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RNS
Manx Telecom PLC  -  MANX   

Half-year Report

Released 07:00 12-Sep-2017

RNS Number : 4319Q
Manx Telecom PLC
12 September 2017
 

Manx Telecom Plc

Results for the six months ended 30 June 2017

 

Stable core performance and Global Solutions growth offsets expected data centre revenue decline. Remain on track to deliver the Board's expectations for the full year

 

Manx Telecom Plc (AIM: MANX), ("Manx Telecom", the "Company" or the "Group") the leading communication solutions provider on the Isle of Man, announces its results for the six months ended 30 June 2017.

Financial Highlights

-     Revenues of £38.5m (H1 2016: £39.2m)

•      Fixed Line, Broadband and Data revenues down 2.9%, with a decline in fixed line call revenue,           partially offset by increased broadband revenue

•    Mobile revenues up 3.6% due to increased inbound roaming revenue and an increase in post pay  contracts revenue

•      Continued strong growth in Global Solutions revenues, up 13.0%

•     Data Centre revenues down 32.3%, due to previously reported customer consolidation. Adjusting for this, Data Centre revenue returned to growth in the period

•     Group revenue excluding Data Centre and Other revenue up 2.4% year on year

-     Underlying EBITDA £12.6m (H1 2016: £13.8m) primarily due to a shift in directory distribution date to H2 and   Data Centre customer consolidation

-    Underlying Profit Before Tax of £6.7m (H1 2016: £8.3m). Reported Profit Before Tax of £5.2m (H1 2016: £6.3m) reflecting planned costs of transformation programme

-     Strong cash flow generation with Underlying operating cash flow of £10.2m (H1 2016: £10.1m) equating to   increased cash conversion from Underlying EBITDA of 81.3% (H1 2016: 73.2%)

-    Net debt increased to £61.7m (H1 2016; £53.1m), due primarily to costs associated with transformation programme. Net debt expected to improve in H2

-     Interim dividend of 3.9p (H1 2016: 3.7p), in line with progressive dividend policy

 

Operational Highlights

-        Group trading in line with Board expectations

-        Demand in the core business of Fixed, Broadband, Data and Mobile remains robust

-       Commenced initial investment in fibre to the premises ("FTTP"), which will provide ultrafast fibre broadband to 77 Island locations, for roll out in H2 2017

-       Acquisition of majority stake in Goshawk Communication, which provides exciting technology for the hard of hearing

-        Implementation of transformation programme proceeding well

 

Gary Lamb, Chief Executive Officer, said:

"We have had a solid six months of trading for the Group, in line with Board's expectations.

The core business continues to perform well with decent levels of growth in both Broadband and Mobile revenues, while we have continued to deliver double digit growth in our Global Solutions business. Our first half performance also reflects the anticipated impact of the customer consolidation in our Data Centre business and realignment of our directory revenues.

First half net debt was affected by the expected exceptional costs associated with the transformation programme, but I am pleased to say that underlying levels of cash flow remain strong and net debt is expected to fall in the second half as these costs reduce. Whilst it remains early days, we are pleased with the impact of the Transformation Programme thus far.

We are also excited to report another addition to the group in the form of Goshawk Communications whose technology will enhance the customer experience for those phone users with hearing loss. Recent trials showed that over 90% of users were pleased with the experience provided by the technology.

We remain confident in the long-term prospects of the business which continues to trade in line with the Board's expectations for the full year."

 

Underlying results

Reported results

 

30 June 2017***^

£m

30 June 2016^

£m

Change

30 June 2017

£m

30 June 2016

£m

Change

Revenue

38.5

39.2

(1.8%)

38.5

39.2

(1.8%)

EBITDA*

12.6

13.8

(9.0%)

10.7

13.8

(23.0%)

Margin

32.7%

35.3%

 

27.7%

35.3%

 

Operating Profit

7.8

9.4

(16.9%)

5.9

9.4

(37.5%)

Margin

20.3%

24.0%

 

15.3%

24.0%

 

Cash generated from operations**

10.2

10.1

1.0%

5.4

10.1

(46.5%)

Capital Expenditure (excl. intangibles)

3.0

2.3

 

3.5

2.3

 

Profit before and after tax

6.7

8.3

(19.0%)

5.2

6.3

(17.5%)

Basic Earnings per share

5.93p

7.34p

(19.2%)

4.60p

5.59p

(17.7%)

Diluted earnings per share

5.88p

7.26p

(19.0%)

4.57p

5.53p

(17.4%)

Interim dividend per share

3.9p

3.7p

5.4%

3.9p

3.7p

5.4%

 

*Underlying EBITDA is defined as the group profit or loss before depreciation, amortisation, net finance expense and taxation, adjusted for the items specified below

 

**Underlying operating cash flow is defined as net cash generated from operating activities, adjusted for the cash impact of the items specified below

 

^ Underlying profits are before £0.4m gain (H1 2016: £2.0m loss) on revaluation of interest rate swaps

 

*** The Underlying profits for H1 2017 are additionally before £1.9m Transformation Programme costs and £0.1m acquisition costs

 

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

 

For further enquiries, please contact:

Manx Telecom plc

+44 (0) 1624 636400

Gary Lamb, Chief Executive Officer

 

 

Liberum (Nominated Adviser and Corporate Broker)     

+44 (0)20 3100 2000

Steve Pearce

Joshua Hughes

 

 

Oakley Capital (Financial Adviser)

+44 (0) 20 7766 6900

Christian Maher

Victoria Boxall

 

 

Powerscourt Group (Public Relations)

+44 (0) 20 7250 1446

Juliet Callaghan

Simon Compton

 

 

 

Introduction

The results for the first six months of 2017 showed a robust performance for the Group in line with the Board's expectations. Group revenues for the period were slightly lower as a result of the customer consolidation in our Data Centre business which occurred in 2016, and the decision to move directory sales to the latter half of the year. The lower revenues have been partially offset by continued strong growth in Global Solutions, whilst our Mobile and Broadband businesses also reported solid growth in the period. After adjusting for the effect of the Data Centre customer consolidation and change in directory timing, the Group delivered year on year revenue growth for the period.

The Company's revenues were £38.5m (H1 2016: £39.2m) and underlying EBITDA (1) was £12.6m (H1 2016: £13.8m), with reported EBITDA of £10.7m (H1 2016: £13.8m).  Underlying profit before tax was £6.7m (H1 2016: £8.3m) with reported profit before tax at £5.2m (H1 2016: £6.3m). This impacted underlying diluted EPS at 5.9p (H1 2016: 7.3p) with reported diluted EPS at 4.6p (H1 2016: 5.5p).

Underlying operating cash flow was £10.2m (H1 2016: £10.1m), with Underlying EBITDA cash conversion of 81.3% (H1 2016: 73.2%) aided by improved working capital versus the same period last year.

Reported operating cashflow, which takes into account the exceptional costs associated with the transformation programme and fees associated with acquisitions, was £5.4m (H1 2016: £10.1m).

The Board remains confident in the strength of the underlying cash flows of the Group and as such has declared an interim dividend of 3.9p, representing growth of 5.4% over the same period last year.

