Colt profits hot by tough market

Telecoms group Colt saw its stock plunge 28% today as tough market conditions forced it into a profits warning.

Telecoms group Colt saw its stock plunge 28% today as tough market conditions forced it into a profits warning.

The London-based firm blamed weak demand for data services which are more profitable than the other telecoms products it provides to the business sector.

Aggressive price cutting by competitors has resulted in slower growth in sales of its voice products, which include connections to premium-rate 0800 numbers.

Colt, which employs 1,000 staff at its head office in London and at network operations in Manchester and Birmingham, warned conditions were unlikely to improve during the rest of the year.

“Consequently Colt does not now believe it will meet market expectations for the quarter ended June 30 and the year ending December 31,” the company said.

Although revenues were likely to be ahead of a year ago, any improvement would come from less profitable ranges of telecoms products, such as voice phone calls.

President and chief executive Steve Akin said action was being taken to improve turnover and the development of new products at higher margins was ongoing.

“These initiatives are expected to have a positive impact in the longer term,” he said.

Efforts to bring in fresh expertise are being made while the company is also rethinking how it bids for contracts.

Responsibility for a trading revival at Colt will pass to former BT executive Jean-Yves Charlier later this year when Mr Akin steps down to return to private equity firm Fidelity.

Despite the recent trading downturn, Mr Akin said Colt was financially strong with £800m (€1.2bn) of cash in the bank.

Colt also remained on track to turn free cash flow positive on a sustainable basis next year – meaning it can generate enough money to run the business without incurring debt.

The profits warning dealt a blow to other stocks in the sector with shares in Thus weakening 8% and Kingston Communications down 4% today.

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