As its losses rise, pan-European telecoms provider Colt Telecom Group Plc has announced its intension to raise 300m pounds ($525m) of new equity, the cancellation of its Nasdaq listing, and plans to move its headquarters to mainland Europe.
For the fourth quarter the London, UK-based company posted a massive net loss of 264m pounds ($462m), compared to a net loss of just 36.5m pounds ($64m) in the year-ago quarter.
The large increase was due to a revaluation of its assets that included an impairment charge of 247m pounds ($433m). Sales meanwhile grew a modest 0.5% to 309.9m pounds ($543m) from 308.3m pounds ($540m) in the year ago period.
For the year ending December 31, the net loss tripled to 335.9m pounds ($588m) from a net loss of 109.9m pounds ($192m) in 2004. Sales grew 2.2% to 1.24bn pounds ($2.18bn) from 1.22bn pounds ($2.13bn) in 2004.
2005 was, in many ways, a better year than the results show, said chairman Barry Bateman. Although revenue growth was not as fast as expected, reflecting general pricing pressure, slow introduction of new products and a disappointing reduction of churn, we made substantial progress in controlling costs, improving productivity, streamlining business processes, and transitioning work to India.
As part of a corporate restructuring, Colt announced its intention to create a new holding company for the group based in an unnamed European country, to reflect the fact that more than 80% of its business, and 90% of its network assets are in mainland Europe. The move to Europe will also allow it to reduce costs, and it will consider reporting in Euros instead of Pounds Sterling.
Colt said it would retain a primary listing on the London Stock Exchange, however it will suspend its US registration and cancel its Nasdaq listing, citing the financial burden of parallel regulatory compliance and other costs of its US registration and listing that outweigh the benefits conferred.
Shareholders, including US fund manager Fidelity which has a 59% stake, will be asked to approve this arrangement in the first half of 2006. Shareholders will have their current Colt shares exchanged for shares in the new holding company.
In addition to these developments, Colt also announced a refinancing option that will be used to beef up its balance sheet and redeem three outstanding bond issues that mature in 2007, 2008, and 2009. Afterwards Colt’s net debt will be reduced to less than 100m pounds ($175m).
Cash and cash equivalents sank to 225.3m pounds ($394m) at the end of December 2005, from 452.7m pounds ($793m) at the end of December 2004.
News of the results and the company’s restructuring plans did not exactly set the market alight. Shares in the company fell 6.9% to 60.5 pence ($1.06) on the London Stock Exchange, as of 5pm GMT Thursday. Dresdner Kleinwort Wasserstein also downgraded Colt stock to hold from buy.