RNS No 3025a
ATLANTIC TELECOM GROUP PLC
20th February 1998
Atlantic Telecom Group PLC (Atlantic Telecom)
Proposed Issue of Senior Discount Notes to generate gross
proceeds of up to #95 million
Announcement of Results for the Nine Months to 31
December 1997
Introduction
Atlantic Telecom (the Company) announces that it intends
to make a private offering (the Offering) of Senior
Discount Notes (the Notes) to generate gross proceeds of
up to #95 million. The Notes are expected to have a
maturity of 10 years. The sale of the Notes is expected
to be completed during March 1998. Certain details (most
notably the interest rate and principal amount)
concerning the Notes will not be known until after the
Offering has taken place as they are dependent, inter
alia, upon investor demand. A further announcement will
be made once these facts are determined.
As a requirement of the Offering, Atlantic Telecom will
henceforth commence reporting results on a quarterly
basis. The Group's results for the nine months to 31
December 1997 are set out below.
The Company is a rapidly growing provider of innovative,
high quality, bundled telecommunications services to both
residential and business customers in targeted sectors of
the telecommunications market through the use of a number
of delivery technologies. The Company operates its
business principally in Scotland, but provides certain of
its services throughout the rest of the United Kingdom.
To capitalise on opportunities in the telecommunications
industry, the Company is pursuing a rapid expansion of
its telecommunications services, which will require
significant amounts of capital to finance capital
expenditures and anticipated operating losses. The
Company may elect to slow the speed or narrow the scope
of this expansion in the event that it is unable to raise
sufficient amounts of capital on acceptable terms.
Use of Proceeds of the Offering
The Company intends to utilise approximately #50.0
million of the proceeds from the Offering to complete the
build-out and to upgrade and fund operational costs of
its fixed radio access (FRA) networks in Scotland.
Approximately #14.0 million of the proceeds of the
Offering will be used to upgrade its cable network in
Aberdeen for the provision of digital service, and to
fund prepayment of a portion of the Company's cable
network operating lease. The Company also intends to
repay #2.1 million of indebtedness. The balance of the
proceeds from the Offering will be used for the Company's
telecommunications businesses, a portion of which will be
used, subject to obtaining regional Wireless Telegraphy
Act licences, to begin construction of FRA networks in
one or more operating regions in England and Wales. In
order to develop fully any future licences in England and
Wales, the Company will require substantial additional
funding, which the Company believes is likely, initially,
to come from a future equity issue, although such
additional funding may be in the form of additional
indebtedness. Following the Offering and the application
of the use of proceeds therefrom, the Company expects
that all of its cable and telecommunications activities
associated with its operations in Scotland will be fully
funded.
Network Build Plan
In 1998, the Company intends to expand its network so as
to include all of the Greater Glasgow area, covering
approximately an additional 300,000 homes and 10,000
businesses, as well as to construct its network in
Aberdeen, a city of approximately 100,000 homes and 7,500
businesses. The Company also intends to upgrade and to
build resilience into the FRA network in Glasgow. In
1999, the Company plans to complete construction of its
networks covering the remaining two principal cities in
Scotland, Edinburgh and Dundee, containing approximately
300,000 homes and 16,500 businesses. This will give the
Company a combined total coverage of its Scottish FRA
networks of approximately 900,000 homes and over 50,000
businesses. The Company expects that following the
completion of the network build of the principal cities
in Scotland, it may in the future consider selectively
filling in additional areas in Scotland or expanding the
network to other regions should the densities and
economics present themselves as attractive. The Company's
build plan for the FRA networks outside of Scotland will
be limited to certain densely populated regions in the
United Kingdom and will be subject to the receipt of
licences covering those regions. Subject to the
availability of appropriate equipment and the
availability of programming at suitable prices, the
Company expects to complete the digital upgrade of its
cable network by late 1998.
Prior to the launch of its telecommunications business in
1996, the Company incurred development expenses in
connection with the design, development and construction
costs of its FRA network and certain organisational and
marketing expenses associated with developing the
Atlantic brand name. Accordingly, the Company has
generated operating and net losses and negative EBITDA
since 1995. Although the Company expects gradually to
achieve positive EBITDA within the next 24 months in its
existing Atlantic Telecom business in Scotland as it
acquires new customers, the Company expects, subject to
regulatory approvals and receipt of additional financing,
to develop FRA networks elsewhere in the United Kingdom
and therefore may continue to generate operating and net
losses and negative EBITDA for a longer period of time as
it implements this growth strategy. The Company generally
expects to achieve positive EBITDA in a market two to
three years after it commences service in such market.
