18th October 2007 : Leadcom voted "AIM International Company of the Year for 2007"




Main Web Site : http://www.leadcom-is.com/

Investor Relations Email : investorsinfo@leadcom-is.com

Why has this fallen like lead today???


Leadcom says 9-mth revenues over 149 mln usd; sees strong growth in 2008 UPDATE - AFX

(Adds further details)

LONDON (Thomson Financial) - Leadcom Integrated Solutions Ltd said its revenues for the nine months to Sept 30 exceeded 149 mln usd, and that it expects continued strong growth in 2008, while 'at least' maintaining its normal standards of profitability.

In a statement ahead of its third-quarter results, the telecommunications solutions provider said its growth in revenues has been translated to the expected operating profitability, apart from the Caribbean and Latin America (CALA) region.

Leadcom said it has traded in line with its expectations, with the exception of the CALA region and a significant rise in its financial expenses, and that it expects to report full-year revenues of 206-210 mln usd.

The company said that it has decided not to take up any new engagements with a major customer -- a telecom equipment vendor -- in the CALA region, as its year-to-date engagements with the client have contributed extremely low profits.

This business sector is therefore expected to be treated as discontinued, Leadcom said.

Despite the operational challenges in CALA, Leadcom said its cash flow in the third quarter continues to be on track, including the cash injected into YTelcom SAS, the business which it acquired in August.

TFN.newsdesk@thomson.com

The finance costs is the shocker to the system, and nobody was expecting that it seems for Q3. The effects of the dollar were to be expected and why I had used the 5.5+ and 9+ for 07 and 08 EPS figures, I was expecting some fall out from dollar weakness.

I would at this stage go for a \"worst case\" scenario :

2007

Turnover $206 mill
Normalised operating profit 10% give $20 mill
Exceptional $5 mil (3m+1m+spare 1m)
Tax of 31% of $15 mill
Net profit $10.35 mill
120 mill shares in issue

Exchange rate $2.08 to £1
EPS 8.625 Cents = 4.1p
Write it down for luck and so call it 4p for this year.

Going forward to next year with the vendor removed from CALA and margins increasing in that region on lower revenue, ignoring the CPI figure but taking in dollar weakness to be sure to be sure, knock a full penny off of forecast EPS and reduce down to 8p for 2008 from 9p.

You\'d end up with 4p for 2007 and 8p for 2008.

Should the dollar appreciate in the coming 12 months (and expectation is it will) then you can start adding back a million here and there and you might get your 9p EPS back for 2008.

I have not added in any CPI correction for 2008 as the forecast is for 1.5% over the coming 12 months in Israel (as opposed to the shocker 2.5% for just Q3 07).

This from the JPost :

\".......Israel\'s consumer prices rose the most since 2002, jumping 2.5 percent during June, July and August, the three-month period upon which Israeli accounting laws require companies to base third-quarter earnings. Price growth has since slowed, with a recent Bank of Israel economist poll showing anticipated inflation of 1.5% in the next 12 months. Comparatively, second-quarter inflation rose only 0.7% and third-quarter inflation last year rose 0.2%.

The CPI is an index number measuring the average price of consumer goods and services purchased by households and the percent change in the CPI is a measure of inflation......... \"

******************************************

However, the issue with this statement is not about it contents (taking aside the CPI shocker) its all about the way it was written.

Having followed them for so long, I really am at a loss to explain or to even understand how they could, after what is a long time of very good PR, suddenly be so shocking at PR. This is why my earlier quip about it perhaps it was written so badly to get the seller out and finished at lower prices. I do fail to comprehend how firstly Yael and crew would allow such a terribly written piece of prose to be released, and also why Panmure and Blue Oar let it be released in that format.

It is extremely badly worded with regards to CALA. I would agree with Ptolemy that perhaps the 2.5% CPI figure for 2007 was not taken into account and someone suddenly realised that there was no chance like previous years to ignore a single quarter of events as it will be diluted by the following quarter and therefore better for a half year report, and therefore, as full financials must be reported for the quater in question now (as Leadcom is now on quarterly reporting), then an update was required.

Perhaps this is the overiding factor, that the 2.5% CPI figure is going to hurt the Q3 report and create a bit of an anomoly (which would not have been the case if just reporting a 2nd half come prelims) and with likely 700K$ requried to cover that CPI spike, it will have a big effect on EPS for Q3 when taken in with dollar weakness during Q3.

Quarterly reporting, live and die by the sword, you get much greater visibility, however with increased visibility you also get to hang your dirty linen in public if and when little events occur that could normally be hidden by being diluted in a half year or full year report.

Therefore, moving forward, the CPI issue should not effect Q4 as its now died down, however there will be no Q4 report as its Prelims. Rather sad that CPI was 2.5% during Q3, and Q3 now requires its own full report - but thats life. Brace yourself Sheila, Q3 ain\'t going to be pretty on the earnings front as a stand alone quarter.

