Esprit Telecom Announces Record Second Quarter 1998 Results With Third
Consecutive Period of Strong Retail Sales and Gross Margin Gains
READING, England--(BUSINESS WIRE)--May 25, 1998--Esprit Telecom
Group plc (NASDAQ:ESPRY)(Easdaq:ESPR), one of Europe's leading
independent telecommunications companies, today announced record
financial results for the six months ended 31 March 1998. Strong
retail sales growth continues to drive the overall growth of the
business and enhance gross margins.
During the second quarter ended 31 March 1998, retail revenues
grew to 9.0 million pounds sterling, a 115% increase over retail
revenues of 4.2 million pounds sterling for the second quarter ended
31 March 1997 and an increase of 23% over retail revenue of 7.3
million pounds sterling for the first quarter ended 31 December 1997.
Retail revenue for the six-month period ended 31 March 1998 was 16.4
million pounds sterling, an increase of 105% over the equivalent
period in 1997. Gross profit, switched minutes, and total customers
also reached record levels during the second quarter of 1998.
According to David L. Oertle, chief executive officer at Esprit
Telecom: "Esprit Telecom again posted strong figures which continue
the trends we set in the previous three quarters. Retail sales
continue to be the growth engine for the business, showing strong
quarter on quarter growth in both absolute and relative terms. Retail
sales now account for 62% of Esprit Telecom's overall revenue,
compared with 39% for the second quarter of 1997 and 56% for the first
quarter of 1998. Over half of retail sales revenue now comes from
outside the UK and we expect this proportion to continue to increase
quarter on quarter. Our gross margin of 18.3% is 1.6% higher than last
quarter and this is the third consecutive quarter of gross margin
improvement."
Gross profit for the second quarter was 2.7 million pounds
sterling, up 54% over gross profit of 1.7 million pounds sterling for
the same quarter in 1997 and a 21.5% increase over gross profit of 2.2
million pounds sterling for the first quarter ended 31 December 1997.
For the six-month period ended 31 March 1998, gross profit of 4.9
million pounds sterling was up 35% over the first six months of the
1997 financial year.
"Our strong financial performance was matched by equally
significant operational achievements across the whole of Esprit
Telecom. During the second quarter of 1998, we were granted public
operator licenses in France, the United Kingdom, and Belgium,
completing our current licensing requirements in every country in
which we have significant operations. We also neared completion of the
first ring in our pan-European SDH fibre network and were able to
extend that network to the United States by swapping capacity with
another major international carrier. We have subsequently launched the
first leg of that network -- a fully resilient fibre ring between
London and Paris -- on schedule. This marks our arrival as one of the
only carriers in Europe building and operating cross border networks,"
said Oertle.
During the second quarter of 1998, Esprit Telecom billed 122.4
million minutes, more than doubling the 57.8 million minutes billed
during the second quarter of 1997. This represents a 30% increase over
billed minutes of 94.4 million during the previous quarter. For the
six-month period ended 31 March 1998, billed minutes were 216.7
million, also more than double the number reported in the comparable
six month period in 1997. Customers grew by 323 to 4,625 during the
second quarter of 1998, a six fold increase over the second quarter of
1997.
Total revenue for the second quarter of 1998 was 14.5 million
pounds sterling, an increase of 36.5% over total revenue of 10.6
million pounds sterling for the second quarter of 1997 and an increase
of 10.7% over total revenue of 13.1 million pounds sterling for the
previous quarter.
Total revenue for the six-month period ended 31 March 1998 was
27.6 million pounds sterling, a 43% increase over total revenue of
19.3 million pounds sterling for the first six months of 1997. For the
third consecutive quarter, wholesale revenues fell due to planned
reductions of this service. According to Oertle: "The lower margin
wholesale business continues to be deliberately cut back, resulting in
a 27% decline in wholesale revenue during the second quarter of 1998.
Wholesale traffic accounted for just 11.4% of total revenue in the
second quarter of 1998, compared with 49.6% during the same period in
1997."
Esprit Telecom had a number of significant accomplishments during
the quarter. In addition to obtaining operating licenses in the UK,
Belgium, and France, Esprit Telecom became the first independent
operator to obtain such a license in Belgium and was also the first
independent operator to sign an interconnection agreement with
Belgacom.
In February, Esprit Telecom also became the first company to
acquire fibre assets from Belgian railways operator NMBS. The 200
route kilometres of acquired "dark" fibre between the French and Dutch
borders of Belgium is a critical piece of Ring Two of Esprit Telecom's
pan-European fibre optic SDH network, connecting major cities in the
UK, France, The Netherlands, and Belgium.
Also in February, Esprit Telecom was informed that its
application for a single digit "carrier pre-selection" code -- or
"E digit" -- had been accepted by the French telecommunications
regulatory body ART. The reservation of the highly sought after code
places Esprit Telecom in a group of just six telecommunications
companies entitled to compete on an equal basis with France Telecom.
