Manx Telecom PLC
15 March 2018
15 March 2018
Manx Telecom Plc
Results for the year ended 31 December 2017
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 2017.
Financial Highlights
-- Revenues of GBP78.5m (2016: GBP80.8m)
- Fixed Line, Broadband and Data revenues remained stable at GBP31.5m (2016: GBP31.6m), with a good
uptake of high-speed broadband
- Mobile revenues are 1.4% lower due to competitive roaming charges associated with our new roaming product, SmartRoam. Excluding retail roaming, revenue was up 3.1% year on year
- Global Solutions revenues continued to grow, up 6.2% year on year, with particularly strong growth in Machine to Machine (M2M) and the international traveller market
- As anticipated, Data Centre revenues were impacted by the previously reported customer consolidation, falling 19.0% year on year but improving in H2 (up 4.9% compared with H1)
- Other revenues decreased by 23.0% to GBP5.9m, predominately as a result of the rescheduling of the directory
distribution in 2016
Hot Features
Premium
-- Underlying EBITDA was moderately lower at GBP27.1m (2016: GBP27.7m) after incentive payments, triggered by the
excellent underlying cash performance. Reported EBITDA increased to GBP23.1m (2016: GBP22.7m), primarily
reflecting lower Transformation Programme costs in the year of GBP3.9m (2016: GBP4.3m)
-- Underlying Profit Before Tax of GBP15.1m (2016: GBP16.3m) following higher depreciation charges in the year.
Reported Profit Before Tax of GBP11.9m (2016: GBP8.8m)
-- Strong underlying free cash flow, up 22.1% at GBP20.0m (2016: GBP16.4m). Reported free cash flow, down 35.7% at
GBP9.1m (2016: GBP14.1m)
-- Net debt at the period end of GBP56.9m (2016: GBP52.4m) due to cash investment in our Transformation Programme
during the year. This resulted in a net debt/underlying EBITDA ratio of 2.1x (2016: 1.9x)
-- Final dividend of 7.5p (2016: 7.2p) making 11.4p for the full year (2016: 10.9p), in line with the Company's
progressive dividend policy
Operational Highlights
-- Roll-out of Fibre to the Premises ('FTTP') programme started, providing ultrafast fibre broadband to selected
areas of the Isle of Man
-- Transformation Programme on track, with the majority of exceptional costs now incurred and due to deliver
benefits from 2018
-- Good progress at Vannin Ventures, our new business incubator
- Acquisition of a controlling stake in Goshawk Communications Limited, which provides telecom solutions for those with hearing difficulty
- Partitionware, the software developer acquired by Vannin Ventures, is performing well -- Continued growth in Global Solutions
- China Unicom UK mobile and roaming product now fully operational ahead of the 2018 travel season, with initial revenues generated under the agreement in H2 2017
Gary Lamb, Chief Executive Officer, said:
"I am very pleased to report a solid performance for 2017.
The dedication and hard work of our people has been outstanding during 2017 and is the reason we have delivered a very good result in a period of significant change during our Transformation Programme.
Our core business has remained stable, with a solid performance in Fixed Line, Broadband and Data Services, Mobile and further growth in our Global Solutions business.
Vannin Ventures, our business incubator, has successfully integrated Partitionware following the acquisition in December 2016, and has acquired a majority stake in Goshawk Communications, a provider of technology for those with hearing loss, bringing exciting growth potential in the medium term.
We remain confident in the outlook for the Group, which is reflected in the maintenance of our progressive dividend policy. The strong underlying cashflow performance during the year reflects our focus on working capital and control over capital expenditure, and enables us to create value for our shareholders and invest in our network infrastructure in the Isle of Man."
Underlying results(1) Reported results
---------------------------------- -----------------------
2017 2016 Change 2017 2016 Change
GBPm GBPm GBPm GBPm
Revenue 78.5 80.8 (2.9%) 78.5 80.8 (2.9%)
EBITDA(2) 27.1 27.7 (2.2%) 23.1 22.7 1.5%
Margin 34.5% 34.2% 29.4% 28.1%
Operating Profit 17.4 18.5 (6.3%) 13.4 13.6 (1.5%)
Margin 22.1% 22.9% 17.1% 16.8%
Operating cash flow 26.5 22.6 17.3% 20.0 22.0 (8.8%)
Capital Expenditure (excl.
intangibles) 8.5 6.0 8.9 6.0
Free cash flow(2) 20.0 16.4 22.1% 9.1 14.1 (35.7%)
Profit before and after
tax 15.1 16.3 (7.4%) 11.9 8.8 35.3%
Basic earnings per share 13.28p 14.44p (8.0%) 10.50p 7.82p 34.3%
Diluted earnings per share 13.15p 14.26p (7.8%) 10.40p 7.72p 34.7%
Final dividend per share 7.50p 7.20p 4.2% 7.50p 7.20p 4.2%
Total dividend per share 11.40p 10.90p 4.6% 11.40p 10.90p 4.6%
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 636
Manx Telecom plc 400
Gary Lamb, CEO
Paul Tierney, CFO
Liberum Capital (Nominated Adviser and Corporate
Broker) +44 (0)20 3100 2000
Steve Pearce
Joshua Hughes
Oakley Advisory (Financial Adviser) +44 (0) 20 7766 6900
Christian Maher
Victoria Boxall
Powerscourt Group (Public Relations) +44 (0) 20 7250 1446
Celine MacDougall
Andreas Grueter
___________ (1) Underlying results are alternative performance measures which are relevant to an understanding of the Group's financial performance which are not defined in IFRS and are therefore termed 'non-GAAP' measures. See note 5 for further details, including definitions of terms and for reconciliations to the most comparable GAAP measure.
