FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of February, 2005
COLT TELECOM GROUP plc
(Translation of Registrant's Name into English)
Beaufort House
15 St. Botolph Street
London
EC3A 7QN
England
_________________________________
(Address of Principal Executive Offices)
(Indicate by check mark whether the Registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F..X... Form 40-F.....
(Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934)
Yes ..... No ..X...
(If "Yes" is marked, indicate below the file number assigned to the Registrant
in connection with Rule 12g3-2(b): 82- ________)
This Form 6-K shall be deemed to be incorporated by reference in the
Registrant's Registration Statement on Form F-3 (Reg. No.333-05972), in the
Registrant's Registration Statement on Form S-8 (Reg. No.333-8362)
24 February 2005
COLT TELECOM GROUP PLC ANNOUNCES RESULTS FOR THE
QUARTER AND YEAR ENDED 31 DECEMBER 2004
Solid fourth quarter performance; business refocused
COLT Telecom Group plc (COLT), a leading pan-European provider of business
communications solutions and services said today that in the fourth quarter it
had delivered a solid financial performance, had refocused the business and had
begun the implementation of its new strategic plan.
HIGHLIGHTS OF THE QUARTER
- Turnover was GBP308.0 million compared with GBP303.7 million in the third
quarter, an increase of 1.4%. Turnover decreased by 1.4% on a constant
currency basis (0.5% excluding reductions in fixed to mobile prices)
- Gross margin before depreciation was 34.2% compared with 31.6% in the
third quarter reflecting improved mix
- EBITDA (1) was GBP35.6 million compared with GBP33.4 million in the third
quarter
- Net capital expenditure was GBP35.3 million
- Strong year end financial position with cash and liquid resources of
GBP452.7 million
- Early redemption of GBP322.0 million of bonds with a further GBP80.9 million
in January 2005 resulting in net interest saving of GBP31.1 million over the
next three years
- New strategic plan defined and implementation commenced
- Further successful expansion of presence in India - 5% of workforce now
in India
OVERVIEW OF THE YEAR
Turnover increased by 7% to GBP1,214.0 million on a constant currency basis and
excluding Fitec which was disposed of in December 2003. Gross margin before
depreciation declined slightly from 34.2% to 33.0%. EBITDA was GBP153.7 million
compared with GBP163.4 million and pre-tax losses before exceptional items
reduced by 15% to GBP114.6 million. Net capital expenditure was GBP124.7 million
compared with GBP141.0 million. There was a free cash outflow of GBP9.5 million
in 2004, reduced from an outflow of GBP30.4 million in 2003. COLT Chairman Barry
Bateman said:
"2004 was a tough year for the telecommunications industry and COLT.
Nevertheless, turnover was up, losses were down and cash flow improved. We have
entered 2005 in a stronger position having put in place the management team and
strategic initiatives to move COLT forward to long term profitability.
"We do not anticipate any significant improvement in market conditions during
2005 but by building on the recent momentum established by the new management
team we expect further progress and remain on track to be free cash flow
positive on a sustainable basis during the year."
(1) EBITDA is earnings before interest, tax, depreciation, amortisation, foreign
exchange and exceptional items
Commenting on progress made during the quarter Jean-Yves Charlier, Chief
Executive Officer, said:
"We have delivered a solid fourth quarter performance. Whilst revenue growth
between the third and fourth quarters was adversely affected by reductions in
fixed to mobile prices, revenue mix improved as a result of the action we have
taken to reduce the proportion of lower margin carrier revenues. This resulted
in pre-depreciation gross margin improving from 31.6% to 34.2%. Whilst EBITDA
rose from GBP33.4 million in the third quarter to GBP35.6 million, the
improvement was tempered by an increase in SG&A costs due mainly to the further
investment in our platform in India, increased personnel costs and costs
associated with Sarbanes Oxley compliance.
"The business was refocused during the quarter as we put in place an enhanced
set of strategic initiatives designed to re-establish COLT as an innovator and
as one of the top three players in each of the metropolitan markets in which it
operates across Europe. This is a three year programme and our challenge for
2005 is to begin to deliver against those initiatives by accelerating revenue
growth, improving mix, improving productivity and being free cash flow positive
on a sustainable basis.
"It is still early days but we have made a good start. We put in place an
organisation designed to deliver our strategic objectives including a further
significant move of activity to India. We launched three new Ethernet services
for the corporate market, including the first Switched Ethernet VPN service in
Europe, and our Secure IT service designed to meet the specific needs of the SME
market. Planning is well advanced for the launch of our Voice IP service early
in the second quarter."
KEY FINANCIAL DATA Three months ended Twelve months ended
31 December 31 December
2003 2004 2003 2004
GBP m GBP m GBP m GBP m
Turnover 306.3 308.0 1,166.3 1,214.0
Interconnect and network costs (197.7) (202.8) (766.9) (813.7)
Gross profit before depreciation 108.6 105.2 399.4 400.3
Gross profit before depreciation % 35.5% 34.2% 34.2% 33.0%
Network depreciation (50.4) (52.8) (204.4) (192.0)
Gross profit 58.2 52.4 195.0 208.3
Loss for the period (before
exceptional items) (23.5) (36.8) (134.7) (114.6)
Loss for the period (after
exceptional items) (21.1) (36.8) (124.6) (114.4)
EBITDA (1) 48.2 35.6 163.4 153.7
(1) EBITDA is earnings before interest, tax, depreciation, amortisation, foreign
exchange and exceptional items.
FINANCIAL REVIEW
Unless otherwise stated all comparisons are between the quarter and year ended
31 December 2004 and 31 December 2003. Unless otherwise stated all numbers are
quoted before exceptional items and at actual exchange rates.
Turnover
Turnover for the quarter was GBP308.0 million (2003: GBP306.3 million). This was
an increase of 2% on a constant currency basis and excluding the turnover
contributed by Fitec (which was disposed of in December 2003). Turnover for the
year was GBP1,214.0 million (2003: GBP1,166.3 million). This was an increase of
7% on a constant currency basis and excluding the turnover contributed by Fitec.