The process is now being reviewed by the Administrative High Court in
France following an appeal by another applicant. A final decision is
expected this summer.
During the second quarter of 1998, Esprit Telecom also completed
a fibre "swap" deal with international operator Teleglobe to acquire
significant network capacity between the United States and the United
Kingdom in return for capacity on the London/Paris ring. This is
expected to result in a lower unit cost base leading to higher
subsequent margins on this critical route, and will allow Esprit
Telecom to extend its new private circuits and managed bandwidth
businesses to the United States.
Finally, Esprit Telecom completed its senior corporate management
team with the hiring of Jim Reynolds as chief operations officer
(COO). Reynolds has more than 25 years experience in the
telecommunications and IT industries and was previously director of
products and services at Mercury Communications in the UK.
Subsequent Events
On 10 May, Esprit Telecom announced the cash acquisition of the
business of German telecommunications operator company PLUSNET
Gesellschaft fur Netzwerk Services mbH ("PLUSNET"), one of
Germany's leading telecommunication services companies, from Thyssen
Telecom AG, a subsidiary of Thyssen AG. The combined entity will
initially serve approximately 1,400 business customers, operate an
extensive telecommunications network across much of Germany and employ
100 staff.
Esprit Telecom's central office switch in Dusseldorf, an Ericsson
AXE, went live in April and is now carrying customer traffic. This
switch will now be integrated with PLUSNET's two existing switches and
18 points of presence in Germany. In April, Esprit Telecom went live
with the first segment of its pan-European broadband network, a
complete SDH ring between London and Paris operating at an initial
speed of 2.5 Gbits/second (STM-16). With the formal "lighting" of the
network and the launch of two new product ranges -- leased private
circuits and managed bandwidth -- in May, Esprit Telecom has become
one of the few companies that currently own and operate cross-border
facilities in Europe.
On 16 April, Esprit Telecom and Manx Telecom, the Isle of Man's
long standing telecommunications carrier, announced an agreement
making Esprit Telecom one of the only competitive telephone companies
with free and unlimited access to the island's business market.
About Esprit Telecom
Esprit Telecom Group plc, a NASDAQ and EASDAQ quoted company,
trading under the symbols "ESPRY" and "ESPR" respectively, is one of
the largest independent European telecommunications service providers.
The company has sales offices in 25 major cities in the United
Kingdom, The Netherlands, Spain, France, Germany, Belgium, and Italy
and has 19 points of presence on its pan-European network. It has an
additional 18 points of presence in Germany through its acquisition of
PLUSNET Gesellschaft fur Netzwerk Services mbH ("PLUSNET") in May
1998. Esprit Telecom provides high quality, low cost, and customised
international and national long distance telecommunications services
to large and medium-sized businesses. As a market leader of
international telecoms services, Esprit Telecom counts among its many
customers: governmental organisations, leading financial institutions,
travel services organisations, hotels and transport companies.
Except for the historical information contained herein, there are
matters discussed in this news release that are forward-looking
statements. Such statements are only predictions and actual events or
results may differ materially. For a discussion of important factors
including, but not limited to, the development of the Company's
business, actions of regulatory authorities and competitors, and other
factors, which could cause actual results to differ materially from
the forward-looking statements, refer to the Company's prospectus
dated 27 February 1997.
ESPRIT TELECOM GROUP PLC
Unaudited Financial Highlights (UK GAAP) (1)
(In thousands, except per ordinary share, per ADS and per minute
amounts, number of customers and numbers of employees)
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
pounds pounds pounds pounds
sterling sterling sterling sterling
Consolidated Profit and
Loss Account Data:
Revenue 14,520 10,640 27,634 19,267
Cost of revenue (11,857) (8,916) (22,779) (15,666)
Gross profit 2,663 1,724 4,855 3,601
Other operating expenses:
Selling, general and
administrative (6,441) (3,012) (11,698) (5,440)
Restructuring costs - (377) - (377)
Stock option compensation
costs (2) (108) 18 (139) (373)
Depreciation and amortization (1,440) (626) (2,642) (1,150)
Operating loss before interest (5,326) (2,273) (9,624) (3,739)
Profits on the sale of investment 200 - 200 -
Net interest (expense) / income (3,063) 95 (3,303) 66
Loss on ordinary activities
before taxation (8,189) (2,178) (12,727) (3,673)
Taxation on loss on ordinary
activities (2) - (2) -
Loss for the period (8,191) (2,178) (12,729) (3,673)
Pro forma loss per Ordinary Share (0.07) (0.02) (0.10) (0.04)
Pro forma weighted average
number of shares (3) 124,229 96,764 123,224 89,000
Equivalent pro forma loss
per ADS (4) (0.46) (0.16) (0.72) (0.29)
Other Financial Data
EBITDA (5) (3,686) (1,647) (6,782) (2,589)
Summary Operating Data:
Number of billable minutes
(000s) (6) 122,357 57,753 216,732 105,683
Average revenue per billable
minute 0.119 0.184 0.128 0.182
Average gross margin per
billable minute 0.022 0.030 0.022 0.034
Number of customers
(at period-end) 4,625 772
Number of employees
(at period-end) 444 189
1. The Company prepares its financial statements in accordance
with accounting principles generally accepted in the United
Kingdom (UK GAAP), which differ in certain significant
respects from the accounting principles generally accepted
in the United States. The financial results set forth above
represent the Company's financial results under UK GAAP. All
amounts derive from continuing operations.
