Colt margins improve as carrier voice exit concludes
Third quarter revenues at Colt Group were not as bad as feared and voice margins improved after it withdrew from roughly €175m of its lower margin carrier voice trading contracts.
COLT Group SA
189.75p
16:34 09/09/15
Revenue in the three months to 30 September declined 8.4% compared to the same period last year, as carrier voice revenue reduced by €24.8m to €25.5m between the second and third quarters of 2014.
Sterling's strength against the euro contributed roughly €8m to revenue performance. On a constant currency basis, group revenue declined 10.2%.
Colt said it had completed the exit from these low margin voice contracts, though it will take three further quarters before this is no longer reflected in year-on-year comparatives.
Carrier voice has now stabilised at a recurring monthly revenue of around €7m, which freed capacity for enterprise voice and improved overall voice earnings before interest, tax, depreciation and amortisation (EBITDA) margins to 15.4% from 10.3% a year ago and had no material impact on overall voice EBITDA.
"These actions [...] are focused on returning the business to profitable revenue growth and improved return on investment," the FTSE 250 company said. "We expect to see signs of this in the fourth quarter of 2014."
Chief executive Rakesh Bhasin added that the lines of business established in May were enabling a "more focused approach on customers, sales propositions and efficiency of operations", realigning the IT services propositions and operating structure to meet the growing demand for cloud services.
The sales team is being expanded and other restructuring programmes are "progressing well" he added.
"We look forward to continued progression of the business and reaffirm our 2014 EBITDA guidance issued in the first quarter of 2014."
Network services and data centre services both grew revenues in the period, while information technology revenues declined due to lower equipment sales.
Group EBITDA of €73.7m was down 5.5% on last year's, but up 3.4% from the second quarter as the cost reduction programmes began to deliver their expected results.