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MANX Manx Telecom

215.50
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Last Updated: 00:00:00
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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 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Manx Telecom PLC Half-year Report (4319Q)

12/09/2017 7:00am

UK Regulatory


Manx Telecom (LSE:MANX)
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RNS Number : 4319Q

Manx Telecom PLC

12 September 2017

Manx Telecom Plc

Results for the six months ended 30 June 2017

Stable core performance and Global Solutions growth offsets expected data centre revenue decline. Remain on track to deliver the Board's expectations for the full year

Manx Telecom Plc (AIM: MANX), ("Manx Telecom", the "Company" or the "Group") the leading communication solutions provider on the Isle of Man, announces its results for the six months ended 30 June 2017.

Financial Highlights

   -     Revenues of GBP38.5m (H1 2016: GBP39.2m) 

-- Fixed Line, Broadband and Data revenues down 2.9%, with a decline in fixed line call revenue, partially offset by increased broadband revenue

-- Mobile revenues up 3.6% due to increased inbound roaming revenue and an increase in post pay contracts revenue

   --      Continued strong growth in Global Solutions revenues, up 13.0% 

-- Data Centre revenues down 32.3%, due to previously reported customer consolidation. Adjusting for this, Data Centre revenue returned to growth in the period

   --     Group revenue excluding Data Centre and Other revenue up 2.4% year on year 

- Underlying EBITDA GBP12.6m (H1 2016: GBP13.8m) primarily due to a shift in directory distribution date to

H2 and   Data Centre customer consolidation 

- Underlying Profit Before Tax of GBP6.7m (H1 2016: GBP8.3m). Reported Profit Before Tax of GBP5.2m (H1 2016: GBP6.3m) reflecting planned costs of transformation programme

- Strong cash flow generation with Underlying operating cash flow of GBP10.2m (H1 2016: GBP10.1m) equating

to   increased cash conversion from Underlying EBITDA of 81.3% (H1 2016: 73.2%) 

- Net debt increased to GBP61.7m (H1 2016; GBP53.1m), due primarily to costs associated with transformation programme. Net debt expected to improve in H2

   -     Interim dividend of 3.9p (H1 2016: 3.7p), in line with progressive dividend policy 

Operational Highlights

   -        Group trading in line with Board expectations 
   -        Demand in the core business of Fixed, Broadband, Data and Mobile remains robust 

- Commenced initial investment in fibre to the premises ("FTTP"), which will provide ultrafast fibre broadband to 77 Island locations, for roll out in H2 2017

- Acquisition of majority stake in Goshawk Communication, which provides exciting technology for the hard of hearing

   -        Implementation of transformation programme proceeding well 

Gary Lamb, Chief Executive Officer, said:

"We have had a solid six months of trading for the Group, in line with Board's expectations.

The core business continues to perform well with decent levels of growth in both Broadband and Mobile revenues, while we have continued to deliver double digit growth in our Global Solutions business. Our first half performance also reflects the anticipated impact of the customer consolidation in our Data Centre business and realignment of our directory revenues.

First half net debt was affected by the expected exceptional costs associated with the transformation programme, but I am pleased to say that underlying levels of cash flow remain strong and net debt is expected to fall in the second half as these costs reduce. Whilst it remains early days, we are pleased with the impact of the Transformation Programme thus far.

We are also excited to report another addition to the group in the form of Goshawk Communications whose technology will enhance the customer experience for those phone users with hearing loss. Recent trials showed that over 90% of users were pleased with the experience provided by the technology.

We remain confident in the long-term prospects of the business which continues to trade in line with the Board's expectations for the full year."

 
                                                 Underlying results           Reported results 
-----------------------------------------  -----------------------------  ------------------------ 
                                              30 June       30    Change      30      30    Change 
                                             2017***^     June              June    June 
                                                 GBPm    2016^              2017    2016 
                                                          GBPm              GBPm    GBPm 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Revenue                                         38.5     39.2    (1.8%)    38.5    39.2    (1.8%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 EBITDA*                                         12.6     13.8    (9.0%)    10.7    13.8   (23.0%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Margin                                         32.7%    35.3%             27.7%   35.3% 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Operating Profit                                 7.8      9.4   (16.9%)     5.9     9.4   (37.5%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Margin                                         20.3%    24.0%             15.3%   24.0% 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Cash generated from operations**                10.2     10.1      1.0%     5.4    10.1   (46.5%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Capital Expenditure (excl. intangibles)          3.0      2.3               3.5     2.3 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Profit before and after tax                      6.7      8.3   (19.0%)     5.2     6.3   (17.5%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Basic Earnings per share                       5.93p    7.34p   (19.2%)   4.60p   5.59p   (17.7%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Diluted earnings per share                     5.88p    7.26p   (19.0%)   4.57p   5.53p   (17.4%) 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 Interim dividend per share                      3.9p     3.7p      5.4%    3.9p    3.7p      5.4% 
-----------------------------------------  ----------  -------  --------  ------  ------  -------- 
 

*Underlying EBITDA is defined as the group profit or loss before depreciation, amortisation, net finance expense and taxation, adjusted for the items specified below

**Underlying operating cash flow is defined as net cash generated from operating activities, adjusted for the cash impact of the items specified below

^ Underlying profits are before GBP0.4m gain (H1 2016: GBP2.0m loss) on revaluation of interest rate swaps

*** The Underlying profits for H1 2017 are additionally before GBP1.9m Transformation Programme costs and GBP0.1m acquisition costs

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

For further enquiries, please contact:

 
                                         +44 (0) 1624 
 Manx Telecom plc                         636400 
 Gary Lamb, Chief Executive Officer 
 Liberum (Nominated Adviser and          +44 (0)20 3100 
  Corporate Broker)                       2000 
 Steve Pearce 
  Joshua Hughes 
                                         +44 (0) 20 7766 
 Oakley Capital (Financial Adviser)       6900 
 Christian Maher 
  Victoria Boxall 
                                         +44 (0) 20 7250 
 Powerscourt Group (Public Relations)     1446 
 Juliet Callaghan 
  Simon Compton 
 

Introduction

The results for the first six months of 2017 showed a robust performance for the Group in line with the Board's expectations. Group revenues for the period were slightly lower as a result of the customer consolidation in our Data Centre business which occurred in 2016, and the decision to move directory sales to the latter half of the year. The lower revenues have been partially offset by continued strong growth in Global Solutions, whilst our Mobile and Broadband businesses also reported solid growth in the period. After adjusting for the effect of the Data Centre customer consolidation and change in directory timing, the Group delivered year on year revenue growth for the period.

The Company's revenues were GBP38.5m (H1 2016: GBP39.2m) and underlying EBITDA (1) was GBP12.6m (H1 2016: GBP13.8m), with reported EBITDA of GBP10.7m (H1 2016: GBP13.8m). Underlying profit before tax was GBP6.7m (H1 2016: GBP8.3m) with reported profit before tax at GBP5.2m (H1 2016: GBP6.3m). This impacted underlying diluted EPS at 5.9p (H1 2016: 7.3p) with reported diluted EPS at 4.6p (H1 2016: 5.5p).

Underlying operating cash flow was GBP10.2m (H1 2016: GBP10.1m), with Underlying EBITDA cash conversion of 81.3% (H1 2016: 73.2%) aided by improved working capital versus the same period last year.

Reported operating cashflow, which takes into account the exceptional costs associated with the transformation programme and fees associated with acquisitions, was GBP5.4m (H1 2016: GBP10.1m).

The Board remains confident in the strength of the underlying cash flows of the Group and as such has declared an interim dividend of 3.9p, representing growth of 5.4% over the same period last year.

The Isle of Man economy continues to perform well, with unemployment at 1%, 33 years of uninterrupted GDP growth and economic growth forecast to continue. Manx Telecom continues to support the Isle of Man Government in attracting business to the Island, and the telecommunications infrastructure and services the Company provides form an important part of the Island's continued success.

During the period, we acquired a majority stake in Goshawk Communications who have developed technology which enhances the audio quality for phone users who suffer from hearing loss.

