RNS Number:7189A
Atlantic Telecom Group PLC
12 November 1999
PART 2
Not for release, publication or distribution in whole or in part in or into
the United States, Canada, Japan, Australia or the Republic of Ireland
ATLANTIC TELECOM GROUP PLC
APPENDIX I
ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 1999
CHAIRMAN'S STATEMENT
REVIEW
Atlantic has made considerable progress in the half-year ended 30 September
1999 with customer lines over the two quarters exhibiting record growth to
reach 81,799 at 30 September 1999. This compares favourably with 52,212 lines
at 31 March 1999 and 40,005 lines at 30 September last year, a doubling of
lines in the last twelve months.
Turnover for the half-year increased by 48% to reach #10,202,000 compared to
the corresponding period last year. Nearly 70% of our turnover now comes from
our core telecommunications activities with our cable TV activities in the
City of Aberdeen becoming less significant to the overall business with the
passage of time.
Operationally, we now provide telecommunications service in four Scottish
cities, and have expanded our support services to cater for the new areas and
to cope with increased demand for our services. Inevitably, this has caused
our operational costs to increase and our loss, before interest costs, for the
half-year has widened from #6,552,000 for the half-year to 30 September 1998
to #12,651,000 for this half year, which was consistent with our plans.
During the period we commenced trials of high-speed data technology supplied
by Marconi. The trials are progressing well and the project plan remains on
track to launch a commercial high-speed service around Easter 2000. This
technology can deliver data to customers at up to 3.2 Mbs in either direction
using internet protocols ("IP") on the air interface from the base stations to
the customer. This places Atlantic in an excellent position to take full
advantage of the anticipated demand for high bandwidth data services in the
important "local loop".
In my report to shareholders which formed part of our annual report and
accounts for the year ended 31 March 1999, I stated we would be opportunistic
in the capital markets. Today we have announced a Strategic Partnership with
Marconi, allowing us access to a state-of-the-art national fibre network and
cash, which results in Marconi having an important equity holding in Atlantic.
We regard this as a milestone for the Group and have taken the opportunity to
raise further equity in the capital markets alongside the investment by
Marconi. This allows us to fast track our business plans in a way that we
would not otherwise be able to achieve. The entire transaction is, of course,
subject to shareholder approval.
DIRECTLY CONNECTED SERVICES
The last six months has seen further build in our networks. In this period we
brought a further 17 base stations into service to take the number to 118 at
30 September. Our base station networks passed nearly 650,000 sets of premises
at the period end and we have achieved a residential penetration of 2.7% and a
business penetration of 4.6% at 30 September. The network build in Scotland is
therefore 75% complete, the penetration is on track and we remain confident
that the Scottish builds will be complete within our current financial year.
Average revenues per directly connected customer remain at encouraging levels.
In the residential market we have achieved average monthly revenues per
customer of #38.45 excluding value-added tax, averaged over the six-month
period. This is an uplift of 4.7% over the full year to 31 March. This uplift,
coupled with a churn of just 13.19%, is an excellent performance in an
environment where per minute pricing is on the decline. In the business market
the average monthly revenues per connected customer have averaged #85.98
excluding value-added tax and the churn has averaged 14.94%. The average
revenue is 3% ahead of the full year. These results more than mandate our
strategy to deliver high value-added services to customers and give us a
platform from which we can continue to deliver further value added.
In the early part of this year we were awarded five licences to expand our
fixed radio access point to multipoint services into England. Shortly after
the half-year, we were awarded a sixth licence in Yorkshire (excluding the
City of Hull and its environs). These licences give us a platform for growth
and we look forward to expanding the opportunity.
INDIRECTLY CONNECTED SERVICES
Our indirect services cover our branded packaged services in Scotland, under
the Crest name, and our managed business product that we operate across the UK
under the brand name Logicall.
The half- year has seen considerable progress from our Crest service. At 30
September our Crest residential lines had reached 22,556 a near 172% increase
over the six month period. Furthermore, our average revenue per Crest
residential customer had increased to #13.98 per month averaged over the six-
month period compared to #12.40 for the full year, an increase of 12.7%.
In the business market our Crest business service had attracted 361 customers
with 920 lines in total. These customers have delivered #102 per month
revenues averaged over the period.
Our Logicall service continues to attract the high-end business customer
attracted by the independent management aspects of our product. At 30
September we had 593 customers with 19,102 lines an increase of 1,439 lines
since 31 March 1999. These customers on average spent #793 per month on this
service.
