Directors’ report
Business & operating review
Strategy
The Group strategy is defined around its two principal trading segments, Telecoms & Internet Services (‘T&IS’) and Integration & Managed Services (‘I&MS’). Each segment has separate objectives, operating characteristics and serves a distinct part of the market for IT and Communications services.
Telecoms & Internet Services
This segment addresses small and medium businesses across the United Kingdom benefiting from established market positions in certain regions, most notably East Yorkshire. Our business proposition has been developed from just offering a customer network access, to one which now offers a range of hosted services.
We continue to invest in the Group’s existing carrier network assets, wherever this is financially advantageous. By using these network assets and exploiting the scale economies that other network partners provide, we are able to grow earnings and cash flow.
Integration & Managed Services
This segment serves the public sector and larger UK-headquartered businesses. Its skills are built around the design, implementation, support and ongoing management of integrated customer solutions. The business is focused on five key areas of the IT and Communications market: the provision of secure IP enabled networks, unified communications, data management, contact centre integration and applications integration.
Investment through acquisition has played a large part in the creation of our business proposition and we are now well positioned to exploit the convergence themes that are emerging across both network and applications environments.
The longer term potential returns of this business will be improved as we move towards a solution-led sales proposition encompassing the full range of services and capabilities that we have assembled.
Overview
Group revenue has increased 7.1 per cent to £517.3 million. This growth benefits from the full year impact of prior year acquisitions with organic Group revenue growth of 2.1 per cent.
Group EBITDA before exceptional items reduced 2.4 per cent to £69.3 million, the reduction wholly attributable to the reduction within the I&MS segment. The reduction in Group EBITDA has impacted overall profitability such that Adjusted Group profit from operations has reduced 6.9 per cent to £36.7 million from £39.4 million.
The continuing capacity of the Group to generate cash is demonstrated through the 2.9 per cent increase in EBITDA less capital expenditure to £39.0 million.
Group profit before tax is £4.4 million (2007: £10.6 million) with the reduction reflecting, amongst other factors, an increase of £7.0 million in amortisation charges from intangible assets arising on acquisition.
Contribution to Group revenue