There can be no assurances, however, that the Company
will achieve or maintain positive EBITDA at any time in
the future or that it will receive the necessary
regulatory approvals or additional financing to develop
FRA networks elsewhere in the United Kingdom.
General
The Company has not authorised any offer or sale of Notes
to the public in the United Kingdom within the meaning of
The Public Offers of Securities Regulations 1995 (the
Regulations) or the Financial Services Act 1986 (the
FSA). Notes may not lawfully be offered or sold to
persons in the United Kingdom except in circumstances
which do not result in an offer to the public in the
United Kingdom within the meaning of the Regulations or
the FSA or otherwise in compliance with all applicable
provisions of the Regulations and the FSA.
This press release shall not constitute an offer to sell
or the solicitation of an offer to buy, nor shall there
be any sale of, the Notes in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities
laws of any jurisdiction. The Notes have not been
registered under the United States Securities Act of 1933
and, unless so registered, may not be offered or sold in
the United States except pursuant to an exemption from or
in a transaction not subject to the registration
requirements of the Securities Act and any applicable US
state securities laws.
Enquiries:
Graham Duncan, Chairman Tel: 01224 646644
ATLANTIC TELECOM GROUP PLC
UNAUDITED RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 1997
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Nine months ended Year
ended
31 December 31 March
1997 1996 1997
#'000 #'000 #'000
(Unaudited)(Unaudited) (Audited)
Turnover
Continuing operations 7,534 4,645 6,713
Discontinued 700 1,738 2,180
operations
------- ------ -------
8,234 6,383 8,893
Cost of sales
Continuing operations (5,323) (3,036) (4,398)
Discontinued (397) (997) (1,200)
operations
------- ------- -------
(5,720) (4,033) (5,598)
Gross profit
Continuing operations 2,211 1,609 2,315
Discontinued 303 741 980
operations
------- ------- -------
2,514 2,350 3,295
Other operating (8,801) (3,437) (5,801)
charges
Operating loss
Continuing operations (6,176) (879) (2,180)
Discontinued (111) (208) (326)
operations
------- ------- -------
(6,287) (1,087) (2,506)
Exceptional items
Discontinued
operations:
Provision for
operations to be - - (1,028)
discontinued
Profit (loss) on sale
of discontinued (504) 3,779 3,779
operations
Less reinstatement of
goodwill previously
written off - (3,238) (3,238)
------- ------- -------
Loss on ordinary
activities before (6,791) (546) (2,993)
interest
Net interest 94 167 145
------- ------- -------
Loss on ordinary
activities before (6,697) (379) (2,848)
taxation
Tax on loss on
ordinary activities - - -
------- ------- -------
Retained loss for the
financial year (6,697) (379) (2,848)
======= ======= =======
Loss per share (13.24)p (1.09)p (7.35)p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND
LOSSES
Nine Months ended Year
31 December ended 31
March
1997 1996 1997
#'000 #'000 #'000
(Unaudited)(Unaudited) (Audited)
Loss for the (6,697) (379) (2,848)
financial year
======= ======= =======
ATLANTIC TELECOM GROUP PLC
CONSOLIDATED BALANCE SHEETS
As at As at
31 31 March
December
1997 1997
#'000 #'000
(Unaudited) (Audited)
Fixed assets
Intangible assets 3,927 4,048
Tangible assets 25,140 13,297
-------- --------
29,067 17,345
Current assets
Stocks 752 1,049
Debtors: amounts falling due
after more than one year 3,513 5,366
Debtors: amounts falling due
within one year 6,302 2,246
Cash at bank and in hand 3,188 17,475
-------- --------
13,755 26,136
Current liabilities
Creditors: amounts falling
due within one year (12,216) (6,946)
-------- --------
Net current assets 1,539 19,190
-------- --------
Total assets less current
liabilities 30,606 36,535
Creditors: amounts falling
due after more than one year (5,691) (4,946)
-------- -------
24,915 31,589
======== =======
Capital and reserves
Called up share capital 12,644 12,639
Share premium account 22,840 22,822
Profit and loss account (10,569) (3,872)
-------- --------
Shareholders' funds 24,915 31,589
======== ========
