BUSINESS MATTERS
Comms sector in review T
he Hosting and Fixed Line sector marginally outperformed the FTSE All Share last month, but remains
Philip Carse
Philip Carse, Telecoms Analyst at IS Research, reports on the recent performance of leading companies in the comms space.
Comms Index (17th July closing prices) Adept Telecom
Alternative Networks BT Group
C&W Worldwide COLT Telecom Daisy Group Iomart Kcom
Maintel Holdings Pinnacle Telecom TalkTalk Telecom Telecity
Telecom Plus Virgin Media Average
FTSE All Share
well ahead on a three and 12 months view. Alternative Networks fell 11.7% and is now the peer group’s worst share price performer over the last 12 months, down 25.3%. In contrast, TalkTalk had another good month, up 9.6% after increasing its medium term EBITDA margin guidance to 25% at the May full year results, and is now the best performer over three months, up 47%. BT also had a good month, up 8.4%, with investors shrugging off an expensive acquisition of Premier League football rights (£6.5m per game and £740m over three years).
Of the few companies that reported formal results or trading updates in the last month, business telecom reseller Adept Telecom reported yet another year of improved EBITDA margins on falling revenues, with EBITDA up 0.7% to £3.7m on revenues down 7.7% to £21.9m, while business telco Pinnacle enjoyed an M&A driven 67% growth in revenues to £6.4m for the half year, but was just EBITDA profitable. Adept also put its toe back into M&A waters for the first time in several years, buying the fixed line operations of Expanse (UK) Communications and adding £1m of revenues. Adept is now the second
Hosting and Fixed Line peer group share price performance Share price
MKt cap £m 52.0
233.0 220.8 37.9
123.8 97.3
146.0 75.2
347.5 0.3
190.4 842.5 869.8
1598.0 2919.7 11.0 112.5
17203.9 1046.8 1105.5 259.8 153.6 388.5 37.2 6.6
1740.4 1691.7 611.5
4416.9
best share price performer over the last year (behind Telecity), up 50%.
Multi-utility reseller Telecom Plus released a typically upbeat update for its Q1, with an estimated 15% organic growth in services taken, with net customer and service additions running 50% above last year’s levels. The company now has 0.43m customers taking 1.43m services, or an average of 3.3 each. This average is set to continue rising, with 55% of new customers taking four or more services. The company highlighted the success of new mobile products, driving 42% annualised growth in mobile services taken.
The last month or so has seen a spate of UK data centre and hosting M&A by foreign companies, with NTT buying 85% of Gyron for a rumoured £40m, Digital Realty Trust buying three data centres from Sentrum for £716m and PEER 1 buying Group NBT’s hosting business, NetBenefit, for £25m, all at double digit EBITDA multiples. In all cases, the buyers have substantially improved their existing UK businesses. Meanwhile, Vodafone’s £1.04bn bid for Cable&Wireless Worldwide received CWW shareholder approval. The deal will double Vodafone’s UK business presence and elevate it from 4th to 2nd in the UK telecoms market behind BT, but the overall cost to Vodafone could reach £2bn.
Share price 1 month 4.5%
-11.7% 8.4% 0.4% -1.6% 2.4% 2.8% 5.4% -1.1%
-11.4% 9.6% 3.9% 3.8% 6.1% 1.5% 0.8%
Share price 3 months 3.0%
-12.2% 3.3% 4.5%
21.5% -11.8% 4.3% 7.4%
-19.2% 0.0%
47.0% 7.6%
25.2% 8.2% 6.3% -1.6%
Share price 1 year 49.9% -25.3% 14.4% -13.8% -9.0%
-19.6% 38.1% -0.5% 31.3% -8.8% 35.2% 58.7% 31.8% 16.8% 14.2% -3.2%
Round up
Telecom Plus powering on despite US holiday for top distributors Multi-utility reseller Telecom Plus has issued another typically upbeat update, with new customer and service growth running 50% ahead of last year, representing estimated annualised organic service growth of c15%, and the company remains on track for strong profitability growth this year. Oddly enough, our own experience as a customer suggests the company could do more still.
Geo Networks enjoys growing demand for dedicated fibre We recently caught up with management of fibre provider Geo Networks for an update. 2011 revenues and EBITDA are down 5- 10% on 2010’s £28.5m and £6.8m due to a further decline in one-off installation revenues arising from the Welsh Government’s Fibrespeed and other projects, but the more valuable recurring monthly revenues (from contracts signed on an average 10-year term) continued their strong growth, and 2012 should see a return to headline growth.
n
Maintel accelerates Totility earn out, with level suggesting good performance Business telecom provider Maintel has announced an early settlement of the earn out on the Totility acquisition, taking the total price paid to £7.0m. The agreed earn out of £3.1m is £0.9m below the maximum, but double the £1.5m expected at the time of the deal, suggesting that the O2 and Vodafone dealer is doing rather well.
Megabuyte’s monthly Hosting and Fixed Line reports are sponsored by Knight Corporate Finance.
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
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34 COMMS DEALER AUGUST 2012
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