The increase in turnover was driven by demand for COLT's services from existing
and new customers and new service introductions.
Corporate
Turnover from corporate customers for the quarter decreased by 1% to GBP179.9
million (2003: GBP181.4 million) and for the year increased by 1% to GBP698.3
million (2003: GBP692.7 million). Turnover from corporate customers represented
58% of total turnover in the quarter and year (2003: 59% in both periods).
Switched turnover for the quarter decreased by 3% to GBP85.2 million (2003:
GBP88.2 million) and was marginally down for the year at GBP336.1 million (2003:
GBP337.0 million). Non-switched turnover for the quarter increased by 1% to
GBP94.2 million (2003: GBP93.2 million) and for the year increased by 1% to
GBP359.3 million (2003: GBP354.8 million).
Wholesale
Turnover from wholesale customers for the quarter increased by 3% to GBP128.1
million (2003: GBP124.9 million) and for the year increased by 9% to GBP515.7
million (2003: GBP473.6 million). Turnover from wholesale customers represented
42% of total turnover in the quarter and year (2003: 41% in both periods).
Switched turnover for the quarter increased by 2% to GBP102.1 million (2003:
GBP99.8 million) and for the year increased by 12% to GBP411.0 million (2003:
GBP365.7 million). Included in switched turnover from wholesale customers was
turnover from other telecommunications carriers of GBP63.9 million and GBP264.1
million for the quarter and year respectively (2003: GBP63.7 million and
GBP238.9 million). Non-switched turnover for the quarter increased by 3% to
GBP26.0 million (2003: GBP25.1 million) and for the year decreased by 3% to
GBP104.5 million (2003: GBP107.6 million).
Cost of Sales
Cost of sales for the quarter increased by 3% to GBP255.6 million (2003:
GBP248.1 million) and for the year increased by 4% to GBP1,005.7 million (2003:
GBP971.4 million).
Interconnection and network costs for the quarter increased by 3% to GBP202.8
million (2003: GBP197.7 million) and for the year increased by 6% to GBP813.7
million (2003: GBP766.9 million). The increase for the year was driven mainly by
the increase in switched minutes.
Network depreciation for the quarter increased by 5% to GBP52.8 million (2003:
GBP50.4 million) and for the year decreased by 6% to GBP192.0 million (2003:
GBP204.4 million). The decrease for the year reflected the effect of some assets
being fully depreciated, partially offset by further investment in fixed assets
to support the growth in demand for services and new service developments.
Operating Expenses
Operating expenses for the quarter increased by 12% to GBP78.0 million (2003:
GBP69.6 million) and for the year increased by 1% to GBP277.2 million (2003:
GBP274.5 million).
Selling, general and administrative (SG&A) expenses for the quarter increased by
15% to GBP69.6 million (2003: GBP60.3 million) and for the year increased by 5%
to GBP246.6 million (2003: GBP235.9 million). SG&A expenses as a proportion of
turnover for the quarter and year was 23% and 20% (2003: 20% in both periods).
The increases in SG&A expenses reflected the initial costs associated with the
establishment of COLT's presence in India, increased personnel costs and costs
associated with Sarbanes-Oxley compliance.
Other depreciation and amortisation for the quarter decreased by 10% to GBP8.4
million (2003: GBP9.3 million) and for the year decreased by 21% to GBP30.5
million (2003: GBP38.5 million). The reductions reflected the effect of some
assets being fully depreciated, partially offset by increased investment in
customer service and other support systems.
Interest Receivable, Interest Payable and Similar Charges
Interest receivable for the quarter decreased by 33% to GBP4.4 million (2003:
GBP6.5 million) and for the year decreased by 21% to GBP21.0 million (2003:
GBP26.7 million). The decreases were as a result of reduced average balances of
cash and investments in liquid resources following the redemption of some of the
Company's outstanding notes during 2003 and 2004.
Interest payable and similar charges for the quarter ended 31 December 2004
decreased by 27% to GBP15.3 million (2003: GBP21.0 million) and for the year
decreased by 24% to GBP66.8 million (2003: GBP88.3 million). These decreases
were due primarily to the reduction in debt levels following the redemption of
some of the Company's outstanding notes during 2003 and 2004.
Interest payable and similar charges for the quarter included GBP5.0 million
(2003: GBP8.6 million) of interest and accretion on convertible debt and GBP8.9
million (2003: GBP12.3 million) of interest and accretion on non-convertible
debt. Interest payable and similar charges for the year included GBP30.2 million
(2003: GBP34.4 million) of interest and accretion on convertible debt and
GBP35.0 million (2003: GBP51.7 million) of interest and accretion on
non-convertible debt. Interest payable and similar charges for the quarter
comprised GBP11.5 million and GBP3.8 million of interest and accretion
respectively.
Gain on Redemption of Debt
Gains arising on the early redemption of GBP335.3 million of debt during the
year were GBP0.2 million (2003: GBP7.6 million).
Exchange Gains
For the quarter there were exchange losses of GBP0.2 million (2003: gain of
GBP2.3 million). For the year there were no net exchange gains or losses (2003:
gain of GBP6.4 million). The exchange gains in the prior year were due primarily
to movements in the British pound relative to the U.S. dollar on cash and debt
balances denominated in U.S. dollars.
Tax on Loss on Ordinary Activities
COLT had no taxable profits in the years ended 31 December 2003 and 2004.
Financial Needs and Resources
FREE CASH FLOW Three months ended Twelve months ended
31 December 31 December
2003 2004 2003 2004
GBP m GBP m GBP m GBP m
EBITDA 48.2 35.6 163.4 153.7
Changes in working capital and
provisions (13.3) (19.4) (15.5) (13.0)
Interest paid (net) (16.0) (7.7) (37.3) (25.5)
Capital expenditure (32.7) (35.3) (141.0) (124.7)
Free cash outflow (13.8) (26.8) (30.4) (9.5)
There was a free cash outflow of GBP26.8 million in the quarter (2003: outflow
of GBP13.8 million) and for the year there was an outflow of GBP9.5 million
(2003: outflow of GBP30.4 million). The improvement in free cash flow for the
year was driven by reduced capital expenditure, reduced interest payments and
lower payments against provisions.