The Isle of Man economy continues to perform well, with unemployment at 1%, 33 years of uninterrupted GDP growth and economic growth forecast to continue.   Manx Telecom continues to support the Isle of Man Government in attracting business to the Island, and the telecommunications infrastructure and services the Company provides form an important part of the Island's continued success.

During the period, we acquired a majority stake in Goshawk Communications who have developed technology which enhances the audio quality for phone users who suffer from hearing loss.

Our transformation programme, launched in October 2016 with the aim of improving competitiveness and our customer experience, remains on track and its implementation has begun well. A large proportion of the costs have now been incurred, including redundancy costs, with costs in H2 expected to be focused on investment in new IT systems to drive automation, efficiency and improved customer service.

Operational review

Fixed Line, Broadband and Data Services

Fixed Line, Broadband and Data Services provide fixed line voice, broadband and connectivity services for customers, connecting approximately 37,000 homes and 4,000 businesses on the Isle of Man.  Collectively these remain our largest business, representing 40.5% of Company revenues in the period. H1 saw continued revenue growth of 4% in Broadband, as customers migrated to higher speed services. This was offset by the expected reduction of 3% in our Fixed Line revenue, as well as a reduction in Data Services revenue of 9% as the previously noted customer consolidation also affected this revenue stream. This resulted in a decrease in revenues of 2.9% to £15.6m (H1 2016: £16.0m).

In May 2017, we introduced changes to our Fixed Line and Broadband Tariff Charges. The price changes increased fixed line rental charges, but offered opportunity to deliver greater value for money to customers who subscribe to multiple services.

The Company continued to roll out high speed VDSL broadband services (up to 80mbps download) across the Island and in H1 2017 added a further 15 cabinets to extend the provision of our VDSL services ''Ultima'' and ''Ultima Plus''. Our Ultima broadband services now reach 93% of households, with 45% penetration (31 December 2016: 40%, 30 June 2016: 36%). The sale of Ultima and Ultima Plus has helped Broadband revenues to increase by 4% to £4.7m.

As part of the Company's ongoing investment in its network, a plan is in place to bring ultrafast fibre to the premises (FTTP) broadband to an initial 77 island locations. The new service will offer download speeds of up to 1Gbps and upload speeds of up to 200Mbps. The roll-out will begin during the second half of 2017 covering key business districts and industrial estates across the Island, the cost of which will be included within our normal capital expenditure plans

Mobile

Our award winning 4G network provides 99% population coverage at speeds 10 times faster than 3G services and is available to both our post-paid and pre-paid customers. 

Revenue from Mobile accounts for 26.5% of our total revenues for the period. In line with our expectations, Mobile performed well during the period, with an increase in revenue from H1 2016 of 3.6%. This is primarily due to growth in our post-paid revenues which grew by 7% following increases in our subscriber base and continued migration of customers to higher ARPU 4G tariffs.

During the first half of 2017, we created a new mobile contract tariff proposition which provides customers with inclusive UK and EU roaming allowances, which launched successfully on 1 August 2017. Our inclusive roaming tariffs are the first of their kind in the Isle of Man and the initial customer response has been very positive.

Global Solutions

The Global Solutions business generates revenue from services which run on our domestic mobile technology platform and use our international roaming agreements.  This enables us to offer a variety of products to UK and international partners who use our Global Solutions sim cards.  There are four key revenue areas: wholesale SMS and voice, international traveler market, M2M and Strongest Signal Mobile (branded Chameleon).

Global Solutions continues to experience strong growth across much of the product portfolio, especially in M2M and Strongest Signal Mobile, with an increase in revenues of 13.0% during the period to £7.9m (H1 2016: £7.0m). Revenue from our partnership with China Unicom has been slow to arrive following delays in the project, but we remain excited by the partnership and expect a positive contribution in H2.

Data Centre

The Data Centre business offers co-location, managed hosting, cloud and disaster recovery services to an international and local corporate client base.  These services are supplied by three data centres at Douglas North, Douglas Central and Greenhill Data Centre ("GDC"). The data centres at GDC and Douglas North are Tier III designed data centres (according to Telecommunications Industry Association standards). This provides high standards of data security, resilience, and expandable hosting capacity, including business continuity and distributed denial of service protection (DDoS).

As communicated in previous results, following customer consolidation in 2016, Data Centre revenues reduced in H1 2017 by £1.1m. This decline has been partially offset by an increase in kit sales and increasing utilization of our rack space. We continue to market our remaining Data Centre capacity together with our managed and cloud services, securing some new customers for 2017, and have seen modest growth from a re-based position.

Other

Other revenues include the advertising revenue from our telephone directory, hardware equipment sales, inter-connection fees and managed services. Other revenue also includes revenue from our subsidiary, Partitionware Limited.

 

Other revenues during the period fell as expected to £2.5m (H1 2016: £2.9m) with the reduction mainly driven by the change in distribution date of our directories to every December.

 

Outlook

With a continued focus on innovation and early progress on the Transformation Programme encouraging, we are continuing to pursue our joint strategy of strengthening our position in our core market on the Isle of Man whilst looking for growth on and off island by leveraging our mobile technology platform and exploring new products and services for existing and future customers.

 

Current trading remains on course to deliver a result for the full year in line with the Board's expectations. We expect similar trends in the core business during the second half as we saw in the first six months of the year, with a continuation of growth in Mobile and Broadband balanced by moderate decline in Fixed Line and Data Services revenues. Following the loss of two major customers in our Data Centre business last year, the Group is expected to grow revenue from this lower base in H2, whilst we expect Global Solutions to continue to perform well.

 

We remain confident in the outlook for the Group, reflected in our commitment to maintain our progressive dividend policy. We continue to generate strong operating cash flow from our core business, which enables us to support our ongoing investment programme and to create further value for shareholders.

Financial review

 

Results Overview

Revenue

H1 2017

%

H1 2016

%

YoY

£'000

Total Revenue

£'000

Total Revenue

%

Fixed Line, Broadband and Data

15,568

40.5%

16,027

40.9%

(2.9%)

Mobile

10,209

26.5%

9,857

25.1%

3.6%

Global Solutions

7,891

20.5%

6,986

17.8%

13.0%

Data Centre

2,318

6.0%

3,424

8.7%

(32.3%)

Other

2,507

6.5%

2,918

7.5%

(14.1%)

Total Revenue

38,493

 

39,212

 

(1.8%)

 

Group revenue declined by 1.8% to £38.5m (H1 2016: £39.2m) with a reduction in Data Centre and Other revenue (driven by a change in our directory delivery date) partially offset by increased Global Solutions revenue.

The Fixed Line, Broadband and Data business declined by 2.9% to £15.6m (H1: 2016: £16.0) with reduced Fixed Line call revenue and a reduction in Data revenue partially offset by continued Broadband revenue growth from the increased uptake of our Ultima and Ultima Plus high speed products. Mobile showed steady revenue growth of 3.6% to £10.2m (H1 2016: £9.9m) as a result of a continued increase in post pay contract subscription revenue. The Global Solutions business grew strongly at 13.0% to £7.9m (H1 2016 £7.0m) with particularly encouraging levels of growth in our strongest signal mobile, M2M and international traveller propositions. Data Centre revenues fell to £2.3m (H1 2016 £3.4m) as a result of customer consolidation. Other revenues were down as expected by 14.1% to £2.5m (H1 2016 £2.9m) as the distribution of directories moved from H1 to H2.