We launched an integrated fixed and mobile service to the residential market
in late May, with our mobile customers using the BT Cellnet network. This
service, branded as Atlantic "All-in-One", capitalises on the bundled theme
and has been sold initially only through our retail stores. The take up has
been modest but remains encouraging enough for us to expand this service on a
wider basis and into the business market.
CABLE TELEVISION
Cable TV take up in the City of Aberdeen continues to please us. At 31 March,
the customer base reached 18,219 and the average revenue, despite a material
reduction in price the previous November, remained high and had reached #29.76
per customer per month.
In the half-year to 30 September, the customer base has dipped marginally to
18,035. The drop of just 1% compares to a drop of 2.7% the previous year.
Importantly, the average revenue per customer has held up well and has
averaged #28.96 per month over the traditionally difficult summer period.
YEAR 2000 COMPLIANCE
As reported in the 1999 financial statements, the Group has been an active
member of the Year 2000 Telecom Operators Forum. This includes a peer review
process which requires each member of the Forum to undergo a Year 2000
Healthcheck Review. The Forum Steering Team members are made up of
representatives from major telecom companies, Oftel and Action 2000. In April
1999, Atlantic Telecom received confirmation that its process for achieving
Year 2000 readiness was assessed as a 'Blue' rating. Blue is the top rating
which every telecom operator needs to achieve.
The Group fully recognises the potential for business disruption should its
system fail to handle date information in accordance with the BSI DISC PD2000
- 1:1998 Year 2000 specification or should any supplier of goods or services
to the company suffer a failure within their systems. The Group is working to
ensure that no disruption will occur due to the Year 2000.
Contingency plans have been made to support all critical or core functions,
this includes issues which arise from supply chain failures. For all critical
systems, recovery plans covering almost every eventuality are being prepared.
These will become effective should any abnormal problems materialise.
The issue is complex, and no business can guarantee that there will be no Year
2000 problems. However, the Board believes that its plans and resources
allocated are appropriate and adequate to address the issue. The inter-
dependant nature of the Group's business systems, particularly through
interconnection with other telecommunication service providers means that the
Group may be adversely affected if other telecommunication service providers
are not year 2000 ready.
STRATEGY AND OUTLOOK
We are very encouraged by the developments outlined earlier. The ability to
carry our traffic on our own national network, the expansion of our services
into new areas and the introduction of new services all go to cement our
strategy. The introduction of a very important partner in Marconi strengthens
our ability to progress rapidly.
Atlantic remains a provider of high value added services to targeted customer
groups and we endeavor at all times to directly connect these customers to our
own infrastructure. The building blocks are now in place. We look forward to
building the business.
GRAHAM J DUNCAN
Executive Chairman
12 November 1999
CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNT
for the six months ended 30 6 months 6 months to 12 months
September 1999 to 30 30 September to 31 March
September 1998 1999
1999 (unaudited) (audited)
(unaudited)
#'000 #'000 #'000
TURNOVER 10,202 6,906 14,924
Operating costs
- ongoing (22,853) (13,028) (29,647)
- exceptional - (430) (1,121)
(22,853) (13,458) (30,768)
OPERATING LOSS (12,651) (6,552) (15,844)
LOSS ON ORDINARY ACTIVITIES
BEFORE INTEREST (12,651) (6,552) (15,844)
Net interest (1,065) (332) (419)
Tax on loss on ordinary - - -
activities
RETAINED LOSS FOR THE PERIOD (13,716) (6,884) (16,263)
Loss per share (16.18)p (11.47)p (22.50)p
The directors regard earnings before interest, tax, depreciation and
amortisation, which is set out below and is often used in the
telecommunications and cable industry, as an important measure of the
operating cash flow of the business.
