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TeleCity Group PLC (TCY)

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Monday 06 August, 2012

TeleCity Group PLC

Results for the six months ended 30 June 2012

RNS Number : 3305J
Telecity Group plc
06 August 2012
 



6 August 2012

TELECITY GROUP PLC

 

Telecity Group plc results for the six months ended 30 June 2012

TelecityGroup delivers strong growth and confirms a positive outlook

Telecity Group plc ('TelecityGroup', 'the Group' or 'the Company'), Europe's industry-leading provider of premium carrier-neutral data centres, today announces its results for the six months ended 30 June 2012

 

Highlights

·  Revenue up 22.4% to £137.3m (H1 2011: £112.2m), with currency neutral growth of 25.6%

·  EBITDA(1) up 26.6% to £62.6m (H1 2011: £49.4m), with currency neutral growth of 30.4%

·  EBITDA margin up by 150 bps to 45.6% (H1 2011: 44.1%)

·  Adjusted(2) diluted earnings per share up 36.2% to 15.8p (H1 2011: 11.6p) with currency neutral growth of 41.1%

·  Available customer power up to 76MW (H1 2011: 59MW)

·  Announced(3) customer power up to 124MW (H1 2011: 112MW)

·  Available and announced power up to 80MW and 130MW respectively since the period end

·  Maiden interim dividend of 2.5p per share declared

·  New market position established in Helsinki through the acquisition of Tenue in August 2012 (note 16)

 

Statutory equivalent

The above highlights are based on the Group's adjusted results. A full reconciliation between the adjusted and statutory results is contained in note 5. Where different, the statutory equivalents of the above results are as follows:

·  Operating profit £43.4m (H1 2011: £33.5m)

·  Diluted earnings per share of 15.1p (H1 2011: 12.6p)

 

Michael Tobin, TelecityGroup CEO, said:

"I am again delighted with TelecityGroup's performance. Once more the Group has delivered excellent results and we have enhanced our growth platform with new capacity openings across Europe and continued to secure further capacity in response to customer demand to underpin longer-term growth.

I am particularly pleased to announce our entry into the Finnish market through the acquisition of Tenue. This expands our European growth platform and allows us to serve the growing demand generated from the Helsinki internet hub. It is testament to the strength of TelecityGroup's business model that we are able to expand the Group's growth horizon while at the same time commencing a progressive dividend policy.

Demand for premium data centres remains strong in all of our markets and I am confident that 2012 will continue to be another strong year for TelecityGroup."

 

 

 

 

(1) Earnings before interest, taxation, depreciation and amortisation (note 5). There are no adjusting items to EBITDA in either the current or prior period.

(2) Adjusted to exclude intangible assets amortisation and other financing items (note 5).

(3) Total available customer power when all currently announced expansion projects are complete.



For further information please contact:

 

TelecityGroup:

Investors:

Matthew Springett                                  +44 (0)20 7005 6337

 

Media:

James Tyler                                           +44 (0)20 7001 0076

 

Brunswick:

Sarah West/James Olley                        +44 (0)20 7404 5959

Notes to Editors

Telecity Group plc

TelecityGroup is the leading provider of carrier-neutral data centres in Europe, operating highly connected facilities in key cities.

These data centres are the places in which separate networks that make up the internet meet and where bandwidth-intensive applications, content and information are hosted. As such, they are the key network hubs, or enabling environments, of the European digital economy. TelecityGroup's customers take advantage of the highly-connected facilities to operate, store, share, distribute and access digital media, IT applications and information effectively and efficiently.

Telecity Group plc is listed on the London Stock Exchange (LSE: TCY).

www.TelecityGroup.com/investor

The content of the Telecity Group plc website should not be considered to form a part of or be incorporated into this announcement.

Cautionary note regarding forward-looking statements

This announcement includes statements that are forward-looking in nature. All statements other than statements of historical facts could be deemed to be forward-looking statements. By their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. Accordingly, the actual results, performance or achievements of the Company may be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, due to known and unknown risks, uncertainties and other factors. Except as required by the Listing Rules and applicable law, Telecity Group plc undertakes no obligation to update or change any forward-looking statements to reflect events occurring after the date such statements are published.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any securities in the United States, or any other jurisdiction. The Company's shares have not been registered in any U.S. jurisdiction, and, in particular, will not be registered under the U.S. Securities Act of 1933, as amended or any applicable state securities laws.



 

Operational Review

Overview and outlook

Overview of the six months to 30 June 2012

TelecityGroup aims to deliver controlled, sustainable, profitable growth by constructing and selling high quality, differentiated data centre capacity in the key internet economy cities in Europe, to meet the demand for highly connected and resilient capacity that is being driven by the growth in the digital economy.

Demand for the Group's infrastructure and services is increasing due to the ongoing growth of the internet, which is itself being driven by trends including a continued migration of social, entertainment and business functions online, the growth in mobile internet and cloud computing. These trends increase the amount of equipment that needs to be housed in carrier-neutral data centres.

TelecityGroup has enjoyed another good first half. The Group has delivered excellent financial results, with significant growth in revenue, EBITDA and adjusted EPS.

During the first half of 2012, TelecityGroup experienced strong demand, from a broad base of customer verticals, with the strongest demand coming from the internet content and connectivity categories. As in previous periods, the majority of TelecityGroup's orderbook growth was driven by new or extended orders from its existing customer base.

First half period end physical occupancy (measured as fitted-out space divided by occupied space) increased to 81.3% (H1 2011: 80.3%), at the same time as significant additional capacity was delivered. TelecityGroup's capacity utilisation is a blend of fully utilised older capacity and recently delivered growth capacity. While it is in a strong growth phase, the Group aims to continually bring new capacity on-line in response to customer demand, as its existing capacity reaches full occupancy.

Revenue per occupied sq.m increased 4.8% to £4,497 (H1 2011: £4,292). This was due to a combination of factors including inflationary price rises, further power capacity being sold in existing space and increasing data centre power densities, partly offset by adverse currency movements. On a currency neutral basis, revenue per occupied sq.m increased 7.5%.

The Group also made strong progress with the delivery of its secured capacity expansion programme during the first half, which is discussed in more detail below in the Operational delivery section. Significant returns on capital are being generated from this investment programme, while balance sheet leverage remains modest. These metrics are discussed in more detail in the Financial review.

Current trading, outlook and dividend

Demand for carrier-neutral data centres remains strong across TelecityGroup's markets, with growth in customers' requirements for capacity being driven by a continuing increase in the use of the internet by both consumers and businesses.