The Group generated underlying EBITDA of £12.6m (H1 2016: £13.8m) and reported EBITDA of £10.7m (H1 2016: £13.8m). The lower underlying EBITDA was primarily due to the change in directory distribution to H2 and customer consolidation in the Data Centre business. Underlying EBITDA margin decreased to 32.7% (H1 2016 35.3%), while reported EBITDA margin was 27.7% (H1 2016: 35.3%).

Depreciation and amortisation was £4.8m (H1 2016: £4.4m) which increased as a result of additions made during 2016, particularly in relation to updated billing platforms.

Underlying operating profit decreased by 16.9% from £9.4m in H1 2016 to £7.8m in the current period, reflecting the decrease in underlying EBITDA and increased depreciation expense. Reported operating profit was £5.9m (H1 2016: £9.4m) due to the effect of the transformation programme costs of £1.9m.

Underlying profit before tax was £6.7m (H1 2016 £8.3m) which is calculated as profit before tax, adjusted for the transformation programme related expenses of £1.9m, acquisition costs of £0.1m and a £0.4m gain on re-measurement of interest rate swap liability. Before adjusting for these items, reported profit before tax was £5.2m (H1 2016: £6.3m).

Underlying diluted EPS was 5.88p (H1 2016: 7.26p) resulting from the lower underlying profit before tax. Reported diluted EPS was 4.57p (H1 2016: 5.53p).

The Company has declared an interim dividend of 3.9p, a 5.4% or 0.2p increase on last year.

Costs

Costs of sales increased by 4.1% to £15.5m (H1 2015 £14.9m), primarily due to the increased Global Solutions revenue which generates roaming costs as a cost of sale.

Administrative expenses increased by 14.7% to £17.1m (H1 2016: £14.9m) due to transformation programme costs and increased depreciation and amortisation costs resulting from additional billing platform fixed assets brought into use in 2016.

Net finance costs at £1.1m were the same as prior period (H1 2016: £1.1m) which is in line with expectations as no significant changes were made to lending arrangement terms.

We recorded an unrealised gain of £0.4m (H1 2016: unrealised loss £2.0m) on interest rate swaps due to improvements in market forward interest rates.

There is no corporation tax payable on the Company's profits for H1 2017 or last year. The Company enjoys the benefit of an Isle of Man 0% corporation tax rate.

 

Cash flow and Capital Expenditure

 

Cash generated from underlying operating activities increased by 1.0% to £10.2m (H1 2016: £10.1m). This represents an underlying EBITDA cash conversion of 81.3% (H1 2016: 73.2%) with year on year progress boosted by improved working capital management and reduced pension contributions to the Group's defined benefit pension scheme, resulting from reduced annual funding obligations for 2017 onwards, down from £1.2m per annum to £0.6m per annum. Underlying operating cash flow includes adjustments for the following specific items;

 

 

 

Cash Flow

June

2017 £'000

June

2016 £'000

 

Reported operating Cash Flow (2)

5,422

10,138

Transformation programme operating costs

4,790

-

Acquisition costs

30

-

Underlying operating cash flow

10,242

10,138

 

Acquisition costs relate to the acquisition of Partitionware and Goshawk Communications (UK) Limited.

 

Reported free cash flow after investing activities was a cash outflow of £0.1m (H1 2016: £8.0m cash inflow) again primarily due to transformation programme payments and deferred payments relating to the acquisition of Partitionware in December 2016. After adjusting for these items, underlying free cash flow was £7.3m (H1 2016: £8.0m), the reduction being due to increased capital expenditure in the period as a result of phasing of spend throughout the year.

 

 

 

Cash Flow

June

2017 £'000

June

2016 £'000

Reported free Cash Flow

(110)

8,036

Transformation programme operating costs

4,790

-

Transformation programme capital expenditure

541

-

Acquisition costs

30

-

Acquisition of Subsidiary

2,007

-

Underlying  free cash flow

7,258

8,036

 

Balance Sheet

 

Property, plant and equipment decreased to £58.5m (H1 2016: £60.5m). Capital additions were £2.8m in H1 2017 compared with £1.0m in H1 2016.  Depreciation at £4.7m has increased from the prior year (H1 2016: £4.3m) as a result of a billing platform upgrade in 2016.

 

Goodwill of £87.9m increased from £84.3m in H1 2016 as a result of the purchase of Partitionware in December 2016. The original balance of goodwill arose from the purchase of Manx Telecom from Telefonica in 2010 and is robustly supported by current valuations.

 

Current assets increased to £35.7m (H1 2016: £35.5m). Cash held at the end of the period decreased to £7.5m down from £15.8m at H1 2016 following cash outflows on the transformation programme and final payments in relation to the acquisition of Partitionware in 2016.

 

Trade and other receivables increased from £19.1m H1 2016 to £27.7m in H1 2017, offset by an increase in current liabilities from £20.1m H1 2016 to £26.1m H1 2017. Both were largely a result of higher unsettled roaming balances. The fair value of the interest rate swaps reduced to a liability of £1.5m at H1 2017 (H1 2016: £2.7m).

 

Net debt increased to £61.7m (H1 2016 £53.1m) as a result of cash flows described above. Given the higher level of exceptional costs in the first half, both due to the transformation programme and final payments associated with the acquisition of Partionware, net debt is expected to fall in H2.

 

_____________________________________________________________________________________

(1) The Directors of the Group have presented a number of additional performance measures in the Statement of Comprehensive Income and financial review which they believe are relevant to an understanding of the Group's financial performance which are not defined in IFRS and are therefore termed 'non-GAAP' measures. See note 3 for further information.

  

(2) Reported operating Cash Flow is referred to as Net cash generated from operating activities in the Condensed Interim Consolidated Statement of Cash Flows

 

Condensed Interim Consolidated Statement of Comprehensive Income

 

 

Note

Unaudited 6 months to 30 June 2017 

Unaudited 6 months to 30 June 2016 

 

 

£'000

£'000

Revenue

6

38,493

39,212

Cost of sales

 

(15,522)

(14,911)

Gross profit

 

22,971

24,301

 

 

 

 

Administrative expenses

 

(17,091)

(14,895)

Operating profit

 

5,880

9,406

 

 

 

 

Underlying EBITDA

 

12,595

13,842

Depreciation and amortisation

 

(4,783)

(4,436)

Underlying Operating profit

 

7,812

9,406

Transformation programme

 

(1,902)

-

Acquisition Costs

 

(30)

-

Operating Profit

 

5,880

9,406

 

 

 

 

Other income

 

15

10

Financial income

7

7

49

Finance costs

7

(1,125)

(1,183)

Net unrealised profit/(loss) on interest rate swaps

 

428

(1,976)

Profit before tax

 

5,205

6,306

Taxation

 

-

-

Profit for the period

Attributable to:

 

5,205

6,306

Owners of the Group

Non-Controlling Interest

 