ATLANTIC TELECOM GROUP PLC
CONSOLIDATED CASH FLOW STATEMENTS
Nine Year
months ended
ended 31 March
31
December
1997 1996 1997
#'000 #'000 #'000
(Unaudited) (Unaudited) (Audited)
Net cash outflow from
operating activities (657) (4,618) (6,250)
Returns on investments
and servicing of 57 168 183
finance
Corporation tax - - -
recovered
Capital expenditure and
financial investment (12,669) (5,832) (7,704)
Acquisitions and 100 6,818 6,818
disposals
Management of liquid
resources 14,000 (20,736) (16,000)
Financing (1,223) 24,651 24,922
------- -------- --------
Increase/decrease) in
cash (392) 451 1,969
======= ======== ========
Reconciliation to US Generally Accepted Accounting
Principles (US GAAP)
Nine months Year
ended ended
31 December 31
March
1997 1996 1997
#'000 #'000 #'000
Net Loss per UK GAAP (6,697) (379) (2,848)
Development expense (1) 110 (2,060) (2,023)
Amortisation expense (2) (131) (137) (189)
Difference in (loss) gain on
disposal (2) (537) 2,289 2,289
------- ----- -------
Net loss per US GAAP (7,255) (287) (2,271)
======= ===== =======
Shareholders' equity per UK 24,915 33,787 31,589
GAAP
Goodwill (2) 4,164 4,164 4,164
Development expense (1) (2,927) (3,074) (3,037)
Amortisation expense (2) (790) (610) (661)
Difference in gain on 1,124 1,663 1,663
disposal
------- ----- -------
Shareholders' equity per US 26,486 35,930 33,718
GAAP
======= ===== =======
Changes in Shareholders'
equity on a US GAAP basis:
Shareholders' equity at
beginning of year 33,718 13,031 13,031
Net Loss (7,255) (287) (2,771)
Issuance of shares, net of
related costs 23 23,186 23,458
------- ----- -------
Shareholders' equity at end
of period 26,486 35,930 33,718
======= ===== =======
The following are descriptions of US GAAP reconciling
items:
(1) Under UK GAAP, the Company capitalises
development expenditures related to specific projects
when recoverability can be assessed with reasonable
certainty and these expenditures are amortised over
the license period of the project or its expected
economic life, which ever is shorter. Under US GAAP,
development expenditures are expensed in the period
incurred.
(2) Under UK GAAP, depending on the circumstances of
each acquisition, goodwill is either written off
directly against reserves or amortised through the
profit and loss account over the directors' estimate
of its useful life (not to exceed 40 years). If a
subsidiary or a business is subsequently sold or
closed, any goodwill arising on acquisition that was
written off directly to reserves or that has not been
amortised through the profit and loss account is taken
into account in determining the profit or loss on sale
or closure. For US GAAP purposes, the Company has
amortised goodwill over 20 years.
NOTES TO THE RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 1997
1. Preparation of Results
The financial information for the nine months ended
31 December 1997 was approved by the directors on 19
February 1998. It has been prepared in accordance with
relevant accounting standards on a consistent basis using
accounting policies set out in the 1997 Annual Report.
2. Financial Information
The financial information set out does not
constitute full accounts for the purposes of section 240
of the Companies Act 1985. Comparative figures for the
year ended 31 March 1997 are extracted from the full
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 of the Companies
Act 1985.
3. Disposals
On 31 July 1997, the Company disposed of Broadcast
Satellite Television Ltd, which formed the majority of
its narrowband cable operations. The narrowband
operation in Hull remains, although it is likely that
this will be discontinued prior to 31 March 1998.
The results of Broadcast Satellite Television Ltd
are shown within discontinued operations in the profit
and loss account. The cash flow from these discontinued
operations has not been separately identified within the
cash flow statement as it is not material to the overall
group cash flow. Also included within discontinued
operations in the period to 31 December 1996 and the year
to 31 March 1997 are the results of Coventry Cable Ltd
for one month. Coventry Cable Ltd was sold on 29 April
1996.
