The Colt Group: To buy or sell, that is the question 10/11/10
Posted by Kevin Box on Wed, Nov 10, 2010 @ 07:02 AM
Six years ago The Times decided that the Colt Group was a share 
to sell. But what do they think now?
Since The Times now has a pay wall (which may have been a mistake) you probably won’t have seen that the Colt Group was discussed by them only last week.
History
The Colt Group was founded in 1992 by Jim Hynes, with funds provided by Fidelity Investments as City Of London Telecommunications. The company began to construct a telecoms network in London and, in 1993, was awarded a licence to compete with British Telecom and Cable & Wireless in voice and data transmission. The Colt Group was first listed on the London Stock Exchange in 1996 before its rapid growth made it a stock-market darling and carried it into the FTSE 100. At its March 2000 peak, the company was valued at £28 billion.
Then the bursting of the telecoms bubble slowed growth and devastated the Colt Group’s share price. In 2002, an American hedge fund tried to have the company put into administration, even though it had £1 billion of cash.
Now
The Colt Group is now reorganising itself to drive growth (a little late one would have thought but, with effect from early 2011, it intends to simplify the way it goes to market). The company will soon be organised into three new customer-facing units supported by two service units.
Looking Forward
The Colt Group expects to take an exceptional charge of approximately €35 - 40 million in 2010 to increase efficiencies amounting to approximately €35 million in a full year. Of these annual efficiency benefits, approximately 35% will be invested into new customer facing roles, providing recurring annual cost savings.
Looking Back
In 2004 the plan was for the Colt Group’s cash flow to become positive sometime in 2005, with enough revenue being generated to pay back all debt by 2009. That was planning for nearly five years away and, at that point, The Times said: “In this industry it’s hard enough to predict what will happen in the next six months, let alone in half a decade’s time.”
But it had been one of the best-performing companies in the FTSE 250 in 2003 and so The Times pondered was it a ‘buy’? After considering all the evidence, they concluded that, with a capitalisation of £1.85bn, it simply wasn’t a ‘buy’.
Fast Forward
So fast forward six years to the current day. Was The Times right to declare the Colt Group’s shares non-buy? The share price may be 120.80 p but that’s not the full story because they are also now capitalised at £1.08bn because of a rights issue in 2009, when they raised a further £178m to redeem their own bonds in a 31 for 100 issue. The results were 2005 loss £439m, 2006 profit £15.4m, 2007 profit £55.3m, 2008 profit £93.3m and 2009 profit £86.30m - an overall five year loss of £188.7m.
What Does The Times Think Now?
The Times only last week stated “that despite cost cutting and extensive restructuring this telecoms firm needs to display clearer signals that growth is on the horizon before investors start buying.” Colt is a Sell
Fast forward to 2015 anyone?
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