2. Since September 1997, the Company's financial information
has been restated from that previously published in order to
give effect to a change in UK GAAP relating to the granting
of employee stock options at a discount to the market price.
The financial value of such discounts are now recognised as
employee compensation and charged against net income. As
required by UK GAAP, this accounting change has been
effected by restating the results of previous periods.
3. Under UK GAAP, pro forma loss per Ordinary Share is
calculated based upon the weighted average number of shares
outstanding during the period, adjusted to reflect the
redesignation of the "A" ordinary shares as Ordinary Shares
and the fifty for one Share Split that occurred in February
1997.
4. Each ADS represents seven Ordinary Shares.
5. Earnings before interest and similar items, taxes,
depreciation and amortisation ("EBITDA") is presented
because it is a measure commonly used in the
telecommunications industry and is presented solely to
enhance the understanding of the Company's operating
results. EBITDA, however, should not be considered as an
alternative to operating income or income for the periods as
an indicator of the operating performance of the Company.
Similarly, EBITDA should not be considered as an alternative
to cash flows from operating activities as a measure of
liquidity.
6. Billable minutes are those minutes during which a call is
connected to any Company switch and for which the Company
bills a customer.
ESPRIT TELECOM GROUP PLC
SUMMARIZED CONSOLIDATED BALANCE SHEET DATA (Unaudited) (1)
AS AT MARCH 31, 1998 (UK GAAP)
As at As at
Mar 31 1998 Sep 30 1997
(Unaudited) (Audited)
(in thousands)
pounds pounds
sterling sterling
Fixed Assets
Intangible assets 11,278 3,312
Tangible assets 21,516 14,284
Investments -- 131
32,794 17,727
Current Assets
Debtors 18,791 17,291
Restricted securities 56,461 --
Short term deposits and investments 127,114 22,876
Bank balances and cash 3,331 1,649
205,697 41,816
Creditors: amounts falling due
within one year (35,653) (25,295)
Net current assets 170,044 16,521
Total assets less current liabilities 202,838 34,248
Creditors: amounts falling due
in more than one year (12,025) (2,874)
Senior Notes due 2007 (171,122) --
Net assets 19,691 31,374
Capital and Reserves
Called up share capital 1,246 1,219
Other capital reserves 52,492 50,108
Reserve for stock option compensation (2) 1,667 3,295
Profit and loss account (35,714) (23,248)
Total shareholders' funds 19,691 31,374
1. The Company prepares its financial statements in accordance with
accounting principles generally accepted in the United Kingdom
(UK GAAP), which differ in certain significant respects from the
accounting principles generally accepted in the United States.
The financial results set forth above represent the Company's
financial results under UK GAAP. All amounts derive from
continuing operations.
2. Since September 1997, the Company's financial information has
been restated from that previously published in order to give
effect to a change in UK GAAP relating to the granting of
employee stock options at a discount to the market price. The
financial value of such discounts are now recognised as employee
compensation and charged against net income. As required by UK
GAAP, this accounting change has been effected by restating the
results of previous periods.
General
These results are unaudited and do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
The financial statements for the year ended September 30, 1997 have
been reported on by the Company's auditors, Price Waterhouse.
Reference can be made to the Esprit Telecom 1997 Annual Report and
Accounts and the Senior Notes prospectus dated December 12, 1997. The
audit report was not qualified and neither did it contain any
statements under Section 237 (2) or (3) of the Companies Act 1985. The
unaudited results for the six months ended March 31, 1998 have been
prepared in accordance with the accounting policies stated in the 1997
Annual Report and Accounts, as also mentioned in the above prospectus.
For a discussion of certain significant differences between UK GAAP
and US GAAP, see Note 29 to the Audited Consolidated Financial
Statements in the Esprit Telecom Senior Notes prospectus dated
December 12, 1997.
Additional copies will be available from
Reading Headquarters: Minerva House, Valpy Street, Reading, Berkshire,
RG1 1AR, United Kingdom.
CONTACT: Esprit Telecom, Reading
Roy Merritt, 44 (0) 118 951 4066
esprittele.com |