TelecityGroup won significant new orders during the first half of 2012, adding to its recurring revenue base. The Group also has an encouraging order book pipeline for the remainder of the year and a largely stable and predictable cost base. As such, management are confident that the Group will deliver a strong performance in 2012 as a whole.

TelecityGroup is expected to continue to generate substantial operating cash flows. The Group plans to continue to invest the majority of these discretionary cash flows in its announced and future ongoing capacity expansion programme and to support value enhancing inorganic expansion, in response to growing customer demand for data centre capacity.

In this context, as announced at the time of the 2011 preliminary results in February, the Board has decided to initiate a progressive dividend policy and announces a maiden interim dividend of 2.5p per share. The interim dividend will be paid on 21 September 2012 to shareholders on the register on 17 August 2012.

The Board continues to focus on demand driven capacity expansion across its European markets into the longer-term, in response to the ongoing growth in the digital economy.



 

Key performance indicators ('KPIs')

 

Six months
ended
30 June
2012

Six months
ended
30 June
2011

%
Change

Currency
neutral
%
Change

Revenue (£'000)

137,325

112,211

22.4%

25.6%

EBITDA (£'000)

62,592

49,449

26.6%

30.4%

Adjusted diluted earnings per share (pence)

15.8

11.6

36.2%

41.1%

Return on capital employed (%)

17.4

19.4

(10.3)%

-

Available customer power (MW)

76

59

28.8%

-

Announced customer power (MW)

124

112

10.7%

-

Fitted-out space (sq.m)

76,100

65,900

15.5%

-

Occupancy (%)

81.3

80.3

100bps

-

Revenue per occupied sq.m(1) (£/sq.m)

4,497

4,292

4.8%

7.5%

(1) Calculated as the annualised revenue for the period divided by the average occupied space during the period.

 

Group growth strategy and operations

Growth strategy

TelecityGroup's data centres are the places in which many of the separate networks that make up the internet meet and where bandwidth-intensive applications, content and information are hosted. As such, they are key network hubs, or enabling environments, of the European digital economy.

Over the last decade, many of TelecityGroup's data centres have become amongst the most significant European and global internet hubs, with its buildings in London Docklands and Amsterdam in particular being world-leading in terms of connectivity options.

The Group has a multi-year, demand driven, announced capacity expansion programme across Europe, which provides its growing customer base with visibility of how their needs for capacity can be met now and in the future.

As an infrastructure business, TelecityGroup aims to continue to generate strong returns on the capital that it invests in capacity expansions. It does this by only competing in the premium data centre market where it can add value for customers with high levels of connectivity, excellent infrastructure and high quality service. When expanding, it is able to leverage the value of its existing connectivity and customer ecosystems by opening new capacity close to established sites.

The Group also aims to make acquisitions, either for the purpose of entering new markets or to provide growth capacity in existing markets where data centres are fully occupied. This enables it to shorten the time to market for growth capacity, as the highly connected internet data centre market is characterised by long lead times for new capacity.

Operational delivery

TelecityGroup made good progress with the delivery of its secured capacity expansion programme, opening 8MW (4,800 sq.m) of available customer capacity during the first half of 2012. This took period end capacity to 76MW and 76,100 sq.m (H1 2011: 59MW and 65,900 sq.m). Since the period end, the Group has opened a further 3MW (2,100 sq.m) of available customer capacity.

TelecityGroup has also enhanced its long-term growth prospects during 2012 to date. The Group has established a position in Finland via the acquisition of Tenue for consideration of £3.7m, expanding the geographic footprint in which it can grow. Tenue is a leading carrier-neutral operator in Helsinki, an emerging internet hub market within the strong Nordic market, demonstrating significant growth potential. Tenue has 1MW of operational capacity and a secured capacity pipeline of 4MW. This has taken total operational capacity to 80MW and the secured power expansion pipeline to 130MW.



 

Segmental performance

Whilst TelecityGroup has a unified Group strategy, for reporting purposes it segments its results between the UK and the other countries of operation ('Rest of Europe'). A summary of each of the Group's reporting segments is given below:

UK

TelecityGroup's UK business encompasses leading positions in London and Manchester. London is one of the world's primary internet hubs and Manchester is the UK's second largest internet hub.

TelecityGroup has enjoyed a strong first half in the UK, in terms of operating performance, financial results and the progress made to underpin future demand driven growth. Revenue increased 20.3% to £67.8m (H1 2011: £56.4m) and EBITDA increased 21.0% to £30.0m (H1 2011: £24.8m).

In terms of capacity expansion, the Group opened the first phase of the London Powergate expansion and since the period end has opened the first phase of its new fourth Manchester data centre. Work to expand capacity at the Group's Harbour Exchange site in London Docklands is progressing well, with the first phase of expansion due to open during the second half of 2012.

During the period fitted-out space increased 8.4% to 32,100 sq.m (H1 2011: 29,600 sq.m) and occupancy was 88.0% (H1 2011: 90.1%). Revenue per occupied sq.m increased 12.7% to £4,805 (H1 2011: £4,264). Revenue per occupied sq.m growth was assisted by increased sales of power within existing space. These metrics include the impact of the capacity acquired with UK Grid in the second half of 2011.

Total period end customer available power was 30MW, increasing to 32MW currently. The total announced capacity pipeline for the UK division is now a further 25MW, most of which will be delivered over the next three years.

Rest of Europe ('RoE')

TelecityGroup's RoE business encompasses strong positions in Amsterdam, Dublin, Frankfurt, Milan, Paris and Stockholm.

As with the UK, TelecityGroup has enjoyed a strong first half in RoE, in terms of operating performance, financial results and the progress made to underpin future demand driven growth. Revenue increased 24.5% to £69.5m (H1 2011: £55.9m) and EBITDA increased 32.1% to £32.6m (H1 2011: £24.7m). On a currency neutral basis revenue increased 31.2% and EBITDA increased 39.8%.

In terms of capacity expansion during the first half, the Group opened the first phase of its new Amsterdam 5 site and brought more capacity on-line at its Frankfurt 1 and Stockholm 2 sites. Since the period end further capacity has been brought on-line at Stockholm 2.

During the period fitted-out space increased 21.2% to 44,000 sq.m (H1 2011: 36,300 sq.m) and occupancy to 76.5% (H1 2011: 72.4%). Revenue per occupied sq.m decreased 2.0% to £4,233  (H1 2011: £4,321). On a currency neutral basis, revenue per occupied sq.m increased 3.2%. These metrics include the impact of the capacity acquired with Data Electronics in the second half of 2011.

