Colt to focus on core strengths and drive free cash flow. Business Plan to refocus Colt and improve financial performance

Transcription

1 Colt to focus on core strengths and drive free cash flow Business Plan to refocus Colt and improve financial performance 30 J une 2015 Colt Business Plan 1

2 Forward Looking Statements This presentation 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 Group S.A., ("the Group"), 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 regulations and technology within the IT services and communications industries, (ii) the Group's ability to manage its growth, (iii) the nature of the competition that the Group will encounter and wider economic conditions including economic downturns and (iv) 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. No statement in this presentation is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed historical or published earnings. This presentation is for information purposes only and does not constitute an offering of securities. This presentation is not intended to provide the basis for any credit or other evaluation of any securities of the Group and should not be considered as a recommendation that any person should subscribe for, dispose of or purchase any such securities or enter into any other transaction with the Group or any other person. 30 J une 2015 Colt Investor Presentation 2

3 Contents Disclaimer 2 Strategic context 4 ITS Services exit 13 Cost transformation 17 Trading performance and outlook 19 Summary 21 Announcement in the context of Fidelity Offer J une 2015 Presentation title 3

4 Strategic context 30 J une 2015 Colt Business Plan 4

5 The market is continually evolving Big data, smartphones, IoT, Apps everything today is transmitted everywhere - someone is carrying, storing and managing every packet Telecoms market is consolidating as scale matters The specialists are increasingly winning Companies are embracing the digital economy Taking the risk out of IT and telecoms is our customers key focus Colt must also evolve Need to focus on what we are good at, and being the best at that Still focus on the information intensive businesses and cities of the world, and can create value by being: The most customer oriented business in our industry 30 J une 2015 Colt Business Plan 5

6 New business plan May 2014 restructuring enabled a more granular review of our strategy Strategic review has been ongoing since January 2015 Aim to maximise return for shareholders and accelerate performance improvement We need to refocus on our core strengths: Focus is now on Network, Voice and Data Centre Services (our Core Business ) Controlled exit of IT Services over two to three years New Business Plan approved by the Full Board Recent key management changes, with track record of delivery 30 J une 2015 Colt Business Plan 6

7 Business model We evolved our strategy accordingly To be the most customer oriented business in our industry Our Vision Customers Network Services Voice Services Data Centre Services Our LOBs Colt Network and data centre infrastructure Market Customer Experience Asset Optimisation Our Strategic priorities Focus on information intensive verticals & cities Provide a differentiated customer experience Drive asset utilisation

8 Lines of business performance in 2014 Cash generation** Revenue: 452.1m EBITDA: 60.3m 13% Capex: 11.7m Voice Services Network Services Revenue: 841.5m EBITDA: 234.8m 28% Capex: 164.6m IT Services Loss* Revenue: 77.8m EBITDA: m -33% Capex: 24.9m Cash consumption* * Profit* Colt Asia Revenue: 144.6m EBITDA: 17.4m 12% Capex: 23.1m (all pro-forma numbers) Data Centre Services Revenue: 120.2m EBITDA: 27.4m 23% Capex: 29.2m Core Business * Profit / Loss is EBITDA margin as a percentage of revenue ** Cash generation / consumption is EBITDA less capex 30 J une 2015 Colt Business Plan 8

9 A network and data centre infrastructure business Our global breadth and local depth give us a unique infrastructure that sets us apart from competitors 30 J une 2015 Colt Business Plan 9

10 Core strengths and differentiation Network Services Value proposition comes from a combination of local depth and international breadth. We specialise in the business grade quality of service and flexibility required by enterprise customers Focus is on better leveraging our network assets to drive improved profitability and cash returns Improving on-net proportion is a key metric to deliver Specific growth programmes in place Dark fibre High speed circuits between data centres Wireless backhaul Cloud access and connected buildings Global financial extranet launched at the beginning of 2015 Strong recent bookings levels 30 J une 2015 Colt Business Plan 10

11 Core strengths and differentiation Voice Services Value proposition and differentiation comes from the focus on multi-country platform - delivering consistent end-to-end customer experience across Western Europe and Asia to enterprise and wholesale customers Strategic withdrawal from low margin carrier voice trading contracts in 2014 Several initiatives in place to drive higher margin through its existing product portfolio Improved underlying recent trajectory 30 J une 2015 Colt Business Plan 11

