Colt Group S.A. (the Group ) publishes its Annual Report for the twelve months ended 31 December 2013

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1 Press release Colt Group S.A. K2 Building Forte 1 2a rue Albert Borschette L-1246 Luxembourg R.C.S. B Colt Group S.A. (the Group ) publishes its Annual Report for the twelve months ended 31 December February 2014: Colt Group S.A. (London Stock Exchange: COLT) today issued its Annual Report for the 12 months ended 31 December The Colt Group S.A Annual Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at This document is also available to view and download from the Company's website at Compliance with the Disclosure and Transparency Rules (DTR 6.3.5) The information below, which is extracted from the Group s 2013 Annual Report, is included solely for the purpose of complying with DTR in relation to the publication of annual financial reports. It should be read in conjunction with the Group s 2013 Results Announcement issued on 27 February 2013 (available at which includes a management report and condensed set of financial statements. Together these constitute the material required by DTR to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report. Directors responsibilities statements The Directors confirm that, to the best of each person s knowledge: a) the consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of Colt Group S.A. and the undertakings included in the consolidation taken as a whole; b) the directors report includes a fair review of the development and performance of the business and the position of Colt Group S.A. and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and c) the annual report and consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, business model and strategy of Colt Group S.A. and the undertakings included in the consolidation taken as a whole. So far, as the Directors are aware, there is no relevant audit information of which the Group s auditor is unaware and they have each taken all reasonable steps that they ought to have taken as a Director to be aware of any relevant audit information and to establish that the Group s auditor is aware of that information. The financial statements are published on the Company website. The maintenance and integrity of the website is the responsibility of the Directors. Legislation in Luxembourg governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 1

2 Approved by the Board of Directors and signed on its behalf by Caroline Griffin Pain / Company Secretary 26 February 2014 Principal risks and uncertainties Like all businesses, Colt and the execution of the Group s strategy are exposed to a number of internal and external risks and uncertainties. The key risks facing the business are set out below, along with our key mitigation activities: 1) Risk - Regional economic conditions While growth has returned in 2013 to certain Eurozone territories, this risk exposure remains as other territories have yet to achieve growth, structural reforms of the fragile Eurozone are ongoing and Europe remains susceptible to global headwinds. Further volatility could adversely affect Colt s results by muting the confidence of Colt s corporate and government customers across Europe. Reduced revenues and cash inflows can also lead to an increased risk of asset impairment. Further sovereign debt defaults could also potentially impact the Group s short term investments. However, challenging economic conditions may also increase opportunities as our customers seek to reduce costs and outsource their operations. The Group cannot completely mitigate the risk associated with the Eurozone. However, the Group s financial planning processes allow for appropriate management of cost in relation to revenue performance. Our investment policy is restricted to AAA money market funds and deposits with approved counterparties. We have reviewed these funds for exposure to sovereign debt. In addition, our standard processes include: Credit: We have a rigorous credit and due diligence process for customers and suppliers Investment planning: Capital expenditure and investment boards enhance the prioritisation and monitoring of initiatives in relation to business growth 2) Risk - Infrastructure operations As Colt serves its customers through an extensive multi- technology network, multiple regionally located data centres and shared service delivery centres, there is an inevitability that technical faults and outages can occur. Accordingly, we have established incident processes that address these on a 24x7 basis. In contrast, this risk refers to a major or prolonged disruption in the form of a critical physical loss, damage, failure or limitation of capacity to one or more of Colt s data centres, network, network management centres, nodes or key IT systems. Such a failure could disrupt our business or customers business. This could have an adverse impact on the Group s reputation, business and financial condition including asset carrying values and operating results. Colt has established processes to effectively deal with this risk and reduce the exposure including: A resiliently designed network Dedicated teams to manage and maintain the infrastructure and equipment to ensure failures are minimised Infrastructure monitoring and fault resolution by our Operations Centre A business continuity and crisis management capability 2