Total period end customer available power was 46MW, increasing to 48MW currently. The total announced capacity pipeline for the RoE division is now a further 25MW, most of which will be delivered over the next three years.

 

 

Michael Tobin

Chief Executive Officer
6 August 2012



 

Financial Review

Introduction

The Group's focus on controlled, sustainable, profitable growth has helped to deliver another period of strong results. Revenue increased 22.4% to £137.3m (H1 2011: £112.2m), EBITDA increased 26.6% to £62.6m (H1 2011: £49.4m) and adjusted EPS increased 36.2% to 15.8p (H1 2011: 11.6p). The continuing growth has been achieved whilst maintaining a strong return on capital employed of 17.4% (H1 2011: 19.4%) and a low leverage ratio (calculated as period end net debt divided by annualised EBITDA for the period) of 1.6 (H1 2011: 0.6), which are after the acquisitions in the second half of last year.

Cash flows from operations increased 14.0% to £63.8m (H1 2011: £55.9m). After interest, tax and operational capital expenditure spend, operating free cash flow was £42.9m (H1 2011: £41.2m) and was invested in the demand driven expansion programme. Investment related capital expenditure was £73.3m (H1 2011: £39.6m) with a further £15.0m funded by a previous landlord contribution. Operating free cash flow was impacted by a £6.0m increase in tax payments as tax losses have been largely utilised.

The Group benefited from the inclusion of the results of Data Electronics and UK Grid, both acquired during the second half of 2011. These have been successfully integrated into the Group's existing operations and during the period contributed £8.0m and £1.8m to revenue and EBITDA respectively.

With approximately half of the Group's business being based in the Eurozone, the Group has closely monitored the related financial issues. The vast majority of the Group's European businesses are located in countries with sound financial positions, however the continuing weakness of the Euro has adversely impacted the Group's reported results due to currency translation. On a currency neutral basis revenue growth was 25.6%.

TelecityGroup continues to have a strong financial position, with good operating cash flows and committed bank facilities sufficient to finance all currently announced expansion plans. At the period end the Group had net debt of £203.3m (H1 2011: £56.1m), the increase is largely related to the corporate acquisitions that took place in the second half of last year, together with amounts incurred on investment capital expenditure. The Group has further undrawn committed facilities of £87.3m (H1 2011: £232.9m) and 89.7% of the Group's borrowings are due in three or more years.

For clarity, each of the following sections discusses the Group's adjusted results. The adjusting items are discussed later in this review and a reconciliation between the adjusted and statutory results is contained in note 5.

Revenue

TelecityGroup generated strong revenue growth in each of its areas of operation. UK revenue increased 20.3% to £67.8m (H1 2011: £56.4m) and Rest of Europe ('RoE') revenue increased 24.5% to £69.5m (H1 2011: £55.9m). On a currency neutral basis, RoE revenue increased 31.2%.

The Group has a strong revenue base, over 90% of the Group's revenue is derived from services that are recurring.

Operating costs

With the exception of power costs, which are directly linked to customer usage, the Group has a relatively stable cost base which is kept under constant review to ensure tight cost control is maintained as the Group grows. Operating costs, including depreciation, increased 18.3% to £92.1m (H1 2011: £77.8m) due to the growth in the business. Operating costs as a percentage of revenue decreased to 67.0% (H1 2011: 69.3%).

A review of the major cost categories follows:

Power costs of £19.5m (H1 2011: £16.0m) represented 14.2% of revenue (H1 2011: 14.2%). The increase of £3.5m was principally due to increased usage from new and existing customers. The Group seeks to pass on to customers the cost of power directly used by their equipment, together with the associated supporting infrastructure power costs, for example cooling.

Property costs of £18.8m (H1 2011: £15.1m) represented 13.7% of revenue (H1 2011: 13.5%). The increase of £3.7m was mainly due to additional rent and rates associated with new capacity.

Staff costs of £21.2m (H1 2011: £18.0m) represented 15.4% of revenue (H1 2011: 16.1%). The increase of £3.2m was due to an increase in headcount reflecting the Group's expanding capacity, annual salary increases and an increase in share-based payment expenses.



 

Other costs, comprising operational maintenance costs, sales and administrative costs and cost of sales of services, were £15.3m (H1 2011: £13.6m) and represented 11.1% of revenue (H1 2011: 12.2%). The increase of £1.7m was mainly due to higher cost of sales associated with customer services, along with increased marketing and administration costs as the business grew.

EBITDA

EBITDA was £62.6m (H1 2011: £49.4m) and the EBITDA margin increased to 45.6% (H1 2011: 44.1%).

UK EBITDA increased 21.0% to £30.0m (H1 2011: £24.8m) and RoE EBITDA increased 32.1% to £32.6m (H1 2011: £24.7m).

Some other companies exclude share-based payments from their adjusted EBITDA. For comparative purposes the equivalent figure for the Group was £64.3m (H1 2011: £51.0m).

Depreciation

Depreciation was £17.3m (H1 2011: £15.0m) for the period. The increase of £2.3m was due to additional depreciation from data centre expansions and prior year acquisitions. For new builds depreciation commences when a data centre, or a part thereof, is brought into use.

Net finance costs

Net finance costs for the period were £3.0m (H1 2011: £2.4m). These comprised net interest on borrowings of £2.3m (H1 2011: £1.4m), loan commitment fees of £0.4m (H1 2011: £0.8m) and net other finance costs of £0.3m (H1 2011: £0.3m). Interest on borrowings is stated net of capitalised interest of £2.7m (H1 2011: £1.4m). The Group is required under IFRS to capitalise interest on the borrowings which fund assets in the course of construction.

Interest accrues on the Group's borrowings at LIBOR, or equivalent based on the currency of borrowings, plus a margin. At the period end the Group had interest rate swaps in place that converted the interest rate on 91.5% (H1 2011: 89.7%) of the Group's borrowings from a floating rate to a fixed rate. The period end valuation of the interest rate swaps is included on the balance sheet under the heading of derivative financial instruments.

The Group's cost of drawn debt during the period was 4.0% (H1 2011: 5.3%). The gross interest rate (calculated as gross cost of borrowings, note 8, divided by the average borrowings for the period) was 4.8% (H1 2011: 6.7%).

Taxation

The adjusted tax charge for the period was £10.1m (H1 2011: £8.7m) or 23.9% (H1 2011: 27.2%) of adjusted profit before tax. The reasons for the reduction in tax charge from the previous period are the reduction in the UK corporation tax rate, the greater contribution of Ireland to the taxable profits and a credit in respect of the utilisation of previously unrecognised losses.

