RNS No 3954j
ATLANTIC TELECOM GROUP PLC
16th July 1998
PART 2
ATLANTIC TELECOM GROUP PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS
FOR THE YEAR ENDED 31ST MARCH, 1998
CHAIRMAN'S STATEMENT
Summary
This year has again been one of significant progress. This
time last year the Group had commenced telecommunications
service in the City of Glasgow using fixed radio access rather
than wires to connect the customer. This year the Group has
built on this by concentrating on expanding the network and
increasing the capacity of the network in line with demand
which has been running at encouraging levels.
In the early part of the year the Group received a new
telecommunications licence for substantially the rest of
Scotland, expanding on the Strathclyde Region licence which it
already held. Later in the year, we received the radio
licence required to enable us to deliver our fixed radio
access service throughout substantially the whole of Scotland.
In September 1997, we launched a service aimed at customers
who were unable to gain access to our fixed radio access
network. This was stimulated by demand that we received from
people in areas that we could not serve. The indirectly
accessed service, which we have called Crest, utilises a small
routing box that the customer plugs in to British Telecom's
network and the calls are then billed by Atlantic. The Group
was delighted to receive a national public telecommunications
licence in December 1997 to allow us to deliver
telecommunications services throughout the whole of the United
Kingdom. This licence enables us to install switching
facilities anywhere in the UK and enables us to provide our
indirect services, and certain other services, throughout the
UK, although we are not able to expand our fixed radio access
service into England and Wales without further radio licences.
We continue to work to achieve our objective of expanding this
service. The national licence also allows us to build wire-
based networks and, in principle, enables us to utilise point
to point microwave links anywhere in the UK, subject to
suitable link licence. We believe that this gives us a great
deal of flexibility to use appropriate technologies that match
the customers' need and greatly expand the area in which the
Group can profitably provide a number of its services.
During the year we exited completely from our narrowband cable
networks which, for ten years, had been a cornerstone of our
business. These networks had been losing customers for many
years as their capacity is very limited and satellite dish
systems, able to deliver much wider choice, were making
inroads into the customer base. The Directors were pleased to
be able to sell most of the systems, thereby largely
preserving employment for the workforce, by concluding the
sale of the main company, Broadcast Satellite Television Ltd,
on 31st July, 1997. We closed down our last remaining
operational narrowband network in Hull on 31st March, 1998.
The Directors regard our sole remaining broadband cable
network in Aberdeen as complementary to the delivery of
telephone services in the city as our network strategy focuses
our fixed radio access build on the main Scottish cities. The
Directors have plans in place to upgrade the Aberdeen cable
network for the delivery of digital services once they are
satisfied with the general demand for digital services in the
UK.
Our telecom management and least cost routing company,
Logicall Telecommunications Limited ("Logicall"), has had an
outstanding year and the Directors believe that it is now
recognised as a leader in the provision of these types of
services. Operating across the whole of the UK, Logicall can
now count a number of blue chip clients on its customer base
including Clarks Shoes, HSBC Gibbs and Prudential Assurance.
The loss before taxation of #9,540,000 is in line with market
expectations and reflects the activities of Atlantic
Telecommunications Limited for a full year compared to a
period of five months last year as it did not start to trade
until it launched its FRA service in Glasgow on 30 October,
1996. Increasing customers requires investment and the Group
will continue to invest in subscriber acquisition while at the
same time ensuring that its costs are reasonable in relation
to the size of the business opportunity. During the year the
Company incurred certain costs on an aborted issue of senior
discount notes and included in the loss before taxation is a
provision of #325,000 for certain out of pocket and other
irrecoverable costs. The majority of the expenditure incurred
has, however, been carried forward as a prepaid expense as it
is the Directors' belief, having taken suitable advice, that
an issue of senior discount notes can be completed in the
current financial year.
