Business communications specialist Colt is increasingly chipper about the future thanks to signs that customers are spending again, moving delayed IT contracts forward at last.
Total revenue in the first half of 2010 declined 3.7 per cent at constant currencies, mainly because of a 9 per cent fall in voice revenue due to stiff competition in Europe. Still, the revenue performance is good deal better than the near 5 per cent decline reported in the first quarter with the managed services division the star performer, increasing revenues by 13 per cent to €83m (£70m), while data revenues dipped slightly to €397m. Cash profits came in flat at £158m despite lower revenues, but adjusted pre-tax profits fell 25 per cent to €34.4m which reflected a rise in depreciation charges and lower currency gains.
Colt ended the period with net cash of €266m after reporting a net cash outflow of €49.2m. This was largely because of a 76 per cent hike in capital spending to €160m following the €57.1m acquisition of the freehold to its state-of-the-art 33 MVA data centre on the outskirts of London.
Evolution Securities is forecasting full-year pre-tax profit of €104m and EPS of 11.6¢ (2009: €85m/14¢).
|ORD PRICE:||132p||MARKET VALUE:||£1.2bn|
|DIVIDEND YIELD:||na||PE RATIO:||13|
|NET ASSET VALUE:||152¢||NET CASH:||€266m|
|Half-year to 30 Jun||Turnover (€m)||Pre-tax profit (€m)||Earnings per share (¢)||Dividend per share (¢)|
The upturn in managed services revenues and investments in data centre capacity should help return Colt to growth although recovery is likely to be a long haul. A 2010 PE ratio of 13 is fair in the circumstances. Fairly priced.
Last IC view: Fairly priced, 132p, 26 February 2010