Earnings per share

Strong revenue growth together with tight cost control, selective capital allocation and an efficient financing structure has resulted in adjusted diluted earnings per share ('adjusted EPS') increasing 36.2% to 15.8p (H1 2011: 11.6p). Adjusted EPS is calculated based on adjusted profit after tax. A reconciliation between the adjusted and unadjusted profit is given in note 5.

Dividends

An interim dividend of 2.5p per share (H1 2011: nil) was declared by the Board of Directors and is payable on 21 September 2012 to shareholders who are on the register at 17 August 2012. This interim dividend totalling £5.0m (H1 2011: nil), has not been recognised as a liability in this half year financial report. It will be recognised in shareholders' equity in the year to 31 December 2012.

Return on capital employed

Return on capital employed ('ROCE'), calculated by dividing the adjusted annualised EBITA (note 5) for the period by the average total equity plus borrowings during the same period, was 17.4% (H1 2011: 19.4%). The current period ROCE has been impacted by the short-term effect of the significant current activity in the expansion programme and the acquisitions in the second half of 2011. Despite the Group's phased approach to its expansion projects, it is often the case that capital investment is necessarily front loaded whilst the EBITA builds steadily from the initial opening. The underlying ROCE remains strong and ROCE is expected to return to normal levels in the near future.

Adjusting items

The Group presents adjusted results in addition to the statutory results as the Directors consider that they provide a useful indication of performance. The items that are excluded from the adjusted results are intangible asset amortisation, other finance items and the associated tax. A reconciliation between the adjusted and statutory results is given in note 5.

Intangible asset amortisation for the period was £1.9m (H1 2011: £1.0m). The increase was due to the acquisition of Data Electronics and UK Grid during the second half of 2011.

Other financing items were a cost of £0.3m (H1 2011: income £2.9m) related to net foreign exchange gains and losses on financing items including borrowings, cash and intercompany loans. The Group seeks to minimise this figure by matching the currency of its financial assets and liabilities in each country.

Cash flow and net debt

The Group finances its demand-driven expansion programme through a combination of cash flows from operating activities and bank borrowings principally provided by its senior debt facility. Where appropriate, the Group will purchase certain plant and machinery items under finance lease. The Group's senior debt facility is provided jointly by Barclays, HSBC, Lloyds Banking Group and RBS. This facility is for £300m with a term to May 2016. The Group has capacity for additional debt finance should it be needed.

Cash flow from operating activities increased 4.1% to £53.7m (H1 2011: £51.6m). The Group's cash performance was primarily a result of the increased EBITDA of £62.6m (H1 2011: £49.4m), enhanced by working capital cash inflows derived from the advance billing cycle operated by the Group and efficient working capital management. This was offset by increased tax payments of £8.4m (H1 2011: £2.4m).

After deducting operational capital expenditure, operating free cash flow increased 4.2% to £42.9m (H1 2011: £41.2m). Operational capital expenditure includes maintenance of the existing customer capacity and equipment for new customer installations (for example, racks and cages).

In addition to operational capital expenditure, the Group spent £73.3m (H1 2011: £39.6m) on investment capital expenditure and a further £15.0m on landlord funded leasehold improvements. Such capital expenditure relates to the delivery of additional customer capacity through new data centres and expansion or enhancement of existing sites.

Cash inflows from financing activities totalled £44.0m (H1 2011: outflow £6.3m). Financing cash flows comprised net proceeds from borrowings of £41.8m (H1 2011: outflow £4.9m), proceeds from the issue of shares of £2.2m (H1 2011: £1.0m) and, in the prior period, costs incurred in extending the value and the term of the Group's senior debt facility of £2.5m.

The decrease in cash for the year was £1.4m (H1 2011: £4.8m) and before amounts relating to borrowings was £43.2m (H1 2011: £nil). This compares to an increase in net debt during the period of £39.3m (H1 2011: reduction £0.7m). The difference of £3.9m relates mainly to foreign exchange. At the period end, net debt was £203.3m (H1 2011: £56.1m).

The Group is in full compliance with its debt covenants, with significant headroom, and expects to remain so for the foreseeable future.

Balance sheet

The Group's intangible assets, which had a book value of £131.0m (H1 2011: £62.1m), comprised acquired customer contracts and goodwill. The increase was predominantly due to the acquisitions of Data Electronics and UK Grid during the second half of 2011, partially offset by amortisation and foreign exchange movements.

The carrying value of property, plant and equipment was £509.2m (H1 2011: £354.8m). Accounting additions of £97.8m (H1 2011: £43.4m) were made during the period, the difference from the cash capital expenditure above was due to the timing of payments. The depreciation charge for the period was £17.3m (H1 2011: £15.0m). As a significant proportion of the Group's capital assets are denominated in Euros, the relative strengthening of Sterling against the Euro since 31 December 2011 resulted in a decrease in the net book value of property, plant and equipment of £10.1m (H1 2011: £8.9m increase).

Current trade and other receivables were £27.3m (H1 2011: £21.2m) and increased in line with the growth in the business. The Group's trade receivables risk is significantly reduced as customers are generally billed, and pay, in advance of services being provided.

Current trade and other payables increased to £56.2m (H1 2011: £41.5m) again in line with the growth in the business.

Deferred income was £56.4m (H1 2011: £37.2m), split between current of £38.1m (H1 2011: £32.3m) and non-current of £18.3m (H1 2011: £4.9m) respectively. The balance increased due to the growth of the business and the deferral of a lease incentive that was received during the second half of 2011.

Provisions for other liabilities and charges were £7.1m (H1 2011: £5.5m), split between current of £0.9m (H1 2011: £1.0m) and non-current £6.1m (H1 2011: £4.6m) respectively. The increase relates to the reassessment of the provisions in respect of dilapidations and onerous leases performed at the previous year end.

Total equity

Equity shareholders' funds increased during the period by £25.4m to £323.5m and comprised total comprehensive income of £21.5m (H1 2011: £30.2m) and equity transactions of £3.9m (H1 2011: £2.6m).

Total comprehensive income comprised retained profits of £30.7m (H1 2011: £25.4m), amounts recorded directly in equity relating to currency translation reductions on the Group's foreign currency net investments of £7.7m (H1 2011: £4.8m increase) and a fair value decrease in the Group's cash flow hedges of £1.5m (H1 2011: £nil). The decrease in the Group's foreign currency net investments is due to the strengthening of Sterling against the Euro during the period.

Equity transactions comprise share-based payment credits and share issues. In accordance with accounting standards, the share-based payment expense, included within retained profits, of £1.7m (H1 2011: £1.6m) is added back to reserves. In addition, the Group received £2.2m (H1 2011: £1.0m) in respect of shares issued under the share option schemes.

