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Colt boosts margins

RESULTS: With revenues still sliding, Colt Telecom has tightened costs in order to boost margins.
February 26, 2010
by LiM

Revenues at telecoms services provider, Colt Telecom, continued to slide in the second half as increases in data and managed services revenue were more than offset by falls in voice revenues. However, an improved revenue mix and better control of operating costs helped Colt to deliver a profit that marginally beat analysts' expectations.

IC TIP: Hold at 132p

Revenues from higher margin managed services grew 24.6 per cent to €156m (£139m), mainly reflecting new Data Centre contracts. Voice revenues continued to decline under greater competitive pressures, reductions in the payment rates to mobile operators (with no profit impact) and the continued decline of the legacy Carrier Pre-Select product. The wholesale division relaunched its Data Backbone service following the upgrade of the long distance network.

The profit for the year incorporates an exceptional exchange gain of €9.7m, relating to April's open offer. The €199m proceeds from that enabled Colt to redeem €262m-worth of bonds early; they had been due for repayment at the end of 2009. Free cashflow more than doubled to €101m on the back of the higher profit and capital expenditure having reduced 30 per cent to €216m. This reflected lower expenditure on major infrastructure and internal IT projects and lower customer installations.

Prior to these results, broker Evolution Securities was forecasting 2010 pre-tax profits of €96m and EPS of 10.8¢.

COLT TELECOM (COLT)
ORD PRICE:132pMARKET VALUE:£1.17bn
TOUCH:131-132p12-MONTH HIGH:144pLOW: 76p
DIVIDEND YIELD:NILPE RATIO:11
NET ASSET VALUE:143¢NET CASH:€200m

Year to 31 DecTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (p)
20051.82-490-97.0nil
20061.80-19-3.0nil
20071.68396.0nil
20081.687211.0nil
20091.629514.0nil
% change-3+32+27-

£1=€1.122

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