Warning wipes £530m off Energis

ENERGIS, Britain's largest carrier of internet traffic, has issued a devastating profits warning and said it was close to breaching terms on parts of its £1bn-plus debt.

The group's shares nosedived, falling 57% or 30 1/2p to 23p and wiping more than £530m off the company's value. The price hit 793 1/2p at the height of the telecoms boom in early 2000.

Energis said breaking the terms on bank loans would trigger a massive review of its business and probable job losses. Dresdner is the group's primary banker.

Energis said earnings would miss sales forecasts of more than £1bn in its year to 31 March by 5%, and earnings before interest and other charges would fall 10%, or £16m, below estimates. Core earnings had been expected to reach £161m.

The group, spun out of National Grid in late 1997 and which uses its former parent's electricity pylon network for its telecoms infrastructure, said it had seen a sudden deterioration in its business in December. It has been particularly hard hit by a shift by internet companies to unmetered access.

'December's figures contrasted with the information received for October and November, during which some £120m of new business had been gained,' it said. 'December's operating and financial information showed lower-than-expected growth in revenue and increased pressure on margins.'

Analysts said the news was particularly hard coming just two-and-a-half months after chief executive David Wickham secured new funding which lifted Energis's medium-term debt facilities to £850m from £600m, and extended its maturity to 2008. The company had said the funding would be sufficient to fund it until its cashflow turned positive.

Energis said the lower growth would force it to cut capital expenditure by £40m to £300m next year. The company, which has already shed about 350 of its 3,500 workforce, hinted at further redundancies as it sought to save £30m in the 2002/2003 financial year. It faced restructuring costs of about £10m.

Analysts said the setbacks raised doubts about the company's independence.