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EQUANT Announces Financial Results; Revenues Increase 31.2%; EBITDA Grows by 203%
AMSTERDAM, The Netherlands--(BUSINESS WIRE)--Sept. 10, 1998--EQUANT (NYSE:ENT; Paris Bourse:EQU), a leading provider of seamlessinternational data network services to multinational businesses, todayannounced results for the six months ended June 30, 1998. Revenues increased 31.2% to $319.5 million, compared with $243.5 million for the first six months in 1997. Network revenues, which now represent 60% of the Company's total revenue, increased 82% to $192.0 million.
EQUANT successfully completed its Initial Public Offering on
July 21, 1998, raising $768 million through the issuance of
30.0 million shares on the New York Stock Exchange and the Paris
Bourse. As a result of the public offering and the subsequent movement in the EQUANT share price, EQUANT will recognise further costs in 1998 relating to the employee share plan set up in 1995 on the foundation of the Company. From the third quarter 1998, the Company will begin to
recognise significant non-cash compensation costs calculated in
accordance with FASB123. The share plan costs have been separately
identified in the consolidated statements of operations, with prior
periods adjusted accordingly.
The results of the Company, as discussed below, have been
adjusted to exclude the share plan costs and non-recurring charges in
all periods.
Earnings before interest, taxes, depreciation and amortisation
(EBITDA), increased 203% to $38.8 million for the six months ended
June 30, 1998 compared to $12.8 million in the same period in 1997.
EBITDA continued to grow strongly with the second quarter showing a
29% increase over the first quarter 1998 - an annualised rate of more
than 175%. As adjusted, operating profit was $6.0 million for the
first six months of 1998, compared to an operating loss of
$6.1 million for the comparable period in 1997.
EQUANT reported an adjusted net loss of $6.4 million, or $0.04
per share for the first six months of 1998 compared with a loss of
$9.4 million, or $0.06 per share, in the comparable period last year.
Prior to the adjustment for the employee share plan and the
non-recurring charge, and as reported in the consolidated statement of
operations, the net losses were $12.0 million and $10.5 million in the
first six months of 1998 and 1997, respectively.
Commenting on EQUANT's interim results, Didier Delepine, Chief
Executive Officer, said, "These results validate our strategy and
business model, and demonstrate our commitment to operate for
profitability. As a new breed of fully integrated telecommunication
services provider, EQUANT saw its traffic multiply by 3.5 and the
number of connections increase by 40% since June 30th of last year."
Additional Financial Information
Gross profit for the six months ended June 30, 1998 was $100.3
million, an increase of $21.6 million over the comparable period last
year. The gross margin percentage was 31.4% in the 1998 period
compared to 32.3% in the first half year of 1997. This decline
reflects the lower margins at EQUANT Integration Services as the
business is repositioned.
Selling expenses for the first six months of 1998 were $45.1
million, an increase of 10.5%. This increase reflects the Company's
strategy to grow revenues by increasing the size and quality of the
direct sales force at EQUANT Network Services, where selling expenses
increased 29.4% to $33.1 million. Selling expenses in EQUANT
Integration Services decreased 11.3% reflecting partly the headcount
reductions undertaken in Asia earlier in 1998. Selling expenses as a
percentage of revenues were 14.1% in the first half of 1998 compared
to 16.7% in the same period in 1997.
General and administrative expense (G&A) for the six-month period
ended June 30, 1998, was $49.2 million, an increase of $5.3 million,
or 12.0% over 1997. As a percentage of revenues, however, G&A expense
decreased from 18.0% in the first half-year of 1997 to 15.4% for the
same period this year.
Share plan costs for the first half year 1998, comprising
accruals for social security charges payable on vesting of shares to
employees, amounted to $5.3 million compared to $0.2 million for the
first half of 1997. The costs reflected in the second quarter were
$3.5 million, compared to $1.8 million for the first quarter of 1998.