Risk

The Group's operations expose it to a variety of risks. Effective management of these risks is essential to the delivery of the Group's business plans and strategic objectives, as well as maximising shareholder return. The Group's approach is focused on early identification of key risks, mitigating or removing those risks and responding quickly and effectively should a risk crystallise.

The Board has overall responsibility for ensuring that risk is appropriately managed across the Group. The Board is supported by the Risk Working Group ('RWG'), a committee comprising the executive Directors as well as other senior managers. The RWG meets regularly to consider all areas of risk, including operational, financial, environmental, reputational, strategic, technological, compliance and regulatory risks, to which the Group is exposed and appropriate steps are taken to reduce or eliminate the risks or mitigate their potential impact.

The Group's principal risks relate to the delivery and successful operation of existing and future capacity, pricing of the Group's revenues and costs and foreign exchange movements. A detailed review of the Group's risks and risk management at 31 December 2011 is contained on pages 26 to 28 of the Annual Report in respect of that year. Such risks are considered to remain relevant at the current period end and for the remaining six months of the financial year. No additional significant risks have been identified since 31 December 2011.

Summary

TelecityGroup has again delivered an excellent financial performance and returns whilst maintaining its strong and efficient financial base from which the Group can continue to grow in a controlled, sustainable and profitable manner.

 

 

Brian McArthur-Muscroft

Group Finance Director
6 August 2012



 

Consolidated income statement

 

Notes

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Revenue

5, 6

137,325

112,211

Cost of sales

5, 6

(58,691)

(48,675)

Gross profit

 

78,634

63,536

Sales and marketing costs

 

(5,368)

(4,255)

 Administrative costs analysed:

 

 

 

 Depreciation and amortisation charges

 

(19,232)

(15,998)

 Other administrative costs

 

(10,674)

(9,832)

Administrative costs

 

(29,906)

(25,830)

Operating profit

5, 6

43,360

33,451

Finance income

 

14

8

Finance costs

8

(3,025)

(2,448)

Other financing items

 

(272)

2,898

Profit on ordinary activities before taxation

 

40,077

33,909

Income tax charge

9

(9,398)

(8,525)

Profit for the period

 

30,679

25,384

Earnings per share:                          basic (p)

10

15.4

12.9

                                                               diluted (p)

10

15.1

12.6

Adjusted(1) earnings per share:     basic (p)

10

16.1

11.8

                                                               diluted (p)

10

15.8

11.6

(1) Adjusted as set out in note 5.

 

 

Consolidated statement of comprehensive income

 

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Profit for the period

30,679

25,384

Other comprehensive (expense)/income:

 

 

Currency translation differences on foreign currency net investments

(7,690)

4,826

Fair value movement on cash flow hedges net of tax

(1,481)

 3

Other comprehensive (expense)/income for the period net of tax

(9,171)

4,829

Total comprehensive income recognised in the period

21,508

30,213



 

Consolidated statement of changes in equity

 

Share
capital
£'000

Share premium account £'000

Retained earnings £'000

Own shares £'000

Cumulative translation reserve £'000

Total
£'000

At 1 January 2011

396

74,127

176,043

(3,083)

10,062

257,545

Profit for the period

-

-

25,384

-

-

25,384

Other comprehensive income:

 

 

 

 

 

 

Currency translation differences on foreign currency net investments

-

-

-

-

4,826

4,826

Fair value movement on cash flow hedges net of tax

-

-

3

-

-

3

Total comprehensive income for the period ended 30 June 2011

-

-

25,387

-

4,826

30,213

Transactions with owners:

 

 

 

 

 

 

Credit to equity for share-based payments

-

-

1,579

-

-

1,579

Issue of shares

1

726

-

295

-

1,022

 

1

726

1,579

295

-

2,601

At 30 June 2011

397

74,853

203,009

(2,788)

14,888

290,359

At 1 January 2012

398

75,852

221,713

(2,160)

2,224

298,027

Profit for the period

-

-

30,679

-

-

30,679

Other comprehensive income:

 

 

 

 

 

 

Currency translation differences on foreign currency net investments

-

-

-

-

(7,690)

(7,690)

Fair value movement on cash flow hedges net of tax

-

-

(1,481)

-

-

(1,481)

Total comprehensive income for the period ended 30 June 2012

-

-

29,198

-

(7,690)

21,508

Transactions with owners:

 

 

 

 

 

 

Credit to equity for share-based payments

-

-

1,695

-

-

1,695

Purchase of own shares by EBT

-

-

-

(100)

-

(100)

Issue of shares

4

1,208

-

1,111

-

2,323

 

4

1,208

1,695

1,011

-

3,918

At 30 June 2012

402

77,060

252,606

(1,149)

(5,466)

323,453



 

Consolidated balance sheet

 

Notes

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

131,029

135,760

62,108

Property, plant and equipment

11

509,202

438,875

354,778

Deferred income taxes

 

4,926

5,933

5,905

Trade and other receivables

 

1,207

1,126

2,975

 

 

646,364

581,694

425,766

Current assets

 

 

 

 

Trade and other receivables

 

27,276

26,365

21,168

Cash and cash equivalents

 

20,380

22,033

19,291

 

 

47,656

48,398

40,459

Total assets

6

694,020

630,092

466,225

Equity

 

 

 

 

Share capital

13

402

398

397

Share premium account

 

77,060

75,852

74,853

Retained earnings

 

252,606

221,713

203,009

Own shares

 

(1,149)

(2,160)

(2,788)

Cumulative translation reserve

 

(5,466)

2,224

14,888

Total equity

 

323,453

298,027

290,359

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred income

 

18,272

19,579

4,911

Borrowings

12

221,169

183,451

74,955

Derivative financial instruments

 

2,348

856

672

Provisions for other liabilities and charges

 

6,148

6,870

4,583

Deferred income taxes

 

14,192

18,026

6,357

 

 

262,129

228,782

91,478

Current liabilities

 

 

 

 

Trade and other payables

 

56,192

57,935

41,523

Deferred income

 

38,107

35,071

32,313

Current income tax liabilities

 

9,776

6,385

8,527

Borrowings

12

2,526

2,551

410

Derivative financial instruments

 

912

452

662

Provisions for other liabilities and charges

 

925

889

953

 

 

108,438

103,283

84,388

Total liabilities

6

370,567

332,065

175,866

Total equity and liabilities

 

694,020

630,092

466,225



 

Consolidated cash flow statement

 

Notes

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Cash flows from operations

14

63,777

55,936

Interest paid

 

