Sharewatch: Telecoms group’s gains running out of ammunition

Colt Telecom shares have doubled since January – but there are fears that further gains could be running out of ammunition after interim results this week. Figures for the six months to June 30 showed demand from its corporate telecoms customers had slowed more than expected as decisions on IT projects are delayed. The Luxembourg-
domiciled group reported second-quarter sales of €401.2m (£347m) and earnings before interest, tax, depreciation and amortisation (ebitda) of €79.1m. Analysts had forecast sales of about €417.8m and ebitda of €78.7m. Margins in data services remained strong, with managed services revenue rising 25.3 per cent to €36.1m. Its cash position is also healthy thanks to February’s capital raising. But Colt’s drastically lowered capital expenditure – down from €300m to €200-€250m – indicates it is preparing for a further slowdown. Having outperformed the telecoms market, the shares now trade on a prospective price/earnings ratio of 9 times, suggesting there is better value elsewhere.