Investors' first big purchases can make or break their reputations. Zegona Communications (ZEG) completed its maiden deal - the €640m (£496m) takeover of Telecable - in August 2015. Its directors can hold their heads high: strong demand for telecoms bundles drove cash profit for the latter up 3 per cent to €65m in 2015.
Two former Virgin Media executives launched and listed Zegona in early 2015 to buy, fix and sell European technology, media and telecoms companies. After acquiring Spanish telco Telecable, they invested €6.4m in faster broadband and mobile services, expanded Wi-Fi coverage and premium content such as Champions League football. They also targeted enterprise clients and worked to reduce distribution, maintenance and installation costs. And the business benefited from a better economic backdrop and weaker price competition.
Telecable's improved offering, together with strong demand for its 'quad-play' bundles of broadband, TV, landline and mobile telephony, underpinned solid revenue growth. Consumer mobile sales leapt 17 per cent, while business turnover climbed 7 per cent. Moreover, overall year-on-year sales growth accelerated to 5 per cent in the fourth quarter - a five-year high.
Management predicts a recent consumer price hike will support further gains. It expects mid-single digit revenue growth and to boost cash flow by a tenth in 2016. There is as yet no analyst coverage of the stock.
| ZEGONA COMMUNICATIONS (ZEG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 111p | MARKET VALUE: | £218m | |
| TOUCH: | 110-112p | 12-MONTH HIGH: | 165p | LOW: 111p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 191¢* | NET DEBT: | 71% | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢)x | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | na | na | na | na |
| 2015† | 53.0 | -16.4 | -16.6 | nil |
| % change | - | - | - | - |
*Includes intangible assets of €575m, or 294¢ a share †Zegona was incorporated in January 2015 and floated in March 2015 | ||||
