Investors may balk at the sharp decline in statutory earnings at KCOM (KCOM). But that primarily reflects a one-off impairment charge of £34m to account for the reduced value of decade-old acquisitions. Strip that out and the telecom group's adjusted operating profit rose 4 per cent to £57.2m.
The main driver was a 3 per cent rise in cash profits at the core KC business, which caters to consumers and small and medium-sized businesses in Hull and East Yorkshire. That reflected strong demand for bundled telecom services, broadband and high-speed fibre. Indeed, a third of the premises connected to the segment's fibre network had signed up by the end of April - over 15,800 customers - and management expect to expand the service to 100,000 customers by March 2017. But continued declines in legacy publishing and call-centre revenues meant divisional turnover fell overall.
Flagging demand for traditional voice services sent cash profits down a tenth at the Kcom division, which offers cloud-based communications and consulting to enterprises such as HM Revenue & Customs. On the bright side, companies' mounting demand for cloud services fuelled an 11 per cent rise in sales at its Eclipse subsidiary.
Broker finnCap expects adjusted EPS of 7.6p for the year to March 2016, down from 7.8p for the reported period.
| KCOM (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 97p | MARKET VALUE: | £501m | |
| TOUCH: | 96-97p | 12-MONTH HIGH: | 102p | LOW: 79p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 39 | |
| NET ASSET VALUE: | 12p* | NET DEBT: | 145% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 395 | 32.9 | 4.4 | 3.60 |
| 2012 | 387 | 51.1 | 7.4 | 4.00 |
| 2013 | 373 | 47.7 | 7.1 | 4.44 |
| 2014 | 371 | 50.5 | 7.6 | 4.88 |
| 2015 | 348 | 16.7 | 2.5 | 5.37 |
| % change | -6 | -67 | -68 | +10 |
Ex-div: 25 Jun Payment: 4 Aug *Includes intangible assets of £93.3m, or 18p a share | ||||