(2) EBITDA, Free Cash Flow and Net Debt are non-GAAP measures and are defined in note 5.
About Manx Telecom
Manx Telecom is the leading communication solutions provider on the Isle of Man, providing a wide range of Fixed Line, Broadband, Mobile and Data Centre services to retail, business and public sector customers on the island, as well as a growing portfolio of innovative hosting and "Smart SIM" solutions to global customers.
The Company focuses on providing outstanding customer experience, high-quality and high-availability networks achieving 99% 4G and 93% superfast fibre broadband population coverage, and consistent first-to-local-market roll-out of new products for homes and businesses.
Manx Telecom is the only operator of a Fixed Line network and is currently investing in state of the art 1 Gbps Fibre-to-the-Premise (FTTP) broadband for both its consumer and business customer base. The Company has three data centres, two of which are Tier 3 designed, plus international connectivity, and its operations are business-critical to the economic strategy of the Isle of Man.
One of the Isle of Man's largest employers with around 300 staff, Manx Telecom plays a major role in the wider community through a range of activities including: charitable donations, sponsorships and corporate social responsibility initiatives.
Manx Telecom is strengthening its core market position whilst exploring new market opportunities on and off-island, leveraging its telecommunications expertise and mobile technology platform. In 2016, the Company launched its business incubator Vannin Ventures, focused on identifying and investing in new products, services and business opportunities as part of the Group's long-term growth strategy.
Manx Telecom is listed on the Alternative Investment Market of the London Stock Exchange (AIM: MANX). www.manxtelecom.com
Market Abuse Regulation
This announcement is released by Manx Telecom plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Manx Telecom plc was Gary Lamb, CEO.
Chairman's Statement
I am pleased to present a solid set of full year results for 2017, with stable trading performance and strong underlying cash flow which continues to support our progressive dividend policy.
Our core business continues to perform solidly. As announced previously, revenue levels in 2017 were impacted by customer consolidation in our Data Centre operations during 2016 and the rescheduling of our directory distribution. This revenue reduction was offset in part through continued growth in our Global Solutions business, driven by our Strongest Signal Mobile solution, M2M and international traveller propositions. The agreement signed with China Unicom in December 2016 to provide connectivity for China Unicom's UK based Mobile Virtual Network Operator (MVNO) service grew slowly in 2017, due to technological challenges which have now been addressed and we expect this agreement to bring further growth in 2018.
Our Transformation Programme, launched in October 2016, is progressing well with the implementation of IT systems and improvements in our internal processes and organisation structure. The associated costs are on track and the programme is due to complete in 2018.
Vannin Ventures was launched in 2016 to create future medium-term growth opportunities for the Company. Following on from its acquisition of Partitionware in 2016, it acquired a second company, Goshawk Communications Limited, a business focussed on services to help the hard of hearing.
The Isle of Man economy remains stable and resilient with unemployment at only 1.8%. We continue to work with the Isle of Man Government on attracting business to the Island, and our telecommunications infrastructure and services play an important part in the Island's continued success.
Dividend
The Board has declared a final dividend of 7.5p per share to be paid on 29 June 2018. This will bring the full year dividend to 11.4p (2016: 10.9p). The shares will trade ex-dividend on 24 May 2018 and will have a record date of 25 May 2018.
Outlook
The Company's strategy continues to focus on both maintaining our core market position on the Isle of Man through high-quality customer service enhanced by our Transformation Programme and seeking on and off island growth by leveraging our mobile infrastructure and exploring new innovative products and services for our customers.
We expect that our core domestic business (Fixed Line, Broadband and Data) and Mobile revenue streams will be supported by our continued improvement in our on-island network infrastructure, resulting in overall stable revenues in our core lines of business.
We remain positive about the future progress in our Global Solutions business, building upon the successes of 2017 and with new opportunities also starting to contribute revenue. Following the return to growth within our Data Centre business in H2 2017, we expect this area of the business will continue to grow in 2018, supported by new product development.
The recent acquisitions of Partitionware in 2016 and Goshawk in 2017 by our business incubator, Vannin Ventures, are exciting opportunities thatwe expect will contribute to the Group's growth strategy.
Our net debt/underlying EBITDA ratio of 2.1x (2016: 1.9x) and GBP10m of committed and unutilised loan facilities at year end means that we are well capitalised. The Group's excellent cash conversion enables us to support our ongoing Transformation Programme and our progressive dividend policy.
CEO's review
Overview
The Company has had a busy year operationally and continues to provide a wide range of telecommunications services to consumers, businesses and the public sector on the Isle of Man, as we continue to demonstrate our commitment to the Island community. 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 increase, and the introduction of our SmartRoam tariffs have been a success with a positive take-up by our post-pay customer base. Our 4G network is performing well, supporting our significant market share of mobile subscribers.
Our International Global Solutions business has performed well during the year, with continued year on year growth across the majority of the product portfolio.
Results overview
Revenue was lower than 2016 due to the previously noted consolidation of some of our Data Centre customers and rescheduling of the directory distribution, partially offset by continued growth in Global Solutions.