(1,409)

 (1,864)

Interest received

 

18

8

Interest element of finance lease payments

 

(265)

(21)

Taxation paid

 

(8,416)

(2,445)

Cash inflow from operating activities

 

53,705

51,614

Purchase of operational property, plant and equipment

 

(10,829)

(10,448)

Operating free cash flows

 

42,876

41,166

Cash flows from investing activities

 

 

 

Purchase of investment related property, plant and equipment

 

(73,303)

(39,608)

Purchase of landlord funded leasehold improvements

 

(15,000)

-

Net cash used in investing activities

 

(88,303)

(39,608)

Cash flows from financing activities

 

 

 

Net proceeds on issue of ordinary share capital

13

2,223

1,022

Amounts paid in respect of costs relating to refinancing

 

-

(2,500)

Net proceeds from/(repayment of) borrowings

 

41,765

(4,851)

Net cash inflow/(outflow) from financing activities

 

43,988

(6,329)

Net decrease in cash and cash equivalents

 

(1,439)

(4,771)

Effects of foreign exchange rate change

 

(214)

(300)

Cash and cash equivalents at beginning of period

 

22,033

24,362

Cash and cash equivalents at end of period

 

20,380

19,291

 

Reconciliation of consolidated net debt

 

Notes

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Decrease in cash and cash equivalents

 

(1,439)

(4,771)

Cash (inflow)/outflow from movement in debt

 

(41,765)

4,851

Movement in deferred debt arrangement fees

 

(827)

1,912

Other non-cash movements in net debt

 

550

91

Change in net debt

 

(43,481)

2,083

Effects of foreign exchange rate change

 

4,135

(1,376)

Movement  in net debt in period

 

(39,346)

707

Net debt at beginning of period

 

(163,969)

(56,781)

Net debt at end of period

12

(203,315)

(56,074)



 

Notes to the condensed financial statements

1. General information

The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is Masters House, 107 Hammersmith Road, London W14 0QH.

The Company is listed on the London Stock Exchange.

This half year financial report, which comprises the Operational Review, the Financial Review, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Reconciliation of Consolidated Net Debt and notes 1 to 17 to the condensed financial statements, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011 were approved by the Board of Directors on 10 February 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498(2) or (3) of the Companies Act 2006.

This half year financial report has been reviewed, not audited.

The Directors of Telecity Group plc are listed in the Telecity Group plc Annual Report for 31 December 2011. A list of current directors is maintained on the Telecity Group plc website: www.telecitygroup.com.

2. Basis of preparation and Directors' Responsibility Statement

The Directors confirm that this half year financial report for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting', as adopted by the European Union. It should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRS as adopted by the European Union. As required by DTR 4.2.7 and DTR 4.2.8, the half year financial report includes a fair review of important events that have occurred, any material related party transactions during the period, and a description of the principal risks and uncertainties for the remaining six months of the financial year.

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.

This half year financial report, including the responsibility statement above made in accordance with DTR 4.2.10 (1), was approved on behalf of the Board by Michael Tobin and Brian McArthur-Muscroft on 6 August 2012.

3. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2011.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to the expected total annual earnings.

IFRS 9, 'Financial instruments', addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. However, the standard has not yet been endorsed by the EU. When adopted, the standard is not expected to have a material effect on the Group's results.

4. Estimates

The preparation of half year financial report 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 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 2011.



 

5. Presentation of adjusted results

The Group presents adjusted results in addition to the statutory results as the Directors consider it provides a useful additional measure of performance. A reconciliation between the two is given below:

 

Six months ended 30 June 2012

Six months ended 30 June 2011

 

Adjusted £'000

Adjustments £'000

Statutory total
£'000

Adjusted £'000

Adjustments £'000

Statutory total
£'000

Revenue

137,325

-

137,325

112,211

-

112,211

Cost of sales

(58,691)

-

(58,691)

(48,675)

-

(48,675)

Gross profit

78,634

-

78,634

63,536

-

63,536

 Depreciation charges

(17,320)

-

(17,320)

(15,046)

-

(15,046)

 Amortisation charges(1)

-

(1,912)

(1,912)

-

(952)

(952)

 Operating expenses

(16,042)

-

(16,042)

(14,087)

-

(14,087)

Total operating costs

(33,362)

(1,912)

(35,274)

(29,133)

(952)

(30,085)

Operating profit

45,272

(1,912)

43,360

34,403

(952)

33,451

Finance income

14

-

14

8

-

8

Finance costs

(3,025)

-

(3,025)

(2,448)

-

(2,448)

Other financing items(2)

-

(272)

(272)

-

2,898

2,898

Profit before tax

42,261

(2,184)

40,077

31,963

1,946

33,909

Income tax charge(3)

(10,115)

717

(9,398)

(8,691)

166

(8,525)

Profit for the year

32,146

(1,467)

30,679

23,272

2,112

25,384

Supplementary non-statutory information

 

 

 

 

 

 

EBITDA

62,592

-

62,592

49,449

-

49,449

Depreciation charges

(17,320)

-

(17,320)

(15,046)

-

(15,046)

EBITA

45,272

-

45,272

34,403

-

34,403

Amortisation charges

-

(1,912)

(1,912)

-

(952)

(952)

Operating profit

45,272

(1,912)

43,360

34,403

(952)

33,451

(1) Amortisation charges are excluded from the Group's adjusted results as is emerging practice for high growth companies.

(2) Other financing items for the current period comprise foreign exchange movements on the Group's financing items and are not considered to be related to the underlying performance of the Group.

(3) The tax effect of the above items is also removed from the adjusted results.



 

6. Segmental information

The chief operating decision-maker has been identified as the Board of Directors (the 'Board'). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Board sets a unified strategy for the Group, however for reporting purposes considers the business from a geographic perspective and principally assesses the performance of the UK and the Rest of Europe. When further detail is required the results of individual countries are reviewed.

The Group derives its revenue from the provision of colocation and related services in France, Germany, Ireland, Italy, the Netherlands, Sweden and the United Kingdom. Due to similarities in services, customers, regulatory environment and economic characteristics across the countries in which the Group operates, the Group aggregates certain segments in order to provide more meaningful analysis.

The Board assesses the performance of the operating segments based primarily on Key Performance Indicators ('KPIs') which are set out in this note. These KPIs have been chosen because they are considered to be useful indicators of the Group's performance. Other information provided to the Board is measured in a manner consistent with that in the condensed financial statements.

Certain assets and liabilities, for example cash deposits and bank borrowings, are managed on a central basis and as such have not been allocated to individual segments.

