Manx Telecom (MANX) is a rare example of an Aim-traded company with a near monopoly. It owns all the fixed-line telecommunications infrastructure on the Isle of Man, controls 80 per cent of the retail broadband market, and customers in its mobile business account for about three-quarters of the island’s population.
That dominance means revenue is incredibly reliable, which allows the group to generate predictable levels of cash. In 2017, Manx made £20m of cash from operations off £27m of underlying cash profit and, after stripping out the £8.9m investment in its ‘transformation programme’, free cash inflows were £20m, or 133 per cent of underlying net profits.
But, despite its monopoly position and abundance of free cash, Manx seems to be struggling to grow. Its fixed, broadband and data division reported £31.5m of revenue last year, flat on 2016, while mobile sales dropped 1.4 per cent to £19.9m. Reported profit was lifted by the lower transformation investment in 2017, but management incentive payments for the strong cash performance dented underlying cash profit.
Looking forward, the savings from the transformation programme and the group’s characteristically tight cost control means broker Liberum expects pre-tax profit of £15.7m and £16.7m in 2018 and 2019, respectively, giving EPS of 13.6p and 14.5p (from £15.1m and 13.1p in 2017).
| MANX TELECOM (MANX) | ||||
| ORD PRICE: | 185p | MARKET VALUE: | £211m | |
| TOUCH: | 184-186p | 12-MONTH HIGH: | 208p | LOW: 172p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 74.5p* | NET DEBT | 67% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 76.0 | 0.4 | 0.7 | na |
| 2014 | 79.3 | 5.7 | 5.4 | 9.9 |
| 2015 | 79.6 | 16.6 | 14.7 | 10.4 |
| 2016 | 80.8 | 8.8 | 7.8 | 10.9 |
| 2017 | 78.5 | 11.9 | 10.5 | 11.4 |
| % change | -3 | +35 | +34 | +5 |
| Ex-div: | 24 May | |||
| Payment: | 29 Jun | |||
| *Includes intangible assets of £88.7m, or 78p a share | ||||
