KCOM gloom

There's not too much excitement at Hull-based telecoms group, KCOM (KCOM). As expected, the group's UK-wide business services division saw sales decline by £10m to £138m and underlying cash profits squeezed by 10 per cent to £14.5m, which largely reflected lower revenue from a one-off network build contract. More encouragingly, perhaps, turnover from KCOM's strategic focus areas - such as local authorities and multi-site enterprises, which tend to carry higher margins - held steady at £122m.

KC, the part of the business offering telephony and broadband services in Hull and East Yorkshire, proved more resilient as underlying cash profits held steady at £27.8m. Expansion, too, is in the offing. After passing 15,000 homes and businesses with its fibre-to-the-premise network by October, KC plans to pass another 30,000 premises with its high-speed network by March 2015. Annual capital spending is pegged at £30m until the target is met.

Increases in working capital outflow, higher capital spending - plus meeting the group's share scheme obligations - pushed up net debt by a quarter to £93.4m, although stronger net cash flow from operations is expected in the second half. However, although the board has committed to a full-year 10 per cent dividend increase, uncertainty hangs over future dividend levels given the next actuarial valuation looms next April.

Broker finnCap forecasts full-year adjusted pre-tax profit of £52.3m and EPS of 7.5p, up from £51.1m and 7.1p, respectively, last year.

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