colt group s.a. 2015 interim report · 24372-04 23-07-2015 proof 2 highlights headlines of first...

24372-04 23-07-2015 Proof 2

Colt Group S.A.2015 Interim Report

For the six months ended 30 June 2015

Stock code: COLT.L

Colt Interim Report 2015.indd 2 30/07/2015 16:36:29

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Highlights

Headlines of first half of 2015• On an underlying1 basis Colt Group revenue grew 0.2%, EBITDA

increased 5.6% and free cash flow improved €38.5m from H1 2014.

• Group revenue increased 2.6% from H1 2014. On a constant currency basis Group revenue declined 1.3% as the contribution of Colt Asia (formerly known as KVH) revenue was more than offset by our exit from low margin carrier voice trading contracts.

• Group EBITDA of €156.4m represented year on year growth of 7.6% (€11.0m). The contribution of Colt Asia EBITDA and benefits of the 2014 restructuring programme continued to offset the margin compression within Network Services. On a constant currency basis Group EBITDA grew 6.7%.

• Free cash improved materially with the outflow reducing from €29.1m in H1 2014 to €7.3m in H1 2015 due to improved EBITDA and working capital, and reductions in capital expenditure.

• As announced in June, to accelerate improved performance, the Group will focus on its Network, Voice and Data Centre Services, the “Core Business”, and exit IT Services.

• The Group recognised €128.4m of exceptional expenses during H1 2015 including a non-cash impairment expense of €87.1m in relation to the exit of IT Services, associated restructuring expenses of €32.2m, plus a €9.1m expense in relation to long term incentive schemes that vested under scheme rules as a result of the Fidelity share offer in June.

• Fidelity announced its intention to make an offer at a price of 190p in cash per share on 19 June 2015. The Offer process is ongoing and our EGM is set for 11 August.

Key information:

€ millions

Six months to 30 June Underlying1

2015 Unaudited

2014 Unaudited

Nominal Movement

B/(W)

Constant Currency

Movement B/(W)

2014 Unaudited

Underlying1

Underlying Constant Currency

Movement B/(W)

Group revenue 790.8 770.4 2.6% (1.3%) 756.6 0.2%Network Services 433.9 415.3 4.5% 0.2% 411.1 1.3%Voice Services 186.1 260.8 (28.7%) (31.8%) 180.7 (1.3%)Data Centre Services 57.5 56.8 1.3% (3.8%) 56.8 (3.8%)IT Services 33.3 37.5 (11.2%) (13.7%) 37.5 (13.7%)Colt Asia 80.0 — N/A N/A 70.5 8.9%EBITDA2 156.4 145.4 7.6% 6.7% 146.4 5.6%(Loss)/profit before tax3 (13.0) 13.6 (195.6%) (125.5%) N/A N/AFree cash outflow4 (7.3) (29.1) 74.9% N/A (45.8) N/ACapital expenditure (125.6) (137.5) 8.7% N/A (150.2) N/ANet funds5 73.3 167.1 (56.1%) N/A N/A N/A

1 2014 unaudited underlying performance includes Colt Asia pro-forma revenue and EBITDA. It removes the impact of low margin carrier voice contracts which we have since exited and non-recurring duct sales H1 2014 and excludes the effect of currency movements

2 EBITDA reflects profit before net finance costs and related foreign exchange, tax, depreciation, amortisation and exceptional items3 (Loss)/profit before tax is stated before exceptional items4 Free cash flow is net cash generated from operating activities less net cash used to purchase non-current assets and net finance costs paid5 Net funds reflects cash and cash equivalents

GovernanceHighlights IFC

Operating and Financial Review 01

FinancialsCondensed consolidated income statement (Unaudited) 06

Condensed consolidated statement of comprehensive income (Unaudited) 06

Condensed consolidated statement of financial position (Unaudited) 07

Condensed consolidated statement of changes in equity 08

Condensed consolidated statement of cash flows (Unaudited) 09

Notes to the condensed set of financial statements 10

APPENDIX 1 — Analysis of cash used in investing activities (capital expenditure) (Unaudited) 15

APPENDIX 2 — Constant currency analysis (Unaudited) 15

Contents


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Operating and Financial Review

Simon Haslam

Non-Executive Chairman

Rakesh Bhasin

Chief Executive Officer

Business overviewUnderlying progress of the business is demonstrated by looking at the 2014 reported numbers adjusted for inclusion of Colt Asia pro-forma (pre-acquisition) revenue and EBITDA, and removing the contribution of low margin carrier voice contracts (which we have since exited) and non-recurring duct sales. Underlying Group revenue grew 0.2% and underlying EBITDA increased 5.6%, primarily driven by cost savings and the 2014 restructuring programme. Underlying free cash outflow improved €38.5m from H1 2014.