12 Core strengths and differentiation Data Centre Services Location is key. Colt s strength comes from its 29 data centres globally and connectivity to a further 521 third party data centres. Our value proposition comes from our capacity on demand capability and our flexible commercial terms for customers Now prioritising sales of existing infrastructure over longer term investment opportunities Conducting a detailed review to identify the optimal structure and positioning of the business Detailed site by site review of the estate 30 J une 2015 Colt Business Plan 12

13 ITS exit 30 J une 2015 Colt Business Plan 13

14 ITS exit rationale ITS is mainly a legacy hosting business Cloud hosting still nascent Significant investment required to achieve scale and deliver a sustainably profitable and cash generative business We don't believe this business can compete and grow successfully in an acceptable time frame with an acceptable level of risk Higher returns can be achieved from directing investments into our Core Business 30 J une 2015 Colt Business Plan 14

15 ITS exit expected financial effects Cash exceptional charge of 45m to 55m c. 90m non-cash impairment charge c. 20m exceptional cash cost in each of 2015 and 2016, balance in 2017 IT Services revenue to decline by c. 20m in each of 2015, 2016 and To become immaterial by 2018 Total cash costs of exiting IT Services, including the up-front cash exceptional charge and expected negative operating cash flows to 2019, in range of 90m to 100m 30 J une 2015 Colt Business Plan 15

16 ITS exit products, process and timeline Products and services affected Exiting legacy hosting, cloud, asset sales and professional services Storage & back-up and network security not affected Process and timeline July Commence employee consultation, customer contract and supplier renegotiations Before end of 2015 Completion of employee consultations, and supplier renegotiations Aim to complete exit from IT Services by the end of J une 2015 Colt Business Plan 16

17 Cost transformation 30 J une 2015 Colt Business Plan 17

18 Cost transformation in progress Several cost transformation activities have already commenced: Reduction of senior executives Service assurance transformation Significant procurement savings identified and being delivered Sales organisation has been restructured, and rewards being aligned with effectiveness Exceptional restructuring cost of c. 25 million relating to the Core Business c. 25m annual savings relating to this restructuring to be reflected in Core Business EBITDA partially in 2015 and fully in 2016 Significant additional potential to continue improving the efficiency of the business, cost transformation to continue beyond this initial phase 30 J une 2015 Colt Business Plan 18

19 Trading performance and outlook 30 J une 2015 Colt Business Plan 19

20 Trading performance and outlook Guidance Core Business revenue 1,500m to 1,520m 1,500m to 1,530m Core Business free cash flow 70m to 80m 100m to 120m Note: Core Business refers to the combination of Network Services, Voice Services, Data Centre Services (including KVH). This excludes the operational performance of the IT Services (discontinuing) business and exceptional items. Q2 trading performance of the Group is in line with Management expectations Interim results will be reported before the end of July J une 2015 Colt Business Plan 20

21 Summary 30 J une 2015 Colt Business Plan 21

22 Summary focus on cash Detailed strategic review in process for some time We are focusing on our Core Business, Network, Voice and Data Centre Services. We will exit IT Services over two to three years Together with further restructuring designed to focus and simplify the business we can rapidly return the business to strong cash generation 150 Historical ( ) and targeted (2015,16) FCF 1 ( m) Underlying free cash flow excludes exceptional cash costs and the costs of operating the IT Services business in run-down.

23 Announcement in the context of Fidelity Offer The development of the Business Plan preceded and is unrelated to the recent Offer announced by Fidelity to acquire the shares in Colt not already owned by it. Fidelity first approached the independent directors of Colt with a proposal to acquire the remaining shares in Colt in April Following discussions with the independent directors of Colt and certain shareholders, Fidelity announced its intention to make an offer at a price of 190p in cash per share on 19 June 2015 (the Offer ) In considering their response to Fidelity's Offer terms, the independent directors took into account the prospects of Colt including the potential benefits from the Business Plan. For its part, Fidelity has confirmed that it was aware of the Business Plan and that the terms of its Offer take into account its assessment of the impact of the Business Plan. The Fidelityrelated directors on the Board of Colt have played no part in the consideration of the Offer or the assessment of the prospects and value of the Company undertaken by the independent directors in their response to the Offer

24 For further information: Morten Singleton Vice President Investor Relations Colt Technology Services DDI: +44 (0) Mobile: +44 (0) Colt Technology Services Group Limited, Beaufort House, 15 St Botolph Street, London, EC3A 7QN. UK