Cash performance in the year has been exceptionally strong as a result of tight control of our working capital and capital expenditure and continues to support our progressive dividend policy for 2017.
Underlying EBITDA declined slightly to GBP27.1m (2016: 27.7m). Reported EBITDA was up for the year at GBP23.1m (2016: 22.7m) as a result of a reduction in the costs relating to the Transformation Programme compared with 2016 and a lower impairment charge for obsolete assets. The cash performance triggered the provision for incentive payments resulting in a moderately lower underlying EBITDA, while decreased revenues were offset by cost saving initiatives made throughout the year.
Underlying profit after tax decreased to GBP15.1m (2016: GBP16.3m), as a result of lower underlying EBITDA and increased depreciation. Underlying diluted earnings per share was therefore reduced to 13.15p (2016: 14.26p). Reported profit after tax increased year-on-year to GBP11.9m (2016: GBP8.8m), primarily due to a non-recurring GBP1.3m loss on the revaluation of property costs in the prior year and a GBP0.8m profit on interest rate swaps (2016: GBP1.2m loss).
In 2017, the Company continued to invest in its infrastructure, specifically in the mobile network, increasing the availability of our VDSL high speed broadband network, and in key back office systems as part of the Transformation Programme.
% %
2017 Total 2016 Total Y-o-Y
Revenue GBPm revenue GBPm revenue %
------------------------------- ----- -------- ----- -------- -------
Fixed Line, Broadband and Data 31.5 40.1% 31.6 39.1% (0.5%)
------------------------------- ----- -------- ----- -------- -------
Mobile 19.9 25.3% 20.2 24.9% (1.4%)
------------------------------- ----- -------- ----- -------- -------
Data Centre 4.7 6.0% 5.9 7.3% (19.0%)
------------------------------- ----- -------- ----- -------- -------
Global Solutions 16.5 21.1% 15.6 19.3% 6.2%
------------------------------- ----- -------- ----- -------- -------
Other 5.9 7.5% 7.6 9.4% (23.0%)
------------------------------- ----- -------- ----- -------- -------
Total Revenue 78.5 80.8 (2.9%)
------------------------------- ----- --------------- -----------------
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 40% of all Company revenues. In 2017, revenue was stable, at GBP31.5m (2016: GBP31.6m).
Take up of our high-speed broadband services, known as Ultima and Ultima plus, has delivered Broadband revenue growth of 2.2% during 2017 to GBP9.3m. During 2017, we commenced our roll-out of our fibre to the premises (FTTP) programme with the first businesses and consumers expected to be serviced in H1 2018. Our planned investment in FTTP for 2018 is included in our 2018 capital expenditure budget and is expected to result in ARPU accretion as customers upgrade to the new service.
In May 2017, we introduced changes to our Fixed Line and Broadband Tariff Charges. The price changes increased fixed line rental charges, but offered the opportunity to deliver greater value for money to customers who subscribe to multiple services.
Mobile
Our Mobile business performed well with encouraging revenues following successful Christmas promotions and well-received additional complementary products, offset by the anticipated impact on revenues from our roaming proposition (SmartRoam). In August 2017, we launched inclusive roaming usage for our post-pay customers, as well as reduced roaming rates to all our mobile customers; a first for the Isle of Man market. These price reductions were supported by improved cost control and have proved popular with our customer base.
Our award-winning 4G network, which provides 99% population coverage at speeds of up to ten times faster than 3G services, continues to perform well and enable us to defend our market share of mobile subscribers.
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').
Following a decline in Data Centre revenue last year due to customer consolidation, it is good to see underlying growth for the year. H2 saw an improved performance, with revenues up 4.9% compared with H1. This growth was primarily due to recurring revenues from a good uptake of our intelligent cloud services and from some non-recurring sales. We continue to be responsive in seeking to re-populate capacity in our data centres, with a focus on managed service business, to better utilise our investment as well as through new complimentary product offerings.
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 continues to perform well with increased year on year revenues, up 6.2% during the year to GBP16.5m (2016: GBP15.6m), with most of the product portfolio enjoying growth, in particular M2M and the international traveller market.
In 2016, 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, to provide the connectivity to facilitate China Unicom's 'CUniq' UK mobile and roaming product. Whilst there were some delays in the project in the first half of 2017 as explained at the half year, the partnership performed better in H2. We remain excited about the potential of this collaboration and other growth opportunities for the Global Solutions business in 2018.
Other revenues
Other revenues include the advertising revenue from our telephone directory, hardware equipment sales, interconnection fees and managed services. Other revenue also includes our revenues from our standalone business, Vannin Ventures and its subsidiaries.
Other revenue decreased in line with management's expectations by 23% during the year to GBP5.9m (2016: GBP7.6m) due to the rescheduling of the directory distribution and lower kit sales.
In August 2016, we launched Vannin Ventures, a standalone business 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 a dedicated team behind the new business with a view to fostering a creative environment and entrepreneurial ethos.
The acquisition of Partitionware, an Isle of Man software developer specialising in telecommunication platforms, at the end of 2016 has proven successful, with Partitionware supporting Vannin Ventures throughout the year as it seeks to acquire new businesses in line with our transformational growth strategy.
In May 2017, the Group acquired a 67% interest in Goshawk Communications UK Limited ("Goshawk"). Goshawk is a UK-based company which develops and exploits technology-based solutions that enhance audio quality. Goshawk was acquired in order to support the Group's growth strategy by developing disruptive technologies and bringing innovative products and services to the market.
