BUSINESS MATTERS
Comms sector in review S
hares of hosting and fixed line companies have suffered in line with global equity markets recently, down
4.1% and 9.6% in the last one and three months, though the sector has still outperformed the FTSE All Share by 30% over the last year. The notable under-performers on a one, three and 12 month view are the network owning telcos CWW, COLT and TalkTalk, while the relatively resilient out-performers have been resellers Adept, Alternative Networks and Telecom Plus.
Philip Carse
Philip Carse, Telecoms Analyst at IS Research, reports on the recent performance of leading companies in the comms space.
Comms Index (14th September closing prices) Adept Telecom
Alternative Networks BT Group
C&W Worldwide COLT Telecom Daisy Group
Maintel Holdings Pinnacle Telecom TalkTalk Telecom
The last six-eight weeks have been very quiet for company results and trading statements. Maintel released strong interim results, aided by last October’s acquisition of Redstone’s maintenance business. Revenues for the six months to June rose 19.8% to £12.7m, or 10% before the Redstone impact. Gross margin was up 13% to £4.3m, adjusted PBT was up 16% at £1.7m and adjusted EPS was up 21%. Operating cash flow was typically strong at £1.7m versus PBT of £1.6m, with net cash up £0.9m to £3.3m.
Maintenance revenues were up 17% to £6.5m, driven by the Redstone acquisition and orders from existing customers, while equipment revenues were up 51% to £3.28m, representing the release of ‘pent up demand’. Network services revenues
Hosting and Fixed Line peer group share price performance Share price
MKt cap £m 34.0
278.5 169.4 31.0
101.5 111.0
Iomart 101.5 Kcom
72.5
220.0 0.3
124.0
Telecity 540.5 Telecom Plus Virgin Media Average
FTSE All Share 2709.6 687.0 1577.0 7.2 134.1
13238.4 856.0 916.6 295.7 106.3 375.8 22.5 6.8
1134.4 1087.3 484.0
4770.2
were up 0.7% to £2.9m, with small growth in ‘data and other’ offsetting small declines in calls and line rentals.
Meanwhile, results from Telecity and US-listed data centre peers Interxion, Equinix and Rackspace all reaffirmed positive conditions in data centre and hosting markets, with double digit organic revenue and profitability growth. Telecity, for example, reported half year revenues up 15.9% at £196.4m and EBITDA up 31.1% to £85.9m (43.7% margin), with the growth in EBITDA reflecting the operating leverage inherent in the data centre business as utilisation increases.
M&A activity Telecity has also been busy in terms of M&A, with the company enhancing its Irish presence by buying Data Electronics Group for £87.6m, or 13.9x historic EBITDA, which is not that far removed from public market multiples. The company has also bolstered its presence in Manchester with the acquisition of UK Grid for £11.7m. This deal has come just over one year after Telecity acquired Manchester-based IFL from Attenda for £21.1m.
At the other end of the scale, B2B comms provider Pinnacle followed up its recent acquisition of IP CCTV assets with the acquisition of IT service provider MacLellan for shares
Share price 1 month 1.5% -7.2% -5.1%
-19.7% -12.5% 0.1% -3.8% 0.7% 0.0%
-15.4% -3.9% 1.0% 1.5% 5.9% -4.1% -2.6%
Share price 3 months -8.1% 0.2%
-12.9% -38.6% -31.3% -5.1% 14.7% -3.3%
-10.7% -19.5% -14.2% -0.2% 13.6% -18.7% -9.6%
-10.6%
Have you booked your table for the Comms National Awards yet? Visit
www.cnawards.com
42 COMMS DEALER OCTOBER 2011
Share price 1 year 74.4% 75.4% 22.8% -54.6% -14.9% 12.1% 49.2% 59.2% 37.6% 10.0% -5.1% 3.1%
87.9% 13.5% 26.5% -5.7%
valued at £0.67m at the current share price, or just 2.8x historic EBIT. This deal is very much in keeping with Pinnacle’s style of all share based acquisitions, both reflecting the company’s relatively limited cash resources and its desire to bring in new management capabilities. The deal will boost Pinnacle’s revenue run rate by about 12%, but more importantly significantly boost profitability.
Round up
Unicom continued impressive record leading up to Vitruvian acquisition Latest accounts from telecoms B2B reseller Unicom (Universal Utilities) showed that the company managed to eke out yet more organic revenue growth and increased margins prior to its recent sale to Vitruvian Partners, reaffirming its status as the crème de la crème of the B2B telecoms resellers.
Interxion’s growth journey continues Leading European data centre provider Interxion continues its growth trajectory, delivering a strong performance for the second quarter of 2011, marking its 19th straight quarter of sequential growth in revenues and EBITDA.
Geo’s falling headline revenues and profits mask strong underlying growth The 2010 accounts of fibre network provider Geo Networks show headline revenues and EBITDA down 4.2% and 18.4% respectively, though underlying revenues were actually up 25% and cash flow was much improved, taking into account a release of deferred revenues that boosted 2009 revenues.
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
Comms Dealer Special Award Sponsor
www.comms-dealer.com n
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