Fixed radio access
During the year we have expanded the network to 42 operational
base stations (from 30 operational base stations at 31st
March, 1997), and have concentrated a significant amount of
activity in expanding the capacity of the network in line with
a growing demand for our services. We have now substantially
completed the network build in the City of Glasgow and will
now embark on taking the network build into the rest of
Greater Glasgow as well as the expansion into the three other
Scottish cities, namely Aberdeen, Dundee and Edinburgh. The
Group has developed a network architecture that has been
designed in a modular way to allow capacity to be built into
the network as demand dictates. The Directors have made a
deliberate decision to focus on the need to ensure that
network capacity is available to connect customers when
required, rather than to expand the network without sufficient
capacity to connect customers. We are pleased to have taken
penetration of customers on the network to 3 per cent. of
homes and businesses passed at 31st March, 1998, after just 17
months of operations, in half the time that the Directors
originally estimated.
Least cost routing and managed services
During the year we also concentrated on building up our
business designed for larger companies by expanding the
activities of Logicall, our least cost routing and telecom
management company, which has experienced record growth. At
31st March, 1998, Logicall had increased its line base to
nearly 13,500 lines. The Directors expect, subject to
completing the funding arrangements announced today, to be
able to continue to expand Logicall's activities in the
current year and are working at providing switch based
facilities and value added services for this company.
Cable television
On 31st July, 1997, we sold the majority of our older
narrowband cable networks with the sale of Broadcast Satellite
Television Ltd ("BSTV") for #400,000. At that time we
retained our interest in Hull Cablevision Ltd ("Hull"), one of
the larger narrowband networks in the UK. On 31st March,
1998, we closed that system down and our cable interests are
now limited to Atlantic Cable (Aberdeen Cable Services Ltd),
which is the franchised broadband operator for the City of
Aberdeen where our operational headquarters are based. The
sale of BSTV coupled with the closure of Hull has required us
to write off a further #670,000 to reflect the terms of the
sale and closure. Atlantic Cable has had a disappointing year
with its customer base reducing from 17,392 at 31st March,
1997, to 15,420 at 31st March, 1998. The Directors believe
that this can be explained by an aggressive push by BSkyB to
capture customers ahead of the roll out of digital services
resulting in a substantial fall in the price of satellite dish
systems which became very competitive against the price of our
service. On the positive side, the average revenue per
customer in Aberdeen remains more than 40 per cent. higher
than the UK average and the system has the highest pay-to-
basic ratio, at 261 per cent., of any UK network.
The Directors believe that the introduction of the Group's
fixed radio access telephone service in Aberdeen, coupled
ultimately with a digital upgrade of the network, will enable
Atlantic Cable to maintain and build on its customer base. In
the short to medium term this is likely to be at reduced
average revenues per customer as prices are realigned to be
more competitive. The Group's indirect telephone service,
Crest, has been specifically targeted at the Aberdeen market
and has been successful at capturing customers ahead of the
direct FRA service with over 2,300 Crest customers in Aberdeen
at 31st March, 1998.
Strategy and outlook
The focus and strategy of the Group is to provide, wherever
possible, directly connected services in the local loop using
appropriate technologies. We accomplish this with a radio
connection using point to multipoint technologies for the
residential market and for small business customers and
certain other technologies, particularly indirect access, for
customers outside our network areas. The Directors believe
that this mix of access technologies gives the Group
flexibility to target customers with advanced and innovative
service packages and that it is the service packages that
create customer demand and not the technology that delivers
them.
Looking forward, the Directors are very optimistic that the
Group can continue to develop and build on what it has already
achieved. So far this year the Group has continued to expand
its telecommunications line base at an encouraging rate and at
30th June, 1998, the Group's line base had increased to 35,321
from 31,083 at 31st March, 1998, which the Directors believe
is an encouraging start to the current financial year. For
companies such as Atlantic that are focused on specific
markets, the Directors believe there is great opportunity for
the business to grow in a sector that is fast expanding.
Growth cannot be achieved without capital, particularly in the
telecommunications industry, and I am pleased that, subject to
the necessary shareholder approvals, we will be moving forward
with an enhanced capital base and importantly, a fully funded
business plan, in order to build on what has already been
achieved.
