Colt has approved a new business plan that will put greater focus on the company’s core businesses, namely Network, Voice and Data Centre Services, with a managed exit from IT Services. Cost transformations across the group will also continue to be a key strategic focus, with Colt looking to reduce the number of senior executives in order to simplify and streamline operations.
The European carrier has been working on the plan since the beginning of the year; it has now been given a provisional approval by its management board. The plan, which is unrelated to the recent buy-out offer by Fidelity, will be put into effect as quickly as possible.
The Business Plan is expected bring cash one-off expenses of EUR 45-55 million and a non-cash impairment charge of around EUR 90 million. There will also be an exceptional restructuring cost of EUR 25 million relating to the Core Business. Savings are seen at EUR 25 million per year, reflected in Core Business EBITDA partially this year and fully next year.
Trading is still expected in line with expectations for the second quarter; results will be reported before the end of July. Colt is guiding for a free cash flow for its Core Business of EUR 70-80 million for 2015 and of EUR 100-120 million for 2016, including all restructuring exceptionals and cash outflows.
The main thrust of the plan is the focus on core businesses. Colt said the fundamentals of its core Network Services and Voice Services businesses are solid and continue to improve.
The company will continue to drive improvement at Data Centre Services through a better use of assets, with specific growth programmes on dark fibre, high speed circuits between data centres, wireless backhaul and cloud access. A sales team has been formed to sell into the existing estate of connected buildings. Colt is conducting a detailed review of the business to identify the best structure and positioning. A detailed review is also being conducted for KVH (Colt Asia), with integration remaining on track. Voice Services was able to successfully withdraw from low margin carrier voice trading contracts last year. It will now look to drive margins higher through its existing product portfolio.
Meanwhile, Colt will stage a controlled exit from IT Services, which it said would need considerable investment in the short-to-medium term in order to deliver profitability. Colt does not believe the business can compete and grow successfully with an acceptable level of risk. The company will make its exit over the next two to three years, while honouring existing customer contracts through to termination. It will no longer seek new business.
The total plan is unrelated to Fidelity’s buy-out offer. Colt directors took account the prospects of Colt when responding to the offer terms. For its part, Fidelity has confirmed its offer takes into account the Business Plan.
