21 May 2007

OVER £200M OF NEW CONTRACTS DRIVE GROWTH
INTEGRATION OF ACQUISITIONS AHEAD OF PLAN


Progress summary

• New contracts accelerate organic growth in the second half, with continuing operations revenue up 5% and EBITDA¹ improved by 28% compared to the first half
  
• Integration of the two acquisitions announced last year ahead of plan with additional synergy savings identified for less cost than originally announced
  
• Contract momentum for converged and managed solutions services has increased with 77% of new major corporate and public sector contracts² signed during year for next-generation services²
  

Financial highlights for the year

Continuing Operations

• Revenue up 52% to £532.7m (FY 06 £350.0m)
  
• Gross profit up 58% to £89.7m (FY 06 £56.6m)
  Gross profit margin improved to 16.8% (FY 06 16.2%)
  
• EBITDA1 up 14% to £42.9m (FY 06 £37.6m)
  EBITDA1 up 33% to £42.9m on a pro forma¹ basis (FY 06 £32.3m)
  
• Operating loss³ reduced to £9.5m (FY 06 £11.6m)

Total Group

• Post-tax profit for the year of £83.9m including post-tax gain on sale of Demon Netherlands and recognition of deferred tax asset
  
• Net debt⁴ of £25.8m (FY 06 £26.3m) with net gearing⁴ of 5.5%

Contract momentum for next-generation services

• Seven year contract signed with The Highland Council, lead partner for the Pathfinder North Project, in March 2007 for £70m
  
• Five year contract signed with HSBC Bank plc (HSBC), in May 2007, for UK-wide services worth £77m
  
• Seven year contract signed with Dumfries & Galloway and Scottish Borders Councils, for the Pathfinder South Project, in November 2006 worth up to £32m
  
• Three year contract signed with United Utilities, in May 2007, following competitive tender and worth more than £13m
  
• Five year contract signed with London Metropolitan Network, in April 2007, for £11.3m
  
• Other next-generation services contracts won during the year included Wolseley UK, University of Central England, Vodat International, Audit Commission, University of Westminster and Digica

Awards for innovation and quality

• THUS won "Service Provider Channel Programme" for second year running at Channel Network Awards
  
• THUS WAN service solution for University of Westminster won the "Communications in Business Best Public Sector WAN project"
  
• THUS won the "Gold Award for Utility services to the City of London" for the third consecutive year

William Allan, Chief Executive said:

"This has been a highly successful year for THUS. The integration of the two acquisitions has proceeded ahead of plan with increased synergy savings for less cost than originally anticipated. Contract momentum for next-generation services has accelerated in the second half, with some 55% of our variable gross margin now being derived from next-generation customers.

Strong growth in the second half was such that we exited the year with more revenue from next-generation services than from our legacy base. THUS has now passed through the transition point from legacy services to next-generation services growth – and it is clear that future growth in our market will be determined by the ability to manage and grow converged services and managed solutions, where THUS has a proven track record with increased strength and capability.

Our balance sheet remains strong. As we continue to increase our market share we will maintain our disciplines of sound cash management, operational productivity and capital expenditure predominantly focused on customer related growth.

Although we remain cautious on pricing and the market structure for telecommunication services in the UK, our significant new managed solutions contracts, other new contracts and expansion of existing customer relationships, underpin our revenue and the Board’s confidence that we remain on track to move into positive operating profit during this financial year."

1 Adjusted earnings before interest, tax, depreciation (including impairment) and amortisation (EBITDA) is stated after share based payment costs but before restructuring costs of £1.6m in the current year and £8.8m in the previous year. Pro forma results include twelve months contribution for Your Communications and Legend Communications and excludes the Contact Centre and Demon Netherlands for both years.
2 Next-generation services exclude traditional fixed switched voice services, leased lines, frame relay and ATM data services. Major corporate and public sector contracts represent bespoke contracts typically covering higher value sales.
3 Adjusted operating loss is stated before restructuring costs of £1.6m in the current year and £10.4m in the previous year.
4 Net debt represents loans and finance leases net of cash at bank and in hand. Net gearing is net debt represented as a percentage of the total equity attributable to equity holders of the parent.

For further information, please contact:

THUS Group plc
Jennifer Lawton Investor Relations Manager THUS plc.	0141 566 3176
Deborah Rodger  THUS Head of Product Communications and Programmes THUS plc.	0141 566 3167
Smithfield (Public relations adviser to THUS)
Tania Wild or John Antcliffe	020 7360 4900

An analysts’ conference will be held this morning at 09.00am for 09.30am at the City Presentation Centre, 4 Chiswell Street, Finsbury Square, London, EC1Y 4UP. A simultaneous webcast of the conference will be screened at www.thus.net via the following link www.thus.net/prelims. Webcast participants are advised to visit the web link at least 15 minutes before the start of the conference to ensure they have all necessary software to take part.

Click here to download the PDF of this release (206KB)