Our transformation programme, launched in October 2016 with the aim of improving competitiveness and our customer experience, remains on track and its implementation has begun well. A large proportion of the costs have now been incurred, including redundancy costs, with costs in H2 expected to be focused on investment in new IT systems to drive automation, efficiency and improved customer service.

Operational review

Fixed Line, Broadband and Data Services

Fixed Line, 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. Collectively these remain our largest business, representing 40.5% of Company revenues in the period. H1 saw continued revenue growth of 4% in Broadband, as customers migrated to higher speed services. This was offset by the expected reduction of 3% in our Fixed Line revenue, as well as a reduction in Data Services revenue of 9% as the previously noted customer consolidation also affected this revenue stream. This resulted in a decrease in revenues of 2.9% to GBP15.6m (H1 2016: GBP16.0m).

In May 2017, we introduced changes to our Fixed Line and Broadband Tariff Charges. The price changes increased fixed line rental charges, but offered opportunity to deliver greater value for money to customers who subscribe to multiple services.

The Company continued to roll out high speed VDSL broadband services (up to 80mbps download) across the Island and in H1 2017 added a further 15 cabinets to extend the provision of our VDSL services "Ultima" and "Ultima Plus". Our Ultima broadband services now reach 93% of households, with 45% penetration (31 December 2016: 40%, 30 June 2016: 36%). The sale of Ultima and Ultima Plus has helped Broadband revenues to increase by 4% to GBP4.7m.

As part of the Company's ongoing investment in its network, a plan is in place to bring ultrafast fibre to the premises (FTTP) broadband to an initial 77 island locations. The new service will offer download speeds of up to 1Gbps and upload speeds of up to 200Mbps. The roll-out will begin during the second half of 2017 covering key business districts and industrial estates across the Island, the cost of which will be included within our normal capital expenditure plans

Mobile

Our award winning 4G network provides 99% population coverage at speeds 10 times faster than 3G services and is available to both our post-paid and pre-paid customers.

Revenue from Mobile accounts for 26.5% of our total revenues for the period. In line with our expectations, Mobile performed well during the period, with an increase in revenue from H1 2016 of 3.6%. This is primarily due to growth in our post-paid revenues which grew by 7% following increases in our subscriber base and continued migration of customers to higher ARPU 4G tariffs.

During the first half of 2017, we created a new mobile contract tariff proposition which provides customers with inclusive UK and EU roaming allowances, which launched successfully on 1 August 2017. Our inclusive roaming tariffs are the first of their kind in the Isle of Man and the initial customer response has been very positive.

Global Solutions

The Global Solutions business generates revenue from services which run on our domestic mobile technology platform and use 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 traveler market, M2M and Strongest Signal Mobile (branded Chameleon).

Global Solutions continues to experience strong growth across much of the product portfolio, especially in M2M and Strongest Signal Mobile, with an increase in revenues of 13.0% during the period to GBP7.9m (H1 2016: GBP7.0m). Revenue from our partnership with China Unicom has been slow to arrive following delays in the project, but we remain excited by the partnership and expect a positive contribution in H2.

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 III designed data centres (according to Telecommunications Industry Association standards). This provides high standards of data security, resilience, and expandable hosting capacity, including business continuity and distributed denial of service protection (DDoS).

As communicated in previous results, following customer consolidation in 2016, Data Centre revenues reduced in H1 2017 by GBP1.1m. This decline has been partially offset by an increase in kit sales and increasing utilization of our rack space. We continue to market our remaining Data Centre capacity together with our managed and cloud services, securing some new customers for 2017, and have seen modest growth from a re-based position.

Other

Other revenues include the advertising revenue from our telephone directory, hardware equipment sales, inter-connection fees and managed services. Other revenue also includes revenue from our subsidiary, Partitionware Limited.

Other revenues during the period fell as expected to GBP2.5m (H1 2016: GBP2.9m) with the reduction mainly driven by the change in distribution date of our directories to every December.

Outlook

With a continued focus on innovation and early progress on the Transformation Programme encouraging, we are continuing to pursue our joint strategy of strengthening our position in our core market on the Isle of Man whilst looking for growth on and off island by leveraging our mobile technology platform and exploring new products and services for existing and future customers.

Current trading remains on course to deliver a result for the full year in line with the Board's expectations. We expect similar trends in the core business during the second half as we saw in the first six months of the year, with a continuation of growth in Mobile and Broadband balanced by moderate decline in Fixed Line and Data Services revenues. Following the loss of two major customers in our Data Centre business last year, the Group is expected to grow revenue from this lower base in H2, whilst we expect Global Solutions to continue to perform well.

We remain confident in the outlook for the Group, reflected in our commitment to maintain our progressive dividend policy. We continue to generate strong operating cash flow from our core business, which enables us to support our ongoing investment programme and to create further value for shareholders.

Financial review

Results Overview

 
 Revenue                  H1          %   H1 2016          %       YoY 
                        2017 
------------------ 
                     GBP'000      Total   GBP'000      Total         % 
                                Revenue              Revenue 
------------------  --------  ---------  --------  ---------  -------- 
 Fixed Line, 
  Broadband and 
  Data                15,568      40.5%    16,027      40.9%    (2.9%) 
------------------  --------  ---------  --------  ---------  -------- 
 Mobile               10,209      26.5%     9,857      25.1%      3.6% 
------------------  --------  ---------  --------  ---------  -------- 
 Global Solutions      7,891      20.5%     6,986      17.8%     13.0% 
------------------  --------  ---------  --------  ---------  -------- 
 Data Centre           2,318       6.0%     3,424       8.7%   (32.3%) 
------------------  --------  ---------  --------  ---------  -------- 
 Other                 2,507       6.5%     2,918       7.5%   (14.1%) 
------------------  --------  ---------  --------  ---------  -------- 
 Total Revenue        38,493               39,212               (1.8%) 
------------------  --------  ---------  --------  ---------  -------- 
 

Group revenue declined by 1.8% to GBP38.5m (H1 2016: GBP39.2m) with a reduction in Data Centre and Other revenue (driven by a change in our directory delivery date) partially offset by increased Global Solutions revenue.

The Fixed Line, Broadband and Data business declined by 2.9% to GBP15.6m (H1: 2016: GBP16.0) with reduced Fixed Line call revenue and a reduction in Data revenue partially offset by continued Broadband revenue growth from the increased uptake of our Ultima and Ultima Plus high speed products. Mobile showed steady revenue growth of 3.6% to GBP10.2m (H1 2016: GBP9.9m) as a result of a continued increase in post pay contract subscription revenue. The Global Solutions business grew strongly at 13.0% to GBP7.9m (H1 2016 GBP7.0m) with particularly encouraging levels of growth in our strongest signal mobile, M2M and international traveller propositions. Data Centre revenues fell to GBP2.3m (H1 2016 GBP3.4m) as a result of customer consolidation. Other revenues were down as expected by 14.1% to GBP2.5m (H1 2016 GBP2.9m) as the distribution of directories moved from H1 to H2.

The Group generated underlying EBITDA of GBP12.6m (H1 2016: GBP13.8m) and reported EBITDA of GBP10.7m (H1 2016: GBP13.8m). The lower underlying EBITDA was primarily due to the change in directory distribution to H2 and customer consolidation in the Data Centre business. Underlying EBITDA margin decreased to 32.7% (H1 2016 35.3%), while reported EBITDA margin was 27.7% (H1 2016: 35.3%).

Depreciation and amortisation was GBP4.8m (H1 2016: GBP4.4m) which increased as a result of additions made during 2016, particularly in relation to updated billing platforms.

Underlying operating profit decreased by 16.9% from GBP9.4m in H1 2016 to GBP7.8m in the current period, reflecting the decrease in underlying EBITDA and increased depreciation expense. Reported operating profit was GBP5.9m (H1 2016: GBP9.4m) due to the effect of the transformation programme costs of GBP1.9m.