In June we announced our new business plan to refocus the Company’s activities and accelerate the improvement of its performance. The development of the Business Plan preceded and is unrelated to the Offer announced by Fidelity on 19 June 2015 to acquire the shares in Colt not already owned by it. The Business Plan gives Colt greater focus on its core - Network, Voice and Data Centre Services, with a managed exit from IT Services. The fundamentals of our core Network Services and Voice Services businesses are solid and continue to improve. We have already initiated the implementation of the Business Plan.

As a result of our new business plan and as announced in June, the Group recognised €128.4m of exceptional expenses including a non-cash impairment expense of €87.1m in relation to the exit of IT Services and associated restructuring expenses of €32.2m. We expect to incur total restructuring expenses of €70-80m once the conditions to book the related provision are met. Of this €25m relates to restructuring in the Core business where we anticipate around €25m of annual savings, partially in 2015 and fully in 2016. We also incurred a €9.1m expense in relation to long term incentive schemes that vested under scheme rules as a result of the Fidelity Share Offer in June, rather than being spread over the remaining term of the relevant schemes had the Offer not been made.

In accordance with the guidance provided at 30 June 2015, the Core Business (excluding IT Services and exceptional items) posted revenue for the half year of €757.5m (2014: €732.9m) and free cash inflow of €7.7m (2014: outflow of €0.4m).

“ The decisions we have made over the last couple of years, including the acquisition of KVH, the reorganisation into the Lines of Business and go-to market alignment, are starting to deliver results. This places the business on a solid footing, with further improvements to come. Through the implementation of our new business plan, which we announced in June, we will continue to focus and simplify the organisation and we are confident we will deliver our recent guidance for the Core Business.”

www.colt.net Stock code: COLT.L 01

GOVERNANCE


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Financial review Group revenue grew 2.6% (declined 1.3% on a constant currency basis). The growth was principally due to the contribution of Colt Asia revenue and the positive impact of foreign exchange. EBITDA increased by 7.6% in the period due to the contribution from Colt Asia which more than offset the impact from regulated termination rate reductions and gross margin impact from product mix changes in Network Services. Group free cash outflow improved in the half by €21.8m year-on-year to €7.3m (H1 2014: net outflow of €29.1m) due to an increase in cash generated from operations driven by improved EBITDA, a reduced working capital outflow and lower capital expenditure. Foreign currency movements (primarily the strength of Sterling vs. Euro) positively affected revenue in H1 2015 by €30.6m.

The Group incurred exceptional expenses of €128.4m during H1 2015 as noted above.

RevenueGroup revenue for the first half of 2014 was €790.8m (H1 2014: €770.4m) a 2.6% increase over H1 2014 mainly due to currency movements, with the contribution of Colt Asia revenue offset by our exit from low margin carrier voice trading. Details of the financial performance by line of business are presented further below. In summary nominal terms: Network Services revenue grew 4.5% to €433.9m (H1 2014: €415.3m); Voice Services revenue decreased by 28.7% to €186.1m (H1 2014: €260.8m); Data Centre Services grew 1.3% to €57.5m in H1 2015 (H1 2014: €56.8m); IT Services revenue decreased 11.2% to €33.3m in H1 2015 (H1 2014: €37.5m) and Colt Asia contributed €80.0m to revenue compared to pro-forma (pre-acquisition by Colt) H1 2014 revenue of €70.5m.

Cost of sales and gross profit (before exceptional items) Gross profit (before exceptional items) increased 5.8% to €205.6m during the period (H1 2014: €194.3m). As a percentage of revenue, gross profit before exceptional items increased to 26.0% (H1 2014: 25.2%) primarily due to the inclusion of Colt Asia results in H1 2015 and the exit from low margin carrier voice trading. This growth was partially offset by regulatory driven termination rate reductions in Voice Services, increased use of lower margin third party networks (off-net connections) in Network Services and €22.6m higher infrastructure depreciation in the period driven by Colt Asia.

Operating expenses (before exceptional items) Operating expenses (before exceptional items) of €217.0m (H1 2014: €186.2m) increased 16.5% (€30.8m) due to the inclusion of Colt Asia and the effects of foreign currency movements, principally Sterling based costs. This offset savings in selling, general and administrative expenses from our workforce transformation and cost control programmes.

EBITDA (before exceptional items) Group EBITDA increased 7.6% to €156.4m (H1 2014: €145.4m) due to the contribution of Colt Asia EBITDA and cost saving measures, including restructuring, partially offset by lower EBITDA from Network Services.