5,217

(12)

6,306

-

 

Underlying Profit before Tax

 

6,709

8,282

Net unrealised profit/(loss) on interest rate swaps

3

428

(1,976)

Transformation Programme

3

(1,902)

-

Acquisition Costs

3

(30)

-

Profit before tax

 

5,205

6,306

 

 

 

 

Other comprehensive income - Items that will never be reclassified to profit or loss

 

 

 

Remeasurement of defined benefit pension scheme asset

14

600

(3,700)

Total comprehensive profit for the period Attributable to:

 

5,805

2,606

Owners of the Group

Non-Controlling Interest

 

5,817

(12)

2,606

-

 

Earnings per share from continuing operations

 

 

 

Basic earnings per share

  13

4.60p

5.59p

Diluted earnings per share

13

4.57p

5.53p

Underlying basic earnings per share

  13

5.93p

7.34p

Underlying diluted earnings per share

13

5.88p

7.26p

 

 

 

 

           

 

Condensed Interim Consolidated Statement of Financial Position

 

 

 

 

Note

 

Unaudited

30 June 2017

 

Unaudited

30 June 2016

 

Audited

31 December 2016 

 

 

£'000

£'000

£'000

Non-current assets

 

 

 

 

Property, plant and equipment

9

58,515

60,520

60,328

Goodwill

10

87,911

84,277

87,911

Intangible assets

 

749

282

881

 

 

147,175

145,079

149,120

Current assets

 

 

 

 

Inventories

 

511

508

905

Trade and other receivables

 

27,730

19,146

23,230

Cash and cash equivalents

 

7,458

15,804

16,674

 

 

35,699

35,458

40,809

Current liabilities

 

 

 

 

Trade and other payables

 

(26,061)

(20,094)

(26,784)

Provisions

8

(586)

-

(3,840)

 

 

(26,647)

(20,094)

(30,624)

 

 

 

 

 

Net current assets

 

9,052

15,364

10,185

 

 

 

 

 

Non-current liabilities

 

 

 

 

Interest-bearing loans and borrowings

12

(69,161)

(68,911)

(69,036)

Interest rate swaps

 

(1,484)

(2,650)

(1,912)

Retirement benefit liability

14

(4,495)

(2,700)

(5,400)

 

 

(75,140)

(74,261)

(76,348)

Net assets

 

81,087

86,182

82,957

 

 

 

 

 

Equity

 

 

 

 

Share capital

11

228

226

226

Share premium

11

92

84,366

84,366

Revaluation Reserve

 

1,159

-

1,159

Retained earnings/(losses)

11

79,630

1,590

(2,794)

Equity attributable to owners of the Group

 

81,109

86,182

82,957

Non-Controlling Interest

                17

(22)

-

-

Total equity

 

81,087

86,182

82,957

 

The notes on pages 14 to 28 form an integral part of these condensed interim financial statements.

 

These financial statements were approved by the Board of Directors and were signed on its behalf by:

 

  

Gary Lamb                                                                                                                                                                                      

Director                                   

11 September 2017

 

 

Condensed Interim Consolidated Statement of Changes in Equity

 

 

Share

Capital

Share

Premium

Revaluation Reserve

Non-Controlling Interest

Retained

earnings

Total
equity

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2016

226

84,347

-

-

6,474

91,047

Total comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

6,306

6,306

Other comprehensive income

-

-

-

-

(3,700)

(3,700)

Total comprehensive profit for the period

        -

-

-

-

2,606

2,606

Transactions with owners of the Group, recorded directly in equity

 

 

 

 

 

 

 

Share based payment

-

-

-

-

305

305

Issue of shares

-

19

-

-

-

19

Dividend paid

-

-

-

-

(7,795)

(7,795)

Total contributions by and distributions to the owners of the Group

-

19

-

-

(7,490)

(7,471)

Balance at 30 June 2016

226

84,366

-

-

1,590

86,182

 

 

 

 

 

 

 

Balance at 1 January 2016

226

84,347

-

-

6,474

91,047

Total comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

8,821

8,821

Other comprehensive income

-

-

1,159

-

(7,000)

(5,841)

Total comprehensive profit for the period

-

-

1,159

-

1,821

2,980

Transactions with owners of the Group, recorded directly in equity

 

 

 

 

 

 

Share-based payment transactions

-

-

-

-

887

887

Issue of shares

-

19

-

-

-

19

Dividend paid

-

-

-

-

(11,976)

(11,976)

Total contributions by and distributions to the owners of the Group

-

19

-

-

(11,089)

(11,070)

Balance at 31 December 2016

226

84,366

1,159

-

(2,794)

82,957

 

 

 

 

 

 

 

Balance at 1 January 2017

226

84,366

1,159

-

(2,794)

82,957

Total comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

(12)

5,217

5,205

Other comprehensive income

-

-

-

-

600

600

Total comprehensive profit for the period

-

-

-

(12)

5,817

5,805

Transactions with owners of the Group, recorded directly in equity

 

 

 

 

 

 

Share-based payment transactions

-

-

-

-

428

428

Issue of shares

2

92

-

-

-

94

Dividend paid

-

-

-

-

(8,197)

   (8,197)

Reclassification of share premium as retained earnings

-

(84,366)

-

-

84,366

   -

Adjustment arising from change in non-controlling interest

-

-

-

(10)

10

-

Total contributions by and distributions to the owners of the Group

2

(84,274)

-

(10)

76,607

(7,675)

Balance at 30 June 2017

228

92

1,159

(22)

79,630

81,087

                   

 

The notes on pages 14 to 28 form an integral part of these condensed interim financial statements.

 

 

Condensed Interim Consolidated Statement of Cash Flows

 

Note

Unaudited 6 months to 30 June 2017 

Unaudited 6 months to 30 June 2016 

 

 

£'000

£'000

£'0000

£'000

Cash flows from operating activities

 

 

 

 

 

Profit for the period

 

 

5,205

 

6,306

Adjustments for:

 

 

 

 

 

Depreciation of property, plant and equipment

9

4,649

 

4,348

 

Amortisation of intangibles

 

134

 

88

 

Profit on disposal of property, plant and equipment

 

(5)

 

(10)

 

Finance income

 

(7)

 

(49)

 

Finance costs

 

1,125

 

1,183

 

Net (profit)/loss on interest rate swaps

 

(428)

 

1,976

 

Negative Goodwill released to income

 

(10)

 

-

 

Equity-settled share-based payments transactions

 

430

 

306

 

Pension contributions

 

(300)

 

(600)

 

Changes in:

 

 

 

 

 

Inventories

 

394

 

86

 

Trade and other receivables

 

(4,500)

 

89

 

Trade and other payables

 

1,989

 

(3,585)

 

Provisions

 

(3,254)

 

-

 

 

 

 

217

 

3,832

Net cash generated from operating activities

 

 

5,422

 

10,138

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Proceeds from sale of property, plant and equipment

 

5

 

152

 

Purchase of property, plant and equipment

9

(3,535)

 

(2,298)

 

Acquisition of Subsidiary

 

(2,007)

 

-

 

Purchase of intangible assets

 

(2)

 

(5)

 

Interest received

 

7

 

49

 

Net cash used in investing activities

 

 

(5,532)

 

(2,102)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issue of shares

11

92

 

19

 

Repayment of borrowings

12

(20)

 

(19)

 

Interest paid

 

(981)

 

(1,038)

 

Dividends paid

18

(8,197)

 

(7,795)

 

Net cash used in financing activities

 

 

(9,106)

 

(8,833)

Net decrease in cash and cash equivalents

 

 

(9,216)

 

(797)

Cash and cash equivalents brought forward

 

 

16,674

 

16,601

Cash and cash equivalents at 30 June

 

 

7,458

 

15,804

 

The notes on pages 14 to 28 form an integral part of these financial statements.

