Manx Telecom PLC (LON:MANX) (LSE:MANX.L) has released a trading update for 2016. Trading has been in line with expectations, with cash flow expected to be supportive of a progressive dividend policy.
The performance of the core domestic business of fixed line, broadband, data and mobile was solid during the year. The availability of high speed broadband service is rising on the Isle of Man, with it now reaching 93% of premises. Take-up continues to expand, with 40% of broadband customers now on VDSL or VDSL+. Manx Telecom’s 4G network has performed well, with subscriber numbers up year on year.
In the company’s data centre business, revenues were lower than in 2015 due to a decline in low margin kit sales and data centre usage driven by customer consolidation. However, the fall in sales was largely offset by a return to good levels of growth in the Global Solutions business.
Manx Telecom continues to see growth across its product range and could benefit from a refreshed strategy. It aims to improve competitiveness and the customer experience by reorganising the business, investing in supporting technology and improving competitiveness. Costs of £10 million are therefore expected to be incurred over a two year period, with most of the financial improvements set to commence in 2018.
In the last month Manx Telecom has lagged industry peers BT Group plc (LON:BT.A) (LSE:BT.A.L), Vodafone Group plc (LON:VOD) (LSE:VOD.L), Sky PLC (LON:SKY) (LSE:SKY.L) and Talktalk Telecom Group PLC (LON:TALK) (LSE:TALK.L). BT is up 9%, Vodafone is 7% higher, Talktalk is 2% and Sky is 1% higher.
In my view, Manx Telecom has a sound strategy through which to deliver improved financial performance. However, I feel that there may be greater growth opportunity elsewhere within the sector, and that other companies within the telecom space offer greater diversity. While I would rather buy one of its sector peers for the long term, I still think Manx Telecom has investment appeal.