Transformation Programme
In October 2016, the Company launched a two-year programme aimed at improving the experience it delivers to customers.
The programme progressed well in 2017 with the introduction of new IT systems supporting improvements in processes and organisational structure. We are still on track to incur exceptional costs of approximately GBP10m over a 24-month period with GBP8.2m recognised up to the year end (2017: GBP3.9m, 2016: GBP4.3m) in addition, capital expenditure of GBP3.2m has been incurred to date (2017: GBP3.2m, 2016: nil) over the course of the programme. The cash cost of the programme in 2017 was GBP8.9m (2016: GBP0.5m).
Financial review
The Fixed Line, Broadband and Data business continues to perform solidly with a small decrease in revenue of 0.5% to GBP31.5m (2016: GBP31.6m). As expected, the Data Centre business saw a decrease in revenue to GBP4.7m (2016: GBP5.9m), due to the previously reported consolidation and from lower kit sales than in previous years. Mobile revenues declined as expected to GBP19.9m (2016: GBP20.2m) due to a reduction in retail roaming revenues resulting from the introduction of our SmartRoam tariffs. SmartRoam is our roaming proposition in response to the changes to EU Roaming regulations. Excluding retail roaming, Mobile revenues were up 3.1%. Global Solutions performed well, with full year revenue of GBP16.5m (2016: GBP15.6m), a 6.2% increase year-on-year, driven by continuous growth in our Strongest Signal Mobile solution (branded Chameleon), M2M and international traveller propositions. Other revenues declined by 23% to GBP5.9m (2016: GBP7.6m) back in line with 2015 levels due to the rescheduling of our directory distribution and one-off revenues for hardware equipment sales which have not repeated.
The Group generated GBP27.1m of underlying EBITDA (2016: GBP27.7m) which was marginally lower year on year due to certain incentive payments being triggered by the Group's excellent cash conversion. Reported EBITDA for the year was GBP23.1m (2016: GBP22.7m). The Group's underlying EBITDA margin was slightly higher at 34.5% (2016: 34.2%) as reduced revenue was offset by a reduction in costs across the business.
Depreciation and amortisation increased in the year to GBP9.7m (2016: GBP9.1m), impacted by prior year investment in billing platforms with shorter economic lives.
Underlying operating profit declined to GBP17.4m (2016: GBP18.5m) as a result of the increase in depreciation and amortisation and lower underlying EBITDA. Reported operating profit was GBP13.4m (2016: GBP13.6m).
Reported profit before tax increased from the prior year to GBP11.9m (2016: GBP8.8m) due to favourable movements on the interest swaps and 2016 including a GBP1.3m loss on revaluation of properties. Underlying profit before tax decreased to GBP15.1m (2016: GBP16.3m) as a result of decreased underlying EBITDA and increased depreciation offset only in part by interest income on the interest rate swaps.
Underlying diluted EPS was lower at 13.15p (2016: 14.26p). Reported diluted EPS was 10.40p (2016: 7.72p).
The Company paid an interim dividend of 3.9p per share in October 2017 and declared a final dividend for 2017 of 7.5p per share on 15 March 2018 resulting in a full year dividend for 2017 of 11.4p per share, a 4.6% increase from 2016.
Costs
Reduced Cost of Sales and Administrative expenses in the year contributed to an improved underlying EBITDA margin from 34.2% to 34.5%.
Energy costs were down 9% during 2017, due to a full year of customer consolidation in our Data Centre business. Mobile handset costs were up 16% due to successful Christmas promotions and the introduction of SmartRoam, supporting an increase in post-paid contract subscribers and upsell of customers on legacy tariffs to the new SmartRoam tariffs.
Administrative expenses decreased by 3.7% to GBP33.7m (2016: GBP35.0m), as a result of cost saving initiatives throughout the year, offset in part by increased depreciation. Administrative expenses excluding depreciation were down 7.1%. The main component of administrative costs is staff, the cost of which decreased by 2.2% in the period, partly as a result of the reduction in costs for part of the year following voluntary redundancies under the transformation programme.
Net finance costs
Net finance costs increased to GBP2.4m (2016: GBP2.3m). Included in this figure is the cost of interest at GBP2.0m (2016: GBP2.1m).
We recorded an unrealised gain of GBP0.8m on interest rate swaps (2016: GBP1.2m loss), resulting from changes in market interest rates. 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 has no impact on cash.
Taxation
There is no corporate taxation payable on our profits for either 2017 or the comparative year. We have the benefit of an Isle of Man 0% corporate tax rate.
Cash flow
Underlying cash flow from operations increased by 17.3% to GBP26.5m (2016: GBP22.6m) due to tight control of working capital. Reported cash flow from operations decreased by 8.8% from GBP22.0m to GBP20.0m.
2017 2016
GBP'000 GBP'000
------------------------------------ --------- ---------
Reported operating cash flow 20,023 21,963
Transformation programme operating
costs 6,419 495
Acquisition costs 30 110
------------------------------------ --------- ---------
Underlying operating cash flow 26,472 22,568
------------------------------------ --------- ---------
Reported operating cash flow
conversion 86.9% 96.7%
------------------------------------ --------- ---------
Underlying operating cash flow
conversion 97.9% 81.6%
------------------------------------ --------- ---------
Underlying free cash flow, which excludes Transformation Programme cash outflows of GBP8.9m (2016: GBP0.5m) and acquisition cash outflows of GBP2.0m (2016: GBP1.8m), was up 22.1% at GBP20.0m (2016: GBP16.4m). Reported free cash flow decreased to GBP9.1m (2016: GBP14.1m), primarily as a result of the restructuring costs associated with the Transformation Programme paid during the year.