 

1              General information

Manx Telecom plc (the "Company") and its subsidiaries (together "the Group") supply of a broad range of telecommunications services to the Isle of Man.

The Company is a public limited company, which is listed on the Alternative Investment Market of the London Stock Exchange ("AIM") and is incorporated and domiciled in the Isle of Man. The address of its registered office is 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB.

These condensed interim consolidated financial statements were approved for issue on 11 September 2017. The interim report will be available from 11 September 2017 on the group's website www.manxtelecom.com and from the registered office.

2              Basis of preparation

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. These condensed interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union. However, explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2016. These condensed interim financial statements should be read in conjunction with the last annual consolidated financial statements as at and for the year ended 31 December 2016.

3              Accounting policies

The accounting policies adopted are consistent with those of the previous financial year. The Group has not adopted any new accounting policies in the period to 30 June 2017. Other amendments to IFRSs effective for the financial year ending 31 December 2017 are not expected to have a material impact on the Group.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

 

Non-GAAP measures

The Directors of the Group have presented a number of additional performance measures which they believe are relevant to an understanding of the Group's financial performance which are not defined in IFRS and are therefore termed 'non-GAAP' measures. These terms include EBITDA, underlying EBITDA, underlying operating profit, underlying profit before tax, underlying operating cash flow and underlying free cash flow, which are not defined performance measures in IFRS. The Group's definition of these terms may not be comparable with similarly titled performance measures and disclosures by other entities. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

 

EBITDA is defined as the Group profit or loss before depreciation, amortization, net finance expense and taxation. Underlying EBITDA is defined as EBTIDA, adjusted for specific items. EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies, particularly in the telecommunications sector. The Directors consider EBITDA and underlying EBITDA to be useful measures of operating performance. This presentation is consistent with the way that financial performance is measured by management and reported internally and assists in providing a meaningful analysis of the trading results of the Group.

 

Underlying operating profit and underlying profit before tax are based on equivalent IFRS reported measures from the consolidated statement of comprehensive income, adjusted for specific items. Underlying operating cash flow is based on the equivalent reported measure from the consolidated statement of cash flows, adjusted for the cash impact of specific items. Free cash flow is defined as net cash generated from operating activities less net cash used in investing activities. Underlying free cash flow is defined as free cash flow, adjusted for the cash impact of specific items. Free cash flow represents the cash that the Group is able to generate from operations after taking into account cash outflows required to maintain or expand its asset base. The Directors consider free cash flow and underlying free cash flow to be important performance measures as they determine the amount of cash available for strategic investments, repayment of debt or distribution to shareholders in the form of dividends.

 

Specific items are identified by virtue of their size, nature, or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factor such as the frequency or predictability of occurrence.

 

 

The adjustments made to reported profit before tax and operating profit are income and charges that are one-off in nature, significant and distort the Group's underlying performance. For the period ended 30 June 2017 these adjustments included:

 

-        Transformation Programme. As part of the Transformation Programme, launched in 2016, the Group incurred costs of £1,902,000 during the period to 30 June 2017 relating to employee termination benefits, consulting fees and other programme-related costs.

-        Acquisition Costs. Costs of £30,000 were incurred in relation to the acquisition of Goshawk Communications (UK) Limited in May 2017 and the acquisition of Partitionware in December 2016.

-        Unrealised gains and losses on interest rate swaps. During the period to 30 June 2017, the Group made an unrealized gain of £428,000 on interest rate swap fair value movements, while for the period ended 30 June 2016, the Group made a loss of £1,976,000. See note 11 for further information.

Additionally, there are the following adjustments to reported cash flows from operating activities and free cash flow that are one off in nature, significant and distort the Group's underlying performance:

 

-        Transformation Programme. The Group made operating cash outflows of £4,790,000 and investing cash outflows of £541,000 in the first six months of 2017 in relation to the Transformation Programme expenses described above.

-        Acquisition of Subsidiary. The net cash outflow of £2,007,000 in relation to the second consideration payment in respect of the acquisition of Partitionware in December 2016 was made in the period. In addition the Group also made cash outflows of £30,000 in relation to acquisition costs of both Partitionware and Goshawk Communications (UK) Limited.

 

New currently effective requirements and forthcoming requirements

The following new and revised Standards and Interpretations have been adopted in the current period. Their adoption has not had any significant impact on the amounts reported in these financial statements.

 

IFRS 14

Regulatory Deferral Accounts

 

Annual Improvements 2012 - 2014

IFRS 10, IFRS 12 & IAS 28

Investment Entities: Applying the Consolidation Exemption (Amendments to IFRS 10, IFRS 12 and IAS 28)

IFRS 11

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

IAS 1

Disclosure Initiative (Amendments to IAS 1)

IAS 16 & IAS 38

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

IAS 27

Equity Method in Separate Financial Statements (Amendments to IAS 27)

 

 

At the date of authorization of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

 

Amendments/improvements

Effective date (applicable to annual periods beginning on or after stated date)

IFRS 2

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)

  

1 January 2018

IFRS 9

Financial Instruments

1 January 2018

IFRS 15

Revenue from Contracts with Customers

1 January 2018

IFRS 16

Leases

1 January 2019

IAS 12

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

1 January 2017

IAS 7

Disclosure Initiative (Amendments to IAS 7)

1 January 2017

 

The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material

impact on the financial statements of the Group in future periods, except as that:

 

-- IFRS 15 may have a material impact on the amounts of revenue reported and disclosures made in the Group's

consolidated financial statements; and

 

-- IFRS 16 may require the Group to recognise new assets and liabilities in respect of its operating leases and replace

operating lease expenses with depreciation.

 

IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The standard requires

entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a relative

standalone selling price basis, based on a five-step model.

 

The Group is still in the process of quantifying the implications of this Standard, however we expect the following

indicative impacts:

 

-        Under the current accounting policy, revenue recognised in relation to equipment and mobile handsets is based on the corresponding customer charge when the asset is transferred to the customer. Generally, customer premises equipment is provided for free, and mobile handsets are either provided for free or for a small upfront charge. Under IFRS 15, additional revenue will be allocated to all equipment and handsets with reference to the asset's relative standalone value within the contract, regardless of contract pricing. As a result, on adoption of IFRS 15, there will be an acceleration of revenue for these items, with a corresponding reduction in ongoing service revenue over the contract period. The difference between the revenue and the customer charge will be recognised as a contract asset - a receivable arising from secured cash flows - on the balance sheet.

