euNetworks Reports Steady Growth, Consolidates Shares

May 9th, 2013 by · 1 Comment

The independent European metro operator euNetworks continued its steady upward trends in both revenue and EBITDA with today's report.  They've also been setting up their balance sheet for the next phase.  Yesterday they announced the raising of up to €45M in term loans that is earmarked for further organic and inorganic growth opportunities, and today they consolidated their share count.  Here's a quick table of their numbers in context:

 in millions of €  Q1/12 Q2/12 Q3/12 Q4/12 Q1/13
Revenue 23.0 23.2 24.1 24.5 24.8
Gross margin 66.5% 67.1% 67.1% 71.2% 72.4%
Adj EBITDA 2.1 2.5 3.3 5.1 5.7
Adj EBITDA margin 9.1% 10.8% 13.7% 20.8% 23.0%
Capital Expenditures 8.1 8.2 6.4 5.0 3.6
Churn 1.3% 1.2% 1.7% 1.7% 1.2%
On-net buildings 701 790 853 912 945

Trends: Revenues have been growing a bit slower in the past two quarters, although the upward trend is still very much intact and contrasts well with declining telecom revenues for the continents largest providers.  Greater scale and a favorable mix of high margin new sales mean that EBITDA margins have continued to rise, now reaching 23%.  Capex was lower this quarter, but the company expects this to go back up in subsequent quarters - especially if they put much of their new funding to work on organic growth.  Churn was down nicely, but there is another legacy colo disconnect coming next quarter.

Share Consolidation - euNetworks took the opportunity to reconfigure another legacy piece of its balance sheet: the mind-boggling 22.55B shares outstanding.  With a 50:1 share consolidation, a.k.a. reverse split, they're cutting that to about 450M shares, which will definitely make their share count in Singapore rather more in-line with others listed there.  It will move their stock price out of the penny stock range, better reflecting where their business is now.  Reverse splits get a bad rap, but it's a matter of whether it's done from a position of strength or weakness -- and euNetworks' position has been getting steadily stronger for years now.

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Categories: Financials · Mergers and Acquisitions · Metro fiber

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