Non-recurring charges in 1998 represent the goodwill write-off
associated with the final cash settlement in May 1998 for the
acquisition by the Company of the 10% minority shareholding in EQUANT
Application Services.
Net interest expense was $5.4 million for the three months ended
June 30, 1998, and $10.5 million for the six months this year. Net
interest expense is expected to fall as a result of the proceeds from
the Company's Initial Public Offering and the replacement of the
existing loan facility. The use of the IPO proceeds to effect an early
repayment of debt will give rise in the third quarter to an
extraordinary charge as unamortised financing costs are written-off.
The weighted average shares outstanding were 171.429 million for
the six-month period ending June 30, 1998. This reflects the 20:1
share split of the shares issued and outstanding immediately prior to
the IPO period, but not the 30.0 million shares issued in the Initial
Public Offering.
As noted earlier, revenues from EQUANT Network Services and
EQUANT Network Operations for the first six months of 1998, increased
82.2% to $192.0 million, from $105.4 million in the same period in
1997. The strong revenue growth led to a combined operating profit of
$15.3 million in the first half-year of 1998, compared with an
operating loss of $4.7 million in the same period in 1997.
The increase in EQUANT Network Services revenue was due to
increased demand for international data communications, including the
addition of new customers, as well as the sale of more services,
additional capacity and new services to existing customers.
Connections at the end of the first half of 1998 increased 40%
compared to first half 1997, while characters transmitted during the
period increased 248%. The increase in the characters per connection
reflects the faster growth in high-capacity services such as Frame
Relay and Internet Protocol (IP). Frame Relay and IP services now
represent nearly 50% of the EQUANT Network Services revenues, compared
to 35% in the same period last year. Revenues from traditional managed
data network services still increased by more than 39% over the same
periods.
Capital expenditures on the Network were $63.1 million out of the
total capital expenditure of the Company of $70.2 million. These
compare to $53.5 million for the network out of a total expenditure of
$59.1 million for the same six-month period in 1997. We continue to
strive for, and achieve, higher characters transmitted per dollar
invested each year. Incremental traffic per dollar invested in the
period increased by 195%.
In April, EQUANT Network Services acquired Rhone-Poulenc Telecom,
a subsidiary of the Rhone-Poulenc Group. Through this company, EQUANT
will manage the worldwide data communications requirements of the
Rhone-Poulenc Group through an exclusive seven-year contract valued at
more than $161 million in revenues. Customer contracts led to the
order book for EQUANT Network Services amounting to approximately
$1 billion at June 30, 1998.
Performance for EQUANT Integration Services saw revenues fall
7.7% to $120.1 million in the six months to June 1998, compared with
$130.1 million in the first half of 1997. This was due to the impact
of exchange rate movements, which accounted for $9.6 million of the
decline, and the down-turn in activity in the Asia Pacific region and
Japan. The Asia Pacific and Japan regions returned operating profits
in June. The Europe, Middle East, Africa region is still reporting an
operating loss, and actions are in hand to reduce costs in the last
half year.
From 1997 the Company has reduced its exposure to Asia which now
accounts for less than 13% of revenue.
About EQUANT
EQUANT, with primary offices in Atlanta and Amsterdam, is a
leading provider of seamless international data network services to
multinational businesses.
The company is a single source for global desktop communications;
providing managed data network services, network design and
integration, equipment installation, maintenance and support services,
as well as software development services.
EQUANT operates the world's largest commercial data network in
terms of geographical coverage, which extends to over 220 countries
and territories. EQUANT's customers include American Express, Hilton,
Interpol, ING Bank, P&O Nedlloyd, Rhone-Poulenc, Samsung, Shell,
SWIFT, SwissRE, Xerox, and other multinational organizations with
substantial cross-border data communications needs.
See www.equant.com for more information.