-        Sales commissions resulting directly from securing contracts with customers are currently expensed when incurred. IFRS 15 will require these costs of acquiring contracts to be recognised as an asset when incurred, to be expensed over the associated contract period.

-        IFRS 15 will also result in some contract fulfilment costs which are currently expensed at a point in time to be deferred on the balance sheet where they relate to a performance obligation which is satisfied over time. The Group is continuing its analysis of the expected impacts of transition to IFRS 15. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these Standards until a detailed review has been completed.

 

4              Estimates

The preparation of these condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.

5              Financial risk management and financial instruments

5.1           Financial risk factors

 

The Group's operations expose it to a variety of financial risks including credit risk, currency risk, interest rate risk and liquidity risk. The Group's overall risk management policies focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the Group's financial performance and net assets.

 

These condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2016.

5.2           Liquidity risk

The Group's liquidity profile is unchanged during the period (see note 12).

5.3           Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.

 

In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial states is determined on such a basis, except for share based payments within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

 

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

 

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3: inputs for the asset or liability that are not based on observable market data.

 

 

The table below analyses financial instruments carried at fair value at 30 June 2017, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Interest rate swaps are valued using discounted cash flows, under which future cash flows are estimated based on forward interest rate yields (from observable yield curves at the end of the reporting period) and contract interest rates.

 

30 June 2017

Level 1

£'000

 

Level 2

£'000

 

Level 3

£'000

 

Total

£'000

 

 

 

 

 

 

 

Financial assets

-

 

-

 

-

 

-

Financial liabilities

-

 

          (1,484)

 

-

 

(1,484)

 

The following table presents the group's assets and liabilities that are measured at fair value at 30 June 2016.

30 June 2016

Level 1

£'000

 

Level 2

£'000

 

Level 3

£'000

 

Total

£'000

 

 

 

 

 

 

 

Financial assets

-

 

-

 

-

 

-

Financial liabilities

-

 

(2,650)

 

-

 

(2,650)

 

The following table presents the group's assets and liabilities that are measured at fair value at 31 December 2016.

31 December 2016

Level 1

£'000

 

Level 2

£'000

 

Level 3

£'000

 

Total

£'000

 

 

 

 

 

 

 

Financial assets

-

 

-

 

-

 

-

Financial liabilities

-

 

(1,912)

 

-

 

(1,912)

 

There were no transfers between levels during the current or prior periods.

6      Operating segment information

The Group has five reportable revenue segments which management report on and base their strategic decisions on:

 

 

 

 

30 June 2017 

 

30 June 2016 

 

 

£'000

£'000

 

 

 

 

Fixed line, broadband and data

 

15,568

16,027

Mobile

 

10,209

9,857

Global Solutions

 

7,891

6,986

Data Centre

 

2,318

3,424

Other

 

2,507

2,918

Total

 

38,493

39,212

 

 

 

The segmental analysis shows revenue classified according to market source.  However, the group is not structured on a divisional basis and has functional departments, processes, assets and obligations which serve each of these revenue streams.  These are not allocated in the financial reports received by the Board and its decisions are not routinely based on any such identification.  Consequently, the analysis shown above does not extend to any segmentation of profits and net assets.

There is no inter-segmental trading.

 

The products and services included within each of the five segments are as follows:

Fixed line, broadband and data includes revenues from ADSL and VDSL rental and connection charges, fixed line call charges, fixed line rental and connection charges, and private circuit rental and connection charges.

Mobile includes revenues from mobile calls, SMS and data charges, mobile rental charges, mobile handset and accessory sales, and roaming.

Global solutions includes revenues from mobile termination, products such as Chameleon, strongest signal mobile and M2M (machine to machine).

Data centre includes revenues from hosting services provided.

Other includes kit sales, directory revenues and managed service rental charges.

 

7      Finance income and expense recognised in profit or loss

 

30 June 2017

30 June 2016

 

£'000

£'000

Finance income

 

 

Other interest receivable

7

49

Total

7

49

 

 

 

Finance expense

 

 

Interest payable on borrowings

978

1,035

Amortisation of loan transaction costs

144

145

Finance lease interest

3

3

Total

1,125

1,183

 

8      Provisions

 

Restructuring Provision

£'000

At 1 January 2017

3,840

Additional provision in the period

457

Utilisation of Provision

(3,711)

At 30 June 2017

586

     

 

During 2016, the Group committed to a plan to restructure the business as part of the Transformation Programme. The restructuring provision at 31 December 2016 related to redundancy costs, consulting fees and other costs of the transformation programme. Estimated costs were based on the terms of relevant contracts. During the period, a substantial proportion of the restructuring provision was utilised as planned, as affected employees had left the Group and received payment. Additional provisions were made during the period, primarily relating to consulting costs.

 

9      Property, plant and equipment

Fixed asset additions during the period relate principally investment in the Group's fixed voice network, billing systems and building facilities.

 

Property, plant and equipment

Land and buildings

Plant and equipment

Under construction

Total

Cost

£'000

£'000

£'000

£'000

Balance at 1 January 2016

38,167

90,992

6,202

135,361

Additions

-

16

1,026

1,042    

Transfer

344

3,830

(4,174)

-

Disposals

(170)

(39)

-

(209)

Balance at 30 June 2016

38,341

94,799

3,054

136,194

 

 

 

 

 

Balance at 1 January 2016

38,167

90,992

6,202

135,631

Additions

-

16

5,940

5,956

Transfer

933

8,947

(9,880)

-

Disposals

(170)

(38)

-

(208)

Acquisition of Subsidiary

-

218

-

218

Impairment

(750)

(984)

-

(1,734)

Revaluation

(5,551)

-

-

(5,551)

Balance at 31 December 2016

32,629

99,151

2,262

134,042

 

 

 

 

 

Balance at 1 January 2017

32,629

99,151

2,262

134,042

Additions

-

-

2,835

2,835

Transfer

36

921

(957)

-

Disposals

-

-

-

-

Acquisition of Subsidiary

-

1

-

1

Balance at 30 June 2017

32,665

100,073

4,140

136,878

 

 

 

 

 

Depreciation and impairment

 

 

 

 

Balance at 1 January 2016

10,888

60,505

-

71,393

Depreciation charge for the period

844

3,504

-

4,348

Disposals

(28)

(39)

-

(67)

Balance at 30 June 2016

11,704

63,970

-

75,674

 

 

 

 

 

Balance at 1 January 2016

10,888

60,505

-

71,393

Depreciation charge for the period

1,708

7,226

-

8,934

Disposals

(28)

(39)

-

(67)

Acquisition of subsidiary

-

160

-

160

Impairment

(597)

(673)

-

(1,270)

Eliminated on revaluation

(5,436)

-

-

(5,436)

Balance at 31 December 2016

6,535

67,179

-

73,714

 

 

 

 

 

Balance at 1 January 2017

6,535

67,179

-

73,714

Depreciation charge for the period

699

3,950

-

4,649

Disposals

-

-

-

-

Balance at 30 June 2017

7,234

71,129

-

78,363

 

 

 

 

 

Net book value 30 June 2017

25,431

28,944

4,140

58,515

Net book value 31 December 2016

26,094

31,972

2,262

60,328

Net book value 30 June 2016

26,637

30,829

3,054

60,520

 

 

 

 

 

The carrying value of land and buildings held under the revaluation model is the same as if it were held under the historical cost model. There were no changes in valuation techniques during the period.