Net cash outflow from financing for the quarter was GBP322.0 million (2003:
outflow of GBP119.5 million) and net cash outflow from financing for the year
was GBP334.7 million (2003: outflow of GBP142.8 million).
COLT had balances of cash and investments in liquid resources at 31
December 2004 of GBP452.7 million compared with GBP802.4 million at 31
December 2003. On 19 October 2004 all of the outstanding DM600 million 2%
Senior Convertible Notes due August 2005 and the EUR368 million 2% Senior
Convertible Notes due December 2006 were redeemed. The redemptions were at
the accreted principal amount of the Notes and were funded out of cash and
liquid resources. The aggregate amount payable was GBP322.0 million. On 21
January 2005 all of the outstanding GBP50 million 10.125% Senior Notes due
2007 and the DM150 million 8.875% Senior Notes due 2007 were redeemed. The
redemptions were at the principal amount of the Notes and were funded out
of COLT's cash and liquid resources. The aggregate amount payable was
GBP80.9 million.
Consolidated Profit and Loss Account
Three months ended 31 December
2003 2003 2003 2004 2004 2004 2004
Before After Before After After
Exceptional Exceptional Exceptional Exceptional Exceptional Exceptional Exceptional
Items Items Items Items Items Items Items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 $'000
Turnover 306,263 -- 306,263 307,967 -- 307,967 590,065
Cost of sales
Interconnect
and
network (197,677) -- (197,677) (202,797) -- (202,797) (388,559)
Network
depreciation (50,378) -- (50,378) (52,814) -- (52,814) (101,192)
(248,055) -- (248,055) (255,611) -- (255,611) (489,751)
Gross profit 58,208 -- 58,208 52,356 -- 52,356 100,314
Operating expenses
Selling, general
and
adminis-
trative (60,339) 2,453 (57,886) (69,610) -- (69,610) (133,373)
Other depreciation
and
amortisation (9,284) -- (9,284) (8,390) -- (8,390) (16,075)
(69,623) 2,453 (67,170) (78,000) -- (78,000) (149,448)
Operating
loss (11,415) 2,453 (8,962) (25,644) -- (25,644) (49,134)
Other income
(expense)
Interest
receivable 6,532 -- 6,532 4,364 -- 4,364 8,361
Interest
payable
and similar
charges (20,988) -- (20,988) (15,335) -- (15,335) (29,381)
Exchange
gain (loss) 2,329 -- 2,329 (218) -- (218) (418)
(12,127) -- (12,127) (11,189) -- (11,189) (21,438)
Loss on ordinary
activities
before
taxation (23,542) 2,453 (21,089) (36,833) -- (36,833) (70,572)
Taxation -- -- -- -- -- -- --
Loss for
period (23,542) 2,453 (21,089) (36,833) -- (36,833) (70,572)
Basic and diluted
loss per share (GBP0.02) GBP0.01 (GBP0.01) (GBP0.02) -- (GBP0.02) ($0.05)
There is no difference between the loss on ordinary activities before taxation
and the retained loss for the periods stated above, and their historical cost
equivalents. All of the Group's activities are continuing. The basis on which
this information has been prepared is described in Note 1 to these financial
statements.
Consolidated Profit and Loss Account
Twelve months ended 31 December
2003 2003 2003 2004 2004 2004 2004
Before After Before After After
Exceptional Exceptional Exceptional Exceptional Exceptional Exceptional Exceptional
Items Items Items Items Items Items Items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 $'000
<c>
Turnover 1,166,318 -- 1,166,318 1,214,020 -- 1,214,020 2,326,062
Cost of
sales
Interconnect
and network (766,942) -- (766,942) (813,728) -- (813,728) (1,559,102)
Network
depreciation (204,417) -- (204,417) (191,969) -- (191,969) (367,813)
(971,359) -- (971,359) (1,005,697) -- (1,005,697) (1,926,915)
Gross profit 194,959 -- 194,959 208,323 -- 208,323 399,147
Operating expenses
Selling,
general and
administrative (235,928) 2,453 (233,475) (246,633) -- (246,633) (472,549)
Other depreciation
and amortisation (38,531) -- (38,531) (30,519) -- (30,519) (58,474)
(274,459) 2,453 (272,006) (277,152) -- (277,152) (531,023)
Operating loss (79,500) 2,453 (77,047) (68,829) -- (68,829) (131,876)
Other income
(expense)
Interest
receivable 26,718 -- 26,718 21,001 -- 21,001 40,238
Gain on redemption
of debt -- 7,589 7,589 -- 205 205 393
Interest payable
and similar charges(88,295) -- (88,295) (66,812) -- (66,812) (128,012)
Exchange gain 6,388 -- 6,388 4 -- 4 8
(55,189) 7,589 (47,600) (45,807) 205 (45,602) (87,373)
Loss on ordinary
activities before
taxation (134,689) 10,042 (124,647) (114,636) 205 (114,431) (219,249)
Taxation -- -- -- -- -- -- --
Loss for period (134,689) 10,042 (124,647) (114,636) 205 (114,431) (219,249)
Basic and diluted
loss per share (GBP0.09) GBP0.01 (GBP0.08) (GBP0.08) -- (GBP0.08) ($0.15)
There is no difference between the loss on ordinary activities before taxation
and the retained loss for the periods stated above, and their historical cost
equivalents. All of the Group's activities are continuing. The basis on which
this information has been prepared is described in Note 1 to these financial
statements.