2017 2016
GBP'000 GBP'000
-------------------------------------- --------- ---------
Reported free cash flow 9,074 14,120
Transformation programme operating
costs 6,419 495
Transformation programme capital 2,480 -
expenditure
Acquisition costs 30 110
Acquisition of Subsidiary 2,007 1,668
-------------------------------------- --------- ---------
Underlying free cash flow 20,010 16,393
-------------------------------------- --------- ---------
Reported free cash flow conversion 76.4% 160.1%
-------------------------------------- --------- ---------
Underlying free cash flow conversion 132.6% 100.6%
-------------------------------------- --------- ---------
Capital expenditure
Capital expenditure in 2017, including intangibles, was GBP8.6m (2016: GBP6.7m), of which a significant portion (GBP3.2m) was related to the Transformation Programme; including GBP2.0m of improvements to our information systems and GBP0.7m of property renovation costs. Of the remainder, we invested GBP0.7m in our broadband network to increase the reach of our VDSL high-speed broadband and a further GBP0.7m in our mobile network. 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 GBP1.0m to GBP59.3m (2016: GBP60.3m). Capital additions were GBP8.5m (2016: GBP6.7m), as described above. Depreciation increased to GBP9.4m (2016: GBP8.9m) due to prior year investment in billing platforms with shorter economic lives.
We retain goodwill of GBP87.9m on the balance sheet; GBP84.3m arising from the purchase of Manx Telecom from Telefónica in 2010, and GBP3.6m from the purchase of Partitionware Limited in 2016, both of which are 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 net liability of GBP3.8m (2016: GBP5.4m net liability), there was a 5.5% return on scheme assets during the period. Scheme liabilities decreased by GBP0.4m mainly due to a decrease in the discount rate tied to deteriorating corporate bond yields.
Current assets increased to GBP41.7m (2016: GBP40.8m). Cash held at the end of the period decreased to GBP12.3m (2016: GBP16.7m) following GBP8.5m of payments in relation to the Transformation Programme, offset by tightly controlled working capital and capital expenditure. Trade and other receivables increased by GBP5.4m, of which other receivables increased by GBP3.2m, due to an increase in roaming discount receivables compared to the prior year. A large outstanding amount of the roaming discount receivables was settled in January 2018.
Current liabilities increased to GBP30.9m (2016: GBP30.6m), due an increase in trade payables of GBP3.3m and GBP0.3m of the interest rate swaps the Group has entered into maturing within 12 months of the financial year end. These increases were offset by GBP3.3m of provisions against the Transformation programme being utilised.
Non-current liabilities reduced to GBP73.9m (2016: GBP76.3m) as a result of a GBP1.6m reduction in the net defined benefit pension scheme liability and a GBP0.8m reduction in the interest rate swap liability. Interest bearing loans and borrowings were relatively unchanged at GBP69.3m (2016: GBP69.0m).Our loan facility matures on 30 June 2020. On 28 December 2017, Lloyds Bank plc as arranger, novated its portion of the loan to DNB Bank ASA whilst remaining agent and security agent.
The Group has entered into two interest rate swaps, one maturing in June 2018 and one maturing in June 2020. As at 29 December 2017, the fair value of the interest rate swap maturing in June 2018 was a GBP0.3m liability (2016: GBP0.9m), while fair value of the interest rate swap maturing in June 2020 was a GBP0.9m liability (2016: GBP1.0m liability). During the year, the portion of the swap held with Lloyds changed counterparty to DNB Bank ASA.
Net debt for the year increased to GBP56.9m (2016: GBP52.4m) as a result of the Transformation Programme cash outflows of GBP8.9m paid during the year, offset in part by strong underlying cash generation. Period end Net Debt was equivalent to 2.1x underlying EBITDA (2016: 1.9x).
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
------------------------------------------------------- ----- -------- --------
Revenue 1 78,491 80,823
Cost of sales (31,395) (32,229)
Gross profit 47,096 48,594
Administrative expenses (33,735) (35,027)
Operating profit 2 13,361 13,567
--------
Underlying EBITDA 5 27,051 27,669
Depreciation and amortisation (9,695) (9,142)
Underlying operating profit 5 17,356 18,527
Impairment of equipment 2 102 464
Transformation Programme 2 3,863 4,335
Acquisition costs 2 30 161
Operating profit 13,361 13,567
------------------------------------------------------- ----- -------- --------
Other income 110 36
Financial income 10 72
Finance costs 3 (2,382) (2,342)
Other gains and losses - (1,274)
Net Profit/(loss) on interest rate swaps 777 (1,238)
Profit before tax 11,876 8,821
Taxation - -
------------------------------------------------------- ----- -------- --------
Profit for the year 11,876 8,821
------------------------------------------------------- ----- -------- --------
Attributable to:
------------------------------------------------------- ----- -------- --------
Owners of the group 11,938 8,821
------------------------------------------------------- ----- -------- --------
Non-Controlling interest (62) -
------------------------------------------------------- ----- -------- --------
Underlying Profit before Tax 5 15,094 16,293
Impairment of equipment 2 (102) (464)
Transformation Programme 2 (3,863) (4,335)
Acquisition costs 2 (30) (161)
Other gains and losses - (1,274)
Net Profit/(loss) on interest rate swaps 2 777 (1,238)
Profit before tax 11,876 8,821
------------------------------------------------------- ----- -------- --------
Other comprehensive income - items that will never
be reclassified to profit or loss
Remeasurement of defined benefit pension scheme asset 1,100 (7,000)
Gain on property revaluation - 1,159
------------------------------------------------------- ----- -------- --------
Total comprehensive profit for the year 12,976 2,980
------------------------------------------------------- ----- -------- --------
Attributable to:
------------------------------------------------------- ----- -------- --------
Owners of the Company 13,038 2,980
------------------------------------------------------- ----- -------- --------
Non-Controlling Interest (62) -
------------------------------------------------------- ----- -------- --------
Earnings per share attributable to owners of the group
from continuing operations
Basic 4 10.50p 7.82p
Diluted 4 10.40p 7.72p
Underlying basic 4 13.28p 14.44p
Underlying diluted 4 13.15p 14.26p
------------------------------------------------------- ----- -------- --------
The Directors consider that all results are derived from continuing operations.