(Loss)/profit before tax (before exceptional items)There was a loss before tax and before exceptional items of €13.0m in H1 2015 (H1 2014: profit of €13.6m), with the movement due to the inclusion of Colt Asia results, foreign currency movements and incremental depreciation.

Exceptional itemsThe Group incurred exceptional expenses of €128.4m during H1 2015 as noted above.

TaxationThe Group recognised a tax expense of €3.0m in H1 2015 (H1 2014: €2.8m). The current tax expense arose in jurisdictions where we cannot fully offset income against accumulated tax benefit carried forward. The Group continues to recognise a deferred tax asset because it is probable future taxable income will arise to utilise the asset.

(Loss)/profit after taxThere was a loss after tax before exceptional items of €16.0m in H1 2015 (H1 2014: profit of €10.8m), with the movement due to the inclusion of Colt Asia results and negative impact of foreign currency translation and revaluation. Including the 2015 exceptional restructuring expense of €128.4m, the loss after tax increased to €144.4m in H1 2015 (H1 2014: profit of €2.4m).

Free cash flowFree cash flow remains a core focus of the business. The free cash outflow of €7.3m in H1 2015 was an improvement on the €29.1m outflow of the first half of last year. Net cash generated from operating activities (excluding restructuring payments) increased by €19.5m (16.9%) to €134.7m (H1 2014: €115.2m). This was aided by €9.1m reduced working capital outflow compared to H1 2014. As usual, the first half working capital outflow included our normal annual outflows for staff bonuses and prepayments for network capacity and IT support.

Net capital expenditure of €125.6m in H1 2015 was €11.9m (8.7%) lower than H1 2014 (€137.5m). The main movements were lower spend on our internal investments across Colt and higher investment in our data centre capacity as well as Colt Asia capex.

Statement of financial positionNon-current assets decreased €53.1m to €1,694.5m (31 December 2014: €1,747.6m) mainly due to the IT Services exceptional impairment charge in the period partially offset by the impact of foreign exchange gains arising on translation of non-Euro denominated operations. The

Operating and Financial Reviewcontinued

Colt Group S.A. Interim Report 201502


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movement in net working capital balances, comprising receivables, payables and provisions, is discussed in the cash flow section above. Net cash and deposits of €73.3m decreased €4.1m compared to 2014 year end, reflecting the net cash outflow for the period. Shareholders’ funds decreased €67.4m in H1 2015, as the loss for the period was partially offset by exchange gains on translation of foreign operations for the period.

Revolving credit facilityThe €150.0m revolving credit facility put in place in August 2014 has an initial three year term. We can request a one-year extension to the facility at the end of years one and two, giving a total term of five years. Under the agreement, notice of an extension request has to be given 30 days prior to the anniversary date of the facility. Given the potential impact of the Fidelity bid on the future funding needs of the business, we sought, and have been granted an extension to the end of September to the notice period for requesting the extension (which is at the lenders’ discretion).

Business reviewNetwork ServicesColt provides data connectivity products and services from simple broadband access to complex managed networking solutions to support businesses and wholesale carriers across Europe, Asia and North America. Our services are dedicated to business and wholesale customers so our network investment is focused on the cities and information hubs (such as business parks, financial districts and major data centres) where our customers do business. Our network addresses the connectivity needs of the SME to the multinational through a combination of local access and international breadth.

Revenue of €433.9m increased 4.5% compared to prior year (€415.3m). Managed Network revenue grew by 11.5% (€16.7m) and Bandwidth Services (excluding legacy SDH bandwidth) 3.1% (€7.4m). This was partially countered by the continued decline in legacy SDH bandwidth revenue, contracting 15.9% year-on-year (€5.5m) in the first half of 2015. We expect the decline in SDH business to continue but with a slowing absolute rate of decline as revenue from this product continues to be phased out. On an underlying constant currency basis, excluding non-recurring duct sales, total Network Services revenue increased by €5.2m (1.3%).

EBITDA declined 2.1% to €114.8m (H1 2014: €117.3m) mainly as a result of the non-recurring 2014 duct sale, with the continued margin pressures due to changing revenue mix largely compensated by the benefits of currency movements and ongoing cost efficiency programmes. On an underlying constant currency basis EBITDA increased €0.8m (0.7%).

Voice ServicesColt delivers reliable carrier and enterprise grade voice services with a focus on customers in Western Europe and, through our recent acquisition of Colt Asia. We provide traditional telephony services as

well as VoIP to both enterprises and service providers (carriers, cloud service providers).