Consolidated Statement of Total Recognised Gains and Losses
Three months ended Twelve months ended
31 December 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Loss for
period (21,089) (36,833) (70,572) (124,647) (114,431) (219,249)
Exchange
differences 2,035 11,071 21,212 31,002 (798) (1,529)
Total
recognised
losses (19,054) (25,762) (49,360) (93,645) (115,229) (220,778)
Prior year
adjustment in
respect of the
adoption of
UITF 38 (note
1) -- -- -- -- 910 1,744
Total
recognised
losses since
previously
reported (19,054) (25,762) (49,360) (93,645) (114,319) (219,034)
Consolidated Reconciliation of Changes in Equity Shareholders' Funds
Three months ended Twelve months ended
31 December 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Opening equity
shareholders'
funds as
previously
reported 880,802 773,758 1,482,520 955,010 862,698 1,652,929
Prior year
adjustment in
respect of the
adoption of
UITF 38 (note 1) (206) -- -- (206) -- --
Opening equity
shareholders'
funds as
restated 880,596 773,758 1,482,520 954,804 862,698 1,652,929
Loss for
period (21,089) (36,833) (70,572) (124,647) (114,431) (219,249)
Issue of share
capital 1,155 43 83 1,767 570 1,092
Shares to be
issued (10) -- -- (239) -- --
Grant of
shares from
Group Quest 11 55 105 11 55 105
Exchange
differences 2,035 11,071 21,212 31,002 (798) (1,529)
Closing equity
shareholders'
funds 862,698 748,094 1,433,348 862,698 748,094 1,433,348
Consolidated Balance Sheet
Restated* At 31 December 2004
At 31
December
2003
GBP'000 GBP'000 $'000
Fixed assets
Intangible fixed assets (net) 9,493 7,317 14,019
Tangible fixed assets (cost) 2,934,503 3,051,731 5,847,117
Accumulated depreciation (1,590,218) (1,798,229) (3,445,407)
Tangible fixed assets (net) 1,344,285 1,253,502 2,401,710
Total fixed assets 1,353,778 1,260,819 2,415,729
Current assets
Trade debtors 199,849 199,074 381,426
Prepaid expenses and other debtors 66,834 48,078 92,117
Investments in liquid resources 742,143 393,312 753,586
Cash at bank and in hand 60,239 59,404 113,818
Total current assets 1,069,065 699,868 1,340,947
Total assets 2,422,843 1,960,687 3,756,676
Capital and reserves
Called up share capital 37,754 37,778 72,383
Share premium 2,315,904 2,316,665 4,438,730
Merger reserve 27,359 27,359 52,420
Shares to be issued 215 -- --
Profit and loss account (1,518,534) (1,633,708) (3,130,185)
Equity shareholders' funds 862,698 748,094 1,433,348
Provisions for liabilities and
charges 62,860 48,708 93,325
Creditors
Amounts falling due within one year
Non-convertible debt -- 81,692 156,522
Other 352,736 336,508 644,749
Total amounts falling due within one
year 352,736 418,200 801,271
Amounts falling due after more than one
year
Convertible debt 700,131 382,320 732,525
Non-convertible debt 444,418 363,365 696,207
Total amounts falling due after more
than one year 1,144,549 745,685 1,428,732
Total creditors 1,497,285 1,163,885 2,230,003
Total liabilities, capital and
reserves 2,422,843 1,960,687 3,756,676
* Restated as a result of the adoption of UITF 38 "Accounting for ESOP trusts"
as disclosed in note 1
Consolidated Cash Flow Statement
Three months ended 31 December Twelve months ended 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Net cash
inflow from
operating
activities 34,915 16,253 31,142 147,866 140,638 269,463
Returns on
investments
and servicing
of finance
Interest
received 6,249 4,628 8,867 26,526 20,530 39,335
Interest paid,
finance costs
and similar
charges (22,303) (12,326) (23,617) (63,849) (45,965) (88,069)
Net cash
outflow from
returns on
investments
and servicing
of finance (16,054) (7,698) (14,750) (37,323) (25,435) (48,734)
Capital
expenditure
and financial
investment
Purchase of
tangible fixed
assets (32,673) (36,072) (69,114) (140,973) (129,417) (247,963)
Sale of
tangible fixed
assets -- 751 1,439 -- 4,721 9,045
Net cash
outflow from
capital
expenditure
and financial
investment (32,673) (35,321) (67,675) (140,973) (124,696) (238,918)
Acquisitions
and
disposals
Sale of
subsidiary
undertakings 912 -- -- 912 -- --
Net cash sold
with
subsidiary (2,944) -- -- (2,944) -- --
Net cash
outflow from
acquisitions
and disposals (2,032) -- -- (2,032) -- --
Management of
liquid
resources 141,106 351,372 673,228 187,765 343,297 657,756
Financing
Issue of
ordinary
shares 1,156 43 83 1,630 570 1,092
Redemption of
convertible
debt -- (322,047) (617,042) (9,606) (333,659) (639,291)
Redemption of
non-convertibl
e debt (120,703) -- -- (134,869) (1,635) (3,133)
Net cash
outflow from
financing (119,547) (322,004) (616,959) (142,845) (334,724) (641,332)
Increase in
cash 5,715 2,602 4,986 12,458 (920) (1,765)
Notes to Financial Statements
1. Basis of presentation and principal accounting policies
COLT Telecom Group plc ("COLT" or the "Company"), together with its
subsidiaries, is referred to as the Group. Consolidated financial statements
have been presented for the Group for the three and twelve months ended 31
December 2003 and 2004.
The financial statements for the twelve months ended 31 December 2003 and 2004
and at 31 December 2003 and 2004 have been extracted from the Group's audited
financial statements for those periods and do not constitute the Group's
statutory accounts for those periods. The auditors have made a report on the
Group's financial statements for the years ended 31 December 2003 and 2004 under
Section 235 of the Companies Act 1985 which does not contain a statement under
sections 237 (2) or (3) of the Companies Act and is unqualified. The statutory
accounts for the twelve months ended 31 December 2003 have been filed and the
statutory accounts for the twelve months ended 31 December 2004 will be filed
with the Registrar of Companies.