Underlying profit before tax was GBP6.7m (H1 2016 GBP8.3m) which is calculated as profit before tax, adjusted for the transformation programme related expenses of GBP1.9m, acquisition costs of GBP0.1m and a GBP0.4m gain on re-measurement of interest rate swap liability. Before adjusting for these items, reported profit before tax was GBP5.2m (H1 2016: GBP6.3m).

Underlying diluted EPS was 5.88p (H1 2016: 7.26p) resulting from the lower underlying profit before tax. Reported diluted EPS was 4.57p (H1 2016: 5.53p).

The Company has declared an interim dividend of 3.9p, a 5.4% or 0.2p increase on last year.

Costs

Costs of sales increased by 4.1% to GBP15.5m (H1 2015 GBP14.9m), primarily due to the increased Global Solutions revenue which generates roaming costs as a cost of sale.

Administrative expenses increased by 14.7% to GBP17.1m (H1 2016: GBP14.9m) due to transformation programme costs and increased depreciation and amortisation costs resulting from additional billing platform fixed assets brought into use in 2016.

Net finance costs at GBP1.1m were the same as prior period (H1 2016: GBP1.1m) which is in line with expectations as no significant changes were made to lending arrangement terms.

We recorded an unrealised gain of GBP0.4m (H1 2016: unrealised loss GBP2.0m) on interest rate swaps due to improvements in market forward interest rates.

There is no corporation tax payable on the Company's profits for H1 2017 or last year. The Company enjoys the benefit of an Isle of Man 0% corporation tax rate.

Cash flow and Capital Expenditure

Cash generated from underlying operating activities increased by 1.0% to GBP10.2m (H1 2016: GBP10.1m). This represents an underlying EBITDA cash conversion of 81.3% (H1 2016: 73.2%) with year on year progress boosted by improved working capital management and reduced pension contributions to the Group's defined benefit pension scheme, resulting from reduced annual funding obligations for 2017 onwards, down from GBP1.2m per annum to GBP0.6m per annum. Underlying operating cash flow includes adjustments for the following specific items;

 
                                 June       June 
                                 2017       2016 
   Cash Flow                  GBP'000    GBP'000 
--------------------------  ---------  --------- 
 Reported operating 
  Cash Flow (2)                 5,422       10,138 
 Transformation programme       4,790            - 
  operating costs 
 Acquisition costs                 30            - 
--------------------------  ---------  ----------- 
 Underlying operating 
  cash flow                    10,242       10,138 
--------------------------  ---------  ----------- 
 

Acquisition costs relate to the acquisition of Partitionware and Goshawk Communications (UK) Limited.

Reported free cash flow after investing activities was a cash outflow of GBP0.1m (H1 2016: GBP8.0m cash inflow) again primarily due to transformation programme payments and deferred payments relating to the acquisition of Partitionware in December 2016. After adjusting for these items, underlying free cash flow was GBP7.3m (H1 2016: GBP8.0m), the reduction being due to increased capital expenditure in the period as a result of phasing of spend throughout the year.

 
                                  June       June 
                                  2017       2016 
   Cash Flow                   GBP'000    GBP'000 
---------------------------  ---------  --------- 
 Reported free Cash Flow         (110)      8,036 
 Transformation programme        4,790          - 
  operating costs 
 Transformation programme          541          - 
  capital expenditure 
 Acquisition costs                  30          - 
 Acquisition of Subsidiary       2,007          - 
---------------------------  ---------  --------- 
 Underlying free cash flow       7,258      8,036 
---------------------------  ---------  --------- 
 

Balance Sheet

Property, plant and equipment decreased to GBP58.5m (H1 2016: GBP60.5m). Capital additions were GBP2.8m in H1 2017 compared with GBP1.0m in H1 2016. Depreciation at GBP4.7m has increased from the prior year (H1 2016: GBP4.3m) as a result of a billing platform upgrade in 2016.

Goodwill of GBP87.9m increased from GBP84.3m in H1 2016 as a result of the purchase of Partitionware in December 2016. The original balance of goodwill arose from the purchase of Manx Telecom from Telefonica in 2010 and is robustly supported by current valuations.

Current assets increased to GBP35.7m (H1 2016: GBP35.5m). Cash held at the end of the period decreased to GBP7.5m down from GBP15.8m at H1 2016 following cash outflows on the transformation programme and final payments in relation to the acquisition of Partitionware in 2016.

Trade and other receivables increased from GBP19.1m H1 2016 to GBP27.7m in H1 2017, offset by an increase in current liabilities from GBP20.1m H1 2016 to GBP26.1m H1 2017. Both were largely a result of higher unsettled roaming balances. The fair value of the interest rate swaps reduced to a liability of GBP1.5m at H1 2017 (H1 2016: GBP2.7m).

Net debt increased to GBP61.7m (H1 2016 GBP53.1m) as a result of cash flows described above. Given the higher level of exceptional costs in the first half, both due to the transformation programme and final payments associated with the acquisition of Partionware, net debt is expected to fall in H2.

_____________________________________________________________________________________

(1) The Directors of the Group have presented a number of additional performance measures in the Statement of Comprehensive Income and financial review 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. See note 3 for further information.

(2) Reported operating Cash Flow is referred to as Net cash generated from operating activities in the Condensed Interim Consolidated Statement of Cash Flows

Condensed Interim Consolidated Statement of Comprehensive Income

 
                                             Unaudited    Unaudited 
                                    Note      6 months     6 months 
                                            to 30 June        to 30 
                                                  2017    June 2016 
                                               GBP'000      GBP'000 
-------------------------------  -------  ------------  ----------- 
 Revenue                               6        38,493       39,212 
 Cost of sales                                (15,522)     (14,911) 
-------------------------------  -------  ------------  ----------- 
 Gross profit                                   22,971       24,301 
-------------------------------  -------  ------------  ----------- 
 
 Administrative expenses                      (17,091)     (14,895) 
-------------------------------  -------  ------------  ----------- 
 Operating profit                                5,880        9,406 
-------------------------------  -------  ------------  ----------- 
 
 Underlying EBITDA                              12,595       13,842 
 Depreciation and amortisation                 (4,783)      (4,436) 
 Underlying Operating 
  profit                                         7,812        9,406 
 Transformation programme                      (1,902)            - 
 Acquisition Costs                                (30)            - 
 Operating Profit                                5,880        9,406 
-------------------------------  -------  ------------  ----------- 
 
 Other income                                       15           10 
 Financial income                      7             7           49 
 Finance costs                         7       (1,125)      (1,183) 
 Net unrealised profit/(loss) 
  on interest rate swaps                           428      (1,976) 
-------------------------------  -------  ------------  ----------- 
 Profit before tax                               5,205        6,306 
-------------------------------  -------  ------------  ----------- 
 Taxation                                            -            - 
-------------------------------  -------  ------------  ----------- 
 Profit for the period 
  Attributable to:                               5,205        6,306 
 Owners of the Group                             5,217        6,306 
  Non-Controlling Interest                        (12)            - 
-------------------------------  -------  ------------  ----------- 
 Underlying Profit before 
  Tax                                            6,709        8,282 
 Net unrealised profit/(loss) 
  on interest rate swaps               3           428      (1,976) 
 Transformation Programme              3       (1,902)            - 
 Acquisition Costs                     3          (30)            - 
 Profit before tax                               5,205        6,306 
-------------------------------  -------  ------------  ----------- 
 
 Other comprehensive 
  income - Items that 
  will never be reclassified 
  to profit or loss 
 Remeasurement of defined 
  benefit pension scheme 
  asset                               14           600      (3,700) 
 Total comprehensive 
  profit for the period 
  Attributable to:                               5,805        2,606 
 Owners of the Group                             5,817        2,606 
  Non-Controlling Interest                        (12)            - 
-------------------------------  -------  ------------  ----------- 
 Earnings per share 
  from continuing operations 
 Basic earnings per 
  share                               13         4.60p        5.59p 
 Diluted earnings per 
  share                               13         4.57p        5.53p 
 Underlying basic earnings 
  per share                           13         5.93p        7.34p 
 Underlying diluted 
  earnings per share                  13         5.88p        7.26p 
-------------------------------  -------  ------------  ----------- 
 