 

10    Goodwill

 

Cost

£'000

 

Balance at 1 January 2016

84,277

 

Additions during the period

-

 

Balance at 30 June 2016

84,277

 

Additions during the period

3,634

 

Balance at 31 December 2016

87,911

 

Additions during the period

-

 

Balance at 30 June 2017

87,911

 

 

 

 

Carrying amount

 

 

As at 30 June 2017

87,911

 

As at 31 December 2016

87,911

 

As at 30 June 2016

                              87,911

       

 

On 29 June 2010, the Group acquired all of the ordinary shares in Manx Telecom Trading Limited (previously Manx Telecom Limited) for £133.8m satisfied in cash.

 

On 1 December 2016, the Group acquired all of the ordinary shares in Partitionware Limited for £4,007,000 satisfied in cash, giving rise to goodwill of £3,634,000.

 

Goodwill is deemed to have an indefinite life and so is not subject to amortisation.

 

The cash generating unit of the Group is considered to be the operations of Manx Telecom Trading Limited in its entirety due to the structure of the Company which operates as one telecommunications business. Goodwill is considered to be impaired if the carrying amount exceeds the recoverable amount.

 

A review for indicators of impairment since 31 December 2016 has been performed with no such indicators identified.

 

 11    Share capital

 

The table below sets out the amounts recorded in equity:

 

 

 

Number of shares in issue (thousands)

 

Ordinary share capital

£'000

Share premium

£'000

Total

£'000

 

Opening balance as at 1 January 2016

112,964

226

84,347

84,573

Shares issued on exercise of SAYE share options

13

-

19

19

At 30 June 2016

112,977

226

84,366

84,592

 

 

 

 

 

Opening balance as at 1 January 2016

112,964

226

84,347

84,573

Shares issued on exercise of SAYE share options

13

-

19

19

At 31 December 2016

112,977

226

84,366

84,592

 

 

 

 

 

Opening balance as at 1 January 2017

112,977

226

84,366

84,592

Reclassification of share premium as retained earnings

-

-

(84,366)

(84,366)

Shares issued on exercise of CIP Scheme options

849

2

-

2

Shares issued on exercise of SAYE

65

-

92

92

At 30 June 2017

113,891

228

92

320

           

 

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

 

On 24 November 2015, the Company made a block listing application to the London Stock Exchange for admission of 30,000 Ordinary Shares of 0.2p each in the Company to trading on AIM. The shares will be issued from time to time pursuant to the exercise of share options under the Company's Save As You Earn share option scheme and will rank pari passu in all respects with the existing ordinary shares of the Company. On 10 December 2015, 3,214 shares were issued in respect of options exercised under this scheme, on 28 January 2016, 9,285 shares were issued in respect of options exercised under this scheme and on 17 May 2016 4,285 shares were issued in respect of options exercised under this scheme. During the period to 30 June 2017, a further 4,284 shares have been exercised under this scheme.

 

On 28 March 2017, the Company made a block listing application to the London Stock Exchange for admission of 250,000 Ordinary Shares of 0.2p each in the Company to trading on AIM. The shares will be issued from time to time pursuant to the exercise of share options under the Company's Save As You Earn share option scheme and will rank pari passu in all respects with the existing ordinary shares of the Company. During the period to 30 June 2016, 60,383 shares were issued in respect of options exercised under this scheme.

 

On 14 June 2017, by way of a special resolution passed at the Annual General Meeting of the Company, it was resolved that share premium of £84,366,271 be cancelled and reclassified as retained earnings.

 

 12    Interest-bearing loans and borrowings

 

 

30 June 2017

30 June 2016

31 December 2016

 

£'000

£'000

£'000

Non-current Liabilities

Finance lease liability

Secured bank loans

 

                    34

             69,127

 

74

68,837

 

53

68,983

 

            69,161

68,911

69,036

Current Liabilities

Current portion of secured bank loans

 

                     -

 

-

 

-

Total

            69,161

68,911

69,036

 

The Group has a £80m revolving credit facility in place with Barclays Bank plc, Lloyds Bank plc and The Royal Bank of Scotland PLC, of which the Group has drawn down £70m. In 2015, the Group extended the term of the existing revolving credit facility by a further 2 years from 30 June 2018 to 30 June 2020. Transaction costs incurred as part of the original debt facility and the extension were capitalised and will be amortised over the loan period.

 

As at 30 June 2016, 31 December 2016 and 30 June 2017 the margin applicable to the interest rate on the facility was 1.5%.

 

Amounts drawn under the Facility Agreement are to be repaid on the last day of each applicable interest period unless the relevant borrower elects otherwise and amounts repaid will (subject to certain drawdown conditions) remain available for re-drawing unless cancelled.

 

The loan is secured by way of a debenture in favour of the security agent providing a fixed and floating charge over certain of the Group's assets, including the shares of Manx Telecom Holdings Limited and Manx Telecom Trading Limited and property, plant and equipment of the Group.

 

To mitigate the Group's exposure to interest rate risk, the Group has entered into interest swap agreements:

 

Bank

Interest rate
%

Expiry date

 

Notional amount
£'000

Fair value at 30 June 2017
£'000

Fair value at 31 December 2016
£'000

Fair value at 30 June 2016
£'000

Royal Bank of Scotland PLC

1.711

29/06/2018

25,000

(313)

(476)

(688)

Lloyds Bank PLC

1.711

29/06/2018

25,000

(313)

(476)

(688)

Lloyds Bank PLC

1.698

30/06/2020

50,000

(858)

(960)

(1,274)

 

 

 

 

(1,484)

(1,912)

(2,650)

 

13    Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

 

30 June 2017

30 June 2016

31 December 2016

 

 

000's

000's

000's

Weighted average number of ordinary shares at 30 June/31 December (Basic)

 

113,367

112,834

112,841

Effect of Co-Investment plan

 

166

687

744

Effect of Save as you earn plan

 

304

303

325

Effect of Share incentive plan

 

96

80

95

Effect of Shadow save as you earn plan

 

3

4

4

Effect of Shadow share incentive plan

 

2

1

1

Effect of Long term incentive plan

 

271

144

249

Weighted average number of ordinary shares at 30 June/31 December (Diluted)

 

114,209

114,053

114,259

             

13.1         Reported Earnings per Share

 

The calculation of the Reported Earnings per Share has been based on the weighted average number of shares outstanding during the period (as above) and the Profit/(loss) for the period after tax attributable to the owners of the Group ("Earnings").

 

 

Earnings

£'000

 

Number of shares (Basic)

000's

 

Basic Earnings per Share

 

Number of shares (Diluted) 000's

Diluted earnings per share

 

30 June 2017

5,217

 

113,367

4.60p

 

114,209

4.57p

 

30 June 2016

6,306

 

112,834

5.59p

 

114,053

5.53p

 

31 December 2016

8,821

 

112,841

7.82p

 

114,259

7,72p

 

13.2         Underlying Earnings per Share

 

The calculation of Underlying Earnings per Share has also been included to enable shareholders to assess the results of the Group excluding income and charges that are one-off in nature, significant and distort the Group's underlying performance.