Accounting policies and presentation applied are consistent with those applied
in preparing the Group's financial statements for the year ended 31 December
2003 except for the adoption of UITF 38 "Accounting for ESOP trusts". Applying
the UITF has resulted in the cost of own shares, previously reported as a fixed
asset investment, being shown as a deduction from shareholders' funds. A prior
year adjustment has been made to reflect this change. The aggregate impact of
this adjustment on the previously reported Balance Sheet as at 31 December 2002
and 2003 is to reduce Equity Shareholders' funds by GBP0.2 million. In addition,
GBP0.9 million has been included in the Statement of Total Recognised Gains and
Losses being the amount charged to the Profit and Loss Account in prior years to
write-down the carrying value of these shares. The adoption of UITF 38 has had
no impact on the Profit and Loss Account in either 2003 or 2004.
Certain British pound amounts in the financial statements have been translated
into U.S. dollars at 31 December 2004 and for the periods then ended at the rate
of $1.916 to the British pound, which was the noon buying rate in the City of
New York for cable transfers in British pounds as certified for customs purposes
by the Federal Reserve Bank on such date. Such translations should not be
construed as representations that the British pound amounts have been or could
be converted into U.S. dollars at that or any other rate.
Notes to Financial Statements
2. Segmental information
North Region comprises Belgium, Denmark, Ireland, The Netherlands, Sweden and
UK. Central Region comprises Austria, Germany and Switzerland. South Region
comprises France, Italy, Portugal and Spain. These reportable segments are
expected to change during 2005 as a result of the reorganisation which was
announced in late 2004.
Switched turnover comprises services that involve the transmission of voice,
data or video through a switching centre. Non-switched turnover includes managed
and non-managed network services, and bandwidth services.
Wholesale turnover includes services to other telecommunications carriers,
resellers and internet service providers (ISPs). Corporate turnover includes
services to corporate and government accounts.
For the three months ended 31 December 2003, 30 September 2004 and 31 December
2004, turnover by segment was as follows:
Three months ended 31 December 2003
Corporate Wholesale North Central South Total
Region Region
Region
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrier -- 63,728 15,943 33,245 14,540 63,728
Non-carrier 88,184 36,026 35,499 59,036 29,675 124,210
Total switched 88,184 99,754 51,442 92,281 44,215 187,938
Non-switched 93,185 25,127 41,610 42,768 33,934 118,312
Other -- 13 -- 13 -- 13
Total 181,369 124,894 93,052 135,062 78,149 306,263
Three months ended 30 September 2004
Corporate Wholesale North Central South Total
Region Region
Region
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrier -- 67,694 19,285 35,597 12,812 67,694
Non-carrier 81,000 36,119 33,119 59,981 24,019 117,119
Switched 81,000 103,813 52,404 95,578 36,831 184,813
Non-switched 90,727 26,343 40,726 43,293 33,051 117,070
Other 1,827 -- 159 1,228 440 1,827
Total 173,554 130,156 93,289 140,099 70,322 303,710
Three months ended 31 December 2004
Corporate Wholesale North Central South Total
Region Region
Region
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrier -- 63,938 18,626 33,364 11,948 63,938
Non-carrier 85,156 38,122 29,775 66,691 26,812 123,278
Total switched 85,156 102,060 48,401 100,055 38,760 187,216
Non-switched 94,200 25,991 40,575 45,339 34,277 120,191
Other 560 -- 182 306 72 560
Total 179,916 128,051 89,158 145,700 73,109 307,967
Notes to Financial Statements
Turnover for the three months ended 31 December 2004, compared to the three
months ended 30 September 2004 and 31 December 2003 and after excluding the
impact of foreign exchange, is shown below:
Compared to Q3 2004 Compared to Q4 2003
Q4 2004 Q4 2004 % Growth Q4 2004 % Growth
GBP'000 GBP'000 GBP'000
Actual Adjusted Actual Adjusted Adjusted Actual Adjusted
(1) (1) (2) (2)
Corporate
Switched 85,156 82,962 5.1 2.4 85,698 (3.4) (2.8)
Non-switched 94,200 91,786 3.8 1.2 94,768 1.1 1.7
Other 560 544 (69.3) (70.2) 564 n/a n/a
Total 179,916 175,292 3.7 1.0 181,030 (0.8) (0.2)
Wholesale
Carrier 63,938 62,067 (5.5) (8.3) 64,422 0.3 1.1
Non-carrier 38,122 36,917 5.5 2.2 38,414 5.8 6.6
Total switched 102,060 98,984 (1.7) (4.7) 102,836 2.3 3.1
Non-switched 25,991 25,309 (1.3) (3.9) 26,153 3.4 4.1
Other -- -- n/a n/a -- n/a n/a
Total 128,051 124,293 (1.6) (4.5) 128,989 2.5 3.3
Total
Carrier 63,938 62,067 (5.5) (8.3) 64,422 0.3 1.1
Non-carrier 123,278 119,879 5.3 2.4 124,112 (0.8) (0.1)
Total switched 187,216 181,946 1.3 (1.6) 188,534 (0.4) 0.3
Non-switched 120,191 117,095 2.7 0.0 120,921 1.6 2.2
Other 560 544 (69.3) (70.2) 564 n/a n/a
Total 307,967 299,585 1.4 (1.4) 310,019 0.6 1.2
(1) Q4 2004 turnover has been restated using Q3 2004 exchange rates, and
compared to turnover which was reported in Q3 2004
(2) Q4 2004 turnover has been restated using Q4 2003 exchange rates, and
compared to turnover which was reported in Q4 2003
For the twelve months ended 31 December 2003 and 2004, turnover by segment was
as follows:
Twelve months ended 31 December 2003
Corporate Wholesale North Central South Total
Region Region
Region
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrier -- 238,913 68,538 116,444 53,931 238,913
Non-carrier 336,980 126,745 138,431 214,092 111,202 463,725
Total switched 336,980 365,658 206,969 330,536 165,133 702,638
Non-switched 354,794 107,610 165,554 162,949 133,901 462,404
Other 909 367 79 918 279 1,276
Total 692,683 473,635 372,602 494,403 299,313 1,166,318
Twelve months ended 31 December 2004
Corporate Wholesale North Central South Total
Region Region
Region
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrier -- 264,091 75,913 136,971 51,207 264,091
Non-carrier 336,064 146,948 134,377 244,040 104,595 483,012
Total switched 336,064 411,039 210,290 381,011 155,802 747,103
Non-switched 359,314 104,527 162,691 171,507 129,643 463,841
Other 2,963 113 457 1,658 961 3,076
Total 698,341 515,679 373,438 554,176 286,406 1,214,020
Notes to Financial Statements
3. Loss per share
Three months ended 31 December Twelve months ended 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Loss for
period (21,089) (36,833) (70,572) (124,647) (114,431) (219,249)
Weighted
average
number
of 1,508,922 1,511,058 1,511,058 1,507,771 1,510,853 1,510,853
ordinary
shares
('000)
Basic
and
diluted (GBP0.01) (GBP0.02) ($0.05) (GBP0.08) (GBP0.08) ($0.15)
loss
per
share
4. Exceptional items
Gain on redemption of debt
During the twelve months ended 31 December 2004, the Group redeemed some of its
debt for a cash outlay of GBP335.3 million (comprising principal of GBP277.3
million and accreted interest of GBP58.0 million), resulting in an exceptional
gain of GBP0.2 million. During 2003, the Group redeemed some of its debt for a
cash outlay of GBP144.5 million, resulting in an exceptional gain of GBP7.6
million.