Graham J Duncan
Executive Chairman
16th July, 1998
Consolidated unaudited profit and loss account
for the year ended 31st March, 1998
1997 1998
#'000 #'000
Turnover
Continuing operations 6,713 10,595
Discontinued operations 2,180 795
------ -------
8,893 11,390
Cost of sales (5,598) (7,953)
------ -------
Gross profit 3,295 3,437
------ -------
Other operating charges
Ongoing (5,801) (12,007)
Exceptional - (325)
------ -------
(5,801) (12,332)
------ -------
Operating loss
Continuing operations (2,180) (8,733)
Discontinued operations (326) (162)
------ -------
(2,506) (8,895)
------ -------
Exceptional items
Continuing operations:
Provision for operations to be (1,028) -
discontinued
Discontinued operations:
Profit/(loss) on sale of discontinued
operations 3,779 (1,698)
Less provision at 31st March, 1997 - 1,028
Less reinstatement of goodwill previously
written off (3,238) -
------ -------
(487) (670)
------ -------
Loss on ordinary activities before
interest (2,993) (9,565)
Net interest received 145 25
------ -------
Loss on ordinary activities before
taxation (2,848) (9,540)
Tax on loss on ordinary activities - -
------ -------
Retained loss for the financial year (2,848) (9,540)
====== =======
Loss per share (7.35)p (18.86)p
====== =======
There were no recognised gains or losses other than the loss
for the financial year.
Consolidated unaudited balance sheet
As at 31st March 1998
1997 1998
#'000 #'000
Fixed assets
Intangible assets 4,048 3,883
Tangible assets 13,297 29,709
------- -------
17,345 33,592
------- -------
Current assets
Stocks 1,049 715
Debtors: amounts falling due after more
than one year 5,366 6,776
Debtors: amounts falling due within one 2,246 4,046
year
Cash at bank and in hand 17,475 57
------- -------
26,136 11,594
Creditors: amounts falling due within 6,946 15,517
one year
------- -------
Net current assets/(liabilities) 19,190 (3,923)
------- -------
Total assets less current liabilities 36,535 29,669
Creditors: amounts falling due after
more than one year 4,946 7,598
------- -------
31,589 22,071
======= =======
Capital and reserves
Called up share capital 12,639 12,644
Share premium account 22,822 22,839
Profit and loss account (3,872) (13,412)
------- -------
Shareholders' funds 31,589 22,071
======= =======
Consolidated unaudited cashflow statement
for the year ended 31st March, 1998
1997 1998
#'000 #'000
Reconciliation of operating loss to net
cash outflow from operating activities
Operating loss from continuing (2,180) (8,733)
activities
Depreciation and amortisation 758 2,312
Amortisation of lease prepayment 164 164
Network lease prepayments (1,625) (1,875)
(Increase)/decrease in stock (978) 305
Increase in debtors (986) (1,748)
(Decrease)/increase in creditors (1,595) 6,349
Gain on disposal of fixed assets (12) (14)
------- -------
Net cash outflow from continuing
operating activities (6,454) (3,240)
Net cash inflow/(outflow) from
discontinued operations 204 (562)
------- -------
Net cash outflow from operating (6,250) (3,802)
activities
======= =======
Cashflow Statement
Net cash outflow from operating (6,250) (3,802)
activities
Returns on investments and servicing of 183 (15)
finance
Capital expenditure (7,704) (13,709)
Acquisitions and disposals 6,818 420
Management of liquid resources (16,000) 16,000
Financing 24,922 (1,984)
------- -------
Increase/(decrease) in cash 1,969 (3,090)
======= =======
Notes
1. Financial information
The figures shown above do not constitute the Group's
statutory accounts for the year ended 31st March, 1998
which have not yet been reported upon by the auditors or
delivered to the Registrar of Companies. The Group's
statutory accounts for the year ended 31st March, 1997
received an unqualified audit report and did not include
a statement under sections 237(2) or (3) of the
Companies Act 1985 and have been filed with the
Registrar of Companies.
2. Discontinued operations
Discontinued operations represent the results of
Broadcast Satellite Television Limited which was
disposed of in July 1997 and Hull Cablevision Limited
which was closed on 31st March, 1998.
Discontinued operations for the year ended 31st March,
1997 also includes the results of Coventry Cable Limited
which was disposed of in April 1996.
3. Loss per share
The calculation of loss per share is based on the loss
for the financial year of #9,540,000 (1997: #2,848,000)
and on the weighted average number of ordinary shares of
25p each in issue during the year which was 50,574,520
(1997: 38,750,906).
4. Dividend
In view of the deficit on reserves the directors cannot
recommend a dividend and the loss for the year has
therefore been transferred to reserves.
END
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