External Voice revenue declined by 28.7% (€74.7m) to €186.1m (H1 2014: €260.8m). The decline was driven by a 54.9% (€74.9m) reduction in Wholesale Voice revenue. In Q1 2014 we announced our withdrawal from low margin carrier voice trading contracts to free up network capacity for higher margin Enterprise Voice business. Accordingly, Wholesale Voice revenue reduced from €136.5m in H1 2014 to €61.6m in H1 2015. On an underlying constant currency basis total Voice revenue declined 1.3%.

Voice Services EBITDA increased by 0.6% (€0.2m) to €26.3m (H1 2014: €26.1m). The majority of this margin improvement was driven by positive foreign currency impacts which offset the impact of regulatory termination rate price declines (€6.0m). On an underlying constant currency basis total Voice EBITDA increased €2.8m (12.6%).

Data Centre ServicesColt Data Centre Services offers colocation and value added data centre services in secure, carrier neutral facilities across Europe and Asia.

Data Centre Services revenue grew 1.3% (€0.7m) to €57.5m (H1 2014: €56.8m) in the half year, consisting wholly of colocation revenue. This weaker growth performance was due to ceased sales of ftec data halls and salesforce vacancies in key markets in the period. EBITDA decreased 8.2% (€1.2m) to €13.5m (H1 2014: €14.7m) reflecting higher fixed costs in the period.

IT ServicesIn June 2015 we announced that we would be exiting our IT Services business over the next two to three years to focus on our core infrastructure and asset based activities. We will continue to honour existing customer contracts through to termination, but will no longer seek new business. The operations of the business will be streamlined accordingly over three years.

IT Services revenue for H1 2015 declined by 11.2% (€4.2m) to €33.3m (H1 2014: €37.5m) due to lower equipment sales. IT Services generated an EBITDA loss of €7.7m, an improvement of €4.9m from H1 2014 which was driven by lower personnel costs.

Colt AsiaIn December 2014 we completed the acquisition of Colt Asia, an infrastructure-based service provider of network and data centres across Asian cities, with headquarters in Tokyo and additional operations in Hong Kong, Seoul and Singapore, strengthening Colt’s position as a global provider of Network, Voice and Data Centre Services.

Colt Asia contributed €80.0m to revenue and €9.5m to EBITDA in the first half of 2015. Colt Asia pro-forma (pre-acquisition by Colt) revenue and EBITDA for the same period last year were €70.5m and €9.2m respectively.



GOVERNANCE


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Trading outlook In accordance with the guidance provided in our 30 June 2015 announcement, management is targeting for the Group to deliver Core Business revenues in a range of €1,500m to €1,520m in 2015, and in a range of €1,500m to €1,530m in 2016, and positive free cash flow for the Core Business in a range of €70m to €80m for full year 2015, improving to a range of €100m to €120m in 2016.

Going concernAs stated in note 1 to the condensed financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Recent offer by FidelityFidelity first approached the independent directors of Colt with a proposal to acquire the remaining shares in Colt in April 2015. Following discussions with the independent directors of Colt and certain shareholders, Fidelity announced on 19 June 2015 its intention to make an offer at a price of 190p in cash per share. The Offer Document and Circular Announcement were posted to shareholders by Fidelity on 9 July with the Response Circular posted to shareholders by Colt on 17 July. An EGM has been convened by Colt for the 11 August 2015 for shareholders to vote on resolutions in connection with the offer. Depository Interest Holders register votes are due on 6 August. Proxies for ordinary shareholders are due on 7 August.

Principal risks and uncertaintiesColt has processes for identifying, evaluating and managing the principal risks and uncertainties faced by the Group. The risk assessment process is updated at least annually and the Group has a detailed risk management process which identifies the key risks and uncertainties it faces. These risks and uncertainties continue to be: global and regional economic conditions; technical faults and outages; changes in laws and regulation; security of Colt’s infrastructure and IT systems; Colt’s ability to provide a high level of customer service; changes in technology within the industry; maintaining business critical processes in shared service centres; and reliance on certain suppliers.

Some or all of the above risks have the potential to impact our results or financial position during the remaining six months of the financial year. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the year ended 31 December 2014. Further details of these key risks and uncertainties can be found on pages 31 to 34 of the 2014 Annual Report which is available from the Colt website (www.colt.net).

Responsibility statementThe Directors confirm that to the best of our knowledge:

a. this condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union, including a description of significant events and transactions during the period;

b. the interim management report herein includes a fair review of the information required by DTR 4.2.7R (indication of important events during the six months and description of principal risks and uncertainties for the remaining six months of the year);

c. the interim management report includes a fair review of DTR 4.2.8R (disclosure of related parties’ transactions and changes therein); and

d. the highlights, business overview, financial review and business review include a fair review of the information required under Article 4(2)(c) of the Luxembourg Transparency Law of 11 January 2008.