Summary :

a/ It is a profits warning - but not one about a poor business, it is one where external pressures (Q3 CPI and Dollar distress) has caused the issues. They did have an issue with a single vendor in CALA, and have now addressed that.

b/ 4p (down from forecast 5p) EPS for the full year, and forecast 8p EPS for 2008 imv.

c/ Business is seeing strong trading and growth, which when taking into account forecast Israeli CPI for the coming 12 months, makes an 8p EPS forecast for 2008 very undemanding imv.

d/ Upside of any dollar appreciation, we have now had the washing of the weak dollar laundry in public (yet to be done by others is an added note), if it moves back in the coming 3 to 12 months, then all those loses becomes gains, and of course, sterling EPS is boosted.

e/ \"Black mark\" against the PR crew, sorry, that was attrocious wording in my opinion.


We are supposed to look forward, to lets look forward.

CALA margins will now increase on 40% reduced revenues. Plus point for margin watchers.
Time and Energy spent on CALA can be focussed on EMEA and AP where the better margin and higher growth levels are. Plus point.
Forecast CPI for the coming 12 months is 1.5% (equals under 0.4% per quarter averaged). Now aware as a Plus point.
Strong trading and growth. Plus point.
Q3 revenue well up at 64m$.
FY revenue forecasts at pre-upgrade levels (206m instead of 225m)
Cash projections are as per forecast. Big Plus point.

07 EPS will be lower than forecast, suggest 4p instead of 5p. Negative point.
08 EPS forecast should be reduced to cater for dollar. Negative point.
Continued dollar weakness. Negative point.
Badly worded statement. Negative point.

Good post PP, back in these this morning at 46.5p, time will tell if that was a good move, but i would consider as always, that the market has over-reacted somewhat...

O.k. should i be putting a stop in place...?!

Results on tuesday 6th now.
2517

Rightly or wrongly I've bought in @ 42p, seems wrongly atm.
2517

Catching a falling knife?

got to admit, i (obviously) thought it would bounce this morning, and although only buying a (smallish) slice, i'm considering buying some more at under 40p to make a relative holding...

Still dropping at 40p...time to get out for me.

Morning all, I have a holdiong of these which is niow sitting at a loss. Someone seems to be dumping a load of stock at 40p according to L2, so will need them out of the way before any headway can be made. 60k then 150k, now 63k, see what happens soon. Will try to keep you posted

Another 100k at 40p

Evening out a bit now

Altium and Panmure's significant downgrades will weigh heavily on sp for some time to come i fear, let alone in a bad market

Still having 100k regularly dumped.

Bad comments from Investor's Champion on LEAD on August 9th have turned out to be true.

Hyleo - from what I hear Investors Champion made comments on Debtor days and Cash (is that true?) - if they are now claiming thats true - then I fail to see how. The company have said clearly that cash is perfectly to forecast and that means no issue with debtor days. The issue is clearly defined as the US$ impact and also the Israeli CPI jump. So for anyone to make claims seems quite hilarious - did they really predict dollar impact and Israeli CPI figure jump ? or not.......... ;)

The answer I am hoping for on Tuesday during the webcast is that there is so much going on that Leadcom no longer need to be involved with low margin revenues any more. As I say revenue is vanity, profit is sanity. They are therefore adjusting themselves out of work where the margin is not acceptable and concentrating on the bigger and better opportunities ahead. We still have more to hear about this Indian contract direct with an operator ( as per the RNS on 12th Jan http://www.investegate.co.uk/Article.aspx?id=20070112125000Z6830 ) and the bias towards operator over vendor was emphaised in the last contract wins RNS where they specifically said all the contracts won were with operators (not vendors) as per 6th June RNS http://www.investegate.co.uk/Article.aspx?id=20070606070000Z4983

In the trading statement we all know so well now, Arik did say at the end "'We have taken decisive action to exit operations that do not offer an attractive return. This goes in line with our set strategic goals, to shift revenues toward operators, leading to overall growth and profitability. We are encouraged with the strong trading in remainder of the group. Looking forward to 2008, we anticipate continued strong growth whilst at least maintaining our normal standards of profitability.'

So emphasing the shift towards operators, and promising that in 2008 the MINIMUM we can expect is the same levels as past in terms of profitability and thus margin levels.


Anyway, roll on Tuesday. And this from Africa, more detail on the big spend in the coming years which has confirmed the correct decision of Leadcom to buy Ytel and their exposure to Africa.

http://allafrica.com/stories/200711020806.html

Africa: Mobile Operators to Invest Billions of Dollars

Highway Africa News Agency (Grahamstown)

2 November 2007 Posted to the web 2 November 2007
David Kezio-Musoke

Mobile operators MTN, Vodacom, Celtel and Orange are among the mobile operators planning to invest a tune of US$50 billion in the expansion and enhancement of their networks.

The GSM Association (GSMA) announced at the 'Connect Africa' summit held in Kigali, Rwanda that the mobile industry plans to invest heavily in sub-Saharan Africa over the next five years to provide more than 90 percent of the population with mobile coverage.

The GSM Association is the global trade association representing more than 700 GSM mobile phone operators across 218 countries and territories of the world.

Tanzania's Vodacom and MTN who operate in Uganda and Rwanda are GSMA subscribers. Celtel a subsidiary of the Kuwait based Zain Group also connects three of the East Africa countries to the GSMA.