Operating loss (12,651) (6,552) (15,844)
Depreciation and amortisation
of 3,192 1,804 4,309
Goodwill
Cost of network leases 82 82 165
Earnings before interest, tax,
depreciation and amortisation (9,377) (4,666) (11,370)
CONSOLIDATED BALANCE SHEET
as at 30th September 1999 30 September 30 September 31 March
1999 1998 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 3,645 3,801 3,718
Tangible assets 71,594 38,506 56,022
75,239 42,307 59,740
CURRENT ASSETS
Stock 5,528 4,075 6,183
Debtors : amounts falling due
after more than one year 9,518 7,694 8,600
Debtors: amounts falling due
within one year 9,868 5,599 6,286
Cash at bank 1,079 27,490 5,680
25,993 44,858 26,749
CREDITORS
Amounts falling due within one (27,350) (17,834) (25,006)
year
NET CURRENT (LIABILITIES) / (1,357) 27,024 1,743
ASSETS
TOTAL ASSETS LESS CURRENT 73,882 69,331 61,483
(LIABILITIES)/ASSETS
CREDITORS
Amounts falling due after more (33,498) (6,827) (8,389)
than one year
40,384 62,504 53,094
CAPITAL AND RESERVES
Called up share capital 21,313 21,147 21,150
Share premium account 62,462 61,653 61,619
Profit and loss account (43,391) (20,296) (29,675)
SHAREHOLDERS' FUNDS 40,384 62,504 53,094
CONSOLIDATED SUMMARISED CASH FLOW STATEMENT
for the six months ended 30 6 months to 6 months to 12 months to
September 1999 30 September 30 September 31 March
1999 1998 1999
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
RECONCILIATION OF OPERATING
LOSS TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
Operating loss from continuing
activities (12,651) (6,552) (15,844)
Depreciation 3,192 1,804 4,309
Amortisation of lease
prepayment 82 82 165
Network lease prepayments (1,000) (1,000) (2,000)
Decrease/ (increase) in stock 655 (3,360) (5,468)
Increase in debtors (3,121) (271) (961)
Increase in creditors 10,947 2,496 10,146
Gain on disposal of fixed
assets (12) (47) (41)
Net cash outflow from operating
activities (1,908) (6,848) (9,694)
CASH FLOW STATEMENT
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (1,908) (6,848) (9,694)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (1,065) (332) (419)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (18,679) (9,475) (25,904)
MANAGEMENT OF LIQUID RESOURCES - (26,000) -
FINANCING 16,047 44,323 43,019
(DECREASE)/INCREASE IN CASH (5,605) 1,668 7,002
NOTE TO THE CONSOLIDATED SUMMARISED CASH FLOW STATEMENT
ANALYSIS OF NET DEBT
At 1 Cash Non-cash At 30
April Flow Items September
1999 1999
#'000 #'000 #'000 #'000
Cash 5,680 (4,601) - 1,079
Bank overdraft (987) (1,004) - (1,991)
4,693 (5,605) - (912)
Debt after one year (700) (17,800) - (18,500)
Debt within year (522) - - (522)
Finance leases (10,895) 2,298 (10,948) (19,545)
(12,117) (15,502) (10,948) (38,567)
Net debt (7,424) (21,107) (10,948) (39,479)
NOTES TO THE INTERIM REPORT
1 Preparation of Interim Report
.
The interim financial information for the six months ended 30 September
1999 was approved by the directors on 11 November 1999. It has been
prepared in accordance with relevant accounting standards on a consistent
basis using accounting policies set out in the 1999 financial statements.
The interim financial information is unaudited but has been reviewed by
the auditors and their independent review report is included with this
announcement.
2 Financial information
.
The financial information set out in this report does not constitute full
financial statements for the purposes of section 240 of the Companies Act
1985. Comparative figures for the year ended 31 March 1999 are extracted
from the statutory financial statements, which have been delivered to the
Registrar of Companies. The report of the auditors on those financial
statements was unqualified and did not contain a statement under section
237 (2) of the Companies Act 1985.
3 Earnings per share
.
The loss per share is based on the loss attributable to the ordinary
shareholders of #13,716,000 (30 September 1998 - loss of #6,884,000 and
31 March 1999 - loss of #16,263,000) and on the weighted average number
of Ordinary Shares in issue during the period of 84,771,637 (30 September
1998 - 60,023,993 and 31 March 1999 - 72,273,690).
At 30 September 1999, there were 4,427,346 outstanding share warrants and
1,138,902 outstanding share options in existence. The shares that would
be issued in respect of these warrants and options are not treated as
dilutive as their issue would decrease the loss per share. Accordingly
no diluted loss per share figure is shown.
4 Dividend
.
In view of the deficit on reserves the directors cannot recommend a
dividend and the loss for the period has therefore been transferred to
reserves.
5 Post balance sheet event
.
Subsequent to the period end, the company allotted 4,386,270 ordinary
shares of 25p at a price of 160p per share in respect of warrants
exercised resulting in a cash inflow of #7 million.
Copies of this interim report can be obtained from the company's head office
at Holburn House, 475 - 485 Union Street, Aberdeen, AB11 6DB, Scotland.