 
 

Condensed Interim Consolidated Statement of Financial Position

 
 
                                           Unaudited    Unaudited        Audited 
                                   Note      30 June      30 June    31 December 
                                                2017         2016           2016 
                                             GBP'000      GBP'000        GBP'000 
-------------------------------  ------  -----------  -----------  ------------- 
Non-current assets 
   Property, plant and 
    equipment                         9       58,515       60,520         60,328 
   Goodwill                          10       87,911       84,277         87,911 
   Intangible assets                             749          282            881 
                                             147,175      145,079        149,120 
-------------------------------  ------  -----------  -----------  ------------- 
Current assets 
   Inventories                                   511          508            905 
   Trade and other receivables                27,730       19,146         23,230 
   Cash and cash equivalents                   7,458       15,804         16,674 
-------------------------------  ------  -----------  -----------  ------------- 
                                              35,699       35,458         40,809 
-------------------------------  ------  -----------  -----------  ------------- 
Current liabilities 
   Trade and other payables                 (26,061)     (20,094)       (26,784) 
   Provisions                         8        (586)            -        (3,840) 
-------------------------------  ------  -----------  -----------  ------------- 
                                            (26,647)     (20,094)       (30,624) 
-------------------------------  ------  -----------  -----------  ------------- 
 
Net current assets                             9,052       15,364         10,185 
-------------------------------  ------  -----------  -----------  ------------- 
 
Non-current liabilities 
   Interest-bearing loans 
    and borrowings                   12     (69,161)     (68,911)       (69,036) 
   Interest rate swaps                       (1,484)      (2,650)        (1,912) 
   Retirement benefit 
    liability                        14      (4,495)      (2,700)        (5,400) 
-------------------------------  ------  -----------  -----------  ------------- 
                                            (75,140)     (74,261)       (76,348) 
-------------------------------  ------  -----------  -----------  ------------- 
Net assets                                    81,087       86,182         82,957 
-------------------------------  ------  -----------  -----------  ------------- 
 
Equity 
   Share capital                     11          228          226            226 
   Share premium                     11           92       84,366         84,366 
   Revaluation Reserve                         1,159            -          1,159 
   Retained earnings/(losses)        11       79,630        1,590        (2,794) 
-------------------------------  ------  -----------  -----------  ------------- 
Equity attributable 
 to owners of the Group                       81,109       86,182         82,957 
Non-Controlling Interest           17           (22)            -              - 
-------------------------------  ------  -----------  -----------  ------------- 
Total equity                                  81,087       86,182         82,957 
-------------------------------  ------  -----------  -----------  ------------- 
 

The notes on pages 14 to 28 form an integral part of these condensed interim financial statements.

These financial statements were approved by the Board of Directors and were signed on its behalf by:

Gary Lamb

Director

11 September 2017

Condensed Interim Consolidated Statement of Changes in Equity

 
                            Share     Share  Revaluation  Non-Controlling   Retained      Total 
                          Capital   Premium      Reserve         Interest   earnings     equity 
                          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 
 income for the period 
Profit for the period           -         -            -                -      6,306      6,306 
Other comprehensive 
 income                         -         -            -                -    (3,700)    (3,700) 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Total comprehensive 
 profit for the period          -         -            -                -      2,606      2,606 
Transactions with 
 owners of the Group, 
 recorded directly 
 in equity 
Share based payment             -         -            -                -        305        305 
Issue of shares                 -        19            -                -          -         19 
Dividend paid                   -         -            -                -    (7,795)    (7,795) 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Total contributions 
 by and distributions 
 to the owners of 
 the Group                      -        19            -                -    (7,490)    (7,471) 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Balance at 30 June 
 2016                         226    84,366            -                -      1,590     86,182 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
 
Balance at 1 January 
 2016                         226    84,347            -                -      6,474     91,047 
Total comprehensive 
 income for the period 
Profit for the period           -         -            -                -      8,821      8,821 
Other comprehensive 
 income                         -         -        1,159                -    (7,000)    (5,841) 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Total comprehensive 
 profit for the period          -         -        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 
 income for the period 
Profit for the period           -         -            -             (12)      5,217      5,205 
Other comprehensive 
 income                         -         -            -                -        600        600 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Total comprehensive 
 profit for the period          -         -            -             (12)      5,817      5,805 
Transactions with 
 owners of the Group, 
 recorded directly 
 in equity 
Share-based payment 
 transactions                   -         -            -                -        428        428 
Issue of shares                 2        92            -                -          -         94 
Dividend paid                   -         -            -                -    (8,197)    (8,197) 
Reclassification 
 of share premium 
 as retained earnings           -  (84,366)            -                -     84,366          - 
Adjustment arising 
 from change in 
 non-controlling 
 interest                       -         -            -             (10)         10          - 
Total contributions 
 by and distributions 
 to the owners of 
 the Group                      2  (84,274)            -             (10)     76,607    (7,675) 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
Balance at 30 June 
 2017                         228        92        1,159             (22)     79,630     81,087 
-----------------------  --------  --------  -----------  ---------------  ---------  --------- 
 
 

The notes on pages 14 to 28 form an integral part of these condensed interim financial statements.

Condensed Interim Consolidated Statement of Cash Flows

 
                                   Unaudited 6 months    Unaudited 6 months 
                           Note       to 30 June 2017       to 30 June 2016 
                                   GBP'000    GBP'000    GBP'0000  GBP'000 
          Cash flows from 
     operating activities 
           Profit for the 
                   period                       5,205                 6,306 
Adjustments 
 for: 
  Depreciation 
   of property, 
   plant and equipment        9      4,649                  4,348 
  Amortisation 
   of intangibles                      134                     88 
  Profit on disposal 
   of property, 
   plant and equipment                 (5)                   (10) 
  Finance income                       (7)                   (49) 
  Finance costs                      1,125                  1,183 
  Net (profit)/loss 
   on interest 
   rate swaps                        (428)                  1,976 
  Negative Goodwill 
   released to 
   income                             (10)                      - 
  Equity-settled 
   share-based 
   payments transactions               430                    306 
Pension contributions                (300)                  (600) 
Changes in: 
  Inventories                          394                     86 
  Trade and other 
   receivables                     (4,500)                     89 
  Trade and other 
   payables                          1,989                (3,585) 
  Provisions                       (3,254)                      - 
                                 ---------  ---------  ----------  -------- 
                                                  217                 3,832 
                                            ---------  ----------  -------- 
Net cash generated 
 from operating 
 activities                                     5,422                10,138 
 
Cash flows from 
 investing activities 
Proceeds from 
 sale of property, 
 plant and equipment                     5                    152 
Purchase of 
 property, plant 
 and equipment                9    (3,535)                (2,298) 
Acquisition 
 of Subsidiary                     (2,007)                      - 
Purchase of 
 intangible assets                     (2)                    (5) 
Interest received                        7                     49 
                                 ---------  ---------  ----------  -------- 
Net cash used 
 in investing 
 activities                                   (5,532)               (2,102) 
 
Cash flows from 
 financing activities 
Proceeds from 
 issue of shares             11         92                     19 
Repayment of 
 borrowings                  12       (20)                   (19) 
Interest paid                        (981)                (1,038) 
Dividends paid               18    (8,197)                (7,795) 
                                 ---------  ---------  ----------  -------- 
Net cash used 
 in financing 
 activities                                   (9,106)               (8,833) 
Net decrease 
 in cash and 
 cash equivalents                             (9,216)                 (797) 
Cash and cash 
 equivalents 
 brought forward                               16,674                16,601 
                                            ---------              -------- 
Cash and cash 
 equivalents 
 at 30 June                                     7,458                15,804 
                                            ---------              -------- 
 

The notes on pages 14 to 28 form an integral part of these financial statements.

   1              General information 

Manx Telecom plc (the "Company") and its subsidiaries (together "the Group") supply of a broad range of telecommunications services to the Isle of Man.

