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Equant Announces Third Quarter 2002 Financial Highlights
-- Network Services Direct Revenues Grow by More Than 6
percent --
- Network Services Orders Continue at Recent Levels
- EBITDA of $46 Million
- Net Cash Position of $384 Million
AMSTERDAM (October 28, 2002) – Equant (New York Stock Exchange: ENT, Euronext
Paris: EQU) today announced financial highlights for the third quarter of 2002.
Commenting on Equant’s results, Didier Delepine, president and chief executive
officer, said: “The economic environment continues to be weak but we see good
levels of demand, especially for our IP based services. We are also seeing the
first signs that pricing has stabilized for our high-end solutions. Besides a
weaker economy our third quarter revenues have been impacted by a normal
seasonal pattern and should increase in the fourth quarter.
“Against this background we continue to deliver. Our Direct Sales revenue
growth of 6 percent is a reflection of the excellence both of our people and our
product offering. I am also pleased to say that the refocusing of our sales
effort earlier this year on integration services has halted the decline in this
revenue stream, which showed a 16 percent sequential increase in the quarter.
“Network Services order intake this quarter continues at recent levels and
brings our year to date order flow to $1.5 billion. Softness in demand due to
the economy has been offset somewhat by wins from distressed carriers. To date
we have some $124 million of wins from customers associated with Worldcom.
“We continue to control costs and are making plans for further cost reductions.
This quarter our gross margin improved, and while we have not finalized the
accounts we expect $46 million of EBITDA. This together with our continued close
management of capital expenditures and working capital means that our cash
position remains very strong.
“We make no changes to 2002 guidance.”
Orders
Total order intake for Network Services was in line with the performance shown
in recent quarters. During the third quarter of 2002, 75 major international
corporations placed orders in excess of $1 million each with the Company.
Contracts announced during the quarter included EurotaxGlass, Credit Lyonnais
Securities Asia, Wessanen and Sylvania Lighting.
Since July 1, the Company has won 45 bids with an estimated order value of $124
million, from customers associated with WorldCom including multi-million dollar
wins from a major European electronics company and a U.S.- based media company.
Revenues
The company’s revenues this quarter were $731 million, a net decrease of 3.9
percent compared with the third quarter of 2001.
Network Services revenues of $388 million were essentially flat compared with
the third quarter of 2001. There was a 6.2 percent increase in revenues from our
multi national customer base serviced by our direct sales force, with increases
in all regions. The increase in direct sales was broadly offset by a 15.0
percent decrease from indirect channels, where two of our key indirect channels,
Deutsche Telekom and Sprint, reported revenue declines year over year.
Revenues from Integration Services were 4.6 percent below the third quarter of
2001 but increased sequentially by 16.2 percent. This increase was mainly driven
by fulfillment revenues.
Revenues from Other Services were 15.1 percent below the revenues recorded in
the third quarter 2001, although broadly in line with the second quarter of
2002. The decrease primarily reflects a reduction in affiliation fees as a
result of agreements reached in the second half of 2001 that changed the product
management agreements with France Telecom Transpac, in line with the principles
agreed at the time of the transaction.
Revenues from SITA declined 6.9 percent compared with the third quarter of 2001,
reflecting the lower pricing and revised minimum revenue commitments effective
July 1, 2002, the commencement of the second year of the new contractual
arrangements.
Revenues derived from the France Telecom Group, which are included above,
totaled $80 million in the third quarter.
Capital Expenditures and Cash
Capital expenditures in the quarter totaled $91 million compared with $160
million in the third quarter of 2001. Capital expenditures for the nine months
to September 30, 2002 totaled $267 million compared with the pro forma $541
million in the comparative 2001 period. These significant reductions are a
direct result of integration synergies and stringent controls on capital
expenditures. The Equant business model has always been customer driven and
capital is deployed on a just in time basis given the extensive existing network
in place. As part of the synergies, the Company has been able to redeploy
network equipment arising from the integration of the two networks.
On the basis of the Company’s current plans, capital expenditures for the full
year are expected to be below $400 million.
At September 30, 2002 the Company’s net cash and cash equivalents totaled $384
million, an increase of $11 million from December 31, 2001 although a reduction
of $42 million from the June 30, 2002 level. The cash position reflects the
Company’s focus on cost management, capital expenditures and working capital.
On the basis of current activity levels and the associated cash burn rates, and
without recourse to either France Telecom’s loan or any other source of
finance, the Company believes it will not require any additional funding before
2004.
Footnotes:
- Network Services (Indirect) refers to Radianz, Deutsche Telekom, Sprint,
France Telecom Transpac and other wholesale channels.
- Equant sold its Application Services division in October 2001. Therefore
its Q3 2001 revenues of $4.4 million have been excluded from the 2001
information.
- EBITDA: earnings before finance charges, income taxes, share plan costs,
non-recurring charges, depreciation and amortization.
- The pro forma information has been prepared, where information is
available, as if the France Telecom transaction, including the acquisition
of Global One, had occurred on January 1, 2001.
The Company will host a conference call for investors on October 29, 2002 at
7:30 am (EST) and 1:30 pm. (CET). The call can be accessed via the Equant web
site (www.equant.com) or by dialing +1
913-981-5519 in North America or +44-20-7984-7572 in Europe.
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