for the quarter ended 31 march 2014:
- strong sales and installations performance, leading to recurring revenue growth in the quarter
- Continued improvement in gross profit, adjusted ebitda and proxy cash flow
- Based on strong trading performance, eunetworks anticipates revenue growth at or marginally above market growth in 2014
London, UNITED KINGDOM – 8 May 2014 – euNetworks Group Limited, a unique Western European provider of bandwidth infrastructure services, announced results for the three months ended 31 March 2014. The Group reported a strong sales performance for the quarter, making the last two quarters the most consistent period of sales success in the company’s history. Installations of services in Q1 2014 reflected this sales success, delivering the highest sustained period of new installations to date. This translated into recurring revenue growth, supporting the Group’s growth plans for 2014.
Recurring revenue was €24.5m in Q1 2014, in line with Q1 2013 and improving from Q4 2013. With a one-time sale of €0.9m in Q1 2014, total revenue was €25.4m, growing 2% from Q1 2013 and 6% from Q4 2013.
Within euNetworks’ revenue composition, Network services revenue grew 8% from Q1 2013 reflecting a growth rate higher than the expected market growth rate of 3-5%, (Analyst estimates) which indicates an increase in market share. Colocation revenues declined 20% in the same period, reflecting the large disconnections covered in previous releases. This also reflects euNetworks’ continued successful commercial focus on Dark Fibre, Wavelengths, Ethernet and the euTrade service portfolio.
Gross profit was €18.7m in Q1 2014, up 4% from Q1 2013 and increasing 6% from Q4 2013. Excluding the €0.7m gross profit on the one-time sale, gross profit was in line with Q1 2013. This is a function of the loss of Colocation, which represented gross profit of €2.9m in the quarter. Net of this, core Network gross profit growth was €15.8m. Gross margin reached 73.5% in the quarter, up from 72.4% in Q1 2013. The Company expects this trend to continue given the focus on selling on-net high bandwidth services. Average gross margin on new sales was 93% in Q1 2014.
Adjusted EBITDA was €6.5m in Q1 2014, increasing 14% from Q1 2013. Excluding a one-off benefit of €0.9m incurred in Q4 2013, Adjusted EBITDA in Q1 2014 was in line with Q4 2013. Capital expenditure was €6.8m in Q1 2014, 36% lower than in Q4 2013. This followed higher spend on network development projects in that period for which a portion of Q1 2014’s sales success can be attributed.
Capital expenditure was 89% higher in the quarter compared to Q1 2013.
Proxy cash flow was €(0.3)m in Q1 2014, down from €2.1m in Q1 2013 but improving from €(3.3)m in Q4 2013.
“The last two quarters have represented a strong improvement in the trading performance of the company,” said Brady Rafuse, Chief Executive Officer of euNetworks. “We believe we have a value proposition that our customers appreciate, with a service performance that is industry leading. Our strong sales performance and sustained installation of services through the quarter have driven growth and we are confident these trends will continue into Q2 2014 and beyond.”
“We wish to give our stakeholders greater visibility into how the business is performing and will perform in the future,” said Rafuse. “To do this we are now also reporting the lead metrics we use to manage our business and providing forward looking guidance for the balance of 2014. From Q2 2014 we will also commence conference calls with stakeholders to cover our results and outlook.”
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