A chunky £107m goodwill impairment has depleted KCom's shareholders' funds to just £20m, while one-off costs again kept the group in the red. But improved working capital management brought net borrowings down by £22.3m last year, and chief financial officer Paul Simpson notes that "while there is still more work for us to do, we've done a lot".
So, despite incurring exceptional costs of £22.4m - including £14.6m of restructuring charges - Mr Simpson is upbeat, and with some justification, as underlying operating profits did rise from £21.7m to £30m last year, despite revenues slipping 9 per cent. He also points to the improved debt position - achieved without disposals or creditor arrangements - as a sign of KCom's improving financial health, and notes that KCom is looking into cutting the group's fixed costs and capital investment requirements.
On a divisional level, the IT business remains weak, with revenues falling by £24.5m, as corporate customers cut back on lower margin communications hardware equipment. Demand for the higher margin services remained robust though, which helped support margins in the business. The telecoms division remains the main profit generator, accounting for almost all the group's cash profits, and better cost management has offset declines in call volumes and internet dial-up revenues.
Analysts at Cazenove have tweaked forecasts down slightly and are expecting 2010 cash profits of £69m.
KCOM GROUP (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 28p | MARKET VALUE: | £ 143m | |
| TOUCH: | 27-28p | 12-MONTH HIGH: | 45p | LOW: 10p |
| DIVIDEND YIELD: | 5.4% | PE RATIO: | NA | |
| NET ASSET VALUE: | 4p* | NET DEBT: | £156.7m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 367 | 8.0 | 3.6 | 0.90 |
| 2006 | 454 | -80.8 | -13.3 | 1.17 |
| 2007 | 483 | 10.6 | 4.7 | 1.95 |
| 2008 | 517 | 4.4 | 3.7 | 2.82 |
| 2009 | 472 | -111.3 | -20.7 | 1.50 |
| % change | -9 | - | - | -47 |
Ex-div:24 Jun Payment:07 Aug *Includes intangible assets of £106.9m or 21p per share | ||||
