Investors sent shares in KCOM down 4 per cent after a desultory first-half performance. Thrifty retailers, legacy challenges and key customer Phones4U's closure drove a 3.5 per cent decline in the Hull-based telco's cash profits.
KCOM expects demand for bundled products, broadband and fibre to offset flagging sales of carrier services. That wasn't the case for its national Kcom business, which suffered a 9 per cent slump in revenues to £123m. However, it did win a landmark contract with HM Revenue & Customs to implement web chat and cloud services at one of the UK's largest call centres. Sales also rose 16 per cent to £15m at Eclipse, which caters to small- and medium-sized businesses.
KC, the group's East Yorkshire division, maintained a cash-profit margin of 54 per cent, and expects to provide high-speed fibre broadband to 45,000 homes and businesses by March. But its gains were overshadowed by falling sales at its contact centre and from directory publishing.
KCOM's capital spending surged 59 per cent to £21.4m in the period, reflecting its fibre rollout and investments in IT systems. However, the group looks well funded, with strong cash generation and a new £200m revolving credit facility. Management is still committed to 10 per cent annual dividend growth until March 2016.
Broker Novo Banco cut its full-year EPS forecast by 4 per cent to 7.33p (from 7.64p in 2013-14).
| KCOM (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 87p | MARKET VALUE: | £449m | |
| TOUCH: | 86-87p | 12-MONTH HIGH: | 106p | LOW: 82p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 15p* | NET DEBT: | 130% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 186 | 25.8 | 3.9 | 1.63 |
| 2014 | 173 | 23.6 | 3.7 | 1.79 |
| % change | -7 | -9 | -6 | +10 |
Ex-div: 29 Dec Payment: 2 Feb *Includes intangible assets of £116m, or 22p a share | ||||