By order of the Board

Rakesh Bhasin / Chief Executive Officer 30 July 2015

Hugo Eales / Chief Financial Officer 30 July 2015




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Forward looking statementsThis report contains ‘forward looking statements’ including statements concerning plans, future events or performance and underlying assumptions and other statements which are other than statements of historical fact. Colt Group S.A., ‘the Group’, wishes to caution readers that any such forward looking statements are not guarantees of future performance and certain important factors could in the future affect the Group’s actual results and could cause the Group’s actual results for future periods to differ materially from those expressed in any forward looking statement made by or on behalf of the Group. These include, among others, the following: (i) any adverse change in regulations and technology within the IT services and communications industries, (ii) the Group’s ability to manage its growth, (iii) the nature of the competition that the Group will encounter and wider economic conditions including economic downturns, (iv) unforeseen operational or technical problems and (v) the Group’s ability to raise capital. The Group undertakes no obligation to release publicly the results of any revision to these forward looking statements that may be made to reflect errors or circumstances that occur after the date hereof.

EnquiriesInvestor Relations: Morten Singleton DDI: +44 (0)20 7863 5314 Mobile: +44 (0)7535 445159 Email: [email protected]

Press: Helen Toft DDI: +44 (0)20 7039 2420 Mobile: +44 (0)7855 301078 Email: [email protected]



GOVERNANCE


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Condensed consolidated income statement (Unaudited)

Six months ended 30 June2015 2014

Before exceptional

items€m

Exceptional items

€m

After exceptional

items€m

Before exceptional

items€m

Exceptional items

€m

After exceptional

items€m

Revenue 790.8 — 790.8 770.4 — 770.4 Cost of salesInterconnect and network expenses (452.9) (17.7) (470.6) (466.4) (3.5) (469.9)Infrastructure depreciation (132.3) (64.2) (196.5) (109.7) -- (109.7)

(585.2) (81.9) (667.1) (576.1) (3.5) (579.6)Gross profit 205.6 (81.9) 123.7 194.3 (3.5) 190.8 Operating expensesSelling, general and administrative (181.5) (23.6) (205.1) (158.6) (4.9) (163.5)Other depreciation and amortisation (35.5) (22.9) (58.4) (27.6) — (27.6)

(217.0) (46.5) (263.5) (186.2) (4.9) (191.1)Operating (loss)/profit (11.4) (128.4) (139.8) 8.1 (8.4) (0.3)

Other income (expense)Finance income — — — 0.2 — 0.2 Finance costs (3.6) — (3.6) (0.5) — (0.5)Net foreign exchange gain arising on finance activities 2.0 — 2.0 5.8 — 5.8

(1.6) — (1.6) 5.5 — 5.5

(Loss)/profit before taxation (13.0) (128.4) (141.4) 13.6 (8.4) 5.2 Taxation (3.0) — (3.0) (2.8) — (2.8)(Loss)/profit for the period (16.0) (128.4) (144.4) 10.8 (8.4) 2.4

Basic and diluted (loss)/earnings per share (€ 0.02) (€ 0.16) € 0.01 € 0.00

Condensed consolidated statement of comprehensive income (Unaudited)

Six months ended 30 June

2015€m

2014€m

(Loss)/profit for the period (144.4) 2.4 Items that may be reclassified subsequently to the income statement:Exchange gain differences on translation of foreign operations 74.9 19.7Total recognised comprehensive (loss)/income for the period (69.5) 22.1

The basis on which this information has been prepared is described in note 1 to this financial information.



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€m

At 30June2015

At 31December

2014

At 30June2014

ASSETSNon-current assetsIntangible assets 199.5 231.0 180.0 Property, plant and equipment 1,429.9 1,455.3 1,322.4 Deferred tax assets 65.1 61.3 60.4 Total non-current assets 1,694.5 1,747.6 1,562.8

Current assetsTrade and other receivables 308.0 302.4 270.8 Cash and cash equivalents 73.3 77.4 167.1 Total current assets 381.3 379.8 437.9 Total assets 2,075.8 2,127.4 2,000.7

EQUITYCapital and reservesShare capital and share premium 1,408.8 1,407.1 1,406.9 Other reserves (84.2) (159.5) (177.9)Retained earnings 127.9 272.3 305.3 Total equity 1,452.5 1,519.9 1,534.3

LIABILITIESNon-current liabilitiesFinance lease liabilities 40.5 39.1 —Provisions for other liabilities and charges 59.0 44.9 16.5 Other payables 1.0 4.1 3.0 Post employment benefits 25.3 22.9 5.3 Deferred tax liabilities — — 0.1 Total non-current liabilities 125.8 111.0 24.9

