COLT Telecom downplays improvements in turnover and earnings

UK-based alternative telecom services provider COLT Telecom [Nasdaq: COLT] reported modest increases in full year and fourth quarter turnover and earnings in 2002, but pointed out that despite coming through a particularly difficult trading year for the UK telecoms sector there are no real signs that 2003 will be any easier. COLT posted full year revenues (excluding infrastructure sales) of GBP1.027 billion, up 13.9% year-on-year, while turnover for the final quarter rose from GBP240.8 million to GBP263.2 million. EBITDA for 2002 was up 190% to GBP71.5 million and Q4 EBITDA leapt dramatically by 290% to GBP27.7 million. The company said that the combination of organic turnover growth and cost containment had helped buoy improvements to its gross margins which rose to 30.5% and 33.2% for the full year and fourth quarter respectively.

The City and analysts broadly welcomed COLT Telecom’s decision to slash capital expenditure in 2002 from GBP804.3 million to GBP412.1 million and have similarly endorsed an announcement to peg spending at between GBP220 million and GBP270 million in 2003. Moreover, COLT Chairman Barry Bateman said that with GBP934.9 million of cash and liquid resources at the end of the year the company was suitably placed to reach its target of becoming free cash flow positive by 2005. The emphasis on cash follows a recent case in the US High Court when COLT was forced to defend its balance sheet after a hedge fund tried to put it into administration by questioning the value of its assets. However, the upbeat tone was tempered by CEO Steve Akin’s cautious warning that 2003 promised to present his company with exceptional challenges as customers continued to tighten their belts to reflect their own business prospects and the general bleak trading climate. Nonetheless he said that although the company would have to work harder, COLT was now better positioned than most and could ‘make further progress in 2003 and beyond’.