Disposal of subsidiaries
In December 2003 the Group sold COLT eCustomer Solutions France SAS ("Fitec")
and COLT Internet AB (Sweden Internet) for a consideration of GBP0.9 million and
GBP0.3 million respectively, which gave rise to a profit on disposal of GBP2.2
million on Fitec and GBP0.3 million on Sweden Internet. In the period to
December 2003, Fitec's turnover was GBP9.2 million and its loss after tax was
GBP3.3 million.
5. Cash flow reconciliations
5a. Reconciliation of operating loss to net cash inflow from operating
activities
Three months ended 31 December Twelve months ended 31
December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Operating (8,962) (25,644) (49,134) (77,047) (68,829) (131,876)
loss
Depreciation
and
amortisation 59,662 61,204 117,267 242,948 222,488 426,287
Exchange
differences 264 (218) (418) 387 (162) (310)
Profit on
disposal of
subsidiaries (2,453) -- -- (2,453) -- --
Movement in
debtors 5,661 (594) (1,138) 20,681 20,871 39,988
Movement in
creditors (12,788) (14,366) (27,524) (9,463) (16,843) (32,271)
Movement in
provisions
for
liabilities (6,469) (4,129) (7,911) (27,187) (16,887) (32,355)
and charges
Net cash
inflow from
operating
activities 34,915 16,253 31,142 147,866 140,638 269,463
Notes to Financial Statements
5b. EBITDA reconciliation
Three months ended 31 Twelve months ended 31
December December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Net cash
inflow from
operating
activities 34,915 16,253 31,142 147,866 140,638 269,463
Adjusted for:
Exchange
differences (264) 218 418 (387) 162 310
Movement in
debtors (5,661) 594 1,138 (20,681) (20,871) (39,988)
Movement in
creditors 12,788 14,366 27,524 9,463 16,843 32,271
Total working
capital
adjustments 7,127 14,960 28,662 (11,218) (4,028) (7,717)
Movement in
provisions 6,469 4,129 7,911 27,187 16,887 32,355
for liabilities and
charges
EBITDA 48,247 35,560 68,133 163,448 153,659 294,411
6. Changes in cash and investments in liquid resources
Three months ended 31 December Twelve months ended 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Beginning
of 934,404 791,367 1,516,259 934,882 802,382 1,537,364
period
Net decrease
in investments
in liquid
resources
before (141,106) (351,372) (673,228) (187,765) (343,297) (657,756)
exchange
differences
Effects of
exchange
differences
on investments
in 3,050 8,607 16,491 40,318 (5,534) (10,603)
liquid
resources
Net
increase
in cash
before 5,715 2,602 4,986 12,458 (920) (1,765)
exchange
differences
Effects of
exchange
differences
on 319 1,512 2,896 2,489 85 164
cash
End of 802,382 452,716 867,404 802,382 452,716 867,404
period
Notes to Financial Statements
7. Summary of differences between U.K. Generally Accepted Accounting Principles
("U.K. GAAP") and U.S. Generally Accepted Accounting Principles ("U.S. GAAP")
a. Effects of conforming to U.S. GAAP - impact on net loss
Three months ended 31 December Twelve months ended 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Loss for
period (21,089) (36,833) (70,572) (124,647) (114,431) (219,249)
Adjustments:
Deferred
compensation
(i), (ii) (197) 27 52 (1,012) 337 646
Amortisation
of
intangibles 504 519 994 2,116 2,027 3,884
(iii)
Capitalised
interest,
net
of
depreciation (814) (896) (1,717) (3,082) (3,712) (7,112)
(iv)
Profit on
sale 261 261 500 1,044 1,044 2,000
of IRUs (v)
Warrants 72 259 496 199 (670) (1,284)
(vi)
Installation
revenue 1,425 375 719 3,469 4,627 8,865
(vii)
Direct costs
attributable
to
installation
revenue (1,559) -- -- (4,231) -- --
(vii)
Impairment
(viii) (2,805) (2,806) (5,376) (11,221) (11,221) (21,499)
Payroll
taxes
on employee
share 385 (385) (738) 385 (385) (738)
schemes
(ix)
Loss for
period under
U.S. GAAP
before
giving
effect to
the
change in (23,817) (39,479) (75,642) (136,980) (122,384) (234,487)
accounting
policy
Cumulative
effect on
prior years
of
change in
accounting -- -- -- -- (72,552) (139,010)
policy (vii)
Loss for
period under
U.S. GAAP (23,817) (39,479) (75,642) (136,980) (194,936) (373,497)
Weighted
average
number
of ordinary 1,508,922 1,511,058 1,511,058 1,507,771 1,510,853 1,510,853
shares
('000)
Basic and
diluted loss
per share
before giving
effect to the
change in (GBP0.02) (GBP0.03) ($0.05) (GBP0.09) (GBP0.08) ($0.16)
accounting
policy
Cumulative
effect on
prior years
of change in
accounting (GBP0.00) (GBP0.00) ($0.00) (GBP0.00) (GBP0.05) ($0.09)
policy (vii)
Basic and
diluted loss
per share (GBP0.02) (GBP0.03) ($0.05) (GBP0.09) (GBP0.13) ($0.25)
(i) The Group acquired ImagiNet in July 1998 and Fitec in July 2001. The
consideration for both of these purchases included deferred shares and payments.