With a primary goal to ensure mobile phones and wireless services work
globally and are easily accessible, the association's members serve more than two billion customers, 82 percent of the world's mobile phone users.

Tom Phillips the Chief Government and Regulatory Affairs Officer of the GSMA told High Way Africa News Agency (HANA) at the summit that, the GSMA projects have an increase of 10 percentage points in mobile penetration and that it would increase the annual growth rate of GDP by up to 1.2 percentage points.

There are more than 150 million mobile subscribers in sub-Saharan Africa today.

However, a further 350 million people have mobile coverage and are not yet directly connected.

It is against this background that the sub-Saharan mobile industry players are focused on using its economies of scale to connect these people. As the number of users grow, so too will economic prosperity.

In a related statement released at the summit the GSMA says the investment will be used to extend the reach of GSM mobile networks, enhanced with third generation (3G) technologies like GPRS, EDGE and HSPA, to provide a rich suite of mobile multimedia services, including Internet access.

Since sub-Saharan governments began liberalising their telecommunications sectors at the turn of the new millennium, the GSMA estimates that the mobile industry has invested $35 billion, providing more than 500 million people (67% of the population) in sub-Saharan Africa with mobile coverage.

"This surge in investment by the mobile industry has changed the lives of millions of Africans, catalysing economic development and strengthening social ties," said Rob Conway, CEO of the GSMA.

"We have the passion and dedication to provide Africa with a world class infrastructure," said MTN Group President and CEO Phuthuma Nhleko.

?We are proud to be a leading "nvestor in Africa, bringing world-class services to our customers on the continent through our Celtel subsidiary," added Dr. Saad Al Barrak, CEO of the Zain Group.

Alan Knott-Craig, CEO of Vodacom Group, said, "We are proud of our investment in Africa, and we will continue to focus on our customers and the development of products and services that benefit them."

The GSMA estimates that an increase of 10 percentage points in mobile penetration can increase the annual growth rate of GDP by up to 1.2 percentage points.

In order to create the conditions that will maximise the benefit of this new investment, the GSMA also called upon governments across sub-Saharan Africa to follow the President of Rwanda, His Excellency Paul Kagame's advice.

Kagame's advice is that, "the barriers that governments put in the path of entrepreneurs need to be urgently removed. Individuals and companies create wealth, not governments. This is not to say that the state should become invisible. But governments should see their roles as enablers of business, and not gatekeepers that control and hamper it."

The GSMA said that it believes that, "The world's governments have an opportunity to narrow the digital divide between those who enjoy high-speed access to multimedia services today and the many people who can't yet be economically served by broadband networks."

According to Tom Phillips, "It is important that the world's governments set aside this spectrum in a harmonised way, enabling handset makers to achieve economies of scale, thereby reducing the cost of access devices for consumers."

"African Governments also need to address other barriers to the uptake of mobile communications, such as high consumer taxes," Phillips said.

Mobile specific taxes are levied in Ghana, Kenya, Tanzania, Uganda and Zambia; if these were lowered or removed, government tax receipts would actually increase as more people will connect and use mobile services, boosting Value Added Tax receipts and stimulating wider economic activity.

High license fees and other regulatory bottlenecks, such as international gateway monopolies, also constrain the competitiveness of African business.

Some decent size buys this morning...



5-Nov-0709:01:3746.0025,000Buy* 45.7546.0011.50kTrade Type:
Automatic execution

5-Nov-0708:59:4846.0070,000Buy* 45.5046.2532.20kTrade Type:
Automatic execution

5-Nov-0708:59:2746.008,000Buy* 45.5046.003,680Trade Type:
Unknown

5-Nov-0708:58:4746.0042,000Buy* 45.5046.0019.32kTrade Type:
Automatic execution

5-Nov-0708:57:1646.0050,000Buy* 45.5046.0023.00kTrade Type:
Automatic execution

5-Nov-0708:55:1746.00195,000Buy* 45.2546.0089.70kTrade Type:
Unknown

5-Nov-0708:54:4846.00105,000Buy* 45.2546.0048.30kTrade Type:
Automatic execution

5-Nov-0708:53:3846.0040,000Buy* 45.0046.0018.40kTrade Type:
Automatic execution

5-Nov-0708:52:5846.002,783Buy* 45.0046.001,280Trade Type:
Automatic execution

5-Nov-0708:52:1646.0022,217Buy* 45.0046.0010.22kTrade Type:
Automatic execution

5-Nov-0708:48:4546.002,217Buy* 45.0046.001,020Trade Type:
Automatic execution

I have just closed my first position at breakeven, but i bought more on Fri @ 40p am holding and have placed a stop...

Big Ted-----yes nice volume, I'd like to think the worst is behind us now, LEAD have brought their 3rd qtr results forward to tomorrow, whether that's to re-assure investors or to get all the bad news out of the way in one hit, we should know by tomorrow. Good luck all.
2517

going into reversal as i type 48.25/48.25 being quoted, have no longer got L2 so difficult to gauge trades...