Consolidated statement of financial position
as at 31 December 2017
2017 2016
Note GBP'000 GBP'000
----------------------------------------- ----- -------- --------
Non-current assets
Property, plant and equipment 59,294 60,328
Goodwill 87,911 87,911
Intangible assets 742 881
Retirement benefit asset - -
Interest rate swaps - -
Investments in subsidiaries - -
----------------------------------------- ----- -------- --------
147,947 149,120
----------------------------------------------- -------- --------
Current assets
Inventories 878 963
Trade and other receivables 28,526 23,172
Due from related parties - -
Cash and cash equivalents 12,341 16,674
------------------------------------------------ -------- --------
41,745 40,809
----------------------------------------------- -------- --------
Current liabilities
Trade and other payables (30,094) (26,784)
Interest rate swaps (290) -
Provisions (560) (3,840)
------------------------------------------------ -------- --------
(30,944) (30,624)
----------------------------------------------- -------- --------
Net current assets 10,801 10,185
------------------------------------------------ -------- --------
Non-current liabilities
Interest-bearing loans and borrowings (69,288) (69,036)
Interest rate swaps (845) (1,912)
Retirement benefit liability (3,795) (5,400)
------------------------------------------------ -------- --------
(73,928) (76,348)
----------------------------------------------- -------- --------
Net assets 84,820 82,957
------------------------------------------------ -------- --------
Share capital 230 226
Share premium 1,265 84,366
Own shares - -
Revaluation reserve 1,159 1,159
Retained earnings/(losses) 82,238 (2,794)
------------------------------------------------ -------- --------
Equity attributable to the owners of the
Group and Company 84,892 82,957
------------------------------------------------ -------- --------
Non-Controlling Interest (72) -
------------------------------------------------ -------- --------
Total equity 84,820 82,957
------------------------------------------------ -------- --------
Consolidated statement of changes in equity
for the year ended 31 December 2017
Share Share Revaluation Non -Controlling Retained Total
capital premium Own shares reserve Interest earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
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)/profit - - - 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
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
Balance at 1 January 2017 226 84,366 - 1,159 - (2,794) 82,957
Total comprehensive profit
for the year
Profit for the year - - - - (62) 11,938 11,876
Other comprehensive profit - - - - - 1,100 1,100
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
Total comprehensive profit
for the year - - - - (62) 13,038 12,976
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
Transactions with owners
of the Group, recorded
directly in equity
Adjustment arising from
change in non-controlling
interest - - - - (10) 10 -
Reclassification of Share
Premium to Retained Earnings - (84,366) - - - 84,366 -
Share-based payment transactions - - - - - 262 262
Issue of shares 4 1,265 - - - - 1,269
Dividend paid - - - - - (12,644) (12,644)
Total contributions by
and distributions to the
owners of the Group 4 (83,101) - - (10) 71,994 (11,113)
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
Balance at 31 December
2017 230 1,265 - 1,159 (72) 82,238 84,820
---------------------------------- -------- -------- ---------- ----------- ---------------- --------- --------
Consolidated statement of cash flows
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
--------------------------------------- ------ --------- --------- --------- ---------
Cash flows from operating activities
Profit for the year 11,876 8,821
Adjustments for:
Depreciation of property, plant
and equipment 9,438 8,934
Amortisation of intangibles 256 208
Impairment of property, plant and
equipment 102 464
Profit on disposal of property,
plant and equipment (100) (36)
Finance income (10) (72)
Finance costs 2,382 2,342
Other gains and losses - 1,274
Net loss/(profit) on interest rate
swaps (777) 1,238
Negative goodwill released to income (10) -
Equity-settled share-based payments
transactions 266 887
Pension contributions (600) (1,200)
Changes in:
Inventories 27 (258)
Trade and other receivables (5,296) (3,762)
Trade and other payables 5,749 (717)
Provisions (3,280) 3,840
----------------------------------------------- --------- --------- --------- ---------
8,147 13,142
---------------------------------------------- --------- --------- --------- ---------
Net cash generated from operating
activities 20,023 21,963
----------------------------------------------- --------- --------- --------- ---------
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 100 178
Purchase of property, plant and
equipment (8,935) (5,700)
Purchase of intangible assets (117) (725)
Acquisition of subsidiary (2,007) (1,668)
Interest received 10 72
----------------------------------------------- --------- --------- --------- ---------
Net cash used in investing activities (10,949) (7,843)
----------------------------------------------- --------- --------- --------- ---------
Cash flows from financing activities
Proceeds on issue of shares 1,268 19 Repayment of borrowings (39) (40) Interest paid (1,992) (2,050) Dividends paid (12,644) (11,976) ----------------------------------------------- --------- --------- --------- --------- Net cash used in financing activities (13,407) (14,047) ----------------------------------------------- --------- --------- --------- --------- Net (decrease)/increase in cash and cash equivalents (4,333) 73 Cash and cash equivalents brought forward 16,674 16,601 ----------------------------------------------- --------- --------- --------- --------- Cash and cash equivalents at 31 December 12,341 16,674 ----------------------------------------------- --------- --------- --------- ---------
Notes
1 Operating segments
The Group has five reportable revenue segments which management report on and base their strategic decisions on:
Group Group
2017 2016
GBP'000 GBP'000
------------------------------- -------- --------
Fixed Line, Broadband and Data 31,476 31,633
Mobile 19,878 20,155
Global Solutions 16,533 15,565
Data Centre 4,748 5,862
Other 5,856 7,608
------------------------------- -------- --------
78,491 80,823
------------------------------- -------- --------
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.