4. Loss per share
The loss per share is based on the loss attributable
to the group of #6,697,000 (31 December 1996 - loss of
#379,000) and on the weighted average number of Ordinary
Shares in issue during the nine month period to 31
December 1997 of 50,574,183 (31 December 1996 -
34,900,713).
5. 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.
CERTAIN OPERATING DATA
The following table sets forth certain data concerning
the Company's operations as of and for the year ended 31
March 1997 and for the nine month period ended 31
December, 1997.
As of and for the periods
ended
31 March 31
December
1997 1997
FRA Direct Telecommunications
(Atlantic Telecom)
Residential Customer Data
Estimated residential homes passed 90,000 200,000
(1)
Residential Customers 2,077 5,096
Residential customer lines (2) 3,802 9,684
Penetration rate of estimated 2.3% 2.5%
homes passed (3)
Average lines per residential 1.83 1.90
customer (4)
Average monthly revenue per #47.77 #37.60
residential customer (5)
Business Customer Data
Business customers 399 818
Business customer lines 1,298 2,526
Average lines per business 3.25 3.09
customer (4)
Average monthly revenue per #71.28 #85.57
business customer (6)
Network Data
Number of base stations 30 42
Excess base station capacity (7) 62.5% 42.8%
Indirect Telecommunications
(Atlantic Telecom Crest Service)
Residential customers - 3,216
Average monthly revenue per - #12.24
customer (5)
Least-Cost Routing (Atlantic
Logicall)
Business Customers 139 274
Business Customer lines 4,222 7,672
Average lines per business 30.4 28.0
customer (4)
Average monthly revenue per
business customer (6) #982.27 #979.29
Average monthly revenue per #35.96 #37.60
business line (6)
Cable Television (Atlantic Cable)
Homes passed (1) 96,658 97,162
Cable television customers 17,392 15,706
Penetration rate of homes passed 18.0% 16.2%
(8)
Average monthly revenue per #27.31 #29.40
customer (9)
Pay-to-Basic Ratio (10) 273.8% 275.2%
Notes:
(1) Estimated homes passed is the Company's estimate of
the residential homes seen by the FRA network which
are capable of connection to a base station
excluding certain multiple dwelling units which the
Company does not presently serve. Homes passed is
the actual number of addresses to which the cable
television network can be connected.
(2) Residential customer lines represent the number of
lines which are connected and in service, and the
number of lines for which customers, where
applicable, have paid for service in advance but not
yet connected.
(3) Penetration rate of estimated homes passed is
calculated by dividing the number of residential
customers on the given date by the estimated homes
passed as of such date, expressed as a percentage.
(4) The average lines per customer is calculated by
dividing the number of lines on a given date by the
number of customers on that date.
(5) The average monthly revenue per customer is
calculated by dividing (a) line and equipment
rental, outgoing call charges and incoming call
charges for the period by (b) the average number of
customers (calculated as a simple average of the
number of customers at the beginning and end of each
month during the period) and dividing that amount by
the number of months in the period covered.
(6) The average monthly revenue per business customer or
per business customer line is calculated by dividing
(a) line and equipment rental, outgoing call charges
and incoming call charges for the period by (b) the
average number of business customers or lines
(calculated as a simple average of the number of
customers or lines at the beginning and end of each
month during the period) and dividing that amount by
the number of months in the period covered.
(7) Excess base station capacity means the theoretical
installed capacity of the network base stations in
excess of the number of installed lines ignoring any
limitations inherent in the backhaul network.
(8) Penetration rate of homes passed is calculated by
dividing the number of homes receiving cable service
on the given date by the number of homes passed by
the cable network as of such date, expressed as a
percentage.
(9) The average monthly revenue per cable television
subscriber is calculated by dividing total cable
subscriber revenues (excluding installation
revenues) for the period by the average number of
cable television subscribers (calculated as the
simple average of the number of basic service
subscribers at the beginning and end of each period)
and dividing that amount by the number of months in
the period covered.
(10) The pay-to-basic ratio is calculated by taking the
number of customers who subscribe to any premium
cable service and dividing the resulting number by
the number of customers subscribing to the basic
cable service.
END
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