Current liabilitiesTrade and other payables 455.8 461.8 417.2 Current tax liabilities 9.9 9.3 8.4 Finance lease liabilities 2.2 1.8 —Provisions for other liabilities and charges 29.6 23.6 15.9 Total current liabilities 497.5 496.5 441.5

Total liabilities 623.3 607.5 466.4 Total equity and liabilities 2,075.8 2,127.4 2,000.7

The financial statements on pages 6 to 14 were approved by the Board of Directors on 30 July 2015 and were authorised on its behalf by

Hugo Eales / Chief Financial Officer Rakesh Bhasin / Chief Executive Officer

Condensed consolidated statement of financial position (Unaudited)


FINANCIALS


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Condensed consolidated statement of changes in equity (Unaudited)

€m

Share capital and share premium

Other reserves*

Retained profit

Total equity

At 31 December 2013 1,405.5 (197.3) 302.9 1,511.1 Profit for the period — — 2.4 2.4 Shares issued in the period 1.4 (1.4) — —Share plan credit — 1.1 — 1.1 Exchange gain differences on translation of foreign operations — 19.7 — 19.7 At 30 June 2014 1,406.9 (177.9) 305.3 1,534.3

At 31 December 2014 1,407.1 (159.5) 272.3 1,519.9 Loss for the period — — (144.4) (144.4)Shares issued in the period 1.7 (1.0) — 0.7 Share plan credit — 1.4 — 1.4 Exchange gain differences on translation of foreign operations — 74.9 — 74.9 At 30 June 2015 1,408.8 (84.2) 127.9 1,452.5

* Other reserves include shares to be issued, translation reserves and other reserves which were disclosed separately in the 2014 Annual Report.



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Condensed consolidated statement of cash flows (Unaudited)

Six months ended30 June

2015€m

2014 €m

Net cash generated from operating activities 120.9 108.3

Cash flows from investing activities:Purchase of intangible assets and property, plant and equipment (125.9) (137.7)Proceeds from the disposal of intangible assets and property, plant and equipment 0.3 0.2 Acquisition of subsidiary net of cash — (0.3)Finance income received 0.3 0.2 Net cash used in investing activities (125.3) (137.6)

Cash flows from financing activities:Finance costs paid (2.9) (0.1)Net cash used generated in financing activities (2.9) (0.1)

Net movement in cash and cash equivalents (7.3) (29.4)Cash and cash equivalents at beginning of period 77.4 195.6 Effect of exchange rate changes on cash and cash equivalents 3.2 0.9 Cash and cash equivalents at end of period 73.3 167.1


FINANCIALS


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Notes to the condensed set of financial statements

1. Basis of preparation and principal accounting policiesColt Group S.A. (“Colt S.A” or “the Company”), together with its subsidiaries, is referred to as “the Group”. Condensed consolidated financial statements have been presented for the Group for the six months ended 30 June 2015.

The financial information for the six months ended 30 June 2015 is unaudited and does not constitute consolidated financial statements within the meaning of Luxembourg company law of 19 December 2002.

The condensed set of financial statements for the Group has been prepared in accordance with International Accounting Standard 34 (IAS 34) “Interim Financial Reporting”, as adopted by the European Union. The financial information should be read in conjunction with the Group’s consolidated financial statements for the year ended 31 December 2014, prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial statements except for the standards and amendments that are effective for accounting periods beginning on 1 January 2015 that are disclosed on page 93 of the Group’s 2014 Annual Report. The impact of these amendments is not material.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period no less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

The Group’s operations are not generally subject to significant seasonal or cyclical variations.

2. Segmental informationThe Group is managed around its five lines of business: Network Services, Voice Services, Data Centre Services, IT Services and Colt Asia. Colt’s five lines of business correspond to its reportable segments in line with the information reported to its chief operating decision maker, the Board of Directors.

Network Services revenue includes managed networking and bandwidth services. Voice Services revenue comprises services including the transmission of voice, data or video through a switching centre and voice traffic which is delivered in a digital form (IP Voice). Data Centre Services incorporates retail and wholesale colocation and sales of our modular data centres. IT Services embraces hosting, storage and cloud network services. Colt Asia comprises integrated communications and IT management solutions. The line of business revenue includes internal revenue which represents recharges between the lines of business.

The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as EBITDA in Colt’s management reporting system. EBITDA is profit before net finance costs, tax, depreciation, amortisation, foreign exchange and exceptional items. Line of business EBITDA includes all directly attributable costs and the recharge of shared operating costs from Corporate and Shared Services functions and sales organisation. The bases used to recharge these costs may be further refined in the future.

The Group has a large customer base and no undue reliance on any one major customer, therefore no such related revenue is required to be disclosed by IFRS 8.

