Manx Telecom (LON:MANX)

Share price: 196.5p (+0.5%)
No. shares: 113m
Market cap: £222m

Final Results

Fairly stable results at Manx, the main broadband/communications company on the Isle of Man.

  • Revenue up 1.5%, £80.8 million.
  • Underlying EBITDA flat at £27.7 million.
  • Underlying PBT flat at £16.3 million (reported PBT £8.8 million).

The profit result is flat on an underlying basis, but on a reported basis, quite a few elements have hit the result: 

  • revaluation of interest rate swaps (£1.2 million loss)
  • Transformation programme (£4.3 million)
  • Property revaluation (£1.3 million)
  • Acquisition costs (£0.2 million)
  • Impairment of equipment (£0.5 million).

Last year, the company's reported PBT was higher than underlying PBT, lending credibility to the argument that the deductions above are indeed one-off events.

The Transformation Programme is "aimed at improving competitiveness and the customer experience" - I can understand why companies internally will set budgets for these sorts of programmes and will want to look at them separately to the underlying profit result for the year. But from an investor point of view, programmes like this do tend to crop up at many companies from time to time, and it's hard to think of them as truly exceptional.

Final Dividend: 7.2p, up from 6.9p. Combined with the prior interim divi, the yield is 5.5%.

My opinion

Seems a very reasonable proposition to me, as far as utilities go.

It has 95% market share in the fixed line network, despite having opened its fixed line product on a wholesale basis to competitors.

Turnover is gently increasing with a variety of non-core and potentially UK-wide services offering some opportunities for growth and innovation (data centre revenue is declining, but special SIM card revenue is growing and offsetting this).

The exceptional costs are worth studying, in particular the Transformation Programme which is set to cost £10 million in total over two years (of which £4.3 million already charged to profits).

Utility shares are never going to be 100-baggers, but are just a relatively safe source of income for investors - they have more in common with high-yield bonds and REITs than conventional equities.

Heavy investment requirements and predictable revenues make them the perfect borrowers, and indeed Manx has net debt of £52 million, which looks manageable.

Possibly worth looking at for long-term income, in my book.

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