BUSINESS MATTERS


Comms sector in review T


he share price highlights of the last month were the contrasting performances of Alternative Networks


Philip Carse


Philip Carse, Telecoms Analyst at IS Research, reports on the recent performance of leading companies in the comms space.


Comms Index (11th April closing prices) Adept Telecom


Alternative Networks BT Group


C&W Worldwide COLT Telecom Daisy Group


and Cable&Wireless Worldwide in response to trading updates, with Alternative rising 20% on an improved outlook and increased dividend and CWW falling 25.5% after warning on profits for FY11/12. While hosting and fixed line companies have performed well in share price terms over the last 12 months, with an average 31% increase and nearly all companies registering an increase, CWW is the standout poor performer, with its share down 42% in the last year, coinciding with its demerger from Cable&Wireless.


In its trading update, Alternative noted that profitability is running ahead of expectations due to a new mobile MVNO agreement with one of its major network suppliers (Vodafone or O2) and to its October 2010 Scalable Communications acquisition performing well in data services, leading the company to plan a 50% higher dividend on an underlying basis (stripping out last year’s special dividend). Despite the higher dividend, the company is still pursuing M&A.


In contrast to Alternative, CWW downgraded profit expectations for FY11/12 by 5% due to weaker


Hosting and Fixed Line peer group share price performance Share price


MKt cap £m 34.0


251.5 190.8 51.2


154.0 94.5


Iomart 89.8 Kcom 62.5 Maintel Holdings Pinnacle Telecom TalkTalk Telecom


136.7


Telecity 499.3 Telecom Plus Virgin Media Average


FTSE All Share 3111.3 471.0 1685.0


201.5 0.4


7.2 120.4


14691.8 1368.2 1327.2 249.8 93.2


325.5 21.1 7.2


1229.5 982.4 329.6


5322.4


legacy voice and data pricing and higher costs. The company also fell out with its well regarded CFO Tim Weller, who was only appointed at the demerger, apparently over disagreements on the timing of the profits warning, the company’s second in a year. Maintel was the only public company reporting formal results during the last month, which in typical Maintel style were solid, with 14% revenue growth and 10% EBITDA growth.


Meanwhile, Daisy’s share price continues to be impervious to continued progress in its M&A strategy, which included two deals in the last month. Having secured an additional £40m banking facility in February, Daisy added to the February purchase of O-Bit with acquisitions of Outsourcery’s Vodafone mobile business and various data and engineering assets from Niu Solutions for a combined £24m. Both deals were around 4.5- 5x EBITDA pre-synergy. The three deals signed this year add about 21% to Daisy’s revenue base.


Despite the pace of M&A, equity fund raising by quoted companies has been scarce in recent months, with bank debt being the preferred choice of funding. Serial acquirer Chess secured a new £21m facility, significantly enhancing its M&A capabilities. It is not clear how much


Share price 1 month -2.2% 20.0% 1.5%


-25.5% 5.5% -0.7% 2.0% -2.3% 3.1% -2.6% -3.7% 4.6% -0.4% -0.4% -0.1% 2.8%


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Share price 3 months 23.6% 30.6% 1.3%


-27.9% 11.6% -7.8% 4.4% 5.0%


-12.2% -2.6%


-17.3% 12.5% 3.5% 3.4% 2.0% -0.8%


Share price 1 year 33.3% 69.6% 62.1% -41.5% 18.0% 0.5%


81.3% 39.8% 38.9% 5.7% -4.6% 16.4% 69.5% 48.0% 31.2% 4.9%


Round up


Daisy keeps up the pace with Telinet asset purchase Telecoms buy and build player Daisy has announced its third meaningful acquisition in just a few weeks with the purchase of the trading assets of Telinet and Ipitomi, both parts of privately owned Niu Solutions. The assets being acquired provide a range of services including voice, data, unified comms as well as Microsoft presence and collaboration.


Positive update and increased dividend from AltNet Alternative Networks has put out a very confident update, with Scalable and mobile performing ahead of expectations. The company is planning a substantially higher dividend, while continuing to pursue M&A.


Accumuli accumulates more security businesses


Accumuli, the managed security service buy and build vehicle (and ex- Netservices), has followed up recent acquisitions of Fujin Technology and Tuscany Networks with the acquisition of Boxing Orange Ltd for initial consideration of £5.48m, taking the business to an estimated £14-15m annual revenue run rate.


IS Research publishes www. megabuyte.com, a company analysis and intelligence service covering over 200 public and private UK technology companies. philip.carse@is-research.co.uk


Chess scales up the acquisition ladder - see page 22


of this is new money and how much repays net debt of £5m and a previous £5m acquisition fund, both from RBS, but it clearly represents a leg up in M&A ambition compared with the c£4-5m spent by Chess on acquisitions in each of the last two years. Barclays recently joined the enlarged Daisy banking syndicate. n


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