The accounting policies adopted by each segment are described in note 1.



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Notes to the condensed set of financial statements continued

For the six months ended 30 June 2015 and 30 June 2014, revenue and EBITDA by reportable segment were as follows:Six months ended 30 June 2015

€mNetwork Services

Voice Services

Data Centre Services

IT Services

Colt Asia Consolidated

Total segment revenue 437.4 186.1 61.0 33.3 81.7 799.5 Internal revenue (3.5) — (3.5) — (1.7) (8.7)External revenue 433.9 186.1 57.5 33.3 80.0 790.8 EBITDA 114.8 26.3 13.5 (7.7) 9.5 156.4

Six months ended 30 June 2014*

€mNetwork Services

Voice Services

Data Centre Services

IT Services

Colt Asia Consolidated

Total segment revenue 418.3 260.8 60.1 37.5 — 776.7 Internal revenue (3.0) — (3.3) — — (6.3)External revenue 415.3 260.8 56.8 37.5 — 770.4 EBITDA 117.3 26.1 14.7 (12.7) — 145.4

* Certain lines of business revenue and EBITDA figures have been restated to ensure comparability between periods as we refined allocation bases.

Assets and liabilities are not reported by segment to the chief operating decision-maker therefore are not disclosed in this note.

3. Earnings per shareSix months ended

30 June2015 2014

Basic weighted average number of ordinary shares (m) 896.7 894.6Dilutive ordinary shares from share options (m)† 0.2 5.3Diluted weighted average number of ordinary shares (m) 896.9 899.9

Before exceptional items(Loss)/profit for the year before exceptional items (€m) (16.0) 10.8 Basic (loss)/earnings per share (€ 0.02) € 0.01Diluted (loss)/earnings per share (€ 0.02) € 0.01

After exceptional items(Loss)/profit for the year after exceptional items (€m) (144.4) 2.4 Basic (loss)/earnings per share (€ 0.16) € 0.00Diluted (loss)/earnings per share (€ 0.16) € 0.00

† Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.


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24372-04 23-07-2015 Proof 2

Notes to the condensed set of financial statementscontinued

4. Exceptional itemsThe Group recognised €128.4m of exceptional expenses during H1 2015 including a non-cash impairment expense of €87.1m in relation to the exit of IT Services, associated restructuring expenses of €32.2m, plus a €9.1m expense in relation to long term incentive schemes that vested under scheme rules as a result of the Fidelity Share Offer in June.

In June 2015, Colt announced the decision to exit IT Services over the next two to three years in order to allow increased focus on its core Network Services, Voice Services and Data Centre Services businesses. The Group recognised exceptional expenses in relation to the associated restructuring programme (€32.2m) and a non-cash impairment expense against our IT Services line of business (€87.1m). Of the €32.2m restructuring expense, €14.8m was recognised in cost of sales and the remaining €17.4m in operating expenses. Of the €87.1m impairment expense, €64.2m was recognised in cost of sales and the remaining €22.9m in operating expenses.

Of the €9.1m exceptional expense recognised in relation to the automatic vesting of long term incentive schemes, €2.9m was recognised in cost of sales and the remaining €6.2m in operating expenses.

During April 2014, Colt announced a reorganisation of its business resulting in workforce restructuring actions. The Company incurred an exceptional expense of €8.4m in the period to 30 June 2014 associated with the costs of implementing these plans. Of the €6.9m restructuring cash payments (see Note 6) made during the period, €2.0m were made in relation to the above restructuring announced in 2014, with the balance related to the restructuring program commenced at the end of 2012.

5. Analysis of cash and cash equivalentsSix months ended

30 June2015

€m 2014

€m

Net movement in cash and cash equivalents (7.3) (29.4)Other non-cash movements 3.2 0.9 Net movement in cash and cash equivalents (4.1) (28.5)Opening cash and cash equivalents 77.4 195.6 Closing cash and cash equivalents 73.3 167.1

Analysed in the statement of financial position:Cash and cash equivalents 73.3 167.1



24372-04 23-07-2015 Proof 2


6. Reconciliation of profit for the period to net cash generated from operations and free cash outflow

Six months ended30 June

2015€m

2014 €m

(Loss)/profit for the period (before exceptional items) (16.0) 10.8 Taxation charge 3.0 2.8 Net foreign exchange gain arising on financing activities (2.0) (5.8)Finance costs 3.6 0.5 Finance income — (0.2)Depreciation and amortisation 167.8 137.3 EBITDA1 156.4 145.4 Other non-cash items 2.6 1.1 Income taxes paid (2.4) (2.2)Movement in receivables 10.2 9.6 Movement in payables (29.8) (38.3)Movement in provisions (excluding restructuring payments) (2.3) (0.4)Restructuring payments (13.8) (6.9)Net cash generated from operations 120.9 108.3 Finance costs paid (2.9) (0.1)Finance income received 0.3 0.2 Net capital expenditure (125.6) (137.5)Free cash outflow2 (7.3) (29.1)

