KeyTech Earnings For Year Ended March 2016
In a filing with the Bermuda Stock Exchange [BSX], KeyTech Limited announced results for the fiscal year ended March 31, 2016, with the consolidated loss from operations being $2.4 million.
In May of this year, the Company completed its transaction with ATN International, Inc., whereby the Company acquired all Bermuda Digital Communications [CellOne] and $41.6 million in cash in exchange for a 51% interest in the Company’s shares.
“From an operational standpoint, the ATN transaction brings together our Logic and CellOne businesses in Bermuda,” said Amaral. “It also strengthened our balance sheet and provided the financial foundation to continue investing in the business and improve the value proposition to the customer.
“By the end of the year we intend to launch a unified customer brand, thereby opening the door for competitive offers that will include next generation wireless, internet, home-phone and television services. To capitalize on the opportunities ahead, we are revamping our operations to better serve our residential and business clients.
The filing stated:
The KeyTech Group of Companies today announced results for the fiscal year ended March 31, 2016. For the year the consolidated loss from operations was $2.4 million.
This loss from operations was primarily the result of an impairment of assets of $4.3 million in the current year as further discussed below and one-time staff termination charges of $1.4 million.
Earnings before interest, depreciation, amortization and one time charges for the period was $22.5 million compared with $ 3.3 million in the prior year, an increase of $19.2 million. Consolidated revenue for the period was $89.3 million compared with $66.9 million in the prior year, an increase of $22.4 million.
An operating loss of $1.1 million [adjusted for one-time charges] relates to increased operations and maintenance costs, depreciation and amortization and government taxes, primarily due to consolidating an entire twelve months of results of Bermuda CableVision, the Company’s Bermuda TV business, compared to seven months of consolidation in the prior year.
The increase in March 31, 2016 revenues was due to the acquisition of BOTCAT, the Cayman TV business and Bermuda CableVision, in September 2014 and the realization of a full year of earnings. In addition, data revenues have grown both in Bermuda and Cayman organically and through acquisition. Our bundled internet access and voice service has allowed the Company to improve market share in addition to consumers purchasing higher bandwidth solutions.
“Consistent with the past, our strategy has been to strengthen market position through investment in networks and service delivery,” said Frank Amaral, Chief Executive Officer of KeyTech.
“During the past year, we focused our efforts on implementing operational efficiencies around several transactions recently completed and are optimistic that these synergies will start to reflect positively in operating results for the 2016/2017 period.
“While much of the year was dedicated to closing and integrating transactions, our team was also hard at work to design and launch new service offerings to improve our value proposition to customers. We expect to expand on these improvements as we adapt the Company to the ever-changing competitive landscape in Bermuda and Cayman, and pass on technology advances to our customers.”
In May of this year, the Company completed its transaction with ATN International, Inc. [“ATN”], whereby the Company acquired all of the ownership of Bermuda Digital Communications, Ltd. [“CellOne”] and $41.6 million in cash in exchange for a 51% interest in the Company’s shares [the “ATN transaction”].
While the ATN transaction valued KeyTech shares higher than the market trading value of between $3.25 and $3.50 per share on the Bermuda Stock Exchange at the time of closing, the valuation was lower than the Company’s historical book value, triggering the requirement for a review of the carrying value of assets under International Financial Reporting Standards [“IFRS”].
Following that review, management concluded, under IFRS, that the initial offer received by ATN related to the transaction should have been considered in the selection of appropriate market participant assumptions in management’s impairment considerations as at March 31, 2015.
Following consideration of the ATN offer, including the timing of available information, management concluded that an impairment or write-down of carrying value of the assets was necessary, resulting in a need to restate 2014/2015 results and to record an accounting impairment charge of $85.6 million in the 2014/2015 period and $4.3 million in the 2015/2016 period.
The 2015/16 audited financial statements supersede previously reported results relating to the fiscal year 2014/15, specifically September 30, 2014 and 2015 and March 31, 2015 reported financial statements. The Company expects to book a gain of approximately $20.0 to $25.0 million in its 2016/2017 reporting period based on preliminary estimates of fair value of the Company’s acquisition of the remaining 57% of CellOne. The Company began fully consolidating CellOne’s results on May 3, 2016.
“From an operational standpoint, the ATN transaction brings together our Logic and CellOne businesses in Bermuda,” said Amaral. “It also strengthened our balance sheet and provided the financial foundation to continue investing in the business and improve the value proposition to the customer.
“By the end of the year we intend to launch a unified customer brand, thereby opening the door for competitive offers that will include next generation wireless, internet, home-phone and television services. To capitalize on the opportunities ahead, we are revamping our operations to better serve our residential and business clients.
“We are making substantial investments in fiber infrastructure and advanced capabilities throughout our networks in Bermuda and Cayman so that we can better serve homes and businesses. This transaction and subsequent restatement of financial results allows us to better reflect the value of the Company and better recognize and measure the positive effects of the merger going forward.”
Operating expenses were $96.2 million for the period compared with the restated prior year of $165.5 million. The prior year includes an impairment charge of $85.6 million.
KeyTech’s share of income in associates for the period, including its investments in CellOne prior to the merger transaction and Quo Vadis Holding Ltd., was $6.9 million compared to $7.1 million in the prior period. KeyTech reduced its long term debt by $6.4 million during the reporting period and retired all of its subordinated debt of $24.7 million on May 3, 2016.
In the 2015/2016 year, there were no regular dividends declared. There was a one-time dividend of $0.75 per share as part of the ATN transaction that was declared and paid after the reporting period. Earnings per share for continuing operations for the period ending March 31, 2016 amounted to a loss of $0.15 compared with a loss of $6.54 in the same period last year.
Notice of the 2016 Annual General Meeting and related materials will be provided to shareholders prior to the end of the month.