The Company is a public limited company, which is listed on the Alternative Investment Market of the London Stock Exchange ("AIM") and is incorporated and domiciled in the Isle of Man. The address of its registered office is 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB.

These condensed interim consolidated financial statements were approved for issue on 11 September 2017. The interim report will be available from 11 September 2017 on the group's website www.manxtelecom.com and from the registered office.

   2              Basis of preparation 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. These condensed interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union. However, explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2016. These condensed interim financial statements should be read in conjunction with the last annual consolidated financial statements as at and for the year ended 31 December 2016.

   3              Accounting policies 

The accounting policies adopted are consistent with those of the previous financial year. The Group has not adopted any new accounting policies in the period to 30 June 2017. Other amendments to IFRSs effective for the financial year ending 31 December 2017 are not expected to have a material impact on the Group.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Non-GAAP 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. These terms include EBITDA, underlying EBITDA, underlying operating profit, underlying profit before tax, underlying operating cash flow and underlying free cash flow, which are not defined performance measures in IFRS. 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 is defined as the Group profit or loss before depreciation, amortization, net finance expense and taxation. Underlying EBITDA is defined as EBTIDA, adjusted for specific items. 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.

Underlying operating profit and underlying profit before tax are based on equivalent IFRS reported measures from the consolidated statement of comprehensive income, adjusted for specific items. Underlying operating cash flow is based on the equivalent reported measure from the consolidated statement of cash flows, adjusted for the cash impact of specific items. 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. 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.

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 factor such as the frequency or predictability of occurrence.

The adjustments made to reported profit before tax and operating profit are income and charges that are one-off in nature, significant and distort the Group's underlying performance. For the period ended 30 June 2017 these adjustments included:

- Transformation Programme. As part of the Transformation Programme, launched in 2016, the Group incurred costs of GBP1,902,000 during the period to 30 June 2017 relating to employee termination benefits, consulting fees and other programme-related costs.

- Acquisition Costs. Costs of GBP30,000 were incurred in relation to the acquisition of Goshawk Communications (UK) Limited in May 2017 and the acquisition of Partitionware in December 2016.

- Unrealised gains and losses on interest rate swaps. During the period to 30 June 2017, the Group made an unrealized gain of GBP428,000 on interest rate swap fair value movements, while for the period ended 30 June 2016, the Group made a loss of GBP1,976,000. See note 11 for further information.

Additionally, there are the following adjustments to reported cash flows from operating activities and free cash flow that are one off in nature, significant and distort the Group's underlying performance:

- Transformation Programme. The Group made operating cash outflows of GBP4,790,000 and investing cash outflows of GBP541,000 in the first six months of 2017 in relation to the Transformation Programme expenses described above.

- Acquisition of Subsidiary. The net cash outflow of GBP2,007,000 in relation to the second consideration payment in respect of the acquisition of Partitionware in December 2016 was made in the period. In addition the Group also made cash outflows of GBP30,000 in relation to acquisition costs of both Partitionware and Goshawk Communications (UK) Limited.

New currently effective requirements and forthcoming requirements

The following new and revised Standards and Interpretations have been adopted in the current period. Their adoption has not had any significant impact on the amounts reported in these financial statements.

 
 IFRS 14         Regulatory Deferral Accounts 
--------------  ----------------------------------------- 
                 Annual Improvements 2012 - 2014 
--------------  ----------------------------------------- 
 IFRS 10, IFRS   Investment Entities: Applying 
  12 & IAS 28     the Consolidation Exemption (Amendments 
                  to IFRS 10, IFRS 12 and IAS 28) 
--------------  ----------------------------------------- 
 IFRS 11         Accounting for Acquisitions of 
                  Interests in Joint Operations 
                  (Amendments to IFRS 11) 
--------------  ----------------------------------------- 
 IAS 1           Disclosure Initiative (Amendments 
                  to IAS 1) 
--------------  ----------------------------------------- 
 IAS 16 & IAS    Clarification of Acceptable Methods 
  38              of Depreciation and Amortisation 
                  (Amendments to IAS 16 and IAS 
                  38) 
--------------  ----------------------------------------- 
 IAS 27          Equity Method in Separate Financial 
                  Statements (Amendments to IAS 
                  27) 
--------------  ----------------------------------------- 
 

At the date of authorization of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 
        Amendments/improvements          Effective date (applicable 
                                          to annual periods 
                                          beginning on or after 
                                          stated date) 
-----  -------------------------------  --------------------------- 
 IFRS   Classification and Measurement   1 January 2018 
  2      of Share-based Payment 
         Transactions (Amendments 
         to IFRS 2) 
-----  -------------------------------  --------------------------- 
 IFRS   Financial Instruments            1 January 2018 
  9 
-----  -------------------------------  --------------------------- 
 IFRS   Revenue from Contracts           1 January 2018 
  15     with Customers 
-----  -------------------------------  --------------------------- 
 IFRS   Leases                           1 January 2019 
  16 
-----  -------------------------------  --------------------------- 
 IAS    Recognition of Deferred          1 January 2017 
  12     Tax Assets for Unrealised 
         Losses (Amendments to 
         IAS 12) 
-----  -------------------------------  --------------------------- 
 IAS    Disclosure Initiative            1 January 2017 
  7      (Amendments to IAS 7) 
-----  -------------------------------  --------------------------- 
 

The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material

impact on the financial statements of the Group in future periods, except as that:

-- IFRS 15 may have a material impact on the amounts of revenue reported and disclosures made in the Group's

consolidated financial statements; and

-- IFRS 16 may require the Group to recognise new assets and liabilities in respect of its operating leases and replace

operating lease expenses with depreciation.

IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The standard requires

entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a relative

standalone selling price basis, based on a five-step model.

The Group is still in the process of quantifying the implications of this Standard, however we expect the following

indicative impacts:

- Under the current accounting policy, revenue recognised in relation to equipment and mobile handsets is based on the corresponding customer charge when the asset is transferred to the customer. Generally, customer premises equipment is provided for free, and mobile handsets are either provided for free or for a small upfront charge. Under IFRS 15, additional revenue will be allocated to all equipment and handsets with reference to the asset's relative standalone value within the contract, regardless of contract pricing. As a result, on adoption of IFRS 15, there will be an acceleration of revenue for these items, with a corresponding reduction in ongoing service revenue over the contract period. The difference between the revenue and the customer charge will be recognised as a contract asset - a receivable arising from secured cash flows - on the balance sheet.

- Sales commissions resulting directly from securing contracts with customers are currently expensed when incurred. IFRS 15 will require these costs of acquiring contracts to be recognised as an asset when incurred, to be expensed over the associated contract period.

- IFRS 15 will also result in some contract fulfilment costs which are currently expensed at a point in time to be deferred on the balance sheet where they relate to a performance obligation which is satisfied over time. The Group is continuing its analysis of the expected impacts of transition to IFRS 15. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these Standards until a detailed review has been completed.

   4              Estimates 

The preparation of these condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.

   5              Financial risk management and financial instruments 
   5.1           Financial risk factors 

The Group's operations expose it to a variety of financial risks including credit risk, currency risk, interest rate risk and liquidity risk. The Group's overall risk management policies focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the Group's financial performance and net assets.

These condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2016.

   5.2           Liquidity risk 

The Group's liquidity profile is unchanged during the period (see note 12).

   5.3           Fair value estimation 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.

In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial states is determined on such a basis, except for share based payments within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3: inputs for the asset or liability that are not based on observable market data.

The table below analyses financial instruments carried at fair value at 30 June 2017, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Interest rate swaps are valued using discounted cash flows, under which future cash flows are estimated based on forward interest rate yields (from observable yield curves at the end of the reporting period) and contract interest rates.

 
                              Level               Level      Level 
                                  1                   2          3      Total 
 30 June 2017               GBP'000             GBP'000    GBP'000    GBP'000 
-----------------------  ----------   -----------------  ---------  --------- 
 
 Financial assets                 -                   -          -          - 
 Financial liabilities             -            (1,484)          -    (1,484) 
-----------------------  -----------  -----------------  ---------  --------- 
 

The following table presents the group's assets and liabilities that are measured at fair value at 30 June 2016.