The final elements of the consideration were paid in July 2003.
Under U.K. GAAP, the deferred shares and payments were included in the purchase
consideration. The excess purchase consideration over the fair value of assets
and liabilities acquired was attributed to goodwill and is being amortised over
its estimated economic life.
Under U.S. GAAP, these deferred shares and payments were excluded from the
purchase consideration and recognised as compensation expense in the profit and
loss account over the period in which the payments vested. Total compensation
charge for the three and twelve months ended 31 December 2003 was GBPnil million
and GBP0.3 million respectively. Because no payments were outstanding in the
twelve months to 31 December 2004, the total compensation charge for the period
was GBPnil.
(ii) The Group operates an Inland Revenue approved Savings-Related Share Option
Scheme ("SAYE Scheme"). Under this scheme, options may be granted at a discount
of up to 20%. Under U.K. GAAP no charge is taken in relation to the discount.
Under U.S. GAAP, the difference between the market value of the shares on the
date of grant and the price paid for the shares is charged as a compensation
cost to the profit and loss account over the period over which the shares vest.
Notes to Financial Statements
Also under U.S. GAAP, an employer's offer to enter into a new SAYE contract at a
lower price causes variable accounting for all existing awards subject to the
offer. Variable accounting commences for all existing awards when the offer is
made, and for those awards that are retained by employees because the offer is
declined, variable accounting continues until the award is exercised, forfeited
or expires unexercised. New awards are accounted for as variable to the extent
that the previous, higher priced options are cancelled.
The total expected compensation cost is recorded within equity shareholders'
funds as unearned compensation and additional paid in share capital, with
unearned compensation being charged to the profit and loss account over the
vesting period. The total compensation cost for the three and twelve months
ended 31 December 2003 was a charge of GBP0.2 million and GBP0.7 million
respectively and for the three and twelve months ended 31 December 2004 was a
credit of GBPnil million and GBP0.3 million respectively.
(iii) Under U.S. GAAP, goodwill with an indefinite useful life is not amortised
but is tested for impairment annually. Under U.K. GAAP goodwill is amortised on
a straight line basis over its useful economic life.
The Group had unamortised goodwill of GBP8.5 million at 31 December 2004, which
is no longer amortised under U.S. GAAP but which is assessed for impairment
annually. Amortisation expense related to goodwill, under U.K. GAAP, was GBP0.5
million and GBP2.1 million for the three and twelve months ended 31 December
2003 and for the three and twelve months ended 31 December 2004 was GBP0.5
million and GBP2.0 million respectively.
(iv) Under U.K. GAAP, the Group does not capitalise interest. Under U.S. GAAP,
the estimated amount of interest incurred on capital projects is included in
fixed assets and depreciated over the lives of the related assets.
(v) In 2000 and 2001 the Group concluded a number of infrastructure sales in the
form of 20-year indefeasible rights-of-use ("IRU") with characteristics which
qualify the transactions as outright sales under U.K. GAAP. Under U.S. GAAP,
these sales are treated as 20-year operating leases. The adjustment reflects the
recognition of profit under U.S. GAAP on the sale of IRUs concluded in prior
years.
(vi) The Group has received warrants from certain suppliers in the ordinary
course of business. Under U.K. GAAP, warrants are treated as financial assets
and recorded at the lower of cost or fair value. Hence for U.K. GAAP purposes
the warrants have been recognised at nil. Under U.S. GAAP, the warrants are
recorded at fair value with unrecognised gains and losses reflected in the
profit and loss account.
(vii) Under U.K. GAAP, customer installation revenue is recognised in the same
period as the related costs. Under U.S. GAAP, such installation revenue is
recognised over the expected customer relationship period.
Under U.S. GAAP, the Group has historically applied a policy of also deferring
attributable direct costs up to the level of associated revenue and recognising
them over the customer relationship period. The Group has now changed this
accounting policy to expensing these costs as incurred. This change has been
presented as though it took effect from 1 January 2004.
The Group has decided to change this accounting policy to reflect the way that
the business is now being monitored and run by senior management. Additionally,
the Group will be adopting IFRS from 1 January 2005. Under IFRS, only certain
attributable directs costs are allowed to be deferred and the Group has elected
that the best representation of its current business is to expense such costs.
The cumulative effect of the change on the opening retained earnings of GBP72.6
million has been recorded as a charge to the current year loss for the period
under U.S. GAAP. The effect of the change in accounting policy for the current
year is to increase the loss for the period under U.S. GAAP by GBP68.1 million
(being the net of the impact on opening retained earnings of GBP72.6 million and
the reduction in the amount of costs which would have been deferred under the
old policy in 2004 of GBP4.5 million).
Notes to Financial Statements
The disclosure below reflects the pro forma impact on loss for the period, under
U.S. GAAP, of the change in accounting policy assuming it had been applied
retroactively in 2003 and 2004.