 

Six months ended 30 June 2012

Six months ended 30 June 2011

Summary income statement

UK
£'000

Rest of Europe
£'000

Total
£'000

UK
£'000

Rest of Europe
£'000

Total
£'000

Revenue

67,791

69,534

137,325

56,353

55,858

112,211

Cost of sales

(31,054)

(27,637)

(58,691)

(25,567)

(23,108)

(48,675)

Gross profit

36,737

41,897

78,634

30,786

32,750

63,536

Depreciation and amortisation charges

(7,996)

(11,236)

(19,232)

(7,016)

(8,982)

(15,998)

Operating expenses

(6,744)

(9,298)

(16,042)

(6,007)

(8,080)

(14,087)

Operating profit

21,997

21,363

43,360

17,763

15,688

33,451

Finance income

 

 

14

 

 

8

Finance costs

 

 

(3,025)

 

 

(2,448)

Other financing items

 

 

(272)

 

 

2,898

Profit before tax

 

 

40,077

 

 

33,909

Income tax charge

 

 

(9,398)

 

 

(8,525)

Profit for the period

 

 

30,679

 

 

25,384

 

 

 

 

 

 

 

Supplementary non-statutory information

 

 

 

 

 

 

EBITDA

29,993

32,599

62,592

24,779

24,670

49,449

Depreciation and amortisation charges

(7,996)

(11,236)

(19,232)

(7,016)

(8,982)

(15,998)

Operating profit

21,997

21,363

43,360

17,763

15,688

33,451

Summary assets and liabilities

 

 

 

 

 

 

Segment assets

284,247

378,528

662,775

204,969

238,824

443,793

Unallocated assets

 

 

31,245

 

 

22,432

Total assets

 

 

694,020

 

 

466,225

Segment liabilities

(85,624)

(51,035)

(136,659)

(45,806)

(43,009)

(88,815)

Unallocated liabilities

 

 

(233,908)

 

 

(87,051)

Total liabilities

 

 

(370,567)

 

 

(175,866)

Additions to property, plant and equipment

44,661

53,099

97,760

30,701

12,692

43,393

 



 

 

 

Six months ended 30 June 2012

Six months ended 30 June 2011

KPIs

UK

Rest of Europe

Total

UK

Rest of Europe

Total

Available customer power (MW)

30

46

76

25

34

59

Fitted-out space (sq.m)

32,100

44,000

76,100

29,600

36,300

65,900

Announced customer power (MW)

57

67

124

55

57

112

Occupancy (%)

88.0

76.5

81.3

90.1

72.4

80.3

Revenue (£'000)

67,791

69,534

137,325

56,353

55,858

112,211

EBITDA (£'000)

29,993

32,599

62,592

24,779

24,670

49,449

Revenue per sq.m(1) (£/sq.m)

4,805

4,233

4,497

4,264

4,321

4,292

Adjusted EPS (p)

 

 

15.8

 

 

11.6

Return on capital employed (%)

 

 

17.4

 

 

19.4

(1)  Calculated as the annualised revenue  for the period divided by the average occupied space during the period.

 

 

7. Expenses by nature

 

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Power costs

19,489

15,959

Property costs

18,816

15,126

Staff costs

21,176

18,029

Other costs

15,252

13,648

Depreciation and amortisation charges

19,232

15,998

 

93,965

78,760

Other costs comprise operational maintenance costs, sales and administrative costs and cost of sales of services

 

 

8. Finance costs

 

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Interest payable on long-term loan

3,963

2,124

Interest payable on finance leases

265

21

Amortisation of loan issue costs

827

589

Gross cost of borrowings

5,055

2,734

Less interest capitalised

(2,734)

(1,369)

Net cost of borrowings

2,321

1,365

Loan commitment fees

432

817

Unwinding of discounts in respect of onerous leases

87

140

Other

185

126

 

3,025

2,448

 



 

9. Income taxes

The income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual adjusted tax rate for the year ending 31 December 2012 is approximately 24%. In accordance with IAS 34, the tax effect of exceptional or one-off items has not been included in the calculation of the estimated average annual tax rate.

 

10. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Adjusted earnings per share is calculated on the same basis but uses the adjusted profit attributable to equity holders of the Company.

The adjusted earnings per share is presented as the Directors consider it provides an additional indication of the underlying performance of the Group. Adjusted profit for the period is calculated as shown in note 5.

 

Six months ended
30 June 2012
Basic

Six months ended
30 June 2011
Basic

Six months ended
30 June 2012
Adjusted

Six months ended
30 June 2011
Adjusted

Profit for the period (£'000)

30,679

25,384

32,146

23,272

Weighted average number of shares in issue ('000)

199,533

196,504

199,533

196,504

Earnings per share (p)

15.4

12.9

16.1

11.8

Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, adjusted for the weighted average effect of share options outstanding during the period.

Diluted adjusted earnings per share is calculated on the same basis but uses the adjusted profit attributable to equity holders of the Company.

 

Six months ended
30 June 2012
Basic diluted

Six months ended
30 June 2011
Basic
diluted

Six months ended
30 June 2012 Adjusted diluted

Six months ended
30 June 2011 Adjusted diluted

Profit for the period (£'000)

30,679

25,384

32,146

23,272

Weighted average diluted number of shares in issue ('000)

203,317

201,241

203,317

201,241

Diluted earnings per share (p)

15.1

12.6

15.8

11.6

 



 

11. Property, plant and equipment

 

Assets in the course of construction £'000

Freehold land and buildings £'000

Leasehold improvements £'000

Plant and machinery £'000

Office equipment £'000

Total
£'000

Cost

 

 

 

 

 

 

At 1 January 2011

48,961

-

186,114

244,476

7,848

487,399

Exchange differences

1,904

-

7,526

4,477

184

14,091

Additions

26,618

-

5,449

11,120

206

43,393

Disposals

-

-

(31)

(425)

(105)

(561)

At 30 June 2011

77,483

-

199,058

259,648

8,133

544,322

At 1 January 2012

99,328

3,700

220,062

307,307

7,682

638,079

Exchange differences

(1,587)

(149)

(7,798)

(5,308)

(158)

(15,000)

Additions

77,294

-

4,460

15,678

328

97,760

Transfers

(52,133)

-

27,037

25,096

-

-

Disposals

-

-

(1,039)

-

(52)

(1,091)

At 30 June 2012

122,902

3,551

242,722

342,773

7,800

719,748

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 January 2011

-

-

67,567

95,373

6,627

169,567

Exchange differences

-

-

2,472

2,598

149

5,219

Charge for the period

-

-

6,173

8,262

611

15,046

Disposals

-

-

(6)

(177)

(105)

(288)

At 30 June 2011

-

-

76,206

106,056

7,282

189,544

At 1 January 2012

-

15

68,642

124,696

5,851

199,204

Exchange differences

-

(8)

(2,318)

(2,400)

(131)

(4,857)

Charge for the period

-

19

7,567

9,422

279

17,287

Disposals

-

-

(1,038)

-

(50)

(1,088)

At 30 June 2012

-

26

72,853

131,718

5,949

210,546

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 30 June 2012

122,902

3,525

169,869

211,055

1,851

509,202

At 31 December 2011

99,328

3,685

151,420

182,611

1,831

438,875

At 30 June 2011

77,483

-

122,852

153,592

851

354,778

The Group had capital commitments in respect of in progress projects at the period end of £21,808,000 (31 December 2011: £43,030,000; 30 June 2011: £11,548,000).