 
                              Level       Level      Level 
                                  1           2          3      Total 
 30 June 2016               GBP'000     GBP'000    GBP'000    GBP'000 
-----------------------  ----------   ---------  ---------  --------- 
 
 Financial assets                 -           -          -          - 
 Financial liabilities             -    (2,650)          -    (2,650) 
-----------------------  -----------  ---------  ---------  --------- 
 

The following table presents the group's assets and liabilities that are measured at fair value at 31 December 2016.

 
                              Level       Level      Level 
                                  1           2          3      Total 
 31 December 2016           GBP'000     GBP'000    GBP'000    GBP'000 
-----------------------  ----------   ---------  ---------  --------- 
 
 Financial assets                 -           -          -          - 
 Financial liabilities             -    (1,912)          -    (1,912) 
-----------------------  -----------  ---------  ---------  --------- 
 

There were no transfers between levels during the current or prior periods.

   6      Operating segment information 

The Group has five reportable revenue segments which management report on and base their strategic decisions on:

 
 
                             30 June   30 June 
                                2017      2016 
                             GBP'000   GBP'000 
   ----------------------   --------  -------- 
 
   Fixed line, broadband 
    and data                  15,568    16,027 
   Mobile                     10,209     9,857 
   Global Solutions            7,891     6,986 
   Data Centre                 2,318     3,424 
   Other                       2,507     2,918 
   -----------------------  --------  -------- 
   Total                      38,493    39,212 
   -----------------------  --------  -------- 
 

The segmental analysis shows revenue classified according to market source. However, the group is not structured on a divisional basis and has functional departments, processes, assets and obligations which serve each of these revenue streams. These are not allocated in the financial reports received by the Board and its decisions are not routinely based on any such identification. Consequently, the analysis shown above does not extend to any segmentation of profits and net assets.

There is no inter-segmental trading.

The products and services included within each of the five segments are as follows:

Fixed line, broadband and data includes revenues from ADSL and VDSL rental and connection charges, fixed line call charges, fixed line rental and connection charges, and private circuit rental and connection charges.

Mobile includes revenues from mobile calls, SMS and data charges, mobile rental charges, mobile handset and accessory sales, and roaming.

Global solutions includes revenues from mobile termination, products such as Chameleon, strongest signal mobile and M2M (machine to machine).

Data centre includes revenues from hosting services provided.

Other includes kit sales, directory revenues and managed service rental charges.

   7      Finance income and expense recognised in profit or loss 
 
                                     30 June   30 June 
                                        2017      2016 
                                     GBP'000   GBP'000 
----------------------------------  --------  -------- 
 Finance income 
 Other interest receivable                 7        49 
 Total                                     7        49 
----------------------------------  --------  -------- 
 
 Finance expense 
 Interest payable on borrowings          978     1,035 
 Amortisation of loan transaction 
  costs                                  144       145 
 Finance lease interest                    3         3 
 Total                                 1,125     1,183 
----------------------------------  --------  -------- 
 
   8      Provisions 
 
                         Restructuring 
                             Provision 
                               GBP'000 
 At 1 January 
  2017                           3,840 
 Additional provision 
  in the period                    457 
 Utilisation 
  of Provision                 (3,711) 
----------------------  -------------- 
 At 30 June 2017                   586 
----------------------  -------------- 
 
 

During 2016, the Group committed to a plan to restructure the business as part of the Transformation Programme. The restructuring provision at 31 December 2016 related to redundancy costs, consulting fees and other costs of the transformation programme. Estimated costs were based on the terms of relevant contracts. During the period, a substantial proportion of the restructuring provision was utilised as planned, as affected employees had left the Group and received payment. Additional provisions were made during the period, primarily relating to consulting costs.

   9      Property, plant and equipment 

Fixed asset additions during the period relate principally investment in the Group's fixed voice network, billing systems and building facilities.

 
 Property, plant and              Land and        Plant           Under     Total 
  equipment                      buildings          and    construction 
                                              equipment 
 Cost                              GBP'000      GBP'000         GBP'000   GBP'000 
-----------------------------  -----------  -----------  --------------  -------- 
 Balance at 1 January 
  2016                              38,167       90,992           6,202   135,361 
 Additions                               -           16           1,026     1,042 
 Transfer                              344        3,830         (4,174)         - 
 Disposals                           (170)         (39)               -     (209) 
-----------------------------  -----------  -----------  --------------  -------- 
 Balance at 30 June 2016            38,341       94,799           3,054   136,194 
-----------------------------  -----------  -----------  --------------  -------- 
 
 Balance at 1 January 
  2016                              38,167       90,992           6,202   135,631 
 Additions                               -           16           5,940     5,956 
 Transfer                              933        8,947         (9,880)         - 
 Disposals                           (170)         (38)               -     (208) 
 Acquisition of Subsidiary               -          218               -       218 
 Impairment                          (750)        (984)               -   (1,734) 
 Revaluation                       (5,551)            -               -   (5,551) 
-----------------------------  -----------  -----------  --------------  -------- 
 Balance at 31 December 
  2016                              32,629       99,151           2,262   134,042 
-----------------------------  -----------  -----------  --------------  -------- 
 
 Balance at 1 January 
  2017                              32,629       99,151           2,262   134,042 
 Additions                               -            -           2,835     2,835 
 Transfer                               36          921           (957)         - 
 Disposals                               -            -               -         - 
 Acquisition of Subsidiary               -            1               -         1 
 Balance at 30 June 2017            32,665      100,073           4,140   136,878 
-----------------------------  -----------  -----------  --------------  -------- 
 
 Depreciation and impairment 
 Balance at 1 January 
  2016                              10,888       60,505               -    71,393 
 Depreciation charge 
  for the period                       844        3,504               -     4,348 
 Disposals                            (28)         (39)               -      (67) 
-----------------------------  -----------  -----------  --------------  -------- 
 Balance at 30 June 2016            11,704       63,970               -    75,674 
-----------------------------  -----------  -----------  --------------  -------- 
 
 Balance at 1 January 
  2016                              10,888       60,505               -    71,393 
 Depreciation charge 
  for the period                     1,708        7,226               -     8,934 
 Disposals                            (28)         (39)               -      (67) 
 Acquisition of subsidiary               -          160               -       160 
 Impairment                          (597)        (673)               -   (1,270) 
 Eliminated on revaluation         (5,436)            -               -   (5,436) 
 Balance at 31 December 
  2016                               6,535       67,179               -    73,714 
-----------------------------  -----------  -----------  --------------  -------- 
 
 Balance at 1 January 
  2017                               6,535       67,179               -    73,714 
 Depreciation charge 
  for the period                       699        3,950               -     4,649 
 Disposals                               -            -               -         - 
 Balance at 30 June 2017             7,234       71,129               -    78,363 
 
 Net book value 30 June 
  2017                              25,431       28,944           4,140    58,515 
-----------------------------  -----------  -----------  --------------  -------- 
 Net book value 31 December 
  2016                              26,094       31,972           2,262    60,328 
-----------------------------  -----------  -----------  --------------  -------- 
 Net book value 30 June 
  2016                              26,637       30,829           3,054    60,520 
-----------------------------  -----------  -----------  --------------  -------- 
 
 

The carrying value of land and buildings held under the revaluation model is the same as if it were held under the historical cost model. There were no changes in valuation techniques during the period.

   10    Goodwill 
 
Cost                                                      GBP'000 
============================  =================================== 
Balance at 1 January 2016                                  84,277 
Additions during the period                                     - 
============================  =================================== 
Balance at 30 June 2016                                    84,277 
============================  =================================== 
Additions during the period                                 3,634 
============================  =================================== 
Balance at 31 December 2016                                87,911 
============================  =================================== 
Additions during the period                                     - 
============================  =================================== 
Balance at 30 June 2017                                    87,911 
============================  =================================== 
 
Carrying amount 
As at 30 June 2017                                         87,911 
============================  =================================== 
As at 31 December 2016                                     87,911 
============================  =================================== 
As at 30 June 2016                                          87,911 
============================  ===================================== 
 
 

On 29 June 2010, the Group acquired all of the ordinary shares in Manx Telecom Trading Limited (previously Manx Telecom Limited) for GBP133.8m satisfied in cash.

