A pretty solid first year on the market it seems for Isle of Man monopoly telco Manx Telecom (MANX:AIM). You shouldn't be surprised, this was always going to be a big income paying steady eddie with a bit of growth on top, hopefully.
A couple of things stand out. Cash generation remains strong and, added to its IPO funds, net debt ha been slashed from £134 million to £54 million, about 61% of total equity, so not highly geared for an incumbant telco. There's also typically strong cash conversion, with operating cash flow of £29.1 million, comfortably paying for £13 million capital expenditure (capex), £2.1 million of pension contributions and, that all important £3.7 million of dividends.
'Final dividend of 6.6p, making 9.9p for the full year, representing a 7% yield on the IPO price of 142p,' says the company. The shares are largely unmoved today but at 186p that's a very decent 31% gain to date. Sadly for new shares buyers, the forward 2015 yield sits at a more modest 5.6%, based on Liberum's 10.4p per share payout estimate.
In theory, the core business should trundle steady along, its mainland data centres and communications solutions that will hopefully bring the growth part. So far, progress is mixed, solutions doing well (revenues up 22.8%) while data centres languish at a less impressive 2.3%. Still, things have got off to a better start this year it seems, securing additional work from a seemingly supportive local government.
'With a relatively amenable relationship with government and regulator coupled with the added benefit of a somewhat weaker competitive environment, the business remains an attractive investment proposition,' says Mike Roger's, analyst at IT and comms research consultancy Megabuyte.
Another things that's worth noting is mobile. Overall revenues fell 4.4% to £18.4 million, largely due to the impact of mobile termination rate declines. That said, having launched 4G services last year (seven months ahead of its closest competitor, Sure) Manx is bit by bit getting more customers to switch from pre-paid top-ups to monthly billing, or post-paid, where average revenue per user (ARPU) increased 5%.
'All key metrics are inline or ahead of expectations,' say Liberum analysts today, before noting cash conversion that 'underlines the ability of the business to generate a healthy yield and progressive dividend.'
'The valuation is not expensive with reference to the peer group and we maintain our 200p price target,' Liberum's Jason Holden and Andrew Bryant conclude.