Strong demand for high-speed fibre broadband helped KCom (KCom) return to modest top-line growth in the six months to September. The Hull-based telco, whose customers include British Airways and Specsavers, also posted a 3 per cent rise in underlying cash profits to £37.2m.
Further declines in legacy call-centre and publishing sales depressed turnover in the mature KC division, which targets consumers and businesses in Hull and East Yorkshire. However, the company expanded its fibre-optic network by 10 per cent to around 53,000 premises, two-fifths of which have opted to pay for faster download speeds. That helped send average revenue per consumer up 3 per cent to £32.34 a month.
Underlying cash profits leapt 9 per cent in the KCom business, which provides cloud-based communications, hosting and consulting to enterprises outside of the group's regional heartland. The division benefited from a longstanding contract with HMRC and strong showings from its Eclipse and Smart 421 subsidiaries.
Net debt was flat as strong cash generation compensated for higher network investment and restructuring costs. Management has committed to growing the dividend by at least 10 per cent a year, implying a payout exceeding 5.9p for the year to March 2016. Analysts at Barclays expect the corresponding EPS to come in at 7.3p (7.5p in FY2015).
| KCom (KCom) | ||||
|---|---|---|---|---|
| ORD PRICE: | 97p | MARKET VALUE: | £501m | |
| TOUCH: | 96.3-97p | 12-MONTH HIGH: | 101p | LOW: 79p |
| DIVIDEND YIELD: | 5.7% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 15p* | NET DEBT: | 136% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 173 | 23.6 | 3.7 | 1.79 |
| 2015 | 178 | 24.2 | 3.8 | 1.97 |
| % change | +3 | +2 | +1 | +10 |
Ex-div: 24 Dec Payment: 1 Feb *Includes intangible assets of £91.3m, or 18p a share | ||||