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 and M2M (machine to machine).
Data Centre includes revenues from hosting services provided.
Other includes kit sales, directory revenues, managed service rental charges and revenues generated from the provision of mobile telecommunications software.
2 Operating profit
The operating profit is stated after charging the following:
2017 2016
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Staff costs 15,330 15,675
Depreciation of property, plant and equipment - owned assets 9,438 8,934
Amortisation of software licences - intangibles 256 208
Impairment of property, plant and equipment 102 464
Net operating lease rentals payable - property 289 233
Acquisition costs 30 161
Transformation Programme 3,863 4,335
Trade receivables impairment 81 130
Audit services - statutory audit 145 129
- non-audit service fees 89 14
------------------------------------------------------------- -------- --------
3 Finance income and expense
Recognised in profit or loss
2017 2016
GBP'000 GBP'000
--------------------------------------- -------- --------
Finance income
Other interest receivable 10 72
Net interest on pension asset - -
--------------------------------------- -------- --------
10 72
--------------------------------------- -------- --------
Finance costs
Interest on borrowings (1,986) (2,044)
Finance lease interest (6) (6)
Net interest on pension liabilities (100) -
Amortisation of loan transaction costs (290) (291)
Total financial expense (2,382) (2,342)
--------------------------------------- -------- --------
Net total finance expense (2,372) (2,270)
--------------------------------------- -------- --------
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').
Thousands Thousand Diluted
Earnings of shares Basic earnings of shares earnings
GBP'000 (Basic) per share (Diluted) per share
----------------- -------- ---------- -------------- ---------- ----------
31 December 2016 8,821 112,841 7.82p 114,259 7.72p
----------------- -------- ---------- -------------- ---------- ----------
31 December 2017 11,938 113,664 10.50p 114,810 10.40p
----------------- -------- ---------- -------------- ---------- ----------
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 the specific items as outlined in note 5.
Thousands Basic Thousand Diluted
Earnings of shares earnings of shares earnings
GBP'000 (Basic) per share (Dilute) per share
----------------- -------- ---------- ---------- ---------- ----------
31 December 2016 16,293 112,841 14.44p 114,259 14.26p
----------------- -------- ---------- ---------- ---------- ----------
31 December 2017 15,094 113,664 13.28p 114,810 13.15p
----------------- -------- ---------- ---------- ---------- ----------
5. Alternative performance measures
The Directors of the Group have presented a number of additional performance measures which they believe are relevant to an understanding of the Group's financial performance which are not defined in IFRS and are therefore termed 'non-GAAP' measures. The Group's definition of these terms may not be comparable with similarly titled performance measures and disclosures by other entities. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
EBITDA
EBITDA is defined as the Group profit or loss before depreciation, amortisation, net finance expense and taxation. Underlying EBITDA is defined as EBITDA, adjusted for specific items listed below. EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies, particularly in the telecommunications sector. The Directors consider EBITDA and underlying EBITDA to be useful measures of operating performance. This presentation is consistent with the way that financial performance is measured by management and reported internally and assists in providing a meaningful analysis of the trading results of the Group.
A reconciliation from Group Operating Profit, the most directly comparable IFRS measure, to EBITDA and Underlying EBITDA is provided below.
2017 2016
GBP'000 GBP'000
------------------------------- ---------- ----------
Operating Profit 13,361 13,567
Depreciation and Amortisation 9,695 9,142
Reported EBITDA 23,056 22,709
Impairment of Equipment 102 464
Transformation costs 3,863 4,335
Acquisition costs 30 110
Underlying EBITDA 27,051 27,669
------------------------------- ---------- ----------
Underlying operating profit and underlying profit before/after tax
Underlying operating profit and underlying profit before/after tax are based on equivalent IFRS reported measures from the consolidated statement of comprehensive income, adjusted for specific items listed below.
A reconciliation from Group operating profit, the most directly comparable IFRS measure, to underlying operating profit and a reconciliation from Group profit before tax, the most directly comparable IFRS measure, to underlying profit before tax is provided below.
