Independent Telecoms outperforms its forecast as profits increase to £500,000

Independent Telecoms Group (ITG), the first company to receive a share listing on the DCM, has outperformed its profit forecast. Preliminary results show a rise in pre-tax profit from £77,000 to £500,000 in the year ended April 30th 1997, or £20,000 higher - representing 4 per cent - than the forecast made in May when its shares were listed.

ITG's core business involves the sale and maintenance of communications equipment, mainly telephone systems and computer hardware. Asked how ITG was able to record a profit of exactly £500,000, the managing director, Mr John Nagle, said it "looks like a manufactured figure, but that is exactly how it came out". Sales rose by 70 per cent from £3,250,000 to £5,526,000. ITG is planning further strong growth, he said. In the past four years there was an annual compound growth of 57 per cent in sales.

While making no specific forecasts, he said growth should continue at a similar rate. "The strategy for the group is to increase its market share and maximise the significant opportunities for further growth, both organic and acquisition driven, which we believe exist". Asked if any takeover talks are taking place, he noted the group had acquired three companies in the past four years and "this trend is not going to change".

No dividends are being paid, as indicated at the time of flotation. Dividend payments will be made "as soon as the company is strong enough", he said. The company, he noted, is at the early stages of its development as a quoted group. However, he suggested that dividend payments could be looked at in about two years time.

ITG's financial ratios are in good shape. Operating margins amount to 11.5 per cent, the interest cover is 4.8 and there was a 75.3 per cent return on equity. The gearing was a substantial 350 per cent but the flotation with the placing of new shares to raise £1.76 million occurred after the year end and gearing is now 70 per cent.

The plan is to bring this down further, Mr Nagle said. A cash flow statement shows net cash flow of £249,000 from operations but, after capital expenditure and interest, there was a fall of £413,000. However, the proceeds from the placing will enhance the cash flow prospects.

In addition, Mr Nagle, who has a 43.3 per cent stake in ITG, noted that the new payphone division, developed in the middle of last year, will generate substantial cash flow, around £1 million, this year. The division installs and manages payphones on private clients' sites. In a further development of this business, it has exercised an option to acquire Coin and Card Technology (Irl), which has the rights to install 20 on-street payphones in the central Dublin area.

Reviewing the latest results, the chairman, Mr Paschal Taggart, said Telecom Eireann's decision to substantially cut telephone costs over the next three years led to its telecommunications division experiencing increased demand from new telephone system buyers for ISDN-compatible telecommunications technology. There was also further growth in its voice recorder business. A new software development will allow the group to offer "an innovative automated recording and evaluation facility", the chairman said.

The computer division added several government departments as new customers. In addition, Gateway retained the division to provide warranty support in the Dublin area for an initial three months period and this is expected to be increased for a further three months.