INDEPENDENT REVIEW REPORT TO THE
MEMBERS OF ATLANTIC TELECOM GROUP PLC
INTRODUCTION
We have been instructed by the group to review the financial information set
out in this announcement and we have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
DIRECTORS' RESPONSIBILITES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the London Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding financial statements except where any
changes, and the reasons for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 'Review of Interim Financial Information', issued by the Auditing
Practices Board. A review consists principally of making enquiries of
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially
less in scope than an audit performed in accordance with Auditing Standards.
Accordingly we do not express an audit opinion on the interim financial
information.
REVIEW CONCLUSION
On the basis of our review we are not aware of any material modifications that
should be made to the interim financial information as presented for the six
months ended 30 September 1999.
Grant Thornton
Chartered Accountants
Glasgow
12 November 1999
ATLANTIC TELECOM GROUP PLC
APPENDIX II
DEFINITIONS AND GLOSSARY
DEFINITIONS
In this announcement, the following words and expressions shall, except where
the context requires otherwise, have the following meanings:
"ATL" Atlantic Telecommunications Limited, a subsidiary of
Atlantic
"Admission" admission of the New Ordinary Shares to the Official
List
"Additional the option for Marconi to subscribe for the Option
Subscription" Shares at the Offer Price during the period from
today's date and ending 24 hours prior to Admission,
as set out in the Framework Agreement
"Application Form" the application form relating to the Open Offer to
be sent to Qualifying Shareholders
"Atlantic" or "the Atlantic Telecom Group PLC
Company"
"Atlantic Cable" or Aberdeen Cable Services Limited, a subsidiary of
"Aberdeen Cable" Atlantic
"Atlantic Logicall" or Logicall Telecommunications Limited, a subsidiary of
"Logicall" Atlantic
"Circular" the circular to be issued by the Company in
connection with the Proposals comprising a
prospectus relating to the Company for the purposes
of the Listing Rules
"Clawback Placing" the conditional placing of the Clawback Shares
(subject to recall to satisfy valid applications
under the Open Offer) at the Offer Price by Hoare
Govett as agent for the Company pursuant to the
Placing Agreement
"Clawback Shares" the 18,568,375 New Ordinary Shares (being all the
Offer Shares other than the 3,847,795 Firm Placing
Shares), representing 82.8 per cent. of the Offer
Shares, which are the subject of the Clawback
Placing
"Close Brothers" Close Brothers Corporate Finance Limited, sponsor
and financial adviser to the Company or, in the
context of the Placing Agreement, Close Brothers
Limited, joint underwriter to the Placing and Open
Offer
"Directors" or "Board" the directors of the Company
"Enlarged Group" the Group, as enlarged by the Proposals
"Equipment and an agreement to be entered into pursuant to the
Software Supply Framework Agreement which sets out the basis on
Agreement" which Atlantic may acquire up to #100 million of
certain types of equipment and software, under the
terms of which (1) Atlantic has agreed to purchase
on arm's length commercial terms (including all
warranties as to the equipment quality and fitness
for purpose) certain types of communications
equipment and software from Marconi for a total
consideration of no less than #50 million over a
period of three years; and (2) Marconi has agreed to
offer #50 million of vendor financing facilities to
Atlantic in relation to such minimum purchase
obligation
"Extraordinary General the extraordinary general meeting of the Company
Meeting" or "EGM"
"Facility Agreement" the agreement (as amended) governing the Senior Debt
Facility
"Fibre Agreement" the agreement to be entered into between Fibreway
and Telco pursuant to the Framework Agreement
"Fibres" the dark fibres of which Telco will have the
exclusive use for a period of 20 years under the
terms of the Fibre Agreement
"Firm Placing" the conditional placing (not subject to recall to
satisfy valid applications under the Open Offer) at
the Offer Price of the Firm Placing Shares by Hoare
Govett as agent for the Company pursuant to the
Placing Agreement
"Fibreway" Fibreway Limited, a subsidiary of Marconi
"Firm Placing Shares" the 3,847,795 New Ordinary Shares in respect of
which the Directors (other than Alisdair McKenzie,
Martin Beard and Andrew Laing) and certain connected
parties have irrevocably undertaken not to
subscribe, representing 17.2 per cent. of the Offer
Shares, which are the subject of the Firm Placing
"Framework Agreement" the conditional agreement dated 11 November 1999,
between Marconi, Fibreway, Atlantic, ATL and Telco
setting out the principal terms of the Strategic
Partnership
"GEC" The General Electric Company, p.l.c.
