Investment drives Zen’s profits higher

INDEPENDENT North West internet service provider Zen Internet has reported a jump in turnover and profits on the back of strong growth in voice and data services.

In the year to the end of September 2014 operating profits surged 34% from £760,000 to £1.02m and revenues rose 6.8% from £47.36m (2013) to £50.62m.

The Rochdale company, founded 20 years ago this year by its owner and chief executive Richard Tang who invested his life savings in the fledgling dial-up internet venture, now has more than 430 staff.

Finance director Matt Kay said the business was seeing the benefit of heavy investment in its network and expanding its product range.

“The benefits of this investment account for the year-on-year growth in operating profits, but the real impact is now being realised in the 2015 performance with revenues continuing to grow.

“The company is now on track to report an operating profit up almost threefold from that reported in 2014 and this year – 2015 – is expected to be the most profitable in Zen’s 20 year history.”

The year under review was not without its challenges, and recently-filed accounts reveal there was a technical breach of one of the company’s banking covenants with its lender NatWest.

Kay said Zen’s investment in its infrastructure had put a “temporary pressure on earnings and working capital”.

He explains: “The covenant specifically relates to a property loan we took out in 2008 which we used to buy our head office. Since filing our accounts, the directors have received written confirmation from the company’s bankers that facilities are not affected in any way and that the property loan – which is in no way used to fund the creation, distribution or delivery of our products and services – will continue to be repayable over the remaining term of the loan agreement which runs to March 2028.”

Elsewhere in the accounts, Zen flagged-up a contingent liability of £423,000  in respect of a historic investment it made into a film business, which is being challenged by HM Revenue and Customs.

In relation to this matter, the company said: “Zen does not expect the challenge to materialise, but to be prudent we have recognised a contingent liability in our financial reports. We do not consider our involvement in the scheme to be in any way questionable.”