Financial Tables prepared in accordance with US GAAP follow:
EQUANT
Condensed Consolidated Statements of Operations
(US Dollars in thousands, Six Month Ended
except per share amounts) June 30,
(Unaudited) (Unaudited)
1998 1997
Revenues :
EQUANT Network Services $158,364 $ 85,520
EQUANT Network Operations 33,595 19,861
EQUANT Integration Services 120,108 130,058
EQUANT Application Services 7,463 8,084
------- ------
Total revenues 319,530 243,523
Costs of products and services 219,262 164,890
------- ------
Gross profit 100,268 78,633
Selling 45,065 40,788
General & administrative 49,223 43,950
Share plan costs 5,255 180
Non-recurring charges 401 850
------ ------
Operating profit (loss) 324 (7,135)
Net interest expense (10,497) (3,112)
Loss before income taxes and
minority interests 10,173 10,247
Income taxes 1,727 647
Minority interests 126 (423)
-------- --------
Net loss $ 12,026 $ 10,471
Net loss per share:
Loss per share before share
plan costs and non-recurring
Charges $(0.04) $ (0.06)
Share plan costs and non-
recurring charges per share $(0.03) $ -
Net loss per share $(0.07) $ (0.06)
Weighted average shares outstanding 171,428,560 171,428,560
Notes :
1. Weighted average shares outstanding has been adjusted to
reflect the 20:1 share split effected in the recent Initial Public
Offering, but not the shares issued therein.
2. Prior year figures have been reclassified to conform to current
period presentation.
Condensed Consolidated Balance Sheets
(Unaudited) (Audited)
(US Dollars in thousands) At June 30 At December 31
1998 1997
ASSETS
Current Assets
Cash and cash equivalents $ 24,413 $ 25,146
Accounts receivable 153,819 135,041
Inventories 12,537 11,520
Other current assets 82,142 62,830
Total current assets 272,911 234,537
Property and equipment, net 267,018 233,401
Intangible assets, net 10,182 -
Long term receivables 28,553 26,265
Deferred taxation 6,845 9,242
Total Assets $585,509 $ 503,445
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities
Bank loans $4,643 $ 6,894
Current portion of long term debt 26,504 28,031
Accounts payable 46,939 25,419
Deferred revenue 12,857 8,722
Other current liabilities 103,272 92,615
Total current liabilities 194,215 161,681
Long term debt 271,475 211,784
Other non-current liabilities 13,004 9,890
284,479 221,674
Minority interests 1,117 1,183
Shareholders' Equity
Common shares 528 528
Additional paid-in capital 212,042 212,042
212,570 212,570
Retained earnings (93,193) (81,076)
Statutory reserves 981 905
Cumulative foreign currency (14,660) (13,492)
translation adjustments
Total Shareholders' Equity 105,698 118,907
Total Liabilities and $585,509 $ 503,445
Shareholders' Equity
Condensed Consolidated Statement of Cash Flows
(in thousands)
For the six months ended June 30, 1998
(Unaudited)
(US Dollars in thousands)
Net cash provided by operating activities $17,016
Cash flows from / used in investing activities
Capital expenditure (70,178)
Proceeds from disposals of equipment 3,535
Net cash invested in acquisitions of subsidiaries (6,820)
--------
Net cash used in investing activities (73,463)
Cash flows from financing activities
Net proceeds from short term borrowing (2,999)
Proceeds from long term borrowing 63,477
Repayment of long term borrowing (3,750)
--------
Net cash provided by financing activities 56,728
Effect of exchange rate changes (1,014)
Net increase (decrease) in cash and cash (733)
equivalents
Cash and cash equivalents at beginning of the period 25,146
--------
Cash and cash equivalents at the end of the period $24,413
CONTACT:
EQUANT, Atlanta
Media Relations
Scott McClintock, 770/612-4725
or
EQUANT, Atlanta
Investor Relations
Jim Armstrong, 770/303-3754
KEYWORD: GEORGIA
BW1099 SEP 10,1998
5:36 PACIFIC
08:36 EASTERN
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