"GEC Group" GEC and its subsidiary undertakings
"Group" the Company and its subsidiary undertakings
"Hoare Govett" Hoare Govett Limited, joint stockbroker to the
Company and joint underwriter to the Placing and
Open Offer
"Listing Rules" the listing rules of the London Stock Exchange
"London Stock London Stock Exchange Limited
Exchange"
"Marconi" GEC and, where appropriate, Marconi plc, the
successor company to GEC following completion of the
GEC scheme of arrangement announced on 11 October
1999 or any member of the GEC Group as the context
requires
"Network" the fibre optic network comprising the fibres and
the equipment, software and services to be provided
by Marconi to Telco pursuant to the Network
Framework Agreement
"Network Framework an agreement to be entered into between Telco,
Agreement" Marconi and Fibreway
"New Ordinary Shares" up to 63,870,731 new Ordinary Shares to be issued
pursuant to the Strategic Partnership (including, if
exercised, the Additional Subscription) and the
Placing and Open Offer
"Offer Price" 440p per New Ordinary Share
"Offer Shares" up to 22,416,170 New Ordinary Shares, representing
35.1 per cent. of the New Ordinary Shares, which are
being made available to Qualifying Shareholders
pursuant to the Open Offer
"Official List" the Official List of the London Stock Exchange
"Open Offer" the conditional open offer of up to 22,416,170 New
Ordinary Shares to Qualifying Shareholders at the
Offer Price
"Ordinary Shares" ordinary shares of 25p each in the capital of the
Company
"Placing" together the Firm Placing and the Clawback Placing
"Placing Agreement" the conditional agreement dated 12 November 1999
between the Company, Close Brothers and Hoare Govett
in respect of the Placing and Open Offer
"Proposals" the Strategic Partnership and the Placing and Open
Offer
"Qualifying the holders of existing Ordinary Shares on the
Shareholders" register of members of the Company on the Record
Date other than certain overseas shareholders
"RA" the Radiocommunications Agency, an executive agency
of the DTI which regulates the use and administers
licensing of the radio spectrum in the UK
"Record Date" the close of business on 4 November 1999
"Resolutions" the resolutions to be proposed at the EGM
"Securities Act' The United States Securities Act of 1933
"Senior Debt Facility" the secured senior debt facility made available
pursuant to the Facility Agreement (as amended)
"Shareholder" a holder of Ordinary Shares
"Strategic the arrangements with Marconi as described in the
Partnership" Framework Agreement and its annexes
"Subscription Shares" the 11,363,636 New Ordinary Shares to be subscribed
by Marconi for #50 million in cash pursuant to the
Framework Agreement
"Telco" Faststill Limited, a wholly owned subsidiary of
Atlantic
"UK" or "United the United Kingdom of Great Britain and Northern
Kingdom" Ireland
"Underwriters" Close Brothers and Hoare Govett
"Warburg Dillon Read" Warburg Dillon Read, a division of UBS AG
GLOSSARY
The following definitions of telecommunications industry terms apply
throughout this announcement unless the context otherwise requires:
"ATM" Asynchronous Transfer Mode, a packet based system
for the transfer of digital signals
"bandwidth" a measure of the communication capacity or data
transmission rate of a circuit. The total frequency
spectrum (in Hertz - cycles per second) that is
allocated or available to a channel, or the amount
of data that can be carried (in bits per second) by
a channel
"broadband" a service or connection allowing a considerable
amount of information to be conveyed, such as
television channels (usually 25 or more) and other
services
"buildout" network construction
"churn" the number of customer disconnections during a
period expressed as a percentage of the annualised
average number of customers during the period
"Crest" the Company's indirect telecommunications service
"customer installation the costs associated with the installation of the
costs" equipment required to connect a new customer to
Atlantic's network
"dark fibres" fibre optic cables that have no electronic equipment
connected to them such that they cannot carry
traffic
"FRA" or "fixed radio a fixed access point to multipoint radio based
access" network to deliver telecommunications services in
the local loop
"ISP" Internet Service Provider
"lit fibres" dark fibres which have had electronic equipment
connected to them such that they can carry traffic
"local loop" the part of a telecommunications network in a local
area connecting the local telephone exchanges to the
customers' premises
"Mbs" Megabits per second
"point to point a means of transmitting telecommunications signals
microwave" over the air from one fixed point to another fixed
point
"point to multipoint" a means of transmitting telecommunications signals
over the air from a base station to a number of
customers
"SDH" Synchronous Digital Hierarchy
END
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