The net book value of assets held under finance leases at 30 June 2012 was £13,642,000 (31 December 2011: £10,811,000; 30 June 2011: £527,000).

Included within additions to assets in the course of construction for the period are capitalised finance and other costs (principally rent and rates incurred during the construction or commissioning phase) in respect of the Group's new data centres, totalling £2,734,000 and £2,348,000 respectively (H1 2011: £1,369,000 and £958,000).



 

12. Borrowings

Borrowings comprise bank borrowings and obligations under finance leases. Bank borrowings relate to the Group's senior debt facility and comprise a term loan of £50,000,000 and amounts drawn under a revolving credit facility. 

 

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Current

 

 

 

Bank borrowings

-

550

206

Obligations under finance leases

2,526

2,001

204

 

2,526

2,551

410

Non-current

 

 

 

Bank borrowings

210,904

174,676

74,287

Obligations under finance leases

10,265

8,775

668

 

221,169

183,451

74,955

Total borrowings

223,695

186,002

75,365

The maturity profile of borrowings is set out below:

 

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Within one year

2,526

2,551

410

In one to two years

2,526

2,001

204

In two to three years

18,514

9,989

204

In three to four years

201,900

17,982

16,191

In four to five years

2,343

157,803

64,403

After five years

1,897

2,373

-

 

229,706

192,699

81,412

Less future interest and unamortised debt issue costs

(6,011)

(6,697)

(6,047)

 

223,695

186,002

75,365

The Group pays LIBOR (or equivalent based on currency) plus a margin on its borrowings. The Group uses interest rate swaps to fix the LIBOR, or equivalent, rate it pays on its borrowings. The split of borrowings between fixed and variable is shown below:

 

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Fixed rate borrowings

210,286

117,658

72,987

Variable rate borrowings

19,420

75,041

8,425

 

229,706

192,699

81,412

Percentage of bank borrowings at fixed rate

91.5%

61.1%

89.7%

The Group's net debt comprises:

 

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Cash and cash equivalents

20,380

22,033

19,291

Current borrowings

(2,526)

(2,551)

(410)

Non-current borrowings

(221,169)

(183,451)

(74,955)

Net debt

(203,315)

(163,969)

(56,074)

 



 

The Group has undrawn committed loan facilities at the period end as shown below:

 

30 June 2012
£'000

31 December 2011
£'000

30 June 2011
£'000

Senior debt facility

300,000

300,000

300,000

Finance lease facility

22,500

22,500

22,500

Gross borrowings drawn

(229,706)

(192,699)

(81,412)

Rental guarantees issued under senior debt facility

(5,471)

(5,508)

(8,202)

Undrawn committed loan facility

87,323

124,293

232,886

 

13. Share capital

The allotted share capital of the Company is shown below:

 

Number
'000

Value
£'000

At 30 June 2011

198,428

397

Shares issued under share option schemes

464

1

At 31 December 2011

198,892

398

Shares issued under share option schemes

1,885

4

At 30 June 2012

200,777

402

Each ordinary share carries one vote at general meetings.

During the period 1,885,000 new shares were issued by the Company for total consideration of £1,213,000.

In the addition to the issue of new shares during the period, 607,000 shares were issued from the Company's Employee Benefit Trust for total consideration of £1,010,000.

 

14. Cash flows from operations

Reconciliation of profit on ordinary activities before taxation to cash flows from operations:

 

Six months ended
30 June 2012
£'000

Six months ended
30 June 2011
£'000

Profit on ordinary activities before taxation

40,077

33,909

Add finance costs

3,025

2,448

Less finance income

(14)

(8)

Add/(less) other financing items

272

(2,898)

Operating profit

43,360

33,451

Add depreciation charge

17,320

15,046

Add intangible asset amortisation

1,912

952

Movement in receivables

(2,142)

1,418

Movement in payables

202

120

Movement in deferred income

2,584

2,623

Movement in provisions

(458)

(458)

Loss on disposal of property, plant and equipment

3

273

Share-based payments

1,695

1,579

Exchange movement

(699)

932

Cash flows from operations

63,777

55,936

 



 

15. Contingent liabilities

Financial guarantees granted by the Group's banks in respect of operating leases amount to £5,471,000 at 30 June 2012 (31 December 2011: £5,508,000; 30 June 2011: £8,202,000). At 30 June 2011 the estimated discounted cost of reinstating leasehold properties at the end of leases in accordance with the lease contracts was not materially different from the balance disclosed in the 2011 Annual Report. Of this amount £1,557,000 (31 December 2011: £1,557,000; 30 June 2011: nil) is recorded within provisions. In accordance with the Group accounting policy, an amount is only recorded in the financial statements when it is considered probable that such liabilities will be incurred.

16. Post balance sheet events

On 6 August 2012, the Group acquired 100% of the share capital of Tenue Oy, a Finnish data centre operator, on a debt and cash free basis, for cash consideration of £3.7m. As part of the acquisition the Group incurred associated costs, including stamp duty, of approximately £0.4m. Tenue Oy was acquired from the management team of that company.

17. Related party transactions

There were no related party transactions, other than remuneration to key management, during the period.



 

Independent Review Report

Introduction

We have been engaged by the Company to review the condensed financial statements in the half year financial report for the six months ended 30 June 2012, which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the reconciliation of consolidated net debt and the related notes. We have read the other information contained in the half year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial statements.

Directors' responsibilities

The half year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed financial statements included in this half year financial report has been prepared in accordance with International Accounting Standard 34, 'Interim financial reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed financial statements in the half year financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed financial statements in the half year financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

PricewaterhouseCoopers LLP

Chartered Accountants
1 Embankment Place
London WC2N 6RH
6 August 2012

 


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