3 3) Risk - Changes in laws and regulation The communications industry is highly regulated in all the countries where Colt provides services. In addition, Colt is required to respond to a number of new regulatory developments including environment laws, new EU security regulations and tax changes by national governments in response to the fragile European economy. The Group is therefore subject to uncertain and changing regulatory issues that could potentially affect the way it operates in different jurisdictions, and have an impact on its results, including the level of interconnect costs. Colt has an established legal and regulatory management framework to understand and manage risk in this area. In regard to environmental and security regulation, Colt has done the following: We have implemented the ISO14001 Environmental Management Standard We are actively working with the regulators and the business to address EU Article 13 and ND1643 security regulation requirements Regulatory and tax teams monitor national developments, where necessary engaging with local industry associations and government representatives 4) Risk - Information security The security risk profile of Colt s IT environment is changing as key technologies converge and new cloud technologies are adopted. Similarly, it is globally recognised that the sophistication of cyber-criminals is increasing. If the Group fails to invest in and maintain an adequate information security organisation, with associated processes and tools, there is a risk of security breaches and consequent reputation damage. Further, an inadequate information security capability may impact our ability to secure solutions revenues as customers and regulators demand more assurance over our services. Dedicated information security professionals who operate an Information Security Management System in line with ISO27001 Specialised security teams who focus on perimeter security, using industry-standard security tools Established cyber-security incident response processes Security policy framework with supporting security baseline standards for many technologies Developing new services: As standard, we include security requirements when developing new services and systems 5) Risk - Service evolution and customer intimacy Colt recognises that success in its growing managed services business is critically dependent on its ability to effectively evolve its portfolio, skillsets, culture, organisation, processes and systems to deliver an excellent customer experience. This is considered an exposure as Colt is still undergoing this transition and this initiative is complex. An inability to achieve this transition may impact Colt s ability to grow its solutions revenues as anticipated. Further, whilst in transition, there is a greater risk of reputational damage as Colt delivers solutions to early adopter customers. As contracts obligate Colt to specific service levels, Colt may become liable for nonperformance penalties. Colt is investing significantly in its service evolution as customer service and intimacy is at the core of Colt s mission and values. Key mitigations include: ITIL-aligned service assurance A strategic programme focused on our service portfolio, technology platforms, best-in-class solutions methodologies and people skills and competencies 3

4 We utilise best-in-class tools to proactively monitor, manage, avoid and resolve service delivery matters. A key achievement for us in 2013 was the implementation of a new strategic customer care system We measure all of our service delivery capabilities against stringent quality targets around service delivery, build and transition We have achieved ISO20000 against the ITIL V3 standard for our service desk and network management services 6) Risk - Changes in technology and competitive risk Colt s industry sector is subject to rapid technological change which may represent both opportunities and/or risks. Further, the IT services and communications industries are highly competitive and introduction of new services to market is time critical. Competition in the industry is based upon a number of factors including strategy, ability to deliver value-added propositions, innovation, price, network footprint and quality, appropriate technology and qualitative customer service. Colt s solutions strategy targets these factors, however, a large cultural and service-oriented step change bears risk. Failure to deliver on any of these aspects could have an adverse effect on Colt s business and financial condition, including asset carrying values, and operating results. Colt has established effective business planning processes as well as business development and strategies to proactively counter this risk. As such, we see this risk as a potential opportunity. Mitigating actions include: A proactive innovation and prototyping capability that aims to establish disruptive propositions for Colt to take to market An established technology and architecture board to evaluate and prioritise responses to industry and technology changes Portfolio development capabilities to drive proactive and reactive commercial propositions 7) Risk - Geopolitical risks with particular emphasis on Colt s shared service centres Colt generally operates in countries that have a low geopolitical risk profile. However, we operate our shared service centres (SSC) in India (Gurgaon and Bangalore), Spain (Barcelona) and Romania (Sibiu). While India has the highest risk profile, we recognise that all these centres represent concentration points where many processes, critical to the effective daily operations of Colt, are located. Physical loss, damage, network isolation or restriction of timely access to the Group s SSCs could disrupt Colt s business or our customers businesses. This could have an adverse impact on the Group s business, financial condition and operating results. Physical risk assessments across Colt Communications and response by our security teams of any emerging geopolitical threats We operate multi-site operations in India and Spain and working on establishing the same in Romania, to ensure continuity of operations in the event of localized disruptions or loss. We also have dedicated business continuity specialists in India and Spain and at Group level to test these processes Indian sites are 2,000 km apart with separate connectivity, and Spain s SSC has multiple offices to decentralise locational risk Certifications: India, the larger SSC, is now accredited against the new international business continuity standard ISO

5 8) Risk - Supply chain The Group is reliant on a number of key IT software, service and communications equipment suppliers to ensure a consistent and effective supply chain and to meet its business plan commitments. Any financial or operating weakness of key IT software suppliers, service suppliers or communications equipment suppliers, which affects their availability, consistency and/or reliability of delivery could affect the Group s performance. Sourcing: We operate dedicated procurement functions to manage supplier relationships, establish dual vendor strategies and monitor key suppliers ability to serve our needs. The functions also engage with Group Business Continuity to perform key supplier risk mapping and assessments Inventory: We operate an established hub and spoke inventory distribution system, including buffer supplies and use of a globally recognised distribution partner This press release is also available via the Colt website at ENQUIRIES: Investor Relations: Morten Singleton DDI: +44 (0) Mobile: morten.singleton@colt.net Press: Helen Toft DDI: Mobile: helen.toft@colt.net 5