Tiscali's 3Q 2003 financial results

Tiscali's board of directors approves 3Q03 results EBITDA positive for the fourth consecutive quarter Broadband customers grow to over 600,000 · Consolidated revenues at EUR 222.2 million in 3Q03, up 24% YoY · 602,000 ADSL customers, an increase of 132,000 (or 28%) vs 2Q03; 18,000 new subscribers per week in September · EBITDA positive for the fourth consecutive quarter at EUR 14.1 million Milan, 14th November 2003. The board of directors of Tiscali has approved the company's 3Q03 results. Revenues and EBITDA continued their upward trend despite seasonality (most notably in July and August). Revenue growth was driven mainly by ADSL broadband services, which attracted an average of 11,000 new users per week over the quarter (and 18,000 in September), bringing the total number of ADSL subscribers to 602,000 at end-September. The rise in broadband offset slower growth in the number of narrowband users and minutes online (due to the hot summer), and enabled Tiscali to increase its broadband market share in all of the major European countries-while keeping its contribution margin broadly unchanged for both internet access and the business as a whole. Tiscali should be able to continue improving the margins on its broadband services thanks to the efficiency of its proprietary network and its strategy of selective investment in unbundling of the local loop. Such investments have already started in the Netherlands and will be implemented in 12 cities in Italy and France in 2004. Tiscali's solid EBITDA results allow to confirm FY 2003 target. · 3Q03 revenues Consolidated revenues stood at EUR 222.2 million in the third quarter, up 24% on the EUR 179.9 million posted in 3Q02. The main revenue drivers in 3Q were internet access and corporate services. Access revenues at EUR 150.5 million were up 24% on the EUR 121.7 million posted in 3Q02. As a proportion of the total, access revenues remained stable, at 68%. This business benefited from growth in broadband services, which generated revenues of EUR 44 million in the quarter (29% of total access revenues), an increase of 388% ahead of the EUR 9 million posted in 3Q02. The gross margin on the access business stood at 54% of revenues, an improvement on the 3Q02 figure (52%), thanks to network efficiencies. Business services generated revenues of EUR 41.6 million in 3Q03. This business was the group's second-biggest revenue driver, accounting for 19% of the total. The figure was up 37% on the EUR 30.4 million posted in 3Q02. This good performance was the result of organic growth produced by a sharper commercial focus and synergies created by Tiscali's proprietary network, coupled with external growth due to the acquisition of C&W in France (consolidated from July) and Eunet in Austria (consolidated from 2Q03). The gross margin on corporate services stood at 51% of revenues, showing an improvement on the 3Q02 figure which amounted to 49% of revenues. Portal revenues came in at EUR 10.9 million, or 5% of the total. The figure was up 16% on the EUR 9.4 million generated in 3Q02. The gross margin was 51%, broadly in line with 50% in 3Q02. Voice revenues (8% of the total) were up 31% on 3Q02 at EUR 16.8 million. The gross margin continued to improve, and stood at 23% for the quarter from 20% in 3Q02. · Gross margin and EBITDA Gross margin in the third quarter was EUR 110.1 million. The gross margin was 49.5% of total revenues-broadly in line with 3Q02 (49.9%). Marketing costs totalled EUR 35.9 million, or 16% of total revenues lower than the 3Q02 figure (18% of revenues). Personnel costs were EUR 35.9 million (16% of revenues) vs 20% of revenues in 3Q02. The headcount at 30 September was 3,111, from 3,036 at 30 June. The rise was due to the recent acquisition of C&W in France, although the company is currently being restructured-a process that should be completed by the end of the year. G&A costs totalled EUR 24.2 million (11% of revenues). This represented a reduction on the 3Q02 figure (15% of revenues). EBITDA was EUR 14.1 million, or 6.3% of revenues, showing a strong improvement on the EUR 3.7 million loss posted in 3Q02 despite seasonality and lower margins on broadband. EBIT was negative at EUR -52.4 million, an 38% improvement on the EUR 84.4 million loss recorded in 3Q02. · 9M03 results In the first nine months of 2003, revenues totalled EUR 651.9 million, up 19% on the same period of 2002. Access revenues (69% of total revenues), were 18% ahead of 9M02 at EUR 449.2 million, versus EUR 380 million. The active user base expanded from 7 million as of 30 September 2002 to 7.6 million a year later, with the number of ADSL subscribers shooting up from 125,000 to 602,000 during the same period. Portal revenues (5% of the total) came in at EUR 34.9 million, 5% lower than a year ago, mainly due to the disposal of Hispavista and WOL Merchandising in the second quarter of 2002. Corporate services revenues advanced 49% in 9M03 versus the corresponding 2002 period, to EUR 111 million, following the expansion in the basis of consolidation and the range of products and services offered by the group. Voice revenues rose 33% versus 9M02 to EUR 49.3 million, demonstrating the strategic value of this business, since voice services can be bundled with internet packages offered to corporate or residential users. Gross margin for the first nine months of 2003 was EUR 327 million. The gross margin was 50%, a 25% improvement on the 9M02 figure (48%). Marketing costs represented 16% of revenues, at EUR 102.3 million. This was a 13% increase over the period, although the figure was an improvement on the first nine months of 2002 (17% on revenues). Personnel costs fell 2% versus 9M02, from EUR 106.5 million to EUR 104.9 million, and from 19% as a proportion of revenues to 16%. General and administrative costs were down 5% versus 9M02, from EUR 76.8 million to EUR 72.7 million. This represented 11% of revenues versus 14% in 9M02. EBITDA for the first nine months of 2003 was positive at EUR 47.1 million, versus a loss of EUR 12.2 million in 9M02. EBIT was negative at EUR 151.2 million, a major improvement on 9M02, when a loss of EUR 437.4 million was recorded. The group made a pre-tax loss of EUR 201.6 million, a sharp reduction compared to the 9M02 figure of EUR -521.3. Investment for the nine months totalled EUR 79 million, including EUR 17 million spent on the new headquarters in Cagliari. In addition, LLU investments in the Netherlands began in 3Q03. As of 30th September, the group had financial resources of EUR 447 million and a negative net financial position of around EUR 233 million. Tender offer on EUR 150 ml bonds On 17th October Tiscali announced its intention to repurchase through a public purchase offer the 6.375% Notes issued by its subsidiary Tiscali Finance S.A. and due July 2004, for a total nominal amount of Euro 150 million. Following this offer, Tiscali will be able to restructure its debt at better conditions, both in terms of cost and maturity, consistently with what announced to the market at the time of issuance of the Equity- Linked Bond in September 2003. Improvement of ADSL growth and profitability targets On the back of its third quarter results, Tiscali has improved the targets of ADSL users' growth and of profitability: · Year-on-year revenue growth of over 20% in 2003 · Around 800,000 ADSL customers by end-2003 · EBITDA margin of 8% · Operating capex at 8% of 2003 revenues · Positive consolidated net profit before goodwill amortisation in 2004 and positive net profit in 2005 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/11/14/20031114BIT00190/wkr0001.doc http://www.waymaker.net/bitonline/2003/11/14/20031114BIT00190/wkr0002.pdf