Three months ended 31 December Twelve months ended 31 December
2003 2004 2004 2003 2004 2004
GBP'000 GBP'000 $'000 GBP'000 GBP'000 $'000
Loss for
period
under (22,258) (39,479) (75,642) (132,749) (122,384) (234,487)
U.S. GAAP
Basic and
diluted
loss (GBP0.01) (GBP0.03) ($0.05) (GBP0.09) (GBP0.08) ($0.16)
per share
(viii) During the quarter ended 30 September 2002, the Group recorded charges of
GBP443.8 million under U.S. GAAP to reflect the impairment of goodwill, network
and non-network fixed assets, resulting in a GAAP difference of GBP107.2 million
at that time. For the three and twelve months ended 31 December 2004
depreciation in the amount of GBP2.8 million and GBP11.2 million was recorded in
respect of the assets which had not been impaired for U.S. GAAP purposes.
(ix) The Group operates a number of employee share schemes on which it incurs
employer payroll taxes. Under U.K. GAAP, the cost of employer payroll taxes is
recognised over the period from the date of grant to the end of the performance
period. Under U.S. GAAP, the cost is recognised when the tax obligation arises.
b. Effects of conforming to U.S. GAAP - impact on net equity
At 31 December 2004
------------------
GBP'000 $'000
Equity shareholders' funds under U.K. GAAP 748,094 1,433,348
U.S. GAAP adjustments:
Deferred compensation (i), (ii) (10,429) (19,982)
Unearned compensation (i), (ii) (39) (75)
Additional paid in share capital (i), (ii) 10,468 20,057
Amortisation of intangibles (iii) 8,043 15,410
Warrants (vi) 381 730
Impairment (viii) 81,948 157,012
Profit on sale of IRUs (v) (16,679) (31,957)
Capitalised interest, net of depreciation (iv) 34,167 65,465
Deferred profit on installations (vii) -- --
Deferred installation revenue (vii) (68,687) (131,604)
Approximate equity shareholders' funds under U.S. GAAP 787,267 1,508,404
(i) - (viii) See note a. for description and adjustment.
c. Effects of conforming to U.S. GAAP - stock options
At 31 December 2004 the Group had certain options outstanding under its Option
Plan. As permitted by SFAS No.123, "Accounting for Stock-Based Compensation",
the Group elected not to adopt the recognition provisions of the standard and to
continue to apply the provisions of Accounting Principles Board Opinion No.25,
"Accounting for Stock Issued to Employees," in accounting for its stock options
and awards. Had compensation expense for stock options and awards been
determined in accordance with SFAS No.123, the Group's loss for the three months
ended 31 December 2004 would have been GBP41.2 million ($78.9 million).
8. International Financial Reporting standards
COLT will be required to report under International Financial Reporting
standards ("IFRS") for quarterly reporting with effect from the quarter ending
31 March 2005.
Additional Information
Q4 03 Q3 04 Q4 04 Growth Growth
Q4 04 Q4 04
- -
Q4 03 Q3 04
Customers (at end of quarter)
North Region 5,708 5,724 5,740 1% 0%
Central Region 6,838 7,960 7,870 15% -1%
South Region 7,019 6,041 6,204 -12% 3%
19,565 19,725 19,814 1% 0%
Customers (at end of quarter)
Corporate 18,581 18,518 18,614 0% 1%
Wholesale 984 1,207 1,200 22% -1%
19,565 19,725 19,814 1% 0%
Switched minutes (million) (for quarter)
North Region 1,541 1,425 1,421 -8% 0%
Central Region 3,480 3,580 3,875 11% 8%
South Region 1,041 1,060 1,301 25% 23%
6,062 6,065 6,597 9% 9%
Private wire VGEs (000) (at end of quarter)
North Region 10,433 12,619 12,710 22% 1%
Central Region 11,274 15,623 15,795 40% 1%
South Region 4,906 6,431 7,859 60% 22%
26,613 34,673 36,364 37% 5%
Headcount (at end of quarter)
North Region 1,541 1,544 1,489 -3% -4%
Central Region 1,393 1,330 1,271 -9% -4%
South Region 932 929 908 -3% -2%
India 0 86 201 n/a 134%
3,866 3,889 3,869 0% -1%
Operating statistics
North Region comprises Belgium, Denmark, Ireland, The Netherlands, Sweden and UK
.. Central Region comprises Austria, Germany and Switzerland. South Region
comprises France, Italy, Portugal and Spain. Customers represent the number of
customers who purchase network and data solutions products. Headcount comprises
active employees excluding temporary and contract workers.
Forward Looking Statements
This report contains "forward looking statements" including statements
concerning plans, future events or performance and underlying assumptions and
other statements which are other than statements of historical fact. COLT
Telecom Group plc wishes to caution readers that any such forward looking
statements are not guarantees of future performance and certain important
factors could in the future affect the Group's actual results and could cause
the Group's actual results for future periods to differ materially from those
expressed in any forward looking statement made by or on behalf of the Group.
These include, among others, the following: (i) any adverse change in the laws,
regulations and policies governing the ownership of telecommunications licenses,
(ii) the ability of the Group to expand and develop its networks in new markets,
(iii) the Group's ability to manage its growth, (iv) the nature of the
competition that the Group will encounter and (v) unforeseen operational or
technical problems. The Group undertakes no obligation to release publicly the
results of any revision to these forward looking statements that may be made to
reflect errors or circumstances that occur after the date hereof.
Enquiries:
COLT Telecom Group plc
John Doherty
Director Corporate Communications
Email: jdoherty@colt.net
Tel: +44 (0) 20 7390 3681
Gill Maclean
Head of Corporate Communications
Email: gill.maclean@colt.net
Tel: +44 (0) 20 7863 5314
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form-6K to be signed on its
behalf by undersigned, thereunto duly authorized.
Date: 24 February, 2005 COLT Telecom Group plc
By: ___Jane Forrest___
Jane Forrest
Company Secretary