1 EBITDA is profit for the period before net finance costs and related foreign exchange, tax, depreciation, amortisation and exceptional items

2 Free cash flow is net cash generated from operating activities less net cash used to purchase non-current assets and net finance costs paid

7. Transactions with related partiesRelated parties as a result of holding shares in the GroupDuring the six months ended 30 June 2015, an amount of €3.7m was billed to FIL and its subsidiaries for Network, Voice, Data and IT Services (H1 2014: €3.5m) and an outstanding balance of €0.2m (H1 2014: €0.7m) was payable to Colt. An amount of €2.0m was paid to FMR in relation to land and buildings rented from an FMR subsidiary. At 30 June 2015 an outstanding balance of €39.0m was due to FMR in relation to a finance lease.

The Group periodically places funds with FIL in unsecured money market mutual funds. At 30 June 2015, the Group placed €2.5m with FIL (H1 2014: €4.4m).

8. Acquisition of subsidiariesThinkGridIn March 2015, the Group paid €0.2m (H1 2014: €0.3m) of the contingent consideration in relation to the 2012 acquisition of ThinkGrid.


FINANCIALS


24372-04 23-07-2015 Proof 2


9. Contingent consideration liabilitySix months ended

30 June2015

€m 2014

€m

As at 1 January 0.4 1.5 Settlement (see note 8) (0.2) (0.3)Exchange differences recognised in translation reserve 0.1 (0.1)As at 30 June 0.3 1.1

The fair value of the contingent consideration in relation to the acquisition of ThinkGrid in 2012 was €0.3m (31 December 2014: €1.1m) as at 30 June 2015. The amount is expected to be settled in 2015 and has not been discounted due to immateriality. The 2014 amount assumed a discount rate of 4.0%. This financial liability has a Level 3 fair value hierarchy as the future payments were contingent on the ThinkGrid business achieving contractually agreed financial and non-financial targets.

10. Capital and other financial commitmentsSix months ended

30 June2015

€m2014

€m

Contracts placed for future plant and equipment capital expenditure not provided for in the financial statements 45.3 37.5



24372-04 23-07-2015 Proof 2

APPENDIX 1 — Analysis of cash used in investing activities (capital expenditure) (Unaudited)An analysis of cash capital expenditure1 within the Group’s consolidated cash flow statement for the six months ended 30 June 2015, compared to the six months ended 30 June 2014, is shown below:

€mSix months ended 30 June

2015 2014 Movement

Customer order related 83.7 84.0 (0.3)Data centre services expansion 17.6 8.7 8.9 Network expansion 2.2 3.7 (1.5)Product and services development 3.3 13.6 (10.3)

23.1 26.0 (2.9)

Internal IT/Operations infrastructure 8.4 19.8 (11.4)DCS infrastructure 5.3 5.3 (0.0)Other 5.1 2.4 2.7 Total 125.6 137.5 (11.9)

1 The categories shown above may further be refined in the future.

APPENDIX 2 — Constant currency analysis (Unaudited)An analysis of revenue and EBITDA for the six months ended 30 June 2015, compared to the six months ended 30 June 2014 after excluding the impact of foreign exchange, is shown below:

Revenue

Six months ended 30 June

2015€m

20142

€m

% Movement

Actual Business

Foreignexchange

impact3

Network Services 433.9 415.3 4.5% 0.2% 4.3%Voice Services 186.1 260.8 (28.7%) (31.8%) 3.1%Data Centre Services 57.5 56.8 1.3% (3.8%) 5.1%IT Services 33.3 37.5 (11.2%) (13.7%) 2.5%Colt Asia 80.0 — — — —Total revenue 790.8 770.4 2.6% (1.3%) 3.9%EBITDA 156.4 145.4 7.6% 6.7% 0.9%

2 Certain lines of business revenue and EBITDA figures have been restated to ensure comparability between periods as we refined allocation bases.3 The foreign exchange impact has been calculated by retranslating non-Euro revenue and EBITDA in the prior period to the current month’s average exchange rate. The most significant

exchange impact on the reported results come from the 11.2% strengthening of the Sterling against the Euro impacting revenue over the last year.


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24372-04 23-07-2015 Proof 2

Colt Group S.A.Beaufort House15 St. Botolph StreetLondonEC3A 7QN

Tel: +44 (0) 20 7390 39000 3900www.colt.net

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