On 1 December 2016, the Group acquired all of the ordinary shares in Partitionware Limited for GBP4,007,000 satisfied in cash, giving rise to goodwill of GBP3,634,000.

Goodwill is deemed to have an indefinite life and so is not subject to amortisation.

The cash generating unit of the Group is considered to be the operations of Manx Telecom Trading Limited in its entirety due to the structure of the Company which operates as one telecommunications business. Goodwill is considered to be impaired if the carrying amount exceeds the recoverable amount.

A review for indicators of impairment since 31 December 2016 has been performed with no such indicators identified.

    11    Share capital 

The table below sets out the amounts recorded in equity:

 
                                Number   Ordinary      Share      Total 
                             of shares      share    premium    GBP'000 
                              in issue    capital    GBP'000 
                           (thousands)    GBP'000 
-----------------------  -------------  ---------  ---------  --------- 
 Opening balance 
  as at 1 January 
  2016                         112,964        226     84,347     84,573 
 Shares issued on 
  exercise of SAYE 
  share options                     13          -         19         19 
-----------------------  -------------  ---------  ---------  --------- 
 At 30 June 2016               112,977        226     84,366     84,592 
-----------------------  -------------  ---------  ---------  --------- 
 
 Opening balance 
  as at 1 January 
  2016                         112,964        226     84,347     84,573 
 Shares issued 
  on exercise of 
  SAYE share options                13          -         19         19 
-----------------------  -------------  ---------  ---------  --------- 
 At 31 December 
  2016                         112,977        226     84,366     84,592 
-----------------------  -------------  ---------  ---------  --------- 
 
 Opening balance 
  as at 1 January 
  2017                         112,977        226     84,366     84,592 
 Reclassification 
  of share premium 
  as retained earnings               -          -   (84,366)   (84,366) 
 Shares issued 
  on exercise of 
  CIP Scheme options               849          2          -          2 
 Shares issued 
  on exercise of 
  SAYE                              65          -         92         92 
 At 30 June 2017               113,891        228         92        320 
-----------------------  -------------  ---------  ---------  --------- 
 
 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

On 24 November 2015, the Company made a block listing application to the London Stock Exchange for admission of 30,000 Ordinary Shares of 0.2p each in the Company to trading on AIM. The shares will be issued from time to time pursuant to the exercise of share options under the Company's Save As You Earn share option scheme and will rank pari passu in all respects with the existing ordinary shares of the Company. On 10 December 2015, 3,214 shares were issued in respect of options exercised under this scheme, on 28 January 2016, 9,285 shares were issued in respect of options exercised under this scheme and on 17 May 2016 4,285 shares were issued in respect of options exercised under this scheme. During the period to 30 June 2017, a further 4,284 shares have been exercised under this scheme.

On 28 March 2017, the Company made a block listing application to the London Stock Exchange for admission of 250,000 Ordinary Shares of 0.2p each in the Company to trading on AIM. The shares will be issued from time to time pursuant to the exercise of share options under the Company's Save As You Earn share option scheme and will rank pari passu in all respects with the existing ordinary shares of the Company. During the period to 30 June 2016, 60,383 shares were issued in respect of options exercised under this scheme.

On 14 June 2017, by way of a special resolution passed at the Annual General Meeting of the Company, it was resolved that share premium of GBP84,366,271 be cancelled and reclassified as retained earnings.

    12    Interest-bearing loans and borrowings 
 
                                          30 June    30 June   31 December 
                                             2017       2016          2016 
                                          GBP'000    GBP'000       GBP'000 
 Non-current Liabilities 
  Finance lease liability                      34         74            53 
  Secured bank loans                       69,127     68,837        68,983 
-----------------------------  ------------------  ---------  ------------ 
                                           69,161     68,911        69,036 
-----------------------------  ------------------  ---------  ------------ 
 Current Liabilities 
  Current portion of secured             -                 -             - 
  bank loans 
-----------------------------  ------------------  ---------  ------------ 
 Total                                     69,161     68,911        69,036 
-----------------------------  ------------------  ---------  ------------ 
 

The Group has a GBP80m revolving credit facility in place with Barclays Bank plc, Lloyds Bank plc and The Royal Bank of Scotland PLC, of which the Group has drawn down GBP70m. In 2015, the Group extended the term of the existing revolving credit facility by a further 2 years from 30 June 2018 to 30 June 2020. Transaction costs incurred as part of the original debt facility and the extension were capitalised and will be amortised over the loan period.

As at 30 June 2016, 31 December 2016 and 30 June 2017 the margin applicable to the interest rate on the facility was 1.5%.

Amounts drawn under the Facility Agreement are to be repaid on the last day of each applicable interest period unless the relevant borrower elects otherwise and amounts repaid will (subject to certain drawdown conditions) remain available for re-drawing unless cancelled.

The loan is secured by way of a debenture in favour of the security agent providing a fixed and floating charge over certain of the Group's assets, including the shares of Manx Telecom Holdings Limited and Manx Telecom Trading Limited and property, plant and equipment of the Group.

To mitigate the Group's exposure to interest rate risk, the Group has entered into interest swap agreements:

 
                                                Fair value       Fair value   Fair value 
                Interest              Notional       at 30   at 31 December   at 30 June 
                    rate      Expiry    amount   June 2017             2016         2016 
Bank                   %        date   GBP'000     GBP'000          GBP'000      GBP'000 
==============  ========  ==========  ========  ==========  ===============  =========== 
Royal Bank of 
 Scotland PLC      1.711  29/06/2018    25,000       (313)            (476)        (688) 
Lloyds Bank 
 PLC               1.711  29/06/2018    25,000       (313)            (476)        (688) 
Lloyds Bank 
 PLC               1.698  30/06/2020    50,000       (858)            (960)      (1,274) 
                                                   (1,484)          (1,912)      (2,650) 
==============  ========  ==========  ========  ==========  ===============  =========== 
 
   13    Earnings per share 

The calculation of the basic and diluted earnings per share is based on the following data:

 
                                                  30 June   31 December 
                                   30 June 2017      2016          2016 
                                          000's     000's         000's 
----------------------------      -------------  --------  ------------ 
 Weighted average 
  number of ordinary 
  shares at 30 June/31 
  December (Basic)                      113,367   112,834       112,841 
 Effect of Co-Investment 
  plan                                      166       687           744 
 Effect of Save as 
  you earn plan                             304       303           325 
 Effect of Share incentive 
  plan                                       96        80            95 
 Effect of Shadow 
  save as you earn 
  plan                                        3         4             4 
 Effect of Shadow 
  share incentive plan                        2         1             1 
 Effect of Long term 
  incentive plan                            271       144           249 
----------------------------  -----------------  --------  ------------ 
 Weighted average 
  number of ordinary 
  shares at 30 June/31 
  December (Diluted)                    114,209   114,053       114,259 
----------------------------  -----------------  --------  ------------ 
 
 
   13.1         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").

 
                                  Number 
                                   of shares 
                  Earnings         (Basic) 
                                                                  Number 
                                                Basic              of shares   Diluted 
                                                 Earnings          (Diluted)    earnings 
                   GBP'000         000's         per Share         000's        per share 
---------------  ---------  ---  -----------  ------------  ---  -----------  ----------- 
 
   30 June 
   2017           5,217           113,367      4.60p              114,209      4.57p 
 
   30 June 
   2016           6,306           112,834      5.59p              114,053      5.53p 
 
   31 December 
   2016           8,821           112,841      7.82p              114,259      7,72p 
---------------  ---------  ---  -----------  ------------  ---  -----------  ----------- 
 
   13.2         Underlying Earnings per Share 

The calculation of Underlying Earnings per Share has also been included to enable shareholders to assess the results of the Group excluding income and charges that are one-off in nature, significant and distort the Group's underlying performance.