2017 2016
GBP'000 GBP'000
----------------------------- ---------- ----------
Operating Profit 13,361 13,567
Impairment of Equipment 102 464
Acquisition costs 30 161
Transformation costs 3,863 4,335
Underlying operating profit 17,356 18,527
----------------------------- ---------- ----------
2017 2016
GBP'000 GBP'000
-------------------------------- ---------- ----------
Profit before/after tax 11,876 8,821
Impairment of Equipment 102 464
Acquisition costs 30 161
Transformation costs 3,863 4,335
Loss on property revaluation - 1,274
Net profit/(loss) on interest
rate swaps (777) 1,238
Underlying profit before/after
tax 15,094 16,293
-------------------------------- ---------- ----------
Underlying operating cash flow
Underlying operating cash flow is based on the equivalent reported measure from the consolidated statement of cash flows, cash flow from operating activities, adjusted for the cash impact of specific items listed below.
2017 2016
GBP'000 GBP'000
--------------------------------------------- ---------
Reported operating cash flow 20,023 21,963
Transformation programme operating
costs 6,419 495
Acquisition costs 30 110
------------------------------------- ------- -----------
Underlying operating cash flow 26,472 22,568
------------------------------------- ------- -----------
Free cash flow
Free cash flow is defined as net cash generated from operating activities less net cash used in investing activities. Underlying free cash flow is defined as free cash flow, adjusted for the cash impact of specific items listed below. Free cash flow represents the cash that the Group is able to generate from operations after taking into account cash outflows required to maintain or expand its asset base. The Directors consider free cash flow and underlying free cash flow to be important performance measures as they determine the amount of cash available for strategic investments, repayment of debt or distribution to shareholders in the form of dividends.
A reconciliation from net cashflow from operating activities, the most directly comparable IFRS measure, to underlying operating cash flow, free cash flow and underlying free cash flow is provided below
2017 2016
GBP'000 GBP'000
------------------------------------ --------- ---------
Reported free cash flow 9,074 14,120
Transformation programme operating
costs 6,419 495
Transformation programme capital 2,480 -
expenditure
Acquisition costs 30 110
Acquisition of Subsidiary 2,007 1,668
------------------------------------ --------- ---------
Underlying free cash flow 20,010 16,393
------------------------------------ --------- ---------
Net debt
Net debt is not a term defined by IFRS but consists of interest bearing loans and borrowings, less cash and cash equivalents, both of which are captions which exist on the statement of financial position. Net debt provides a single measure of the Group's indebtedness and provides an indication of the overall balance sheet strength.
A reconciliation from loans and other borrowings and cash and cash equivalents, the IFRS measures used to calculate Net Debt is provided below.
2017 2016
GBP'000 GBP'000
---------------------------- --------- ---------
Loans and other borrowings 69,288 69,036
Cash and cash equivalents (12,341) (16,674)
---------------------------- --------- ---------
Net Debt 56,947 52,362
---------------------------- --------- ---------
Cash conversion
Operating cash flow conversion and free cash flow conversion, both underlying and reported, are not terms defined by IFRS.
Reported operating cash flow conversion is calculated as reported operating cash flow as a percentage of Reported EBITDA. Underlying operating cash flow conversion is calculated as underlying operating cash flow as a percentage of underlying EBITDA.
Reported free cash flow conversion is calculated as reported free cash flow as a percentage of reported Profit before/after tax. Underlying free cash flow is calculated as underlying free cash flow as a percentage of underlying profit before/after tax.
Underlying earnings per share
Earnings per share, both basic and diluted, are terms which are defined in IFRS. Underlying earnings per share, both basic and diluted are not terms defined by IFRS. They are calculated based upon underlying profit before tax (defined above) and the basic and diluted number of shares as determined for use in the terms defined in IFRS. Note 4.2 provides the components used in the calculation.
Specific items
Specific items are identified by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
Adjusting measures for specific items assists with comparability of measures between reporting periods, as well as removing volatility or distortions from significant events.
The adjustments made to reported profit before tax and operating profit are income and charges that are unpredictable in nature, significant and distort the Group's underlying performance. For the year ended 31 December 2017 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, restructuring costs of GBP3,864,000 were incurred to 31 December 2017 (2016: GBP4,335,000) relating to employee termination benefits, consulting fees and other programme-related costs.
-- Acquisition costs. Costs of GBP30,000 (2016: GBP161,000) were incurred in the acquisition of Goshawk Communications (UK) Limited in May 2017 and the acquisition of Partitionware in December 2016.
-- Loss on property revaluation. During 2016, the Group revalued land and buildings, with the revaluation of some properties resulting in a loss on revaluation of GBP1,274,000. There has been no such loss in the current year.
-- Unrealised gains and losses on interest rate swaps. In 2017, the Group made an unrealised gain on interest rate swap fair value movements of GBP777,000 (2016: GBP1,238,000 loss).
-- 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 GBP102,000 (2016: GBP464,000).
Additionally, there are the following adjustments to reported cash flows from operating activities and free cash flow that are unpredictable in nature, significant and distort the Group's underlying performance:
-- Transformation Programme. The Group made cash outflows of GBP8,899,000 (2016: GBP495,000) in relation to the Transformation Programme costs described above.
-- Acquisition of subsidiary. The net cash outflow on acquisition of Partitionware Limited was GBP2,007,000 (2016: GBP1,668,000). In addition, the Group also made cash outflows of GBP30,000 in relation to acquisition costs (2016: GBP110,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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