 

Earnings

£'000

 

Number of shares (Basic) 000's

Basic Earnings per Share

 

Number of shares (Diluted) 000's

Diluted earnings per share

30 June 2017

6,721

 

113,367

5.93p

 

114,209

5.88p

30 June 2016

8,282

 

112,834

7.34p

 

114,053

7.26p

31 December 2016

16,293

 

112,841

14.44p

 

114,259

14.26p

 

Underlying earnings of £6,721k are attributable to the Parent of the Group and have been calculated as underlying profit before Tax less the loss of £12k attributable to the Non-Controlling Interest.

 

14    Retirement Benefit Obligations

 

The Group operates two pension schemes. The Manx Telecom Limited Combined Pension Scheme is a defined benefit scheme that is closed to new entrants and the Manx Telecom Employee Retirement Plan is a defined contribution plan.

 

At 30 June 2017, the net liability on the defined benefit scheme decreased to £4.5m from a net liability of £5.4m at 31 December 2016 (30 June 2016: £2.7m liability). The fair value of the assets at 30 June 2017 were £91.9m (31 December 2016: £90.9m, 30 June 2016: £85.0m). The defined benefit obligation at 30 June 2017 was £96.4m (31 December 2016 £96.3m, 30 June 2016: £96.4m).

 

The service cost for the six month period was £nil as the scheme was closed to future accrual in August 2014 (31 December 2016: £nil, 30 June 2016: £nil), the net interest expense on the defined benefit liability was £nil (31 December 2016: £nil, 30 June 2016: £nil) and employer contributions were £0.3m (31 December 2016: £1.2m, 30 June 2016: £0.6m) following reduced annual funding obligations for 2017 onwards, down from £1.2m per annum to £0.6m per annum.

 

The gain on remeasurement of the defined benefit pension scheme recognised in other comprehensive income for the six month period was £0.6m (31 December 2016: £7.0m loss, 30 June 2016: £3.7m loss). The gain on remeasurement of the defined benefit pension scheme is a combination of the loss based on changes in financial assumptions, offset by a return on scheme assets greater than the discount rate applied. The loss as a result of financial assumptions was £0.5m for the six month period to 30 June 2017 (31 December 2016: £21.5m, 30 June 2016: £12.6m).

 

The financial assumptions used were:

 

 

30 June 2017

31 December 2016

30 June 2016

Discount rate

2.50%

2.55%

2.75%

Retail price inflation

3.30%

3.35%

2.85%

Consumer price inflation

2.30%

2.35%

1.85%

Salary increases

N/A

N/A

N/A

 

15    Related party transactions

 

There have been no related party transactions during the period other than the compensation of key management personnel.

 

16    Acquisition of subsidiary

 

On 5 May 2017, the Group's subsidiary, Goshawk Communications Limited, a Company incorporated in the Isle of Man, acquired 100% of the issued share capital of Goshawk Communications (UK) Limited ("Goshawk") in exchange for 33% of the issued share capital of Goshawk Communications Limited. As a result of the share for share exchange, the Group has a 67% shareholding in Goshawk Communications Limited, which in turn owns 100% of Goshawk.

 

Goshawk is a UK based company which develops and exploits technology-based solutions that enhance audio quality. Goshawk was acquired in order to support the Group's transformational growth strategy by developing disruptive technologies and bringing innovative products and services to the market.

 

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed from the acquisition of Goshawk on 5 May 2017 are as set out in the table below:

 

 

£'000

Financial Assets

23

Identifiable Intangible Assets

1

Property, Plant and Equipment

-

Financial Liabilities

(14)

 

 

Total Identifiable Assets

10

Gain on bargain purchase

(10)

 

Total Consideration

-

 

The gain on bargain purchase arising from the acquisition is a result of a nil consideration transferred and the fair value of the identifiable net assets acquired.

 

Acquisition related costs incurred in the period related to the acquisition of Goshawk (included in administrative expenses) amounted to £12,000.

 

Goshawk contributed nil revenue and £34,000 of losses to the Group's consolidated profit for the period between the date of acquisition on 5 May 2017 and the balance sheet date of 30 June 2017.

 

If the acquisition of Goshawk had been completed on the first day of the financial period, Group revenues for the six month period to 30 June 2017 would have been £20,000 more and Group profit would have been £15,000 less.

 

 17    Non-Controlling Interest

 

Summarised consolidated financial information in respect of Goshawk Communications Limited, which has a material non-controlling interest, is set out below. The summarised financial information below consolidates Goshawk Communications (UK) Limited and represents amounts before other intragroup eliminations.

Goshawk Communications Limited

 

 

30 June 2017 £'000

Current Assets

4

Non-Current Assets

2

Current Liabilities

(44)

Non-Current Liabilities

-

Equity attributable to the owners of the Group

(16)

Non-Controlling interests

(22)

 

 

30 June 2017 £'000

Revenue

10

Expenses

(49)

Total Comprehensive (Loss) for the year

(39)

Attributable to:

 

Owners of the Group

(27)

Non-controlling interests

(12)

 

Goshawk Communications Limited was a newly formed company acquired by the Group on 2 May 2017 for the purpose of acquiring Goshawk, therefore there is no comparative information for the period ended 30 June 2016.

 

18    Dividends

 

The following amounts were recognised as distributions to equity holders in the period:

 

30 June 2017
£'000

31 December 2016
£'000

30 June

2016
£'000

Interim dividend for the year ended 31 December 2016 of 3.7p (2015: 3.5p) per share

-

4,181

-

Final dividend for the year ended 31 December 2016 of 7.2p (2015: 6.9p) per share

8,197

7,795

7,795

Total dividends recognised in the period/year

8,197

11,976

7,795

Proposed interim dividend for the year ended 31 December 2017 of 3.9p per share

4,442

-

-

 

The final dividend for the year ended 31 December 2016 was declared on 14 March 2017 and paid on 30 June 2017. The interim dividend was declared on 11 September 2017 and has not been included as a liability in these condensed interim financial statements. The dividend is payable to all shareholders on the Register of Members on 13 October 2017. The total dividend to be paid is 3.9p per share. The payment of this dividend will not have any tax consequences for the Group.

 

19    Subsequent events

 

The following significant events occurred after the period end date of 30 June 2017 and prior to the signing of these interim financial statements on 11 September 2017:

 

-       An interim dividend for the period ended 30 June 2017 was declared as detailed in note 18;

-       On 7 July 2017, 448,144 share options were granted to Executive Directors of the Company and Directors of the subsidiary Manx Telecom Trading Limited under a third Long Term Incentive Plan approved by the Remuneration Committee on 14 June 2017; and

-       On 6 July 2017, 61.020 new ordinary shares were issued of 0.2p each in respect of the Save As You Earn share option scheme.

 

Other than as noted above, there are no events after the balance sheet date which require disclosure.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Half-year Report - RNS