 
                           Number                        Number 
                            of shares                     of shares   Diluted 
                Earnings    (Basic)     Basic Earnings    (Diluted)    earnings 
                 GBP'000    000's        per Share        000's        per share 
-------------  ---------  -----------  ---------------  -----------  ----------- 
 30 June 
  2017          6,721      113,367      5.93p            114,209      5.88p 
 30 June 
  2016          8,282      112,834      7.34p            114,053      7.26p 
 31 December 
  2016          16,293     112,841      14.44p           114,259      14.26p 
-------------  ---------  -----------  ---------------  -----------  ----------- 
 

Underlying earnings of GBP6,721k are attributable to the Parent of the Group and have been calculated as underlying profit before Tax less the loss of GBP12k attributable to the Non-Controlling Interest.

   14    Retirement Benefit Obligations 

The Group operates two pension schemes. The Manx Telecom Limited Combined Pension Scheme is a defined benefit scheme that is closed to new entrants and the Manx Telecom Employee Retirement Plan is a defined contribution plan.

At 30 June 2017, the net liability on the defined benefit scheme decreased to GBP4.5m from a net liability of GBP5.4m at 31 December 2016 (30 June 2016: GBP2.7m liability). The fair value of the assets at 30 June 2017 were GBP91.9m (31 December 2016: GBP90.9m, 30 June 2016: GBP85.0m). The defined benefit obligation at 30 June 2017 was GBP96.4m (31 December 2016 GBP96.3m, 30 June 2016: GBP96.4m).

The service cost for the six month period was GBPnil as the scheme was closed to future accrual in August 2014 (31 December 2016: GBPnil, 30 June 2016: GBPnil), the net interest expense on the defined benefit liability was GBPnil (31 December 2016: GBPnil, 30 June 2016: GBPnil) and employer contributions were GBP0.3m (31 December 2016: GBP1.2m, 30 June 2016: GBP0.6m) following reduced annual funding obligations for 2017 onwards, down from GBP1.2m per annum to GBP0.6m per annum.

The gain on remeasurement of the defined benefit pension scheme recognised in other comprehensive income for the six month period was GBP0.6m (31 December 2016: GBP7.0m loss, 30 June 2016: GBP3.7m loss). The gain on remeasurement of the defined benefit pension scheme is a combination of the loss based on changes in financial assumptions, offset by a return on scheme assets greater than the discount rate applied. The loss as a result of financial assumptions was GBP0.5m for the six month period to 30 June 2017 (31 December 2016: GBP21.5m, 30 June 2016: GBP12.6m).

The financial assumptions used were:

 
                           30 June   31 December   30 June 
                              2017          2016      2016 
------------------------  --------  ------------  -------- 
 Discount rate               2.50%         2.55%     2.75% 
------------------------  --------  ------------  -------- 
 Retail price inflation      3.30%         3.35%     2.85% 
------------------------  --------  ------------  -------- 
 Consumer price 
  inflation                  2.30%         2.35%     1.85% 
------------------------  --------  ------------  -------- 
 Salary increases              N/A           N/A       N/A 
------------------------  --------  ------------  -------- 
 
   15    Related party transactions 

There have been no related party transactions during the period other than the compensation of key management personnel.

   16    Acquisition of subsidiary 

On 5 May 2017, the Group's subsidiary, Goshawk Communications Limited, a Company incorporated in the Isle of Man, acquired 100% of the issued share capital of Goshawk Communications (UK) Limited ("Goshawk") in exchange for 33% of the issued share capital of Goshawk Communications Limited. As a result of the share for share exchange, the Group has a 67% shareholding in Goshawk Communications Limited, which in turn owns 100% of 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 transformational growth strategy by developing disruptive technologies and bringing innovative products and services to the market.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed from the acquisition of Goshawk on 5 May 2017 are as set out in the table below:

 
                                  GBP'000 
 Financial Assets                      23 
 Identifiable Intangible 
  Assets                                1 
 Property, Plant and Equipment          - 
 Financial Liabilities               (14) 
 
 Total Identifiable Assets             10 
 Gain on bargain purchase            (10) 
 Total Consideration                    - 
 

The gain on bargain purchase arising from the acquisition is a result of a nil consideration transferred and the fair value of the identifiable net assets acquired.

Acquisition related costs incurred in the period related to the acquisition of Goshawk (included in administrative expenses) amounted to GBP12,000.

Goshawk contributed nil revenue and GBP34,000 of losses to the Group's consolidated profit for the period between the date of acquisition on 5 May 2017 and the balance sheet date of 30 June 2017.

If the acquisition of Goshawk had been completed on the first day of the financial period, Group revenues for the six month period to 30 June 2017 would have been GBP20,000 more and Group profit would have been GBP15,000 less.

    17    Non-Controlling Interest 

Summarised consolidated financial information in respect of Goshawk Communications Limited, which has a material non-controlling interest, is set out below. The summarised financial information below consolidates Goshawk Communications (UK) Limited and represents amounts before other intragroup eliminations.

Goshawk Communications Limited

 
                                    30 
                                  June 
                                  2017 
                               GBP'000 
 Current Assets                      4 
 Non-Current Assets                  2 
 Current Liabilities              (44) 
 Non-Current Liabilities             - 
---------------------------  --------- 
 Equity attributable to 
  the owners of the Group         (16) 
 Non-Controlling interests        (22) 
 
 
                                     30 
                                   June 
                                   2017 
                                GBP'000 
 Revenue                             10 
 Expenses                          (49) 
 Total Comprehensive (Loss) 
  for the year                     (39) 
----------------------------  --------- 
 Attributable to: 
 Owners of the Group               (27) 
 Non-controlling interests         (12) 
----------------------------  --------- 
 

Goshawk Communications Limited was a newly formed company acquired by the Group on 2 May 2017 for the purpose of acquiring Goshawk, therefore there is no comparative information for the period ended 30 June 2016.

   18    Dividends 

The following amounts were recognised as distributions to equity holders in the period:

 
                                            30 
                                          June  31 December   30 June 
                                          2017         2016      2016 
                                       GBP'000      GBP'000   GBP'000 
====================================  ========  ===========  ======== 
Interim dividend for the year ended 
 31 December 2016 of 3.7p (2015: 
 3.5p) per share                             -        4,181         - 
Final dividend for the year ended 
 31 December 2016 of 7.2p (2015: 
 6.9p) per share                         8,197        7,795     7,795 
------------------------------------  --------  -----------  -------- 
Total dividends recognised in the 
 period/year                             8,197       11,976     7,795 
------------------------------------  --------  -----------  -------- 
Proposed interim dividend for the 
 year ended 31 December 2017 of 
 3.9p per share                          4,442            -         - 
====================================  ========  ===========  ======== 
 

The final dividend for the year ended 31 December 2016 was declared on 14 March 2017 and paid on 30 June 2017. The interim dividend was declared on 11 September 2017 and has not been included as a liability in these condensed interim financial statements. The dividend is payable to all shareholders on the Register of Members on 13 October 2017. The total dividend to be paid is 3.9p per share. The payment of this dividend will not have any tax consequences for the Group.

   19    Subsequent events 

The following significant events occurred after the period end date of 30 June 2017 and prior to the signing of these interim financial statements on 11 September 2017:

   -       An interim dividend for the period ended 30 June 2017 was declared as detailed in note 18; 

- On 7 July 2017, 448,144 share options were granted to Executive Directors of the Company and Directors of the subsidiary Manx Telecom Trading Limited under a third Long Term Incentive Plan approved by the Remuneration Committee on 14 June 2017; and

- On 6 July 2017, 61.020 new ordinary shares were issued of 0.2p each in respect of the Save As You Earn share option scheme.

Other than as noted above, there are no events after the balance sheet date which require disclosure.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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September 12, 2017 02:00 ET (06:00 GMT)

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